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.

Continue reading "Proposed Legislation Threatens the Future Enforceability of Non-Compete Agreements" »

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.

Continue reading "Business Disputes in Automotive Industry Can Present Unique Issues" »

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.

Continue reading "Bonus Payment Excluded from Wage Act Claim" »

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.

Continue reading "No Breach of Fiduciary Duty by Corporate Shareholder Who Opened Similar Business" »

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.

Continue reading "General Contractor Who Delayed Project Held to Have Breached Contract with Subcontractor" »

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.

Continue reading "Court Stays Action Pending Arbitration" »

February 27, 2014

Can A Social Media Post Constitute Solicitation in Violation of a Non-Compete Agreement?

Last fall, the business litigation session of the Massachusetts Superior Court considered whether former employee's LinkedIn profile change constituted a violation of the employee's non-competition agreement. In KNF&T Staffing Inc. v. Muller, KNF&T, a staffing agency in the Boston area, had hired the defendant, Charlotte Muller, in 2005. When Muller was hired, she signed an Employee Confidentiality and Non-Competition Agreement that prohibited her from recruiting or referring potential employees for placement in the "Company's Field of Placement" for one year within 50 miles of any of KNF&T's offices. Muller worked at KNF&T for eight years, and was eventually promoted to Vice President and manager of the plaintiff's Boston office. Muller resigned from KNF&T, and three months later joined Panther Global Group, a staffing firm in Boston and direct competitor of KNF&T in certain areas. Muller posted on her LinkedIn account that she had changed jobs, notifying her 500+ contacts of the change. KNF&T filed a lawsuit to enforce the non-compete agreement Muller had signed in 2005.

Continue reading "Can A Social Media Post Constitute Solicitation in Violation of a Non-Compete Agreement?" »

February 20, 2014

The End of Forum Shopping?

The Supreme Court's January decision in Daimler Chrysler v. Bauman has clarified the standard that must be met to establish general personal jurisdiction over corporations that seemingly have a presence in a particular state. The effect of the decision is to limit, to some degree, a plaintiff's ability to "forum shop" - or, to strategically select a certain court in a certain state in which to file a lawsuit in order to gain an advantage over the rival corporation.

Daimler is a German corporation that was sued by Argentinian plaintiffs in California. The plaintiffs brought suit for human rights violations that occurred in Argentina. At issue was whether a defendant parent corporation may be called to a certain court under the pretense of general jurisdiction when a subsidiary of the corporation does business in that state. The Court found that California did not have general jurisdiction over Daimler, and so Daimler could not be sued in California for injuries caused by the conduct of its Argentinian subsidiary when that conduct took place entirely in Argentina.

Continue reading "The End of Forum Shopping?" »

February 13, 2014

No Claim for Misappropriation of Trade Secrets That Are Inadequately Protected

Generally, a company can protect its trade secrets from misappropriation by taking steps to ensure that such information is not easily accessible or otherwise easily disseminated. Requiring employees and others who are exposed to customer lists, business processes, and the like to sign confidentiality agreements is just one way to be vigilant in trade secret protection. However, as highlighted in a recent superior court decision, in the absence of a signed confidentiality agreement, businesses must take other reasonable steps to keep confidential information confidential, or risk that their trade secrets will be stolen - with no legal recourse against the trade secret thief.

In CRTR, Inc. v. Lao, CRTR hired an independent contractor without requiring him to sign a confidentiality agreement. The contractor was the nephew of a CRTR customer who had commenced negotiations with CRTR to purchase the business. When the negotiations failed, the contractor stole a number of trade secrets from the CRTR, and CRTR sued both the contractor and his uncle for misappropriation. When the contractor moved for summary judgment, the court found that CRTR had properly identified the stolen material and had demonstrated that the material would cause damage to the company's interest if the information was shared. Despite that finding, the court granted the contractor's summary judgment motion.

Continue reading "No Claim for Misappropriation of Trade Secrets That Are Inadequately Protected" »

February 6, 2014

Email Communications May Create Enforceable Agreements

Email has become the preferred method of communication amongst many businesses and professionals. As shown by a handful of recent Massachusetts cases, it is imperative to review and revise e-mail correspondence, being mindful of the commitment-value of the written words. A recent article from Massachusetts Lawyers Weekly discussed this topic.

In 2004, Massachusetts adopted the Uniform Electronic Transactions Act, and both Massachusetts state and federal courts have since held that electronic correspondence may create a binding contract and satisfy the statute of frauds, which requires certain types of contracts to be in writing. Additionally, email conversations may be able to substitute as valid signatures, or may fulfill notice provisions of contracts, even when the contract is silent with respect to electronic communications.

Continue reading "Email Communications May Create Enforceable Agreements" »

January 30, 2014

Non-Compete Case: No Competition, No Preliminary Injunction

A federal district court in Massachusetts recently denied a corporation's motion to preliminarily enjoin its former employee from working at an alleged competitor corporation, as was prohibited in the employee's non-competition agreement. The court's decision turned on the fact that the plaintiff never proved that the defendant corporation was in fact a competitor in the marketplace, and thus did not satisfy the requirements that would warrant a preliminary injunction.

In Upromise, Inc. v. Peter Angus and Intuition Systems, Inc., Upromise, Inc. ("Upromise") specialized in servicing college savings plans, and was the former employer of Peter Angus ("Angus"). Angus left Upromise, and found a position with Intuition Systems, Inc. ("Intuition"), a company that focused on providing prepaid service of college savings plans. Upromise filed a lawsuit and a motion for preliminary injunction against Angus and Intuition, seeking (1) to enjoin Angus from accepting employment with Intuition, an alleged competitor of Upromise, for a period of one year pursuant to Angus' non-competition agreement with Upromise, or (2) specific performance of a negotiated settlement agreement to prevent Intuition from hiring Angus.

Continue reading "Non-Compete Case: No Competition, No Preliminary Injunction" »

January 23, 2014

Life After Death for Delaware Corporations

The law has frequently regarded corporations as akin to persons, treating them as entities separate from their owners and granting rights to and imposing obligations upon them quite similar to those imposed on individuals. However, a recent Delaware Supreme Court decision demonstrates how the Delaware statutes have granted Delaware corporations a type of corporate immortality - but only when it comes to their potential liability to third parties.

In the case, In the Matter of Krafft-Murphy Company, Inc., the Delaware Supreme Court considered third parties' right to pursue claims against a dissolved corporation, and any time limitations placed upon that right by Delaware's statutory corporate dissolution scheme. Beginning in 1989, the defendant corporation was named as a defendant in hundreds of asbestos personal injury lawsuits in multiple jurisdictions, all of which the corporation's insurance companies have been defending on its behalf. In 1999, the corporation formally dissolved, and its only presently remaining assets are their unexhausted insurance policies. The plaintiffs instituted the Delaware case seeking the appointment of a receiver for the dissolved corporation, to enable them to lawfully pursue their claims against the dissolved entity.

Continue reading "Life After Death for Delaware Corporations" »

January 17, 2014

A Corporate President's Power May Be Inherently Limited

In a recent decision, the Worcester Superior Court ruled that the president of a corporation has limited power with respect to the firing of corporate officers. The court explored the powers of a corporate president and his ability to hire and fire at-will employees under the guise of his general authority. In that case, the court held that the president's firing of the vice president without support from the board of directors was ineffective.

In Arklow, Inc. et al. v. Weadock, the court addressed the issue of whether a president's unilateral termination of the vice president was effective. Arklow, Inc. and Arlow, LP sought injunctive relief against Daniel Weadock to remove him from his position as the manager at the International, a local golf course owed by the partnership. This court proceeding shortly followed the decision of Bryan Weadock, the president of Arklow, Inc., to fire Daniel Weadock, the vice president at Arklow, Inc. and manager of the International. The court's opinion involved a discussion of the principals of corporate law, as it analyzed the difference between Daniel's managerial role and his role as vice president.

Continue reading "A Corporate President's Power May Be Inherently Limited" »

January 9, 2014

When a Signed Agreement Isn't Enough -- Protecting the Confidentiality of Confidential Information

Maintaining the confidentiality of trade secrets is crucial for business owners who hope to remain competitive and continue earning cash from their investments and novel ideas. Many business owners require that non-disclosure agreements be signed by any persons with whom they deal, in order to limit the proliferation of trade secrets. Recently, two federal courts decisions have made it even more imperative to ensure adherence to such non-disclosure agreements.

The U.S. Court of Federal Claims recently dismissed an inventor's claims against the United States for patent infringement and misappropriation of trade secrets. In Gal-Or v. United States, the federal court heard evidence regarding Mr. Gal-Or's dealings with the federal government. Gal-Or, an Israeli scientist and inventor, created a number of novel devices used by the military's aerospace programs. Gal-Or had an agreement with the federal government that whatever trade secrets of his were disclosed from the parties' dealing would be confidential. While Gal-Or had the agreement with the government, he did not mark all of the documents that he shared as confidential, nor did he always proactively insist on adherence with the non-disclosure agreement. The evidence demonstrating Gal-Or's incomplete protection of his intellectual property persuaded the court to grant the government's motion to dismiss.

Continue reading "When a Signed Agreement Isn't Enough -- Protecting the Confidentiality of Confidential Information" »

January 2, 2014

Be Careful What You Contract For... You Just Might Get It

Nationally, there has long been a circuit split regarding the federal courts' analysis of forum selection clauses. As previously discussed, the federal courts in Massachusetts have generally been unwilling to enforce a forum selection clause appearing in a contract if enforcement of the clause would be unreasonable, unjust, or contrary to the public policy of the forum in which the lawsuit is brought. If a court strikes down a forum selection clause as unenforceable, the plaintiff is free to litigate its case in any proper court having jurisdiction over the parties and the subject matter of the case. Now, based upon a decision from the United States Supreme Court, the circumstances that will justify a federal court's refusal to enforce a forum selection clause will be few and far between, so long as the parties have previously agreed to litigate their disputes in a specific court pursuant to a valid contract.

In Atlantic Marine Construction Company, Inc. v. U.S. District Court for the Western District of Texas, the Supreme Court examined a forum selection clause contained in a construction contract between a contractor and its subcontractor. The parties' contract contained a forum selection clause in which the parties agreed that all disputes between them would be resolved in the state or federal court in Norfolk, Virginia, where the contractor firm was based. However, when the contractor failed to pay the subcontractor for work performed, it sued the contractor for breach of contract in a federal court in Texas, where the construction work occurred. The contractor asked the Texas federal district court to enforce the parties' forum selection clause and either dismiss the case or transfer it to the district court in Virginia. The Texas district court refused to do so, and that decision was upheld on appeal to the Fifth Circuit.

Generally, when a defendant seeks to transfer a case from one federal court to another for forum reasons, the governing statute is 28 U.S.C. 1404(a), which permits a court to transfer the action to another federal forum for the convenience of the parties. In determining whether a transfer should occur, the district court considered both the private interests of the parties as well as public interest considerations relative to the location of the litigation. For example, because the dispute arose from work completed in Texas, and many witnesses and most evidence would be located in Texas, Texas may be a more desirable forum for convenience purposes.

Continue reading "Be Careful What You Contract For... You Just Might Get It" »