Fres-Co System U.S.A., Inc. vs. Bodell

The law firm of Kaufman & Forman, P.C. successfully defended a former salesman against his former employer's attempt to enforce a restrictive employment covenant in the United States District Court for the Eastern District of Pennsylvania. The successful defense against the employer's efforts to impose an injunction, seeking to bar our client, the salesman, from future employment opportunities, was particularly noteworthy due to the very pro-employer laws that prevail in Pennsylvania. Pennsylvania law vests the trial judge with enormous discretion in modifying overly broad restrictive covenants unlike Georgia. The trial court can literally jettison the existing covenant and using its discretionary "blue pencil" powers, write a new covenant. The vast majority of Pennsylvania case law holds that when overly broad covenants have been extracted from employees, rather than holding them unenforceable, the court simply modifies them to create an enforceable covenant rather than invalidating the original covenant. Very few cases in Pennsylvania law exist where the court has determined that the covenants are so overly broad that the court refused to even exercise its discretion in modifying the overly broad covenant to create an enforceable one.

In representing the salesman, Kaufman & Forman convinced the Court that the covenant at issue failed to meet Pennsylvania's standard for enforceability, that it could not succeed on the merits of the case, and therefore should not be entitled to injunctive relief. Moreover, the United States District Court refused to reform the non-competition language despite its recognition that its broad discretion could be invoked to do so. Nonetheless, the United States District Court for the Eastern District of Pennsylvania noted that the "inherently unequal bargaining positions" of employers and employees required covenants of non-competition to be closely scrutinized and in so doing, determined that the covenant at issue in this case was overly broad. Citing Pennsylvania law the Court determined that when the restrictive covenants are designed to eliminate or repress competition or to keep the employee from competing so that the employer can gain an economic advantage, the covenant will not be enforced. The Court concluded that the over reaching terms of the non-competition agreement was an adhesion contract and the Court could not view it as anything other than a restraint of trade unnecessarily preventing the employee from earning his living in the business he knows. Having held the covenant to be overly broad, highly oppressive and unworthy of reformation, the Court denied the employer's demands for an injunction and damages for breach of contract, misappropriation of trade secrets and confidential and proprietary information, and for tortious interference with existing and prospective contractual and business relations.

A copy of the Court's memorandum is attached. See the United States District Court for the Eastern District of Pennsylvania case Fres-Co System U.S.A., Inc. vs. Robert Bodell, Civil Action File No. 05-3349 (November 15, 2005).