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PTSI, Inc. v. Haley

Superior Court of Pennsylvania

May 24, 2013

PTSI, INC., Appellant
v.
COLE HALEY, ANTHONY PIROLI AND EVOLUTION SPORTS INSTITUTE LLC, A PA LIMITED LIABILITY COMPANY, Appellees

Appeal from the Order Entered April 2, 2012, In the Court of Common Pleas of Allegheny County, Civil Division, at No. G.D. 11-009299.

BEFORE: SHOGAN, ALLEN and WECHT, JJ.

OPINION

SHOGAN, J.

Appellant, PTSI, Inc. ("PTSI"), appeals from the order granting summary judgment in favor of Appellees Cole Haley ("Haley"), Anthony Piroli ("Piroli"), and Evolution Sports Institute LLC ("ESI"). For the reasons that follow, we affirm.

PTSI provides sports training to professional and youth athletes under the trade name Power Train Sports Institute. Haley and Piroli are both certified personal trainers. Haley worked for PTSI as its Director of Operations for the Pittsburgh market. Piroli worked for PTSI as a personal trainer. Both men worked at PTSI's facility in Wexford, Pennsylvania. They were both at-will employees and not subject to non-compete, nondisclosure, or non-solicitation agreements.

Sometime before March 2011 and while still employed by PTSI, Haley and Piroli decided to open their own sports training facility. To that end and before they resigned from PTSI on April 29, 2011, Haley and Piroli incorporated ESI, leased a location in Bridgeville, Pennsylvania as of May 2, 2011, and informed PTSI clients that they were starting their own business.

In response to the creation of ESI, PTSI filed a multi-count action against Haley, Piroli, and ESI, averring, inter alia, conversion, breach of duty of loyalty, and breach of fiduciary duty of loyalty. During the course of discovery, PTSI requested sanctions for the personal defendants' alleged spoliation of evidence, i.e., the deletion of electronic files. Following an extended discovery period, PTSI and the defendants filed separate motions for summary judgment. The trial court denied PTSI's motion and granted the defendants' motion. PTSI appealed. PTSI and the trial court have complied with Pennsylvania Rule of Appellate Procedure ("Pa.R.A.P.") 1925.

On appeal, PTSI presents the following issues:[1]
A. Whether the trial court erred in dismissing PTSI's breach of duty of loyalty claim.
B. Whether the trial court erred in dismissing PTSI's breach of fiduciary duty claim.
C. Whether the trial court erred in dismissing PTSI's conversion claim.
D. Whether the court erred in denying PTSI's motion for sanctions after violation of court order to preserve evidence by completely erasing critical electronic records.

PTSI's Brief at 21, 25, 26, and 29 (full capitalization omitted).

PTSI challenges the entry of summary judgment in favor of Haley, Piroli, and ESI, which resulted in the dismissal of its claims. The following standards govern our review of the trial court's order:

A reviewing court may disturb the order of the trial court only where it is established that the court committed an error of law or abused its discretion. Capek v. Devito, 767 A.2d 1047, 1048, n. 1 (Pa.2001). As with all questions of law, our review is plenary. Phillips v. A-Best Products Co., 542 Pa. 124, 665 A.2d 1167, 1170 (1995).
In evaluating the trial court's decision to enter summary judgment, we focus on the legal standard articulated in the summary judgment rule. Pa.R.C.P. 1035.2. The rule states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered. Where the non-moving party bears the burden of proof on an issue, he may not merely rely on his pleadings or answers in order to survive summary judgment. "Failure of a non-moving party to adduce sufficient evidence on an issue essential to his case and on which it bears the burden of proof ….establishes the entitlement of the moving party to judgment as a matter of law." Young v. PennDOT, 560 Pa. 373, 744 A.2d 1276, 1277 (2000). Lastly, we will view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Pennsylvania State University v. County of Centre, 532 Pa. 142, 615 A.2d 303, 304 (1992).

Murphy v. Duquesne University of the Holy Ghost, 565 Pa. 571, 590, 777 A.2d 418, 429 (2001).

PTSI first challenges the dismissal of its breach of duty of loyalty claim against Haley and Piroli. According to PTSI, "[u]nder Pennsylvania law, Haley and Piroli owed PTSI a duty of undivided loyalty while employed by PTSI." PTSI's Brief at 21 (citing Basile v. H. & R. Block, Inc., 563 Pa. 359, 761 A.2d 1115 (2000)). Specifically, PTSI claims that Haley and Piroli breached their duty of loyalty by improperly soliciting PTSI's clients while still employed by PTSI. Id. at 21-22. PTSI bases its solicitation claim on the following assertions:

Nearly all of ESI's initial clientele were former PTSI clients. Further, Haley and Piroli took affirmative steps prior to their April 29, 2011 resignation date to develop closer relationships with PTSI clients by deviating from PTSI's policy of rotating clients and personal trainers and instead provided exclusive training services to certain PTSI clients. Prior to leaving PTSI, Haley and Piroli scheduled appointments for PTSI's clients at ESI for the week of its start-up. Finally, on their April 29, 2011 resignation date, Haley and Piroli took the only copies of more than 40 client training files, depriving PTSI of the information in those files.

PTSI's Brief at 22 (citations omitted); see also PTSI's Reply Brief at 1-6 (regarding breach of duty of loyalty claim). By concluding that "the above evidence demonstrating solicitation by Haley and Piroli of PTSI's clients while still employed by PTSI was merely . . . speculation and conjecture, " PTSI continues, the trial court "improperly supplanted the jury as factfinder." PTSI's Brief at 22.

The Pennsylvania Supreme Court has addressed the solicitation of customers by an employee who seeks to compete with his former employer as follows:

The rule is quite clear that the solicitation of customers and use of customers lists is permissible unless there is a breach of an express contract or violation of some confidence. There must be some element of fraud or trade secrecy involved[.] [Wiegand Co. v. Harold E. Trent Co., 122 F.2d 920, 924 (3rdCir. 1941).]
* * *
Even before the termination of the agency he is entitled to make arrangements to compete, except that he cannot properly use confidential information peculiar to his employer's business and acquired therein. Thus, before the end of his employment, he can properly purchase a rival business and upon termination of employment immediately compete[.] [Restatement (2d) of Agency, § 393 comment e.]
Nor is the fact that the new company may acquire some of the plaintiff's former customers contrary to law. It is not a phenomenal thing in American business life to see an employee, after a long period of service, leave his employment and start a business of his own or in association with others. And it is inevitable in such a situation, where the former employee has dealt with customers on a personal basis that some of those customers will want to continue to deal with him in his new association. This is so natural, logical and part of human fellowship, that an employer who fears this kind of future competition must protect himself by a preventive contract with his employee, unless, of course, there develops a confidential relationship which of itself speaks for non-disclosure and noncompetition in the event the employer and employee separate.

Spring Steels, Inc. v. Malloy, 400 Pa. 354, 359, 363-364, 162 A.2d 370, 372-373, 375 (1960) (emphasis in original; internal quotation marks omitted). See also Gilbert v. Otterson, 550 A.2d 550 (Pa. Super. 1988) (quoting rule affirmed in Spring Steels), appeal denied, 522 Pa. 596, 562 A.2d 320 (1989); Colteryahn Dairy, Inc. v. Schneider Dairy, 415 Pa. 276, 280, 203 A.2d 469, 471 (1964) ("Generally, in the absence of an express contract to the contrary, solicitation of a former employer's customers, on behalf of another in competition with his former employer, will not be enjoined.").

Applying the rationales of Spring Steels and Gilbert, the trial court concluded that no genuine issue of material fact existed as to Haley's and Piroli's alleged solicitation of PTSI's customers:

Mr. Saunders[2] admitted that each of the clients was an "at will" client with no contractual obligation to continue to train with PTSI. Mr. Saunders further stated that the clients were obviously free to train with their teams and not with PTSI. Mr. Saunders admitted that the clients were free to train at Evolution Sports facility, as long as not impermissibly solicited by Haley or Piroli while still employed by PTSI.
In Spring Steels, the Supreme Court of Pennsylvania emphasized:
"The rule is quite clear that the solicitation of customers and use of customers lists is permissible unless there is a breach of an express contract or violation of some confidence. There must be some element of fraud or trade secrecy involved …["] Spring Steels, 162 A.2d at 372-373. (emphasis by Supreme Court). Here, no element of fraud or trade secrecy is invoked simply by the individual Defendants planning to go into business for themselves and preparing to compete prior to terminating their employment with PTSI. [Haley's and Piroli's] conduct of advising clients of their intention to open a new training facility was done with proper motives and to advance legitimate business interests. See Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466, 471 (Pa. 1979) (affirming grant of summary judgment in favor of defendant, including a claim for breach of fiduciary duty, where plaintiff failed to establish a prima facie case or a genuine issue of material fact to prove defendant's alleged unlawful intent where defendant acted to advance its own legitimate interests). PTSI has not offered sufficient evidence that could prove that [Haley's and Piroli's] conduct was other than proper, justified and reasonable under the circumstances.
In order to establish its claims for breach of a duty of loyalty or breach of fiduciary duty, PTSI must show that [Haley and Piroli] unlawfully solicited its clients while still employed by PTSI. PTSI contends that [Haley and Piroli] somehow breached a duty of loyalty by soliciting its clients before they left PTSI by relying upon certain testimony of former PTSI clients. However, the record provides no support for [PTSI's] contention that there was such solicitation. In fact, when asked whether PTSI had any evidence to support the claim that clients had been solicited while employed by PTSI, Mr. Saunders admitted that he was not aware of any former client who stated that he or she was solicited.
To bolster its allegation of unlawful solicitation, PTSI noted that soon after [Haley and Piroli] resigned from PTSI, some athletes, who had been clients of PTSI, began training with ESI. The case law, however, is clear that an employee may make preparations to compete and schedule appointments for a new business prior to termination of employment. New L&N Sales and Marketing v. Menaged, 1998 WL 575270, at *7 (E.D. Pa. Sept. 9, 1998).
[PTSI] relies on an undated document that stated, "We have roughly 45 student and 10 NFL confirmations that they will train at ESI." [PTSI] contends that such evidence of "confirmations" from unnamed persons demonstrates that [Haley and Piroli] unlawfully solicited PTSI's clients while still employed by PTSI. Under Pennsylvania law, a jury cannot be allowed to reach a verdict merely on the basis of speculation or conjecture. Young, 744 A.2d at 1277. Here, however, PTSI must base its solicitation contention upon speculation and conjecture that these confirmations were received from clients of PTSI that would certainly become clients of ESI. The mere reference to "confirmations" from unnamed persons does not provide evidence that they were the result of unlawful solicitation as opposed to a decision of the athlete upon the simple announcement that his trainer was moving.

Trial Court Opinion, 7/31/12, at 16-18 (footnotes omitted).

Upon reviewing the record in the light most favorable to PTSI, we conclude that PTSI is not entitled to relief. Steven Saunders admitted that he did not talk to any former clients who claimed they were solicited. N.T. (Saunders Deposition), 11/17/11, at 69. Even if Haley and Piroli did contact PTSI's clients while still employed by PTSI, PTSI presents no evidence that Haley and Piroli did so improperly. For example, text messages attached to PTSI's motion for summary judgment demonstrate that Piroli was circumspect and cautious in dealing with clients just days before resigning from PTSI. See Motion for Summary Judgment, 1/20/12, at Exhibit H (Excerpts from Deposition of Dillon Buechel and text messages).

Moreover, Haley and Piroli did not breach an express contract or violate some confidence. Spring Steels, 400 Pa. at 359, 162 A.2d at 372-373. Additionally, Haley and Piroli were not subject to a restrictive covenant, i.e., a non-compete, a non-disclosure, or a non-solicitation agreement, which could have been enforced to prevent them from competing with PTSI. Their right to compete included the right to divert customers from PTSI. Gilbert, 550 A.2d at 555. Furthermore, PTSI did not identify an element of fraud or trade secrecy as being involved in this case. Id. PTSI did not present evidence that its customer list was a trade secret, i.e., the product of special work on the part of PTSI, or that Haley and Piroli misappropriated customer names and addresses in violation of a confidential relationship or an express contract. Spring Steels, 400 Pa. at 359, 162 A.2d at 373.

Notably, PTSI makes the assumption that, because its former clients began training the week ESI opened, Haley and Piroli improperly solicited those clients. However, Steven Saunders acknowledged that his clients were not under contract and, therefore, were free to train elsewhere. N.T. (Saunders Deposition), 11/17/11, at 86-88. Indeed, PTSI's witness, Dillon Buechel, testified that he and his fellow Montour High School teammates decided amongst themselves to leave PTSI of their own volition and for their own reasons. N.T. (Buechel Deposition), 11/8/11, at 39. Dominic Martinelli, also of Montour High School, testified to leaving PTSI of his own volition and for his own reasons. N.T. (Martinelli Deposition), 11/8/11, at 32, 35-36, 45-47.

In sum, absent substantiating evidence, PTSI's repeated assertions that Haley and Piroli improperly solicited PTSI customers do not make the underlying claim true. PTSI has failed to satisfy its burden of adducing sufficient evidence of solicitation to establish its breach of loyalty claim. Therefore, Haley and Piroli were entitled to judgment as a matter of law. See Grandelli v. Methodist Hosp., 777 A.2d 1138, 1144 (Pa. Super. 2001) ("If the non-moving party fails to come forward with sufficient evidence to establish or contest a material issue to the case, the moving party is entitled to judgment as a matter of law."). Consequently, we conclude that ...


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