Northern Benefits of Maine, LLC v. Mower

• Court: Superior Court of Maine
• Decided: August 5, 2014
• Docket: CUMcv-14-303
• Status: Unpublished

Opinion

. ENI ERED AUG 2 2 Z014 . ~ I STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss CIVIL ACTION Docket No. CV-14-303 3A~-CIAM-05. 05-l4- NORTHERN BENEFITS OF MAINE, LLC,

Plaintiff

v. ORDER ON MOTION FOR TEMPORARY

VERONICA MOWER, CLm~~fs~~~~~~RDER and AUG 05 2014 ~,..,:~r:F~\fi:::.[·) ATENTOINSURANCE a "~. . . . v ,...,..,.. ' \)_.""' SERVICES, LLC

Defendants

This matter is before the court on plaintiff Northern Benefits of Maine,

LLC's ("Northern") motion for a temporary restraining order. The court heard

arguments from counsel and testimony from defendant Mower on July 31,

2014. The parties also stipulated to the original of the employment

agreement between Northern and Veronica Mower (Mower), which is a two-

sided document of twelve numbered-pages. For the following reasons,

plaintiffs motion is denied.

BACKGROUND

Defendant Mower was employed as a Benefits Manager at Down East

Insurance Agency 1 ("Down East") when plaintiff Northern purchased the

company on December 2, 2013. As part of the purchase, Northern agreed to 1 Down East is the business name of Consolidated Solutions II, LLC. offer Mower a 90-day trial period of employment. On the day of the purchase,

Mower signed an assignment of her employment agreement with Down East

to Northern and a separate employment agreement between her and

Northern. Both agreements contained non-competition and non-solicitation

provisions. Down East's agreement included acceptance provisions as well.

In February 2014, Mower was terminated from Northern. She then

began working for defendant Atento Insurance Services, LLC, which is one of

Northern's competitors. Northern alleges that Mower has violated the non-

solicitation provision in her employment agreement and seeks injunctive

relief and money damages against Mower and Atento.

PROCEDURAL HISTORY

Plaintiff filed a verified complaint seeking a temporary restraining

order on July 7, 2014. Defendants received notice of the action, filed a brief in

opposition to the motion, and presented arguments and evidence at the July

31, 2014 hearing before the court. Because both sides had sufficient notice,

the court will treat the motion for a temporary restraining order as one for a

preliminary injunction. See Clark v. Goodridge, 632 A.2d 125, 127 (Me. 1993)

("A hearing on a TRO may be treated as a hearing on preliminary

injunction ... when there is sufficient notice and when the parties are in a

position to present evidence and legal arguments for or against a preliminary

injunction.").

2 DISCUSSION

1. Trade Secrets

Plaintiff argues that defendant Mower has misappropriated a trade

secret, which entitles plaintiff to injunctive relief. 2 See 10 M.R.S. § 1543

(2013) ("Actual or threatened misappropriation may be restrained or

enjoined."). Trade secret is defined by statute as:

[I]nformation, including, but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: A. Derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and B. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

10 M.R.S. § 1542(4). The court must examine the following five factors to

determine whether the information in this case constitutes a trade secret:

(1) The value of the information to the plaintiff and to its competitors;

(2) The amount of effort or money the plaintiff expended m developing the information;

(3) The extent of measures the plaintiff took to guard the secrecy of the information;

(4) The ease or difficulty with which others could properly acquire or duplicate the information; and

2 Plaintiff argues that if defendant has misappropriated a trade secret, the court does not need to apply the four-factor test for granting a preliminary injunction. The court does not need to determine whether plaintiff is correct on this point because the court finds that plaintiff has not demonstrated the misappropriation of a trade secret as defined by statute.

3 (5) The degree to which third parties have placed the information in the public domain or rendered the information 'readily ascertainable' through patent applications or unrestricted product marketing.

Bernier v. Merrill Air Eng'rs, 2001 ME 17, ~ 26 n.6, 770 A.2d 97 (quoting

Spottiswoode v. Levine, 1999 ME 79, ~ 27 n.6, 730 A.2d 166).

At this stage of the case, plaintiff has failed to show that the

information in defendant's possession constitutes a trade secret. Plaintiff has

not explained precisely what information was misappropriated, the value of

that information, or whether it can be duplicated. Much of the information

regarding plaintiffs customers is likely public information. See OfficeMax

Inc. v. County Qwick Print, Inc., 751 F. Supp. 2d 221, 250 (D. Me. 2010)

vacated on other grounds, OfficeMax, Inc. v. Levesque, 658 F.3d 94 (1st Cir.

2011) (finding that basic information such as customer names and addresses

were "already in the public domain, and . . . easily ascertainable by . . .

competitors"). Plaintiff is not entitled to a preliminary injunction on the

grounds that defendant Mower has misappropriated a trade secret.

Nevertheless, "confidential knowledge or information protected by a

restrictive covenant need not be limited to information that is protected as a

trade secret by the UTSA." Bernier, 2001 ME 17, ~ 15, 770 A.2d 97. Thus, the

court must look to the non-solicitation agreement involved in this case to

decide whether plaintiff is entitled to injunctive relief.

2. Non-Solicitation Agreement

The first co1,1nt of plaintiffs complaint alleges that Mower has violated

4 the non-solicitation provision in her employment agreement.3 To obtain a

preliminary injunction on this count, plaintiff has the burden of

demonstrating that four criteria are met: 4

(1) [plaintiff will] suffer irreparable injury if the injunction is not granted;

(2) such injury outweighs any harm which granting the injunctive relief would inflict on the other party;

(3) [plaintiff] has a likelihood of success on the merits (at most a probability; at least, a substantial possibility; and

(4) the public interest will not be adversely affected by granting the injunction.

Bangor Historic Track, Inc. v. Dep't of Agric., 2003 ME 140, ~ 9, 837 A.2d

129. If plaintiff fails to establish any one of these criteria, injunctive relief

must be denied. Id. ~ 10. "A preliminary injunction is an extraordinary

and drastic remedy, one that should not be granted unless the movant, by

a clear showing, carries the burden of persuasion." 5 Dobson v. Dunlap, 576

F. Supp. 2d 181, 188 (D. Me. 2008) (quotation marks omitted).

a. Balance of Harms

Because plaintiff is not seeking to enforce the non-competition 3 The agreement also contained a non-competition provision, but plaintiff is not seeking to enforce that provision. See Chapman & Drake v. Harrington, 545 A.2d 645, 647 (Me. 1988) ("[P]rotecting the employer simply from business competition is not a legitimate business interest to be advanced by such an agreement."). 4 Paragraph 9 of the Employment Agreement between Mower and Northern, which states that the company shall be entitled to an injunction in the event of a breach, does not affect the court's analysis. (Compl. Ex. B

5 provision in the employment agreement, the harm to defendant Mower is not

as severe. Courts have granted injunctions on limited non-competition

agreements. See, e.g., Everett J. Prescott, Inc. v. Ross, 383 F. Supp. 2d 180,

192 (D. Me. 2005) (granting preliminary injunction for breach of a non-

competition agreement, that "hampers, but does not eliminate [defendant's]

ability to obtain employment"). Defendant Mower would not be prohibited

from working but would only be restricted from enticing Northern's

customers away from Northern. The harm to plaintiff therefore outweighs

any harm to the defendants in this case.

b. Public Interest

Because the Law Court has found that reasonable restrictive

covenants in employment agreements are valid, injunctive relief would not be

against the public interest. Bernier, 2001 ME 17, ~~ 15-17, 770 A.2d 97; see

also Merrill Lynch, Pierce, Fenner & Smith v. Bishop, 839 F. Supp. 68, 72 (D.

Me. 1993) ("[T]he public interest will not be adversely affected by the

granting of preliminary injunctive relief because such relief simply enforces

the contractual rights of the parties and has no negative effect discernible to

the Court upon any public interest, if any exists, in the present

controversy.").

c. Likelihood of Success on the Merits

"To demonstrate likelihood of success on the merits, plaintiffs must

show more than mere possibility of success-rather, they must establish a

6 strong likelihood that they will ultimately prevail." Outside Television, Inc. v.

Murin, 977 F. Supp. 2d 1, 8 (D. Me. 2013) (quotation marks omitted). To

succeed on the merits, plaintiff will have to show there is an enforceable non-

solicitation agreement and that Mower violated that agreement.

1. Enforceability of the Non-Solicitation Agreement

Defendants make several arguments regarding the enforceability of

the non-solicitation provision in the employment agreement. First, defendant

Mower contends that she was only handed two pages of the agreement: page

one and page twelve, which she signed. Mower says that she never saw the

remaining pages of the agreement, including the non-solicitation provision.

The court finds that Mower's testimony on this point is not credible. In the

original of which she signed, page one of the agreement ends with an

unfinished definitions section and the top of page twelve is paragraph

numbered "18" and page twelve is on the back of page eleven. Thus, it would

have been obvious to Mower that she did not receive the complete agreement

if she was only handed the first and last page.

Next, defendants argue that both the agreement Mower signed while

at Down East, which was assigned to Northern, and the new agreement she

signed on December 2, 2013 fail for lack of consideration. The original

agreement between Mower and Down East includes a provision that states

$10,000 of Mower's salary is consideration for agreeing to the non-

competition provision. (Munsey Mf. Ex. 2, at 2.) Mower agreed to the

7 assignment of the Down East employment agreement to Northern. (Compl.

Ex. A.) In exchange, Northern agreed to give defendant Mower a 90-day trial

period of employment. (Sturtevant Aff. ~ 2); see Brignull v. Albert, 666 A.2d

82, 84 (Me. 1995) ("Employment itself has been held to be consideration for a

noncompetition covenant in an employment contract."). Defendants argue

that Northern never intended to retain Mower as an employee, but Northern

has offered evidence that she was terminated because of her poor job

performance. (Sturtevant Mf. ~ 12.) Accordingly, plaintiff has shown that it

will likely succeed in proving Mower signed a valid non-solicitation

agreement.

n. Violation of the Agreement

The non-solicitation provision provides:

The Employee agrees that, during the Term of this Agreement ... and during the period of three (3) years following the termination of this agreement ... Employee ... will not in any such manner, compete with or solicit or call on any Customer who was a Customer at any time during the period one year prior to the termination of the Employee's arrangement with the Company, for the purpose of inducing such Customer to purchase a competing product.

(Compl. Ex. B, ~ 7 .) Defendants argue that Mower has not solicited any of

Northern's customers because the customers in question all contacted her to

buy insurance products. With respect to one of the customers, Mower alleges

that she merely completed the insurance contract for Northern, even though

she no longer worked for Northern. Mower argues that she cannot be deemed

to have breached the non-solicitation agreement for simply accepting

8 business, although the assigned agreement included acceptance of customers.

Plaintiff alleges in its complaint that Mower contacted three of its

former clients that it purchased from Down East. In addition, plaintiff relies

on an affidavit, which names two more former clients that Mower allegedly

contacted. (Sturtevant Aff. ~~ 15-16.) One customer, Ross Burgess,

acknowledges in an email to Adam Sturtevant, Vice President of Northern,

that Mower contacted him about processing his policy. Based on this

information, the court concludes that plaintiff will likely have at least some

success on the merits. This is not a case, however, in which the likelihood of

success is so great so as to influence the court's decision on the other

preliminary injunction factors. See Fairchild Semiconductor Corp. v. Third

Dimension (3D) Semiconductor, Inc., 564 F. Supp. 2d 63, 67 (D. Me. 2008)

("[W]hen the likelihood of success on the merits is great, a movant can show

somewhat less in the way of irreparable harm .... ").

d. Irreparable Injury

"'Irreparable injury' is defined as injury for which there is no adequate

remedy at law." Bangor Historic Track, Inc., 2003 ME 140, ~ 10, 837 A.2d 129

(quotation marks omitted). Plaintiff argues it will suffer irreparable injury in

this case because there is no adequate remedy for the loss of good will and

harm to its business reputation. Plaintiff relies in part on the following

passage from Maine Civil Remedies:

[A]n employer can readily obtain injunctive relief when the former employee goes beyond mere competition and actually

9 solicits the employer's customers, exploits the employer's trade secrets, or otherwise takes improper advantage of the employee's knowledge of the employer's business or the employee's influence over the employee's customers.

Horton & McGehee, Maine Civil Remedies, § 5-5(d)(3) at 117-18 (4th ed.

2004). That treatise identifies the difficulty of measuring damages as a basis

for finding irreparable injury. See id. § 5-3(a) at 103. As one of the cited cases

explains, "[w]hile damage awards have been fashioned to compensate for

injury to a business' reputation and good will, such damages are difficult to

calculate with any degree of certainty or accuracy." Nelson & Small, Inc. v.

Polaris Indus. Partners, L.P., 1989 Me. Super. LEXIS 199, at *6-7 (Sept. 20,

1989). In Nelson & Small, the plaintiff sought to enforce a distributorship

agreement that allowed plaintiff to sell defendant's snowmobiles. Id. at *1-3.

As the court explained, "[b]eyond the difficulty of measuring the loss of good

will, monetary damages are simply inadequate to compensate for the loss of

an entire line of products." Id. at *9. Unlike in this case, Nelson & Small

depended on their agreement to sell defendant's snowmobiles, which

constituted 25% of their business. Id. at *9-10.

Other Maine decisions have rejected the argument that the difficulty of

determining damages for a loss of business good will supports a finding of

irreparable injury. See Bishop, 839 F. Supp. at 74; Rencor Controls, Inc. v.

Stinson, 230 F. Supp. 2d 99, 103-04 (D. Me. 2002); Parkview Adventist Med.

Ctr. v. Streeter, 2006 WL 6376827 (Me. Super. Ct., Dec. 28, 2006); Downeast

Mortgage Corp. v. Balzano, 2004 WL 1925525, at *1 (Me. Super. Ct., June 29,

10 2004). As the Balzano court (Hjelm, J.) explained, "because loss of good will

and future economic injury arising from the defendant's alleged alliance with

a competitor are frequently quantified and awarded in litigation, the claim

that the plaintiff will suffer irreparable harm is speculative." Balzano, 2004

WL 1925525, at *1.

Plaintiff also relies on Everett J. Prescott, Inc. v. Ross, in which the

court found irreparable harm where "it would be very difficult to calculate

monetary damages that would successfully redress the loss of a relationship

with a client that would produce an indeterminate amount of business in

years to come." Everett J. Prescott, Inc. v. Ross, 383 F. Supp. 2d 180, 192 (D.

Me. 2005) (quotation marks omitted). In that case, however, the defendant

admitted to soliciting his former employer's customers. Id. The court also

appeared to accord great weight to the unique nature of the parties' business,

which the court described as follows:

The pipe and valve distribution business is a world unto itself. As in many businesses, vendors sell to distributors, which in turn sell to customers. However, as described by EJP, the pricing practices in the pipe and valve distribution business are reminiscent of a NorthMrican casbah: all prices are negotiable. Prices for the same item vary depending on who is selling, who is buying, what is being sold, the project being built, the distributor, and a host of other factors.

Id. at 183. Thus, the pipe and valve industry involved many sales at different

prices, which would make calculating damages much more difficult. The court

also noted the defendant's particular skill in the business:

Having worked his whole adult life in the pipe and valve

11 business, Mr. Ross carries an impressive set of assets to his job. He has worked the counter and knows the product; he has worked in inside sales, analyzing plans, doing take-offs, pricing, and packaging; he has worked in outside sales; and, he has an engaging personality. But, Mr. Ross brings an unusual mathematical capacity particularly advantageous to this line of work: he can do the multipliers in his head.

Id. Thus, of all the Maine cases relied on by the parties, the Everett decision

is an outlier because of the nature of the business, the defendant's particular

expertise, and because the defendant admitted to violating the non-

competition agreement.

Based on the evidence submitted to the court, plaintiff has failed to

demonstrate that it will suffer irreparable injury. Through discovery, plaintiff

will be able to identify any and all of the accounts that Mower has solicited

away from Northern and recover damages for Mower's breach of the non-

solicitation agreement. Plaintiff offers no explanation as to why its damages

will be difficult to ascertain. Unlike in Everett, plaintiff has not produced any

evidence of the unique characteristics of the industry or any particular skill

umque to Mower. Plaintiff has not shown that it will suffer irreparable

InJury.

CONCLUSION

Plaintiff has failed to demonstrate all of the required elements for the

court to grant a temporary restraining order or preliminary injunction.

The entry is:

Plaintiffs motion for a temporary restraining order or preliminary injunction is DENIED.

12 Plaintiffs request for a hearing on its motion for preliminary injunction is DENIED.

This case will proceed according to the scheduling order dated July 30, 2014.

August 5, 2014 ~A. Wheeler Justice, Superior Court

13 Plaintiff-Teresa Cloutier Esq/John Lambert Esq Defendants-Graydon Stevens Esq