Michael A. Luongo Joins our Doylestown Law Office

High Swartz LLP is pleased to announce the addition of Michael A. Luongo, Esq. to the firm's Doylestown Law office. He will add his diverse skillset to the firm's business litigation, personal injury, criminal defense, and municipal practices. Michael joins High Swartz after practicing for 4 and a half years in the litigation department at a prominent law firm in Blue Bell, PA.

"I'm excited to be part of the litigation team at High Swartz. Their reputation in the Bucks and Montgomery region is well-respected and I look forward to contributing right away," states Michael.

Prior to his time there as a business litigator and criminal defense attorney, Michael served as an Assistant District Attorney in the Philadelphia District Attorney’s Office. Mr. Luongo litigated multiple high-profile criminal cases, including hundreds of bench trials and jury trials. He was the designated vertical prosecutor handling all press cases, non-fatal shootings and gunpoint robberies. He also conducted hearings for motions to suppress, bail, quash, discovery, reconsider, and consolidate prior bad acts. It was Michael's trial and prosecution acumen that garnered his promotion to Northeast Philadelphia's top prosecutor position.

Michael utilizes his strong business background in his work as a small and medium-sized business litigator in the Philadelphia region. He plans to also assist the firm's municipal group, consisting of attorneys who counsel multiple first and second class townships in the region as solicitors.

"What really stood out to me was the opportunity to work with High Swartz's municipal team. I look forward to gleaning from the many years of Southeastern Pennsylvania representation experience the group possesses," Mr. Luongo said.

While in law school at Rutgers of Camden, Michael served Philadelphia County's Court of Common Pleas judge the Honorable Rose Mare Defino-Nastasi as a summer law clerk. He earned a Master's of Business Administration from LaSalle University and also a Bachelor's of Science from Lehigh University. Michael also studied International Business during his time at Villanova University's Post Grad Program and worked at a marketing firm during his law school days.

11 High Swartz Attorneys named to PA Super Lawyers and Rising Stars lists

High Swartz is pleased to announce that 11 of its attorneys have been named among Pennsylvania’s 2019 Super Lawyers and Rising Stars. Among the highlights are two inclusions on the 50 Top Female Lawyers in Pennsylvania list going to Melissa M. Boyd and Mary Cushing Doherty of the High Swartz Domestic Relations practice.

2019 High Swartz Super Lawyers Melissa Boyd David Brooman Mary Cushing Doherty Mark Fischer Gilbert High, Thomas Panzer Thomas Rees Joel Rosen
2019 High Swartz attorneys added to the Super Lawyers List

What is Super Lawyers?

The Super Lawyers list recognizes no more than 5 percent of attorneys in each state. The Super Lawyers Rising Stars list recognizes no more than 2.5 percent of attorneys in each state. To be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger, or in practice for 10 years or less. High Swartz 2019 Super Lawyers and Rising Stars are listed below in alphabetical order.

Melissa M. Boyd: Has been nominated to her 5th consecutive Super lawyer list preceded by 6 Rising Star distinctions. On top of her streak, Missy has been nominated to 3 Super Lawyers Top Lists in Pennsylvania. Those accolades are 100 Top Lawyers in Pennsylvania, 100 Top Lawyers in Philadelphia and 50 Top Female Attorneys in Pennsylvania. Missy is a partner and family law attorney with High Swartz and advocates in various areas including divorce, prenuptial and postnuptial agreements, child custody and child support, equitable distribution, alimony, adoptions, protection from abuse and juvenile law.

David J. Brooman: 2019 marks the return to the Super Lawyers list for David. This is his 10th selection. As a land development and litigation attorney, David J. Brooman has more than three decades experience in zoning and land use development, as well as environmental law.

Mary Cushing Doherty: This will be Mary’s 16th consecutive selection to the Super Lawyers list. Along with her distinction, she’ll join the 50 Top Female Lawyers in Pennsylvania list. With a distinguished record of professional and community service, Mary Cushing Doherty has more than 35 years of legal experience as a family law lawyer. She concentrates her practice on all aspects of marital dissolution and family law issues including divorce, child support, custody, spousal support and alimony, premarital agreement asset protection, complex property division, and is the chair of High Swartz’s Family Law practice.

Mark R. Fischer: Mark has been nominated to his second consecutive Super Lawyer designation. He focuses his practice primarily on representing businesses in breach of contract, payment collection, construction defect, and consumer protection disputes throughout Pennsylvania and New Jersey.

Gilbert P. High, Jr.: This will be Gil’s 14 section in a row. Gil’s impressive career is devoted primarily to the practice of municipal and Real Estate and Land Use Law. He regularly speaks on issues pertaining to municipal liability, particularly regarding the maintenance of the Urban Forest, a subject on which he has lectured nationally.

Thomas E. Panzer: This is Tom’s first and much-deserved selection to the Super Lawyers’ list. Thomas E. Panzer, a workers’ compensation attorney, joined High Swartz in 2016 as a result of a merger with McNamara, Bolla & Panzer, Attorneys at Law, a firm for which he served as Managing Partner. Mr. Panzer is active in his community and is currently the Bucks County, Pennsylvania Treasurer.

Thomas D. Rees: Elected to his 14th Super Lawyers list, Tom heads the firm’s Litigation and Employment Practice. He focuses his practice primarily on employment law and private education law. In the education area, Tom represents a number of independent schools in the Philadelphia area, handling employment, student discipline, contract, and governance matters.

Joel D. Rosen: As High Swartz’s Managing partner, Joel has been a Super Lawyer since 2017. With more than 30 years of legal experience as a corporate law attorney, Joel Rosen’s areas of practice include franchise law, business and commercial law, employment law, trademark/copyright law and commercial leasing.

list of 2019 high swartz super lawyers rising stars
2019 Rising Stars attorneys from High Swartz

Kevin Cornish: Recently elected as a partner at High Swartz, Kevin receives his 8th Super Lawyers Rising Star selection. Kevin focuses his practice on commercial, civil, and contract & multi-state litigation support. His clients include individuals as well as local, regional, and national businesses up and down the east coast.

Elizabeth Early: has been nominated to her third consecutive Rising Star selection. Her areas of specialization include divorce, custody, support, equitable distribution, pre and post-nuptial agreements, parenting coordination and abuse matters. Liz also serves as court-appointed counsel and guardian for minor children.

Brittany M. Yurchyk: High Swartz congratulates Brittany’s first nomination to the Super Lawyers’ list as a Rising Star. Specializing in alternative dispute resolution, Brittany concentrates her family law practice on equitable distribution, child custody, child and spousal support, abuse and domestic relations.

How were the High Swartz Super Lawyers selected to the list?

Super Lawyers nominates the best attorneys using a unique selection process. Peer evaluations and nominations are combined with independent research. Nominees are evaluated on 12 indicators from professional achievement through peer nominations. Nominations are made on an annual, state-by-state basis. The Super Lawyers objective is to create a credible, comprehensive and diverse listing of outstanding attorneys on a national level that can be used as a resource for attorneys and consumers searching for legal counsel. As an aid to those selecting a lawyer, Super Lawyers only selects outstanding local lawyers who are able to be retained by the public.

Kevin Cornish Elected Partner at High Swartz

High Swartz is pleased to announce that Kevin Cornish has become a partner effective October 1st.

“We are pleased to welcome Kevin as High Swartz’s newest partner. Kevin has been with the firm for over 5 years and has shown great leadership and experience in his practice areas,” said Joel D. Rosen, Managing Partner.

“High Swartz has provided me with opportunities to grow and develop as an attorney.  I am grateful to High Swartz and look forward to serving my clients in this new role,” said Kevin Cornish.

Kevin focuses his practice on commercial, civil, and contract & business litigation. His clients include individuals as well as local, regional, and national businesses.  Kevin has handled cases involving contract disputes, the Mechanic’s Lien Law, the Contractor Subcontractor Payment Act, the Unfair Trade Practices and Consumer Protection Law, the Fair Debt Collection Practices Act, the Real Estate Seller Disclosure Law, and the Landlord Tenant Act.  Kevin’s experience includes resolving cases through trial, arbitration, and negotiation.

About High Swartz LLP: High Swartz LLP is a full-service law firm serving clients in the Delaware Valley and throughout Pennsylvania from offices in Norristown and Doylestown. Established in 1914, High Swartz serves the needs of businesses, municipalities, government entities, nonprofits and individuals. With offices in Bucks County and Montgomery County, the full-service law firm provides comprehensive counsel and legal support to individuals and business entities of all sizes across a broad spectrum of industries throughout Pennsylvania and New Jersey. For more information, go to www.highswartz.com.

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Be Wary of “Binding Mediation”

Over the last 100 years, High Swartz attorneys have engaged in countless cases involving alternative dispute resolution, representing litigants in arbitrations and mediations and serving as arbitrators and mediators.   Recently however, I have noticed a newer concept being incorporated into contractual provisions and settlement discussions:  “binding mediation”.  Such a provision raises immediate questions.  What is binding mediation?  Is this something that a party should agree to?

While not widely used, or even widely known about, binding mediation is a form of alternative dispute resolution.  Alternate dispute resolution is, generally speaking, a collection of methods of resolving disputes outside of court.  In the arbitration method of alternate dispute resolution, the parties conduct a evidentiary hearing before a neutral arbitrator, or panel of arbitrators, that decides the case as would a judge and jury.  Except in very limited circumstances, and unless the parties expressly agree otherwise, the parties are bound by the arbitrator’s decision, and there are very limited rights of appeal.  The arbitrator’s decision can be entered as a judgment in court, the judgment can be enforced, and assets of the losing party can be seized to satisfy the judgment  In a mediation, there is no evidentiary hearing.  A neutral mediator listens to the various positions of the parties and facilitates their settlement discussions.  In mediation, there is no “decision” to be binding.  The culmination of the mediation is either a settlement acceptable to both parties, a partial settlement acceptable to both parties, or the parties leave without their dispute resolved.

“Binding mediation” therefore would seem to be a contradiction in terms, and is often discarded as a viable option.   There is no statutory definition or even universal understanding of what binding mediation even means.  Some consider it to be a traditional mediation, except that the parties are expressly bound by any agreement they reach.  Others consider it to be a traditional mediation, but if the parties do not settle, the mediator determines the final settlement somewhere at or between the final positions of the parties.  Still others believe it is simply another term for arbitration.

Case law highlights that the term is vague.  In Pennsylvania, the Superior Court addressed binding mediation in its unreported decision Miller v. Miller, 2016 WL 6301602 (Pa.Super. 2016), when it found that because the parties used the word “binding” it meant that they were agreeing to an arbitration, despite the use of the word “mediation.”  In Connecticut, the Appellate Court found in the case of Tirreno v. The Hartford, 129 A.3d 735 (Conn.App.Ct. 2015) that binding mediation was not an arbitration, and thus not subject to that state’s Arbitration Statute, particularly since there was no hearing.  However, the mediation decision in Tirreno was nonetheless found binding in the context of a petition to enforce a settlement that was pending was before the court.

While there is no clear accepted definition, what is clear is that if you are going to enter into a binding mediation agreement, simply referencing the process by name is not sufficient to protect your rights.  You must clearly set forth how the process will be conducted, how the decision will be treated, and how the decision will be enforced.

Is it a good idea to enter into a binding mediation agreement?  Since you are potentially giving up your rights to a hearing, to examine and challenge evidence and the ability to cross examine witnesses, it would seem that it is rarely a good choice, particularly in an agreement addressing prospective disputes.  However, binding mediation may be appropriate in some circumstances, such as when a dispute has arisen, there are relatively few material facts in dispute, there is a clear mutual understanding of each party’s positions and the scope of the mediator’s authority (such as monetary limits) is clearly defined.

If you have any questions about binding mediation, please contact Richard C. Sokorai at 610-275-0700 or rsokorai@highswartz.com. Our Bucks County and Montgomery County Litigation attorneys  have knowledge and experience in all facets of arbitration and mediation.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

What is the Statute of Repose in Pennsylvania?

A statute of repose in Pennsylvania places a time limit that cuts off a plaintiff's ability to recover damages in a civil lawsuit. Typically, it's used for product liability cases, construction defects or designs, and medical negligence claims.

Statute of Limitations vs. Statute of Repose

A statute of repose differs from a statute of limitations, which focuses on requiring timely action from an injured party. A statute of limitations allows for delays in commencing legal action. For example, a statute of limitations may begin only when an injured party discovers the injury.

On the other hand, a statute of repose in Pennsylvania seeks to immunize the injuring party from long-term liability. So, generally, it's based on the elapsed time from an event. As a result, it's more favorable to the defendant than a statute of limitations.

For example, imagine you are a homeowner and hiring someone to perform a construction project on your house. Once completed, you have a maximum time that Pennsylvania allows for filing a lawsuit for deficient work, property damage, or personal injury resulting from allegedly substandard materials or workmanship. 

Image of a house being constructed to reflect the statute of repose in Pennsylvania

Following the timeframe's completion, a statute of repose bars you from filing an action. So, it protects defendants from having to defend against old or stale claims that the passage of time makes challenging to defend. For instance, you might lose paperwork from the project, or potential witnesses might move away. 

In the context of home repairs, an injury doesn't trigger the statute of repose. Instead, it begins to run upon completion of the repair. If enough time elapses, allowing the contractor to present a statute of repose defense in PA, you can lose the case despite having a successful cause of action. So as mentioned, a statute of repose can be a valuable defensive tool if you're a defendant.

What is the Time Limit for Filing a Lawsuit in PA?

The statute of repose in Pennsylvania generally prohibits construction lawsuits filed more than 12 years after completion of the contractor's work. As a result, you must file a case related to construction within 12 years after completion of the project. Otherwise, the law bars you from doing so.

The statute of repose applies even if you failed to discover the faulty construction until 12 years had passed. However, there is one exception. If an injury occurs more than ten but less than 12 years after work completion, the statute allows you to file suit up to 14 years after completion.

With construction projects, you can file a civil action within 12 years following construction completion to recover damages for:

  1. Any deficiency in the design, planning, supervision, or observation of construction or construction of the improvement
  2. Injury to property, real or personal, arising out of any such deficiency
  3. Injury to the person or for wrongful death arising from any such deficiency
  4. Contribution or indemnity for damages sustained on account of any injury relating to items 2 and 3 above

Again, it's essential to note the time to commence any claim begins from the completion of the construction. Note that although the statute of repose in Pennsylvania is 12 years, it varies by state.

Talk to a Construction Lawyer at Our Law Offices

If you are a homeowner who suffered damage due to construction, or a contractor facing a suit for work performed, it is vital to evaluate how much time has passed since the completion of work to determine if a claim is barred.  Otherwise, you may be impacted by the statute of repose in Pennsylvania.

Whether you're a client or contractor, it's essential to consult with a construction lawyer or attorney near you. With the former, you'll want to ensure you file your civil claim before the statute of repose. As the latter, you'll want to determine if the law provides a viable defense.

Our attorneys stand ready to evaluate your potential construction case claim or potential liability. We have law offices in Montgomery County and Bucks County, PA, and Camden County, NJ. If you have any questions, please contact Kevin Cornish at 610-275-0700 or via email at kcornish@highswartz.com.

The information above is general: we recommend you consult an attorney regarding your circumstances. The content of this information is not meant to be considered legal advice or a substitute for legal representation.

 

 

Commercial Lease Agreements: Why You Need A Lawyer

September 24, 2015

By Kevin Cornish, Esq.

Small business owners spend significant time and money preparing to open and operate their businesses.  From market research to obtaining necessary equipment to securing inventory, the tasks are endless.  Small business owners must also secure facilities from which to operate.  Often, this means renting commercial space from a landlord.  Unfortunately, this aspect of operating a small business frequently is not given the appropriate amount of attention.

commercial lease

Here is how the process typically goes: the small business owner spends time researching appropriate locations in which to operate.  When the owner finds a suitable location, the owner inquires with the landlord about availability.  Understandably, owners focus their negotiations around the monthly rental amount and length of the lease agreement.  If the parties agree on these issues, the landlord will often present the business owner with a lease agreement that contains numerous provisions and legal issues over many single spaced pages.  Not wanting to incur additional costs, business owners often spend little time reviewing, negotiating, and understanding all of the terms of the lease agreement that the landlord has provided.

Landlord lease agreements often contain terms that are very favorable to the landlord and not as favorable to the tenant.  Commercial lease agreements also contain provisions that small business owners without legal training may not fully understand.  These issues can include confession of judgment, common area maintenance and how such charges are calculated, which party is responsible for repairs and improvements, legal options for the landlord and tenant in the event of a breach, legal requirements of the parties to act upon a breach, insurance requirements, indemnity and releases, subletting and assignment, acceleration of rent, and many more.

Many issues within a commercial lease agreement may not seem important at the outset of the lease, but could prove costly in the long term.  Frequently, the first time small business owners have an attorney review a lease is after an issue arises.  By that time, with the lease agreement signed, nothing can be done to change the lease terms.  After consulting with an attorney, business owners are surprised at what the lease means or the terms that are included.

While small business owners may not view legal review and negotiation of the lease agreement as an important investment, it can often prove indispensable in the future.  Small businesses can often secure more favorable terms with negotiations prior to signing of the lease.  At a minimum, having an attorney review and explain the lease terms greatly assists the business owner in understanding options and ramifications.

It is true that legal review of a lease agreement is another startup cost for a small business.  However, the benefits of reviewing the lease agreement before signing it are significant and can prevent headaches in the future. And that’s usually money well spent.

For more information feel free to contact Kevin Cornish at (610) 275-0700 or by email at kcornish@highswartz.com. Visit his attorney profile here.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

What happens when your insurance company refuses to defend you?

In these cases, its important to understand that just because the insurance company asserts that the policy does not provide coverage, does not necessarily make it true.

Individuals and businesses purchase insurance to protect themselves and their assets: automobile insurance to protect them in the event of an accident involving a motor vehicle; homeowners insurance to protect their house and property; commercial general liability insurance to protect their businesses; professional liability insurance to protect professional business activities.

Each of these types of insurance generally protects the insured in the event a lawsuit or legal claim is filed or asserted against them. Often, insureds expect that if a claim is filed against them, their insurance company will step up and defend the person or business.

Insurance policies offer two types of protection: defense and indemnification.  An insurance company’s duty to defend requires that the insurance company defend the insured if a legal claim is asserted against the insured and the allegations “may potentially come within the policy’s coverage,”  Sphere Drake, P.L.C. v. 101 Variety, Inc., 35 F. Supp. 2d 421, 426 (E.D. Pa. 1999). (emphasis added).   The duty to defend exists even if the “claims against the insured [are] groundless, false, or fraudulent.”

On the other hand, the duty to indemnify is narrower. It requires that the insurer pay for any losses for which the insured is found liable.  An insurer has a duty to indemnify “only where the insured is held liable for a claim actually covered by the policy.  Whole Enchilada, Inc. v. Travelers Prop. Cas. Co. of Am., 581 F.Supp.2d 677, 694-95 (W.D. Pa. 2008).

Insureds are sometimes faced with situations in which a legal claim is asserted against them, but their insurance company denies coverage and refuses to defend them.  This leaves insured wondering what to do and where to turn.  Individuals or businesses could face significant expense to defend against the alleged claims.  This is especially difficult when the insured has been paying premiums expecting that their insurance company would protect them in the event of a lawsuit.

When an insurance company denies coverage, the insured can defend the claim itself or file a declaratory judgment action against the insurance company.  In a declaratory judgment action, the insured asks the court to review the insurance policy and the claims asserted and determine if the insurance company is required to defend the insured.  Many times, the court determines that the insurance company is wrong and that the insurance company is required to defend the insured.

Similarly, insureds can also face difficult and confusing situations when their insurance company initially agrees to defend them, but then files its own declaratory judgment action asking the court to rule that the insurer is not required to continue defending the insured.  If the court agrees with the insurer’s position, then the insurer would stop defending the claim.  Therefore, the insured has a strong interest in defending the claim to ensure that the insurance policy provides coverage.

Finally, there is a potential that an insurance company’s failure to defend an insured constitutes bad faith.  In such a situation, an insured may be able to recover their attorneys’ fees from the insurer.

Any time an insurance company does not agree to provide coverage under an insurance policy, it is important for an attorney to review the insured’s legal rights and options.

Visit Kevin’s attorney profile.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

HICPA Compliance and Unjust Enrichment Claim

By Kevin Cornish, Esq.

March 11, 2015Construction Deal

 

This is a follow up to the June 1, 2014 blog entitled Pennsylvania Supreme Court to Decide Whether HICPA Allows Recovery under a Theory of Unjust Enrichment.

HICPA does not preclude recovery on Unjust Enrichment Claim

The Pennsylvania Supreme Court issued its decision in the case of Shafer Electric & Construction v. Mantia, 96 A.3d 989 (2014). At issue before the Supreme Court was whether the Home Improvement Consumer Protection Act, 73 P.S. §§ 517.1-517.18, bars a contractor from recovery for unjust enrichment when the home improvement contract does not comply with HICPA requirements. The Superior Court held that HICPA does not preclude a non-compliant contractor from pursuing an unjust enrichment claim, and the Supreme Court affirmed. Unjust enrichment is an equitable doctrine allowing a party to recover on the basis of a quasi-contract, or contract implied in law, when one party is enriched unjustly at the expense of another.

The Supreme Court first recognized that HICPA only bars actions for breaches of express home improvement contracts when the contract does not comply with HICPA. The Supreme Court noted that an unjust enrichment claim does not sound purely in contract and that HICPA is silent as to quasi-contract actions, such as unjust enrichment.

The Supreme Court also noted that disallowing an unjust enrichment claim when HICPA requirements have not been satisfied would allow a homeowner to avoid payment for work performed even if the work was perfect.

The Supreme Court focused primarily on the language of HICPA. While HICPA specifically states that a contract which is not compliant with HICPA is invalid and unenforceable, the Supreme Court held that HICPA’s language does not discuss the preclusion of common law equitable remedies such as unjust enrichment. The Supreme Court noted that if the Pennsylvania General Assembly wanted to modify the right of non-compliant contractors to recover under unjust enrichment, it could have done so.

Due the Supreme Court’s decision, contractors who do not comply with HICPA are permitted to bring equitable causes of action, such as unjust enrichment. Likewise, homeowners cannot avoid payment for work performed by non-compliant contractors on the sole basis that the contractor did not comply with HICPA.

Recoverable Damages

The procedural posture of Shafer Electric is also important. After the contractor brought suit against the homeowners, the homeowners filed preliminary objections to the action. Preliminary objections challenge the legal basis of a lawsuit based upon the facts alleged in the complaint, which are accepted to be true. The defendant does not have an opportunity to present its facts. In determining preliminary objections, courts assume all alleged facts to be true and determine whether the law allows for recovery.

Due to the procedural posture of the case, certain legal issues and defenses, in addition to the underlying facts of the case, were not litigated. For instance, under unjust enrichment, a plaintiff can only recover the reasonable value of services rendered. In a breach of contract action, a plaintiff could recover expectation damages, reliance damages, or restitution damages. Additionally, certain legal defenses are available to a defendant in an unjust enrichment action, such as the doctrine of unclean hands. Breach of contract actions may also implicate attorneys’ fee and interest recovery that are not available in an unjust enrichment action.

As a result of the Supreme Court’s decision, contractors who have not strictly complied with all aspects of HICPA are not precluded from bringing actions to recover money that has not been paid to them. However, a contractor’s damages may not be as expansive as those available in a breach of contract action. In order to assure the most options in the event of non-payment, contractors should comply with all aspects of HICPA and assure that written contracts are HICPA compliant.

The Supreme Court’s decision also means that homeowners cannot avoid payment to contractors based solely on a contractor’s failure to comply with HICPA. However, a homeowner may still have equitable defenses to a contractor’s claim of non-payment.

If you are a homeowner or home improvement contractor with questions regarding HICPA compliance and rights and responsibilities under HICPA, feel free to contact Kevin Cornish at 610-275-0700 or kcornish@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

 

PA Supreme Court Will Review Superior Court's Decision on Non-compete Consideration

January 19, 2015

By Thomas D. Rees, Esq.

In my June 16, 2014 blog, I reported on the Pennsylvania Superior Court’s decision upholding the requirement of consideration for a non-competition agreement with a current employee. Socko v. Mid-Atlantic Systems of CPA, Inc., 99 A.3d 928 (Pa. Super. 2014). The Pennsylvania Supreme Court has now granted the former employer’s request to review the Superior Court’s decision. Socko v. Mid-Atlantic Systems of CPA, Inc. 2014 WL 6991669 (Pa. Dec. 11, 2014). The issue before the Supreme Court is whether the Pennsylvania Uniform Written Obligations Act, 33 P.S. § 6 (“UWOA”) eliminates a current employee’s ability to require consideration for a non-compete agreement that states that the parties intend “to be legally bound”. The former employer, who is appealing, says that consideration is unnecessary in these circumstances. The ex-employee asserts that consideration is required. The parties agree that the employer did not give consideration for the non-compete. The ex-employee brought the suit by seeking a judgment that the non-compete was unenforceable. The ex-employee won summary judgment without a trial in the Court of Common Pleas, and the Superior Court upheld this decision.

The Supreme Court rarely grants petitions for review. In the majority of recent non-compete cases where the Supreme Court has decided to review the Superior Court, the Supreme Court has overturned the Superior Court.

If the Supreme Court reverses the Superior Court, greater enforcement of post-employment non-competes may take place in Pennsylvania. This trend would run counter to trends in states such as California and Massachusetts. California prohibits non-competes by statute, but the state’s courts protect trade secrets vigorously. Massachusetts is now considering legislation to prohibit non-competes and (finally) considering enactment of the Uniform Trade Secrets Act. California attributes its vibrant high-tech economy partly to the fact that trade secret protection has primacy over non-compete enforcement.

So it is worth staying tuned on Socko. All commercial and employment lawyers will want to follow this case through briefing and argument. They may also want to ask themselves how “Uniform” the UWOA really is when Pennsylvania is the only state where the act is in effect.

 

For more information regarding non-compete agreements or employment law, please contact Thomas D. Rees at 610-275-0700 or by email at trees@highswartz.com.

The information above is general; we recommend that you consult with an attorney regarding your specific circumstances. The content contained herein is not meant to be considered as legal advice or as a substitute for legal representation.

 

Noncompetes: Is Consideration Needed, or Just the intention to be Legally Bound?

By Thomas D. Rees, Esquire

June 16, 2014

It has long been an article of faith – and precedent – that a Pennsylvania employer must provide an employee with consideration for an enforceable agreement prohibiting post-employment competition with the employer. In short, the employer must provide the employee with a benefit to offset the burden on an employee who may be unable to work freely after employment.

Now, in the aptly-named case of Socko v. Mid-Atlantic Systems of CPA, Inc., 2014 WL 1898584, 2014 Pa. Super. 103 (May 13, 2014), the consideration requirement is being tested. So far, the courts have upheld the requirement, but Socko raises important issues and warrants a review of the law on consideration for post-employment restrictions.

Post-Employment Restrictions

For new employees, the start of employment itself is enough of a benefit to constitute consideration. For current employees, the employer has to provide valuable benefits in addition to continued employment. Why has additional consideration been necessary for current employees? The answer is that Pennsylvania is an employment-at-will state; therefore, continued employment itself does not provide any benefit to offset the burden of the non-compete. Also, non-competes are disfavored under Pennsylvania law because the restrictions interfere with employees’ rights to earn a living.

The consideration requirement has led to a number of court decisions on questions, like, “How much in pay or benefits is enough consideration?” for current employees; or, “When does employment actually begin?” for new employees. On the latter question, some courts have required employers to treat new employees as current employees (and thus to provide additional benefits) if the employer fails to inform the employee of the non-compete while extending a comprehensive employment offer.

The Uniform Written Obligations Act

Pennsylvania’s Uniform Written Obligations Act, 33 P.S. §6 (“UWOA”), throws a wild card into this debate. The UWOA provides, “[A] written release or promise, hereafter made and signed by the person releasing or promising, shall not be invalid or unenforceable for lack of consideration, if the writing also contains an additional express statement, in any form of language, that the signer intends to be legally bound.” In short, no consideration is necessary when the agreement provides that the parties “intend to be legally bound.” Despite UWOA’s “uniform” name, Pennsylvania is apparently the only state that has enacted and retained the UWOA. (Utah enacted the law but later repealed it.)

“Uniform” or not, the UWOA is all-encompassing; the law contains no exception for non-competition or non-solicitation agreements. The UWOA seems at odds with the time-honored requirement of consideration for non-competes. By and large, the courts have overlooked the UWOA until recently. The great majority of Pennsylvania courts have required additional consideration beyond continued employment in actions to enforce a non-compete. These courts have not even mentioned the UWOA in ruling on the issues. Even those courts that have expressed support for the UWOA have often found ways to side-step the issue. Some courts have held that the UWOA eliminates the need for consideration, but have gone on to find that the employer gave the employee enough consideration to enforce the non-compete. Other courts have used the UWOA to dispense with the need for consideration but have gone on to find that the non-compete itself was too burdensome to be enforced. In this uncertain context, Pennsylvania employment lawyers have continued to advise employers to provide consideration to employees who sign non-competes.

As mentioned, in Socko v. Mid-Atlantic, the consideration requirement appears to have won the battle against the UWOA. Socko dealt with a waterproofing company’s enforcement of a non-compete against an individual who had signed the document while a current employee. The covenant contained the key UWOA clause: “intending to be legally bound hereby.” The employer had provided no consideration other than continued at-will employment. The Superior Court, affirming the trial court’s grant of summary judgment, held that the non-compete was unenforceable for lack of consideration. Continued at-will employment plus an intent to be legally bound were not enough to support the restrictions. Actual valuable consideration in the form of a benefit or change in job status was necessary to support the non-compete.

What the Future May Bring

The Superior Court’s decision preserves the status quo, for now. But it is important to keep an eye on this issue. The Superior Court’s decision is likely to be challenged by petition for allowance of appeal. And, whatever the final result, questions will remain: If the courts continue to require valuable consideration, what is the purpose of the UWOA? On the other hand, if the courts say that the UWOA governs, what are the implications of dispensing with consideration for restrictive agreements that the courts disfavor?

If you wish to learn more about consideration and other employment issues, feel free to contact Tom Rees at 610-679-9588 or trees@highswartz.com.

 

The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.