Syncom Industries, Inc. v. Wood

920 A.2d 1178 (2007)

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Nature of the Case

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Facts

P provides cleaning and maintenance services for movie theaters. Ds executed “key employment contracts' in 2001. One D served as vice-president of sales the other as an area manager and later as a regional manager. Ds agreed that for a period of three years after termination of his employment, whether with or without cause, D will not directly or indirectly, solicit business from any of P's customers located in any territory serviced by P while D was in the employment of P. D also agrees that during such period D will not become interested in or associated, directly or indirectly, as principal, agent or employee, with any person, firm or corporation which may solicit business from such customers. Ds also agreed to not disclose the private affairs of P or any secrets or confidential information of P, which D may learn while in P's employ. In late November or early December 2001, while they were still employed by P, Ds began plans to establish a new movie theater cleaning company, which they envisioned as a competitor to P. Ds met during working hours, to discuss the establishment of D's new company. D negotiated with three of P's customers, Regal Brandywine, Regal Burlington, and Regal Cumberland, and lined them up as customers for himself upon his departure from P and the establishment of his new company. D's superiors at P confronted him with their suspicions that he was planning to form a rival company. He denied it, but indicated that he would consider doing so, and threatened to breach the restrictive covenants in his employment contract. D was suspended without pay from January 14 through January 20, 2002. By letter dated January 14, 2002, D resigned from P, citing the lack of commission payments and his suspension. Within two weeks of D's resignation, Big E began performing cleaning and maintenance at the three Regal Theaters D had solicited for Big E while he was still employed by P. Quickly one by one D began to effectively pick off P's customers. On February 11, 2002, P terminated another D's employment. After the Wood (D) resigned but before Hogan (D) was terminated, Hogan performed various tasks for Big E such as providing production rates and advising on budgetary matters. Hogan was observed carrying a stack of papers and several faxes containing confidential information were recovered from the trash at Wood's home. Those faxes were sent on various dates in March 2002. In May 2003, approximately fifteen months after P terminated the Hogan, Big E hired him. P sued for declaratory judgment, permanent injunction and other relief against Ds (Wood, Hogan, and Flores). Flores defaulted, and the trial court awarded P a judgment of $3,650,000 against him. Ds argued that the restrictive covenants were unenforceable as a matter of law because they were overly broad and otherwise unreasonable, and also were unenforceable because P materially breached the employment contract. The court ruled that Ds breached both the restrictive covenants and their fiduciary duties and enjoined Ds from rendering services to any current or former customer of P for a period of eighteen months, and awarded P $1,145,700 in compensatory damages, $250,000 in enhanced compensatory damages and $100,000 in attorney's fees. Ds appealed.