Pittsburgh Logistics Sys., Inc. v. Beemac Trucking, LLC

202 A.3d 801

PITTSBURGH LOGISTICS SYSTEMS, INC., Appellant

v.BEEMAC TRUCKING, LLC and BeeMac Logistics, LLC

No. 134 WDA 2017

Superior Court of Pennsylvania.

Submitted October 23, 2018

Filed January 11, 2019

William S. Stickman IV, Pittsburgh, for appellant.

Daniel B. McLane, Paul D. Steinman, Michael P. Pest, Pittsburgh, for appellee.

BEFORE: GANTMAN, P.J., BENDER, P.J.E., BOWES, J., PANELLA, J., LAZARUS, J., OTT, J., STABILE, J., DUBOW, J., and MURRAY, J.

OPINION BY OTT, J.:

Pittsburgh Logistics Systems, Inc. (PLS) appeals from the order entered on December 22, 2016, in the Court of Common Pleas of Beaver County, that determined the contractual no-hire provision in the Motor Carriage Services Contract (MCSC) between PLS and BeeMac Trucking, LLC and BeeMac Logistics, LLC (BeeMac)¹ was unenforceable as a matter of law. A panel of this Court previously affirmed the trial court decision. PLS sought reargument before a court en banc on the issue of whether the trial court erred in denying a request for a preliminary injunction that sought to enforce a no-hire provision in a contract between PLS and BeeMac. PLS's request was granted and substituted briefs were filed by both parties. The case was submitted to the en banc panel without oral argument. After a thorough review of the submissions by the parties, relevant law, and the certified record, we affirm.

PLS is a third party logistics provider. Essentially, it is a facilitator between those who need items shipped and those who are shippers. In its Appellant's Brief, PLS has provided a hypothetical transaction demonstrating its business model.

- PLS will be retained by a potential shipper or existing customer to ship freight from its facility to certain specified locations;

- PLS's employee is well-trained to recognize the type of truck necessary for particular freight, and to know what "lane" the shipment must take to get to its destination;

- PLS's employee knows which reliable trucking companies can offer the needed transportation in the designated lane and under certain cost parameters;

- PLS arranges the shipment with the carrier.

PLS's Brief, at 9-10.

BeeMac is a shipping company that does non-exclusive business with PLS. As a non-exclusive shipper, BeeMac was required to enter into the MCSC with PLS. This contract is at the heart of the instant litigation. Paragraph 14.6 of the contract² is a no-hire provision that prohibits BeeMac from directly or indirectly hiring, soliciting for employment, inducing or attempting to induce, any employee of PLS or any of its affiliates to leave their employment with PLS or the affiliate. This prohibition is ostensibly in place for the duration of the contract, which is self-renewing,³ and for two years post-contract.

While the contract was still in force, four employees of PLS, Mary Colman, Racquel Pakutz, Michael Ceravolo,⁴ and Natalia Hennings, left PLS and took employment with BeeMac.⁵

PLS filed suit against both BeeMac and PLS's former employees, seeking an injunction preventing BeeMac from employing any former employees and to prevent BeeMac from soliciting business directly from other entities that had done business with PLS. The trial court granted PLS relief in part, preventing BeeMac from soliciting other PLS customers for the two-year period established by the Motor Carriage Services Contract. However, the trial court refused to grant PLS the injunctive relief it sought regarding BeeMac's employment of the former PLS employees. PLS appealed.

With this background in place, we turn our attention to the substance of our review. Our standard of review for an order granting or denying a preliminary injunction is as follows:

We have emphasized that our review of a trial court's order granting or denying preliminary injunctive relief is "highly deferential". Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc. , 573 Pa. 637, 828 A.2d 995, 1000 (2003). This "highly deferential" standard of review states that in reviewing the grant or denial of a preliminary injunction, an appellate court is directed to "examine the record to determine if there were any apparently reasonable grounds for the action of the court below." Id. We will find that a trial court had "apparently reasonable grounds" for its denial of injunctive relief where the trial court has properly found "that any one of the following ‘essential prerequisites’ for a preliminary injunction is not satisfied." Id. at 1002.

There are six "essential prerequisites" that a party must establish prior to obtaining preliminary injunctive relief. The party must show: 1) "that the injunction is necessary to prevent immediate and irreparable harm that cannot be adequately compensated by damages"; 2) "that greater injury would result from refusing an injunction than from granting it, and, concomitantly, that issuance of an injunction will not substantially harm other interested parties in the proceedings"; 3) "that a preliminary injunction will properly restore the parties to their status as it existed immediately prior to the alleged wrongful conduct"; 4) "that the activity it seeks to restrain is actionable, that its right to relief is clear, and that the wrong is manifest, or, in other words, must show that it is likely to prevail on the merits"; 5) "that the injunction it seeks is reasonably suited to abate the offending activity"; and, 6) "that a preliminary injunction will not adversely affect the public interest." Id. at 1002. The burden is on the party who requested preliminary injunctive relief[.]

Warehime v. Warehime , 580 Pa. 201, 860 A.2d 41, 46-47 (2004) (footnotes omitted).

Upon review of the parties' arguments, the trial court determined that a no-hire provision such as the one between PLS and BeeMac has never been the subject of litigation in Pennsylvania in any reported case. Accordingly, the trial court looked to case law from other jurisdictions for guidance and followed the logic of those jurisdictions that do not allow such provisions between companies. The trial court determined the no-hire provision would violate public policy by preventing persons from seeking employment with certain companies without receiving additional consideration for the prohibition, or even necessarily having any input regarding or knowledge of the restrictive provision. Additionally, the trial court reasoned the no-hire provision was overly broad in that the enforceable no-solicitation provision between PLS and BeeMac sufficiently protected PLS from the loss of its clients, which was the ultimate purpose of all the relevant restrictions. Based upon the nature and limitations of our review, we agree with the trial court.

Initially, we quote the relevant language from the MCSC:

14.3 The parties acknowledge that during the term of the Contract there may be disclosed to CARRIER [BeeMac Trucking, LLC] confidential information concerning PLS' operations including, but not limited to, the names and addresses of Shippers and others who are clients of PLS, volumes of traffic and rate data. During the term of this Contract and for a period of one year after termination of this Contract, CARRIER hereby agrees that it will not, either directly or indirectly, solicit any individual Shipper or other client of PLS, back-solicit and/or transport for itself, without the involvement of PLS, and freight that CARRIER handles pursuant to this Contract or freight which first becomes known to CARRIER as a result of CARRIER'S past, present or future dealings with PLS.^[6]

...

14.6 CARRIER agrees that, during the term of this Contract and for a period two (2) years after the termination of this Contract, neither Carrier nor any of its employees, agents, independent contractors or other persons performing services for or on behalf of CARRIER in connection with CARRIER's obligations under this Contract will, directly or indirectly, hire, solicit for employment, induce or attempt to induce any employees of PLS or any of its Affiliates to leave their employment with PLS or any Affiliate for any reason.

MCSC, 8/30/2010, at 9-10.

The trial court set forth its reasoning regarding the restrictive provisions of the MCSC, as follows:⁷

We now address the terms of the Motor Carrier [sic] Services Contract (Carrier Contract) between PLS and BeeMac Trucking. PLS is seeking an injunction with respect to two of the provisions of this contract, namely section 14.3, the non-solicitation of PLS customers, and section 14.6, the no-hiring of PLS employees. We will address each of these provisions.

First, with respect to section 14.3 of the parties' Carrier Contract, we note that such restrictions on trade are not always favored by the courts. Indeed, the Pennsylvania Supreme Court acknowledged that "it has long been the rule at common law, that contracts in restraint of trade made independently of a sale of a business or contract of employment are void as against public policy regardless of the valuableness of the consideration exchanged." Jacobson & Co. v. Int'l Environ. Corp. , 235 A.2d 612, 617 ( [Pa.] 1967). However, certain restrictive covenants are valid if they are ancillary to the main purpose of the contract. Id. The covenant must be inserted only to protect one of the parties from the injury which, in the execution of the contract or enjoyment of its fruits, he may suffer from the unrestrained competition of the other. Id. The main purpose of the contract must suggest the measure of protection needed, and furnish a sufficiently uniform standard by which the validity of such a restraint may be judicially determined. Id. We believe that the restrictive covenant in section 14.3 of the Carrie[ ]r Contract meets these requirements; it was ancillary to the main purpose of the agreement and was necessary to protect PLS's interest in its customers.

In the instant case, the covenant contained in section 14.3 furthered PLS's legitimate interest in preventing BeeMac from cutting PLS out of the equation. Courts have held that a

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