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Barton & Associates, Inc. v. Matarese, et al. (Lawyers Weekly No. 09-021-18)

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On December 1, 2005, this court (van Gestel, J.) entered a Final Judgment concluding this case based upon a settlement agreement reached by the parties. The Final Judgment contained a number of elements, among them cash payments from the defendants, Joseph Matarese and Medicus Staffing LLC (Medicus),1 to the plaintiff, Barton & Associates, Inc. (Barton), and a permanent injunction precluding Medicus from hiring anyone previously employed by Barton. Medicus has filed the pending motion under M.R.Civ.P. 60(b)(5) requesting relief from the permanent injunction. For the reasons that follow, the motion is DENIED.
1 As noted in the caption Medicus has changed its name since the Final Judgment entered. The defendants will be referred to collectively as Medicus, unless it is necessary to distinguish between them.
Barton and Medicus are both in the “locum tenens staffing” business. “Locum tenens” is a Latin term apparently originating in the Seventeenth Century generally meaning “a temporary substitute, especially for a doctor or member of the clergy.” It has more recently been used to refer to the business of temporarily placing physicians or other medical professionals with employers. See Wikipedia, locum tenens, last edited January 31, 2018. Barton was first established in 2001, and Matarese was among its first employees, serving as its Director of Operations. Barton maintains that Matarese was the author of its first business plan. In January, 2004, Matarese left Barton and formed Medicus, which began to compete with Barton and solicit its customers. In February, 2004, Barton sued Matarese asserting a number of claims all predicated on his having founded a competing business; in September, 2004, it added Medicus as a defendant.
On September 22, 2005, just prior to trial, the parties reported to the court that the case had settled. That day the court ordered the parties to submit to the court a sealed letter that accurately described the parties’ settlement agreement. The order went on to explain that if the parties had not submitted an agreement for judgment within 45 days, it would open the letter and, if it believed it appropriate, enter a final judgment based upon the terms described in the letter. The parties submitted the letter, but were unable themselves to agree upon and execute the documents concluding the case. The court then opened the letter and entered a Final Judgment incorporating its terms. Medicus filed a notice of appeal from the entry of the judgment, but soon thereafter dismissed the appeal. The Final Judgment included the following provision which is the subject of the pending motion.
Further, with the exception of Stephanie Chinchillo and Julie Hansen, the Defendants, Joseph Matarese and Medicus Staffing, LLC are restrained and enjoined from hiring any employees who have been employed at Baron & Associates, Inc. in their medical/healthcare business provided that any such restraint shall not apply if Barton & Associates, Inc., on or before one year from the date hereof hires any current or former employee of Medicus Staffing, LLC.
Barton did not hire any Medicus employee, and the injunction therefore became permanent.
Medicus maintains that in 2004 it had only 9 employees, all of whom worked in Salem, New Hampshire, and Barton had only 8 employees. Today, Medicus has approximately 250 employees, most of whom work in Windham, New Hampshire. It recruits and places physicians and other health care providers who work in a broad variety of health care fields. Medicus points out that Barton’s corporate offices are in Massachusetts, but, according to Barton’s website, it also has offices in Connecticut, Florida, Texas, New Hampshire (Keene), Arizona, and Nevada. Industry reports suggest that Barton has between 500 and 1000 employees.
Medicus also avers that the locum tenens staffing business is far different than it was in 2005, in part, because potential employees post so much information about themselves and their experience on-line making recruitment much different. Nonetheless, a tight labor market has made it difficult for Medicus to hire additional employees.
Medicus explains that a former employee of Barton, who left Barton in June, 2016 to work in other areas (a beauty salon and a Wholefoods), responded to a Medicus job posting that it placed on LinkedIn for a locum tenens recruiter. It agreed to hire this candidate effective one year after the date she left her position with Barton. However, when Barton learned of this, it filed a complaint for contempt based upon the provision in the Final Judgment quoted above. This led Medicus to let this employee go and to file this motion for relief from the permanent injunction entered in 2005.
Mass.R.Civ.P. 60(b), as relevant to the issue presented by this motion, reads as follows:
On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: . . . (5) . . . it is no longer equitable that the judgment should have prospective application. . . .
The Reporter’s Notes to this section provide: “The third clause of Rule 60(b)(5) only applies to judgments having a prospective effect, as, for example, an injunction, . . . . Specifically, the clause allows relief from a judgment which was valid and equitable when rendered but whose prospective application has, because of change conditions become inequitable. This power to grant relief from the prospective features of a judgment has always been clearly recognized in equity.”
There is substantially more Federal case law reflecting on the standards that should be applied in determining when a permanent injunction should be modified under Fed.R.Civ.P. 60(b)(5), in particular when the injunction has been entered by consent of the parties, than exists in Massachusetts jurisprudence. For many years, the Federal Courts applied the standard articulated by the United States Supreme Court in United States v. Swift & Co. 286 U.S. 106, 119 (1932): “The injunction, whether right or wrong, is not subject to impeachment in its application to the conditions that existed at its making . . . . Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed after years of litigation with the consent of all concerned.” However, more recently, in Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367 (1992), the Supreme Court adopted a more flexible standard holding that “the ‘grievous wrong’ language in Swift was not intended to take on a talismanic quality, warding off virtually all efforts to modify consent decrees.” Id. at 379. It explained that “[a] party seeking modification of a consent decree may meet its initial burden by
showing either a significant change in factual conditions or in law. Modification of a consent decree may be warranted when changed factual conditions make compliance with the decree substantially more onerous. . . . Modification is also appropriate when a decree proves to be unworkable because of unforeseen obstacles. Id. at 384.
In Rufo, the Supreme Court based its analysis, in part, on an “upsurge in institutional reform litigation since Brown v. Board of Education, 347 U.S. 483 (1954),” and its concern that “because such decrees often remain in place for extended period of time, the likelihood of significant changes occurring during the life of the decrees is increased.” Id. at 380. This led some courts to question whether the more flexible approach suggested by Rufo should be applied to consent decrees entered in commercial litigation between private parties, as well decrees entered in institutional reform litigation. In Alexis Lichine & Cie v. Sach A. Lichine Estate Seletins, Ltd., 45 F.3d 582,586 (1st Cir. 1994), the First Circuit applied the teaching of Swift and Rufo to such a commercial case. It reasoned:
In our view, Rule 60(b)(5) sets forth the umbrella concept of “equitable” that both Swift and Rufo apply to particular, widely disparate fact situations.
Indeed, the Rufo Court quoted the basic distinction drawn in Swift between decrees protecting “rights fully accrued upon facts so nearly permanent as to be substantially impervious to change” and decrees involving “the supervision of changing conduct or conditions and are thus provisional and tentative.” Id. 502 U.S. at 379, 112 S.Ct. at 758 (quoting from 286 U.S. at 114-15, 52 S.Ct. at 462-63). Swift illustrates the former and Rufo the latter. We view this not as a limited dualism but as polar opposites of a continuum in which we must locate the instant case.
We therefore agree with cases like In re Hendrix, 986 F.2d 195, 198 (7th Cir.1993), viewing Rufo’s flexible standard as “no less suitable to other types of equitable case[s],” but also share the concerns voiced in cases like W.L. Gore & Assocs. v. C.R. Bard, Inc., 977 F.2d 558, 560-62 (Fed.Cir.1992), about the importance of finality when a decree is based on a negotiated bargain in a commercial case between private parties. Thus, rather than saying either that there is an “institutional reform” exception to Swift or a “private commercial party” exception to Rufo, we apply Rule 60(b)(5) having in mind that we are dealing with a decree arising from a commercial dispute and based on a bargain voluntarily entered into by businessmen represented by lawyers.
Such a decree is shielded from facile modification by a rather formidable carapace. The public interest noted in Rufo is not a factor, see 502 U.S. at 379-83, 112 S.Ct. at 758-59, other than the interest of the public in general and the business community in particular in the stability of final agreements. Nor is it persuasive that “it is no longer convenient to live with the terms of a consent decree.” Id. at 383, 112 S.Ct. at 760. Therefore, in considering whether a decree arising out of commercial litigation between two private parties should be modified, a court should look to such factors as the circumstances leading to the decree (including the nature of a party’s initial wrongdoing), the quantum of hardship on the burdened party, the duration of the burden thus far and the prospect of its continuing, and the benefitted party’s need for a continuation of the decree.
In Mitchell v. Mitchell, 62 Mass. App. Ct. 769, 779-780 (2005), the Appeals Court cited Alexis Lichine & Cie as providing a useful approach to considering a request to modify a restraining order issued under G.L. c. 209A; and in Great Woods, Inc. v. Clemmey, 89 Mass. App. Ct. 788, 794-795 (2016) it applied these concepts in the context of a private dispute between neighbors. Relying on MacDonald v. Caruso, 467 Mass 382, 388-389 (2014) (another case involving a request to modify a chapter 209A restraining order), the Great Woods court went on to explain that the “significant change in circumstances must involve more than the mere passage of time” and if there is such a change, it is important to consider if it was “not foreseen when the last order issued.” With these concepts in mind, we turn to Medicus’ motion to modify the permanent injunction to which it consented in 2005.
Alexis Lichine & Cie suggests that the court look to the circumstances leading to the agreement that the Final Judgment issue, including the nature of Medicus’ wrongdoing. Frankly, the court is not able to assess the parties’ respective wrongdoing. Barton of course avers that Matarese was a faithless servant who breached his fiduciary obligations to his beneficent employer. The court is unable to make such a finding. The parties entered into their settlement agreement to avoid a trial which was about to begin. Clearly, however, the permanent injunction
on hiring former employees of Barton was part of a settlement agreement with a number of elements, which included substantial cash payments from Medicus to Barton. Both parties were represented by counsel, and it is impossible today to determine what other benefits, financial or otherwise, Medicus may have bargained for in return for that permanent injunction. Indeed, the permanent injunction may well have been equitable relief that exceeded what a court would have entered if the case had been tried, but it is also possible that monetary damages might have been awarded that were substantially greater than Barton agreed to accept under the terms of the settlement. This court can now determine only that the many provisions of the settlement were undoubtedly interrelated, and the court should be cautious in undoing a settlement, which is in effect simply a contract, entered into by sophisticated parties each represented by counsel.
The obvious changed circumstance is the size of these businesses today compared to what they were 13 years ago. Although Barton is much larger than Medicus, it appears that both companies have succeeded economically. While Medicus may be constrained in recruiting new employees because it cannot hire anyone who previously worked for Barton, this has not prevented it growing to the point that it has nearly 40 times the number of employees that it did in 2005. While there may not be many additional companies in this part of New England engaged in locum tenens staffing, the court notes that the marketplace for companies providing temporary employment for a wide variety of professionals is highly competitive. The fact that Medicus may not have access to a handful of potential employees that have worked in this specific type of temporary placement does not appear to have been an obstacle to its growth and success.
The court is not convinced that Barton actually has substantial business need for the continued enforcement of this very broad permanent injunction—at least in the scope that it
issued in 2005. Apparently, Barton has its employees execute non-compete agreements that prohibit them from working for a competitor, such as Medicus, for a year after leaving Barton. Further, Medicus has conceded that any modification of the injunction should expressly continue to prevent Medicus from employing any former Barton employee, where that employment would violate the terms of a non-compete agreement that the employee had signed. The court has substantial doubt that, with respect to many modestly paid recruiters, like the young woman who Medicus sought to employ last year, these individuals have trade secrets that might be revealed to Barton’s irreparable injury, if they went to work for Medicus after leaving Barton’s employ.
However, the question before the court is not whether it would enter the injunctive relief today in a contested litigation between the parties, but rather whether Medicus should be relieved of a term of the agreement that it negotiated in 2005. The court finds that on the continuum of cases described in Alexis Lichine & Cie, this case is more like Swift than Rufo. Neither the commercial success of the parties in the intervening years, nor changes in the market place, have been so dramatic to warrant a modification of the injunction that Medicus agreed would be permanent in 2005.
The court offers one further observation. Courts asked to grant injunctive relief (an equitable remedy) must, under appropriate circumstances, consider the “risk of harm to the public interest.” Brookline v. Goldstein, 388 Mass. 443, 447 (1983). The effect of non-competition agreements restricting the ability of employees, particularly moderately paid employees, to change jobs and the potential of such covenants to affect wages has been much in the news. See, e.g., “Corporate America is Suppressing Wages for Many Workers,” New York Times, Feb. 28, 2018. The Massachusetts legislature has been considering legislation restricting, to some extent, the use of non-competition clauses in employment contracts for some time. See,
e.g., “Noncompete contracts in Massachusetts? Lawmakers are near a deal,” Boston Globe, Jan. 15, 2018. The single, anecdotal reference in Medicus’ pleadings to one worker who had previously worked for Barton and was unable to accept employment at Medicus is insufficient to lead the court to modify the parties’ negotiated settlement agreement. However, future changes in the law reflecting new public policy regarding broad non-competes, like that incorporated in the Final Judgment, may be significant.
For the foregoing reasons, Medicus’ motion to modify the Final Judgment is DENIED.
Mitchell H. Kaplan
Justice of the Superior Court
Dated: February 28, 2018 read more


Posted by Stephen Sandberg - March 8, 2018 at 11:32 pm

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