SunGard Business Systems, LLC v. McCloskey

34 Pa. D. & C.5th 181
CourtPennsylvania Court of Common Pleas, Chester County
DecidedNovember 1, 2013
DocketNo. 2013-07190
StatusPublished

This text of 34 Pa. D. & C.5th 181 (SunGard Business Systems, LLC v. McCloskey) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Chester County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SunGard Business Systems, LLC v. McCloskey, 34 Pa. D. & C.5th 181 (Pa. Super. Ct. 2013).

Opinion

TUNNELL, J.,

This case primarily concerns whether any restrictive covenants were violated after defendant McCloskey went to work for another employer and, if so, whether injunctive relief should be granted to the plaintiff at least preliminarily.

A. PROCEDURAL HISTORY

The matter commenced on July 24, 2013 with the filing by SunGard Business Systems, LLC of a complaint seeking injunctive relief and monetary damages along with a motion for special and preliminary injunctions. Count I alleges a breach of noncompetition and nonsolicitation provisions contained in an amendment to defendant McCloskey’s sales compensation agreement. Count II invokes the doctrine of inevitable disclosure. Count III sets forth a claim for unfair competition. Count IV is an action for promissory estoppel. Count V is an action for breach of fiduciary duty. All of these counts are against McCloskey. Count VI alleges tortious interference with [183]*183SunGard’s contractual relations by defendants Innovest Systems and Administrative Systems, LLC.

Although not made parties, individuals named Charleton Moore, Natalie Wyatt and Jeffrey McCuen, who are former SunGard employees now employed by the defendants, are alleged to be using confidential information they acquired in order to compete against SunGard.

The court convened a conference on SunGard’s motion for special injunction on August 1, 2013. It issued an order on the following day, August 2, 2013, essentially by agreement of the parties, enjoining McCloskey from selling or participating in the marketing of any products of defendant Innovest Systems, and from soliciting SunGard employees to leave SunGard to become employed by Innovest or Administrative Systems. The order permitted McCloskey to sell or participate in the marketing of Administrative Systems products pending further order of the court.

The hearing on the request for the preliminary injunction occurred October 15-16,2013.

The court makes the following:

B. FINDINGS OF FACT

SunGard Business Systems, LLC

SunGard Business Systems, LLC is a subsidiary of SunGard. The parent company is a Fortune 500 multinational company with 125 affiliates, 17,000 employees and over $4 billion in revenues in 2012. It sells some 350 software applications to a variety of businesses in the financial, educational and public sectors. It also provides continuity assurance and data center hosting among many other services.

[184]*184SunGard Business Services, LLC (hereinafter “SunGard”) offers software and IT services to the wealth management industry. Its TRUST suite of products includes Global Plus, which is accounting software marketed to very large banks and trust companies. Its Omni products include Omni Payments, which is a software system that automates, organizes and integrates a check writing and benefit disbursement process.

In the retirement sector, SunGard sells Relius software which does record-keeping and administrative solutions for employee benefit professionals. It can manage pension plans. Under the Relius umbrella, SunGard markets Government Forms, which generates Form 1099’s and tax returns.

ASI and Innovest

Administrative Systems Inc. (“ASI Inc.”) was a California corporation. Its main product was ASIPay, a software system used to write checks, process tax forms, and provide secure print and mail services to the employee benefits and retirement industry. Historically, ASIPay was used by financial institutions to complement and supplement the trading and record keeping platforms offered by larger companies including SunGard and SEI. In early 2013, it had about 30 employees and was owned by Bluff Point Associates, Inc. (“Bluff Point”), a private equity firm. On or about April 30, 2013, ASI Inc.’s shares were acquired by Administrative Systems, LLC (“ASI, LLC” or “ASI”), a company organized by Innovest. Upon the acquisition of its shares, ASI Inc. was dissolved. ASI, therefore, is now wholly owned by Innovest, although it operates as a separate, free-standing enterprise with separate executives, separate systems and a separate sales forces. ASIPay competes with Omni Payments, a product [185]*185of SunGard’s Omni business unit. Robert Hickman (“Hickman”) is ASI’s CEO.

Innovest Systems, LLC (“Innovest”), based in New York, provides secure, integrated, real-time trust accounting and reporting systems to trust companies, wealth management firms and other institutions. It has about 50 employees. Innovest’s trust platform competes with Global Plus, a product of SunGard’s TRUST business unit. It does not compete with Omni Payments. William Thomas (“Thomas”) is Innovest’s CEO. Prior to April 30, 2013, Innovest was owned by a trust for the benefit of the children of the principal of Bluff Point. Following the acquisition of ASI Inc., Bluff Point became a member.

Innovest, although now ASI’s parent, continues to be operated as a separate and freestanding enterprise. It maintains a separate sales force, dedicated to selling Innovest’s products, independent of ASI, and the two sales forces do not interface. Recently, ASI and Innovest did merge one small component of their businesses, Relationship Management, for administrative efficiencies by having a single manager oversee each company’s respective customer service staff. None of the individuals under scrutiny, McCloskey, Moore, Wyatt or McCuen, are involved in the relationship management function in any way.

In September 2012, Innovest and ASI Inc. entered into a distribution agreement, whereby Innovest agreed to seek to sell the ASI Pay product to Innovest customers as an additional capability, and ASI Inc. agreed to share with Innovest a percentage of the revenues that resulted from any successful distribution effort. On or about December 10, 2012, Innovest and ASI Inc. issued a press release to announce the distribution relationship. It was not clear [186]*186whether SunGard was aware of this.

Later in 2012, Innovest and ASI Inc. began to discuss a possible business combination and terms were reached around March 2013. By agreement dated April 30, 2013, Innovest acquired all of ASI Inc.’s shares and merged them into a new, wholly-owned subsidiary, ASI, LLC. Both entities are run separately.

McCloskey

Gregory B. McCloskey was a SunGard sales person until February 1, 2013, when he began work as Senior Vice President, Business Development, at ASI Inc. McCloskey worked within SunGard’s TRUST business suite, selling Trust’s Global Plus product. Global Plus is the trust accounting and reporting platform sold to the trust departments of very large financial institutions. He never sold Omni Payments, the SunGard product that is competitive with ASIPay, nor any other product of the Omni or Relius business suites.

McCloskey was hired by ASI, Inc. to seek out potential acquisition target companies as well as bring in opportunities for ASI Inc. to partner with other companies in the distribution of ASIPay, much like the distribution agreement Innovest and ASI Inc. entered into in 2012. In addition, McCloskey was assigned sales responsibilities for the ten (10) top Tier 1 financial institutions. This takes about 5% of his time. McCloskey estimates that since his departure from SunGard, 95% of his time has been spent in non-sales related pursuits, namely in seeking potential mergers and acquisitions.

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Bluebook (online)
34 Pa. D. & C.5th 181, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sungard-business-systems-llc-v-mccloskey-pactcomplcheste-2013.