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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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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