Under a little known and rarely interpreted Massachusetts statute, non-competition agreements in the broadcasting industry are void and unenforceable. So, how could Entercom Boston, the employer of well-known radio personality Howie Carr, keep him from going to work for a competing radio station?
As Massachusetts-based readers of this blog likely are aware, last week Judge Allan van Gestel, a well-respected judge in the Suffolk County Business Litigation Session, issued an eagerly-awaited decision largely in Entercom’s favor. The decision is here. It turns on the interplay between the Massachusetts statutory prohibition on broadcasting industry noncompetes and a right-of-first-refusal provision in Carr’s employment agreement providing Entercom an opportunity to extend Carr’s employment by matching any offer Carr received from another station. In this case, about 10 weeks before Carr’s contract with Entercom was to expire, Carr provided Entercom with notice of his intention to accept an offer of employment from another Boston area radio station. That same day, Entercom exercised its right-of-first-refusal by matching all of the terms of the offer Carr had received from the other station. Under Carr’s contract, this would have the effect of extending Carr’s employment with Entercom by exactly the same term of years that the other station was offering to Carr.
Carr went to court seeking a declaration that the right-of-first-refusal provision, as well as a 90-day post-employment non-competition provision, were unenforceable under the broadcasting industry noncompete prohibition. Entercom, in turn, sought a judgment that the right-of-first-refusal was valid and enforceable. (Judge van Gestel ruled that the 90-day noncompete provision was unenforceable; but this aspect of the dispute is not particularly important, as Entercom was not seeking to enforce that provision.)
Judge van Gestel went to great lengths to contrast this dispute from the typical non-compete enforcement disputes that he has seen on countless occasions in the Business Litigation Session. He did not strictly scrutinize the provision at issue as he typically would, observing that the parties in the case were “extremely sophisticated,” represented at all times by counsel, and “chose specific language to state their intentions” in the agreement at issue.
Carr essentially argued that the right-of-first-refusal provision was tantamount to a post-employment noncompete, in that it gave Entercom the ability to continue his employment beyond the contractual expiration date of September 19, 2007. Judge van Gestel disagreed, taking great pains to explain that his decision was based on the particular timing of the exercise of the right-of-first-refusal and his quite literal interpretation of the contract at issue. The relevant provision permitted Entercom to exercise a right-of-first-refusal at any time during the term of the agreement and for a period of 180 days after the expiration of the term. In this case, the right-of-first-refusal was triggered before Carr’s employment ended. In Judge van Gestel’s view, the case turned on that timing. He reasoned that the application of the right-of-first-refusal in this context was no more of a limitation on competition than any other provision of the agreement, such as a renewal option, which if exercised would continue the term beyond an initially-stated expiration date. That is, according to the judge, the right-of-first-refusal here operated simply as a mechanism to extend the term of the contract, rather than a post-employment non-competition restriction. Had the right-of-first-refusal been exercised after Carr’s employment had ended, the provision would have operated as a non-compete and the judge would have found it prohibited by the broadcasting industry statute. Judge van Gestel concluded that he was permitted by the contract itself to parse the contractual language in this way, pursuant to a severability clause which stated that a judicial determination of the invalidity of one section of the agreement would not affect the remaining provisions of the agreement.
Quite interestingly, Judge van Gestel observed that Carr “could have quietly, even secretly, met with Greater Boston Radio, Inc. and discussed or negotiated his future with it while his [Entercom agreement] was still operative.” Thus, he suggested that had Carr simply waited until the agreement expired before notifying Entercom of his competing offer, any attempt to exercise the right-of-first-refusal in this post-expiration context would have been struck down by the court.
Finally, Judge van Gestel noted his awareness that Carr claims that he cannot be forced to work for Entercom and its radio station, WRKO, and he mentioned some very old case law going back to 19th century England establishing that an employer cannot obtain injunctive relief to enforce a personal services agreement. That issue, however, was not before the Court on the motions in play.
The result for now appears to be that Carr’s attempt to invalidate the right-of-first-refusal as a mechanism to terminate his employment with Entercom has been unsuccessful. Whether and for how long he continues to work for Entercom remains to be seen.