Court Opinion

ID: 1041701
Source: CourtListenerOpinion
Date Created: 2013-09-23 17:53:27.620913+00
Date Added: 2024-06-11T12:39:39.875752
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 13-1706

                  CORPORATE TECHNOLOGIES, INC.,

                      Plaintiff, Appellee,

                               v.

   BRIAN HARNETT; ONX USA LLC, d/b/a ONX ENTERPRISE SOLUTIONS,

                     Defendants, Appellants.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Douglas P. Woodlock, U.S. District Judge]

                             Before

                    Howard, Selya and Lipez,
                         Circuit Judges.

     Michele A. Whitham, with whom Christopher Hart, Elizabeth M.
Holland, and Foley Hoag LLP were on brief, for appellants.
     Kevin J. O'Connor, with whom Kelley A. Jordan-Price, Mark A.
Bross, and Hinckley, Allen & Snyder, LLP were on brief, for
appellee.

                         August 23, 2013
           SELYA, Circuit Judge. Businesses commonly try to protect

their good will by asking key employees to sign agreements that

prohibit them from soliciting existing customers for a reasonable

period of time after joining a rival firm.                 When a valid non-

solicitation covenant is in place and an employee departs for

greener pastures, the employer ordinarily has the right to enforce

the covenant according to its tenor. That right cannot be thwarted

by easy evasions, such as piquing customers' curiosity and inciting

them to make the initial contact with the employee's new firm.                   As

we shall explain, this is such a case.
I.   BACKGROUND

           This is an interlocutory appeal growing out of a business

dispute.     Below,    the    district       court   granted     a    preliminary

injunction that restrained defendant-appellant Brian Harnett, a

former employee of plaintiff-appellee Corporate Technologies, Inc.

(CTI), from doing business with certain customers to whom he had

sold products and services while in CTI's employ.              The preliminary

injunction extended to other matters as well; for example, it

included an order that defendant-appellant OnX USA LLC (OnX), a

competitor of CTI and Harnett's current employer, withdraw certain

bids on which Harnett had toiled.

           The    defendants     appeal       from   the   issuance        of   the

preliminary injunction.       After careful consideration, we affirm.

           The    pertinent    facts    are   catalogued    in       the   district

court's rescript, see CTI v. Harnett (CTI I), No. 12-12385, 2013 WL
1891308, at *1-2 (D. Mass. May 3, 2013), and we assume the reader's

                                       -2-
familiarity with that account.                 For present purposes, a sketch of

the origin and travel of the case will suffice.

               For   nearly      a    decade,      Harnett     worked    as   an     account

executive/salesman at CTI, a provider of customized information

technology solutions to sophisticated customers.                              Because CTI

regards    many      of    the       details    of    its    business    operations      as

proprietary, it insisted that Harnett sign an agreement (the

Agreement)      that      contained        non-solicitation       and    non-disclosure

provisions when he came on board.                    Harnett obliged.

               In October of 2012, Harnett jumped ship to work for OnX.

The record makes manifest that, following his departure from CTI,

Harnett participated in sales-related communications and activities

with certain of his former CTI customers on behalf of OnX.

               CTI was not pleased. It lost little time in repairing to

a Massachusetts state court, where it alleged that Harnett's

actions transgressed the Agreement and that OnX's encouragement of

those     actions      constituted          tortious        interference      with    CTI's

contractual rights and advantageous relationships.                             CTI's suit

sought both money damages and injunctive relief.

               The defendants removed the case to the United States

District Court for the District of Massachusetts based on diversity

of citizenship and the existence of a controversy in the requisite

amount. See 28 U.S.C. §§ 1332(a), 1441(a). When they answered the
complaint, the defendants denied that they had committed either a

breach    of    contract         or    a   tort.       Harnett    also     interposed     a

counterclaim (immaterial to the issues on appeal).

                                               -3-
            CTI sought a preliminary injunction based on affidavits,

deposition testimony, and documentary proffers.            The defendants

opposed the motion, submitting evidence of their own.              In due

course, the district court granted a preliminary injunction.           See

CTI v. Harnett (CTI II), No. 12-12385, 2013 WL 3334979, at *1-2 (D.

Mass. May 3, 2013).      Its decree restrained Harnett from engaging

"in any marketing or sales efforts . . . for a period of twelve

months" with respect to several CTI customers whom he formerly had

serviced.    Id. at *1.      With regard to those customers, it also

compelled the defendants to withdraw any bids that Harnett had

helped to develop.      See id.
            This    timely   appeal   followed.      Notwithstanding   its

interlocutory character, we have jurisdiction under 28 U.S.C.

§ 1292(a)(1).      Because the issues are time-sensitive, we expedited

briefing and oral argument.
II.   ANALYSIS

            In determining whether to grant a preliminary injunction,

the district court must consider: (i) the movant's likelihood of
success on the merits of its claims; (ii) whether and to what

extent the movant will suffer irreparable harm if the injunction is

withheld; (iii) the balance of hardships as between the parties;

and (iv) the effect, if any, that an injunction (or the withholding

of one) may have on the public interest.              See Ross-Simons of
Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir. 1996).

            In this diversity case, the law of Massachusetts supplies

the substantive rules of decision.          See Erie R.R. Co. v. Tompkins,

                                      -4-
304 U.S. 64, 78 (1938); Crellin Techs., Inc. v. Equipmentlease

Corp., 18 F.3d 1, 4 (1st Cir. 1994).            The district court found that

factors two through four of the preliminary injunction paradigm

counseled in favor of, or at least were consistent with, the grant

of injunctive relief.            See CTI I, 2013 WL 18913078, at *7-10.   The

defendants, by their silence, have acquiesced in these findings.1

See, e.g., Ross-Simons, 102 F.3d at 16 (addressing only those

prongs of the preliminary injunction paradigm challenged by the

appellant).

               But the four factors are not entitled to equal weight in

the decisional calculus; rather, "[l]ikelihood of success is the

main       bearing   wall   of    the   four-factor   framework."   Id.   The

defendants have staked their appeal entirely on the perceived

fragility of this main bearing wall, decrying the district court's

determination that CTI was likely to succeed on the merits of its

claims.

               Our standard of review is familiar.            When assaying a

trial court's ruling on a motion for a preliminary injunction, "we
scrutinize abstract legal matters de novo, findings of fact for

clear error, and judgment calls with considerable deference to the

       1
       There is a potential question about the fourth element of
the preliminary injunction paradigm. Under Massachusetts law, a
court need not consider the effect of an injunction on the public
interest. See Hull Mun. Lighting Plant v. Mass. Mun. Wholesale
Elec. Co., 506 N.E.2d 140, 144 (Mass. 1987). It might be argued in
a diversity case that state law supplants federal law in this
regard. Here, however, neither side raises any issue about the
fourth element. Consequently, we need not probe this point more
deeply. See Ocean Spray Cran., Inc. v. PepsiCo, Inc., 160 F.3d 58,
61 (1st Cir. 1998).

                                          -5-
trier."   New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287

F.3d 1, 9 (1st Cir. 2002).    We will disturb the ruling below only

if the court abused its discretion.     See id.

          Abuse-of-discretion review is respectful but appellate

deference is not unbridled. For one thing, a material error of law

invariably constitutes an abuse of discretion.        See Rosario-Urdaz

v. Rivera-Hernandez, 350 F.3d 219, 221 (1st Cir. 2003).                 For

another thing, an abuse of discretion "occurs when a material

factor deserving significant weight is ignored, when an improper

factor is relied upon, or when . . . the court makes a serious

mistake in weighing [the relevant factors]."      Indep. Oil and Chem.
Workers of Quincy, Inc. v. Procter & Gamble Mfg. Co., 864 F.2d 927,

929 (1st Cir. 1988).
          A.    Breach of the Non-Solicitation Agreement.

          The non-solicitation provision contained in the Agreement

prohibits Harnett from "solicit[ing], divert[ing] or entic[ing]

away existing [CTI] customers or business" for a period of twelve

months following the cessation of his employment.            The dispute
between the parties turns on the distinction between actively

soliciting and merely accepting business — a distinction that the

Massachusetts Appeals Court aptly termed "metaphysical." Alexander
& Alexander, Inc. v. Danahy, 488 N.E.2d 22, 30 (Mass. App. Ct.

1986).

          The   defendants   argue   that   because   the   customers   in

question initiated contact with Harnett, he was thereafter free to

deal with them without being guilty of solicitation.         CTI demurs.

                                 -6-
It points out that the customers only contacted Harnett following

their receipt of a blast email announcing his hiring by OnX.          This

email was sent to a targeted list of prospects, approximately forty

percent of whom were (or at least, had been) CTI customers.            The

record   shows   numerous   interactions   between    Harnett   and    the

customers after initial contact — and CTI touts these interactions

as compelling evidence that Harnett engaged in solicitation.

           The line between solicitation and acceptance of business

is a hazy one, and the inquiry into where this line should be drawn

in a particular case is best executed by the district court.           See
Reliance Steel Prods. Co. v. Nat'l Fire Ins. Co., 880 F.2d 575, 576

(1st Cir. 1989) (observing that fact-intensive inquiries are "the

staples of a trial court's diet, and comprise an unappetizing

. . . bill of fare for appellate digestion").        This is especially

true at the preliminary injunction stage — a stage at which the

district court is required only to make an estimation of likelihood

of success and "need not predict the eventual outcome on the merits

with absolute assurance." Ross-Simons, 102 F.3d at 16. Consistent
with this structure, our task is merely to determine whether the

district court's conclusion falls within a range of reasonably

probable outcomes.   See id.
           The defendants seek to change the trajectory of the

debate by insisting that, once a customer initiates contact with an

employee who has switched his affiliation, all bets are off and

subsequent business activity cannot as a matter of law constitute

solicitation. This argument is simply a linguistic trick: creative

                                  -7-
relabeling, without more, is insufficient to transform what is

manifestly a question of fact into a question of law.                  See Fed.
Refin. Co. v. Klock, 352 F.3d 16, 27 (1st Cir. 2003).

           To be sure, Massachusetts trial courts have accorded

varying degrees of significance to initial contact depending on the

facts at hand, compare Oceanair, Inc. v. Katzman, No. 00-3343, 2002

WL 532475, at *6 (Mass. Super. Ct. Jan. 22, 2002) (treating initial

contact as crucial), with McFarland v. Schneider, No. 96-7097, 1998

WL   136133,   at    *37-38,    *44   (Mass.   Super.    Ct.   Feb.   17,   1998)

(treating initial contact as non-dispositive), and the parties each

point to language that seems to speak in their favor.                 But these

trial court decisions have no precedential force, see Dayton v.
Peck, Stow and Wilcox Co. (Pexto), 739 F.2d 690, 694 n.5 (1st Cir.

1984), and in any event, no consensus emerges from them. Where, as

here, the highest court of a state has not spoken to a question of

state law, our precedents teach that we should look, among other

things, to "persuasive adjudications by courts of sister states"

and "public policy considerations."            Blinzler v. Marriott Int'l,
Inc., 81 F.3d 1148, 1151 (1st Cir. 1996).

           After      careful    consideration,     we    conclude     that the

Massachusetts       Supreme    Judicial   Court,   if   confronted    with   the

question, would hold that a per se rule vis-à-vis initial contact

has no place in this equation. In reaching this conclusion, policy

considerations loom large.

           In the employment context, restrictive covenants are

meant to afford the original employer bargained-for protection of

                                       -8-
its accrued good will.           See generally Marine Contractors Co. v.

Hurley, 310 N.E.2d 915, 920 (Mass. 1974).               According decretory

significance to who makes the first contact would undermine this

protection because that factor, standing alone, will rarely tell

the   whole    tale.     And     because   initial   contact   can   easily   be

manipulated      —   say,   by    a   targeted   announcement    that   piques

customers' curiosity2 — a per se rule would deprive the employer of

its bargained-for protection.

              There is a related consideration.         The defendants argue

as if "initial contact" is a term of art, capable of conveying a

fixed meaning.         But that is not the case.        Initial contact can

entail anything from a call to ascertain the circumstances of a

defendant's new employment, see, e.g., Getman v. USI Holdings
Corp., No. 05-3286, 2005 WL 2183159, at *4 (Mass. Super. Ct. Sept.

1, 2005), to the placement of an order, see, e.g., Liberty Mut.

Ins. Co. v. Batchelor, No. 09-4170, 2009 WL 5910242, at *1 (Mass.

Super. Ct. Nov. 23, 2009).            At many points along this continuum,

the initial contact will be preliminary and, thus, unlikely to bear
fruit in the absence of subsequent solicitation.                The amorphous

nature of the term counsels persuasively against a per se rule.

              This lack of precise meaning is reinforced by yet another

factor: the weight that initial contact should be given depends to

some extent on the setting in which a particular case arises.                 In

an industry in which a defendant subject to a non-solicitation

      2
       The announcement that OnX made in this instance, discussed
infra, illustrates this point.

                                        -9-
agreement       is    peddling    fungible,      off-the-shelf    goods,    initial

contact might weigh heavily.            In contrast, where the sales process

is complex and the products are customized, initial contact is

usually at a considerable remove from a closed sale.                    In such a

situation, initial contact is likely to weigh far less heavily.

This variable militates strongly against a bright-line rule.

            In the last analysis, we believe that the better view

holds that the identity of the party making initial contact is just

one factor among many that the trial court should consider in

drawing the line between solicitation and acceptance in a given

case. This flexible formulation not only reflects sound policy but

also comports with well-reasoned case law from other jurisdictions.

See, e.g., Bessemer Trust Co. v. Branin, 949 N.E.2d 462, 469 (N.Y.
2011) (declining to create a "hard and fast rule").                        Thus, we

decline the defendants' invitation to assign talismanic importance

to initial contact.

            Discerning no error of law, we need not tarry over the

district court's weighing of the facts.                 This is a situation in
which     the        initial   contacts     by    customers      are   necessarily

preliminary, the sales process is sophisticated, and the products

are custom-tailored. Viewed against this backdrop, the evidence of

record    is     adequate        to   underpin    the   lower     court's    binary

determination that Harnett violated the non-solicitation covenant

and that the plaintiff is therefore likely to succeed on the

merits.

                                          -10-
             There    is   no   need   for    us    to    wax   longiloquent.

Solicitation can take many forms, and common usage suggests that

the word has a protean quality.         See, e.g., The Compact Edition of
the Oxford English Dictionary 2911 (1971) ("To entreat or petition

(a person) for, or to do, something; to urge, importune; to ask

earnestly or persistently."). Here, moreover, the non-solicitation

provision specifically forbids Harnett from "entic[ing] away"

customers of CTI.

             Harnett's own words and actions with respect to customers

covered    by   the   non-solicitation        provision     lend   considerable

credence to the district court's tentative conclusion that he

violated that provision.        His calendar, email, and testimony show

significant business communications with at least four of his

former CTI customers on behalf of OnX.             This persistent pattern of

pursuing patronage permits a plausible inference that he was urging

those customers to do business with OnX rather than CTI (in other

words, an inference that he was trying to entice them away).

             What is more, Harnett organized several meetings with CTI

customers designed to facilitate future sales and admitted in his

deposition that he had transmitted product pricing information to

them.     Additionally, he submitted no fewer than ten requests for

registered      opportunities     (ROs)       to    third-party     information

technology vendors, in which he sought exclusive discounts for

future sales proposals to CTI customers.                 These submissions are

telling because ROs are a prerequisite to obtaining orders from

customers in this specialized field.

                                       -11-
           We add one last point.     Even though we have entertained

the parties' supposition that it was the customers who made the

initial contacts, the record shows that those customers reached out

to Harnett only in response to a blast email from OnX.         While we do

not question the rights of parties to make public announcements of

changes in employment, "targeted mailings" to former customers may

cross the line into impermissible solicitation.              Bessemer, 949

N.E.2d at 469.   Given how many of Harnett's clients were on the

relatively short email list, it was plausible to infer here (as the

district court apparently did) that the email was part and parcel

of a pattern of solicitation.

           Harnett's overall course of conduct is most vividly

exemplified by what happened with a particular customer.3                On

November 8, 2012 — shortly after Harnett switched sides and in

direct response to OnX's blast email — a high-ranking Company X

executive contacted OnX in order to set up a meeting with Harnett.

Harnett   arranged   the   meeting   and   brought   along    OnX's   chief

technology officer. Harnett's calendar over the next several weeks
reflects periodic contacts (and reminders to schedule calls) with

Company X, as well as an internal OnX call to discuss the customer.

Furthermore, Harnett admitted in his deposition that there were

other calls not shown in his calendar.

           On December 3, Harnett submitted a request for an RO

anent Company X to a third-party vendor.         Eleven days later, he

     3
       The particular customer is well-known to the parties but,
due to confidentiality concerns, we refer to it only as "Company
X."

                                 -12-
reviewed with Company X's management a sales proposal that had been

submitted by OnX to Company X.              This process culminated in a

completed sale.       One could more readily believe in the Tooth Fairy

than believe that this course of conduct was insufficient to ground

a finding of probable solicitation.

             In an endeavor to denigrate the force of the district

court's reasoning, the defendants say that the court confused the

non-solicitation provision — which did not bar Harnett from all

competition but, rather, barred him from soliciting CTI's customers

— with a non-competition provision. We have scoured the record and

find no indication that the district court labored under any such

misapprehension. To the contrary, the record shows that the court

understood the parameters of the non-solicitation provision and

appropriately applied those parameters.

             Given the court's supportable findings of fact, its

conclusion     that    Harnett    likely    engaged   in   solicitation   was

reasonable.        In turn, that reasonable conclusion suffices to

warrant its grant of injunctive relief.
                             B.    Other Issues.

             There are a few loose ends.      We proceed to tie up each of

them.

             In their opening brief, the defendants challenged the

district court's finding that OnX tortiously interfered with CTI's

rights under the Agreement.         This challenge was premised on the

solitary ground that Harnett's activities did not support a finding

that    he   had    likely   engaged   in    impermissible    solicitation.

                                     -13-
Accordingly, the challenge is undercut by our conclusion that the

district court neither erred nor abused its discretion in finding

a likelihood that Harnett engaged in impermissible solicitation.

          In their reply brief, the defendants sought to shift

gears and make a different argument. There, they asserted that the

evidence did not permit the district court to find the improper

motive or means required to sustain a cause of action for tortious

interference.     See Blackstone v. Cashman, 860 N.E.2d 7, 12-13

(Mass. 2007) (explaining that the plaintiff must prove that the

defendant's interference, "in addition to being intentional, was

improper in motive or means").          It is settled law that, in the

absence of exceptional circumstances, an appellant cannot raise new

arguments for the first time in a reply brief.              See Cahoon v.
Shelton, 647 F.3d 18, 29 n.8 (1st Cir. 2011); Sandstrom v. ChemLawn

Corp., 904 F.2d 83, 86 (1st Cir. 1990).       The instant case presents

no exceptional circumstances sufficient to relieve the defendants

from the operation of this preclusory rule.

          This brings us to the defendants' final broadside: their
contention that the district court misapplied the "inevitable

disclosure"     doctrine.        This   doctrine,    sparingly      used   in

Massachusetts,     allows   an     employer   to    prove   trade     secret

misappropriation by demonstrating that its former employee's new

employment will inevitably lead him to rely on his knowledge of the

plaintiff's trade secrets.       See PepsiCo, Inc. v. Redmond, 54 F.3d
1262, 1269 (7th Cir. 1995).       In the defendants' view, the district

court should not have incorporated the doctrine into its likelihood

                                    -14-
of success analysis on the claimed violation of the non-disclosure

agreement.       This is so, the defendants say, because the doctrine

bears only on the presence of irreparable harm.              See U.S. Elec.

Servs., Inc. v. Schmidt, No. 12-10845, 2012 WL 2317358, at *9 (D.

Mass. June 19, 2012) (discussing cases).

               We need not plunge into this thicket.         Here, there was

sufficient record evidence for the district court to infer that it

was    likely     that     Harnett    actually   used   CTI's   confidential

information in order to secure business for OnX.             See CTI I, 2013

WL 1891308, at *6. No more was exigible to support the preliminary

injunction that the court issued with respect to the non-disclosure

agreement.4      We explain briefly.

               When Harnett left CTI's employ, he took with him about

twenty-five pages of notes that contained confidential information,

much of it related to potential sales. The court narrowly tailored

the    preliminary       injunction    with   respect   to   non-disclosure,

enjoining only the use of information contained in Harnett's notes.

The court's comments about inevitable disclosure, whether or not
correct, were therefore harmless.
III.       CONCLUSION

               We need go no further. For the reasons elucidated above,

we uphold the district court's entry of the preliminary injunction.
               Affirmed.

       4
       We note that the defendants' briefs do not contend that the
lower court's use of the "inevitable disclosure" doctrine
contaminated its findings on the claimed breach of the non-
solicitation agreement.

                                       -15-