October 2, 2014

No Lost Profits Damages in Trade Secret Misappropriation Case

The Massachusetts Supreme Judicial Court ("SJC") recently analyzed the use of expert testimony regarding "lost profits" damages in a case from Suffolk Superior Court's Business Litigation Session, and provided some guidance relative to the appropriate measure of damages in cases involving misappropriation of trade secrets.

In LightLab Imaging, Inc. v. Axsun Technologies, Inc., LightLab Imaging, Inc. ("LightLab") filed suit in Suffolk Superior Court, alleging that a competitor, Volcano Corporation ("Volcano"), was using its trade secrets relative to certain laser technology after a joint venturer, Axsun Technologies, Inc., ("Axsun") secretly offered itself for sale to Volcano and divulged LightLab's specifications for that technology. At the outset of the case, the court granted a preliminary injunction. Later, a jury returned a favorable verdict for LightLab, concluding that Axsun had violated the confidentiality provision of its contract with LightLab. The jury also found that Volcano tortiously interfered with LightLab's contract and business relationship with Axsun, and that Volcano had misappropriated LightLab's trade secrets. On a separate count under M.G.L. c. 93A, the court found that Axsun and Volcano acted knowingly and willfully, thus entitling LightLab to $400,000 in damages plus attorney's fees totaling $4,500,000.

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September 25, 2014

Delaware Amends Laws Relating to Corporations, LLCs, LPs, and Partnerships

Many Massachusetts residents elect to incorporate their businesses under the often more favorable and flexible business laws of Delaware. Accordingly, it is important to be aware of changes in the applicable Delaware statutes, and to understand how those amendments affect existing and future business entities incorporated under those laws.

Delaware recently amended its General Corporation Law, its Limited Liability Company Act, its Revised Uniform Limited Partnership Act, and its Revised Uniform Partnership Act. Those amendments, as explained in a recent National Law Review article, are summarized below.

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August 25, 2014

SJC Clarifies Statutory Duty to Defend as Between Car Manufacturers and Car Dealers

The Massachusetts Supreme Judicial Court (SJC) recently interpreted a statute under M.G.L. c. 93B, section 8(a), which requires a car manufacturer, under certain circumstances, to defend a car dealer against a claim "predicated upon the negligent design or manufacture of a new motor vehicle, or any part or component thereof." While a "duty to defend" often arises based on the terms of contractual relationships between parties, it is less common that a duty to defend arises in a statutory context.

In Ferreira v. Chrysler Group, LLC, the plaintiff had purchased a new Jeep Wrangler from the car dealership, Somerset Auto Group ("Somerset"). The vehicle was manufactured by Chrysler Group LLC, and came with a standard limited warranty, which covered all costs of parts and labor necessary to repair any defects on the vehicle for a period of thirty-six months or 36,000 miles, whichever came first. The plaintiff alleged that after he purchased it, the vehicle underwent six separate repairs, and was out of service for up to forty-two days at a time. In a demand letter to Chrysler and Somerset, the plaintiff alleged that Chrysler's inability to repair the vehicle constituted a breach of warranty, a violation of M.G.L. ch. 93A (unfair and deceptive acts and practices), and the Massachusetts Lemon Law, while Somerset's inability to repair the vehicle was a breach of warranty and a violation of 93A.

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August 21, 2014

Appeals Court Reinstates Employee's Age Discrimination Claim Against Employer

In June, the Massachusetts Appeals Court reinstated an age discrimination claim brought by a former employee against her former employer, the Massachusetts Department of Transitional Assistance (DTA), in which the employee claimed that she was demoted, and constructive terminated, as a result of age discrimination.

In Younker v. Department of Transitional Assistance, the employee claimed that her demotion and subsequent resignation from the DTA constituted a violation of M.G.L. c. 151B, § 4(1C). That statute provides that it is an unlawful discriminatory practice for "the commonwealth or any of its political subdivisions, by itself or its agent, because of the age of any individual, to refuse to hire or employ or to bar or discharge from employment such individual in compensation or in terms, conditions or privileges of employment unless pursuant to any other general or special law."

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August 5, 2014

Non-Compete Agreements Survive Another Legislative Session

Massachusetts legislators have once again declined to amend Massachusetts law relative to non-competition agreements, which operate to ban employees who sign them from working for competitors after they leave a company. According to the Boston Herald, the final version of a proposed Massachusetts economic development bill will not include language placing limitations on non-compete clauses, as many of those opposed to non-competes had hoped.

The legislation has been hotly debated for years. Most of those in favor of keeping non-compete agreements valid and enforceable are employers and owners of large organizations intent on protecting their business information and intellectual property. Earlier this year, as part of a larger economic development bill, Massachusetts Governor Deval Patrick proposed an outright ban on non-compete agreements. As a compromise, Governor Patrick later suggested that Massachusetts adopt the Uniform Trade Secrets Act, a federal act currently in use by 46 states as well as Washington, DC. The Uniform Trade Secrets Act aims to protect employers' intellectual property rights without necessarily limiting employees' ability to change jobs.

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May 22, 2014

Ruling Emphasizes Punitive Nature of Attorney's Fees Award Pursuant to M.G.L. c. 93A

In Holland v. Jachmann, the Massachusetts Supreme Judicial Court (SJC) considered whether the attorney's fees attributable to the plaintiff business's in-house counsel are recoverable as part of assessed damages in a successful claim under M.G.L. c. 93A (Chapter 93A). There, the dispute arose out of a complicated business transaction that effectively split the plaintiff company in two. The defendants were found to have violated Chapter 93A on eight counts, including flagrant breaches of contract and deceptive business practices.

Chapter 93A gives a court discretion to award attorney's fees incurred in connection with an action for unfair and/or deceptive acts or practices in violation of the statute, as well as recovery of double or treble damages. As the SJC observed, the legislative purpose of the statute is to deter misconduct, making the multiple damages and attorney's fee awards punitive in nature.

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May 15, 2014

Employee Bound to Arbitrate Claims Against Employer Based Upon Language in Employee Handbook

In a recent ruling from a federal district court in Massachusetts, the court held that the terms regarding an arbitration program contained in an employee handbook operated as a binding agreement to arbitrate the employee's discrimination claims against the employer.

In Daniels v. Raymours Furniture Co., Inc., the plaintiff had been an employee of the defendant-employer. When he was hired, the plaintiff was required to review and acknowledge receipt of the employer's employee handbook containing the company's employment policies. A few months later, the employer adopted an arbitration program, and incorporated the terms of that program into the employee handbook. The employer emailed the revised handbook to all employees, including the plaintiff. Specifically, the new terms specified that the program was an essential element of the employees' continued relationship with the employer, and that accepting the new program was a condition of employment. The plaintiff reviewed the handbook on his computer, and clicked "done" to certify that he had read the updated policy.

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May 8, 2014

"GRONK" Trademark Claim Lives On

Last month, the United States District Court, District of Massachusetts ruled that New England Patriots player, Rob Gronkowski, and his two brothers sufficiently alleged claims of trademark infringement against the defendant, Sully Tees, LLC, allowing the football players to proceed with the case.

In Gronk Nation, LLC v. Sully's Tees, LLC, brothers Rob, Christopher, and Daniel Gronkowski - all professional football players - alleged that one or more of them have been well known for their athletic achievements since at least the fall of 2005, and are associated with the word or nickname "Gronk." The brothers established Gronk Nation LLC, and assigned their intellectual property rights in the use of their names, nicknames, images, pictures, likenesses, and trademarks to Gronk Nation. Gronk Nation received Federal Trademark Registrations from the United States Patent & Trademark Office for "GET GRONK'D," "GRONK NATION," and "GRONK" in December 2012. The LLC sells t-shirts in interstate commerce that use these trademarked phrases and derivatives thereof, and donates its profits to a charitable organization that supports youth activities.

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April 24, 2014

City Employer Cannot Deny Retired Employee Value of Earned Compensatory Time

The Massachusetts Wage Act has teeth. Among other things, it helps ensure that employers timely pay employees all earned wages, as that term is broadly defined, under the threat of mandatory triple damages, attorney's fees, and costs of litigation for violation of the Act. Leaving little opportunity for employers to avoid their pay obligations to employees, the Act specifically prohibits an employer from entering into a contract with an employee that exempts the employer from his Wage Act obligations.

Earlier this month, the Massachusetts Appeals Court struck down two arguments advanced by an employer to justify the employer's non-payment of wages to an employee. In Plourde v. Police Dept. of Lawrence, the plaintiff had been a police officer with the Lawrence Police Department (LPD) for twenty-five years. Pursuant to the terms of his collective bargaining agreement (CBA), the plaintiff was permitted and elected to work additional shifts, separate from his salaried work. The CBA referred to these extra shifts as "overtime." The LPD's policies and practices permitted officers to elect to receive compensatory time in lieu of wages for the overtime shifts. Throughout his employment, the plaintiff often elected to take compensatory time.

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April 15, 2014

Proposed Legislation Threatens the Future Enforceability of Non-Compete Agreements

In the past, Massachusetts legislators have proposed legislation that would ban the enforcement of non-competition agreements in Massachusetts, but no such law has yet passed. Last week, Governor Deval Patrick announced that he would propose similar legislation as part of an economic growth bill, in an effort to remove the barriers that non-compete agreements create for workers in high-tech companies who wish to open their own competing business.

As we have previously discussed, Massachusetts law presently views non-competition agreements as valid and enforceable, if they are reasonable in duration, geographic scope, and restricted activities. These agreements have been essential to many Massachusetts employers to prevent employees from leaving the employer and taking with them the employer's valuable business information and trade secrets.

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April 10, 2014

Business Disputes in Automotive Industry Can Present Unique Issues

A recent decision from the United States District Court in Massachusetts illustrates how business disputes in the automotive industry may be subject to specific laws that can have an effect on substantive claims as well as the enforcement of arbitration agreements to resolve such disputes. In Aston Martin Lagonda of North America, Inc. v. Lotus Motorsports, Inc., laws specific to automotive business disputes led the federal court to dismiss various claims brought by dealership franchisee Lotus Motorsports, Inc. (Lotus) against franchisor Aston Martin Lagonda of North America, Inc. (Aston Martin).

After entering into an automobile dealership franchise agreement with Aston Martin in 1996, Lotus served as the only Aston Martin dealer in New England, except for southern Connecticut. Around 2003, Aston Martin advised Lotus that the showroom at Lotus's dealership was insufficient for the anticipated increase in volume, and assured Lotus that it would sell 75 to 100 units per year when Aston Martin's new volume model was released. Based on these statements and encouragement from Aston Martin, Lotus moved its dealership to a larger facility in which it invested more than $700,000, and passed on other business opportunities. In 2013, Lotus learned that another Aston Martin authorized dealership would be opening 8.7 miles from Lotus's new location.

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March 27, 2014

Bonus Payment Excluded from Wage Act Claim

The Suffolk County Superior Court recently analyzed the Massachusetts Wage Act in a case involving the compensation package of a company's departing president. The case was complicated by the multiple and inconsistent compensation agreements the plaintiff and defendant company signed. At bottom, the court decided the issue of whether annual bonuses and vacation pay may be considered wages under the Wage Act. The court found that annual bonuses may not be considered wages under the Wage Act, but that vacation pay may be wages, provided that certain criteria are be met.

In Boesel v. Swaptree, Inc., the plaintiff brought claims the defendants under the Wage Act, for breached of fiduciary duties, and for interference with contractual relations. The plaintiff founded Swaptree, Inc. and served as its CEO until 2010. As part of an investment agreement, the plaintiff resigned as CEO, and accepted the position of president of the company. Upon accepting the position, the plaintiff entered into an employment agreement with the company that differed from the original agreement he had signed at the company's inception. The agreement provided that Boesel receive a certain salary, health and retirement benefits, paid vacations, and would receive compensation for unused vacation days. In addition, Boesel was to receive an annual bonus each year he worked for the defendant company, as well as a discretionary bonus based on his success as president. However, the company paid Boesel only his base salary, without bonuses or vacation time reimbursement.

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March 20, 2014

No Breach of Fiduciary Duty by Corporate Shareholder Who Opened Similar Business

In Ricci Consultants, Inc. v. Bournival, a case recently tried in the Norfolk Superior Court, it was determined that a defendant did not breach a fiduciary duty when she left employment with Ricci Consultants, Inc. (RCI), an actuarial consulting firm in which she was a shareholder with a one-third interest, to start her own actuarial consulting firm, KMS Actuaries, Inc. (KMS). Although both firms provided actuarial consulting services for clients, the types of clients each firm serviced differed: RCI specialized in private sector work, while KMS focused on the public sector. Following the defendant's departure from RCI, both parties filed suit against each other, both alleging intentional interference with contractual/advantageous relations with customers, and breaches of fiduciary duties. A jury returned verdicts in favor of the defendant and KMS on the intentional interference claims. The parties waived their right to have a jury decide the breach of fiduciary duty claim, which the judge considered.

RCI alleged that the defendant, through KMS, competed with RCI and thereby stole corporate opportunities from KMS, to which she owed fiduciary duties. In doing so, RCI alleged that the defendant breached her duty of loyalty owed to RCI.

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March 13, 2014

General Contractor Who Delayed Project Held to Have Breached Contract with Subcontractor

A Massachusetts Superior Court recently ruled on a case involving a construction contract between a subcontractor and a general contractor, where the contract included a provision that prohibited the subcontractor from recovering damages from the contractor for a delay in the project. The court held that the "no damages for delay" clause did not prevent the plaintiff-subcontractor from recovering damages from the contractor, as the contractor denied the subcontractor of its only available remedy under the contract.

In Central Ceilings, Inc. v. Suffolk Construction Company, Inc., et al., Central Ceilings, Inc. agreed to furnish labor and material for the drywall and ceiling portions of a project under the control of the general contractor, Suffolk Construction Company. Central agreed to respond to change order requests promptly, and to work under a specific schedule, while Suffolk Construction supervised and coordinated the project and job site.

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March 6, 2014

Court Stays Action Pending Arbitration

A recent order from a federal district court in Massachusetts sheds light on the analysis courts perform when addressing whether to stay a civil action pending arbitration. In MOCA Systems, Inc. v. Bernier and Penley Systems, LLC, the court considered the defendants' motion to stay an action pending arbitration. The defendants proffered only an unsigned employment agreement that included an arbitration clause, and testimony suggesting the agreement was valid. The court allowed the motion and stayed the litigation.

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