                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-7-2008

AMG Natl Trust Bank v. Stephen Ries
Precedential or Non-Precedential: Non-Precedential

Docket No. 08-1662




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                                                                 NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT


                               Nos. 07-4051 & 08-1662
.                                   ____________

                         AMG NATIONAL TRUST BANK
                                            Appellee

                                         vs.

                                 STEPHEN C. RIES
                                                     Appellant
                                   ____________


            APPEAL FROM THE UNITED STATES DISTRICT COURT
              FOR THE EASTERN DISTRICT OF PENNSYLVANIA
                        (D.C. Civ. No. 06-cv-04337)
                       District Judge: J. Curtis Joyner
                                ____________

                    Submitted Under Third Circuit L.A.R. 34.1(a)
                                 July 25, 2008
               Before: MCKEE, FUENTES and WEIS, Circuit Judges.

                               (Filed: August 7, 2008)
                                    ____________

                                     OPINION


WEIS, Circuit Judge.


             Defendant Stephen C. Ries appeals from an order granting a preliminary



                                          1
injunction to plaintiff AMG National Trust Bank and an order imposing sanctions for

contempt of a Temporary Restraining Order. We will affirm in part and remand to the

District Court for further proceedings.

                                             I.

              Ries first challenges the injunction. He argues that the District Court erred

by honoring the choice of law provision in the Employment Agreement between Ries and

AMG and applying Colorado rather than Pennsylvania law. The District Court provided

sufficient findings to show that Colorado bore a reasonable relationship to the parties and

the transaction. Berg Chilling Systems, Inc. v. Hull Corp., 435 F.3d 455, 463-64 (3d Cir.

2006) (citing Restatement (Second) of Conflicts of Law § 187(2)). Ries has not shown

that the choice of law provision violates a fundamental public policy interest of

Pennsylvania. Id.

              Ries also argues that the restrictive covenant in the Employment Agreement

is not enforceable under Colorado’s policy disfavoring covenants not to compete. See

Colo. Rev. Stat. §8-2-113(2). The District Court properly concluded that the restrictive

covenant falls under the trade secrets exception to the policy. Colo. Rev. Stat. §8-2-

113(2)(b). The record shows that AMG took numerous steps to protect the client

information that it described as confidential in the Agreement and provided to Ries. See

Colo. Rev. Stat. § 7-74-102(4); Colorado Supply Co., Inc. v. Stewart, 797 P.2d 1303,

1306 (Col. App. 1990).



                                             2
             Ries argues that the restrictive covenant fails under both Pennsylvania and

Colorado law because it was not supported by additional consideration. Additional

consideration was unnecessary, however, because the Agreement was sufficiently

contemporaneous with Ries’ acceptance of employment. See George W. Kistler, Inc. v.

O’Brien, 464 Pa. 475, 484, 347 A.2d 311, 316 (Pa. 1975); Freudenthal v. Espey, 45 Colo.

488, 500, 102 P. 280, 284 (Colo.1909). Ries had notice of the Agreement prior to

beginning work and signed the agreement on his first day of work.

                                           II.

             Ries challenges the amount of sanctions the District Court awarded for

Ries’ contempt. The District Court ordered Ries to pay AMG $138,140.73 in attorneys

fees and $180,051.38 in lost revenue.

             Damages awarded “in civil contempt proceedings [are] compensatory ...

[and] must not exceed the actual damages caused the offended party by a violation of the

court’s order.” Quinter v. Volkswagen of America, 676 F.2d 969, 975 (3d Cir.1982)

(citations omitted). The award of attorneys fees was within the Court’s broad power to

provide AMG full remedial relief. See Robin Woods Inc. v. Woods, 28 F.3d 396, 400

(3d Cir. Pa. 1994). The Court granted fees and costs “incurred [by AMG] in uncovering

and establishing Mr. Ries’ contemptuous behavior.” See Lichtenstein v. Lichtenstein,

425 F.2d 1111, 1113-14 (3d Cir. 1970) (award of reasonable attorney fees permissible



                                            3
where it has some basis in the record).

               The compensatory nature of the award of lost revenues here is unclear.

Allowable damages are intended to restore the injured party to the position it would have

occupied but for the other’s contempt. Robin Woods, 28 F.3d at 400. Because the

determination of the revenues lost as a result of Ries’ contempt is speculative to some

extent and is intertwined with the merits of AMG’s action, the issue is best left until a

final determination on the merits.

               Damages can be determined at that point with more precision and the

relationship between Ries’ contempt and AMG’s actual damages may be clarified.

National Drying Machinery Co. v. Ackoff, 245 F.2d 192, 194 (3d Cir. 1957) (a civil

contempt award “must be an attempt to compensate plaintiff for the amount he is

out-of-pocket or for what defendant by his wrong may be said to have diverted from the

plaintiff”).

               The District Court concluded that “there is no question but that” Ries

helped some clients “de-link” their accounts and provided specific services to two others.

It determined that AMG is entitled “to some compensation” for the “lost profits from

servicing” the accounts of four customers. It then found the evidence “sufficient to

justify awarding the plaintiff for two year’s lost revenue,” which represented the revenue

lost for the entire period of the restrictive covenant.

               Yet, the Court discussed substantial evidence suggesting that the clients



                                               4
terminated their relationships with AMG because Ries would no longer be their advisor.

Although the Court appeared to conclude that the clients’ actions were not “solely”

related to Ries’ departure, it did not explicitly rule out that circumstance as a contributing

factor. The Court should explain whether its damages award reflects the extent that

factors other than Ries’ contempt caused the clients to leave AMG. See Robin Woods,

28 F.3d at 401 (requiring adjustment of damages based on limited success of contempt

motion).

               We will affirm in part and remand to the District Court with instructions

that the Court reconsider its award of lost revenues after a final determination of the

merits of this case.1




               1
                  Ries also argues for the first time on appeal that the damages issue should be
arbitrated under the Employment agreement. We generally refuse to consider issues that are
raised for the first time on appeal.




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