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Razor Technology, LLC v. Hendrickson

United States District Court, E.D. Pennsylvania

May 3, 2018

RAZOR TECHNOLOGY, LLC
v.
TODD HENDRICKSON, et al.

          MEMORANDUM WITH FINDINGS OF FACT AND CONCLUSIONS OF LAW

          KEARNEY, J.

         We appreciate the years of hard work and investment necessary to succeed in selling cutting edge information technology to cautious corporate buyers. Companies selling hardware, software and end-to-end solutions may create a sales or accounting formula which could possibly become its confidential trade secret. The sales representative can also employ his sales techniques and knowledge of the customers' preferences without stealing his former employer's trade secrets unless the former employer can show evidence its knowledge of the customers' preferences is a trade secret. In addition to protecting trade secrets, sales companies wanting to protect their client base often require incoming sales representatives agree not to compete after leaving. Absent definitive agreed terms restricting post-employment conduct, the sales representative can seek the same customer business for a competing new employer.

         In the accompanying Order, we deny an information technology employer's motion to enjoin its former sales representative's successful efforts with one of the former employer's customers as the former employer did not adduce evidence of definitive post-employment restrictions or the former employee is improperly using trade secrets. Under Rule 52, and after evaluating credibility of witness testimony at our April 30, 2018 hearing on Plaintiff's Motion for a preliminary injunction (ECF Doc. No. 24), we today enter findings of facts and conclusions of law supporting our accompanying Order.

         I. Findings of fact

         1. After graduating from the University of Delaware, Todd Hendrickson began working as a sales representative for value-added resellers in the Information Technology (“IT”) hardware and software industry.

         2. Value-added resellers connect end-user customers (e.g., banks, securities firms) with software and hardware manufacturers to meet the customer's IT needs. The manufacturers pay a commission to the value-added resellers.

         3. Mr. Hendrickson worked for Atrion, a value-added reseller, from 2000 until January 2012. At Atrion, Mr. Hendrickson primarily sold Hewlett-Packard products. Mr. Hendrickson wanted to move a value-added reseller partnered with more manufacturers and larger number of products sold.

         4. Razor Technologies, LLC, founded in 2004 by George Sucher and James Stillittano, competes with Atrion in selling software and hardware. Razor claims it offers more than Atrion by providing “full service, end-to-end, IT cloud infrastructure services company with capabilities to meet all of its customer IT needs, including architecture, integration, deployment and managed services.”[1]

         5. Razor contacted Mr. Hendrickson about joining Razor in 2009 and again in 2011. The 2009 discussions did not progress but began again in later 2011.

         6. Messrs. Sucher and Stillittano testified during their 2011 pre-employment discussions with Mr. Hendrickson, Mr. Hendrickson stated he had a non-compete agreement with Atrion.

         7. Mr. Hendrickson testified he did not have a non-compete agreement at Atrion because the owner did not believe in them.

         8. Neither party produced a copy of a non-compete agreement between Atrion and Mr. Hendrickson. We heard no testimony from Atrion.

         9. Mr. Stillittano testified he and Mr. Hendrickson “generally” discussed Razor requiring a non-compete agreement with Mr. Hendrickson and may have mentioned a two year restriction but he could not be sure.

         10. Mr. Sucher testified he and Mr. Hendrickson discussed the client accounts Razor would assign him because Mr. Hendrickson had a two-year non-compete agreement with Atriano and could not bring clients with him to Razor.

         11. On January 9, 2012, Razor extended an offer letter to Mr. Hendrickson to begin work as a Senior Enterprise Account Executive on January. Razor's offer letter does not mention a non-compete agreement.[2]

         12. On January 17-19, 2012, before agreeing to join Razor, Mr. Hendrickson attended Razor's sales kickoff meeting in Atlantic City with Razor's co-founding member Mr. Sucher.

         13. During the sales kickoff, a human resources power point presentation mentioned Razor's use of non-compete agreements. After seeing this slide, Mr. Hendrickson told Mr. Sucher he would not agree to a non-compete agreement with Razor. Hendrickson testified Mr. Sucher did not reply, just looked at Mr. Hendrickson. Mr. Hendrickson testified he took this to mean Mr. Sucher and Razor understood his position he would not sign a non-compete agreement. Mr. Hendrickson testified he earlier told Razor he did not have a non-compete with Atrion and would not sign one now.

         14. Mr. Sucher disputed this account and testified Mr. Hendrickson never said he would not sign a non-compete agreement at the sales kickoff.

         15. On January 19, 2012, Mr. Hendrickson signed Razor's offer letter which did not mention post-employment restrictions.

         16. On January 30, 2012, the Razor receptionist presented Mr. Hendrickson his new hire paperwork including a non-compete agreement. The document is formally called a Confidentiality Agreement but all witnesses referred to it as a “non-compete.” 17. Razor's non-compete agreement prohibits former employees from engaging in business competitive to Razor for 2 years in Pennsylvania, New Jersey, New York, and Massachusetts and “related Razor Technology customer regions.”[3]

         18. Mr. Hendrickson testified he was slightly surprised to see the non-compete agreement included in his new hire paperwork but assumed the receptionist just handed him the standard paperwork and unaware of his refusal to sign the non-compete.

         19. Mr. Hendrickson testified he did not sign the non-compete agreement. Instead, Mr. Hendrickson kept it in his bag for a few weeks. He recalled it began to get crinkled and he eventually threw it out.

         20. Almost six weeks later, on March 12, 2012, Mr. Hendrickson signed the acknowledgement he received with Razor's employee handbook. The handbook stated “In order to protect the company from unauthorized release of [confidential information], all salaried employees will be required to sign [non-compete agreement]. This agreement will be a condition of employment and continued employment.”[4]

         21. In an affidavit filed before our hearing, Mr. Sucher swore he “firmly believed (and still believes[s])” Mr. Hendrickson signed the Confidentiality Agreement.[5]

         22. At the hearing, Mr. Sucher changed his story and testified he recalled seeing Mr. Hendrickson's signature on the non-compete agreement when the receptionist brought him Mr. Hendrickson's completed paperwork right after he started. Mr. Sucher did not recall whether Mr. Hendrickson's signed acknowledgement of receiving the handbook or other paperwork was also in the file because he did not look that closely.

         23. At the time, Razor maintained Mr. Hendrickson's personnel file and all personnel files in hard copy.

         24. In January 2013, Razor presented Mr. Hendrickson with a 2013 Compensation Plan Terms & Conditions and Mr. Hendrickson signed the document.

         25. The 2013 Compensation Plan provides “This is not an employment contract; rather, it is a description of terms, policies, and procedures associated with your incentive payment. Razor Technology, LLC may modify or amend this plan at any time at its sole discretion.”[6]

         26. Mr. Sucher testified the 2013 Compensation Plan states it is not an employment contract because he believes Pennsylvania is right-to-work state and employment contracts are banned but he believes it binds Mr. Hendrickson to the non-compete language.

         27. The 2013 Compensation Plan provided, “By accepting any pay under the Compensation Plan, you are automatically accepting the Plan, agreeing to a full non-compete in your general territory and Razor Technology, LLC territory and agreeing that your compensation shall be determined in accordance with the provisions of this Plan, as it is currently constituted and as it may be changed from time to time by Razor…”[7]

         28. Mr. Sucher testified the 2013 Compensation Plan increased Mr. Hendrickson's commission rate increased for one area of sales and Razor added a new item of sales for Mr. Hendrickson.

         29. In March 2013, Razor hired Chris McGrath to handle its human resources, first as the Controller and then as Chief Financial Officer.

         30. Mr. Sucher testified Razor brought Mr. McGrath on to “sure up” the offer letter and non-compete agreements because “a couple slipped through cracks.” Mr. McGrath changed Razor's offer letters to include a non-compete and a handbook acknowledgement as part of accepting employment.

         31. One of Mr. McGrath's first projects was to convert the employees' personnel files from hardcopy to digitized versions. Razor no longer created hard copy files for new employees and moved the hard copy files for existing employees to a safe in Mr. Stillittano's office.

         32. In the first quarter 2014, Mr. McGrath directed his assistant Amber Young to audit the employees' personnel files for required documents including the non-compete agreement.

         33. Ms. Young created an audit sheet marking whether each employee had returned certain employment papers. One column is named “non-compete.” The box for “non-compete agreement” for Mr. Hendrickson's file is checked. Mr. McGrath could not testify to why Ms. Young placed the check in the box. Mr. McGrath was “sure” Ms. Young reviewed Mr. Hendrickson's electronic personnel file, not the hard copy version.

         34. The next year, Razor presented Mr. Hendrickson with the 2014 Compensation Plan which similarly stated it is not an employment contract and also had non-compete language. Razor also reserved the right to modify the terms of the agreement at any time.

         35. The 2014 Compensation Plan increased Mr. Hendrickson's commission pay in two sales areas.

         36. Mr. Hendrickson did not sign the 2014 Compensation Plan but accepted payments from Razor under the Plan.

         37. Mr. McGrath continued to direct a yearly audit of employees' personnel files and the check for Mr. Hendrickson's non-compete remained until he resigned in August 2017.

         38. After Razor suspected Mr. Hendrickson allegedly violated the non-compete agreement it believed he signed, Mr. McGrath searched Mr. Hendrickson's personnel files.

         39. In Mr. Hendrickson's electronic personnel file, Mr. McGrath discovered a signed non-compete agreement but the agreement is between Razor and a former employee Mr. Kurik.

         40. Mr. McGrath could not locate a non-compete agreement between Mr. Hendrickson and Razor.

         41. Mr. McGrath researched the personnel file's electronic history and discovered Mr. Kurik's non-compete agreement and handbook acknowledgement were digitally placed in Mr. Hendrickson's file on May 26, 2015. No. party explains how it got there. Mr. Hendrickson denies his access to either the hard files or digitized copies and there is no contrary evidence.

         42. In Mr. Hendrickson's hardcopy personnel file, Mr. McGrath did not find a signed non-compete agreement between Mr. Hendrickson and Razor.

         Razor and Mr. Hendrickson's relationship with TD Ameritrade.

         43. While at Razor, Mr. Hendrickson acquired Goldman Sachs as a client through his college fraternity friend Tom Scarpati who worked in information technology there.

         44. In Fall 2015, Mr. Scarpati moved from Goldman Sachs to TD Ameritrade.

         45. Mr. Scarpati provided Mr. Hendrickson with “warm introductions” to TD Ameritrade IT employees for Mr. Hendrickson to try and compete for various portions of TD Ameritrade's IT needs.

         46. TD Ameritrade data storage team leader Bernie Castronovo hired Mr. Hendrickson and Razor for a project. TD Ameritrade server team leader Chibo Qian also hired Mr. Hendrickson and Razor for a project.

         47. While working with these teams, Mr. Hendrickson learned TD Ameritrade needed assistance updating an existing virtual desktop infrastructure (“VDI”), which is a system allowing TD Ameritrade employees to remotely access their work desktop computers.

         48. Mr. Hendrickson asked Razor to hire Steve Wright to assist in selling TD Ameritrade VDI implementation because he had specialized knowledge in VDI technology.

         49. Along with Mr. Wright, Mr. Hendrickson made a sales pitch to TD Ameritrade to assist with their VDI implementation and TD Ameritrade asked him to coordinate its ...


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