UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Michael W. Powers, Plaintiff
v. Case No. 13-cv-007-SM Opinion No. 2014 DNH 144 Northern Lights Landscape Contractor, LLC and Erich Mueller, Defendants
O R D E R
Michael Powers brings this action against his former
employer and its owner (collectively, “Northern Lights”). He
asserts claims for unpaid wages under the Fair Labor Standards
Act, as well as state law claims for unpaid wages, breach of
contract, and defamation, over which he asks the court to
exercise supplemental jurisdiction. Defendants deny any
wrongdoing and advance counterclaims for breach of contract and
conversion.
Pending before the court is Powers’ motion to dismiss
Northern Lights’ counterclaim for breach of the parties’ purchase
and sale agreement. For the reasons stated, that motion to
dismiss is denied. Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must “accept as true all well-pleaded facts
set out in the complaint and indulge all reasonable inferences in
favor of the pleader.” SEC v. Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). Although the complaint need only contain “a short
and plain statement of the claim showing that the pleader is
entitled to relief,” Fed. R. Civ. P. 8(a)(2), it must allege each
of the essential elements of a viable cause of action and
“contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citation and internal
punctuation omitted).
In other words, “a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief’ requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). Instead, the facts alleged in
the complaint must, if credited as true, be sufficient to
“nudge[] [plaintiff’s] claims across the line from conceivable to
plausible.” Id. at 570. If, however, the “factual allegations
in the complaint are too meager, vague, or conclusory to remove
2 the possibility of relief from the realm of mere conjecture, the
complaint is open to dismissal.” Tambone, 597 F.3d at 442.
Background
Accepting the factual allegations set forth in Northern
Lights’ Amended Answer and Counterclaims (document no. 25) as
true, the relevant facts are as follows. In 2012, Powers and
Northern Lights were each in the commercial street-sweeping
business. In April of that year, Powers agreed to sell his
company - “Swept Away Sweeping, Inc.” - to Northern Lights. The
parties executed a purchase and sale agreement, by which Powers
sold to Northern Lights “all existing contracts, trade name,
signage, phone number, customer list, and a 1993 Elgin Eagle
Sweeper.” Sales Agreement (document no. 8-1) at 1. As part of
that agreement, Northern Lights agreed to hire Powers as a
salaried employee “at a weekly rate of $769.23,” and Powers
agreed “to work as many hours as needed to complete job
description assigned by [Northern Lights].” Id.
Included in the Sales Agreement is a section entitled “Non-
compete,” the relevant portions of which provide as follows:
Mike Powers - employee - agrees to a non-compete clause for a period of 5 years, within a radius of 150 miles from Employer’s specific location of 395 Elm Street, Milford, N.H.. A no solicitation rule will be in place with any current Northern Lights customers. . . . The
3 non-compete clause will remain in effect until November 1, 2015.
Id. at 2.
Powers claims Northern Lights has yet to pay him fully for
the purchase of his business. He also asserts that Northern
Lights failed to pay him all the wages (and overtime) to which he
is entitled. So, in September of 2012, through legal counsel, he
notified Northern Lights that he believed he was owed a fairly
sizeable sum of money. Perhaps understandably, Northern Lights
did not look favorably upon what it believed were unfair and/or
inaccurate accusations contained in that letter. Ultimately,
Powers was put on “administrative leave” and, on October 30,
2012, Northern Lights terminated his employment.
Subsequently, Powers brought this action. In response,
Northern Lights counterclaimed, asserting claims for both
conversion and breach of the purchase and sale agreement.
Northern Lights says it purchased the assets and goodwill of
Powers’ company so it could “establish a street sweeping business
as a separate division,” anticipating that Powers would “run that
division, [and] generate additional customers and sales.”
Amended Answer and Counterclaims at para. 13. But, after it
purchased “Swept Away Sweeping” from Powers, it discovered that
4 he “was performing street sweeping services on his own at night
under the name Swept Away Sweeping and that [he] was keeping any
proceeds for himself.” Id. at para. 19. That, says Northern
Lights, amounted to a breach of both the implicit terms of the
parties’ purchase and sale agreement and the explicit terms of
the non-competition provision.
Powers moves to dismiss the breach of contract counterclaim
- pointing specifically to the non-competition provision - for
failure to state a viable cause of action. See Fed. R. Civ. P.
12(b)(6).
Discussion
Generally speaking, New Hampshire’s public policy
discourages covenants not to compete. See Concord Orthopaedics
Prof’l Ass’n v. Forbes, 142 N.H. 440, 442 (1997). They are,
therefore, narrowly construed. See Merrimack Valley Wood Prods.
v. Near, 152 N.H. 192, 197 (2005). Nevertheless, covenants not
to compete “are valid and enforceable if the restraint is
reasonable, given the particular circumstances of the case.” Id.
Whether a covenant not to compete is reasonable is a
question for the court to resolve, in light of the unique facts
presented by each case. See Concord Orthopaedics, 142 N.H. at
5 442-43. For it to be reasonable, a restraint on employment must
meet each of the following three criteria: first, it must be no
greater than necessary for the protection of the employer’s
legitimate interest; second, it cannot impose undue hardship on
the employee; and, finally, it must not be contrary to the public
interest. Id. Assessing the enforceability of a covenant not to
compete is, then, a fact-intensive inquiry. If a restrictive
employment covenant fails to meet any one (or more) of those
criteria, it is unenforceable. See generally ACAS Acquisitions
(Precitech), Inc. v. Hobert, 155 N.H. 381 (2007).
In this case, Northern Lights asserts that within three
months after it purchased “Swept Away Sweeping” from Powers, he
was operating a competing business under that same name. It says
Powers’ conduct breached both an obligation not to use the very
trade name he had sold to Northern Lights, as well as the non-
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UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Michael W. Powers, Plaintiff
v. Case No. 13-cv-007-SM Opinion No. 2014 DNH 144 Northern Lights Landscape Contractor, LLC and Erich Mueller, Defendants
O R D E R
Michael Powers brings this action against his former
employer and its owner (collectively, “Northern Lights”). He
asserts claims for unpaid wages under the Fair Labor Standards
Act, as well as state law claims for unpaid wages, breach of
contract, and defamation, over which he asks the court to
exercise supplemental jurisdiction. Defendants deny any
wrongdoing and advance counterclaims for breach of contract and
conversion.
Pending before the court is Powers’ motion to dismiss
Northern Lights’ counterclaim for breach of the parties’ purchase
and sale agreement. For the reasons stated, that motion to
dismiss is denied. Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must “accept as true all well-pleaded facts
set out in the complaint and indulge all reasonable inferences in
favor of the pleader.” SEC v. Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). Although the complaint need only contain “a short
and plain statement of the claim showing that the pleader is
entitled to relief,” Fed. R. Civ. P. 8(a)(2), it must allege each
of the essential elements of a viable cause of action and
“contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citation and internal
punctuation omitted).
In other words, “a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief’ requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). Instead, the facts alleged in
the complaint must, if credited as true, be sufficient to
“nudge[] [plaintiff’s] claims across the line from conceivable to
plausible.” Id. at 570. If, however, the “factual allegations
in the complaint are too meager, vague, or conclusory to remove
2 the possibility of relief from the realm of mere conjecture, the
complaint is open to dismissal.” Tambone, 597 F.3d at 442.
Background
Accepting the factual allegations set forth in Northern
Lights’ Amended Answer and Counterclaims (document no. 25) as
true, the relevant facts are as follows. In 2012, Powers and
Northern Lights were each in the commercial street-sweeping
business. In April of that year, Powers agreed to sell his
company - “Swept Away Sweeping, Inc.” - to Northern Lights. The
parties executed a purchase and sale agreement, by which Powers
sold to Northern Lights “all existing contracts, trade name,
signage, phone number, customer list, and a 1993 Elgin Eagle
Sweeper.” Sales Agreement (document no. 8-1) at 1. As part of
that agreement, Northern Lights agreed to hire Powers as a
salaried employee “at a weekly rate of $769.23,” and Powers
agreed “to work as many hours as needed to complete job
description assigned by [Northern Lights].” Id.
Included in the Sales Agreement is a section entitled “Non-
compete,” the relevant portions of which provide as follows:
Mike Powers - employee - agrees to a non-compete clause for a period of 5 years, within a radius of 150 miles from Employer’s specific location of 395 Elm Street, Milford, N.H.. A no solicitation rule will be in place with any current Northern Lights customers. . . . The
3 non-compete clause will remain in effect until November 1, 2015.
Id. at 2.
Powers claims Northern Lights has yet to pay him fully for
the purchase of his business. He also asserts that Northern
Lights failed to pay him all the wages (and overtime) to which he
is entitled. So, in September of 2012, through legal counsel, he
notified Northern Lights that he believed he was owed a fairly
sizeable sum of money. Perhaps understandably, Northern Lights
did not look favorably upon what it believed were unfair and/or
inaccurate accusations contained in that letter. Ultimately,
Powers was put on “administrative leave” and, on October 30,
2012, Northern Lights terminated his employment.
Subsequently, Powers brought this action. In response,
Northern Lights counterclaimed, asserting claims for both
conversion and breach of the purchase and sale agreement.
Northern Lights says it purchased the assets and goodwill of
Powers’ company so it could “establish a street sweeping business
as a separate division,” anticipating that Powers would “run that
division, [and] generate additional customers and sales.”
Amended Answer and Counterclaims at para. 13. But, after it
purchased “Swept Away Sweeping” from Powers, it discovered that
4 he “was performing street sweeping services on his own at night
under the name Swept Away Sweeping and that [he] was keeping any
proceeds for himself.” Id. at para. 19. That, says Northern
Lights, amounted to a breach of both the implicit terms of the
parties’ purchase and sale agreement and the explicit terms of
the non-competition provision.
Powers moves to dismiss the breach of contract counterclaim
- pointing specifically to the non-competition provision - for
failure to state a viable cause of action. See Fed. R. Civ. P.
12(b)(6).
Discussion
Generally speaking, New Hampshire’s public policy
discourages covenants not to compete. See Concord Orthopaedics
Prof’l Ass’n v. Forbes, 142 N.H. 440, 442 (1997). They are,
therefore, narrowly construed. See Merrimack Valley Wood Prods.
v. Near, 152 N.H. 192, 197 (2005). Nevertheless, covenants not
to compete “are valid and enforceable if the restraint is
reasonable, given the particular circumstances of the case.” Id.
Whether a covenant not to compete is reasonable is a
question for the court to resolve, in light of the unique facts
presented by each case. See Concord Orthopaedics, 142 N.H. at
5 442-43. For it to be reasonable, a restraint on employment must
meet each of the following three criteria: first, it must be no
greater than necessary for the protection of the employer’s
legitimate interest; second, it cannot impose undue hardship on
the employee; and, finally, it must not be contrary to the public
interest. Id. Assessing the enforceability of a covenant not to
compete is, then, a fact-intensive inquiry. If a restrictive
employment covenant fails to meet any one (or more) of those
criteria, it is unenforceable. See generally ACAS Acquisitions
(Precitech), Inc. v. Hobert, 155 N.H. 381 (2007).
In this case, Northern Lights asserts that within three
months after it purchased “Swept Away Sweeping” from Powers, he
was operating a competing business under that same name. It says
Powers’ conduct breached both an obligation not to use the very
trade name he had sold to Northern Lights, as well as the non-
competition clause of the purchase and sale agreement. In
response, Powers says that non-competition clause is simply too
broad to be enforceable under New Hampshire law and, for that
reason, Northern Lights’ entire breach of contract claim fails to
state a viable cause of action.
While the non-competition clause may well prove to be too
broadly drafted to be enforceable, given the particular
6 circumstances surrounding this case, that determination requires
a fact-intensive inquiry that cannot be conducted on this record.
Moreover, even if that clause is unenforceable as drafted, this
court has the power - under certain circumstances - to “reform”
it to conform to the requirements of New Hampshire law. See,
e.g., Merrimack Valley Wood Prods., 152 N.H. at 200; Technical
Aid Corp. v. Allen, 134 N.H. 1, 18 (1991).
Northern Lights’ counterclaim for breach of contract sets
forth the essential elements of a viable cause of action under
New Hampshire’s common law. It is, however, too early in this
litigation to determine whether that claim has (or lacks) merit.
Conclusion
At this juncture, absent factual development of the record,
the court cannot determine whether the covenant not to compete is
enforceable under New Hampshire law. Nor can it determine
whether that covenant, even if unenforceable as drafted, is
amenable to equitable reformation. Resolution of those questions
will turn upon facts not apparent on the sparse record currently
before the court. Consequently, the court cannot conclude that
Northern Lights’ breach of contract claim fails to state a viable
cause of action.
7 For the foregoing reasons, Powers’ motion to dismiss
Northern Lights’ counterclaim for breach of contract (document
no. 26) is denied.
SO ORDERED.
____________________________ Steven J. McAuliffe United States District Judge
June 23, 2014
cc: Megan E. Douglass, Esq. John M. Edwards, Esq.