FREEDOM MEDICAL, INC.
THOMAS R. GILLESPIE, III, et al.
MARY A. McLAUGHLIN, J.
Plaintiff Freedom Medical, Inc. (“Freedom Medical”) is in the business of purchasing and refurbishing medical equipment and then reselling, renting, and servicing it. In this suit, Freedom Medical alleges that a number of former employees, along with several companies controlled by them and various associated individuals, combined together to steal Freedom Medical’s inventory and business opportunities in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq. Freedom Medical also brings a number of state law claims against different configurations of defendants. The original complaint in this action named seventeen individual defendants and six corporate defendants. Currently, eleven defendants remain.
In two separate motions, four of the remaining defendants here move for summary judgment on all claims. One motion for summary judgment is filed by U.S. Med-Equip, Inc. (“U.S. Med”), Gurmit Bhatia, and Gregory Salario (collectively, the “U.S. Med Defendants”). The other motion is filed by Sandra “Dawn” Hall. The Court held oral argument on the defendants’ motions on March 14, 2013.
The Court will grant summary judgment in favor of all of the moving defendants on Freedom Medical’s RICO claims and in favor of Ms. Hall on all state law claims against her. The Court will, however, deny the U.S. Med Defendants’ motion for summary judgment on the state law claims against them.
I. Summary Judgment Record
The facts described herein are undisputed unless otherwise noted. Inferences are drawn in the light most favorable to Freedom Medical, the non-moving party. Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009).
A. Relevant Parties
The plaintiff, Freedom Medical, is a Pennsylvania corporation operated by Frank Gwynn and Dominic Greco. It was founded in 1997 and engages in the business of buying, renting, and selling biomedical equipment. U.S. Med Def’ts’ Undisputed Stmt. ¶¶ 2-3.
Moving defendant U.S. Med is a Texas corporation that also buys, sells, rents, and services biomedical equipment. It is the successor to Techmate, Inc. (“Techmate”), a Texas entity started by moving defendant Gurmit Bhatia. Today, U.S. Med is wholly owned by Bhatia and moving defendant Gregory Salario, a former Freedom Medical employee. Id. ¶¶ 1, 4.
Moving defendant Sandra “Dawn” Hall is married to non-moving defendant Clifford Hall, who also once worked for Freedom Medical. The couple was married in 1997, prior to Mr. Hall’s employment at Freedom Medical. PX-H 1 (8/20/12 C. Hall Dep.) at 69; PX-H 2 (11/16/10 Gillespie Aff.) ¶ 3.
B. Salario’s Employment with Freedom Medical
Salario began working as a salesman at Freedom Medical in August 1999. Within a few years, he had advanced to the position of vice president of sales for the region covering Texas and the states east of the Mississippi. PX-USM 5 (11/11/08 Salario Dep.) at 17-18; PX-USM 1 (8/12/99 Employment Agmt.).
When he was hired, Salario signed an engagement letter outlining the terms of his employment. The letter agreement stated that Salario would not disclose or divulge Freedom Medical’s confidential information, either during or after the term of his employment. The agreement also precluded Salario from soliciting any of Freedom Medical’s customers or employees for a period of one year following termination of his employment. PX-USM 1.
In August 2001, Salario entered into a further “NonDisclosure, Non-Compete, and Property Rights Agreement” with Freedom Medical. That subsequent agreement contained terms similar to, though more detailed than, Salario’s original employment agreement. The contract reiterated that Salario was prohibited from ever disclosing any of Freedom Medical’s confidential information, including information relating to its sales and the identity of its customers. For a one-year period after Salario’s employment with Freedom Medical ended, he also could not “solicit, induce, divert, employ, engage or otherwise interfere with any of Freedom Medical’s employees or consultants.” PX-USM 2 (8/28/01 Non-Disclosure, Non-Compete, and Property Rights Agmt.) §§ 1-2.
The 2001 agreement further barred Salario, for the same one-year period, from engaging in or soliciting business “similar to, in competition with or the same as the Business of Freedom Medical.” The agreement provided the following definition of “Business of Freedom Medical”:
all businesses of Freedom Medical and its affiliates, whether presently conducted or hereafter engaged in or contemplated by Freedom Medical or any affiliate at any time during the term of [Salario’s] engagement involving the research, development, engineering, integration, manufacture, production, purchasing, leasing, and/or selling of emergency medical equipment and supplies, such as (without limitation) defibrillators, patient monitors, infusion therapy devices, and other emergency medical equipment and supplies, and related concepts, plans, or processes.
The agreement set a geographic limitation on this restriction; it applied only to an area within 75 miles of any Freedom Medical office where Salario had worked. By handwritten amendment, the State of Louisiana was exempted from the 75-mile geographic limitation. Id. § 2.1.
C. Outside Business Ventures of Freedom Medical Employees
Several Freedom Medical employees, who also are or were named defendants in this action, created their own business entities within the medical equipment field, both during and after their employment with Freedom Medical.
1. Harbor Medical, LLC
In 2001, while working at Freedom Medical, Salario and two other Freedom Medical employees, George Rivera and Thomas Gillespie, formed their own company, Harbor Medical, LLC, to engage in medical equipment transactions. At the time, Gillespie was vice president of marketing and sales for the company, working out of Freedom Medical’s corporate headquarters in Exton, Pennsylvania. Rivera was the manager of the New York metropolitan area branch. PX-H 2 ¶¶ 12, 14; PX-USM 12 (10/3/11 Janssens Aff.) ¶ 6; PX-USM 18 (12/12/12 Gwynn Aff.) ¶ 4. Harbor Medical engaged in three medical equipment transactions: one in each of 2001, 2002, and 2006. PX-USM 3 (Purchase Orders).
2. U.S. Med
a. Formation of U.S. Med
Through his work at Freedom Medical, Salario met Bhatia, whose Texas-based company, Techmate, did equipment servicing for Freedom Medical. USMX 3 (11/10/08 Bhatia Dep.) at 169. In the spring of 2003, while Salario was still employed at Freedom Medical, he and Bhatia discussed starting their own medical equipment business. They decided to form a new company, U.S. Med, to rent, sell, and service such equipment. Salario informed Bhatia about the terms of his non-competition agreement with Freedom Medical and stated that the only place he could do business in the medical equipment sector was Louisiana. Given that limitation, they determined that Salario would work out of Louisiana and grow their company’s operations in that state. Bhatia would remain in Texas to manage the company and control its finances. PX-USM 6 (12/8/06 Bhatia Dep.) at 58-59. U.S. Med was incorporated that June. USMX 1 (U.S. Med Arts. of Incorp.).
Around the same time, in the early summer of 2003, Salario became aware of a business opportunity for Techmate through his work at Freedom Medical. Salario learned from a co-worker that Freedom Medical had passed on the chance to purchase medical equipment from an Atlanta hospital. Salario told Bhatia about the potential deal, and Techmate bought the devices. PX- USM 5 at 74-78.
In August 2003, Salario left Freedom Medical and took a position with U.S. Med in Louisiana. Id. at 17-18. U.S. Med acquired Techmate approximately a year and a half later, in January 2005, and Salario became a joint owner of U.S. Med with Bhatia. USMX 3 (12/8/06 Bhatia Dep.) at 89-95.
Prior to that acquisition, Techmate and U.S. Med worked in tandem. Techmate, from its Houston offices, supported the new company by performing billing work, maintaining lists of U.S. Med inventory, handling accounts payable, taking customer service phone calls, servicing and storing U.S. Med equipment, and making equipment available to U.S. Med on a rent-to-re-rent basis. The two companies also shared office space in Houston, and Techmate paid Salario’s salary at U.S. Med. PX-USM 4 (11/10/08 Bhatia Dep.) at 84, 90-97, 99-100, 108, 119-20. During the first year of U.S. Med’s existence, Bhatia maintained overall managerial control over the company and supplied it with cash loans. Salario also loaned $35, 000 to Techmate in either 2003 or 2004 to help fund Techmate’s purchase of equipment that it would then rent or sell to U.S. Med Equip. PX-USM 6 at 73-74, 91-92; PX-USM 4 at 111-13.
In September 2003, two other Freedom Medical employees left to join Techmate and U.S. Med, respectively. That month, Techmate hired an employee from the Houston branch office and U.S. Med hired the manager of Freedom Medical’s New Orleans branch, Bob Navo. PX-USM 10 (10/16/08 Gwynn Aff.) ¶¶ 8, 10.
b. Cease and Desist Letters
Based on the two Freedom Medical defections and perceived ties between U.S. Med and Techmate, Freedom Medical engaged outside counsel to send letters to Salario and Techmate reminding them of Salario’s obligations under his employment agreements. Id. ¶ 12.
On September 22, 2003, counsel for Freedom Medical sent a letter to Salario, stating that Freedom Medical believed him to be in breach of both the terms of the 1999 engagement letter and his 2001 non-compete agreement. In particular, Freedom Medical noted that Salario had breached the non-solicitation provisions of his contracts by employing Bob Navo and persuading current and potential customers to discontinue their relationships with Freedom Medical, all within one year of Salario himself leaving the company. Freedom Medical also stated its belief that Salario was breaching the non-competition provisions of his contracts through “business operations that [he was] directly and/or indirectly involved with in Houston, Texas.” Finally, Freedom Medical informed Salario that it believed he was “in possession of and [was] using for [his] benefit, confidential information and corporate property.” Docket No. 402-3 (9/22/03 Letter from G. McCarthy to G. Salario).
In its letter, Freedom Medical demanded that Salario return all Freedom Medical corporate and confidential property, including customer lists and financial information, by no later than 3:00 p.m. on October 3, 2003. Freedom Medical also demanded that Salario immediately stop soliciting any Freedom Medical customers or employees and conducting business in areas covered by the restrictive covenant in Salario’s employment agreement. The letter went on to say that Freedom Medical “intend[ed] to vigorously protect its rights and pursue all available legal remedies against [Salario] in furtherance thereof.” Salario’s attorney responded to Freedom Medical in a three-paragraph letter, dated October 2, 2003. He stated that he did not believe Salario was in violation of any agreement with Freedom Medical, as he was “doing business solely and exclusively in Louisiana.” Docket No. 402-4 (10/2/03 Letter from J. McLindon to G. McCarthy).
On October 7, 2003, Freedom Medical’s attorney also sent a letter to Bhatia. The letter informed Bhatia of the non-solicitation and non-compete provisions of Salario’s contracts with Freedom Medical and stated that it believed “Mr. Salario is violating these restrictions with respect to business operations that he may be involved in, directly or indirectly, with you and your company.” Freedom Medical stated that, if its suspicions proved correct, it intended to hold Bhatia responsible “for all violations of law, including, without limitation, tortious interference with its contractual relationship with Mr. Salario.” Docket No. 402-5 (10/7/03 Letter from G. McCarthy to G. Bhatia).
One week later, counsel for Freedom Medical contacted Salario’s attorney by letter. The letter stated that, assuming Salario was only conducting business in Louisiana as his attorney claimed, Salario was nevertheless soliciting customers and had solicited an employee of Freedom Medical in violation of Salario’s contractual obligations. Freedom Medical again demanded that Salario return all confidential information in his possession and that he cease and desist from contacting its customers and workers. Freedom Medical confirmed its intent to pursue appropriate legal relief if informal resolution was not possible, noting that “any litigation filed will be instituted in the Commonwealth of Pennsylvania.” Docket No. 402-6 (10/14/03 Letter from G. McCarthy to J. McLindon).
c. Salario’s Subsequent Contacts with Freedom Medical Employees
In late January or early February 2004, Salario asked Joseph W. Janssens, Freedom Medical’s Baltimore branch manager, to refer equipment sales, rental, and servicing opportunities to U.S. Med. In February, Janssens informed Salario about two opportunities to rent equipment to Freedom Medical customers, Providence Hospital and Hadley Memorial Hospital. Following that conversation, Salario provided Janssens with letters to Providence Hospital on U.S. Med letterhead, offering rental and purchase arrangements for various pieces of machinery. PX-USM 12 ¶¶ 9, 12-13.
Later that spring, Salario learned that one of Freedom Medical’s technicians, Heidi Nolen, was seeking other employment. Salario spoke with Nolen and told her he would see if he knew someone who could offer her a job or if he could offer her a job at a later point. In April or May of that year, Salario introduced Nolen to Bhatia, who offered her a position with Techmate. Nolen decided to take the job, resigning from her position at Freedom Medical in May 2004 and starting her new job at Techmate approximately one week later. PX-USM 11 (7/25/08 Nolen Dep.) at 30-31, 34-36.
Following his departure from Freedom Medical, Salario also remained in regular telephone contact with Gillespie, with whom he had started Harbor Medical, LLC. During telephone conversations between Gillespie and Salario over an unspecified time period, but particularly in 2004, Salario would ask Gillespie about Freedom Medical’s financial status and efforts to resolve its problems with its secured lender, Wachovia Bank. At some point after August 2004 and before 2006, Salario informed Gillespie that he had a contact within Freedom Medical who could steal equipment for U.S. Med, although Salario never told Gillespie the name of this contact. PX-H 2 ¶¶ 19, 23.
In the spring of 2005, Salario also told Gillespie that he had an arrangement with Rick Burgess, a Freedom Medical branch manager, who was referring certain business opportunities to Salario for compensation. Id. ¶ 25. Burgess had entered into an agreement with Salario in January of that year to receive rental equipment from U.S. Med, distribute the equipment to customers in the Indianapolis market, and then return the equipment to U.S. Med at the end of the customer’s rental period. In return, U.S. Med paid Burgess a commission of 25%. In his job as a branch manager for Freedom Medical, Burgess received a 4% commission. Docket No. 403-14 (2/8/07 Burgess Dep.) at 68-76.
3. American Medical Logistics, LLC
In early 2004, Rivera, who had been terminated as Freedom Medical’s New York area branch manager the previous December, formed American Medical Logistics, LLC (“AML”) to engage in the business of buying, selling, and renting biomedical equipment in the New York area. Gillespie provided working capital for Rivera’s new company and discussed this business development with Salario. PX-H 2 ¶ 13; USMX 9 (3/16/09 Rivera Aff.) ¶¶ 3-4. Once AML was established, Gillespie diverted a number of business opportunities from Freedom Medical to AML. Signature Medical and Salario, through U.S. Med, provided equipment that AML needed to fill customer orders for these transactions. PX-H 2 ¶ 13.
4. Med Logic
The next year, in early 2005, Gillespie created a fictitious business entity named Med Logic with the intent of using it as a vehicle for acquiring medical equipment for AML and U.S. Med. Gillespie discussed creation of Med Logic with Salario. Salario told Gillespie that he supported the undertaking, identified the types of equipment U.S. Med would be interested in obtaining from Med Logic, and told Gillespie to keep an eye out for opportunities to acquire such inventory. Gillespie then used Med Logic to procure equipment and sell it to U.S. Med. Gillespie did not inform the owners of Freedom Medical, Gwynn and Greco, that he had formed this side business. Id. ¶ 20.
In November 2005, Gwynn and Greco asked Gillespie to assist them in selling 166 Baxter 6201 infusion pumps that they had purchased either in their individual capacities or on behalf of a business Greco had created. Id. ¶ 22; USM Reply Ex. 5 (12/3/08 Gwynn Dep.) at 275, 295, 309-11. Gillespie represented that all of the infusion pumps would be conveyed, through Signature Medical, to a purchaser in Michigan. Instead, Gillespie sold 100 of the pumps to U.S. Med through Med Logic. PX-H 2 ¶ 22. Gwynn did not care who purchased the equipment and, as far as he was concerned, he and Greco received adequate compensation from the sale. USM Reply Ex. 5 at 309. In connection with the transaction, Salario asked Gillespie to access the confidential proprietary database of Freedom Medical and provide him with inventory information about the Baxter 6201 infusion pumps Freedom Medical had rented to customers in Texas. Gillespie gave Salario the information. PX-H 2 ¶ 22.
5. Signature Entities
a. Formation of Signature Entities
Clifford Hall was an employee of Freedom Medical from approximately October 16, 2000 to June 1, 2001. Id. ¶ 3. Within six months to a year after leaving Freedom Medical, Mr. Hall began doing business under the name Signature Medical, Ltd., LLC (“Signature Medical”), incorporating Signature Medical as an independent legal entity on September 18, 2003. For the first six to eight months of Signature Medical’s business operations, Gwynn and Greco of Freedom Medical supplied Mr. Hall with medical equipment that he would strip down to its component parts and sell, dividing the profits with Gwynn and Greco. Eventually, Signature Medical began selling, renting, and servicing medical equipment. At first, the business operated out of the home that Mr. Hall shared with his wife. Signature Medical moved to separate offices on Huddell Avenue in late 2004 or early 2005. PX-H 1 at 72-73, 75, 79-83, 88; PX-H 4 (Signature Med. Cert. of Org.).
Mr. Hall and Gillespie had been acquaintances when they both worked at Freedom Medical. After leaving and starting Signature Medical, the two men became friends. At Mr. Hall’s request, Gillespie caused Freedom Medical to enter into business transactions with Signature Medical on terms that were more favorable than those offered to other of Freedom Medical’s customers and suppliers. In all, between 2004 and 2006, Gillespie secured the sale of over 100 pieces of equipment from Freedom Medical to Signature Medical. Gillespie also referred a number of business opportunities to Signature Medical for a commission. Gillespie did not secure approval from Freedom Medical’s owners before consummating disproportionately favorable transactions with Signature Medical. Nor did he disclose his business referrals to Gwynn and Greco. PX-H 2 ¶¶ 3-5.
In late 2003 and early 2004, Freedom Medical began scaling back its operations in the market for emergency medical services (“EMS”) equipment and consolidated that portion of its business with other activities already under Gillespie’s purview as vice president of marketing and sales. In view of this development, Mr. Hall and Gillespie decided to form an EMS business of their own. On March 3, 2004, they created Signature Emergency Products, LLC (“SEP”), and set about diverting business opportunities from Freedom Medical to SEP. Salario’s company, U.S. Med, was an occasional customer of SEP. Id. ¶¶ 6, 17; PX-H 5 (SEP Bus. Entity Filing History).
As part of the competitive strategy adopted by Gillespie and Mr. Hall, in 2005, SEP hired Fred Howland, the last employee of Freedom Medical’s EMS division. Gillespie arranged for Howland to take with him to SEP a Dell computer containing Freedom Medical’s database management system, known as TeleMagic. TeleMagic contained proprietary information about current and potential EMS customers, including their purchasing preferences, buying history, and contact information. SEP used this Freedom Medical system to aid its sales and marketing activities. Id. ¶¶ 7-9. After Howland left SEP, he trained a replacement to work with TeleMagic. PX-H 18 (2/2/07 Howland Dep.) at 42-43.
b. Dawn Hall’s Involvement in Signature Entities
Although she was not an employee of either Signature entity, Ms. Hall performed tasks for her husband’s businesses, both while Signature Medical operated out of her home and after the businesses moved to separate offices. When Mr. Hall first created Signature Medical and was working from the couple’s home, Ms. Hall would answer the phone and take messages relating to business matters. She would also sit with her husband while he did work in the evening hours. Hall Reply Ex. A (1/3/13 S. Hall Aff.). In 2004 and 2005, George Rivera rented medical equipment for his AML business from Signature Medical, often re-renting the equipment and splitting the rental revenue with Signature Medical. When he wanted to start or stop renting a piece of equipment, he talked with or sent a fax to Clifford, Dawn Hall, or another Signature employee. USMX 9 ¶ 9. Over those two years, Rivera sent tens of faxes to Ms. Hall, some of which she stamped or signed to confirm receipt. PX-H 9 (Facsimile Transmissions from G. Rivera to S. Hall). Ms. Hall did not establish the terms of any of these rental transactions. Hall Reply Ex. A.
Fred Howland, Martin Crouch, Jason Ragazzo, Jasper Smith, and Richard Collinson, all of whom did work for either Signature Medical or SEP between 2004 and 2006, recall that Ms. Hall performed various administrative functions for the companies. Howland, the SEP employee, spoke to Ms. Hall “numerous times” when she was “refurbishing equipment or handling customer service calls.” Howland is “pretty certain” that Ms. Hall sent him e-mails regarding customer service issues while he worked for SEP. PX-H 18 at 40, 137. Ms. Hall did have a Signature Medical e-mail address. PX-H 10 (6/14/07 Hr’g Tr.) at 9.
During his employment with Signature Medical in 2004, Martin Crouch saw Ms. Hall perform shipping and receiving work for the business. PX-H 7 (4/29/08 Crouch Dep.) at 215. Jason Ragazzo, who serviced equipment for Signature Medical, worked on infusion pumps with Ms. Hall at the Signature entities’ business location on Huddell Avenue and recalls Ms. Hall answering phones for the Signature businesses. PX-H 16 (4/28/08 Ragazzo Dep.) at 41-42. Jasper Smith also repaired equipment in Signature Medical’s possession, while at the same time working as an employee of Freedom Medical. Smith saw Ms. Hall at the Huddell Avenue offices answering phones, ...