WMI Group, Inc. v. Fox, C.

J.A05035/14

2015 PA Super 25

WMI GROUP, INC., WM ROBOTS, LLC, : IN THE SUPERIOR COURT OF

AND WM MANAGEMENT GROUP, INC., : PENNSYLVANIA

:

Appellants :

:

v. :

:

:

CHARLES FOX AND IED DETECTION :

SYSTEMS, LLC, :

:

Appellees : No. 1550 EDA 2013

Appeal from the Order Entered May 24, 2013

In the Court of Common Pleas of Montgomery County

Civil Division No(s).: 2013-11288

BEFORE: ALLEN, JENKINS, and FITZGERALD,* JJ.

OPINION BY FITZGERALD, J.: FILED FEBRUARY 06, 2015

Appellants, WMI Group, Inc., WM Robots, LLC, and WM Management

Group, Inc., appeal from the order entered in the Montgomery County Court

of Common Pleas denying their petition for a temporary restraining order

and preliminary injunction against Appellees, Charles Fox and IED Detection

Systems, LLC.1 Appellants contend the trial court erred by not issuing a

preliminary injunction enjoining Appellees from violating a restrictive

covenant. We hold that Appellants have not established their burden that

*

Former Justice specially assigned to the Superior Court.

1

This is an interlocutory appeal as of right. See Pa.R.A.P. 311(a)(4).

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the restrictive covenant binds Fox and, regardless, have not demonstrated

the existence of a trade secret. Given the preliminary nature of the record

and that Appellants’ entitlement to injunctive relief is presently unclear, we

affirm.2

We state the facts as set forth by the trial court:

[Appellants] are in the business of marketing and selling

machine and robotic products, some of which they

manufacture, and some of which are manufactured by

other companies.

On August 6, 2004, [Fox] entered into an employment

agreement with Wolstenholme Machine, Inc. (WMI).[3]

Attached to the employment agreement was an

employment letter on Wolstenholme Machine stationary

which outlined Fox’s salary, commission, benefits and

2

Our affirmance is based on the preliminary nature of this record. It is not

a holding on the ultimate merits of Appellants’ claims, which can be

developed more fully prior to trial. As our Supreme Court explained:

It is somewhat embarrassing to an appellate court to

discuss the reasons for or against a preliminary decree,

because generally in such an issue we are not in full

possession of the case either as to the law or testimony—

hence our almost invariable rule is to simply affirm

the decree, or if we reverse it to give only a brief outline

of our reasons, reserving further discussion until appeal,

should there be one, from final judgment or decree in law

or equity.

Summit Towne Ctr., Inc. v. Shoe Show of Rocky Mount, Inc., 573 Pa.

637, 646, 828 A.2d 995, 1000-01 (2003) (emphasis added and citation

omitted).

3

Although WMI is not one of the named appellants, the parties agree that

WMI is now known as WMI Group, Inc. Appellants’ Brief at 4; Appellees’

Brief at 3.

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general employment duties. Both of these documents

were signed by Agit Gene Samsi (hereinafter “Samsi”)

[who was then the] Vice President General Manager and

Fox. Section 5 of the 2004 Employment Agreement stated

as follows:

NON-COMPETITION

5.01 During the term of this Agreement and for

12 months following the termination of

Employee’s employment, Employee will not,

without WMI’s prior written consent: (i) accept

employment with a competitor or in any other

manner compete with those business activities

to which the Employee was assigned during the

24 month [sic] prior to his termination of

employment with WMI, (ii) solicit any customer

or potential customer of WMI that Employee or

his subordinates solicited or serviced for WMI or

(iii) solicit to leave WMI or hire any individual

who was an WMI employee during Employee’s

employment at WMI.

Trial Ct. Op. at 1-2.

The 2004 Agreement explicitly provided that the non-compete clause

was effective upon termination of the Agreement:

1.04 This Agreement and all obligations hereunder,

except for the post-employment obligation, shall

automatically terminate if and when Employee assumes a

different position in the Company[4] and signs a new

Agreement, or upon termination of employment. The

post-employment obligations described in Section 4.0 and

5.0 of the Agreement shall remain in full force and effect

after this Agreement is terminated.

4

The 2004 Agreement defined “Company” as Wolstenholme Machine, Inc.,

i.e., WMI. See Appellants’ Prelim. Inj. Hr’g Ex. 3-B.

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Appellants’ Prelim. Inj. Hr’g Ex. 3-B.5 The 2004 Agreement was also binding

upon any successors and assigns to WMI: “This Agreement . . . shall be

binding upon and inure to the benefit of WMI and Employee and their

respective successors and permitted assigns and the Company will require

its successors to expressly assume its obligations under this Agreement . . .

.” Id.

We continue to quote the trial court’s recitation of the facts:

Fox’s initial employment duties were to acquire new

customers and sell products manufactured by [Appellants]

in their machine shop.

On January 10, 2007, Fox signed a document on WM

Robots, LLC stationary titled “Promotion to new Position

within Company.” The employer listed is A. Gene Samsi

with WM Management Group, LLC.[6] This document

described Fox’s new position as WM Robots’ Sales and

Business Development Manager and set forth his salary

and commissions. The document did not contain a non-

compete provision and did not refer to the non-compete

provision in the 2004 agreement [with WMI].

Trial Ct. Op. at 2 (citation omitted).

5

The certified record did not include the preliminary injunction hearing

exhibits. Our Supreme Court held “that where the accuracy of a pertinent

document is undisputed, the Court could consider that document if it was in

the Reproduced Record, even though it was not in the record that had been

transmitted to the Court.” Pa.R.A.P. 1921 note (citing Commonwealth v.

Brown, 617 Pa. 107, 117 n.4, 52 A.3d 1139, 1145 n.4 (2012)). In this

case, because the preliminary hearing exhibits are part of the reproduced

record and neither party has disputed their accuracy, we will consider them.

See id.

6

WM Management Group, LLC is not a named party. WM Management

Group, Inc., however, is a party.

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We reproduce the 2007 document, as follows:

Promotion to new Position within Company

Employee: [Fox]

Employer: A. Gene Samsi with WM Management Group,

LLC

Date: 1/10/2007

Effective Date: 1/1/2007

This letter is to formalize and define the agreement to

Promote . . . Fox to the position of WM Robots’ Sales and

Business Development Manager.

Responsibilities include, but not limited to, Sales, Sales

Management, Customer Service & Business Development

for WM Robots’ products.

The defined territory for these responsibilities is global with

the exception of UVSS products with territories reserved

by BDL Systems Limited (England).

Products included, but not limited to, Robots (Currently

[sic] the KNIGHT) and accessories, Wolstenholme

AeroMed’s HazProbe, BDL Systems’ UVSS, and any other

WM Robots’ product defined as any product or system sold

as a WM Management Group’s part number.

Salary is $70,000 per year with annual reviews in the

month of December.

Commissions on all WM Robot products will be 1% of Gross

Sales with the exception of the KNIGHT product line, which

will be .5% of Gross Sales. All new sales (sales orders

received after January 1st, 2007) are subject to this

commission structure. In addition to commissions

received for WM Robots’ products, certain projects

currently running or pending in WMI and CST are subject

to a commission of .25% through 2007. These projects

are listed below . . . .

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Appellants’ Prelim. Inj. Hr’g Ex. 4. As noted above, WM Robots, LLC, is a

different entity than WMI/WMI Group, Inc., in the 2004 agreement.

Fox’s new position replaced two individuals who left the

company, and included new responsibilities of working on

WM Robots’ robotic under-vehicle surveillance and [robotic

camera]-type equipment. Fox stopped selling WMI

products and solely worked on WM Robots’ product lines in

his new position.

Later in 2007, WM Robots, LLC contracted with Vallon, a

German manufacturer of metal detection systems,

magnetometers and degaussing equipment to represent

and sell their products in the United States. Fox was

assigned by Samsi as the sole salesperson for Vallon

products. In this new position, Fox established a

relationship with Vallon and the U.S. Military, the largest

customer of WM Robots’ Vallon products. Thereafter, 90

percent of Fox’s sales were devoted to selling Vallon

products. The annual sales from WM Robots to the U.S.

Military was approximately $60 million in 2011 and $110

million in 2012.

On April 6, 2011, Fox signed a document on WM Robots

stationary titled “Promotion and Commission Agreement

Update for Charles Fox.” This document identified Fox’s

new title as Vice President of Business Development and

described his commissions. This document was signed by

Samsi and Fox, and did not contain a non-compete

provision. Again, no reference was made to the non-

compete provision in the 2004 agreement between Fox

and WMI.

Trial Ct. Op. at 2-3.

We set forth the 2011 document:

PROMOTION & COMMISSION AGREEMENT UPDATE FOR

CHARLES FOX

Effective immediately, Charles Fox has been promoted to

the new position of Vice President of Business

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Development. The following commission rates apply and

are valid indefinitely:

All Vallon products: 3% of Gross Sales

All existing WM Robots’ products: 1% of Gross Sales

New WM Robots’ products: To be negotiated on a case by

case basis.

HazProbe: 1% of Gross Sales

Wolstenholme Machine Shop Sales related to WM Robots’

customers: 1% of Gross Sales

Commission is due upon payment from customer in [sic]

payable in soonest pay cycle.

Appellants’ Prelim. Inj. Hr’g Ex. 8. WM Robots, LLC—a different entity than

WMI Group, Inc.—is the company listed in the signature blocks of the

agreement. Id.

In late October 2012, Samsi and Bob Wolstenholme,

owner of the three companies, presented Fox with a new

Employment Agreement[,] which included a non-compete

provision. Fox believed he was not bound by a non-

compete provision since there was no such provision in the

April 6, 2011 Employment Agreement. Fox would not

agree to Wolstenholme’s proposed non-compete

restriction. After failed negotiations, Fox submitted a

letter of resignation on March 29, 2013, wherein he stated

“it is my intention to begin a new venture which will

involve my representation of Vallon GmbH and Cobham

Technological Services.” Fox intended to actively compete

with [Appellants] for Vallon’s business. On April 2, 2013,

Samsi received an email from Dan Dukes, a program

manager for WM Robots, which was anonymously

forwarded to him by one of his government contacts who

had received the email from Fox. The email states, in

relevant part:

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If I have assumed correctly, you should have

received an email from Gene Samsi about my

resignation from WM Robots. I am creating my

own company and still will be representing

VALLON. I will also be representing Cobham

Technical Services, who manufactures the

ground penetrating radar portion of the VALLON

detectors.

I am not sure what role WM Robots will have

with Vallon in the future, but I promise there

will be no service interruptions. This departure

from WM Robots was not a rushed decision. My

company will allow you more flexibility in

dealing with VALLON, including direct contracts

if so desired.

On May 10, 2013, Jürgen Braunstein, sales director for

Vallon, emailed Samsi and Fox and stated:

We informed you in an earlier phase that we

want to go ahead with Clay [i.e., Charles Fox],

preferably within WM Robots.

This is still our preference. However, Clay

has his own company now.

The legal situation remains to be cleared,

also for the staff that WM Robots is hiring. As

long as the legal situation is not clear, we do not

want to lose any business opportunities.

Therefore we encourage WM Robots and IED

Detection Systems to win customers for our

products. We do not want any confusion for the

customers and that both parties behave fair.

Do not do any competition in front of the

customer. If one party has a new business

opportunity then the other party should respect

it and should not try to squeeze in.

On May 13, 2013, [Appellants] filed a Complaint against

Fox and his new company, IED Detection Systems, LLC,

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alleging breach of contract, misappropriation,[7]

conversion of trade secrets, tortious interference, unfair

competition, conversion, and breach of duty of loyalty.

[Appellants] concurrently filed a Petition for Temporary

Restraining Order and for Preliminary Injunction. An

evidentiary hearing before the undersigned was held on

May 22, 2013, and an order denying the Petition for

Temporary Restraining Order and for Preliminary

Injunction was entered on May 24, 2013. A Notice of

Appeal to the Superior Court was filed by [Appellants] on

the same day.

Trial Ct. Op. at 3-4 (footnote omitted). Appellants timely filed a court-

ordered Pa.R.A.P. 1925(b) statement. Appellants also filed an application for

an injunction pending appeal pursuant to Pa.R.A.P. 1732(b), which this

Court denied on August 19, 2013.8

Appellants raise the following issues:

Whether [Appellees] should have been temporarily and

preliminarily restrained from using [Appellants’] trade

secrets and confidential information to unfairly compete

with [Appellants] by stealing (and/or attempting to steal)

[Appellants’] primary supplier and customers, in violation

of the restrictive covenants in Fox’s 2004 employment

agreement and in violation of [PUTSA]?

Whether Fox’s employment agreement was valid and

enforceable at the time of [his] resignation, where the

employment agreement was never terminated or

superseded by a subsequent agreement during the course

of [his] employment?

7

This claim is based upon a violation of the Pennsylvania Uniform Trade

Secrets Act (“PUTSA”), 12 Pa.C.S. §§ 5301-5308, which “displaces

conflicting tort, restitutionary and other law of this Commonwealth providing

civil remedies for misappropriation of a trade secret.” 12 Pa.C.S. § 5308.

8

Appellants did not file anything under seal with the trial court or this Court.

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Whether [Appellants’] network of customer contacts,

customer-related information, marketing relationships

within the niche (bomb detection device) market, and

pricing methodology constitute trade secrets under the

PUTSA, where such information is integral to [Appellants’]

competitive advantage, required the expenditure of

significant resources to develop, and is not readily

ascertainable by [Appellants’] competitors?

Whether Fox’s solicitation of [Appellants’] primary supplier

and customers while possessing and using [Appellants’]

confidential information and trade secrets, in violation of

the restrictive covenants in Fox’s 2004 employment

agreement, constitutes irreparable harm under

Pennsylvania law?

Appellants’ Brief at 2-3 (reordered to facilitate disposition).

We summarize Appellants’ arguments for their first two issues.9

Appellants generally allege the trial court was obligated to issue a

preliminary injunction against Appellees. Appellants suggest that a prior

2004 agreement with WMI, which included a non-compete clause, was not

replaced by the 2007 and 2011 agreements with WM Robots, LLC, each of

9

Despite raising four issues in their brief, Appellants divide their argument

into only three parts, thus violating Pa.R.A.P. 2119(a), which mandates that

“argument shall be divided into as many parts as there are questions to be

argued.” See Pa.R.A.P. 2119(a). We decline to quash, however. See PHH

Mortg. Corp. v. Powell, 100 A.3d 611, 615 (Pa. Super. 2014) (declining to

quash appeal despite numerous violations of appellate briefing rules); see

also Commonwealth v. Briggs, 608 Pa. 430, 516, 12 A.3d 291, 343

(2011) (“The briefing requirements scrupulously delineated in our appellate

rules are not mere trifling matters of stylistic preference; rather, they

represent a studied determination by our Court and its rules committee of

the most efficacious manner by which appellate review may be conducted so

that a litigant’s right to judicial review as guaranteed by Article V, Section 9

of our Commonwealth’s Constitution may be properly exercised.”).

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which lacked a non-compete clause. Id. at 17. Appellants reason that Fox’s

promotion within WM Robots, LLC, did not void the prior agreement with

WMI. Id. Instead, Appellants opine that the trial court should have

disregarded the plain language of the 2007 and 2011 agreements with WM

Robots, LLC, and considered the parties’ intent. Id. That intent, Appellants

insist, was to incorporate the original 2004 agreement with WMI by implicit

reference. Id. To substantiate their unstated intent, Appellants rely upon

parol evidence. Id. at 19-21. Appellants alternatively suggest that the

2004 agreement with WMI coexists with the 2007 and 2011 agreements

with WM Robots, LLC. Id. at 17-18 (citing, inter alia, Restatement (First) of

Contracts § 408 (1932)).10 We hold Appellants are not entitled to relief.

In Synthes USA Sales, LLC v. Harrison, 83 A.3d 242 (Pa. Super.

2013), our Court discussed the applicable standard of review and legal

principles for resolving an appeal from a request for a preliminary injunction:

Our scope of review is plenary.

Our review of a trial court’s order granting or

denying preliminary injunctive relief is highly

deferential. This highly deferential standard of

review states that in reviewing the grant or

10

Appellants cite only one Pennsylvania state case, Robert Grace

Contracting Co. v. Norfolk & W. Ry. Co., 259 Pa. 241, 102 A. 956

(1918), which predates Section 408. Appellants also cite several

Pennsylvania federal cases, which are not binding on this Court. See

Appellants’ Brief at 17-18. Generally, “federal court decisions do not control

the determinations of the Superior Court.” NASDAQ OMX PHLX, Inc. v.

PennMont Secs., 52 A.3d 296, 303 (Pa. Super. 2012) (citations omitted).

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denial of a preliminary injunction, an appellate

court is directed to examine the record to

determine if there were any apparently

reasonable grounds for the action of the court

below.

An abuse of discretion is not merely an error of judgment,

but if in reaching a conclusion the law is overridden or

misapplied, or the judgment exercised is manifestly

unreasonable, or the result of partiality, prejudice, bias, or

ill will, as shown by the evidence or the record, discretion

is abused. We do not inquire into the merits of the

controversy. Only if it is plain that no grounds exist

to support the decree or that the rule of law relied

upon was palpably erroneous or misapplied will we

interfere with the decision of the trial court.

A trial court has apparently reasonable grounds for

granting the extraordinary remedy of preliminary

injunctive relief if it properly finds that all of the essential

prerequisites are satisfied.

There are six essential prerequisites that a party

must establish prior to obtaining preliminary

injunctive relief. The party must show: 1) “that

the injunction is necessary to prevent

immediate and irreparable harm that cannot be

adequately compensated by damages”; 2) “that

greater injury would result from refusing an

injunction than from granting it, and,

concomitantly, that issuance of an injunction will

not substantially harm other interested parties

in the proceedings”; 3) “that a preliminary

injunction will properly restore the parties to

their status as it existed immediately prior to

the alleged wrongful conduct”; 4) “that the

activity it seeks to restrain is actionable, that its

right to relief is clear, and that the wrong is

manifest, or, in other words, must show that it

is likely to prevail on the merits”; 5) “that the

injunction it seeks is reasonably suited to abate

the offending activity”; and, 6) “that a

preliminary injunction will not adversely affect

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the public interest.” The burden is on the party

who requested preliminary injunctive relief.

A decision addressing a request for a preliminary

injunction thus requires extensive fact-finding by the trial

court because the moving party must establish it is likely

to prevail on the merits. If the moving party’s right to

relief is unclear, then a preliminary injunction should not

issue.

Synthes, 83 A.3d at 248-50 (emphasis added and punctuation, footnote,

and citations omitted). Upon fulfilling all the “essential prerequisites,” the

movant may obtain injunctive relief narrowly tailored to protect the

employer’s legitimate business interest. Three Cnty. Servs., Inc. v. Phila.

Inquirer, 337 Pa. Super. 241, 246, 486 A.2d 997, 1000 (1985) (noting “the

preliminary injunction, if issued, should be no broader than is necessary for

the petitioner’s interim protection”).

To establish a clear right to relief on a claim for breach

of restrictive covenants of an employment contract, a

party must, inter alia, demonstrate the following:

In Pennsylvania, restrictive covenants are

enforceable if they are incident to an

employment relationship between the parties;

the restrictions imposed by the covenant are

reasonably necessary for the protection of the

employer; and the restrictions imposed are

reasonably limited in duration and geographic

extent. Our law permits equitable enforcement

of employee covenants not to compete only so

far as reasonably necessary for the protection of

the employer. However, restrictive covenants

are not favored in Pennsylvania and have been

historically viewed as a trade restraint that

prevents a former employee from earning a

living.

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Pennsylvania cases have recognized that trade secrets of

an employer, customer goodwill and specialized training

and skills acquired from the employer are all legitimate

interests protectable through a general restrictive

covenant. In essence, the court must examine and

balance the employer’s legitimate business interest, the

individual’s right to work, the public’s right to unrestrained

competition, and the right to contract in determining

whether to enforce a restrictive covenant.

In construing a restrictive covenant, courts do not

assume that a contract’s language was chosen carelessly,

nor do they assume that the parties were ignorant of the

meaning of the language they employed. When a writing

is clear and unequivocal, its meaning must be determined

by its contents alone. It is not the function of this Court to

re-write it, or to give it a construction in conflict with the

accepted and plain meaning of the language used.

Only where a contract’s language is ambiguous

may extrinsic or parol evidence be considered to

determine the intent of the parties. A contract

contains an ambiguity if it is reasonably

susceptible of different constructions and

capable of being understood in more than one

sense. This question, however, is not resolved

in a vacuum. Instead, contractual terms are

ambiguous if they are subject to more than one

reasonable interpretation when applied to a

particular set of facts. In the absence of an

ambiguity, the plain meaning of the agreement

will be enforced. The meaning of an

unambiguous written instrument presents a

question of law for resolution by the court.

Synthes, 83 A.3d at 250-51 (punctuation and citations omitted).

Furthermore, with respect to restrictive covenants:

Courts have consistently held that the taking of

employment is sufficient consideration for a covenant not

to compete. Capital Bakers v. Townsend, 426 Pa. 188,

190, 231 A.2d 292, 293 (1967). An employee’s promotion

to a new position within the company also constitutes

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sufficient consideration. Jacobson & Co. v.

International Environment Corp., 427 Pa. 439, 449,

235 A.2d 612, 618 (1967). However, the covenant must

be executed contemporaneously with the exchange of

consideration. Capital Bakers[,] 426 Pa. at 190–91, 231

A.2d at 293–94. In Capital Bakers, a salesman executed

a restrictive covenant when he was hired. He later

executed a supplementary covenant without any change in

his employment status. Our Supreme Court refused to

enforce the second covenant because it was not executed

contemporaneously with the exchange of consideration.

The Court allowed enforcement of the original covenant.

Id.

Records Ctr., Inc. v. Comprehensive Mgmt., Inc., 363 Pa. Super. 79,

84-85, 525 A.2d 433, 435-36 (1987) (emphasis added).

Strong public policy considerations underlie the conclusion

that restrictive covenants are not assignable. Given that

restrictive covenants have been held to impose a restraint

on an employee’s right to earn a livelihood, they should be

construed narrowly; and, absent an explicit assignability

provision, courts should be hesitant to read one into the

contract. Moreover, the employer, as drafter of the

employment contract, is already in the best position to

include an assignment clause within the terms of the

employment contract. Similarly, a successor employer is

free to negotiate new employment contracts with the

employees . . . or secure the employee’s consent to have

the prior employment contract remain in effect.

Hess v. Gebhard & Co., 570 Pa. 148, 164-65, 808 A.2d 912, 921 (2002)

(punctuation and citation omitted).

Instantly, as set forth above, Appellants asked the trial court to

disregard the 2007 and 2011 agreements with WM Robots, LLC, and hold

that the 2004 agreement with WMI controlled. When Fox terminated

employment with WMI and joined WM Robots, LLC, in 2007, Fox did not

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assume a different position within WMI. See Appellants’ Prelim. Inj. Hr’g Ex.

3-B; cf. Records Ctr., 363 Pa. Super. at 84-85, 525 A.2d at 435-36.

Accordingly, the non-compete clause provision—set forth within the 2004

agreement with WMI—became effective for twelve months. See Appellants’

Prelim. Inj. Hr’g Ex. 3-B; Hess, 570 Pa. at 164-65, 808 A.2d at 921

(mandating narrow, stringent construction of restrictive covenants).

Similarly, absent an applicable, explicit assignment clause, we decline to

impute the non-compete clause to WM Robots, LLC. See Hess, 570 Pa. at

164-65, 808 A.2d at 921.

Appellants have also asked this Court to rely upon parol evidence to

establish the parties’ intent to incorporate by reference the 2004

agreement’s non-compete clause. But Appellants have not referred this

Court to any ambiguous language such that we may resort to extrinsic and

parol evidence. See Synthes, 83 A.3d at 248-51. Appellants have not

identified any contract language “reasonably susceptible of different

constructions and capable of being understood in more than one sense.”

See id. Our courts are barred from considering Appellants’ parol evidence

absent the predicate condition of ambiguity. See id.

As noted above, Appellants alternatively relied on, inter alia,

Restatement (First) of Contracts § 408 in support of their proposition that

the 2004 agreement with WMI coexists with the 2007 and 2011 agreements

with WM Robots, LLC. Section 408 states as follows:

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§ 408 Discharge of Duty Under an Earlier Contract by a

Subsequent Inconsistent Contract

A contract containing a term inconsistent with a term of an

earlier contract between the same parties is interpreted

as including an agreement to rescind the inconsistent

term in the earlier contract. The parties may or may not

at the same time agree to rescind all the other provisions

of the earlier contract. Whether they do this is a question

of interpretation, except as this rule is qualified by the rule

stated in § 223.[11]

Restatement (First) of Contracts § 408 (emphases added). Section 408 self-

evidently addresses rescission of an inconsistent term—i.e., a non-compete

clause—in a prior contract between the same parties. Id.; Wathen v.

Brown, 200 Pa. Super. 620, 624, 189 A.2d 900, 903 (1963) (holding,

“Parties to a contract may rescind it by making a new contract inconsistent

therewith.” (citing Restatement (First) of Contracts § 408)); see also In re

Klugh’s Estate, 362 Pa. 166, 173, 66 A.2d 822, 825 (1949) (“The rule is

well settled that the parties to a contract may rescind it by making a new

contract inconsistent therewith.” (emphasis added and citations omitted)).

Instantly, Appellants’ argument presumes the parties are identical for

both the earlier and subsequent contracts. WMI was a party to the 2004

agreement; WM Robots, LLC was not a party. See Appellants’ Prelim. Inj.

Hr’g Ex. 3-B. WM Robots, LLC—not WMI—was a party to the 2007 and 2011

agreements. See Appellants’ Prelim. Inj. Hr’g Ex. 4, Ex. 8. Absent identical

11

Restatement (First) of Contracts § 223 (1932) addresses the effect of the

statute of frauds.

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parties for the contracts at issue, § 408 is inapplicable and rescission cannot

occur. See Wathen, 200 Pa. Super. at 624, 189 A.2d at 903; Restatement

(First) of Contracts § 408; see also In re Klugh’s Estate, 362 Pa. at 173,

66 A.2d at 825. For these reasons, Appellants are not entitled to relief.

For their third issue, Appellants contend their pricing method is a trade

secret. Appellants opine they price their products based upon negotiating

discounts with their customers, profit margins, and “currency hedging,” i.e.,

“hedging against the fluctuation in the exchange rate between the U.S.

Dollar and the Euro.” Appellants’ Brief at 28.12 They claim this “compilation

of information” is a trade secret because the “mixture of those ingredients”

is “unknown outside” of Appellants. Id. at 29. The trial court erred,

Appellants suggest, by focusing on the individual ingredients—i.e., the

discounts, profit margins, and “currency hedging”—and not on the

combination of those individual ingredients. Id. Appellants separately

contend their network of customer contacts, information, and relationships

are also trade secrets. We hold Appellants are due no relief.

At the preliminary injunction hearing, Appellants testified about their

currency hedging:

[Samsi13]: WM Robots buys these products from Vallon,

and we pay for them in euros. The exchange rate

12

Appellants did not define “currency hedging” in any of their pleadings.

13

Samsi is the chief operating officer of WMI.

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fluctuation that is prevalent in the euro is absorbed by WM

Robots. So in order to maintain a certain level of margin

of profit, we do what is called currency hedging. And we

determine an exchange rate for a—let’s say there is a

quotation or an estimate being supplied by the

Government. I determine what the exchange rate should

be so that we cover the period that that particular

contractor delivery order is going to be open.

N.T. Prelim. Inj. Hr’g, 5/22/13, at 53 (emphasis added).

The trial court requested clarification from Samsi:

The court: . . . One of the things I think you mentioned

about was that [Fox] has unique knowledge as to the

currency exchange during a transaction.

[Samsi]: Yes.

The court: Why would that be so unique? Why wouldn’t

any person who is sophisticated in international currency

understand the same logistics that you’re saying he has?

[Samsi]: Your Honor, it is unique to the extent of how we

use the exchange rate fluctuation and how we hedge

against fluctuations and how we price our products; that is

unique to WM Robots.

The court: How so? In other words, wouldn’t that be the

same for anybody who buys and sells internationally?

[Samsi]: In some form, yes. They would be able to be

[sic] do that, yes.

The court: With respect to the pricing schedule, from what

I understood . . . , if someone were to make a Freedom of

Information Request—would they actually see the actual

contract?

[Samsi]: They can see the contract, yes, Your Honor.

Id. at 101 (emphases added and capitalization omitted).

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During the cross-examination of Fox, the court elicited an example of

currency hedging:

[Appellants’ counsel]. Part of the way [Appellants] made a

profit was to figure out how to correctly hit the right

number of the conversion rate from euros to dollars?

[Fox]. Yes.

Q. And you were aware of how . . . WMI, did that?

A. I was tracking the exchange rate myself. The present

communication that [Samsi] would have with the

accountants, dealing with the exchange rates was not . . .

presented to me.

The court: Can you give me an example? Let’s use [100

euros] as to how fluctuation in the exchange rate would

affect the price, the setting of the price, let’s say a unit

costs [100 euros].

[A.] We would get a 20% discount. So the WM Robots’

cost for that product would then be 80 euros. We would

take the 100 euro price and look at the exchange rates. If

the exchange rate—around now, it is about 1.3. So we

would then take the 1.3 exchange rate and multiply that

by the euro cost. And we would put out a price of $130.

And if there were additional discounts, then that would be

done separately. That would be based on whatever Samsi

would allow.

The court: Let me follow this again. Let’s say the price

from Vallon is 100 euros. There is a discount of 20

percent, so now it is 80 [euros]. But you’re setting it at a

1.3 exchange rate, at 130 euros. Does that mean the

Government would pay 130 euros for the unit?

[A.] . . . They would pay $130.

The court: Oh, $130. What about the discount? Is that

just profit?

[A.] Yes.

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J. A05035/14

[Appellants’ counsel]: So as you just explained, you were

aware of how the pricing worked, right?

A. Yes. But I was not aware of the actual exchange rates

that Mr. Samsi was getting.

The court: Would he get a different rate than anyone

trading in international currency would get?

[A.] No.

The court: So I don’t understand your comment that you

weren’t aware of the rates he was getting. Would [Samsi]

get a unique rate?

[A.] Mr. Samsi was the only one that was dealing with the

accountants to hedge the dollar to the euro. I was not—

that was not a part of my role or responsibility.

Id. at 146-48 (capitalization omitted); see also id. at 53.

Fox confirmed that he did not hedge currency on redirect examination:

[Appellees’ counsel: Y]ou mentioned something called in

the pricing . . . a “hedging of the rates.” I am a little

unclear on what that means. In the circumstances of

pricing, when you’re calculating the conversion rate from

the euro to the dollar, what does it mean to hedge that

rate?

[Fox]. The . . . existing currency conversion rate is only in

real time. These [sales] contracts [for products] would

take place or be delivered several months down the road.

So to properly anticipate what the exchange rate would be

at the time of delivery or payment from the Government in

order to make the WM Robots’ payment to Vallon, you

would enter into hedging contracts to limit your exposure

to wildly fluctuating exchange rates.

Q. Who made these hedging decisions?

A. [Samsi] did.

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J. A05035/14

Q. Do you have any experience in international markets

that make you qualified to make hedging decisions?

A. No.

Id. at 186-87. Thus, both Fox and Samsi testified that only Samsi engaged

in currency hedging.14 Id.; accord id. at 53, 148. Samsi also testified that

customer information, contracts, and prices are publicly available. Id. at

91-94, 101 (agreeing prices publicly available via Freedom of Information

Request).

To obtain injunctive relief, a party must establish that the information

at issue is a “trade secret,” as that term is defined by PUTSA. 12 Pa.C.S. §

5302; Iron Age Corp. v. Dvorak, 880 A.2d 657, 664 (Pa. Super. 2005)

(affirming denial of preliminary injunction because movant failed to establish

information at issue qualified as trade secret). The PUTSA defines “trade

secret” as follows:

“Trade secret.” Information, including a formula, drawing,

pattern, compilation including a customer list, program,

device, method, technique or process that:

(1) Derives independent economic value, actual or

potential, from not being generally known to, and not

being readily ascertainable by proper means by, other

persons who can obtain economic value from its

disclosure or use.

14

We note the common occurrence of currency hedging contracts. See,

e.g., Union Steel Mfg. Co. v. United States, 837 F. Supp. 2d. 1307, 1321

(Ct. Int’l Trade 2012) (noting “currency hedging” involves currency swap

contracts); In re Sadia, S.A. Secs. Litig., 643 F. Supp. 2d 521, 523

(S.D.N.Y. 2009) (same).

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J. A05035/14

(2) Is the subject of efforts that are reasonable under

the circumstances to maintain its secrecy.

12 Pa.C.S. § 5302. “[I]f a competitor could obtain the information by

legitimate means, it will not be given injunctive protection as a trade secret.”

Shepherd v. Pittsburgh Glass Works, LLC, 25 A.3d 1233, 1245 (Pa.

Super. 2011) (citation omitted).

Instantly, even assuming the existence of a valid non-compete

agreement, Appellants never raised an argument before the trial court that it

was the unique combination or compilation of information that formed

the basis of the trade secret at issue. Given Appellants’ emphasis on the

currency hedging alone, we do not fault the trial court for not anticipating

Appellants’ unvoiced compilation-of-information argument. Accordingly,

because they failed to raise the argument that the compilation or

combination of the instant discounts, profit margins, and currency hedging is

a trade secret, see 12 Pa.C.S. § 5302, Appellants have waived it on appeal.

See Pa.R.A.P. 302 (“Issues not raised in the lower court are waived and

cannot be raised for the first time on appeal.”). Regardless, currency

hedging is common knowledge and Fox did not engage in such hedging.

N.T. at 53 (Samsi testifying, “I determine” exchange rate), 146-48, 186-87.

Samsi also testified Appellants’ customer information, contracts, and prices

were publicly available. Id. at 91-94, 101. Thus, because such information

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J. A05035/14

can be obtained via legitimate means, injunctive relief is presently

unavailable.15 See Shepherd, 25 A.3d at 1245.

Appellants lastly claim the trial court failed to ascertain whether

Appellees’ use of Appellants’ alleged trade secrets constitutes irreparable

harm. Appellants’ last issue presumes the existence of trade secrets and

thus derives from their third issue. Because we discern no abuse of

discretion with the trial court’s resolution of Appellants’ third issue, we need

not address it. Accordingly, we affirm.

Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 2/6/2015

15

As noted above, our standard of review for preliminary injunctive relief is

highly deferential. See Summit Towne Ctr., 573 Pa. at 646, 828 A.2d at

1000-01 (stating default position of appellate court is to affirm trial court’s

order resolving request for preliminary injunctive relief); Synthes, 83 A.3d

at 248 (same). Appellants have an opportunity to develop the record further

at trial.

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