District Court Nixes OHL's Unfair Competition Lawsuit Against J&K Fresh
A federal judge in Philadelphia dismissed on Aug. 15 a lawsuit brought by OHL against a group of former employees that left to form their own competing customs brokerage named 721 Logistics. OHL alleged the exodus of its employees was arranged by a former executive to paralyze the company's perishables business at the height of the season. It also said 721 Logistics, operating under the J&K Fresh East name, illegally used a proprietary list to target OHL customers. But the Eastern Pennsylvania U.S. District Court judge ruled that the client list was publicly available information and that the OHL employees were hired because of their expertise, not to intentionally hurt the company.
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Former OHL employee Larry Antonucci founded 721 Logistics in 2012, eventually hiring nine OHL employees, court papers said. Antonucci had joined OHL as president of its global freight management and logistics division for the Americas in 2006 when OHL bought Barthco International, where Anonucci was president. When he left OHL in 2009, Antonucci was bound by a non-compete agreement that lasted until the end of 2010, and a non-solicitation covenant that expired on Dec. 31, 2011.
In early 2011, tired of his unemployment, Antonucci contemplated starting his own brokerage, and contacted Lynette Keffer, CEO of specialty perishable brokerage J&K Fresh, with a business proposition. They eventually agreed to a licensing agreement where Antonucci would use J&K Fresh’s brand for his company, and in return would pay a percentage of his profits to J&K Fresh. This would allow J&K Fresh to expand to the East Coast in order to continue to thrive in a consolidating industry and compete against global logistics firms like OHL that offer door-to-door services, court papers said.
Ready to launch, and no longer bound by his termination agreements, Antonucci invited nine employees in OHL’s perishables clearance division to his house on Jan. 1, 2012 and offered them positions at the new company. All nine, who had worked with Antonucci at Barthco, accepted the offers. He also created a spreadsheet of produce importers in the Philadelphia area to contact as potential clients, nearly all which were OHL customers.
According to District Judge Felipe Restrepo, the “mass resignation” caused OHL “significant difficulty” in clearing produce through the Port of Philadelphia for a period of time. January was the peak of the winter produce season, and 2012’s winter produce season was complicated by CBP’s implementation of centralized examination stations. OHL consequently lost customers to the upstart J&K Fresh East.
OHL argued the contact information of the produce importers on the list Antonucci compiled to find the customers was a trade secret, and said J&K Fresh East’s use of the list was illegal misappropriation. It also alleged J&K Fresh East committed unfair competition when it poached OHL’s employees in order to intentionally cripple OHL’s perishables division.
But after a trial held late June and early July, Judge Restrepo said the contact information for the produce importers was mostly public information, and was not an OHL trade secret. He also found that J&K Fresh East hired the group of OHL employees because they were “skilled and gifted,” and not to intentionally hurt OHL. “All members of the group were experienced and hardworking,” said Restrepo. “They had expertise, relationships in the industry, respect for each other, and the respect of others. Inside and outside of OHL, they were perceived as the best in OHL’s perishables division. He did not target OHL’s perishables division in order to paralyze it. Rather, he recruited from among former Barthco employees because that was his ‘family business’ and his network, and because they were the people with relevant experience.”
OHL also argued that one of the employees that switched sides, John Ercolani, violated a non-compete and non-solicitation agreement he signed two months after being hired by OHL in 2009. However, the agreement was not binding under Pennsylvania law because it was not signed as a condition of Ercolani’s hiring, said Judge Restrepo. Ercolani had already accepted a job offer without any such conditions. The non-compete and non-solicitation covenants were “added as ’an after-thought to impose additional restrictions on the unsuspecting employee’ after a contract was already formed,” ruled Restrepo.
(Ozburn-Hessey Logistics v. 721 Logistics, E.D. Pa. 12-0864, dated 08/15/14, Judge Restrepo)
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