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Socko v. Mid-Atlantic Sys. of CPA, Inc.

Superior Court of Pennsylvania

May 13, 2014

DAVID M. SOCKO, Appellee
v.
MID-ATLANTIC SYSTEMS OF CPA, INC., Appellant

Appeal from the Order entered October 15, 2012, Court of Common Pleas, York County, Civil Division at No. 2012-SU-001608-44. Before ADAMS, J.

Michael J. Torchia, Huntingdon Valley, for appellant.

BEFORE: GANTMAN, P.J., DONOHUE and STABILE, JJ.

OPINION

Page 929

DONOHUE, J.

Appellant, Mid-Atlantic Systems of CPA, Inc. (" Mid-Atlantic" ), appeals from the trial court's order granting the motion for partial summary judgment filed by Appellee, David M. Socko (" Socko" ). This appeal presents an issue of first impression in this Commonwealth, namely whether a non-competition restrictive covenant in an employment agreement entered into after the commencement of employment is unenforceable for lack of consideration, where the employer provided the employee with no benefit or change in job status at the time of execution, but the agreement states that the parties " intend to be legally bound" by its terms. For the reasons that follow, we conclude that the restrictive covenant is unenforceable for lack of valuable consideration, and therefore affirm the trial court's order.

The parties do not dispute the relevant factual background. Mid-Atlantic, which is in the business of basement waterproofing services, originally hired Socko as a salesman in March 2007, at which time he signed an employment contract containing a two-year covenant not to compete. Socko resigned in February 2009, but was rehired in June 2009, at which time he signed a new employment agreement containing another two-year covenant not to compete. While still employed by Mid-Atlantic as an at-will employee, on December 28, 2010, Socko signed a third employment contract (hereinafter, " the Non-Competition Agreement" )[1] containing a covenant not to compete with Mid-Atlantic for two years after the termination of his employment in any of the following locations: Connecticut, the District of Columbia, Delaware, Maryland, New Jersey, Pennsylvania, New York, Virginia, West Virginia, or any other jurisdiction in which Mid-Atlantic does business. The Non-Competition Agreement expressly provides for the application of Pennsylvania law.

On January 16, 2012, Socko resigned from Mid-Atlantic, and a few weeks later he accepted a position with Pennsylvania Basement Waterproofing, Inc. in Camp Hill, Pennsylvania. On February 7, 2012, Mid-Atlantic sent a letter to Socko's new employer, attaching the Non-Competition Agreement and threatening litigation. Ten days later, Pennsylvania Basement Waterproofing, Inc. terminated Socko's employment.

On April 13, 2012, Socko filed a Complaint and Action for Declaratory Judgment against Mid-Atlantic, seeking, inter alia, [2] a determination that the Non-Competition Agreement is unenforceable because it was not supported by sufficient consideration. After discovery, on June 11, 2012, Socko filed a motion for partial summary judgment. In its response on August 3, 2012, Mid-Atlantic did not dispute that the Non-Competition Agreement was signed during the course of Socko's employment. Mid-Atlantic likewise did not deny Socko's contention that he did not receive a benefit or beneficial change in his employment status in exchange for signing the Non-Competition Agreement. Instead, Mid-Atlantic argued that the Non-Competition Agreement contains the language " intending to be legally bound," and that as a result, the Uniform Written Obligations Act,

Page 930

33 P.S. § 6 (" UWOA" ), prevents the avoidance of any written agreement for lack of consideration.

In a memorandum opinion and order dated October 15, 2012, the trial court granted Socko's motion for partial summary judgment, concluding as follows:

[Mid-Atlantic] contends that a stated intent 'to be legally bound' in the [Non-Competition Agreement] constitutes adequate consideration under Pennsylvania common law and the UWOA to make [the Non-Competition Agreement], including the non-competition clause, enforceable. Our Superior Court has held to the contrary, stating 'where a restrictive covenant is executed after the commencement of employment, it will not be enforced unless the employee restricting himself receives a corresponding benefit or change in status.' Ruffing v. 84 Lumber Co., 410 Pa.Super. 459, 600 A.2d 545 (Pa. Super. 1991). The parties agree that [Socko] received no additional benefit or any change in in employment status. ... The [c]ourt ... finds the [Non-Competition Agreement] is invalid for want of consideration.

Trial Court Opinion, 10/15/2012, at 5.

This timely appeal followed, in which Mid-Atlantic contends that the trial court erred in granting Socko's motion for partial summary judgment by failing to apply the UWOA. Our standard of review with respect to a trial court's decision ...


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