Mixing Equipment Co. v. Philadelphia Gear, Inc.

• Decision Date: 10 March 1970
• Docket Number: Civ. A. No. 70-320.
• Citation: 312 F. Supp. 1269
• Parties: MIXING EQUIPMENT CO., Inc. v. PHILADELPHIA GEAR, INC. and George Leamy.
• Court: U.S. District Court — Eastern District of Pennsylvania

312 F. Supp. 1269

MIXING EQUIPMENT CO., Inc. v. PHILADELPHIA GEAR, INC. and George Leamy.

Civ. A. No. 70-320.

United States District Court, E. D. Pennsylvania.

March 10, 1970.

Bancroft D. Haviland, of Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for plaintiff.

Edwin B. Barnett, of Strong, Barnett & Grasberger, Philadelphia, Pa., for defendant.

FINDINGS OF FACT, DISCUSSION AND ORDER

BODY, District Judge.

Plaintiff, a designer, manufacturer and seller of industrial mixing equipment, brings this action against one of its former employees for breach of certain covenants ancillary to employment by plaintiff, and against a competitor corporation for the inducement of that breach. A conspiracy on the part of the defendants to commit the aforementioned breach is also alleged. The plaintiff seeks equitable as well as monetary relief.

Jurisdiction is based upon diversity of citizenship and the requisite amount in controversy.

FINDINGS OF FACT

1. Plaintiff is a New York corporation whose principal place of business is located in Rochester, New York.

2. Defendant Philadelphia Gear is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, with its principal office and place of business located at King of Prussia, Pennsylvania.

3. Defendant George Leamy is a resident of the Commonwealth of Pennsylvania, with a place of business at Philadelphia Gear.

4. Diversity of citizenship for purposes of federal jurisdiction exists among the parties.

5. The amount in controversy exceeds ten thousand dollars ($10,000.00), exclusive of interest and costs.

6. (a) Since 1923 plaintiff has been engaged in the business of designing, manufacturing and selling industrial mixing equipment throughout the United States and in foreign countries throughout the world. It is the largest manufacturer of such equipment in the United States. As a result of research, engineering, designing, manufacturing and sales, plaintiff has succeeded in establishing throughout the United States and abroad a valuable and extensive trade, trade name and good will for plaintiff and its products among its customers, and has engineered, developed and marketed numerous mixing devices throughout said area which have developed for it and its trade name a reputation among customers and the public at large for excellence in design, engineering and manufacturing.

(b) Defendant Philadelphia Gear is engaged in several lines of production, but one of its major lines is also industrial mixers, in which field it is in direct competition with plaintiff and, indeed, is one of plaintiff's two major competitors.

7. (a) Much of plaintiff's business involves the design and manufacture of specialized mixing equipment and the selection of mixing equipment to meet the specific needs of specific customers. Engineering, design and manufacturing processes for much of this equipment were developed by plaintiff, and much of the information, plans, specifications, drawings and models, tables, charts and other material relating thereto have been developed at great expense to plaintiff and are confidential and secret, and known by plaintiff's employees and former employees, including George Leamy, to be confidential and secret.

(b) Plaintiff employs a staff of graduate engineers, to whom it has given prolonged specialized training in the "art" of mixing technology and know-how, and whom it employs to solve complex mixing problems of its customers and to deal with its customers and their technical mixing problems. These engineers are called "application engineers".

(c) Plaintiff has developed four technical reference books and voluminous files for the use of its application engineers, which contain confidential information concerning plaintiff's experience in application and designing of mixing techniques, formulas, equipment, procedure and charts, which it has developed through its experience in solving its customers' mixing problems, as well as confidential design, pricing and customer information. Access to these documents is restricted to plaintiff's employees or agents who have need of using the material, and much of it is available only to the application engineers and the officers of the plaintiff corporation. Plaintiff takes stringent precaution to insure the confidentiality of this data.

8. In order to prevent its competitors from utilizing plaintiff's confidential information, know-how, experience and the training of its application engineers, plaintiff has, since 1960, required each person hired by it as an application engineer, as a condition of his or her agreement of employment, to execute a covenant essentially providing in part:

(a) I also agree that I will never disclose or authorize anyone else to disclose, without first getting written permission from the Company, any confidential information about the Company, its plans, its products, or its operations;

(b) I hereby agree that during my employment, and for one year after, I will not disclose or authorize anyone else to disclose, without first getting written permission from the Company, any information concerning the Company's plans, business or products except as is necessary in the ordinary course of the Company's business, even though such or similar information may have been made public before;

(c) I hereby further agree that, during my employment by the Company, and for one year thereafter, I shall not, either as principal, agent, consultant, employee, partner, or any other capacity, engage in any work or other activity in the field or fields in which I have worked or shall work for the Company, and I shall not engage in any work or other activity in any way connected with the development, manufacture or sale of any product which competes with any product of the Company made or sold either during the term of my employment or within one year thereafter.

9. In early March 1965, defendant George Leamy, who had no prior experience in the industrial mixing field, was employed by plaintiff as an application engineer. He executed an employment application, agreeing that if employed he would execute as a part of his employment agreement the restrictive covenants referred to above. Thereafter, on March 15, 1965, defendant George Leamy commenced his training with plaintiff for application engineering, the formal portion of which lasted for six months. On March 18, 1965, he executed the aforesaid covenants. The execution of this agreement was in consideration of and ancillary to Leamy's employment by plaintiff.

10. During the course of, and in connection with, his employment with plaintiff, defendant George Leamy had access to and utilized confidential files, plans, specifications, designs, blueprints, processes, tables, models, charts, technical reference books, customer and pricing information and lists, and other materials developed by plaintiff, as well as plaintiff's production and marketing techniques, and defendant George Leamy was aware of the confidential and secret nature of such material.

11. During his employment with plaintiff, defendant Leamy served as an application engineer and, in addition, was in charge of the application engineering laboratory of plaintiff. The training he received, the confidential information entrusted to him, and the nature of his employment were such that restraint of his revelation of confidential information and prohibition of his employment by a competitor for a one year period after he left plaintiff served a reasonable business purpose of plaintiff.

12. On July 4, 1969, defendant George Leamy voluntarily terminated his employment with plaintiff, and on July 7, 1969, he became employed by defendant Philadelphia Gear as an application engineer in mixing, and later as technical director of Philadelphia Gear's mixing division.

13. Plaintiff fulfilled all the terms of its agreement of employment with defendant George Leamy.

14. Prior to leaving plaintiff's employ, defendant Leamy falsely and deceptively advised plaintiff that he was being employed by Philadelphia Gear in its limitorque division, which was not competitive with plaintiff, assured plaintiff that he would not compete for the one year period, and knowingly misled plaintiff as to the true nature of his new employment.

15. Defendant Philadelphia Gear employed defendant George Leamy as an application engineer because of his experience with plaintiff and with knowledge of his prior employment by plaintiff and of facts putting it on notice of his aforesaid agreement with plaintiff.

16. Commencing on July 7, 1969, and continuing until the present, defendant George Leamy has violated his agreement with plaintiff in that he has:

(a) worked for Philadelphia Gear in the fields of engineering, design, solution of customer problems, and sales representation, all in connection with equipment directly competitive with plaintiff;

(b) approached customers of plaintiff on behalf of defendant Philadelphia Gear in connection with sales presentation of design work for mixers and mixer installations, which customers he knew to be customers of plaintiff;

(c) disclosed confidential information of plaintiff concerning its plans, products, operation, engineering, design, manufacture and sales of mixing equipment to defendant Philadelphia Gear without permission of plaintiff;

(d) copied or utilized plaintiff's confidential designs, plans, processes, specifications, other confidential information and papers acquired from plaintiff on behalf of defendant Philadelphia Gear.

17. Philadelphia Gear induced defendant George Leamy to violate his agreement with plaintiff in the foregoing respects, and has conspired with him to secure for its own profit confidential information which was the property of plaintiff.

18. Plaintiff has no adequate remedy at law to protect itself from defendants' violation of its rights and of the aforesaid covenant, and plaintiff is being subjected to irreparable...