United States District Court, W.D. Pennsylvania
COLTON YOST and AAH ACQUISITION, LLC d/b/a ALL-AMERICAN HOSE Plaintiffs,
MID-WEST HOSE AND SPECIALTY, INC., Defendant.
MEMORANDUM OPINION WITH FINDINGS OF FACT AND
CONCLUSIONS OF LAW
PARADISE BAXTER UNITED STATES DISTRICT JUDGE
Colton Yost and his present employer AAH Acquisition, LLC
(doing business as All-American Hose) (hereinafter,
"All-American Hose") initiated this civil action by
filing a complaint for declaratory judgment. ECF No. 1. As
the sole Defendant to this action, Plaintiffs name Mid-West
Hose and Specialty, Inc. ("Mid-West Hose"), Mr.
Yost's former employer. This case arises out of the
present employment of Mr. Yost as an extruder operator at
All-American Hose. The parties do not dispute that Mr. Yost
signed a non-competition/nondisclosure agreement with his
former employer or that the two corporations are competitors
in the manufacture of 10- and 12-inch hose.
Mid-West Hose filed an Answer and Counterclaims bringing a
breach of contract claim against Mr. Yost and an intentional
interference with contractual relations claim against
Ail-American Hose. ECF No. 10. As relief, Defendant seeks to
enjoin All-American Hose's continuing employment of Yost,
as well as monetary damages. Id. at 10.
Mid-West Hose also filed a motion for preliminary injunction,
1) An injunction [...] against Colton Yost for a period of 18
months [...] enjoining Mr. Yost from accepting or continuing
employment with Ail-American Hose or any other business or
enterprise within the scope of the prohibition set forth in
the August 21, 2017 Noncompetition, Nonsolicitation, and
Nondisclosure Agreement between Midwest Hose and Mr. Yost;
2) [...] an injunction [...] against Mr. Yost for a period of
18 months [...] enjoining All-American Hose from continuing
employment of Mr. Yost.
ECF No. 11-4, page 1. Defendant argues that because Mr.
Yost's new employment violates his
noncompetition/nondisclosure agreement, the Court should
preliminarily enjoin Mr. Yost's employment during the
pendency of this case. ECF No. 11, page 1. Defendant's
argument in this regard is limited to the breach of contract
Choice of Laws on the Breach of Contract Claim
this Court exercises diversity jurisdiction over this matter,
a choice of laws determination must be made at the outset.
The Agreement between Mr. Yost and Mid-West Hose contains a
choice of laws clause that provides that the laws of the
State of Florida "shall govern this Agreement and the
Parties' rights, obligations and/or liabilities under
this Agreement and/or that relate to Covenantor's
employment with Company at law or in equity." ECF No.
1-1, page 6.
district court's jurisdiction rests on the diversity of
the parties, as it does here, the district court must apply
the choice of law rules of the forum state. Collins v.
Mary Kay, Inc., 874 F.3d 176, 183 (3d Cir. 2017).
See also Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U.S. 487, 497 (1941). Under Pennsylvania law,
"courts generally honor the intent of the contracting
parties and enforce choice of law provisions in contracts
executed by them" (Kruzits v. Okuma Mack Tool,
40 F.3d 52, 55 (3d Cir. 1994)) except in situations where
either (a) the chosen state has no substantial relationship
to the parties or the transaction and there is no other
reasonable basis for the parties' choice, or (b)
application of the law of the chosen state would be contrary
to a fundamental policy of a state which has a materially
greater interest than the chosen state in the determination
of the particular issue." Gay v. Creditlnform,
511 F.3d 369, 389 (3d Cir. 2007) citing § 187
of the Restatement (Second) Conflict of Laws.
Yost and Ail-American Hose argue that despite the
agreement's express language, Pennsylvania law should
apply to this dispute because: 1) none of the parties has any
relevant connection to Florida and the dispute occurred in
Pennsylvania; and 2) there is a fundamental conflict between
Florida law and Pennsylvania law (as Pennsylvania law
requires a court to balance the protectable interest of the
party seeking enforcement against an employee's interest
in earning a living, while a Florida statute expressly
forbids any such balancing analysis). Conversely, Mid-West
Hose argues that the Florida statute should apply because
Mid-West Hose has a substantial relationship to Florida and
has an interest in the uniform application of its restrictive
covenants, "a feat accomplished through Florida's
detailed laws on the topic." ECF No. 25, page 7.
the pleadings nor the record indicates that Mid-West Hose has
a substantial relationship to Florida. Mid-West Hose
is an Oklahoma corporation with its principal place of
business in Oklahoma. ECF No. 1, Complaint, ¶ 3; ECF No.
10, Answer, ¶ 3. At the evidentiary hearing, Mark
Lockhart of Mid-West Hose testified that the corporation has
twenty-six branches throughout the United States including
two branches in the state of Florida. ECF No. 28, page 5.
Mid-West Hose suggests that Florida law was specified in the
Agreement because "Florida had codified its laws
regarding the interpretation of restrictive covenants,
leading to a more streamlined and consistent approach to
enforceability throughout Mid-West Hose's
operations." ECF No. 25, page 7. Maintaining two out of
twenty-six branches in a state, without more, does not
demonstrate a substantial relationship to that state.
assuming, for the purposes of this motion only, that Mid-West
Hose has a substantial relationship to Florida and the choice
of Florida is a reasonable one due to the state's
detailed statutory structure regarding restrictive covenants,
the application of Florida's law would be contrary to a
fundamental policy of the Commonwealth of Pennsylvania
"which has a materially greater interest" in the
determination of the particular issue. While many of the
elements of the enforceability of a covenant not to compete
are the same between the two states, Florida has codified its
approach to the enforceability of restrictive covenants,
while under Pennsylvania common law, restrictive covenants
are generally disfavored. F.S.A. § 542.335; Victaulic
Co. v. Pieman, 499 F.3d 227, 235 (3d Cir. 2007)
("[M]andating compliance with a covenant not to compete
is disfavored."); Siemens Medical Solutions Health
Services Corp. v. Carmelengo, 167 F.Supp.2d 752, 760
(E.D. Pa. Apr. 12, 2001) ("because they constitute a
"restraint on an employee's trade, "
restrictive covenants "are strictly construed against
the employer" by Pennsylvania courts).
Plaintiffs' point, Florida law expressly prohibits a
court from considering any "individualized economic harm
or other hardship that might be caused to the person against
whom enforcement is sought" F.S.A. § 542.335(g)(1),
while Pennsylvania law provides that a court is required to
balance the protectable interest of the party seeking
enforcement against a former employee's interest in
earning a living. Bimbo Bakeries USA, Inc. v.
Botticella, 613 F.3d 102, 119 (3d Cir. 2010) ("[A]
court should not impose lightly" a preliminary
injunction "prohibiting someone from pursuing his
livelihood in the manner he chooses" as such is "a
severe restriction on him."). See also PharMethod,
Inc. v. Caserta, 382 F.App'x 214, 220 (3d Cir. 2010)
("A court must make an in-depth inquiry before entering
a preliminary injunction that may have an impact on a
person's livelihood."). This presents a fundamental
conflict between the laws of the two states as to the law on
the breach of contract claim.
another important distinction, Florida law does not require
the execution of a noncompetition agreement contemporaneous
with the start of the employment relationship, while
Pennsylvania requires restrictive covenants to be included in
the initial employment agreement or if agreed upon later, to
be supported by new consideration. See F.S.A. §
542.335; Pulse Technologies, Inc. v. Notaro & MK
Precision LLC, 620 Pa. 322, 328 (2013) quoting
Maintenance Specialties Inc. v. Gottus, 455 Pa. 327, 331
(1974) ("While a restrictive covenant, in order to be
valid need not appear in the initial contract, if it is
agreed upon at some later time it must be supported by new
of these reasons, we find there is a conflict between the
Florida and Pennsylvania law on the breach of contract claim.
Here, the parties entered into an agreement in Pennsylvania,
Mr. Yost is a resident in Pennsylvania, both corporations
have manufacturing facilities and employ others in
Pennsylvania. Because Pennsylvania has a materially greater
interest in the application and enforcement of restrictive
covenants entered into in its Commonwealth, we will apply
The Evidentiary Hearing and Standard of Review
Court held an evidentiary hearing on November 29, 2018 at
which the following people testified: Mark Lockhart,
Technical Director at Mid-West Hose; Kyle Stine, Extrusion
and Finishing Manager at Mid-West Hose; Colton Yost,
Plaintiff; and Robert Maleski, Manager of Engineering and
Strategic Purchasing at All-American Hose. Following the
hearing, the parties were encouraged to supplement their
briefing, specifically with regard to irreparable injury,
which they did. See ECF No. 28, page 43.
preliminary injunction is "an extraordinary remedy
granted only in limited circumstances." Issa v.
School District of Lancaster, 847 F.3d 121, 131 (3d Cir.
2017) citing Ferring Pharm., Inc. v. Watson Pharrn.,
Inc., 765 F.3d 205, 210 (3d Cir. 2014). There are four
factors a court must consider when evaluating a motion for
preliminary injunctive relief:
1) Has the moving party established a reasonable likelihood
of success on the merits (which need not be more likely than
not); 2) Is the movant more likely than not to suffer
irreparable harm in the absence of preliminary relief; 3)
Does the balance of equities tip in its favor; and 4) is an
injunction in the public interest?
LFw/tow v. City of Philadelphia, 922 F.3d 140, 152
(3d Cir. Apr. 22, 2019) citing Reilly v. City of
Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017). After the
movant meets the first two "gateway factors, " the
court then determines whether all four factors, taken
together, balance in favor of granting the relief sought.
this standard of review in mind, having now considered the
testimony of the witnesses and the evidence admitted at the
evidentiary hearing, as well as the submissions of the
parties, the Court makes Findings of Fact and Conclusions of
Law denying the motion for preliminary injunction.
See Federal Rule of Civil Procedure 52.
Findings of Fact
Plaintiff Colton Yost is a resident of Pennsylvania.
is a Delaware limited liability corporation with its
principal place of business in Pennsylvania doing business as
"All- American Hose."
Defendant Mid-West Hose is an Oklahoma corporation doing
business in Pennsylvania. ECF No. 1, Complaint, ¶ 3; ECF
No. 10, Answer, ¶ 3. Mid-West Hose has twenty-six
branches around the United States, including two branches in
the state of Florida. ECF No. 28, Transcript, page 5.
All-American Hose's Union City facility is located less
than 14 miles from Mid-West Hose's Corry facility. ECF
No. 34, Stipulated Findings of Fact.
All-American Hose and Mid-West Hose are competitors in the
hose manufacturing business. ECF No. 28, page 30.
manufacturing process for any TPU hose begins by weaving a
polyester jacket in a weaving loom. The jacket is moved to an
extruder where the jacket enters an extruder head and is
surrounded with TPU and heated and dried to create a water-
tight seal. Following completion, a coupling is applied and
the hose is tested for leaks or defects. Once the hose passes
testing, it is ready for transport. ECF No. 34, Stipulated
Findings of Fact.
Large diameter TPU hoses, those with a 10- or 12-inch
diameter, are more difficult to make than smaller hoses. ...