Massachusetts Judge Uses Strong Words for Enforcing Noncompete

Posted on August 31, 2007 by Michael Rosen

The current trend in the world of noncompete litigation in Massachusetts is away from the enforcement of traditional noncompetes -- as distinguished from non-solicitation and non-disclosure provisions.  Massachusetts judges seem to be increasingly skeptical of traditional noncompete provisions in contexts other than very senior, highly-paid employees going to work for direct competitors.  So, when a decision like Eastern Bag & Paper Co., Inc. v. Ross, is issued, one can’t help but take notice.  In this case, Superior Court Judge Dennis J. Curran (a 2006 Romney appointee) issued a preliminary injunction and enforced a noncompete by its terms against a sales employee.  In addressing the defendant’s arguments against enforcement, Judge Curran wrote the following:

These are not mere words.  They are express contract terms.  Mr. Ross, over the age of 18 and of capacity, freely signed a document committing himself to them.  He later reaffirmed them.  He took $5,000 to abide by them; he later re-affirmed them so he could keep the $5,000.  The defendant’s present attack on this contract is simply unavailing; indeed, it reminds one of the expression:

A deal is a deal only until something better comes along

Strong words!  In enforcing the non-compete, the judge was influenced by a number of factors, including the relatively generous financial package being earned by the defendant (exceeding six figures); the limited geographical scope of the non-compete (one county in New Hampshire, four counties in Massachusetts and the state of Rhode Island); the fact that as a territory manager, the defendant was responsible for sales strategy and had extensive customer contact; and the fact that the employee reaffirmed the noncompete and received some cash consideration (although only $5,000) when he departed.  In addition, it should be noted that the court was applying Connecticut, rather than Massachusetts law, although the substantive standard of enforceability articulated by the court was identical to the Massachusetts standard.

The decision ultimately seems to underscore one of the fundamental variables in play in this area:  whether or not a noncompete will be enforced depends very much on the facts of the case and the particular judge deciding it. 

Here are some useful documents:

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Mazonson, Part II: Judge Finds Customer-based Noncompete Overbroad

Posted on August 29, 2007 by Michael Rosen

The Mazonson decision described in the previous post also contained an interesting discussion of the plaintiff’s request to enforce a customer-based restriction against one of the individual defendants.  On this issue as well, the Massachusetts court denied the request for a preliminary injunction.  Interestingly, Judge Murtagh found that the agreement’s restriction prohibiting the employee from providing services or selling insurance to any customer, even if there had been no solicitation by the employee, violated public policy and was unenforceable.  

The provision at issue was something of a hybrid:  it prohibited not only the solicitation of the company’s customers but also the provision of services to them.  As such, it was essentially a limited form of non-compete agreement.  Such provisions have been enforced by other Massachusetts judges in other contexts, particularly where the plaintiff could show that enforcement was necessary to protect customer goodwill.  But Judge Murtagh found it to be a “naked and unreasonable restraint on trade and commerce.”  He went on to find that there was no concrete evidence that any of the three customers at issue in the case were solicited by the individual defendants.  (As it happens, one of the allegedly-solicited customers was Foley Hoag; we played no role as counsel in the case.)   In so doing, Judge Murtagh sent a clear signal that he will scrutinize very carefully any request for injunctive relief in a restrictive covenant case.

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Employee's Remote Computer Access Undermines Employer's injunction Request

Posted on August 27, 2007 by Michael Rosen

Your valuable sales employee abruptly departs and begins working at your direct competitor.  Soon, some of your customers follow the departed employee and other customers cancel meetings you have scheduled with them.  Now you are suspicious, so you scrutinize your former employee’s computer activity and discover that just prior to his departure, he emailed to himself or downloaded valuable customer information and other data.  Can you get an immediate injunction stopping your former employee’s conduct?

In one recent Massachusetts case involving this scenario, the answer -- perhaps surprisingly -- was no, due to the fact that the departed individuals convinced the judge that they regularly accessed and downloaded information remotely as part of their jobs.  The case, Mazonson, Inc. v. Greenbaum, involved a sales employee and a independent contractor who departed for Mazonson’s direct competitor.  To support its request for immediate injunctive relief, Mazonson offered evidence that the individuals collected and either emailed to themselves or downloaded from Mazonson’s computer system confidential customer and business planning information.  Superior Court Judge Thomas Murtagh’s denied the requested injunction based on the issue of remote access:  he found that it was not unusual for employees of Mazonson to work from home, and it was not unusual for employees to email information to their homes and to download information from the employer’s database to a USB device.  In the end, Judge Murtagh found that the plaintiff could not establish that possession of the material at issue was “anything other than an acceptable practice to possess the material for work away from the office.”  He concluded that at least at the preliminary injunction stage, Mazonson’s concerns amounted to mere “suspicion.”

What lessons can be drawn from this case?  From the perspective of a former employer seeking to protect against theft of electronic information, the decision highlights the careful attention companies need to give to employees who work from home and who are permitted to remotely access and download information from company computer systems.  Care should be taken to craft policies spelling out precisely what kinds of  remote computer activities are and are not permitted so that companies can successfully argue, if and when the time comes, that their employees have engaged in improper activities involving the company’s electronic information.

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