Victaulic Co. v. Tieman

Decision Date23 August 2007
Docket NumberNo. 07-2088.,07-2088.
Citation499 F.3d 227
PartiesVICTAULIC COMPANY, v. Joseph L. TIEMAN; Tyco Fire Products, LP (E.D.P.A. Civil No. 06-cv-05601) Joseph L. Tieman; Tyco Fire Products, LP v. Victaulic Company (E.D.P.A. Civil No. 07-cv-00512) Victaulic Company, Appellant.
CourtU.S. Court of Appeals — Third Circuit

Liddell & Sapp, Houston, TX, Counsel for Appellees.

Before: RENDELL, AMBRO and NYGAARD, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

This is a classic case of jumping the gun. The dispute centers on a covenant not to compete between an employer and former employee. All parties admit that the employee is violating the covenant; the question is whether it is unreasonable, and thus not appropriately enforced through an injunction. Because reasonableness is a fact-intensive inquiry, we hold that it should not have been determined on the pleadings. After resolving that we have jurisdiction over the interlocutory dismissal of claims related to the covenant because it effectively denied a request for a preliminary injunction, we vacate the District Court's order and remand for further proceedings.

I. Facts and Procedural History

Victaulic Company manufactures valves, couplings, sprinkler heads, and other mechanical devices for use in a variety of industries, one of which is fire protection. Joseph Tieman worked as a sales representative for Victaulic from April 1998 until December 2006. He primarily worked in Ohio, West Virginia, and western Pennsylvania, but, according to Victaulic, he had relationships with Victaulic customers throughout the United States. He also trained new sales representatives in various states, thus becoming familiar with the company's customers outside his three-state focus area.

As a condition of his employment, Tieman signed a covenant not to compete with Victaulic. In relevant part, he agreed that upon leaving Victaulic he would not sell or distribute the types of items regularly sold (or contemplated for sale) by Victaulic for 12 months (1) within a ten-state Restricted Victaulic Sales Region, or (2) in any area in which Victaulic products are sold on behalf of nine named competitors (of which Tyco is one). He further agreed (3) not to solicit any past or present Victaulic customer on behalf of any business in competition with it.1

Upon leaving Victaulic, Tieman immediately began working as a sales representative for Tyco, selling the same kinds of products he sold for Victaulic. Tieman alleges (and Victaulic appears to admit) that he does not sell Tyco products in his former three-state focus area, but he does sell within the ten-state Restricted Victaulic Sales Region.

Tieman and Tyco filed a declaratory judgment action against Victaulic in December 2006 in the Southern District of Ohio seeking a declaration that the covenant not to compete was invalid under Pennsylvania law. Victaulic counterclaimed against both for breach of contract, misappropriation of trade secrets, tortious interference with contractual relations, and unfair competition. It also filed its own substantially identical suit in the Eastern District of Pennsylvania. The Ohio District Court transferred its case to Pennsylvania's Eastern District, and the two cases were consolidated.

At the time of consolidation, two motions were pending: (1) Victaulic's request for a preliminary injunction, and (2) Tyco and Tieman's motion to dismiss for failure to state a claim. The District Court granted the motion to dismiss on the breach of contract, tortious interference, and unfair competition claims. In so doing, it ruled that the covenant not to compete was invalid because it was unreasonable as a matter of law. Because the dismissed claims were premised on the agreement's validity, none could survive this ruling. The Court reserved judgment on the trade secrets claim, asking the parties for supplemental briefing. Because the Court stayed its actions when Victaulic appealed, the motion to dismiss that count is still pending.

II. Appellate Jurisdiction

Victaulic argues that we have jurisdiction under 28 U.S.C. § 1292(a)(1), which provides for appellate review of interlocutory orders "refusing . . . injunctions." Here, the District Court did not explicitly deny an injunction, but Victaulic argues that the dismissal of four counts of the complaint effectively denied Victaulic's requests for preliminary (and permanent) injunctions related to those claims.

An order that has the "practical effect of refusing an injunction" can be appealable under § 1292(a)(1). Carson v. Am. Brands, Inc., 450 U.S. 79, 84, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981). But "the mere fact that injunctive relief is requested and is therefore encompassed within the ruling made by the court on other grounds does not transform the ruling into one denying an injunction." Shirey v. Bensalem Twp., 663 F.2d 472, 477 (3d Cir.1981). Rather, § 1292(a)(1) covers situations in which "the requested injunction was the predominant relief sought." Id. at 478. By moving for a preliminary injunction, Victaulic demonstrated that one of its chief goals was to end Tieman's (admitted) violation of the covenant not to compete. Thus, the dismissal had the practical effect of refusing an injunction.

Even so, an interlocutory appeal only lies if the District Court's order has "`serious, perhaps irreparable, consequence[s],' and . . . the order can be `effectually challenged' only by immediate appeal." Carson, 450 U.S. at 84, 101 S.Ct. 993 (quoting Baltimore Contractors, Inc. v. Bodinger, 348 U.S. 176, 181, 75 S.Ct. 249, 99 L.Ed 233 (1955)). We have interpreted Carson as establishing a two-pronged test for determining whether an order such as this is appealable: it must (1) have serious consequences, and (2) immediate appeal must be the only means of effective challenge. See Ross v. Zavarella, 916 F.2d 898, 902 (3d Cir.1990).

Our opinions in this area have not been careful to distinguish Carson's "serious consequences" and "effective challenge" prongs. Nevertheless, it appears that urgency is the touchstone of the former. When the appellee's actions are not causing any continuing harm, we generally have held that this prong is not met; when they are, we have held the opposite. Compare United States v. RMI Co., 661 F.2d 279, 282 (3d Cir.1981) (disclaiming jurisdiction when no continuing harm), with Rolo v. Gen. Dev. Corp., GDV, 949 F.2d 695, 703 (3d Cir.1991) (exercising jurisdiction when appellee was allegedly liquidating assets to render itself judgment-proof). We have written that whether the appellant moved for a preliminary injunction is evidence of the case's urgency. See United States v. Wade, 713 F.2d 49, 53 (3d Cir.1983); Shirey, 663 F.2d at 476; see also Samayoa v. Chicago Bd. of Educ., 783 F.2d 102, 104 (7th Cir.1986). In addition, we have denied one request for appellate review on the ground that while the appellant was suffering continuing harm, it was too minimal to meet the "serious consequences" prong. Ross, 916 F.2d at 902 (disclaiming jurisdiction when appellant, a state-court judge challenging her transfer to a different subject-matter division, suffered no diminution in status or pay (merely the inconvenience of a different docket) during the pendency of the litigation).

In our case, Tieman continues to work for Tyco in a position substantially similar to the one he held at Victaulic (selling the same kinds of equipment). Victaulic alleges that his employment is harming it, and we must accept that allegation as true at this stage of the litigation. Adding to the urgency is that seven months have elapsed since Tieman began working for Tyco, utterly frustrating the purpose of the covenant: to keep Tieman from competing with Victaulic for one year. Moreover, this is an appeal from the (implicit) denial of the preliminary injunction, which, we have held, is the primary purpose of § 1292(a)(1). Shirey, 663 F.2d at 476. The efficacy of any remedy is likely declining as time passes, so we have little trouble concluding that Tieman's conduct is causing Victaulic a serious injury.2

The "effective challenge" prong deals with whether the appellant can get substantially similar relief without an immediate appeal. Here, the relief requested was a preliminary injunction enforcing the covenant not to compete. Tyco and Tieman argues that Victaulic asked for a preliminary injunction on the basis of all of its claims, including the trade secrets claim that has not been dismissed. Thus, they argue, Victaulic may yet receive similar relief if that request is granted.

We disagree. The language of Victaulic's motion is telling. It asked that Tieman be enjoined:

(1) for a period of twelve (12) months following the date of termination of his employment with Victaulic [from] engag[ing] . . . in the sale or distribution of the type of items or products regularly sold . . . by [Victaulic] within any Restricted Victaulic Sales region or any geographic region in which Victaulic products are sold, as an employee . . . of Tyco. . . .

(2) for a period of twelve (12) months following the date of termination of his employment from Victaulic, [from] contact[ing] or solicit[ing] any past or present customer of [Victaulic] on behalf of Tyco. . . .

App. at A77. This language is all but lifted from the covenant not to compete, see App. at A71, which supports Victaulic's claim that enforcement of the covenant (and not preliminary relief on the trade secrets claim) was its only aim in seeking preliminary injunctive relief. In addition, in its briefing before the District Court on likelihood of success,...

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