EMC Corp. v. Gresham

14 Mass. L. Rptr. 128
CourtMassachusetts Superior Court
DecidedNovember 14, 2001
DocketNo. 012084BLS
StatusPublished

This text of 14 Mass. L. Rptr. 128 (EMC Corp. v. Gresham) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
EMC Corp. v. Gresham, 14 Mass. L. Rptr. 128 (Mass. Ct. App. 2001).

Opinion

van Gestel, J.

This matter is before the Court on the application of the plaintiff, EMC Corporation (“EMC"), for a preliminary injunction against the defendant Kenneth Todd Gresham (“Gresham”). Unlike many cases of this nature, the parties have embarked upon fairly extensive discovery before briefing and [129]*129arguing the issues and the key facts are well understood.

BACKGROUND

Gresham worked for Data General Corporation (“Data General”) from 1996 until September 1999, when EMC acquired Data General and continued Gresham’s employment with EMC. While at Data General, Gresham was Vice President of that company’s CLARiiON Storage Division.

When Gresham came to EMC, his position was Vice President of its Global Systems Alliance group, overseeing EMC’s OEM and reseller business. It appears that, effectively, Gresham continued doing basically the same work as at Data General, with a new EMC title.

In October of 1999, Gresham was asked to execute a “Key Employee Agreement” (the “Agreement”) with EMC that included non-competition/non-solicitation covenants. Initially he refused to do so, but finally acquiesced on December 20, 1999. Among other things, the Agreement provided:

1. Non-Competition . . . For the twelve-month period following the effective date of your termination, for any reason, from the Company, you agree not to directly or indirectly compete with the Company in any manner, including but not limited to directly or indirectly developing, producing, marketing, soliciting or selling products or services being developed, produced, marketed or sold by the Company as of the date of your termination. For purposes of the immediately preceding sentence you shall not be considered to be competing with the Company unless you have an ownership interest amounting to at least 1% in the competing enterprise (whether direct or indirect by way of stock options (vested or unvested) or otherwise) or an officership, directorship or other policy-making position with the competing enterprise.

The Agreement also contained provisions regarding customer and vendor confidentiality and confidentiality of company records.

Gresham was contacted in December 2000, by an executive search firm on behalf of Eurologic Systems, Inc. (“Eurologic”) seeking to find a person to oversee Eurologic’s worldwide sales and management team, and possibly to ultimately succeed Eurologic’s chief executive officer.

In March of 2001, Eurologic conveyed an offer to Gresham. Among other things, because of changes in his situation at EMC — a significant reduction in his base salary, a change in his reporting structure, reduced responsibilities and other problems in performing his work — Gresham decided to leave EMC for Eurologic. On March 27, 2001, Gresham accepted the offer to become executive vice-president for Eurologic Ireland and president of Eurologic America. On March 30, 2001, Gresham formally resigned from EMC. Thereafter, EMC made efforts to convince Gresham not to leave.

In exit discussions with Gresham, EMC officers made it known that they considered Eurologic to be a competitor, and also that they would seek to enforce the non-competion covenants in his Agreement.1 As a result, on April 16, 2001, Gresham turned down the position with Eurologic and formed his own consulting firm called Meritage Associates (“Meritage”).

Through Meritage Gresham then began providing consulting services to Eurologic and others, although Eurologic seems to be by far the principal customer of Meritage. As such, Gresham provides strategic business consulting and advice to Eurologic’s chief executive officer, as well as advice to the CEO on his personal investments. Specifically, as to the consulting advice for Eurologic, Gresham provides advice on the overall structure of the company: the interface between the sales and marketing group and the rest of the company; product development processes; mergers and acquisitions; investment strategy; and efficiency issues.

Gresham is paid by Eurologic on an hourly basis, including reimbursement for all travel and other expenses. As a consultant, Gresham has no officership or other status with Eurologic, such as an employee or director; he lacks any reporting responsibilities or revenue accountability; he holds no stock or options therefor; he has no insurance, no automobile allowance, and no other benefits. He is, however, permitted to use an office at Eurologic when working on matters for it.

DISCUSSION

In order to prevail on its request for preliminary injunctive relief, EMC bears the burden of showing its likelihood of success on the merits; that it will suffer irreparable harm if the injunctive relief sought is not granted; and that its harm, without the injunction, outweighs any harm to Gresham, from his being enjoined. GTE Products Corp. v. Stewart, 414 Mass. 721, 722-23 (1993); Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 616-17 (1980). Before assay-, ing these issues, it is appropriate to canvass the relevant elements of the Massachusetts law dealing with the enforcement of non-competition and confidentiality agreements.

Employee covenants not to compete generally are enforceable only to the extent that they are necessary to protect the legitimate business interests of the employer. Novelty Bias Binding Co. v. Shevrin, [342 Mass. 714, 716 (1961)]. Such legitimate business interests might include trade secrets, other confidential information, or, particularly relevant here, the good will the employer has acquired through dealings with its customers. See All Stainless, Inc. v. Colby, [364 Mass. 773, 779-80 (1974)]. Protection of the employer from ordinary competí[130]*130tion, however, Is not a legitimate business interest, and a covenant not to compete designed solely for that purpose will not be enforced. Richmond Bros, Inc. v. Westinghouse Bdcst. Co., Inc., 357 Mass. 106, 111 (1970).

Marine Contractors Co., Inc. v. Hurley, 365 Mass. 280, 287-88 (1974).

Good will is a broad term and encompasses a variety of intangible business attributes such as the “name, location and reputation, which tends to enable’ the business ‘to retain [its] patronage.’ ” Slate Co. v. Bikash, 343 Mass. 172, 175-76 (1961). An employer’s positive reputation or position in the eyes of its customers or potential customers is an element of good will. Marine Contractors Co., Inc., supra, 365 Mass. at 287-89. Good will is also generated by repeat business with existing customers. Id. Good will is a legitimate business interest that an employer is entitled to protect. Kroeger v. Stop & Shop Co., Inc., 13 Mass.App.Ct. 310, 316 (1982).

Gresham’s position at EMC was sufficiently high, that EMC has a justifiable interest beyond that of just ordinary competition in seeking to enforce the non-competition and other covenants of the Agreement with Gresham.

A non-competition agreement, however, to be enforceable, must be reasonable in geographical scope and length of time. See, e.g., Blackwell v. E.M. Helides. Jr., Inc., 368 Mass. 225, 228 (1975); All Stainless, Inc., supra, 364 Mass, at 779-80; Becker College of Business Admn. & Secretarial Science v. Gross, 281 Mass. 355 (1933).

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