Labor & Logistics Management Inc. v. Wallover
Opinion of the Court
The defendants, David Wallover and Winner Logistics Inc., have served upon us a notice of appeal to the Pennsylvania Superior Court relating to rulings made in our January 24, 2005 order. In particular, the defendants challenge our decision imposing an injunction as a result of finding certain documents and information obtained by the defendants constitute misappropriated trade secrets. We offer this opinion as an explanation of our decision.
Plaintiff, Labor & Logistics Management Inc., is a New Jersey corporation in the business of providing contract truck drivers to its customers. Labor & Logistics’ customers are typically companies who do not employ truck drivers themselves or companies that need additional or replacement truck drivers to satisfy their business needs. Labor & Logistics has 10 offices in seven states to accommodate customer requirements.
In September of 2000, plaintiff hired David Wallover as a driver lease manager for their Delanco, New Jersey
While at Labor & Logistics, Wallover had access to the company’s customer lists, prospective customer lists and driver lists.
To protect the privacy and confidentiality of the lists, Labor & Logistics requires employees with access to the lists to sign noncompete and nonsolicitation covenants. As a further safeguard, only the territorially relevant customer list is maintained at each location; the master list is kept only in the Labor & Logistics coiporate office.
In the early summer of 2002, Robert Latronica, an employee of Labor & Logistics, conducted a routine review of personnel records. At that time, Latronica informed Ball that a signed noncompete agreement was missing from Wallover’s personnel file; he also reported that Wallover’s was the only personnel file missing the noncompete agreement. As corporate records indicated Wallover had in fact signed the agreement, Ball instructed Latronica to review the file again.
In the month after Wallover was terminated from Labor & Logistics, Curt Roble incorporated Winner Logistics, a company in the same business as Labor & Logistics, i.e., the leasing of commercial truck drivers. Prior to the incorporation of Winner Logistics, Roble had no experience in the day-to-day operations or management of a truck-driver leasing company.
As Winner Logistics had no customers and Roble had little or no knowledge of the industry, the solicitation of customers became Wallover’s responsibility. Among others, Wallover began contacting businesses that he serviced while an employee of Labor & Logistics. At the time of the December 13, 2004 trial, Winner Logistics had approximately 15 customers. Of these customers,
As a result of Wallover and Winner Logistics’ solicitation, Labor & Logistics estimates they suffered a 10 to 15 percent loss of business.
“From the evidence presented at the hearing on December 13, 2004, we make the following:
“Findings of Fact
“(1) Defendant David Wallover never executed a written contract of employment with plaintiff Labor and Logistics Management Inc. (LLM) and never agreed orally not to compete with LLM in the event of his termination of employment with LLM.
“(2) Defendant David Wallover is not prohibited by written or oral contract from engaging in business in direct competition with plaintiff.
“(3) Notwithstanding the absence of a contract of employment, defendant Wallover was subject to a common-law duty not to violate plaintiff’s rights to the security and confidentiality of its trade secrets.
“(4) Plaintiff’s customer lists were developed over a period of time through the collection of bits of information from a variety of sources. The customer lists, therefore, constitute trade secrets.
“(5) Defendants are hereby prohibited from initiating any contact with any of plaintiff’s customers such as they existed on July 31, 2002.
“(6) Other forms and documents wholly or substantially copied or duplicated from plaintiff’s forms and documents do not constitute trade secrets subject to employee confidentiality, as the same were easily obtainable in the open market or could be easily created.
*296 “Accordingly, we enter the following
“Order
“And now, January 24,2005, defendants are enjoined and prohibited from having any contact with such of plaintiff’s customers as existed on July 31, 2002, for a period of two years from the date of this order.”
On January 29,2005, Wallover and Winner Logistics filed for an emergency motion for reconsideration of our January 24, 2005 order and, in the alternative, a motion for a stay pending appeal. We heard argument on February 4, 2005, and denied the motion for reconsideration and the motion for stay pending appeal.
In their concise statement of matters complained of on appeal, Wallover and Winner Logistics complain that our January 24,2005 order is not supported by sufficient evidence to find that Labor & Logistics’ customer list constituted a trade secret and that such information was misappropriated. Wallover and Winner also argue the issuance of an injunction in this case is an error as a matter of law because: (1) Labor & Logistics presented no evidence that an injunction was necessary to prevent irreparable harm; (2) Labor & Logistics’ delay in bringing this matter to the court for disposition conclusively establishes there is no immediate irreparable harm being suffered; (3) that the injunction we issued is overbroad and would prevent Winner Logistics from engaging in lawful competitive activity; (4) the injunction is contrary to
TRADE SECRETS
Defendants first argue that we erred in finding that Labor & Logistics’ customer list constitutes a trade secret. Pennsylvania courts have generally adopted the definition of a trade secret as provided by section 757 of the Restatement of Torts. Tyson Metal Products Inc. v. McCann, 376 Pa. Super. 461, 465, 546 A.2d 119, 121 (1988). Section 757 states that a trade secret “consists] of any formula, pattern, device or compilation of information which is in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.” Restatement of Torts §757, comment b (1939).
When making a determination as to whether information should be protected as a trade secret, courts have considered the following: “(1) the extent to which the
Although the concept of a trade secret is a nebulous one that requires a case-by-case analysis of the facts presented, courts of the Commonwealth have determined that customer lists warrant protection as trade secrets. Morgan’s Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957); O.D. Anderson Inc. v. Cricks, 815 A.2d 1063, 1072-73 (Pa. Super. 2003); A. M. Skier Agency Inc. v. Gold, 747 A.2d 936 (Pa. Super. 2000).
In Morgan’s Home Equipment, our Supreme Court explained why certain customer lists are protected as trade secrets.
“In many businesses, permanent and exclusive relationships are established between customers and salesmen. The customer lists and customer information which have been compiled by such firms represent a material investment of employers’ time and money. This information is highly confidential and constitutes a valuable asset. Such data has been held to be property in the nature of a ‘trade secret’ for which an employer is entitled to protection, independent of a nondisclosure contract, either under the law of agency or under the law of unfair
Moreover, there seems to be little significance, if any, as to whether the information from the customer list is utilized from the former employee’s memory or from a wrongfully obtained physical list; either way, courts have held the information was entitled to protection. Renee Beauty Salons Inc. v. Blose-Venable, 438 Pa. Super. 601, 603, 652 A.2d 1345, 1346 (1995).
Since the decision to protect information as a trade secret is made on a case-by-case basis, a brief summary of the relevant case law is helpful. In Morgan’s Home Equipment, our Supreme Court upheld an injunction against former employees of a company engaged in the door-to-door selling of household products. Upon gaining employment with the company, the employees were given a confidential list of customers to whom they would sell products and from whom they would collect weekly payments. After resigning from Morgan’s, several employees began a rival company and solicited their former customers. In enjoining the former employees from soliciting their former customers, the Supreme Court stated that the customer lists were confidential, particular secrets of Morgan’s, and thus, warranted protection as a trade secret. Morgan’s Home Equipment, 390 Pa. 618, 136 A.2d 838 (1957).
In Colteryahn Dairy Inc. v. Schneider Dairy, 415 Pa. 276, 203 A.2d 469 (1964), the issue was whether a former employee of a milk delivery company could be enjoined from soliciting former customers. Our Supreme Court focused on the relationship of the employee with the customer when determining if a customer list deserved
Similar to Colteryahn Dairy, the court in Renee Beauty Salons, 438 Pa. Super. 601, 652 A.2d 1345 (1995), distinguished Morgan’s Home Equipment by focusing on the nature of the employ ee/customer relationship and held that the customer list of a particular beauty salon did not constitute a trade secret. There, a number of employees left their employer and began a competing salon. Soon thereafter, the former employees began soliciting customers they serviced while employed by their former employer. The court stated that in a business such as beauty salons, “intense relationships and loyalty to the service providers] often develop. As such, customers naturally will follow the employee to the new employer, rather than remain customers of the former employer.” Id. at 609, 652 A.2d at 1349. The court also noted that it was an encouraged practice for salons to encourage new employees to solicit their former customers. Presented with these facts, the court refused to protect the customer list as a trade secret and stated, “[a]n injunction will not make Renee patrons of those who desire to go elsewhere.” Id. at 609, 652 A.2d at 1349.
Turning to the present matter, the record establishes that Labor & Logistics’ customer list is compiled with confidential and valuable information. As in O.D. Anderson, the data contained not only the names, addresses and telephone numbers of customers, but also included more particular information regarding each customer. The list included sales histories, products those customers typically shipped, pricing data, names of competitors and other information that would assist a driver in transporting a specific customer’s goods. Moreover, the data on the list was not readily obtainable by the public.
Testimony revealed that, although a competitor could potentially obtain similar information, it would take substantial effort to do so. The list was the product of “years of soliciting and interacting” with present and prospective customers. As Labor & Logistics engaged in business transactions with a client, employees upgraded the
In addition, the safeguards taken by Labor & Logistics to protect the information provides further evidence of its value. To keep the list confidential, only employees who signed the noncompete and nonsolicitation covenants were provided access to the list. When not being used, employees were told to store the list in a locked cabinet drawer. All copies of the list stored on computers were password-protected and the master list was maintained at corporate headquarters to prevent any of the particular office managers from having access to the entirety of Labor & Logistics’ customer information. In fact, Curt Roble, the founder of Winner Logistics, testified that he considers his own customer list — the majority of which is comprised of former Labor & Logistics’ customers — confidential. As they consider the information confidential, Winner Logistics also maintains their list on a password-protected computer. These safeguards were implemented at Winner Logistics, as indicated by Wallover, to prevent the information from being obtained by competitors. Wallover suggested that if the list were not kept confidential, Winner Logistics may lose an advantage over their competitors.
MISAPPROPRIATION OF THE CUSTOMER LIST
Defendants further claim that, even if the information compiled in Labor & Logistics’ customer list constituted a trade secret, there was insufficient evidence to find that either Wallover or Winner Logistics misappropriated that protected information. The necessary criterion to establish a claim for misappropriation of trade secrets is well established. Van Products Co. v. General Welding and Fabricating Co., 419 Pa. 248, 259, 213 A.2d 769, 775 (1965). To establish this claim, the employer must demonstrate: “(1) [the existence of] a trade secret. . . ; (2)
As Labor & Logistics has already established the customer list is a protectable trade secret, it is clear from the record that the remaining criteria are also satisfied. First, it is undisputed that the customer list was important and of value to Labor & Logistics’ business. Testimony reveals that the extensive data was compiled through years of solicitation and interacting with customers. To utilize this information, Labor & Logistics constructed a spreadsheet database with a variety of fields so that employees could enter customer data as it was obtained. The value and importance of the list is also demonstrated by the aforementioned methods used to safeguard it. As further support, Wallover admitted during his testimony that Winner Logistics protected their information to sustain an advantage over their competitors.
THE PERMANENT INJUNCTION
Defendants next argue that we erred in issuing a permanent injunction that prohibits them from contacting certain Labor & Logistics’ customers for a period of two years. Although defendants make a laundry list of challenges relating to the issuance of the injunction, we will address all the issues as appealed to the Superior Court.
In order for a plaintiff to prevail in an action seeking a permanent injunction, he must establish a “clear right to
In their first two challenges, defendants argue there was insufficient evidence to establish that an injunction was necessary to prevent immediate and irreparable harm. Here, as the italicized language above indicates, immediate and irreparable harm is a required showing of a plaintiff seeking a temporaiy injunction, not a permanent injunction. In order to obtain the injunction, Labor & Logistics needed to prove an actual or substantial injury had occurred or would be threatened in the future. Although this issue was not appealed and is thus waived, we note that Labor & Logistics has shown an actual injury that has occurred and that is threatened to occur in the future. Labor & Logistics claims to already have lost
We next turn to defendants’ contention that the injunction issued by this court is overbroad and would prevent defendants from engaging in lawful activity. An examination of Pennsylvania case law offers little guidance as to the appropriate scope of an injunction. Nevertheless, the Superior Court has held it is entirely within the discretion of the trial court to determine the proper scope of an injunction. Christopher M’s Hand Poured Fudge Inc. v. Hennon, 699 A.2d 1272, 1277 (Pa. Super. 1997). At a minimum, “trade secret injunctions... [should be] ‘broad enough to ensure that the information is protected.’ ” Id. (citing ST Handling Systems Inc. v. Heisley, 753 F.2d 1244, 1265 (3d Cir. 1985)).
As explained at the February 4, 2005 oral argument on defendants’ motion for reconsideration, we believe our injunction to be relatively narrow. In our order dated January 24, 2005, we enjoined defendants from having any contact with Labor & Logistics’ customers as existed on July 31, 2002, for a period of two years. The
Defendants also argue the injunction is contrary to the public interest as it will prevent non-parties to this litigation from exercising their right to make a choice regarding what company supplies them services. The instant injunction was issued to protect Labor & Logistics from the unfair competition of Winner Logistics stemming from the wrongful usurpation of protected information. Although the economic principles of free trade are a concern in any trade secrets case, it is not the only consideration. We found the misappropriation of valuable and confidential Labor Sl Logistics’ information outweighed the concerns of a customer’s right to make a choice regarding which company supplies them services. In reaching this decision, it is important to note that there is no evidence that Labor & Logistics holds a monopoly on the truck-driver leasing business. Therefore, as our order does not enjoin third parties from seeking the services of truck-driver leasing companies other than Win
Defendant also maintains the injunction is contrary to our finding that Wallover is not subject to any contractual restrictions on his right to compete and that defendants have not utilized any of Labor & Logistics’ trade secrets in the conduct of their business. Initially, it is true that we did not find Wallover was subject to any contractual restrictions relating to his right to compete or solicit.
We did find, however, that Wallover was subject to a common-law duty not to violate Labor & Logistics’ right to the security and confidentiality of its trade secrets— the customer list. In offering such a challenge, it seems that defendant has not completely read our findings, does not understand them or believes that a common-law duty of confidentiality does not exist.
Defendants next argue that the injunction is “contrary to the public policy of this Commonwealth.” We believe this concise statement is too vague to address on appeal. When a party is ordered to file a concise statement of
“The trial court may not frame issues for an appellant, either by guessing or anticipating— the appellate courts have emphasized that a trial court’s unsolicited discussion of issues not raised by an appellant in his 1925(b) statement by guessing, anticipating, or predicting the issues would not save the issues from being waived.” Commonwealth v. Lemon, 804 A.2d 34, 38 (Pa. Super. 2002).
In Dowling, the appellant made the following argument on appeal: “Did the trial court err and deprive the appellant from receiving a fair trial by prohibiting counsel from cross-examining the complainant with respect to matters impeaching his credibility?” The Superior Court determined the issue was waived as it lacked sufficient specificity to allow a trial court to address any issue on appeal. Dowling, 778 A.2d at 686.
When compared to Dowling, the concise statement filed here lacks the specificity to allow this court to properly identify or address the issue on appeal. Courts of the Commonwealth have identified many public policies to be considered by a trial court. The concise statement filed by defendants provides no guidance as to which policy the issuance of the injunction contradicts. Therefore, as it is improper for this court to guess or attempt to predict defendants’ issues on appeal, this challenge to our ruling is waived.
.N.T., 12/13/2004 trial at 13.
. N.T., 12/13/2004 trial at 14.
. See 12/13/2004 trial exhibit P-2.
. N.T., 12/13/2004 trial at 18-20; plaintiff’s trial memorandum at 2.
. N.T., 12/13/2004 trial at 20.
. See generally, 12/13/2004 trial exhibits P-3, P-4 and P-5.
. N.T., 12/13/2004 trial at 23; plaintiff’s trial memorandum at 2.
. N.T., 12/13/2004 trial at 22.
. N.T., 12/13/2004 trial at 22.
. N.T., 12/13/2004 trial at 26.
. Testimony at the 12/13/2004 trial indicated that no Labor & Logistics employee recalls presenting WalEover with a noncompete agreement or witnessing him sign one. N.T., 12/13/2004 trial at 103-104.
. N.T., 12/13/2004 trial at 114-18.
. N.T., 12/13/2004 trial at 121-23.
. N.T. 12/13/2004 trial at 119.
. N.T., 02/04/2004 argument at 17.
. N.T., 12/13/2004 trial at 177.
At trial the following testimony was elicited from Wallover:
“Court: Isn’t it true you protect your customer and driver information because you don’t want it released to competitors?
“A: That is a simple statement but I guess so, yes ...
“Court: For whatever advantage it gives you, you don’t wish to give any information you have to your competitors, do you?
“A: No.”
. N.T., 02/04/2005 argument at 17.
. N.T., 02/04/2005 argument at 26-29.
. N.T., 12/13/2004 trial at 177.
. N.T., 02/04/2005 argument at 26.
. N.T., 12/13/2004 trial at 177.
. TM.T., 02/04/2005 argument at 17.
. If defendant contends the latter, Morgan’s Home Equipment and its progeny clearly establish otherwise. 390 Pa. at 624, 136 A.2d at 842 (“The duty of the servant not to disclose the secrets of the master may arise from an express contract, or it may be implied from their confidential relations.”).
. Pennsylvania courts have upheld injunctions barring a former employee and their new employer from utilizing protected customer lists. See Morgan’s Home Equipment, 390 Pa. 618, 136 A.2d 838 (1957); A. M. Skier Agency Inc. v. Gold, 747 A.2d 936 (2000).
Case-law data current through December 31, 2025. Source: CourtListener bulk data.