Posts tagged "Systems"

Da Costa, et al. v. Vanguard Cleaning Systems, Inc. (Lawyers Weekly No. 09-021-17)

COMMONWEALTH OF MASSACHUSETTS

 

MIDDLESEX, ss.                                                                                        SUPERIOR COURT

                                                                                                                       CIVIL ACTION

  1. 15-04743

 

LUIZ THOMAZ DA COSTA & others[1]

vs.

 

VANGUARD CLEANING SYSTEMS, INC.

MEMORANDUM OF DECISION AND ORDER ON PLAINTIFFS’ CROSS-MOTION FOR SUMMARY JUDGMENT AND DEFENDANT’S CROSS-MOTION FOR SUMMARY JUDGMENT

The plaintiffs, Luiz Thomaz Da Costa and others, and the defendant, Vanguard Cleaning Systems, Inc. (“Vanguard”), have filed cross motions for summary judgment seeking a ruling on the plaintiffs’ employment classification status under the laws of Massachusetts and Connecticut in connection with commercial cleaning work which the plaintiffs claim they performed on behalf of Vanguard. G.L. c. 149, § 148B; Conn. Gen. Stat. § 31-222(a)(1)(B).  After hearing, and upon review and consideration, the plaintiffs’ cross-motion for summary judgment is ALLOWED, and Vanguard’s cross-motion for summary judgment is DENIED. read more

Posted by Stephen Sandberg - October 25, 2017 at 7:32 pm

Categories: News   Tags: , , , , , , ,

Rush v. FastCAP Systems Corporation, et al. (Lawyers Weekly No. 09-006-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, so SUPERIOR COURT
CIVIL ACTION
NO. 2017-02842-BLS2
JACK RUSH,
Plaintiff
vs.
FASTCAP STYSTEMS COPRATION, JOHN COOLEY, JAMES HARRIS,
MATTHEW FENSLAU AND RICCARDO SIGNORELLI,
Defendants
MEMORANDUM OF DECISION AND ORDER ON
MOTION FOR TRUSTEE PROCESS ATTACHMENT
AND FOR ATTACMENTS OF REAL PROPERTY
This action alleges violations of the Massachusetts Wage Act, G.L.c. 149 §148B. Specifically, the plaintiff Jack Rush alleges that the defendant FastCAP Systems Corporation (FastCAP) misclassified and compensated him as an independent contractor when he should have been classified and paid as an employee within the meaning of G.L.c. 149 §148. It then terminated him when he complained about his compensation. Certain individuals are also named as defendants on the grounds that, because they exercised managerial control over FastCAP, they are personally liable for these violations. Cook v. Patient Ed LLC, 465 Mass. 548, 552-553 (2013). The case is now before the Court on the plaintiff’s motion to attach the bank accounts of FastCAP in the amount of $ 594,593, and to attach real property owned by the individual defendants. After hearing and careful review of the parties’ submissions, this Court concludes that, taking into account the likelihood of success on the merits, the balance of equities supports the denial of these motions, for the following reasons.
Whether seeking an attachment of real property or an attachment of funds by way of
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trustee process, plaintiff must establish a reasonable likelihood that he will recover judgment against the defendant in an amount at least equal to the amount sought to be attached; he must further demonstrate that there is no liability insurance available that could satisfy any possible judgment. See Rules 4.1 and 4.2, Mass.R.Civ.P. Although there is no explicit requirement that the Court balance the relative harms to the parties, the Rules are based on the idea that there must be a need for the relief requested; moreover, because it is equitable nature, the Court can and should take into account the relative equities in denying or allowing the requested relief. In the instant case, FastCAP makes out a compelling case that a trustee process attachment would have a serious impact on its business. The Company is in the business of developing cutting edge power systems and has ongoing contracts with NASA and U.S. Department of Energy, with sales to top oilfield service companies. See Affidavit of Matthew Fenselau. With seventeen full time employees and the financial backing of a Boston investment firm, FastCAP is optimistic about its future. An attachment of its bank accounts, however, could cause FastCAP’s financial backing to be withdrawn and could trigger claims by other individuals and entities. If on the other hand, no attachment issues, the harm to plaintiff is that any judgment he obtains would be uncollectible, but that danger is neither imminent nor is it certain. Indeed, FastCAP has known about Rush’s claim and his threat to bring suit since April of this year, and yet has taken no action to dissipate or conceal its assets.
Given the harm that could befall the defendants from an attachment that was improvidently granted, this Court is inclined to require plaintiff to make a very strong showing on the merits. The problem is that that the allegations themselves are very fact driven, and the Court at this very early juncture in the case has very limited information before it. Moreover, that information that is before me suggests that liability is not clear cut.
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In attempting to demonstrate a likelihood of success, the plaintiff relies on the Verified Complaint. Those allegations state that the plaintiff was a full time employee of FastCAP from January 2014 through October 2016 but was wrongfully classified and paid as an independent contractor. The defendants have submitted documents, however, showing that during most of that time, Rush was an employee of a consulting firm Momentum which in turn entered into a contract with FastCAP entitled “Independent Contractor Agreement.” Under that contract, FastCAP paid what is described as “commissions” to Momentum in return for the services of certain Momentum employees whose work Momentum directed and controlled and who Momentum (not FastCAP) paid. Although plaintiff may have been the only Momentum employee to actually provide services to FastCAP, it is not clear whether he did work for other Momentum clients at the same time. This Court also has no evidence before it as to why Rush worked through Momentum and not directly with FastCAP. These are all facts which may be relevant to plaintiff’s misclassification claim.
This Court understands that in a misclassification case, there is a presumption that an individual is an employee unless the business receiving the benefit of his services can satisfy three tests as set forth in G.L.c. 149 §148B. It is also cognizant of case law which makes it clear that individuals who provide services through a corporate entity may still be considered employees of the entity receiving those services; otherwise, it would be far too easy for an employer to misclassify its employees by setting up a separate corporate structure simply to avoid the employer’s statutory obligations. Chambers v. RDI Logistics, Inc. 476 Mass. 95, 109-110 (2016). Ultimately, however, there is no bright line rule defining who is an employee and who is an independent contractor: the inquiry turns on the particular facts. As those facts develop in the course of discovery, plaintiff may very well have a basis to renew his request for
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security against a judgment, particularly since any victory on his part will also require the trebling of damages and attorney’s fees. At this point, however, his request is premature, particularly when this Court considers the harm that would be inflicted on FastCAP if its bank accounts were attached.
Accordingly, for all the foregoing reasons and for other reasons articulated in defendants’ Memoranda in Opposition, Plaintiff’s Motion for Attachment by Trustee Process is DENIED. Because the liability of the individual defendants depends on FastCAP itself being held liable, this Court also DENIES the plaintiff’s Motion for Real Estate Attachments.
_________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: September 19, 2017 read more

Posted by Stephen Sandberg - October 4, 2017 at 4:45 am

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Casella Waste Systems, Inc., et al. v. Steadfast Insurance Company (Lawyers Weekly No. 09-008-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 2016-2521 BLS 1
CASELLA WASTE SYSTEMS, INC. et al1
vs.
STEADFAST INSURANCE COMPANY
MEMORANDUM AND ORDER ON STEADFAST INSURANCE COMPANY’S
MOTION FOR SUMMARY JUDGMENT
This is an insurance coverage dispute between a company engaged in the landfill business
and its insurer. The insurer, defendant Steadfast Insurance Company, issued a policy called Z
Choice Pollution Liability (the “Policy”) to plaintiff, Casella Waste Systems, Inc., naming
Casella and its subsidiary, Southbridge Recycling & Disposal Park, Inc. (“SRDP”), as insureds.
The Policy covers claims made against the insureds during the Policy period of April 30, 2015 to
June 15, 2016. Following notification by Casella in October 2015 to the Massachusetts
Department of Environmental Protection (“DEP”) of the detection of pollution flowing from
Casella’s property to neighboring property, a claim by DEP, as defined in the Policy, arose.
Casella sought insurance coverage for the claim. Steadfast denied coverage. Casella sued for
breach of contract, violation of G.L. c. 93A and for a declaration of coverage. Steadfast now
moves for a summary judgment declaring there is no coverage under the Policy. For the reasons
described below, summary judgment must be denied because there are material issues of fact that
1 Southbridge Recycling & Disposal Park, Inc.
1
are genuinely in dispute.
BACKGROUND
The following facts are taken from the parties’ Statement of Undisputed Material Facts
and Responses Thereto (“SUMF”), supplemented by documents and affidavits in the summary
judgment record.
The coverage at issue under the Policy is what was provided under Coverage C: Cleanup
Costs – New Pollution Event. Under Coverage C, Steadfast is obligated to pay “cleanup costs” to
the extent resulting from a “new pollution event” that migrates beyond the boundaries of a
“covered location” if that “new pollution event” is first “discovered” during the policy period.
The obligation to pay includes “cleanup costs” that the insured is legally obligated to pay
resulting from a third-party “claim.” The Policy also contains an exclusion from coverage for a
“known pollution event.” The words in quotes are defined terms in the Policy.
Casella seeks to be reimbursed and indemnified by Steadfast for all past and future
cleanup costs incurred on account of a claim by DEP. There is no dispute that (i) Casella incurred
cleanup costs, as defined, (ii) arising from migration of pollution from a covered property, as
defined, and (iii) Casella received and reported to Steadfast a claim, as defined, coming from
DEP. The dispute between the parties that is the crux of this lawsuit is whether the DEP claim
resulted from a “new pollution event” that first commenced in the Policy period and was not
known by Casella prior to the commencement of the Policy
The DEP claim concerns a landfill in the Town of Southbridge, Massachusetts operated
by plaintiff/insured SRDP. Beginning in 2002, the landfill began an annual residential well
monitoring program under which residents within ½ mile of a portion of the landfill could
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request testing of their potable wells. On October 23, 2015, Casella, by its consultant, gave notice
to DEP that SRDP’s well testing in September 2015 had detected certain contaminants above
applicable standards in the wells of three residences. The three residence were along a road called
H. Foote Road and the addresses were 65, 74 and 81 H. Foote Road. Of the three residences, it
was only at 65 where two contaminants – – trichloroethene (“TCE”) and 1,1-dichloroethene
(“DCE”) were detected in the well water at concentrations greater than the Massachusetts
Maximum Contaminant Level (“MMCL”). In fact, the detection of TCE and DCE at 65 H. Foote
Road was nearly double the applicable MMCLs. This was the first time since the well testing
program had begun that TCE and DCE were detected at concentrations above the MMCLs in any
residential well that participated in the program. The residence at 65 H. Foote Road had not
participated in the well testing program until December 2014, and its drinking water was not
tested until September 24, 2015.
The notice to DEP also referenced that another contaminant, 1,4 dioxane (“Dioxane”),
was detected in the well water of all three residence at 65, 74 and 81 H. Foote Road. The
concentration levels were all above the Massachusetts Drinking Water Guideline. Also, TCE and
DCE were found in the water of 81 H. Foote Road at levels below MMCL.
Prior to the September, 2015 detection of TCE and DCE at levels above MMCL at 65 H.
Foote Road, there had been detections, as part of the well testing program, of TCE and DCE
below MMCL, as well as detections above reportable conditions of Dioxane in the drinking
water supply of some of the residences on H. Foote Road. None of these detections, however,
caused Casella to be assigned a release tracking number under the 21-E Program or to be
designated as a potentially responsible party. No claim was asserted by DEP and no remedial
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action was required because of these earlier detections.
As a result of the notice to DEP in October 2015, the DEP for the first time assigned a
Release Tracking Number pursuant to its 21-E Program and identified SRDP as a potentially
responsible party for cleanup costs. Casella prepared, as required by DEP, an Immediate
Response Action Plan which was subsequently approved by DEP. In March 2017, Casella
reached an agreement in principle with the Town of Southbridge, the Town of Charlton and the
DEP to resolve the DEP claim. The agreement in principle was later finalized by way of an
Administrative Consent Order in May 2017, providing, among other things, for the sharing of
costs between DEP and SRDP of up to $ 10 million to install a municipal waterline in the Town
of Charlton. Casella became legally obligated to pay cleanup costs and take other remedial
action. Casella incurred more than $ 2.5 million in cleanup costs in connection with the DEP
claim and expects to incur additional costs.
On December 15, 2015, Casella provided notice to Steadfast of an occurrence or claim by
attaching a letter from Casella’s consultant to DEP. By letter dated April 8, 2016, Casella
notified Steadfast of the DEP claim. Steadfast denied coverage for the DEP claim, by letter dated
April 27, 2016, based on the “known pollution event” exclusion. This lawsuit followed.
DISCUSSION
A claim cannot be resolved on a motion for summary judgment where “a reasonable jury
could return a verdict for the nonmoving party.” Dennis v. Kaskel, 79 Mass. App. Ct. 736, 741
(2011), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). For this reason, in
evaluating the motion for summary judgment the court “must . . . draw all reasonable
inferences” from the evidence presented “in favor of the nonmoving party,” as a jury would be
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free to do at trial. Godfrey v. Globe Newspaper Co., Inc., 457 Mass. 113, 119 (2010). A request
for summary judgment must be denied where a claim turns on disputed issues of fact or on
disputed inferences from admitted facts. See Molly A. v. Commissioner of Dept. of Mental
Retardation, 69 Mass. App. Ct. 267, 284 (2007)(“summary judgment cannot be granted if the
evidence properly before the motion judge reveals a genuine issue of disputed material fact”);
Flesner v. Technical Communications Corp., 410 Mass. 805, 811-812 (1991) (“Where a jury can
draw opposite inferences from the evidence, summary judgment is improper.”).
Here, there are at least two major disputes of fact that are material to the legal issue of
whether insurance coverage exists under the Policy. Those disputes are (1) whether a relevant
“pollution event” was known to a “responsible insured” prior to the commencement of the
Policy, and (2) whether the “claim” submitted by Casella to Steadfast resulted from a “new
pollution event.” The disputes coalesce around the events at 65 Foote Road.
(1) Knowledge of Pollution Event
In SUMF Nos. 19, 20 and 45, Steadfast asserts that a 2006 collection of samples of water
at 65 H. Foote Road showed some level of TCE and DCE. Steadfast claims that the samples were
part of the residential well program of testing by SRDP. Casella denies these facts, based on
affidavits stating that the 2006 detections were not part of its well program. The affidavits aver
that the 2006 results were not known by Casella until late 2015. In SUMF No. 85, a statement of
fact submitted by Casella, Steadfast then admits that Casella was not aware of the 2006 report of
TCE and DCE at 65 H. Foote Road before April 2015 (the commencement of the Policy). This
contradiction suggests an unresolved issue of fact. Moreover, Steadfast contends in response to
SUMF No. 85 that detection by Casella’s well testing program prior to 2015 at other residences
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on H. Foote Road revealed at least some level of TCE and DCE in the water migrating to the
residences along H. Foote Road. While not stated with precision, Steadfast appears to argue that
the known pollution along H. Foote Road may be sufficient to ascribe knowledge of pollution at
65 H. Foote Road to Casella.
Thus, the facts of what did Casella know and when did it know it, are at issue. The
insurance provided by the Policy does not apply to a “pollution event” that was known to Casella
before the commencement of the Policy. A “pollution event” is defined in the Policy to mean
“the discharge, release, or escape of any solid, liquid, gaseous or thermal irritant, contaminant or
pollutant . . . into or upon land . . . or any watercourse or body of water including groundwater.”
Whether there was a pollution event known to Casella prior to the commencement of the policy
at 65 H. Foote Road or at any other relevant residences presents factual issues that must be
determined by a jury.
(2) What Caused the Claim
The question of what caused DEP’s claim brings the focus to 65 H. Foote Road. That is
because Steadfast’s obligation to pay under the Policy is triggered when Casella is legally
obligated to pay “as a result of” a “claim.”
The Policy defines “claim” as a “written demand or written notice received by the
‘insured’ alleging liability or responsibility on the part of the ‘insured.’” There does not appear to
be any dispute that the “claim” in this case is the assertion of liability of SRDP and Casella by
DEP.2 It is the position of Casella that the claim by DEP “resulted from” (quoting the language of
2 On March 9, 2016, Casella provided Steadfast with notice of a letter from legal counsel
to residents in the surrounding area of H. Foote Road. That letter threatened a lawsuit under
federal law for the alleged contamination of drinking water. By letter dated April 5, 2016,
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the Policy) the discovery in September 2015, of TCE and DCE at levels in excess of MMCL at
65 H. Foote Road. Stated another way, Casella contends that but for the discovery of high levels
of TCE and DCE at 65 H. Foote Road, there would not have been a DEP enforcement proceeding
or a claim at all. In SUMF No. 79, Casella states “[i]t was not until the detection in the drinking
water of TCE and 1,1 DCE above the MMCLs – – which had never occurred previously as part of
the Well Program – – that Casella was faced with a Claim in connection with the Well Program
identifying SRDP as a PRP under M.G.L. c. 21E and mandating that Casella incur extensive
‘cleanup costs’ in the form of a submission of an Immediate Response Action plan and the
performance of extensive remediation in accordance with M.G.L. c. 21E.” Steadfast disputes
SUMF No. 79. In addition, in response to Steadfast’s SUMF Nos. 18 to 44, wherein Steadfast
described detections on dates prior to the inception of the Policy of some level of TCE and DCE
and Dioxin at residences on H. Foote Road, other than number 65, Casella responded that “the
Mass DEP Claim was not as a result of those detections.”
In sum, Casella asserts that (1) it had no knowledge prior to September 2015 of pollution
migrating to 65 H. Foote Road, and (2) the “claim” occurred as a result of what was discovered
in September 2015 at 65 H. Foote Road, and absent the discovery at 65 H. Foote Road there
would have been no claim. The latter assertion will, ultimately, depend on Casella’s ability to
prove what would have occurred in a hypothetical situation: i.e., if only the Dioxane test results
for 74 and 81 H. Foote Road had been reported rather than in combination with the severe
readings of TCE and DCE from 65 H. Foote Road. I find that the facts asserted by Casella, as to
Steadfast denied coverage under the Policy for this potential claim based upon the “known
pollution event” exclusion. While these events are recited at ¶¶ 35 to 37 of the Complaint,
Casella asserts no claim in this lawsuit arising from this correspondence.
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the lack of any enforcement by DEP prior to the October 2015 report of findings at 65 H. Foote
Road, and the immediate assertion of a claim arising after the October 2015 report, give rise to a
reasonable inference that the claim by DEP resulted from a “new pollution event” at 65 H. Foote
Road.3 The reasonable inference may be rebutted by evidence in the correspondence and
otherwise indicating that DEP required remedial action with respect to 74 and 81 H. Foote Road,
but a triable issue is presented. Moreover, it may be that some of the “claim” asserted by DEP
resulted from pollution at locations other than 65 H. Foote Road as to which Casella was aware
prior to 2015. In that case, a question of allocation of cleanup costs to a covered claim (65 H.
Foote Road) and other locations that may not be covered because of the “known pollution event”
exclusion, may have to be determined. Summary judgment is not available to decide those fact
issues.
CONCLUSION
For the reasons stated above, Steadfast’s Motion for Summary Judgment is DENIED.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: September 7, 2017
3 A “new pollution event” is defined in the Policy to mean “a ‘pollution event’ that first
commences after the ‘delimitation date.’” The delimitation date is April 30, 2015.
8 read more

Posted by Stephen Sandberg - October 4, 2017 at 1:11 am

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Suffolk Construction Company, Inc. v. Benchmark Mechanical Systems, Inc., et al. (Lawyers Weekly No. 12-045-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1384CV01463-BLS2
____________________
SUFFOLK CONSTRUCTION COMPANY, INC.
v.
BENCHMARK MECHANICAL SYSTEMS, INC. and READING CO-OPERATIVE BANK
____________________
MEMORANDUM AND ORDER ALLOWING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
This case arises from Suffolk Construction Company’s mistaken payment of monies to Benchmark Mechanical Systems rather than to Benchmark’s lender, Reading Co-Operative Bank. Suffolk had hired Benchmark as a subcontractor on a large construction project. Benchmark secured a line of credit by assigning to the Bank all money that Benchmark stood to collect from Suffolk under its subcontract. Suffolk mistakenly made payments totaling $ 3,822,500.49 to Benchmark instead of to the Bank. Benchmark held and spent those monies, rather than forward them to the Bank. After Benchmark went out of business, the Bank sued Suffolk. The Supreme Judicial Court ordered Suffolk to pay the Bank the full amount it should have paid under Benchmark’s assignment. See Reading Co-Operative Bank v. Suffolk Constr. Co., 464 Mass. 543, 557 (2013). With statutory interest included, Suffolk paid the Bank a judgment totaling $ 7,640,907.45.
Suffolk brought this action seeking to recover the surplus held by the Bank that was left after the Bank deducted its reasonable costs of collection and the principal and interest owed by Benchmark from the amount paid by Suffolk. In addition, Suffolk asserted common law claims against Benchmark seeking to recover the $ 3,822,500.49 in subcontract payments that Suffolk was compelled to pay a second time to the Bank. The Supreme Judicial Court recently held that Suffolk had stated viable claims against the Bank, but that its claims against Benchmark are barred by the applicable statute of limitations. See Suffolk Constr. Co. v. Benchmark Mechanical Systems, Inc., 475 Mass. 150 (2016).
Suffolk now moves for summary judgment as to its right to collect the surplus of roughly $ 1.35 million being held by the Bank. The Court will ALLOW this motion.
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This resolves all remaining claims. Suffolk and the Bank report that they have settled Suffolk’s claim that the Bank’s costs of collection were unreasonable, and that this settlement will take effect if the Court were to rule (as it does) that Suffolk is entitled to receive the full surplus amount that the Bank owes to Benchmark.
The SJC has held that under the circumstances of this case Suffolk is entitled to equitable subrogation as against Benchmark, meaning that it may “stand in Benchmark’s shoes as to the surplus” held by the Bank. Suffolk Constr., 475 Mass. at 156. This holding is the law of the case, is binding on all parties, and may not be reconsidered now that the case has been remanded to the Superior Court. See City Coal Co. of Springfield, Inc. v. Noonan, 434 Mass. 709, 712 (2001).1 It necessarily follows that Suffolk is therefore the “debtor” for purposes of G.L. c. 106, § 9-608(a)(4), and thus by law is entitled the full amount of the surplus held by the Bank. See Suffolk Constr., 475 Mass. at 155-156. Suffolk’s alternative theories as to why it is entitled to recover the surplus are therefore moot.
Benchmark’s claim that Suffolk owes it $ 964,642.51 for change orders that Benchmark carried out on the project, and that Benchmark should be able to recoup this amount from the surplus held by the Bank, is without merit. The summary judgment record demonstrates that the Bank, as Benchmark’s assignee, settled and resolved these claims against Suffolk. In exchange for a $ 35,000 payment by Suffolk, the Bank (acting as Benchmark’s assignee) executed a settlement agreement providing that this payment “constitutes full and final satisfaction, discharge and payment for any monies owed to Benchmark by Suffolk. The settlement agreement also expressly released “any rights Benchmark may have against Suffolk” arising out of or with respect to any work by Benchmark for Suffolk on this project. This release and settlement agreement did more than merely extinguish any right by Benchmark
1 The Court recognizes that an issue decided on appeal may be reopened by a trial judge after remand “if the evidence on a subsequent trial was substantially different, controlling authority has since made a contrary decision of the law applicable to such issues, or the decision was clearly erroneous and would work a manifest injustice.” Kitras v. Town of Aquinnah, 474 Mass. 132, 146 (2016), quoting King v. Driscoll, 424 Mass. 1, 8 (1996), quoting in turn United States v. Rivera-Martinez, 931 F.2d 148, 151 (1st Cir.), cert. denied, 502 U.S. 862 (1991). None of these circumstances is present here, however.
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to assert a claim directly against Suffolk for further payment; it also extinguished any debt owed to Benchmark by Suffolk.
ORDER
Plaintiff’s motion for summary judgment on the remaining claims is ALLOWED. Final judgment shall enter: (1) in favor of Suffolk Construction Company, Inc., on Counts VII and XI of its amended complaint by (a) Declaring that Suffolk is the equitable subrogee of Benchmark Mechanical Systems, Inc., with respect to the surplus remaining after Reading Co-Operative Bank applied Suffolk’s judgment payment to Benchmark’s outstanding debt to the bank, Suffolk is therefore the “debtor” for purposes of G.L. c. 106, § 9-608(a)(4), and Suffolk is entitled to recover the full amount of that surplus held by the Bank, and (b) Ordering Reading Co-Operative Bank to pay the full amount of that surplus to Suffolk Construction Company, Inc., forthwith; and (2) Dismissing all other remaining claims, counterclaims, and cross-claims with prejudice.
25 April 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - April 26, 2017 at 7:04 pm

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NetScout Systems, Inc. v. Hohenstein (Lawyers Weekly No. 12-015-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1784CV00373-BLS2
____________________
NETSCOUT SYSTEMS, INC.
v.
CARL HOHENSTEIN
____________________
MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR RECONSIDERATION OF ITS REQUEST FOR A PRELIMINARY INJUNCTION
A week ago the Court decided a motion by NetScout Systems, Inc., for a preliminary injunction that would enforce non-competition and other covenants (the “Agreement”) that Carl Hohenstein entered into when he was employed by Danaher Corporation’s subsidiaries. In support of its motion, NetScout argued and presented evidence that Danaher had assigned to NetScout all of Danaher’s rights under Hohenstein’s non-competition agreement. The Court concluded, based on NetScout’s own evidence, that Hohenstein’s obligations under the disputed provisions of his non-competition agreement expired on July 14, 2016, one year after Hohenstein’s employment with any Danaher subsidiary ended. The Court therefore denied NetScout’s motion to the extent that it sought to enforce the non-competition and non-solicitation covenants, but allowed the other relief sought without any opposition by Hohenstein.1
1. Reconsideration. NetScout seeks reconsideration with respect to enforcement of the non-competition and non-solicitation covenants based on a new legal theory as to why it is entitled to enforce the Agreement.
When it first sought a preliminary injunction, NetScout filed an affidavit by its Director of Human Resources to explain why NetScout was entitled to enforce Danaher’s rights under the Agreement. She stated that Hohenstein had been employed by a Danaher subsidiary called Fluke Networks and that “[o]n July 14, 2015, NetScout acquired Danaher’s communications business, which included Fluke
1 At oral argument, Hohenstein said he did not contest the issuance of an injunction that would bar him from using or disclosing any NetScout proprietary information, helping to develop products or services that would compete with NetScout’s offerings, helping to hire away NetScout’s employees or contractors, or interfering in any relationship with NetScout’s vendors.
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Networks.” The HR Director did not say that Fluke Networks, Inc., had been merged into NetScout or a subsidiary of NetScout. If that had happened, then of course Hohenstein would still be employed by the same company as before the NetScout/Danaher transaction, and NetScout would be entitled to enforce the Agreement as the legal successor to Fluke Networks. But that is not what NetScout contended. Instead, its HR Director swore that as part of the NetScout/Danaher transaction Hohenstein became a NetScout employee and “Danaher’s rights under the Agreement were assigned to NetScout.”
This characterization of the transaction between Danaher and NetScout suggested that NetScout was acquiring selected assets and liabilities of Danaher. As NetScout now recognizes, if whatever Danaher subsidiary that employed Hohenstein had been merged into NetScout or one of its subsidiaries, there would have been no need for Danaher to assign to NetScout its rights against Hohenstein under the Agreement. But NetScout represented that Hohenstein had been employed by Fluke Networks, and the Form 8-K that NetScout filed with the Securities and Exchange Commission at time it closed its transaction with Danaher makes clear that Fluke Networks was not merged into NetScout. Instead, the Form 8-K states that the transaction was structured as follows: (i) Danaher agreed to and did “transfer … certain assets and liabilities of Danaher’s communications business, including … certain parts of Fluke Networks Enterprise,” to a new Danaher subsidiary that the parties referred to as “Newco;” (ii) a NetScout subsidiary referred to as Merger Sub merged with and into Newco, with Newco as the surviving entity; and (iii) immediately thereafter, Newco then merged with and into a second NetScout subsidiary referred to as Merger Sub II. This meant that NetScout’s subsidiary Merger Sub II was the legal successor in interest to whatever legal rights belonged to Newco at the time of these statutory mergers.
Significantly, however, when NetScout originally sought a preliminary injunction it did not present any evidence or make any argument that Hohenstein had ever been employed by Newco. To the contrary, NetScout showed and argued that Hohenstein had gone directly from being a Fluke Networks employee one day to being a NetScout employee the next. Given this evidence, the Court concluded that
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Hohenstein’s employment relationship with any Danaher subsidiary ended when he started working for NetScout, and thus that the twelve-month post-employment non-competition period started to run as of July 2015.
In its motion for reconsideration, NetScout asks the Court to consider new evidence and arguments that are inconsistent with its prior submissions. For the first time NetScout asserts that it is entitled to enforce Hohenstein’s Agreement not because Danaher assigned its rights under that contract to NetScout, but instead because it succeeded to Danaher’s rights under that Agreement as a result of a statutory merger.
The mere fact that the NetScout/Danaher transaction included two statutory mergers is, of course, not sufficient to show that NetScout is the legal successor to Danaher with respect to its rights and obligations under its Agreement with Hohenstein. If the Danaher subsidiary that employed Hohenstein was never merged into NetScout, the fact that NetScout merged with some other Danaher subsidiary (Newco) would not give NetScout any right to enforce the Agreement.
But NetScout has now shown that Hohenstein’s employment relationship with Fluke Networks was transferred to Newco before that entity was merged into a NetScout subsidiary. In support of its motion for reconsideration, NetScout provided a copy of the “Employee Matters Agreement” by and among Danaher, Newco, and NetScout. That contract provides that all employees of any Danaher subsidiary who were primarily dedicated to Danaher’s communications business would become an employee of Newco as of the date that Danaher transferred its communications business assets and liabilities to Newco, and that to the extent allowed by local employment law the rights and obligations of the Danaher subsidiary that had the employment relationship with the employee would all be transferred to Newco as well. It is undisputed that Hohenstein was employed by Fluke Networks to work on part of Danaher’s communications business.
In sum, NetScout has shown that its prior assertion and evidence that it received an assignment of Danaher’s rights under Hohenstein’s Agreement were incorrect, and that instead Hohenstein’s employment was transferred to a Danaher subsidiary (Newco) that was then merged into a wholly-owned subsidiary of
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NetScout. Therefore, one effect of the statutory merger of Newco into Merger Sub II is that NetScout, through its subsidiary, became the legal successor to the last Danaher subsidiary that was entitled to enforce the Agreement against Hohenstein.
The Court concludes, in the exercise of its discretion, that it is appropriate to reconsider its prior ruling in light of this new evidence. NetScout does not explain why its legal theory this week differs from and is inconsistent with the legal theory it presented last week. But it appears that this week’s theory is correct, because it comports with the governing contracts that NetScout filed for the first time in support of its motion for reconsideration. Since final judgment has not entered, the Court has “broad discretion” to reconsider all prior rulings in this case. Genesis Technical & Fin., Inc. v. Cast Navigation, LLC, 74 Mass. App. Ct. 203, 206 (2009); accord Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 401 (2003) (“it is within the inherent authority of a trial judge to ‘reconsider decisions made on the road to final judgment.’ ”) (quoting Franchi v. Stella, 42 Mass. App. Ct. 251, 258 (1997)). And since the Court is now convinced that it should have allowed NetScout’s motion for a preliminary injunction, it is appropriate to correct its prior order. See Jones v. Boykan, 464 Mass. 285, 292 (2013) (“if a judge determines that ‘he has erred in an announced decision, he ought to correct his error while he still has the power [to do so]’ ”) (quoting Sheriff v. Gillow, 320 Mass. 46, 49 (1946)).
2. NetScout’s Rights to Enforce the Agreement. For the reasons discussed above and in the Court’s original memorandum, Hohenstein’s contract with Danaher is an enforceable contract and NetScout is entitled to enforce Hohenstein’s obligations under that Agreement as the legal successor in interest to the Danaher subsidiary that last employed Hohenstein.
3. Scope of Injunctive Relief. The Agreement’s non-competition and non-solicitation provisions may only be enforced to the extent they are reasonable in scope in terms of the activities they restrict, the geographic limitations they impose on those activities, and the length of time they are in effect. See New England Canteen Services, Inc. v. Ashley, 372 Mass. 671, 673-676 (1977); All Stainless, Inc. v. Colby, 364 Mass. 773, 778-780 (1974).
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The Court concludes that the Agreement is reasonable with respect to the scope of activities it restricts and the length of time (one year) that those provisions remain in effect after Hohenstein stopped working for NetScout.
But the Agreement’s restrictions on completion and solicitation are overbroad geographically. Hohenstein worked for NetScout as a principal sales engineer for the mid-Atlantic region, which consisted of the District of Columbia and the states of Pennsylvania, Maryland, Virginia, West Virginia, Ohio, Michigan, Indiana, and Kentucky. Although Hohenstein occasionally dealt with customers located outside the mid-Atlantic region, NetScout has not met its burden of proving “that its good will” is likely to suffer irreparable harm of Hohenstein supervises sales engineers who engage in or support sales activity “outside of the sales territory formerly assigned to him.” All Stainless, 364 Mass. at 780.
NetScout argues that Hohenstein had access to technical information about its products, and that this is an independent reason for not limiting the geographical scope of the Agreement’s non-competition and non-solicitation provisions. But NetScout has not met its burden of proving that this information was in fact confidential, as opposed to something that is routinely shared with customers. To the contrary, NetScout submitted a marketing papers published by Riverbed Technologies that compares the architecture and performance of Riverbed’s products with those sold by NetScout. This suggests that competitors and customers are well aware of the kind of technical information that Hohenstein had access to and used while he was part of NetScout’s sales team. NetScout is not entitled to enforce such an agreement to keep former sales engineers from making use of publicly available information or knowledge that they happened to learn while they were employed by NetScout. See, e.g., Abramson v. Blackman, 340 Mass. 714, 715-16 (1960); Folsum Funeral Service, Inc. v. Rodgers, 6 Mass. App. Ct. 843 (1978) (rescript).
The Court therefore concludes that the non-competition and non-solicitation provisions of the Agreement may only be enforced within the mid-Atlantic region that was the focus of Hohenstein’s sales efforts while employed by NetScout. Cf. All Stainless, 364 Mass. at 780. It will not require NetScout to post any bond because
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Hohenstein stipulated, in ¶ 9 of the Agreement, that NetScout could obtain and enforce preliminary or final injunctive relief “without the posting of a bond.”
ORDER
Plaintiff’s motion for reconsideration is ALLOWED. The Court will enter an amended preliminary injunction that contains all of the provisions of the original preliminary injunction and that, in addition, bars Defendant from soliciting Plaintiff’s customers in the mid-Atlantic states or attempting to sell products that compete with those of the Plaintiff to customers or potential customers in the mid-Atlantic states until January 12, 2018. Plaintiff shall submit a proposed form of an amended preliminary injunction consistent with this order within ten business days.
February 22, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - March 2, 2017 at 12:59 am

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NetScout Systems, Inc. v. Hohenstein (Lawyers Weekly No. 12-014-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1784CV00373-BLS2
____________________
NETSCOUT SYSTEMS, INC.
v.
CARL HOHENSTEIN
____________________
MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION
NetScout Systems, Inc., seeks a preliminary injunction that would enforce non-competition and other covenants agreed to by Carl Hohenstein when he was employed by Danaher Corporation’s subsidiaries. When NetScout acquired Danaher’s communications business, Hohenstein became a NetScout employee and Danaher assigned its rights under the contract with Hohenstein to NetScout. Eighteen months later, Hohenstein left NetScout to work for a competitor. Hohenstein agrees he was bound by NetScout’s code of business conduct, including its restrictions on the use or disclosure of NetScout’s proprietary information. At oral argument, Hohenstein said he does not contest the issuance of an injunction that would bar him from using or disclosing any NetScout proprietary information, helping to develop products or services that would compete with NetScout’s offerings, helping to hire away NetScout’s employees or contractors, or interfering in any relationship with NetScout’s vendors. But Hohenstein contends that NetScout is not entitled to an injunction that would bar Hohenstein from selling or trying to sell products or services that compete with NetScout.
The Court concludes that, although NetScout is entitled to enforce the non-competition agreement assigned to it by Danaher, that contract does not bar Hohenstein from selling or trying to sell products or services that compete with those of NetScout. In any case, the contract provisions that barred Hohenstein from selling products and services that compete with those of Danaher and its subsidiaries lapsed in July 2016, twelve months after Hohenstein’s employment with Danaher subsidiaries came to an end. The Court will therefore deny NetScout’s motion to the extent it seeks to bar Hohenstein from selling products that compete with NetScout’s offerings (covered in paragraphs 2 and 3 of the form of order proposed by NetScout).
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It will allow the motion only to the extent it seeks to protect NetScout’s proprietary information and to obtain other relief that is not opposed by Hohenstein (covered in paragraphs 1, 4, 5, 6, and 7 of the proposed order, which the Court will renumber as paragraphs 1 through 5).
1. Findings of Fact. The Court makes the following findings of fact based on the affidavits submitted by NetScout and Mr. Hohenstein.
Hohenstein worked for subsidiaries of Danaher Corporation from January 2001 through July 2015. Throughout this time he was employed at-will, with no fixed contract term. Hohenstein worked for Fluke Networks, Inc., as a sales engineer from September 2004 to April 2014, and as a senior systems engineer through April 2015. He then worked for AirMagnet, Inc. (an affiliated company, also owned by Danaher) as senior systems engineer.
In late 2011 Hohenstein and Danaher entered into an “Agreement Regarding Solicitation and Protection of Proprietary Interests” that governed Hohenstein’s continued employment by Danaher or any of its subsidiaries. This Agreement included provisions requiring Hohenstein not to use or disclose any confidential information belonging to “the Company” for any purpose other than performing his duties as a Danaher employee, and not to compete with “the Company” by soliciting potential customers to purchase, selling or offering to sell, or helping to develop competing products while employed by “the Company” and for twelve months thereafter. The Agreement defined “the Company” to mean “Danaher Corporation including its subsidiaries and/or affiliates.” The phrase “the Company” did not include any assigns of Danaher or its subsidiaries or affiliates.
NetScout acquired Danaher’s communications business, which included Fluke Networks and AirMagnet, on July 14, 2015. This was structured as an asset deal, in which Danaher transferred certain assets and liabilities to NetScout, not as a stock transaction.1 As of that date Hohenstein became a NetScout employee and his
1 See the Form 8-K that NetScout filed with the Securities and Exchange Commission on July 14, 2015, which is available at https://www.sec.gov/ Archives/edgar/data/1078075/000119312515253647/d36264d8k.htm (last visited February 13, 2017). A court may take judicial notice of matters of public record, Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000), including SEC filings that are
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employment relationship with any Danaher subsidiary came to an end. As part of this transaction, Danaher assigned to NetScout its rights under the 2011 Agreement between Danaher and Hohenstein. (NetScout has not presented any documentation of this assignment. But Hohenstein does not dispute NetScout’s evidence that Danaher assigned its contract rights to NetScout, at least for the purpose of resolving the pending motion for a preliminary injunction.) Hohenstein and NetScout never entered into any non-competition or non-solicitation agreement of their own. During 2016 NetScout asked Hohenstein to sign a “Commission Plan” that contained a statement that the plan was not valid unless it was accompanied by a signed non-compete agreement. Hohenstein never signed the Commission plan or any non-competition agreement with NetScout. But Hohenstein did agree to abide by NetScout’s code of business conduct, which limits the use or disclosure of NetScout’s proprietary information.
NetScout says that it sells “application and network performance management products and solutions.” Hohenstein worked for NetScout as a principal sales engineer for the mid-Atlantic region, which consisted of the District of Columbia and the states of Pennsylvania, Maryland, Virginia, West Virginia, Ohio, Michigan, Indiana, and Kentucky. He served in a pre-sales and support role in which he made technical presentations to prospective or current customers about NetScout’s products, learned about the prospect’s or customers IT infrastructures, and helped to explain to prospects and customers how NetScout’s products could help them better manage their IT networks. Hohenstein had access to confidential financial information about NetScout’s sales and customer accounts in his territory, including information about the customer’s networks and technical requirements. He did not have access to similar information about other regions or about customers located outside of his region. He had complete access to information about NetScout’s product
publicly accessible. See, e.g., Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000); Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014); Yates v. Municipal Mortg. & Equity, LLC, 744 F.3d 874, 881 (4th Cir. 2014); Northstar Financial Advisors Inc. v. Schwab Investments, 779 F.3d 1036, 1043 (9th Cir. 2015); Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1276-1277 (11th Cir. 1999); see also G.L. c. 23, § 76A (authenticated copies of SEC filings are admissible in evidence).
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offerings. (Given the Court’s rulings below, it need not make any findings as to whether NetScout has met its burden of proving that the technical product information to which Hohenstein was privy was confidential, as opposed to something that is routinely shared with customers.) Hohenstein accompanied NetScout’s account managers on customer visits and built relationships with customers located in NetScout’s mid-Atlantic region. He was well compensated by NetScout, which paid him more than $ 200,000 per year.
In January 2017 Hohenstein left NetScout to work for a competitor called Riverbed Technologies, Inc. Like NetScout, Riverbed markets information technology solutions for network performance management, application performance management, and cloud virtualization. Riverbed has published at least one marketing paper that compares the architecture and performance of its products with those sold by NetScout.
Riverbed employs Hohenstein as its sales engineer director/manager for the New England states (excluding western Connecticut), North New York state, and Eastern Canada. At Riverbed, Hohenstein has no direct customer interaction. Instead he supervises other sales engineers who do have customer contact
2. Legal Standards.
2.1. Motions for Preliminary Injunction. “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). To the contrary, “the significant remedy of a preliminary injunction should not be granted unless the plaintiffs had made a clear showing of entitlement thereto.” Student No. 9 v. Board of Educ., 440 Mass. 752, 762 (2004). “Trial judges have broad discretion to grant or deny injunctive relief.” Lightlab Imaging, Inc. v. Axsun Technologies, Inc., 469 Mass. 181, 194 (2014).
A plaintiff is not entitled to preliminary injunctive relief if it cannot prove that it is likely to succeed on the merits of its claim. See, e.g., Fordyce v. Town of Hanover, 457 Mass. 248, 265 (2010) (vacating preliminary injunction on this ground); Wilson v. Commissioner of Transitional Assistance, 441 Mass. 846, 858-859 (2004) (same). Nor may a plaintiff obtain a preliminary injunction without proving that it will suffer irreparable harm in the absence of such an order, and that such harm to the plaintiff
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from not granting the preliminary injunction would outweigh any irreparable harm that defendants are likely to suffer if the injunction issues. See, e.g., American Grain Products Processing Institute v. Department of Pub. Health, 392 Mass. 309, 326-329 (1984) (vacating preliminary injunction on this ground); Nolan v. Police Comm’r of Boston, 383 Mass. 625, 630 (1981) (same). “The public interest may also be considered in a case between private parties where the applicable substantive law involves issues that concern public interest[s].” Bank of New England, N.A. v. Mortgage Corp. of New England, 30 Mass. App. Ct. 238, 246 (1991). Under Massachusetts law, “[a] covenant not to compete contained in a contract for personal services” is only enforceable to the extent that it is consistent with the public interest. All Stainless, 364 Mass. at 778.
2.2. Non-Compete and Non-Solicitation Agreements. An employee’s agreement not to compete with his or her employer by soliciting away customers or potential customers may only be enforced under Massachusetts law to the extent necessary to protect the employer’s legitimate business interests—which include guarding against the release or use of trade secrets or other confidential information, or other harm to the employer’s goodwill, but do not include merely avoiding lawful competition—and to the extent it is reasonable in scope in terms of the activities it restricts, the geographic limitations it imposes on those activities, and the length of time it is in effect. See New England Canteen Services, Inc. v. Ashley, 372 Mass. 671, 673-676 (1977); All Stainless, Inc. v. Colby, 364 Mass. 773, 778-780 (1974). The employer has the burden of proving that the agreement protects legitimate business interests and thus is enforceable. New England Canteen Services, supra, at 675; Folsum Funeral Service, Inc. v. Rodgers, 6 Mass. App. Ct. 843 (1978) (rescript).
“Protection of the employer from ordinary competition … is not a legitimate business interest,” however, “and a covenant not to compete designed solely for that purpose will not be enforced.” Marine Contractors, Inc. v. Hurley, 365 Mass. 280, 287-288 (1974); accord, e.g., Boulanger v. Dunkin’ Donuts, Inc., 442 Mass. 635, 641 (2004), cert. denied, 544 U.S. 922 (2005).
Thus, “[a]n employer may prevent his employee, upon termination of his employment, from using, for his own advantage or that of a rival and to the harm of
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his employer, confidential information gained by him during his employment; but he may not prevent the employee from using the skill and general knowledge acquired or improved through his employment.” Abramson v. Blackman, 340 Mass. 714, 715-16 (1960); accord, e.g., Richmond Bros., Inc. v. Westinghouse Broadcasting Co., Inc., 357 Mass. 106, 111 (1970); Woolley’s Laundry v. Silva, 304 Mass. 383, 387 (1939). “The ‘right (of an employee) to use (his) general knowledge, experience, memory and skill’ promotes the public interest in labor mobility and the employee’s freedom to practice his profession and in mitigating monopoly.” Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. 254, 267 (1980), quoting J. T. Healy & Son v. James A. Murphy & Son, 357 Mass. 728, 740 (1970); accord Club Aluminum Co. v. Young, 263 Mass. 223, 226-227 (1928).
A contractual covenant restraining competition by a former employee “will be enforced ‘only to the extent that is reasonable and to the extent that it is severable for the purposes of enforcement.’ ” Blackwell v. E-M. Helides, Jr., Inc., 368 Mass. 225, 229 (1975), quoting All Stainless, supra, at 778.
3. Analysis.
3.1. NetScout’s Rights to Enforce the Agreement. Hohenstein’s contract with Danaher is an enforceable contract. And NetScout is entitled to enforce Hohenstein’s obligations under that contract as Danaher’s assignee.
The 2011 Agreement was supported by adequate consideration, even though Hohenstein had already been working for a Danaher subsidiary for almost twelve years and was not given any additional compensation in exchange for executing the new contract. Hohenstein was an employee at will. Continued at-will employment is sufficient consideration to support a non-compete agreement in Massachusetts, just as it is sufficient consideration to support other contractual terms. Economy Grocery Stores Corp. v. McMenamy, 290 Mass. 549, 552 (1935) (covenant not to compete signed eighteen months after defendant began working for plaintiff as at-will employee “was not void for lack of consideration” because “it implied … a promise on the part of the plaintiff to employ the defendant” thereafter); accord Sherman v. Pfefferkorn, 241 Mass. 468, 473 (1922); see also Smith v. Graham Refrigeration Products Co., Inc., 333 Mass. 181, 186 (1955) (agreement to forego salary until
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employer’s financial condition improved); Horner v. Boston Edison Co., 45 Mass. App. Ct. 139, 143 (1998) (release of claims). Since Hohenstein was employed at will by Fluke, his employer “”could modify [the] terms [of employment] or ‘terminate … [the employment] at any time for any reason or for no reason at all,’ with limited exceptions, such as public policy considerations.” York v. Zurich Scudder Investments, Inc., 66 Mass. App. Ct. 610, 614 (2006) (enforcing change of incentive compensation terms for sales person employed at will), quoting Gram v. Liberty Mut. Ins. Co., 384 Mass. 659, 668 n. 6 (1981).
Hohenstein cannot avoid his obligations under the 2011 Agreement on the ground that his employment relationship with Danaher’s subsidiary changed materially over the next several years. Hohenstein has demonstrated that after signing the non-competition agreement he was promoted from sales engineer to senior systems engineer, he assumed additional responsibilities, and his salary increased by a third. The Court is not convinced that the nature of Hohenstein’s duties changed so fundamentally that his prior employment relationship with Danaher was effectively terminated and as a result the prior non-competition agreement could not be enforced unless it is expressly renewed by the parties. See F.A. Bartlett Tree Co. v. Barrington, 353 Mass. 585, 586-587 (1968). In any case, Hohenstein expressly agreed in his written contract “that any change in my position or title with the Company shall not cause this Agreement to terminate and shall not effect any change in my obligations under this Agreement.” Hohenstein is bound by that stipulation.
Danaher’s assignment of its contractual rights to NetScout is valid even though Hohenstein never consented to it. In his contract, Hohenstein agreed that such an assignment by Danaher “may be done without my consent.” He also agreed that if Danaher assigned its rights under the contract then “this Agreement shall remain binding upon me.” Having waived by contract any right to veto or need to consent to an assignment of Danaher’s rights under the 2011 Agreement, Hohenstein cannot now challenge NetScout’s legal authority to act as Danaher’s assignee.
Hohenstein complains that he is the first former Fluke employee that NetScout has sued for violating his Danaher non-competition agreement, even though at least
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two other former Fluke employees who then worked for NetScout went on to work for competitors of NetScout. But he cites no authority and identifies no legal principle suggesting that as a result NetScout is legally barred from enforcing its rights against Hohenstein as Danaher’s assignee.
3.2. Scope and Duration of the Non-Competition Obligations. Although NetScout is entitled to enforce Hohenstein’s obligations under his non-competition agreement with Danaher, that does not mean that NetScout has any right to bar Hohenstein from working for a competitor of NetScout.
The non-competition provisions in the 2011 Agreement barred Hohenstein from soliciting potential customers to purchase and from offering, providing, or selling any products or services that are “competitive with or similar to products or services offered by, developed by, designed by or distributed by the Company.” These restrictions applied so long as Hohenstein was employed by “the Company, and for a period of 12 months thereafter.” As noted above, “the Company” was defined in the contract to mean “Danaher Corporation including its subsidiaries and/or affiliates,” but did not include its assignees. NetScout is not and never was a subsidiary or affiliate of Danaher.
Since Hohenstein’s non-competition agreement only barred him from competing with Danaher, or with Danaher’s subsidiaries and affiliates, Danaher had no contractual right to bar Hohenstein from working for a company that instead competes with NetScout. As a result, NetScout cannot do so either in its capacity as Danaher’s assignee. “[A]n assignee of contract rights must stand in the shoes of the assignor and has no greater rights than the assignor.” Unisys Fin. Corp. v. Allan R. Hackel Org., Inc., 42 Mass. App. Ct. 275, 281 (1997); accord, e.g., Ford Motor Credit Co. v. Morgan, 404 Mass. 537, 545 (1989). NetScout has presented no evidence that Riverbed, Hohenstein’s new employer, competes with Danaher.
In any case, Hohenstein’s obligations under the disputed provisions of the 2011 Agreement expired by their terms twelve months after Hohenstein stopped working for any Danaher subsidiary. Hohenstein’s employment by any Danaher company ended on July 14, 2015, when he became an employee of NetScout. His obligations not to compete with Danaher therefore expired one year later, on July 14, 2016. Since
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Hohenstein did not stop working for NetScout until January 2017, the non-competition provisions of Hohenstein’s contract with Danaher had already expired. This is an independent reason why they cannot be enforced by NetScout.
NetScout correctly notes that Hohenstein agreed that his obligations under the 2011 Agreement would continue and not terminate merely because of a change in his position or title with “the Company,” meaning Danaher and its subsidiaries and affiliates. But this does not help NetScout prove its claims. Hohenstein never agreed that he would remain bound by his non-competition and non-solicitation covenants if a corporate transaction caused him to become employed by a new business that is not a subsidiary or affiliate of Danaher and that sells different products and services to different customers. To the contrary, paragraph 20 of the contract states that the Agreement was “intended to benefit each and every subsidiary, affiliate or business unit of the Company.” NetScout, or any other potential future buyer of part of Danaher’s business operations, was not an intended beneficiary of Hohenstein’s non-competition agreement with Danaher. Indeed, NetScout makes no claim that it can enforce the contract as a third-party beneficiary. Its only claim is made in its capacity as Danaher’s assignee.
In sum, the plain language of the 2011 Agreement indicates that NetScout cannot prevail on its claim that Hohenstein has violated the non-competition provisions in that contract.
Even if the 2011 Agreement were ambiguous in this regard, which it is not, that would not mean that NetScout has any likelihood of succeeding on its claim. Any ambiguity in applying the non-competition agreements must be construed “strongly against” NetScout because the contract was drafted by the contracting party (Danaher) that NetScout now contends was representing its future interests. See Leblanc v. Friedman, 438 Mass. 592, 599 n.6 (2003) (ambiguity in written contract must be construed “strongly against the party who drew it” (quoting Bowser v. Chalifour, 334 Mass. 348, 352 (1956)); accord, e.g., Costa v. Brait Builders Corp., 463 Mass. 65, 76 (2012) (where contract “provision is ambiguous, we construe it against the drafter” (citing Restatement (Second) of Contracts § 206, at 105 (1981)). This general rule of contract construction applies with full force to employment
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contracts, perhaps especially those imposing “a post-employment restraint imposed by the employer’s standard form contract.” Sentry Ins. v. Firnstein, 14 Mass. App. Ct. 706, 707 (1982). Under Massachusetts law, such contracts must be “scrutinized with particular care because they are often the product of unequal bargaining power and because the employee is likely to give scant attention to the hardship he may later suffer through the loss of his livelihood.” Id., quoting Restatement (Second) of Contracts § 188, comment g (1981). Since the Court must construe the relevant contractual provisions “strongly against” NetScout, if those provisions were ambiguous the Court would still conclude that NetScout has not shown that it is likely to succeed on the merits of its claim.
ORDER
Plaintiff’s motion for a preliminary injunction is DENIED IN PART and ALLOWED IN PART. The motion is denied with respect to the provisions of the proposed preliminary injunction that would have barred Defendant from soliciting Plaintiff’s customers or attempting to sell products that compete with those of the Plaintiff. The motion is allowed only with respect to the portions of the proposed injunction that Defendant did not oppose.
February 14, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - March 1, 2017 at 5:50 pm

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Feeney v. Wave Systems Corp., et al. (Lawyers Weekly No. 12-173-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2015-01938-BLS2
GERARD T. FEENEY,
Plaintiff
vs.
WAVE SYSTEMS CORP., WILLIAM M. SOLMS, & WALTER A. SHEPHARD,
Defendants
MEMORANDUM OF DECISION AND ORDER
ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND
ON DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
This is an action alleging a failure to pay accrued vacation time in violation of the Massachusetts Wage Act, G.L.c. 149 §148. Plaintiff, a former Chief Financial Officer for Wave Systems Corp. (Wave), has sued not only Wave but two of its officers, CEO and President William M. Solms and CFO Walter A. Shephard. Wave is in bankruptcy, so the claims against it are stayed. Now before the Court are plaintiff’s Motion for Summary Judgment and defendants’ Motion for Partial Summary Judgment. This Court concludes that both motions must be DENIED, except as to the issue of notice raised by the defendants’ motion.
Although certain facts in the summary judgment record are undisputed, the record also contains many fact disputes on critical issues. Briefly summarized, the record reveals the following. When Feeney was first hired by Wave in June 1998, the terms of his employment were set forth in an Employment Agreement. In addition to salary, Feeney was entitled to four weeks of vacation “in accordance with such executive benefit plans and policies as have been or may be established by Wave.” Upon termination, Feeney was entitled to be paid for all vacation
2
accrued as of the date of termination. In 2002, however, Wave issued an Employee Handbook which capped vacation pay at a total of 320 hours. There is a dispute of fact as to whether this applied to Feeney.
Plaintiff relies heavily on the affidavit submitted by Wave’s former CEO Stephen Sprague in which Sprague states that he decided in or around 2004 not to apply the vacation cap in the Employee Handbook and to permit employees to accrue their vacation time without limitation. However, Solms has submitted a competing affidavit which states that the Handbook controlled and that a vacation cap has been and continued to be applied to employees, including executives like Feeney. Although plaintiff correctly notes that Solms joined the company only in October 2013 and therefore would have no personal knowledge about company policies before that date, there is other evidence in the summary judgment record which backs him up. Specifically, Kathleen Donovan, who worked in the Human Resources Department at Wave and was Wave’s Controller during the relevant time period, states in an affidavit that Sprague never informed her that he was changing what was contained in the Employee Handbook and that it was her understanding that a cap applied. Emails dated in 2007 and 2008 by other employees in the Human Resources Department also suggest that a cap was in effect. At the very least, this evidence raises a question as the credibility of Sprague’s claim, and credibility questions are clearly not appropriate for summary judgment.
In their cross motion, the defendants argue that Shepard should be dismissed as a named defendant since he became CFO of the company after plaintiff received notice of termination and did not participate in formulating or implementing Wave’s vacation policy. The Wage Act imposes personal liability on the “president and treasurer of a corporation and any officers or agents having the management of such corporation…” G.L.c. 149 §148. Wage was hired to
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replace Feeney as CFO, beginning work at the company on April 8, 2014, nine days after Feeney received a notice of his termination. Feeney’s last day of work was April 30, 2014. Although the case against Shephard does indeed appear to be weak, this Court concludes that there are disputes of fact as to Shephard’s duties and as to the role he played in the decision not to pay Feeney for accrued vacation.
As to the second issue raised by the defendants’ motion (which plaintiff does not appear to contest), this Court agrees with the defendants that the March 31, 2014 email to Feeney informing him of his termination constituted written notice as required by his employment agreement.
SO ORDERED.
__________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: December 12, 2016
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Posted by Stephen Sandberg - December 30, 2016 at 6:31 pm

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Suffolk Construction Company, Inc. v. Benchmark Mechanical Systems, Inc., et al. (Lawyers Weekly No. 10-125-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12020

SUFFOLK CONSTRUCTION COMPANY, INC.  vs.  BENCHMARK MECHANICAL SYSTEMS, INC., & another.[1]

Suffolk.     May 2, 2016. – August 12, 2016.

Present:  Gants, C.J., Spina, Botsford, Duffly, Lenk, & Hines, JJ.[2]

Uniform Commercial Code, Secured creditor.  Practice, Civil, Motion to dismiss, Summary judgment, Statute of limitations.  Subrogation.  Indemnity.  Unjust Enrichment.  Restitution.  Limitations, Statute of.

Civil action commenced in the Superior Court Department on April 22, 2013. read more

Posted by Stephen Sandberg - August 13, 2016 at 2:08 am

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New England Survey Systems, Inc. v. Department of Industrial Accidents (Lawyers Weekly No. 11-076-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

15-P-331                                        Appeals Court

NEW ENGLAND SURVEY SYSTEMS, INC.  vs.  DEPARTMENT OF INDUSTRIAL ACCIDENTS.

No. 15-P-331.

Suffolk.     December 8, 2015. – June 30, 2016.

Present:  Grainger, Hanlon, & Agnes, JJ.

Workers’ Compensation Act, Failure to obtain insurance, Cancellation of insurance.  Department of Industrial AccidentsStatute, Construction.  Due Process of Law, Administrative hearing.  Administrative Law, Judicial review. read more

Posted by Stephen Sandberg - June 30, 2016 at 8:35 pm

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Galiastro, et al. v. Mortgage Electronic Registration Systems, Inc., et al. (Lawyers Weekly No. 10-023-14)

NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC‑11299

ANNE-MARIE GALIASTRO & another[1]  vs.  MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., & another.[2]

Worcester.     October 7, 2013.  ‑  February 13, 2014.

Present:  Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly, & Lenk, JJ.

Practice, Civil, Motion to dismiss, Retroactivity of judicial holding.  Retroactivity of Judicial HoldingMortgage, Foreclosure, Real estate.  Real Property, Mortgage.  Consumer Protection Act, Unfair act or practice.  Conspiracy.

Civil action commenced in the Superior Court Department on March 29, 2010. read more

Posted by Stephen Sandberg - February 13, 2014 at 3:37 pm

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