Reprinted with permission from the February 27th edition of The Legal Intelligencer (c) 2026 ALM Media Properties. Further duplication without permission is prohibited.
A recent decision from the Pennsylvania Superior Court highlights the challenges for employers who sue departing partners, employees and contractors. There are many reasons an employee sues the departing person: actual bad acts, perceived bad acts; retribution; or deterrence of competition. The Superior Court’s affirmance of the grant of summary judgment for defendants by the Philadelphia County Court of Common Pleas in TCS Black Label Realty, LLC, et al. v. Serhant Pennsylvania, LLC reminds practitioners of one universal element in every potential claim against such an individual: there must exist proof of actual damages in order to prevail. And yes, that defendant is associated with Ryan Serhant, famous real estate agent of Million Dollar Listings fame. His role is not relevant to this analysis.
The facts of the TCS Black Label Realty case will feel familiar to those who practice in this area. Relevant to this analysis, all of the parties were engaged in the real estate business, focusing on high end and luxury properties. Plaintiff sued three individual defendants for alleged conduct relating to their departure from the business. One of the three individual defendants was a member of the Plaintiff LLC. One individual defendant was an employee and eventually an independent contractor of Plaintiff. The third individual defendant was an employee of Plaintiff. The member defendant eventually departed and started her own company, Societe Select, also a defendant in this case. She remained a member of plaintiff, in accordance with the terms of the operating agreement. The operating agreement permitted competition. Societe Select became an independent contractor of the defendant Serhant entities. The two other defendants, at about the same time, terminated their associations with plaintiff, and joined Societe Select as employees.
Right on cue, Plaintiff filed a complaint and request for preliminary injunction, alleging the usual claims one sees in these cases against the individual defendants: breach of fiduciary duty and the duty of good faith and fair dealing; breach of contract; conversion; replevin, misappropriation of trade secrets; tortious interference; and conspiracy. Plaintiff alleged a series of bad acts committed by the individual defendants. Plaintiff alleged that the individual defendants misappropriated their database of clients and other contacts by closing the account hosting the database. Plaintiff alleged that the individual defendants misappropriated its social media accounts, by “rebranding” them and deleting years of marketing content from social media accounts. Plaintiff alleged that the individual defendants misappropriated marketing materials by redirecting a marketing website to Societe Select and failing to return marketing templates, and by taking “nearly all” of Plaintiff’s marketing materials.
After discovery, which the Superior Court identified as “lengthy,” the trial court entered summary judgment in favor of Defendants. The first issue identified in the Superior Court’s opinion, which is also lengthy, is damages. The Superior Court affirmed trial court’s grant of summary judgment because Plaintiff failed to show actual damages. The trial court’s opinion noted that the damages are an “essential element” of every claim asserted by Plaintiff, and that the Plaintiff failed to show damages, or a causal link between damages and the individual defendants’ alleged misconduct.
Herein lies the challenge with regard to departing employees. Let us assume for sake of this analysis that the individual defendants actually did the things Plaintiff alleged, and that they did them for the purpose of furthering their new business (if the purpose of the litigation is anything else, such as deterrence of competition or retribution, one needs to consult the rules of civil procedure and ethics to ensure that the pleadings are filed for a proper purpose). The truth is that employees and contractors sometimes leave ugly – they take documents, download files, keep or change passwords, and alter files. Most of this type of conduct is prohibited by their agreements, common law duties of loyalty, trade secret law, and perhaps (but infrequently) statutes relating to hacking or access to computer systems.
The trial court and Superior Court noted that the common element for all such claims is damages. The decision in the TCS Black Label case demonstrates that it is not enough to show that a departing employee engaged in some questionable, and maybe even outrageous behavior. The employer will need to show actual damages and a causal link between the damages and the bad conduct. The trial court and the Superior Court treated this issue as common to each cause of action, and thus the fatal flaw for each count. The trial court was so unconvinced of the factual basis for damages that it found the Plaintiff’s expert damages report incompetent. Key to the analysis was evidence that the Plaintiff’s business was “improving.” Although Plaintiff claimed damages in the “millions,” Plaintiff never offered any evidence of those damages. For example, the Superior Court examined each claim separately, including the claim for breach of contract, and concluded its analysis by opining that, regardless of Plaintiff’s allegations, “the record is devoid of any evidence establishing a causal link between these alleged breaches and resultant damages.”
This is a pattern that attorneys and courts often see. That is, that an employee or contractor engages in some misconduct on the way out the door. The misconduct feels outrageous and generates significant anger, inconvenience and emotion, but may not have caused provable damage. In this case, the parties engaged in an unsuccessful preliminary injunction procedure, “lengthy” discovery, summary judgment and an appeal only to lose the case, not on the merits of the defendants’ conduct, but on Plaintiff’s inability to prove actual damages. The Superior Court’s decision in TCS Black Label reminds practitioners to examine with their clients actual, provable damages, and whether litigation is the proper means to address the problem. Because as bad or outrageous as the alleged misconduct may be, without damages, the employer will not prevail.
Patricia C. Collins is a Partner and Employment Law Chair with Antheil Maslow & MacMinn, LLP, based in Doylestown, PA. Her practice focuses primarily on employment, commercial litigation and health care law. Patricia Collins can be contacted at 215.230.7500 ext. 126.