Middlesex Superior Court Not Persuaded by Estoppel Argument in Non-Compete Case

A recent case decided in the Middlesex County Superior Court illustrates how not every claim of generalized “unfairness” will be sufficient to avoid enforcement of a non-competition agreement.

In A.R.S. Services, Inc. v. Baker, the defendant employee worked for A.R.S. Services, a company in the disaster restoration field, and had signed an agreement with non-competition and non-solicitation provisions, both enforceable for one year after he left the employ of A.R.S. Shortly after the employee had resigned from A.R.S., he began working for a competitor of A.R.S. and solicited A.R.S. customers for his new employer. A.R.S. filed suit against the employee and his new employer to enforce the agreement and moved for a preliminary injunction to enjoin the employee from soliciting its customers for the competitor and working at the competitor in a disaster restoration position.

Judge Murtagh of the Middlesex Superior Court allowed the motion for a preliminary injunction. The employee did not challenge the reasonableness of the agreement, but rather only argued that A.R.S. was estopped (that is, precluded) from seeking to enforce the agreement because A.R.S. materially breached the agreement by directing him to engage in acts involving “moral turpitude.” The employee alleged that, while he was an employee of A.R.S., the president of A.R.S. requested that he reduce an estimate to rebuild a home that was destroyed by a tornado. He “reluctantly” reduced his estimate. The employee argued to the court that the president’s request was improper. The court, however, ruled that there was insufficient evidence that A.R.S. and its president were engaged in any fraud or illegal activity. Rather, the employee’s “apparent disagreement with [the president] involved ARS’ attempt to minimize costs to maximize profits.” 

As this case shows, binding obligations in non-competition agreements are ignored at an employee and new employer’s peril. There are legitimate reasons for a court to rule that a non-competition agreement is not enforceable, but an employee’s mere business disagreement with his former boss is not one of them.

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