The opinion of the court was delivered by: Tucker J.
Presently before the Court is Plaintiff's Motion for Preliminary Injunction (Doc. 5), Defendant's Response in Opposition thereto (Doc. 18), and all related exhibits, transcripts, and argument presented to the Court during the preliminary injunction hearing on October 12-14, 2011; October 26-27, 2011; and November 2-3, 2011. For the reasons set forth below, and upon consideration of all the evidence, this Court will grant Plaintiff's Motion for Preliminary Injunction.
This action was filed in the Philadelphia Court of Common Pleas on August 25, 2011. Defendants removed this matter to this Court on August 26, 2011. Plaintiff filed a Motion for Preliminary Injunction and Special Injunction on August 26, 2011, and a Temporary Restraining Order was issued by Emergency Judge Sanchez on August 29, 2011. Thereafter, a Preliminary Injunction Hearing was held before this Court on October 12-14, 2011; October 26-27, 2011; and November 2-3, 2011.
II. BACKGROUND AND FINDINGS OF FACT
Plaintiff, Feldman & Pinto, P.C., ("Plaintiff" or "Feldman & Pinto") is a Pennsylvania professional corporation engaged in the practice of law with its principal place of business located at 1604 Locust Street, 2R, Philadelphia County, Pennsylvania, 19103. (Compl. ¶ 1). Laura Feldman ("Feldman") is the president and sole shareholder of Feldman & Pinto. (Compl. ¶ 2). Defendant Martha Lynn Seithel ("Seithel") is an attorney and resident of South Carolina, with a home address of 4110 East Amy Lane, John's Island, South Carolina, 29455. (Compl. ¶ 3). Defendant Seithel Law, LLC ("Seithel Law") is a South Carolina limited liability company with its registered address at 4110 East Amy Lane, John's Island, South Carolina, 29455. (Pl.'s Ex. 26, 33, 34). Defendant Seithel is currently an attorney with Seithel Law, LLC. (Compl.¶ 4). The firm of Seithel Law LLC consists of Seithel, a paralegal, an administrative assistant, and a "couple of interns." (Tr. 11/2/11, 87:24-88:7; Pl.'s Ex. 27, Tr. 18:17-19:4). The articles of incorporation for Seithel Law LLC were registered with the South Carolina Department of State on July 20, 2011. (Pl.'s Ex. 31, 33, 34).
Prior to establishing Seithel Law LLC, Seithel was employed by the South Carolina law firm of Motley Rice, LLC for eight and one half years. (Tr. 11/2/11, 7:1-2). While at Motley Rice, Seithel focused her practice in pharmaceutical litigation, in which she participated in pre-litigation activities such as taking depositions, preparing parties for depositions, creating liability and causation packages, drafting motions, consulting with experts, and other aspects of preparing cases for trial. (Tr. 11/2/11, 7-9).
Seithel became a full employee of Plaintiff in February 2010, after spending the month of January 2010 in a "transitionary period" in which she was co-employed by both Motley Rice and Plaintiff. (Tr. 10/12/11, 19:7-10; Tr. 11/2/11, 17:17-18:13). Feldman & Pinto is a personal injury practice, (Tr. 10/12/11, 15:23-24), and for the last five years has "almost exclusively" done medical malpractice and pharmaceutical litigation. (Tr. 10/12/11, 16:3-4). Plaintiff began doing pharmaceutical work four or five years before Seithel became an employee of the firm, working on cases involving various drugs including Effexor, Paxil, Reglan, Yaz, and Trasylol. (Tr. 10/12/11, 20:11-19). Before Seithel arrived at Feldman & Pinto, the firm had an inventory of between 500 and 600 Paxil, 50-60 Yaz cases, but no Avandia cases. (Tr. 10/12/11, 21:20-25, 22:1-9).
Plaintiff hired Seithel as an employee-at-will with an annual salary of $250,000. (Complaint ¶ 7; Tr. 10/12/11, 19:5, 23:20). Plaintiff hired Seithel because she had "a great deal of potential" and "a lot of ideas and knowledge about pharmaceutical practice." (Tr. 10/12/11, 19:13-15). Seithel also represented to Plaintiff that she could bring a large group of pharmaceutical cases to the firm because she had a "multitude of contacts" that would be interested in using Plaintiff in Philadelphia. (Tr. 10/12/11, 19:16-20). Although Seithel referred to herself as a partner at Feldman & Pinto, and introduced evidence at the injunction hearing that other members of Feldman & Pinto also referred to Seithel as a partner, Plaintiff denies that Seithel was ever partner at Feldman & Pinto. (Defs.' Ex. 40, Defs.' Ex. 45; Tr. 10/27/11, 39-41).
Shortly after Seithel began her employment with Plaintiff, the firm began to have some concerns with Seithel's work performance. For example, Laura Feldman was concerned that Seithel spent the months of January through March 2010 in Ocala, Florida for a series of horse shows, and a number of Feldman & Pinto employees testified that Seithel was difficult to reach during her time in Florida. (Compl. ¶ 11; Tr. 10/27/11, 133:16-18; Pl.'s Ex. 27.A, Tr. 41:19-21). Seithel was also charging personal expenses to the firm credit card. (Compl. ¶ 11(b)). Seithel's paralegal at Feldman & Pinto, Bouyeh Zulu ("Zulu"), also described Seithel as "very demanding," "unresponsive to clients," and said that Seithel procrastinated and was often difficult to contact. (Tr. 10/26/11, 55:6-11). Seithel's absence from the firm led Laura Feldman to consider terminating Seithel's employment as early as the winter of 2010, but Feldman decided against it. (Tr. 10/12/11, 27: 2-13; Tr. 10/27/11, 133:16-18).
Despite Plaintiff's concerns, Seithel's performance improved throughout the remainder of 2010. Feldman saw Seithel "blossom" when Seithel began gathering a group of cases involving a drug named Paxil from across the country for settlement. (Tr. 10/12/11, 28:1-11). Because Seithel had developed such a large book of cases, the firm increased her salary. (Compl. ¶ 14). However, Seithel returned to Florida to tend to her horses in January-March 2011, and Seithel again became unreachable. (Compl. ¶ 15). Plaintiff also learned that many of the Paxil cases which Seithel had apparently brought to the firm were from firms with whom Plaintiff had already established relationships, and the firm actually had to return a group of the cases to one of those firms. (Compl. ¶ 15(e); Tr. 10/12/11, 29:16-30:6).
At some point in May or April 2011, in a meeting between Feldman, Rosemary Pinto ("Pinto") (the other lawyer after whom Feldman & Pinto is named), and Seithel, Feldman told Seithel that her employment relationship with Plaintiff was not working out as the firm had hoped. (Compl. ¶ 16). Feldman suggested that Seithel and Plaintiff should "part ways," and offered to continue Seithel's employment long enough for Seithel to make plans for her future, including beginning her own practice. (Compl. ¶ 16; Tr. 11/2/11, 51: 3-13). Then, on the morning of June 13, 2011, Feldman asked Zulu to access client files located on the firm's "Dropbox," an online repository of electronic files in which Seithel had been storing client information. (Compl. ¶ 19). Prior to June 13, Zulu had been able to access the Dropbox using the username and password that Seithel had given her for the Dropbox. (Tr. 10/26/11, 60:15-61:5). On the morning of June 13, however, Zulu could not access the Dropbox although she used the same username and password that she had always used. (Tr. 10/26/11, 61:8-15). Believing that Seithel had locked Plaintiff out of the Dropbox, Feldman decided to terminate Seithel's employment immediately. (Compl. ¶ 19).
Seithel heard of her termination through Clint Casperson, a Texas attorney who had called the office of Feldman & Pinto on June 13 and was informed that Seithel was no longer employed there. (Tr. 11/2/11, 68:14 - 69:12). After receiving correspondence from Casperson regarding her termination, Seithel called Feldman, and Feldman informed Seithel that she was terminated because Feldman was unable to access the Dropbox. (Tr. 10/12/11, 39:16-18; Tr. 11/2/11, 69:25-70:4). After her termination, Seithel took no action to restore Plaintiff's access to the Dropbox. (Tr. 10/12/11, 40:1-6). Seithel denies locking Plaintiff out of the Dropbox, but to date, Plaintiff is still unable to access the files in the Dropbox. (Tr. 11/2/11, 76:9-16; Tr. 10/12/11, 40:1-6). Plaintiff sent Seithel formal notice of her termination via letter on June 15, 2011, in which Laura Feldman also demanded access to the Dropbox files; return of Firm property including office keys, apartment keys, an I-pad, all client files, and all office supplies charged to Feldman & Pinto; and reimbursement of personal charges on Seithel's company credit card. (Compl. ¶ 22; Pl.'s Ex. 1).
Prior to her termination, Seithel had sought the advice of an ethics expert to advise her regarding opening her own practice, and took steps toward establishing that practice. (Tr. 11/2/11, 55:3-24). Then, on the day that she learned of her termination, Seithel proceeded to contact a number of referring attorneys and clients with whom Plaintiff was associated. For example, on June 13, 2011, the day of her termination, Seithel sent numerous e-mails to referring attorneys who worked with Plaintiff which informed them that Seithel had "left Feldman & Pinto and started [her] own firm" and that Seithel hoped that they would "continue to work together." (Pl.'s Ex. 5, Seithel 006-024). Then, on July 7, 9, and 12, 2011, Seithel sent letters to approximately 450 of Plaintiff's clients. The letters averred the following:
A. Seithel "recently left the firm of Feldman & Pinto." (Pl.'s Ex. 5).
B. Seithel had "primary responsibility for [the client's] claims." (Id.).
C. Seithel "now practice[s] as Seithel Law, LLC, based in Charleston, South Carolina."(Id.).
D. Seithel Law, LLC has "an experienced team in place with over twenty years of combined experience prosecuting, litigating and resolving pharmaceutical cases and continue[s] to represent . . . clients." (Id.).
E. Seithel has "been involved in [the client's] litigation in a leadership position since the beginning of the lawsuits." (Id.).
F. "With [Seithel Law, LLC's] extensive experience and knowledge, Seithel Law, LLC is well suited to complete the work on your file." (Id.).
All of the letters were written on paper bearing the letterhead "Seithel Law, LLC." (Id.). The letters provided the contact information for Seithel (800-818-5329) and Plaintiff (215-564-2604), as well as the contact information for the client's referring attorney when applicable. (Id.) The letters indicated that the clients' "decision as to whom [they] want to perform legal services is entirely [theirs] to make" and that Seithel was "certainly willing, and desire[d] to continue representing [them]." (Id.) The letter also instructed the clients to "indicate on the enclosed Consent for Representation form" if the clients wished for Seithel "to continue the work in [their] case; "if [they] wish[ed] to have Feldman & Pinto maintain responsibility for [their] file;" or "if [they] wished to have [their] file transferred to some other attorney." (Id.) Attached to each letter was a "Consent to Representation" form which laid out three choices for the clients: 1) "I wish for my case to go with Lynn Seithel, Esquire;" 2) "I wish for my case to go with Feldman & Pinto;" or 3) "I wish for my case to go to [another law firm]." (Id.). Lastly, all of the letters purported to carbon copy Plaintiff. (Id.)
Plaintiff first learned about the letters on July 14, 2011, when a Feldman & Pinto client, Thomas C., called Plaintiff expressing confusion regarding why he received such a letter from Seithel. (Tr. 10/12/11, 43:6-15). That same day, Laura Feldman wrote to Seithel's lawyers demanding that Seithel cease sending the letters to Feldman & Pinto clients. (Pl.'s Ex. 3). Then, on July 15, 2011, a large box containing the letters that Seithel sent arrived at Plaintiff's office. (Tr. 10/12/1,1 55:2-14; Pl.'s Ex. 4). Although not all of the clients that received Seithel's letter returned election forms, of those that did, at least 140 clients elected to have Seithel represent them. (Pl.'s Ex. 6).*fn1 Plaintiff received these election forms from Seithel in a piecemeal fashion. (Tr. 10/12/11, 65:10-20).
After Plaintiff received these election forms, Plaintiff began making efforts to contact the clients and referring attorneys that had elected Seithel. Plaintiff initially reached out to referring attorneys via letter which stated: "we suddenly found it necessary to terminate Lynn Seithel's employment with our firm. It has now been brought to our attention that in an effort to establish a fee interest for herself, Lynn has been soliciting certain referring counsel with whom Feldman & Pinto has contracts and in some instances has even been calling the clients directly." (Defs.' Ex. 12).
Plaintiff also reached out to clients who received letters from Seithel. For example, on or about August 12, 2011, Bouyeh Zulu was instructed by Laura Feldman to call clients that had elected to be represented by Seithel, and Pinto gave Zulu a script regarding what to say to those clients. (Tr. 10/26/11, 118:7-13; 110:1-8). The script essentially required Zulu to tell the clients that Seithel was a disgruntled employee that was terminated from Feldman & Pinto, who had never tried a case, was not licensed in Pennsylvania, and who was " seeking to gain clients for her own advantage." (Tr. 10/26/11, 110:13-18). In one e-mail drafted by Zulu to Avandia clients, Zulu wrote that Seithel was " a disgruntled employee who was fired from our firm and has been trying to solicit clients." (Defs.' Ex. 13). The e-mail told clients to " [p]lease dismiss any letters, emails or correspondence" which Seithel may have sent because the letters "falsely impl[ied] that [Seithel] has been in a leadership role" in their cases "when in fact [Seithel] was merely assisting the partners of the firm (Laura Feldman & Rosemary Pinto) who have solidified the Avandia settlement deal that [they] are now a part of." (Id.). The e-mail also instructed any clients that had "accidentally" signed paperwork from Seithel to inform Zulu that they had so that the firm could "mail [them] an affidavit of service that will rectify the situation immediately." (Defs.' Ex. 13).
An attorney for Feldman & Pinto, Bradley McDermott ("McDermott"), also reached out to clients who elected Seithel to represent them. Specifically, McDermott was asked to contact some Avandia clients who were included in a list for a potential settlement. (Tr. 10/27/11, 136:13-18). McDermott explained to these clients that "there were certain things that Lynn had said in the letter that were not accurate and may be misleading . . . and . . . after [McDermott] explained to [the clients] the circumstances, they all admitted that they were confused. They thought that they had to make an election. . . . and every one of them wanted to stay with Feldman & Pinto after [McDermott] got done talking to them." (Tr. 10/27/11, 138:5-22). The clients told McDermott, "based upon what was written in the letter they wanted Lynn Seithel because she had said she had taken the leadership role in their case." (Tr. 10/27/11, 143:16-19).
In confirmation of these phone calls, on August 22, 2011, McDermott sent out letters to the clients who told him that they wished to retract their election of Seithel. The letter stated that "Ms. Seithel's letter made several misleading and exaggerated statements about her past role in your Avandia litigation while at Feldman and Pinto as well as her experience and ability to finish the work on your file. The letter left clients, like yourself, under the mistaken impression that you had to make an election as to what law firm you wanted to continue to act as your attorney. In truth, there was no decision to make." (Defs.' Ex. 31).
As a result of Plaintiff's correspondence with Feldman & Pinto clients who elected Seithel, approximately thirty-three (33) clients submitted oral or written retractions of their election. (Pl.'s Ex. 7, 7A). At least one other client, however, was noticeably upset by the confusion that ensued as a result of Seithel's departure from Feldman & Pinto. On August 4, 2011, one client, Erika D., sent an e-mail to Plaintiff, complaining that a staff member at Feldman & Pinto gave her "inaccurate and confusing information" by telling her that Seithel was "not qualified to proceed with [her] case" and was merely "helping" the attorneys working on her case. (Defs.' Ex. 8). Erika D. explained that she had "never once" been contacted by anyone other than Seithel, and that she had made her decision regarding her representation when she chose to have Seithel represent her back in July 2011. (Defs.' Ex. 8). Erika D. also wrote that Plaintiff's "lack of organization and communication has shown a lack of professionalism and proven a blatant lack of interest and respect for [her] case" and "tainted [her] regard for [the] firm." (Defs.' Ex. 8). In addition, at least one law firm, the Law Firm of Tor Hoerman, wrote directly to Feldman & Pinto indicating that it wished for cases involved in certain Paxil settlement negotiations to remain with Seithel because the firm had "only worked with Lynn on these cases" and Seithel was "very familiar with the facts of the ...