A U.S. District Judge in the Eastern District of Pennsylvania has allowed several claims to proceed to trial following a motion for summary judgment by defendants in Ozburn-Hessey Logistics, LLC v. 721 Logistics, LLC, et al, No. 12-0864 (April 4, 2014). The allegations in the case go beyond the typical defection of an employee or two to join a competitor. As the court noted:
[m]ost centrally, OHL accuses the defendants of sabotage. According to its allegations, the defendants participated in a coordinated plan to cripple OHL’s produce-clearing operations and convert its customers by arranging for OHL’s entire perishables division to quit, and join 721, at precisely the moment when it would be most damaging to OHL.
Plaintiff Ozburn-Hessey Logistics asserted counts of misappropriation of trade secrets, unfair competition, breach of contract (non-solicitation agreement), tortious interference with contractual relations, civil conspiracy, and breach of duty of loyalty against ten individual defendants as well as its competitor, 721 Logistics. The Court granted a motion to dismiss in part, but allowed core provisions of the lawsuit to survive against the key actors. Specifically, the court held that whether customer contact information was a trade secret under the Pennsylvania Trade Secrets Act was questionable, but ultimately a question of fact as to three of the defendants.
Addressing the claim of unfair competition, the Court noted that under Pennsylvania common law, unfair competition is the “systemic inducing of employees to leave their present employment and take work with another to cripple and destroy an integral part of a business” or “for the purpose of having the employees commit wrongs, such as disclosing their former employer’s trade secrets or enticing away his customers,” rather than “to obtain the services of particularly gifted or skilled employees.” To determine the issue of intent, specifically the argument that the group resignation was timed in order to cause maximal harm, the court looked at various emails that said, in part, “After the first week of January – when all the ‘s’ will hit the fan . . . we’ll set a date!” and “how’s this for quickness? … snapping necks and cashin’ checks!” The court concluded that the unfair competition claim should be dismissed as to all but one individual defendant and the sole corporate defendant. Similarly, the court declined to dismiss the civil conspiracy claim against the same parties based on the possibility of unfair competition. The tortious interference claim was dismissed as to all defendants. The breach of contract claim survived as to one defendant. Finally, the breach of duty of loyalty claim was dismissed because the employees merely made arrangements to compete before resigning and did not use confidential information or solicit customers while still employed.
Overall, the decision provides a useful atlas of the geography of unfair competition law in Pennsylvania.