Renee Beauty Salons, Inc. v. Blose-Venable, BLOSE-VENABL

• Decision Date: 12 January 1995
• Docket Number: BLOSE-VENABL,G
• Parties: RENEE BEAUTY SALONS, INC., d/b/a Outlooks for Hair, Appellant, v. Kristinewynn L. DeLong, Pamela Miller, Bonnie Lou Fogle, Tracy Campanell, Duane A. Decal, Donna O'Rourke, Kerrie L. Semmel, Michael J. Allen, KPM Design Group, Inc.
• Court: Pennsylvania Superior Court

Page 1345

652 A.2d 1345

438 Pa.Super. 601

RENEE BEAUTY SALONS, INC., d/b/a Outlooks for Hair, Appellant, v. Kristine BLOSE-VENABLE, Gwynn L. DeLong, Pamela Miller Bonnie Lou Fogle, Tracy Campanell, Duane A. Decal Donna O'Rourke, Kerrie L. Semmel Michael J. Allen, KPM Design Group, Inc.

Superior Court of Pennsylvania.

Argued Nov. 15, 1994.

Filed Jan. 12, 1995.

James P. Wallbillich, Pottsville, for appellant.

James T. Huber, Allentown, for appellees.

Before CIRILLO, TAMILIA and HOFFMAN, JJ.

TAMILIA, Judge.

This is an appeal from the Order entered December 9, 1993 vacating the injunctive Order of July 30, 1993 and dismissing plaintiff's motion to enforce the preliminary injunction and for contempt. Plaintiff/appellant, Renee Beauty Salons, Inc., d/b/a Outlooks for Hair ("Renee"), filed an action in equity on July 7, 1993 against appellees, Blose-Venable, DeLong, Miller, Fogle, Campanell, Decal, O'Rourke, Semmel and Allen, former employees of Renee ("former employees"), and KPM Design Group, Inc., a corporation formed by some of the former employees. KPM owns and operates Apropos, a Hair, Skin and Nail Salon ("Apropos"), a competing beauty salon in Allentown at which the former employees, with the exception of Tracy Campanell, are now employed.

The underlying equity action arose from events occurring in the summer of 1993. In the last weeks of June 1993, the former employees left Renee and began to contact their former customers to inform them of the creation of Apropos. In its July 7, 1993 complaint, Renee alleged the former employees misappropriated Renee's trade secrets by using confidential customer information and lists developed and protected by Renee, in unfair competition with Renee. The chancellor entered a special injunction pursuant to Pa.R.C.P. 1531, and scheduled a hearing on the matter for July 12, 1993. Following the hearing and argument on July 23, 1993, the chancellor entered a modified injunction Order on July 30, 1993. The modified injunction enjoined the defendants from contacting or soliciting business from any customers of Renee, and ordered defendants to return to Renee any customer lists, computer discs or other proprietary information obtained and/or taken by defendants after leaving Renee's employ.

On October 14, 1993, Renee filed a motion to enforce the preliminary injunction and for contempt. Hearing was held on the motion on November 8, 1993. By Order dated December 9, 1993, the chancellor vacated the July 30, 1993 injunction and dismissed Renee's motion to enforce and for contempt. In its supporting memorandum Opinion, the chancellor found Renee's customers were highly confidential information and constituted a valuable asset in the nature of "trade secrets" for which the employer would be entitled to protection. The chancellor found no significance in whether this information was embodied in written lists or committed to memory; in either case, it was entitled to protection. (Slip Op., Diefenderfer, P.J., 12/9/93, pp. 2-3.) See Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 624, 136 A.2d 838, 843 (1957). The chancellor further found, however, that Renee encouraged a policy of inducing hair stylists from other salons to join Renee and bring with them their customer lists from their former employers. As such, Renee had violated the equitable principle of "clean hands," and was not entitled to relief. This appeal followed.

On appeal, Renee argues the chancellor incorrectly determined Renee was not entitled to relief for the misappropriation of its trade secrets by its employees and KPM, due to the court's finding of "unclean hands."

As an initial matter, we note that this Court's scope of review of a decision to grant, deny or continue an injunction is limited. Crozer Chester Medical Ctr. v. May, 352 Pa.Super. 51, 506 A.2d 1377 (1986). The focus of our review is to determine if reasonable grounds existed for the chancellor's action. Giant Eagle v. Local Union No. 23, 425 Pa.Super. 186, 624 A.2d 208 (1993). An Order denying a preliminary injunction will not be reversed unless there has been a clear abuse of discretion or an error of law. S.D. Bowers, Inc. v. National Bank, 404 Pa.Super. 512, 591 A.2d 324 (1991). Applying that standard to our review of the record in this case, we affirm.

The considerations underlying a "trade secret" claim have been the subject of many cases in this Commonwealth. "The problem of accommodating the competing policies can be stated thus: the right of a business person to be protected against unfair competition stemming from the usurpation of his or her trade secrets must be balanced against the right of an individual to the unhampered pursuit of the occupations and livelihoods for which he or she is best suited." Fidelity Fund, Inc. v. Di Santo, 347 Pa.Super. 112, 120, 500 A.2d 431, 436 (1985). Under such an analysis, and even assuming, arguendo, that in certain situations customer lists and related information can be a trade secret, we still consider customer lists to be at the very periphery of the law of unfair competition.

Our Supreme Court, per Justice Musmanno, stated at an earlier juncture:

It was within the range of foreseeability for the plaintiff to realize that some day [an employee] might want to seek other pastures. There invariably comes the time when the employee leaves his employer, the apprentice leaves his master, the student leaves his tutor and the son leaves his father. To hold the employee, apprentice, student or son beyond the period of natural legal emancipation, a quid pro quo is required. There was no quid pro quo in the case at bar.

To enjoin a former employee from entering into such employment as he wishes is in the nature of a restraint on one's liberty. Such restraint may be in order depending on circumstances which are not present in this case. As Justice Cohen said in the case of Wexler v. Greenberg, 399 Pa. 569, 576, 160 A.2d 430, 434:

"Where, however, an employee has no legally protectable trade secret, an employee's 'aptitude, his skill, his dexterity, his manual and mental ability, and such other subjective knowledge as he obtains while in the course of his employment are not the property of his employer and the right to use and expand these powers remains his property unless curtailed though some restrictive covenant entered into with the employee'. [Pittsburgh Cut Wire Co. v. Sufrin, 350 Pa. 31, 35, 38 A.2d 33, 34.] The employer thus has the burden of showing two things: (1) a legally protectable trade secret; and (2) a legal basis, either a covenant or a confidential relationship, upon which to predicate relief."

Comment "e" of Section 393 of the Restatement of Agency, Second, is particularly relevant and significant when applied to the facts in this case:

"After the termination of his agency, in the absence of a restrictive agreement, the agent can properly compete with his principal as to matters for which he has been employed. See sec. 396. Even before the termination of the agency, he is entitled to make arrangements to compete, except that he cannot properly use confidential information peculiar to his employer's business and acquired therein. Thus, before the end of his employment, he can properly purchase a rival business and upon termination of employment immediately compete * * * " Nor is the fact that the new company may acquire some of the plaintiff's former customers contrary to law. It is not a phenomenal thing in American business life to see an employee, after a long period of service, leave his employment and start a business of his own or in association with others. And it is inevitable in such a situation, where the former employee has dealt with customers on a personal basis that some of those customers will want to continue to deal with him in his new association. This is natural, logical and part of human fellowship, that an employer who fears this kinds of future competition must protect himself by a preventive contract with his employee, unless, of course, there develops a confidential relationship which of itself speaks for non-disclosure and non-competition in the event the employer and employee separate. There is nothing of that in this case.

Spring Steels, Inc. v. Molloy, 400 Pa. 354, 361-364, 162 A.2d 370, 374-375 (1960) (emphasis added).

The sole case upon which the chancellor herein relied in deciding the trade secret issue, Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957), predated the decision in Spring Steels, supra, and is distinguishable from the case before us. Therefore, the precedential value of Morgan to this case, to say the least, is limited. In Morgan, plaintiff, a business "engaged in the installment selling of household articles through door-to-door salesmen-collectors," filed a complaint in equity against former salesmen who had gone to work for a competing business, charging them with breaking restrictive covenants, misusing secret information obtained while...