Thomas Clancy and Lawrence J. Senko both worked for JTS before becoming employed with Alliance. Brett Pinto worked for Judge. While Judge concentrated on permanent placement, JTS concentrated its efforts on placing employees temporarily.
Alliance is based in New York City, but it maintains an office in Philadelphia as well as several other offices in major metropolitan areas across the country. Alliance places specialized computer consultants on a temporary basis.
On Nov. 25, 1997 JTS and Judge filed a complaint and a motion for a preliminary injunction against its three former employees and Alliance alleging breach of employment agreement by Clancy, Senko and Pinto, tortious interference with contractual relations against Alliance and theft of trade secrets against Senko.
The motion sought injunctive relief for the three employees’ breach of restrictive covenants.
In January 1998, Judge and JTS made a discovery request that the defendants produce a list identifying all of Alliance’s technical engineers and consultants. The defendants objected to the request, saying it was “too broad,” and then requested plaintiffs to produce identification of those consultants and clients deemed protected under each of Clancy’s, Senko’s and Pinto’s restrictive covenants.
Both parties filed motions to compel discovery, and the court ordered both parties to respond to the document requests. Defendants then filed a motion for reconsideration, which the court denied.
On March 30, 1998, the court issued an order of contempt against the defendants and later granted a second petition for contempt in May 1998. The May order appointed a “discovery master” to review discovery in camera pursuant to the defendants’ concern over confidentiality.
In June 1998, the defendants appealed both of the courts’ orders compelling discovery. The Superior Court quashed the appeals as interlocutory.
The court then entered default judgment on Aug. 11, 1998, as a sanction for not complying with the discovery requests. The defendants again sought relief from the Superior Court, but the middle appeals court quashed the appeal again.
The Montgomery County court then held a hearing in August 1999 to determine damages.
Damages
The court first noted in its conclusions of law that the plaintiff has the burden of proving damages by a preponderance of the evidence.
JTS and Judge sought recovery for lost profits for the alleged breach of the three employees’ restrictive covenants and Alliance’s alleged interference with their contracts. In Pennsylvania, lost profits constitute the difference between what the plaintiffs actually earned and what they would have earned had the breach not happened.
In rendering its decision based on the default judgment, the court cited Commonwealth Trust Co. of Pittsburgh v. Hachmeister Lind Co., 181 A.2d 787 (Pa. 1935), in which the state high court ruled that “a defendant whose wrongful conduct has rendered difficult the ascertainment of the precise damages suffered by the plaintiff is not entitled to complain that they cannot be measured with the same exactness and precision as would otherwise be possible. …”
Rossanese said that following Commonwealth Trust would require the court to estimate damages in Judge’s case.
The court awarded Judge and JTS liquidated damages under a clause in the contracts with all three employee defendants. Finding there was tortious interference by Alliance, the court ordered Alliance to pay compensatory and punitive damages.
“Where, as here, the parties to a restrictive covenant do not assign a specific value for the covenant in the contract, the proper measure of damages is to ascertain what business the defendant company obtained as a direct result of the breach of those covenants,” Rossanese wrote. “Because we entered default judgment against defendant Alliance for tortious interference with Pinto, Senko and Clancy contracts, we must award damages for same.”
“And, as defendant Alliance has refused to produce any discovery which would aide us in determining this damage amount, we conclude that it is reasonable to award compensatory damages equal to 18 months worth of Pinto, Senko and Clancy’s salaries …,” the court wrote.
Although the court ordered the three employee defendants to pay attorney’s fees, the court did not require Alliance to pay any attorney’s fees. The court, however, said Alliance should pay $700,000 in punitives because Alliance was “the driving force behind all defendants’ refusal to abide by our discovery requests.”
The total award to the plaintiffs came to approximately $2.277 million.
The court also issued a permanent injunction preventing Alliance, Senko, Clancy and Pinto from engaging in competition with JTS for a period of 18 months.
