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Mico Pittsburgh Inc. v. Newman

Superior Court of Pennsylvania

April 19, 2017

METALICO PITTSBURGH INC. Appellant
v.
DOUGLAS NEWMAN, RAY MEDRED, AND ALLEGHENY RAW MATERIALS, INC.

         Appeal from the Order Dated January 20, 2016 In the Court of Common Pleas of Allegheny County Civil Division at No(s): GD 15-019082

          BEFORE: LAZARUS, J., SOLANO, J., and STRASSBURGER, J. [*]

          OPINION

          SOLANO, J.

         Appellant Metalico Pittsburgh, Inc. appeals from the order granting partial[1] summary judgment in favor of Appellee Allegheny Raw Materials, Inc. ("ARM") and its current employees, Appellees Douglas Newman and Ray Medred (together, "Employees"). We reverse.

         Newman and Medred formerly were employed by Metalico, a scrap metal broker, and Metalico brought this action to enforce non-solicitation provisions in their Metalico Employment Agreements. Newman and Medred began working for Metalico in 2011 and signed Employment Agreements that were effective as of September 19, 2011. The Agreements, which were the same in all material respects, [2] stated that each employee would be employed for a term of three years, with an option to renew, and also set compensation and benefits.

         Each Employment Agreement included the following non-solicitation provisions:

(b) Covenants of the Executive. In consideration of the acknowledgments by the Executive, and in consideration of the compensation and benefits to be paid or provided to the Executive by the Employer, the Executive covenants that he will not, directly or indirectly:
(ii) whether for the Executive's own account or for the account of any other person, at any time during the Employment Period or the Post-Employment Period, solicit business of the same or similar type being carried on by the Employer, from (A) any person listed on Schedule A to this Agreement and (B) any other person known by the Executive to be a supplier of the Employer on or before the Termination Date, in either case whether or not the Executive had personal contact with such person during and by reason of the Executive's employment with the Employer;
(iii) whether for the Executive's own account or the account of any other person at any time during the Employment Period and the Post-Employment Period, (A) solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is or was an employee of the Employer at any time during the Employment Period or in any manner induce or attempt to induce any employee of the Employer to terminate his employment with the Employer; or (B) interfere with the Employer's relationship with any person, including any person who at any time during the Employment Period was an employee, contractor, supplier, or customer of the Employer . . . . Employment Agreements, § 8(b).

         The Agreements defined "Employment Period" as "the term of the Executive's employment under this Agreement as set forth in § 2(b)." Employment Agreements, § 1. Section 2(b), in turn, stated:

Subject to the provisions of § 6 [Termination], the term of the Executive's employment under this Agreement will be three (3) years, beginning on the Effective Date [September 19, 2011] and ending on the day before the third (3rd) anniversary of the Effective Date (the "Termination Date"). Thereafter this Agreement may be renewed for additional three-year terms at the Employer's option, subject to the agreement of the Executive, and the Termination Date will be automatically extended to the end of such renewal term.

Id. § 2(b). For purposes of the non-solicitation provisions, the "Post-Employment Period" began "on the last day of the Executive's employment by [Metalico]." Id. § 1. The length of the Post-Employment Period depended on the manner in which the Executive was terminated. See id. If the Executive was terminated for cause or voluntarily terminated his employment with Metalico "during or after the Employment Period, " then the Post-Employment Period was two years. Id. §§ 1, 6(c), 6(e). If Metalico terminated the Executive without cause, the Post-Employment Period was one year. Id. §§ 1, 6(d).[3] The Employment Agreements also provided that, "[i]f the Executive's employment hereunder expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Executive in [§] 8, " the section including the non-solicitation provisions. Id. § 9(b).

         On September 4, 2014, Newman sent an e-mail to Arnie Graber, the General Counsel of Metalico's parent company, with copies to Medred, Carlos Agüero (President of Metalico), and another Metalico executive. The message began:

As I am sure you are aware, both Ray [Medred] and I have contracts that expire on September 18th (two weeks from today). We are looking for clarity on what will happen on September 19th 2014. We are under the assumption from previous discussions that we will become employee[s] at will once the contracts expire.

         Mot. for Partial Summ. J., Ex. 1.[4] Newman then asked about the effect of the contracts' expiration on his and Medred's salary, benefits, expenses, vacations and holidays, bonuses, and annual reviews. Id. That same day, Agüero responded, stating, in pertinent part:

We are aware that the 3 year agreement for both you and Ray matures on the 18th.
As I have mentioned before after the 18th you each become an employee at will.
I believe that you are both valued employees that make important contributions to the business and have the company's best interest at heart. Therefore it is our goal that you both continue to be employed by Metalico even though your preference is to not renew the 3 year agreements.

         Mot. for Partial Summ. J., Ex. 1. Agüero then explained:

• Salary would not change, but raises would be discretionary, rather than contractual;
• Medical coverage would not change;
• Normal and ordinary business expenses would continue to be covered, but corporate credit cards may be eliminated and replaced by a reimbursement plan[5];
• Vacation days and holidays would not change;
• Bonuses would fall under the "IFCO"[6] formula that Metalico was moving towards for the entire company, but there could still be subjective or discretionary bonuses; and
• Contractual deferred stock grants would end with the agreement, but Medred and Newman would still be eligible to participate in ...

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