ABM Industry Groups, LLC v. Palmarozzo, et al. (Lawyers Weekly No. 12-035-17)

ABM Industry Groups, LLC, seeks a preliminary injunction that would enforce restrictive covenants signed by Joseph Palmarozzo while he was working for ABM as a branch manager. ABM provides janitorial and building maintenance services at larger facilities and projects. It is a large, publicly-traded company that generates roughly $ 5 billion in annual revenues. Palmarozzo left ABM in December 2016 to become the general manager at Compass Facility Services, Inc., a much smaller company that generates around $ 15 million in annual revenues by providing janitorial services at relatively small facilities. Palmarozzo overseas CFS’s operations; he has no responsibility for and no role in sales. ABM seeks an order that would bar Palmarozzo from working for CFS, compel Palmarozzo to comply with the non-competition and non-solicitation covenants in his ABM employment contract, and bar him from using or divulging any confidential information belonging to ABM.
The Court will DENY the motion for a preliminary injunction because ABM has not proved that it will likely succeed in proving that its non-competition agreement with Mr. Palmarozzo is enforceable or that Palmarozzo has violated his non-solicitation or non-disclosure agreements.
1. Legal Standards.
1.1. 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).
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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 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, Inc. v. Colby, 364 Mass. 773, 778 (1974).
1.2. 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 be enforced under Massachusetts law only 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, 364 Mass. at 778-780.
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).
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“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 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.
2. Relief Sought against Mr. Palmarozzo. ABM is not entitled to preliminary injunctive relief against Mr. Palmarozzo because it has not met its burden of proving that it is likely to succeed on its claims that Palmarozzo breached his non-competition, non-solicitation, or non-disclosure covenants.
2.1. Sufficiency of Consideration and Suggestion of Duress. At the outset, the Court notes that it is not convinced by Palmarozzo’s arguments that his employment agreement with ABM is unenforceable for lack of consideration and because it was signed under duress. Nonetheless, the Court concludes that ABM has
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not met its burden of proving it is entitled to preliminary injunctive relief, as discussed in the following sections.
The written employment agreement that Palmarozzo accepted in 2015 was supported by adequate consideration, even though Palmarozzo had already been working for ABM for many years as an at-will employee and was not given any additional compensation in exchange for agree to non-competition, non-solicitation, and non-disclosure covenants.
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 employer’s financial condition improved); Horner v. Boston Edison Co., 45 Mass. App. Ct. 139, 143 (1998) (release of claims).
Since Palmarozzo was employed at will by ABM, 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).
The fact that Palmarozzo was told he could not continue to work for ABM if he did not sign the agreement does not show that the contract is voidable on the grounds of economic duress. See United Shoe Machinery Co. v. La Chapelle, 212 Mass. 467, 477 (1912) (same as to assignment of rights in shoe machinery made by employee in exchange for continued employment). A contract entered into under physical or economic duress that “deprives the victim of his unfettered will” is voidable. Cabot Corp. v. AVX Corp., 448 Mass. 629, 637 (2007). However, “[t]he assertion of duress must be proved by evidence that the duress resulted from defendant’s wrongful and
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oppressive conduct and not by plaintiff’s necessities.” Id. at 638, quoting International Underwater Contrs., Inc. v. New England Tel. & Tel. Co., 8 Mass. App. Ct. 340, 342 (1979), and W.R. Grimshaw Co. v. Nevil C. Withrow Co., 248 F.2d 896, 904 (8th Cir. 1957). Merely urging another party to accept a deal that is less generous than they would like, and threatening not to do business with them if they do not, is not economic duress even if the demand is made of someone in difficult financial circumstances. See Boston Medical Center v. Secretary of Executive Office of Health and Human Services, 463 Mass. 447, 464 & 468-469 (2012); Cabot Corp., 448 Mass. at 638-639.
2.2. Non-Competition Agreements. Although Palmarozzo’s employment agreement is an enforceable contract, the Court concludes that ABM has not shown that it is likely to succeed in proving that the non-competition covenant is enforceable, because ABM has not met its burden of proving that enforcing the covenant will protect against misuse of confidential information or loss of goodwill. It appears that ABM’s “purpose in attempting to enforce the covenant is to protect itself from ordinary competition. This it cannot do.” New England Canteen Services, 372 Mass. at 676.
2.2.1. No Confidential Information. There is no evidence and ABM does not claim that Palmarozzo copied and took with him any information belonging to ABM.
ABM is not entitled to enforce the non-competition covenant on the ground that Palmarozzo came to know the identities of some of ABM’s clients and their janitorial needs and requirements. An employee is free to carry away his own memory of customers’ names, needs, and habits and use that information, even to serve or to solicit business from those very customers. Such “remembered information” is not confidential because the information itself, as distinguished from an employer’s compilation of such information into a list or database, is known to the customers and thus not kept secret by the employer. American Window Cleaning Co. of Springfield, Mass. v. Cohen, 343 Mass. 195, 199 (1961); accord Angell Elevator Lock Co. v. Manning, 348 Mass. 623, 625 (1965); Woolley’s Laundry, 304 Mass. at 391-392; May v. Angoff, 272 Mass. 317, 320 (1930).
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Similarly, although ABM asserts that Palmarozzo has knowledge of “ABM’s marketing plans, business strategies, pricing structures, and fees,” it has not met its burden of proving that any of that sort of information known to Palmarozzo was kept confidential, rather than shared with customers and potential customers in the regular course of ABM’s business. Prices that ABM actually quotes to or charges its customers are not confidential and provide no basis for enforcing a non-competition agreement. American Window Cleaning, 343 Mass. at 199 (remembered information as to employer’s prices is not confidential). ABM also “has no proprietary interest” in merchandising techniques, strategies, or methods that are disclosed to potential customers and thus are not kept confidential. National Hearing Aid Centers, 2 Mass. App. Ct. at 290; accord United Tool & Indus. Supply Co. v. Torrisi, 356 Mass. 103, 106 (1969).
Finally, ABM asserts that Palmarozzo has knowledge of “other proprietary and confidential systems, process, and procedures.” That sort of conclusory assertion is insufficient to demonstrate that ABM is entitled to a preliminary injunction enforcing the non-competition covenant. As ABM conceded at oral argument, there is nothing confidential about the manner in which ABM provides janitorial services to its clients.
2.2.2. No Threat to Goodwill. Nor does it appear likely that ABM will succeed in proving that Palmarozzo’s non-competition agreement is needed to protect ABM’s good will with its customers. “Good will” is “a company’s positive reputation in the eyes of its customers or potential customers. Good will is generated by repeat business with existing customers or by referrals to potential customers.” North American Expositions Co. Ltd. P’ship v. Corcoran, 452 Mass. 852, 869 (2009) (internal citations omitted).
In the past ten years ABM and CFS have both bid on the same job only once, and only one former ABM customer has switched and hired CFS to do its janitorial work instead.
The evidence demonstrates that Palmarozzo had nothing to do with ABM’s loss of one customer to CFS after Palmarozzo stopped working for ABM. The customer that switched is known as MediTech. ABM presented an affidavit asserting that it received a letter from that client stating that MediTech cancelled its contract with
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ABM after learning “confidential information relating to ABM’s workforce and business strategies” from Palmarozzo, who had been MediTech’s contact at ABM. That assertion is false because it grossly mischaracterizes what MediTech actually wrote. Defendants provided a copy of this letter. The letter states that MediTech canceled its contract because ABM had been reducing the number of hours that ABM employees spent cleaning MediTech’s facilities, ABM did so without notifying MediTech, and ABM did not adjusting its monthly rates to account for this reduction in labor hours. The letter makes clear that MediTech tried to speak with Palmarozzo after realizing all of this, but was told that Palmarozzo had recently left the company. In sum, MediTech cancelled its contract because ABM’s own business practices had obliterated the goodwill had previously established with MediTech, not because Palmarozzo helped CFS steal the client away.
The Court credits Defendants’ undisputed evidence that Palmarozzo is not and will not be involved in any sales efforts by CFS, and that in any case CFS and ABM almost never compete for the same customers because ABM’s janitorial services business focuses on accounts that are much too large for CFS to handle. Under these circumstances, it seems unlikely that whatever good will that ABM may have with its remaining customers will be harmed if Palmarozzo continues to work for CFS.
2.3. Non-Solicitation Agreement. ABM is not entitled to a preliminary injunction enforcing the non-solicitation covenant because it has not met its burden of proving that it is likely to succeed in proving that Palmarozzo ever breached it. See generally Fordyce, 457 Mass. at 265. The Court assumes without deciding that ABM is entitled to enforce Palmarozzo’s covenant not to solicit any ABM client that Palmarozzo worked with and was responsible for while he was employed by ABM. But ABM has not shown that Palmarozzo ever breached this covenant or is likely to do so in the future. The Court credits the undisputed evidence that Palmarozzo will play no role in any sales efforts by CFS. And, as discussed above, it finds that Palmarozzo had nothing to do with the decision by one customer to cancel its contract with ABM in January 2017 and hire CFS to provide janitorial services instead.
2.4. Non-Disclosure Agreement. Although the parties’ non-disclosure agreement remains in force and Palmarozzo remains bound by it, ABM is not entitled
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to a court order enforcing this confidentiality provision because—as discussed above—it has not shown that it is likely to succeed on its claim that Palmarozzo has violated or will violate his obligation not to disclose confidential information belonging to ABM.
3. Relief Sought against Compass Facility Services. Finally, ABM is also not entitled to any preliminary injunctive relief against CFS. ABM claims that CFS tortiously interfered with its contractual relations with Palmarozzo and engaged in unfair and deceptive practices in violation of G.L. c. 93A. ABM has not shown that it is likely to succeed on either of these claims.
The tortious interference claim against CFS is likely to fail because ABM has been unable to muster any evidence that Palmarozzo breached his employment agreement with ABM, as discussed above. See generally Weiler v. PortfolioScope, Inc., 469 Mass. 75, 84 (2014) (proof that defendant knowingly induced third party to break contract is element of claim for tortious interference with contractual relations); JNM Hospitality, Inc. v. McDaid, 90 Mass. App. Ct. 352, 354-355 & 357 (2016) (where landlord did not breach lease, third party cannot be liable for intentionally interfering with lease to detriment of tenant). CFS was free to compete for MediTech’s business so long as it did not do so “through improper motive or means.” Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass. App. Ct. 582, 608-609 (2007) (reversing jury finding that defendant tortuously interfered with customer relationships).
The claim against CFS under Chapter 93A is likely to fail for the same reason. Since ABM’s claim under c. 93A is based solely on and thus “is wholly derivative of” its claims for breach of contract and tortious interference with contractual relations, and ABM has not shown it is likely to succeed in proving that Palmarozzo ever breached his employment agreement, ABM is unlikely to succeed in proving its claim under c. 93A. See Pembroke Country Club, Inc. v. Regency Savings Bank, F.S.B., 62 Mass. App. Ct. 34, 40-41 (2004) (ordering judgment in favor of defendant); accord, e.g., Macoviak v. Chase Home Mortgage Corp., 40 Mass. App. Ct. 755, 760, rev. denied, 423 Mass. 1109 (1996) (c. 93A claim “necessarily fail[s]” where it “is solely
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based upon … underlying claim for common law” tort and that tort claim fails as a matter of law).
Plaintiff’s motion for a preliminary injunction is DENIED.
March 30, 2017
Kenneth W. Salinger
Justice of the Superior Court

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