WordWave, Inc. v. Owens

19 Mass. L. Rptr. 37
CourtMassachusetts Superior Court
DecidedDecember 7, 2004
DocketNo. 044758F
StatusPublished

This text of 19 Mass. L. Rptr. 37 (WordWave, Inc. v. Owens) 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
WordWave, Inc. v. Owens, 19 Mass. L. Rptr. 37 (Mass. Ct. App. 2004).

Opinion

Muse, J.

On November 1,2004, plaintiff WordWave, Inc. d/b/a LegaLink Corporation (“LegaLink”) filed this action against defendants Dalia Owens (“Owens”) and Jones Reporting Company, Inc. (“Jones”) alleging intentional interference with business relations, breach of contract, violation of G.L.c. 93A, and breach of fiduciary duty. This matter now comes before the court on plaintiffs motion for a preliminary injunction pursuant to Mass.RCiv.P. 65(b) to enforce restrictive covenants, to order the defendants to return LegaLink’s property, and to order the defendants’ certification of their conformity with this order. For the reasons discussed below, the plaintiffs motion for a preliminary injunction is ALLOWED as to Owens’ solicitation of LegaLink’s clients and court reporters and DENIED on all other requests.

[38]*38 BACKGROUND

In 1983 Owens began working for a court reporting company that later became Fritz & Sheehan (“F&S”). By the time LegaLink acquired F&S in 1998, Owens was responsible foradministrative tasks and scheduling court reporters.2 Owens’ employment agreement of April 3, 1993 (the “Agreement”) was one of four closing documents in LegaLink’s purchase of F&S. The Agreement provided for Owens’ employment with LegaLink at an annual salary of $73,000 and allotted Owens 10,000 LegaLink shares, The Agreement contained three restrictive covenants, specifically, a non-competition, a non-disclosure, and a non-solicitation covenant.

During her employment, Owens learned the identities, special needs, and rates of LegaLink’s clientele. At the time Owens resigned from LegaLink on July 2, 2004, she was 61 years old and had over 30 years experience in the competitive court reporting industry. On September 9, 2004, Owens began working for Jones in an administrative capacity. Following Owens’ resignation from LegaLink, nine of LegaLink’s pool of approximately 30 court reporters began working almost exclusively with Jones.

DISCUSSION

A preliminary injunction is appropriate where the moving party has demonstrated: (1) its likelihood of success on the merits; (2) the irreparable harm it will suffer if the injunction is not issued; and (3) that the anticipated harm outweighs the burden imposed upon the party against whom the injunction issues. Packaging Industries Group, Inc. v. Cheney, 380 Mass. 609, 616 (1980); Westinghouse Broadcasting Co., Inc. v. New England Patriots Football Club, Inc, 10 Mass.App.Ct. 70, 72(1980). The issuance of a preliminary injunction is within the sound discretion of the court. T&D Video, Inc. v. Revere, 423 Mass. 577, 580 (1996).

I. Likelihood of Success on the Merits

A. Whether the Agreement Arose Between Seller/Buyer or Employer/Employee

Whereas courts carefully scrutinize restrictive covenants arising from an employment relationship, a more liberal standard applies to restrictive covenants arising from the sale of a business. Alexander v. Alexander, 21 Mass.App.Ct. 488, 496 (1986). Consequently, in assessing the likelihood of LegaLink’s success at trial, this court must first determine the applicable standard of review. The plaintiff claims that the restrictive covenants arose from the sale of a business and urges the court to apply a liberal standard of review. After careful consideration of the facts of this case and the policy behind the more liberal standard, this court finds that the restrictive covenants arose from Owens’ employment relationship with LegaLink, not LegaLink’s purchase of F&S.

Courts look “less critically” at restrictive covenants arising from the sale of a business because, unlike employers and employees, buyers and sellers are likely to be similarly-situated, with equal bargaining power and often times the benefit of counsel. Boulanger v. Dunkin’ Donuts Inc., 442 Mass 635, 640 (2004); Alexander, 21 Mass. at 496-97. The buyer’s right to the benefit of the bargain, the utility of restrictive covenants in the context of the sale of a business, and the sale proceeds which may compensate for the seller’s restricted employment are additional policy considerations meriting a more liberal review. See id.

LegaLink has not established that the restrictive covenants in this case arose from the sale of a business. Though Owens’ future employment may have been a consideration in the purchase and sale of F&S, there is no evidence that Owens had any ownership interest in F&S or any control over its sale, and therefore this case does not warrant an inference of the parties’ equal bargaining power. Additionally, LegaLink did not establish the market value, if any, of the stock Owens received in the purchase and sale of F&S. Thus, it cannot be said that Owens received an “ample cushion” to compensate for restricting her employment. Compare Alexander, 21 Mass.App.Ct. at 497 (president and principal shareholder received an “ample cushion” of $1.5 million to compensate for restricted employment). Accordingly, this court assesses the plaintiffs likely success on the merits by treating the restrictive covenants as arising from an employment relationship rather than the sale of a business.

B. Whether LegaLink Has Established the Enforceability of the Restrictive Covenants Arising From an Employment Relationship

Concerns over unequal bargaining power, one’s right to employment, and the need to earn a living compel the law’s disfavorable view of restrictive covenants arising from an employment relationship. Kroeger v. Stop & Shop Companies, Inc., 13 Mass.App.Ct. 310, 312 (1982) (“reluctance to give full effect to post-employment restraints has a long history in the law”). Under this stringent standard, a party seeking to enforce a restrictive covenant must establish that the covenant is: (1) necessary to protect an employer’s legitimate business interest; (2) reasonably limited in time and space; (3) consistent with public policy; and (4) supported by reasonable consideration. All Stainless, Inc. v. Colby, 364 Mass. 773, 778 (1974); IKON Office Solutions, Inc. v. Belanger, 59 F.Sup.2d 125, 131 n.2 (D.Mass. 1999). This factual determination must be made on a case-by-case basis. Thomas v. Parker, 327 Mass. 339, 341 (1951).

In determining the enforceability of the restrictive covenants, the court considers the non-solicitation, non-disclosure, and non-compete covenants separately.

[39]*39 1.The Non-Solicitation Covenant

Massachusetts law limits legitimate business interests to good will, confidential information, or trade secrets.3 See Folsum Funeral Services, Inc. v. Rodgers, 6 Mass.App.Ct. 843 (1978); Kroeger, 13 Mass.App.Ct. at 316. With respect to good will, a former employee must have had customer contact and the ability to harm the employer’s good will. See National Hearing Aid Centers, Inc. v. Avers, 2 Mass.App.Ct. 285, 289 (1974). An ability to harm the employer’s good will may derive from knowledge of confidential information or contact with clients who may associate the former employee, rather than the employer, with the quality of goods sold or services rendered. Id. at 289.

Here, LegaLink’s interests in good will and confidential information coalesce into a legitimate business interest protected by the non-solicitation covenant. See New England Overall Co., Inc. v.

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Related

Kroeger v. Stop & Shop Companies, Inc.
432 N.E.2d 566 (Massachusetts Appeals Court, 1982)
Westinghouse Broadcasting Co. v. New England Patriots Football Club, Inc.
406 N.E.2d 399 (Massachusetts Appeals Court, 1980)
Abramson v. Blackman
166 N.E.2d 729 (Massachusetts Supreme Judicial Court, 1960)
Alexander & Alexander. Inc. v. Danahy
488 N.E.2d 22 (Massachusetts Appeals Court, 1986)
Packaging Industries Group, Inc. v. Cheney
405 N.E.2d 106 (Massachusetts Supreme Judicial Court, 1980)
New England Overall Co. Inc. v. Woltmann
176 N.E.2d 193 (Massachusetts Supreme Judicial Court, 1961)
Jet Spray Cooler, Inc. v. Crampton
282 N.E.2d 921 (Massachusetts Supreme Judicial Court, 1972)
All Stainless, Inc. v. Colby
308 N.E.2d 481 (Massachusetts Supreme Judicial Court, 1974)
Thomas v. Paker
98 N.E.2d 640 (Massachusetts Supreme Judicial Court, 1951)
National Hearing Aid Centers, Inc. v. Avers
285 N.E.2d 573 (Massachusetts Appeals Court, 1974)
Sherman v. Pfefferkorn
135 N.E. 568 (Massachusetts Supreme Judicial Court, 1922)
Junker v. Plummer
67 N.E.2d 667 (Massachusetts Supreme Judicial Court, 1946)
American Window Cleaning Co. v. Cohen
178 N.E.2d 5 (Massachusetts Supreme Judicial Court, 1961)
T & D Video, Inc. v. City of Revere
670 N.E.2d 162 (Massachusetts Supreme Judicial Court, 1996)
Folsom Funeral Service, Inc. v. Rodgers
372 N.E.2d 532 (Massachusetts Appeals Court, 1978)

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Bluebook (online)
19 Mass. L. Rptr. 37, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wordwave-inc-v-owens-masssuperct-2004.