Brooks v. Systems Manufacturing Corporation

Full title: JOSEPH BROOKS v. SYSTEMS MANUFACTURING CORPORATION

Court: United States District Court, E.D. Pennsylvania

Date published: Sep 9, 2004

Civil Action No. 03-1523 (E.D. Pa. Sep. 9, 2004)

Opinion

Civil Action No. 03-1523.

September 9, 2004

MEMORANDUM

THOMAS O'NEILL, Senior District Judge

I. INTRODUCTION

On March 11, 2003, plaintiff, Joseph Brooks, instituted this action alleging intentional interference with contractual relations by defendant, Systems Manufacturing Corporation (SMC). Brooks contends that defendant, his former employer, deliberately interfered with his employment relationship with his subsequent employer, Westwood, Inc., by coercing the company to terminate him. On December 12, 2003, I denied defendant's motion to dismiss plaintiff's amended complaint in part.¹ Now before me is defendant's motion for summary judgment. For the reasons stated below I will deny defendant's motion.

1 I granted defendant's motion to dismiss plaintiff's claim for intentional infliction of emotional distress.

II. BACKGROUND

Defendant hired plaintiff as a sales representative for its furniture manufacturing business in or around June 2001. At the time of his hiring, Plaintiff signed an agreement with defendant that included a provision prohibiting him from competing with the company upon termination of his employment. Plaintiff subsequently left his employment with defendant in or around September 2002. The parties dispute what plaintiff did next.

Plaintiff alleges that before leaving his job with defendant he reported that his SMC supervisor had directed him to steal two pending deals from Constant Technologies, a firm defendant was in the process of acquiring. Plaintiff asserts that he then went to work for a company known as InterNet, Inc. He claims that after reporting his SMC supervisor's actions defendant emailed him to tell him the company would prohibit him from working for InterNet. He alleges that InterNet was contacted by agents of defendant and was told that plaintiff had to be fired because of his non-compete agreement with SMC. Then plaintiff claims that he was terminated from his position at InterNet after only one month and that defendant's enforcement of the non-compete agreement was in retaliation for his reporting his supervisor. Plaintiff, however, has not produced any documentary or testimonial evidence to support his claims regarding InterNet. Defendant makes no mention of these events in its account of the facts.

According to SMC, after leaving the company, plaintiff went directly to work as a sales representative at Westwood, a company that represents SMC in the Philadelphia market by reselling SMC products. Westwood also competes with SMC by selling products that are competitive with SMC's wares. Plaintiff states that he was hired by Westwood after leaving InterNet and that he began work as a Westwood sales representative in or around October, 2002. He was hired as an at-will employee and he had no agreement with Westwood, either written or oral, that promised employment with the company for a specific period of time. In the noncompete agreement plaintiff signed as an employee of Westwood, he agreed that:

this agreement shall not be deemed to be a guarantee of employment. EMPLOYEE ACKNOWLEDGES THAT HE/SHE IS AN EMPLOYEE-AT-WILL. EMPLOYEE UNDERSTANDS THAT HE/SHE OR THE EMPLOYER HAS THE RIGHT TO DISCONTINUE THE EMPLOYMENT RELATIONSHIP AT ANY TIME AND FOR ANY REASON OR NO REASON. THE TERM TERMINATION OF EMPLOYMENT AS USED IN THIS AGREEMENT MEANS BY THE EMPLOYER OR EMPLOYEE WITH OR WITHOUT CAUSE.

(Grabel Affidavit, Exh. 2 ¶ 6) (emphasis in original).

Plaintiff claims that shortly after he began work at Westwood SMC notified the company of a potential problem because of plaintiff's non-compete agreement with SMC. He also claims that he had been assured by an agent of SMC that he would not violate his non-compete agreement by working for Westwood. Plaintiff asserts that SMC agreed to permit plaintiff to continue to work for Westwood despite the non-compete provision, provided that both he and Westwood sign an authorization agreement designed to protect SMC's proprietary and confidential business information. Plaintiff alleges that on or about November 8, 2002, he received a letter from a Texas law firm threatening to take legal action against him if he and Westwood failed to sign the proposed authorization agreement. On or about January 7, 2003, plaintiff alleges he signed SMC's proposed authorization agreement after several revisions were made. He alleges that Westwood did not sign the authorization agreement.

Plaintiff alleges that SMC then notified Westwood that it would no longer be permitted to represent SMC in the Philadelphia market if it continued to employ plaintiff without signing the authorization agreement. Westwood subsequently terminated plaintiff on or about January 21, 2003, approximately three months after he began working for the company. Plaintiff alleges that two days after his termination, on January 23, 2003, John Farris, an agent of SMC sent Graham and Grabel an email informing them that Westwood could continue its relationship with defendant as a channel partner in the Philadelphia territory.

Defendant acknowledges that one part of the reason for plaintiff's termination from Westwood was that the non-compete dispute between defendant, plaintiff and Westwood had not been resolved. However, defendant further alleges that the primary reason for plaintiff's termination was his poor performance. At deposition, Andrew Graham, plaintiff's direct superior at Westwood, explained that "[p]erformance was an issue. . . . The numbers were nowhere near up to quota, and we did not see enough activity to warrant keeping him." (Graham Depo. at 119). Keith Grabel, the President of Westwood, confirmed at his deposition that the primary reason for terminating plaintiff was performance and that he had not made sufficient sales. (Grabel Depo. at 72).

III. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56. The Supreme Court has recognized that the moving party "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions . . . which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). After the moving party has filed a properly supported motion, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The nonmoving party may not rest upon the mere allegations or denials of the party's pleading. See Celotex, 477 U.S. at 324.

I must determine whether any genuine issue of material fact exists. An issue is "material" only if the dispute over facts "might affect the outcome of the suit under the governing law."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the record taken as a whole in a light most favorable to the nonmoving party, "could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'"Matsushita Elec. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986) (citation omitted). If the evidence for the nonmoving party is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson, 477 U.S. at 249-50 (citations omitted).

IV. DISCUSSION A. Employment At-Will

Plaintiff was an employee at-will with Westwood. Plaintiff's September 27, 2002 noncompetition agreement expressly provides, in part, that "EMPLOYEE ACKNOWLEDGES THAT HE/SHE IS AN EMPLOYEE AT-WILL." (Grabel Affidavit, Exh. 2). Plaintiff asserts that the terms of Westwood's October 1, 2002 offer letter, executed after the non-compete agreement contradict or modify the terms of the non-compete agreement. He argues that the phrase "achieving quota is expected to retain draw privileges and insure continued employment . . ." contained in Westwood's offer letter is sufficient to overcome the presumption of at-will employment and to create a genuine issue of material fact as to whether he can sustain his claim for intentional interference with contractual relations. (Grabel Aff., Exh. 1). This language is not clear evidence of Westwood's intention to convert plaintiff's at-will relationship into a position that could only be severed for cause and is insufficient to rebut the presumption that plaintiff's employment relationship with Westwood was at-will.

In Pennsylvania, "there is a strong presumption that employment is at-will and terminable by either party for any reason, or even no reason at all, unless there is a statutory or contractual provision to the contrary." Buckwalter v. ICI Explosives USA, Inc., No. 96-4795, 1998 WL 54355 (E.D. Pa. Jan. 8, 1998),citing Geary v. U.S. Steel Corp., 319 A.2d 174, 176 (Pa. 1974); Nix v. Temple Univ. of Com. System of Higher Educ., 596 A.2d 1132, 1135 (Pa.Super. 1991); Mercante v. Preston Trucking Co., No. 96-5904, 1997 WL 288614, at *1 (E.D. Pa. May 21, 1997). Plaintiff must rebut the at-will presumption with clear evidence that the employment relationship was contractual. See Buckwalter, 1998 WL 54355, at *6. Whether a plaintiff alleges sufficient facts to overcome the presumption of at-will employment is a matter for the court. Schoch v. First Fidelity Bancorp., 912 F.2d 654, 660 (3d Cir. 1990).

"In order to rebut the presumption of at-will employment, a party must establish one of the following: (1) an agreement for a definite duration; (2) an agreement specifying that the employee will be discharged for just cause only; (3) sufficient additional consideration; or (4) an applicable recognized public policy exception." Luteran v. Loral Fairchild Corp., 688 A.2d 211, 214 (Pa.Super. 1997), citing Robertson v. Atlantic Richfield Petroleum, 537 A.2d 814 (1987). Plaintiff argues that Westwood was required to discharge him "for just cause only" because the October 1 offer letter stated that he could "insure continued employment" by meeting his quota.

"The modification of an `at-will' relationship to one that can never be severed without `just cause' is such a substantial modification that a very clear statement of an intention to so modify is required." Schoch, 912 F.2d at 660. In Marmer v. Saloom Furniture Co., No. 94-6869, 1995 U.S. Dist. LEXIS 13733, at *8-9 (E.D. Pa. Sept. 12, 1995), the court held that "an intention to terminate only for cause [could] not be inferred by [an employer's] statement that `as long as you stick to the plan and we have the sales we expect, you're all part of the team.'" There was not sufficient evidence to suggest the employer intended to convert the employee's at-will relationship into a position that could only be severed for just cause. See also Murray v. Commercial Union Ins. Co., 781 F.2d 432, 435 (3d Cir. 1986) (holding assurance of employment for "as long as I wanted and they wanted me and I was satisfactory to them" established that employee could be terminated without cause), Braun v. Kelsey-Hayes Co., 635 F. Supp. 75, 77 (E.D. Pa. 1986) (holding that allegation that employment relationship would continue as long as services were satisfactory was insufficient as a matter of law to overcome the at-will presumption); Fleming v. Mack Trucks, 508 F. Supp. 917 (E.D. Pa. 1981), quoting Geib v. Alan Wood Steel Co., 419 F. Supp. 1205, 1208 (E.D. Pa. 1976) (holding that language that plaintiff would be employed for "as long as" he performed satisfactorily "did not provide `any specific guidelines for determining the duration of the contract (and thus was) too ambiguous . . . and . . . insufficient to overcome the presumption that the contract was terminable at will.'"). Similar to phrases such as "as long as," "lifetime," "permanent," and "would continue," the phrase "insure continued employment" in the October 1, 2002 offer letter is too vague to overcome the strong presumption of at-will employment.

Indeed, the October 1 letter notes the "required execution of Westwood non-compete non-disclosure" agreement, further supporting defendant's argument that the letter was not intended to modify the terms of the non-compete agreement which explicitly described plaintiff as an employee at-will. Without more, the statement that plaintiff could "insure continued employment" by meeting his quota is not clear evidence of an intention to modify the at-will relationship. See Sharp v. BW/IP Int'l, Inc., 991 F. Supp. 451, 459 (E.D. Pa. 1998), quoting Holewinski v. Children's Hosp. of Pittsburgh, 649 A.2d 712, 715 (Pa.Super. 1994) ("The employee must show that `both parties intended to make a contract.'"); Scott v. Extracorporeal, Inc., 545 A.2d 334, 338 (Pa.Super. 1988) ("great clarity is necessary to contract away the at-will presumption").

To support his argument, plaintiff cites Huguet v. Foodsales, Inc., 19 Pa. D. C. 3d 376, 380 (C.P. Chester 1980), where plaintiff entered into an agreement for employment "for as long as he could `cut the mustard.'" Id. at 379. Despite plaintiff's contention that the court in Hueget could have applied the just cause exception to the at-will doctrine to find that an employment contract existed, the court based its holding that plaintiff was not an at-will employee on the fact that sufficient additional consideration existed because he contracted with defendant to sell them his profitable business. He received no monetary consideration for the sale, but instead contracted for employment for as long as he could "cut the mustard." Plaintiff was not terminable at-will because of his exchange of his business for the employment relationship and not because the "cut the mustard" requirement created a just cause exception.

Unlike in Hueget, here plaintiff has not produced any evidence of additional consideration which would trigger this exception to the at-will doctrine. Indeed, in DiPlacido v. GTE North Inc., 25 Pa. D. C. 4th 97, 107 (C.P. Erie 1995), the court held that plaintiff did not give additional consideration to trigger the exception to the at-will employment doctrine where, as here, plaintiff attempted to meet a revenue quota. The court explained that plaintiff "did not incur any extraordinary detriment or bestow any extraordinary benefit upon [the employer] beyond the services he was already obligated to provide." Id. In this case, plaintiff was hired by Westwood to sell computer and IT equipment. The October 1 letter merely establishes that plaintiff was expected to meet certain sales quotas as part of his employment. He does not allege that he brought more than the services for which he was hired to Westwood and therefore the additional consideration exception is also inapplicable here. See In re Hotstuf Foods, Inc., 95 B.R. 355, 359 (Bankr. E.D. Pa. 1989).

B. Intentional Interference with Contractual Relations

Even though plaintiff was an employee at will, he can sustain a claim of intentional interference with contractual relations under Pennsylvania law. Under Pennsylvania law, a plaintiff must prove the following elements in order to establish a claim for intentional interference with contractual relations: 1) the existence of a contractual relationship between plaintiff and a third party; 2) an intent on the part of the alleged interfering party to harm the claimant by interfering with those contractual relations; 3) absence of privilege or justification for the interference; and 4) damages. Triffin v. Janssen, 626 A.2d 571, 574 (Pa.Super. 1993); Britt v. May Dep't Stores Co., Civ. A. 94-3112, 1995 WL 408348 (E.D. Pa. June 30, 1995). Defendant argues that under Pennsylvania law plaintiff cannot establish the first element of a claim of intentional interference with contractual relations because he was an employee at-will.

I must "apply state law as interpreted by the state's highest court in an effort to predict how that court would decide the precise legal issues before [me]. . . ." Rush v. Scott Specialty Gases Inc., 113 F.3d 476, 486 (3d Cir. 1997), cited in Gallas v. Sup. Ct. of Pennsylvania, No. 96-6450, 1998 U.S. Dist. LEXIS 14172, at *8 (E.D. Pa. Aug. 25, 1998). In 1974, the Pennsylvania Supreme Court wrote that "[t]he courts of this Commonwealth have held that both employers and employees are entitled to freedom from meddling by third parties, even when the employment is at will." Geary v. United States Steel Corp., 319 A.2d 174, 177 (Pa. 1974) (citations omitted). However, Geary was a case involving wrongful discharge and not intentional interference with contractual relations. "In the absence of guidance from the state's highest court, we are to consider decisions of the state's intermediate appellate courts for assistance in predicting how the state's highest court would rule." Rush v. Scott Specialty Gases Inc., 113 F.3d 476, 486 (3d Cir. 1997),cited in Gallas v. Sup. Ct. of Pennsylvania, No. 96-6450, 1998 U.S. Dist. LEXIS 14172, at *8 (E.D. Pa. Aug. 25, 1998). Since the decision in Geary, the Superior Court of Pennsylvania has specifically addressed the issue of intentional interference with a contract in the context of at will employment.

In dicta in Yaindl v. Ingersoll-Rand Co., 422 A.2d 611, 618 n. 6 (Pa.Super. 1980), the court noted that "[o]f course, an action for intentional interference with the performance of a contract lies even though the contract interfered with is terminable at the will of the parties."). Subsequently, relying on Yaindl, the court in Curran v. Children's Service Ctr. of Wyoming County, Inc., 578 A.2d 8, 12 (Pa.Super. 1990) also recognized a cause of action for interference with an at-will employment contract.²

2 The intentional interference claim in Curran ultimately failed because there was "no third party against whom an action for intentional interference with a contractual relationship can lie." Curran, 578 A.2d at 13.

Both Yaindl and Curran referenced Section 766 of the Restatement (Second) of Torts (1979) which has been adopted in Pennsylvania. See, e.g., Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466, 470 (1979). Section 766 provides for a cause of action for intentional interference with contract when an entity "intentionally and improperly interferes with the performance of a contract . . . between another and a third person by inducing or otherwise causing the third person not to perform the contract." Comment g to Section 776 addresses contracts terminable at will, explaining:

A similar situation exists with a contract that, by its terms or otherwise, permits the third person to terminate the agreement at will. Until he has so terminated it, the contract is valid and subsisting, and the defendant may not properly interfere with it. The fact that a contract is terminable at will, however, is to be taken into account in determining damages that the plaintiff has suffered by reason of its breach.

One's interest in a contract terminable at will is primarily an interest in future relations between the parties, and he has no legal assurance of them. For this reason, an interference with this interest is closely analogous to interference with prospective contractual relations.

Pennsylvania recognizes interference with prospective contractual relations as a branch of the tort of interference with contractual relationships. See, e.g., Glenn v. Point Park College, 272 A.2d 895, 897 (Pa. 1971). If the Pennsylvania Supreme Court follows Section 766 as it has done in other contexts, it is likely to recognize the tort of interference with contractual relations where the contract is for employment at-will.

Most recently, however, the Superior Court failed to recognize a cause of action for interference with an at will employment contract in Hennessy v. Santiago, 708 A.2d 1269 (Pa.Super. 1998). The court held that "an action for intentional interference with performance of a contract in the employment context applies only to interference with a prospective employment relationship whether at-will or not, not a presently existing at-will employment relationship." Id. at 1279. The court explained that it would not follow Yaindl in finding that an action for intentional interference with a contract could apply to an at-will employment relationship because the footnote in Yaindl was dicta. It further noted that "appellant brings no [other] cases to our attention where this doctrine has been extended to the ambit of at-will employment." Id. at 1278. In so holding, the court failed to note that in Curran it had relied on Yaindl in holding that recovery for intentional interference with performance of an at-will employment contract was actionable. Curran, 578 A.2d at 13. It is notable that the decision in Hennessy also failed to address Section 766 and comment g.

Decisions in the federal district courts in Pennsylvania are divided on whether the Supreme Court of Pennsylvania would follow the rationale of Section 766, Yaindl and Curran and recognize the tort of intentional interference with a contract where the contract is for employment at-will or whether the more recent decision in Hennessy would prevail.

In Beyda v. USAIR, Inc., 697 F. Supp. 1394, 1398 (W.D. Pa. 1988), the court held that "[t]hough the at will doctrine protects the employer from contractual liability, it offers no comfort to a third party tortfeasor whose wrongful conduct interferes with the employment relationship. The policies which sustain the at-will doctrine, whatever their wisdom or lack of it, are not intended to benefit a party apart from the employment relationship." Citing to Beyda, in Kettler v. Township of Falls, No. 94-5556, 1995 U.S. Dist. LEXIS 10468, at *6 (E.D. Pa. Jul. 20, 1995), the court disagreed with defendant's assertion that "under Pennsylvania law, only written agreements, setting forth the terms, duration, and consideration may properly be the subject of a claim for intentional interference with contractual relations" and would not dismiss plaintiff's claim. In Steinman v. Kennedy House, Inc., No. 90-0195, 1990 U.S. Dist. LEXIS 16729, at *13 (E.D. Pa. Dec. 10, 1990), the court cited toBeyda and Yaindl in holding that "[t]he fact that an employment contract is terminable at will does not mean that tort liability cannot lie for interfering with that contract."

In Gallas, 1998 U.S. Dist. LEXIS 14172 at *14, relying on comment g to Section 766, the court wrote that "I am unpersuaded that the state's highest court would reject this cause of action solely because of the plaintiff's at-will status." The court noted the similarity between interference with an at-will relationship where the party has no legal assurance of the relationship continuing and interference with prospective contracts where the parties likewise have no legal assurance of the contract ever coming into being. It held that it would deny defendants' motions to dismiss the plaintiff's claims for interference with his severance agreement "[b]ecause . . . both the Supreme Court of Pennsylvania and the Superior Court of Pennsylvania have recognized a cause of action for interference with a contract in the context of an employment relationship and have not excluded at-will contracts except in one instance [(Hennessy)]." Id. at *14-15.

In Buckwalter v. ICI Explosives USA, Inc., No. 96-4795, 1998 U.S. Dist. LEXIS 276 (E.D. Pa. Jan. 8, 1998), the court explained why an action for intentional interference with contractual relations should be allowed to lie even in the context of an at will employment relationship, noting that just because one employee is at-will does not mean that someone else should be privileged to interfere with his employment. Despite this logic, the court subsequently held that "[w]hile we do not agree with the superior court's reasoning in Hennessy . . . we believe that Hennessy accurately predicts how the Pennsylvania Supreme Court would rule on this matter." Buckwalter v. ICI Explosives USA, Inc., No. 96-4795, 1998 U.S. Dist. LEXIS 4369, at *4 (E.D. Pa. Mar. 25, 1998) (Buckwalter II).

In Parvensky-Barwell v. County of Chester, No. 98-3664, 1999 WL 213371, at *8 (E.D. Pa. Apr. 13, 1999), the court cited toHennessy in holding that "[t]here is no action for an interference with [an at-will] employment relationship as there is no cognizable contract." The court also cited to Hennessy inCarter v. Philadelphia Stock Exchange, No. 99-2455, 1999 WL 715205 at *5 (E.D. Pa. Aug. 25, 1999), and noted that for the intentional interference with contractual relations claim to succeed "there must have been a contractual and not simply an atwill relationship between plaintiff and her subsequent employers." Plaintiff's claim survived a motion to dismiss because she alleged her relationship with her employer was not at-will. Neither Parvensky-Barwell nor Carter discuss or cite to Section 766.

In Hitchens v. County of Montgomery, No. 00-4282, 2002 WL 253939, at *12 (E.D. Pa. Feb. 20, 2002), the court held plaintiff was unable to maintain a cause of action for wrongful interference with contract rights because "he was an employee at-will without a written contract." However, the court cited no case law and provided no further explanation to support its finding on this issue.

Most recently, in a footnote in McClease v. R.R. Donnelley Sons Co., 226 F. Supp. 2d 695, 704 n. 11 (E.D. Pa. 2002),citing Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466 (Pa. 1979), the court disagreed with the prediction in Buckwalter II. It noted that "[t]he Pennsylvania Supreme Court has long endorsed Section 766. . . . We can find no reason to expect that the Court would reject comment g, which is a logical application of the general principles enunciated in Section 766" and predicted that "the Pennsylvania Supreme Court would adoptYaindl rather than Hennessy."

I agree with the footnote in McClease and the court's holding in Gallas. In light of the Pennsylvania Supreme Court's prior recognition of Section 766 and the tort of intentional interference with prospective contractual relations, I predict that it would find that plaintiff's claim for intentional interference with an at-will employment contract is actionable. I am not persuaded by the district court cases that have held otherwise. The protections of the at-will doctrine should not enable a third party to interfere with an employee's relationship with his employer. Because plaintiff can establish the first element of a claim for intentional interference with contractual relations I will deny defendant's motion for summary judgment.

ORDER

AND NOW, this day of September 2004, after considering defendant's motion for summary judgment and plaintiff's response thereto, plaintiff's motion to compel depositions and defendant's response thereto, and defendant's motion for a protective order and plaintiff's response thereto and for the reasons set forth in the accompanying memorandum, it is ORDERED that:

1. Defendant's motion for summary judgment is DENIED without prejudice to the filing of a motion for summary judgment after completion of discovery on the remaining elements of plaintiff's claim for intentional interference with contractual relations;

2. Plaintiff's motion to compel depositions is DENIED as moot;

3. Defendant's motion for a protective order is DENIED as moot;

4. All discovery pertaining to the remaining elements of plaintiff's claim is to be completed within 90 days of the date of this Order.