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Impact Office Products, LLC v. Siniavsky

United States District Court, D. Maryland

April 19, 2017

IMPACTOFFICE, LLC, Plaintiff,
v.
SAMUEL SINIAVSKY, Defendant. DENNIS CHAPMAN, Plaintiff,
v.
IMPACTOFFICE LLC, Defendant

          MEMORANDUM OPINION

          THEODORE D. CHUANG United States District Judge

         On October 23, 205,, ImpactOffice, LLC ("Impact") filed a civil action against its former employee, Samuel Siniavsky, alleging breach of contract arising from violations of an employment agreement between Impact and Siniavsky. On December 9, 2015, Siniavsky filed an Answer and Counterclaim alleging that the customer non-solicitation covenant in the agreement is unenforceable and asserting breach of contract and fraud counterclaims relating to Impact's application of its compensation plan. In a separate but related civil action filed on June 3, 2016, former Impact employee Dennis Chapman filed suit against Impact seeking a declaratory judgment that the restrictive covenants in any employment agreement he had with Impact are unenforceable as a matter of public policy.[1]

         Siniavsky and Chapman both filed Motions for Judgment on the Pleadings, arguing that the restrictive covenants within their employment agreements with Impact are unenforceable because they are facially overbroad, such that they are entitled to judgment as a matter of law. On November 18, 2016, the Court issued a Memorandum Opinion and Order granting Siniavsky's Motion for Judgment on the Pleadings and granting in part and denying in part Chapman's Motion for Judgment on the Pleadings. Impact and Chapman then submitted a stipulation containing facts about Chapman's customer base when he worked at Impact. Pending before the Court are Chapman's Renewed Motion for Judgment on the Pleadings and Impacts s Motion to Amend Judgment. For the reasons set forth below, both Motions are granted.

         BACKGROUND

         The factual background underlying this case is generally set forth in the Court's Memorandum Opinion of November 18, 2016. Mem. Op., ImpactOffice, LLC v. Siniavsky, ECF No. 43; Mem. Op., Chapman v. ImpactOffice, LLC, ECF No. 48. The Court therefore summarizes here only those facts pertinent to the resolution of the pending Motions.

         I. Restrictive Covenants

         Impact is a national supplier of office products with a coverage area that generally includes Maryland, the District of Columbia, Virginia, Pennsylvania, and New Jersey. Impact and its affiliated companies have over 1, 000 customers and generated approximately $60 million in sales revenue in 2016. Siniavsky worked as a sales representative for Impact in New Jersey and the Philadelphia metropolitan area between August 2010 and April 2015, when he voluntarily resigned. Chapman was an Impact sales representative who primarily serviced customers in northern Virginia and the District of Columbia, with limited activity in Maryland, between 2012 and May 2016, at which time he voluntarily resigned. In the 12 months before Chapman left Impact, he generated approximately $853, 000 in sales. Chapman's customer base at the time of his departure consisted of approximately 87 customers, including eight customers in Maryland. Siniavsky and Chapman are now employed by W.B. Mason Company, Inc., a competitor of Impact.

         While working at Impact, Siniavsky and Chapman signed individual Proprietary and Non solicitation Agreements ("Agreements") that include post-employment restrictions relating to potential competition with Impact or its affiliated companies. Specifically, both Agreements contain a customer non-solicitation provision, under which the employee is not permitted to:

Solicit or accept, directly or indirectly, the business of any customer or prospective customer of the Company or its Affiliates for the purpose of selling or distributing office products or services sold by the Company or its Affiliates within 12 months of the date of the cessation of the Employee's employment with the Company.

         Siniavsky Agreement ¶ 2.2, Impact Compi. Ex. 1, ECF NO.2-1; Chapman Agreement ¶ 2.2, Chapman Compl. Ex. A, ECF No. 1, 1, Renewed Mot. J. Pleadings Ex. A, ECF No. 62-2. "Customer" is defined as "any person or business to whom the Company or its Affiliates sold products or rendered services during the last 12 months Employee was employed by the Company." Siniavsky Agreement ¶ 2.2; Chapman Agreement ¶ 2.2. Under the Chapman Agreement,, Impact's Affiliates consisted of: ImpactOffice Group, LLC; Impact Office Products, LLC; George W. Allen Co.; N.B.A;; and Councell Computer Products. In its November 18, 2016 Memorandum Opinion, the Court found the non-solicitation provision to be facially overbroad and blue penciled the covenant such that a former employee may not:

Solicit or accept, directly or indirectly, the business of any customer or-prospectivc cuotomer of the Company or its Affiliates for the purpose of selling or distributing office products or services sold by the Company or its Affiliates within 12 months of the date of the cessation of the Employee's employment with the Company.

Mem. Gp. 15.

         II. Compensation

         Siniavsky's Counterclaim alleges that Impact improperly deprived him of certain compensation. Impact informed its sales representatives that its compensation plan and scheme would provide for compensation based in part on the "gross profit percentages and/or dollars earned by Impact on sales to their assigned customers." Siniavsky Countercl¶ 18, ECF No. 10. Impact represented to its employees that gross amounts would be calculated by taking the price charged to its customers and subtracting from it the cost to Impact for those products. Siniavsky alleges that Impact intentionally inflated its costs by using dollar values that exceeded the real costs paid by Impact, causing Siniavsky to receive less in compensation than he would have otherwise. Impact did not disclose to its sales representatives that the inflated cost figures used to calculate compensaiion were not its real costs. Siniavsky also asserts that Impact wrongly refused to pay him a sales bonus for the ...


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