Schuylkill Valley Sports, Inc. v. Corp. Images Co., 5:20-cv-02332

SCHUYLKILL VALLEY SPORTS, INC., Plaintiff, v. CORPORATE IMAGES CO.;¹REENIE RICH, INC.; RICH MCGINNIS;and PHIL SNYDER, Defendants.

No. 5:20-cv-02332

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA

June 15, 2020

OPINION

Plaintiff's Emergency Motion for Temporary Restraining Order and Preliminary

Injunction, ECF No. 3 - Denied without prejudice

Plaintiff's Motion for Expedited Discovery, ECF No. 4 - Denied

Joseph F. Leeson, Jr. United States District Judge

I. INTRODUCTION

Plaintiff Schuylkill Valley Sports ("SV Sports") initiated this action against its former employee Phil Snyder and Snyder's current employer Corporate Images ("CI").² The Complaint claims Defendants engaged in unfair competition by raiding SV Sports employees, who had signed non-compete agreements and employment handbooks prohibiting outside work, misappropriated trade secrets/confidential information regarding customer lists, and violated several other related state laws, including breach of contract. SV Sports has filed a Motion for a Temporary Restraining Order ("TRO") and Preliminary Injunctive Relief and a Motion toExpedite Discovery, which Defendants oppose. For the reasons set forth below, a hearing on the motion for a preliminary injunction is unnecessary and SV Sports' motions are denied.

II. PROCEDURAL BACKGROUND

SV Sports filed a Verified Complaint asserting the following claims: (i) unfair competition; (ii) misappropriation of trade secrets/confidential information under the Defend Trade Secrets Act of 2016 (DTSA), 18 U.S.C. § 1836 et seq.; (iii) misappropriation of trade secrets under the Pennsylvania Uniform Trade Secrets Act (PUTSA), 12 Pa. C. S. § 5301 et seq.; (iv) unjust enrichment; (v) tortious interference with business and contractual relationships; (vi) breach of fiduciary duty/duty of loyalty; (vii) breach of contract; and (viii) civil conspiracy.

The same day, SV Sports also filed a Motion for a Temporary Restraining Order and Preliminary Injunctive Relief and a Motion to Expedite Discovery. In the Motion for a Temporary Restraining Order and Preliminary Injunctive Relief, SV Sports seeks to: (1) enjoin Snyder from working for CI or any affiliated entity "within twenty-five (25) miles of any SV Sports location and competes directly with SV Sports, from now and through and including a period of one (1) year after final disposition of this matter, including exhaustion of any and all appeals;" (2) enjoin CI, Reenie Rich, and McGinnis from employing Snyder or any other member of the SV Sports Sales Team "from now and through and including a period of one (1) year after final disposition of this matter, including exhaustion of any and all appeals;" (3) enjoin Defendants from soliciting or recruiting any other member of the SV Sports Sales Team to enter into any employment relationship with CI or any affiliated entity "from now and through and including a period of one (1) year after final disposition of this matter, including exhaustion of any and all appeals;" (4) enjoin Defendants from soliciting, distributing, offering to sell, or selling any products or services to SV Sports customers; (5) enjoin CI from divulging any tradesecrets, proprietary information, or confidential business information belonging to SV Sports; (6) direct CI to immediately return to SV Sports any confidential and proprietary information of SV Sports. See PI Mot., ECF No. 3.

In its Motion to Expedite Discovery, SV Sports argues expedited discovery "will not only enable SV Sports to streamline its presentation at the preliminary injunction hearing, but it will enable SV Sports to determine the full extent of Defendants' unlawful conduct." SV Sports requests expedited discovery of:

information and documents: (1) referring or relating to the hiring and/or employment of Snyder or any member of the SV Sports Team Sales Force by Corporate Images; (2) referring or relating to the scope of Snyder's job responsibilities, or any member of the SV Sports Team Sales Force's job responsibilities, at Corporate Images; (3) provided by Snyder or any member of the SV Sports Team Sales Force to Corporate Images, Reenie Rich, or McGinnis since March 1, 2020; and (4) containing any confidential and proprietary information of SV Sports. SV Sports also seeks copies of communications to/from to Snyder or any member of the SV Sports Team Sales Force to/from Corporate Images, Reenie Rich, or McGinnis since March 1, 2020, and communications to/from Snyder to/from any member of the SV Sports Team Sales Force since March 1, 2020. After receiving such documents and materials, SV Sports requests permission to depose Snyder and McGinnis, and a corporate representative of Corporate Images and Reenie Rich.

Disc. Mot. ¶ 9, ECF No. 4. SV Sports asserts this request is "narrowly tailored to seek information that would be used at the hearing and in support of SV Sports' Motion for Preliminary Injunction." Id.

The next day, this Court entered an Order directing that responses to the motions be filed by the end of the week. Defendants opposed the motions. After review of the responses and reply thereto, the Court scheduled a telephone conference for May 28, 2020. During the telephone conference, the Court asked the parties what evidence they intended to present at a preliminary injunction hearing. SV Sports responded that it did not have any evidence at this time, but hoped to present evidence acquired from expedited discovery. Defendants stated thatthey did not have any evidence to present at a hearing. Thus, it appearing that a hearing would be unnecessary, the Court allowed the parties to file any supplemental evidence and sur-reply briefs.

The Court makes the following findings of fact and conclusions of law. See Fed. R. Civ. P. 52(a) (providing that in granting or denying a preliminary interlocutory injunction, "the court must find the facts specially and state its conclusions of law separately").

III. FINDINGS OF FACT³

SV Sports is a sporting goods retailer and athletic team supplier. As one of the largest team sports suppliers in eastern Pennsylvania, it operates approximately a dozen store locations and maintains an extensive online retail business. SV Sports sells athletic equipment, sporting goods, sports gear for a vast array of sports, individual and team sportswear, and related items. It also provides customized screen-printing and embroidering of apparel and promotional items.

CI is a design firm, located in Allentown, Pennsylvania, specializing in screen-printing and embroidery. CI mainly serves corporate clients and has minimal presence within the team sports uniform market in eastern Pennsylvania. However, because it produces school spirit apparel and assists schools and booster clubs to set up web stores selling spirit wear, it shares some customers (i.e. schools) with SV Sports. SV Sports and CI are competitors in this aspect.

Phil Snyder began working for SV Sports in 1989. During his employment, Snyder served as store manager, team sales representative, Vice President of Team Sales, and manager of Team Sales Development, which is the position he held at the time of his termination. As manager of Team Sales Development, Snyder was in charge of a new Team Sales DevelopmentProgram with responsibility over developing the SV Sports Team Sales Force. The SV Sports Sales Team was responsible for team sales on behalf of SV Sports and had responsibilities over multiple areas, including but not limited to Allentown and surrounding areas.

Snyder and all SV Sports Sales Team employees executed virtually identical agreements with SV Sports containing non-competition and non-solicitation clauses (as to customers and employees⁴). The agreements are attached as an exhibit to the Complaint. The non-competition and non-solicitation clauses apply for "a period of 1 year after the employee is no longer employed by the Company." See Exs. A-B, ECF No. 1-4, 1-5. The last paragraph in the agreements explain:

"Employee is no longer employed by the Company" is defined as:

1. Employee chooses to resign position.

2. Employee is terminated for "just cause".

This agreement would not apply in situations where, through no fault of the Employee, the position is eliminated or the location and/or the Company ceased to do business.

See id. Snyder did not execute the agreement at the time he accepted employment; rather, the first such agreement was signed in 2005, approximately sixteen years after he began working for SV Sports. This is also true for some of the other SV Sports Sales Team employees.

Snyder and each member of the SV Sports Sales Team also signed a Company handbook, the 2020 version⁵ which includes a non-solicitation and a confidentiality provision prohibiting the disclosure of SV Sports trade secrets. The Handbook is an exhibit to the Complaint. See SV Sports Employee Handbook, Ex. E, ECF No. 1-8. The non-solicitation restrictions are limited to the employee's working hours. See § 6.11 ("You are prohibited from soliciting other employeesduring your assigned working time."). The Handbook also states that "[o]utside employment that creates a conflict of interest or that affects the quality or value of your work performance or availability at Schuylkill Valley Sports is prohibited." Id. § 5.2. The confidentiality provisions of the Handbook provide:

As a condition of employment, Schuylkill Valley Sports employees are required to protect the confidentiality of SVS trade secrets, proprietary information, and confidential commercially-sensitive information (i.e. financial or sales records/reports, marketing or business strategies/plans, product development, customer lists, patents, trademarks, etc.) related to the company. Access to this information should be limited to a "need to know" basis and should not be used for personal benefit, disclosed, or released without prior authorization from management.

Id. § 9.1. The SV Sports Employee Handbook states: "Nothing in this handbook or any other SVS...