Easy Access Distribution, Inc. v. Potter, et al. (Lawyers Weekly No. 12-053-17)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
- 2017-1105
EASY ACCESS DISTRIBUTION, INC.
vs.
JASON POTTER, DAVID LESSOR and NOVUS DISTRIBUTION, INC.
MEMORANDUM OF DECISION AND ORDER ON THE PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION
The defendant, Jason Potter, was an employee of the plaintiff, Easy Access Distribution, Inc. (Easy Access). Potter, together with defendant David Lessor, formed defendant Novus Distribution, Inc. (Novus). Novus is a competitor of Easy Access. The case is presently before the court on Easy Access’ motion for a preliminary injunction, among other things, enjoining the defendants from competing with Easy Access or soliciting any of Easy Access’ vendors or customers. The motion is DENIED, for the reasons that follow.
FACTS
The following facts are drawn from the parties’ affidavits and briefly summarized only to the extent necessary to provide context to the court’s decision.
Easy Access is a distributor of audio/visual (AV) electronic equipment. It purchases this equipment from vendors and sells it to installers, who install it in businesses and residences. There are a number of businesses who distribute/wholesale this AV equipment. It is a competitive industry.
Potter began work for Easy Access in 2009. Prior to that time, he worked for another electronics distribution company. He was involved in sales, marketing and purchasing. Easy Access asserts that Potter signed a Proprietary Rights Agreement, which contains a covenant not to compete, when he first began work, although it does not presently have a signed copy of that Agreement. Potter attests that he signed only an At-Will Employment Agreement and never signed a Proprietary Rights Agreement or any other contract that contained a restrictive covenant not to compete.
In 2015, Potter and Lessor, who had run an electronics integration company that installed AV equipment, entered into discussions with the owners of Easy Access with a view to purchasing it. In connection with those negotiations, they signed a Non-Disclosure Agreement. They returned all confidential materials shared with them by Easy Access when the parties could not agree on terms and the negotiations ended in April, 2016.
On April 21, 2016, Potter sent Easy Access a resignation letter. He declined an offer to stay on for an additional six months. His last day at Easy Access was May 20, 2016. On that day he sent a blast email to his contacts (dealers and vendors) using his Easy Access computer in which he: thanked the recipients for their business; announced that he was leaving Easy Access; stated that he had the highest regard for Easy Access and wished it continued success; and stated that he planned on remaining in the industry and hoped “our paths will cross again.” He then returned his computer to Easy Access. It appears that during May, he used his Easy Access computer to forward to himself an invitation to a trade show, a pricing list from a vendor, and to test his new email address.
On June 4, 2016, Potter and Lessor incorporated Novus.
On June 17, 2016, Easy Access’ attorneys wrote to Potter: “It has come to [Easy Access’] attention that you are currently acting in direct violation of your Proprietary Rights Agreement and your Non-Disclosure Agreement. We hereby demand that you immediately cease and desist from engaging in such unlawful activities. Please be advised that your conduct subjects you to significant liability, both under the terms of the Agreements and at common law.” The letter attached a copy of the Proprietary Rights Agreement apparently signed by Potter. Easy Access admits that the signature was a forgery. Potter retained an attorney who responded to the letter on his behalf.
On July 25, 2016, Easy Access received an email from an entity called “dirk marketing,” which stated that on June 3, 2016, someone with the username “jpotter” exported 1451 contacts from an “iContact” database. Easy Access maintains that these are customer names that Potter sent to himself. Potter denies that he did this. The email from dirk marketing only provides the information noted above.
Sometime in the Fall of 2016, Novus began doing business, including sending emails to potential customers. It has offices in Burlington. Its grand opening for vendors and customers occurred on March 28, 2017.
Easy Access filed this action on April 10, 2017.
DISCUSSION
To prevail on its request for a preliminary injunction, Easy Access must show a strong likelihood of success on the merits of its claims, that it will suffer irreparable harm without the requested injunctive relief and that its harm, without the injunction, outweighs any harm to the defendants from being enjoined. GTE Products Corp. v. Stewart, 414 Mass. 721, 722-723 (1993); see also Planned Parenthood League of Massachusetts, Inc. v. Operation Rescue, 406 Mass.701, 710 (1990). “What matters as to each party is not the raw amount of irreparable harm the party might conceivably suffer, but rather the risk of such harm in light of the party’s chance of success on the merits.” Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 617 (1980). “Only where the balance between these risks cuts in favor of the moving party may a preliminary injunction properly issue.” Id. “[T]he significant remedy of a preliminary injunction should not be granted unless the plaintiff[] ha[s] made a clear showing of entitlement thereto.” Student No. 9 v. Board of Educ., 440 Mass. 752, 762 (2004). See also Landry v. Attorney General, 429 Mass. 336, 343 (1999) (remedy of a preliminary injunction “should not be grant[ed] unless [the plaintiffs] by a clear showing, carrie[d their] burden of persuasion”).
In this case, Easy Access had failed to carry its burden for a number of reasons.
First, based on the record now before the court, Easy Access has not made an adequate showing that Potter signed an employment agreement that contained a non-compete clause. “An at-will employee may properly plan to go into competition with his employer and may take active steps to do so while still employed. . . . Such an employee has no general duty to disclose his plans to his employer. . . . The general policy considerations are that at-will employees should be allowed to change employers freely and competition should be encouraged. . . .If an employer wishes to restrict the post-employment competitive activities of a key employee, it may seek that goal through a non-competition agreement. Augat, Inc. v. Aegis, Inc. 409 Mass. 165, 172 (1991) (Internal citations and quotations omitted). Consistent with the teaching of Augat, in the absence of non-competition agreement restricting Potter’s right to compete, an injunction prohibiting Potter or Novus from competing with Easy Access ought not issue. Easy Access’ reliance on New England Overall Co., Inc. v. Woltmann, 343 Mass. 69, 76 (1961) during oral argument is misplaced. There the question was whether the defendant could be enjoined from using certain confidential information to the disadvantage of his former employer. However, the SJC explained that a former agent was expressly permitted to compete and “entitled to use general information concerning the methods of business of the principal and the names of the customers retained in his memory.”
Second, again on the present record, Easy Access has not carried its burden of establishing Potter’s wrongful use of “confidential information.” The only putative confidential information to which Easy Access directed the court during argument was the contact list of customers. Even assuming that Potter wrongfully took the list of contacts from the iContact database, the court is not convinced that this list constitutes a trade secret. Easy Access’ customers were installers of AV systems. Potter would have been familiar with many of them from his years of work in the industry, both with Easy Access and his previous employer. Moreover, as defendants point out, these installers advertise their services to their potential customers–end users of these systems–and there are many public sources of information identifying them: they want to be easily identified by their customers. It is Easy Access’ burden to “show that information constitutes a trade secret.” Harvard Apparatus Inc. v. Cowen, 130 F. Supp. 2d 161, 174 (D. Mass. 2001) (applying Massachusetts law). See also Data Gen. Corp. v. Grumman Sys. Corp., 825 F. Supp. 340, 357 (D. Mass. 1993) (applying Massachusetts law) (a plaintiff “must identify the trade secrets and carry the burden of showing that they exist”).
Third, Easy Access’ attorney sent Potter a cease and desist letter in June, 2016. Potter responded through counsel to that letter. In July, Easy Access’ attorney replied to Potter’s response pointing out that Novus had already been incorporated and alleging that Potter and Lessor had already been in contact with vendors seeking product for their new venture. Also in July, Easy Access received the information that someone using the JPotter username had exported contact information from the iContact database. By the Fall, Easy Access was aware of the Novus’ Burlington office and that it had begun soliciting business. “Unexplained delay in seeking relief for allegedly wrongful conduct may indicate an absence of irreparable harm and may make an injunction based upon that conduct inappropriate.” Alexander & Alexander, Inc. v. Danahy, 21 Mass. App. Ct. 488, 494-495 (1986). Since July, 2016, the defendants have undoubtedly invested significant time and assets in preparing and beginning to conduct business. Although, Easy Access appears to have known about the defendants’ plans since last June and July, when they retained sophisticated counsel to send cease and desist letters, it took no steps to restrain defendants from July, 2016 until it filed this action in April, 2017. The irreparable injury that the defendants would suffer if an injunction issued has clearly very substantially increased over this period of unexplained delay.
ORDER
For the foregoing reasons, the plaintiff’s motion for a preliminary injunction is DENIED.
______________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: April 21, 2017