MEMORANDUM

TAURO, District Judge.

I. Introduction

Rohm and Haas Electronic Materials, LLC ("Plaintiff") asserts that Electronic Circuits Supplies, Inc. ("Defendant"), a former distributor of one of Plaintiff's goods, committed fraud and deceit by deleting a material term in a prior non-competition provision while the Parties were amending another portion of their distributorship agreement. Plaintiff also claims that Defendant is misappropriating Plaintiff's goodwill and confidential information by breaching the Parties' agreement. Presently at issue is Plaintiff's Motion for Preliminary Injunction [#3]. Plaintiff seeks to enjoin Defendant and its agents, representatives or other persons authorized to speak or act on Defendant's behalf from selling the same, similar, or competitive products to Plaintiff's customers for one year. For the following reasons, Plaintiff's Motion for Preliminary Injunction is DENIED.

II. Background

Most of the material facts are undisputed.1 Plaintiff manufactures and distributes electronic products that are used in manufacturing printed circuit boards.2 Prior to December 31, 2007, Plaintiff sold some of its products directly to customers and also used a network of exclusive distributors.3 Plaintiff's network of distributors is responsible for maintaining direct relationships with customers by providing logistical and technical support to the customers. The distributors purchase products from Plaintiff and sell the products to customers.4 Plaintiff has around 15,000 employees and generated sales nearing nine billion dollars in 2007.5 Plaintiff is a subsidiary of Dow Chemicals, and Dow has 46,000 employees and generates annual sales around fifty billion dollars per year.6

Since 1991, Defendant has had a network of customers in the Mid-Atlantic and New England regions on behalf of chemical manufacturers, including those creating chemicals for use in circuit boards and chemical milling industries.7 Defendant has five employees, including its President and co-owner.8 Defendant generates around four million dollars in revenue per year.9 Defendant was Plaintiff's distributor for certain customer accounts.10

A. The Parties' Agreement

Plaintiff entered into an Amended and Restated Distributor Agreement ("Agreement") with Defendant, which made Defendant the exclusive distributor of Plaintiff's products in a specific territory that included New Jersey, New York, Pennsylvania, and Virginia ("Territory").11 Massachusetts law governed the Agreement.12

In the Agreement, Defendant agreed not to sell products that competed with Plaintiff's products during the period of the Agreement and for twelve months following its termination.13 Additionally, Defendant would not be allowed to sell competitive products as long as Defendant violated its non-competition obligations and for any period required for litigation to enforce these obligations.14

The Agreement also required Defendant to agree that goodwill accrued solely to Plaintiff and that Plaintiff owned all rights, title, and interest to its products.15 Additionally, Plaintiff retained ownership of all trade secrets and Defendant agreed not to disclose any "confidential information" without Plaintiff's prior written approval.16 Moreover, during the time period of the Agreement, Defendant was not allowed to market, promote, or sell similar or competitive products within the Territory.17

B. The Amendment to the Agreement and the Disputed Facts

Plaintiff became dissatisfied with Defendant's performance and sought an amendment to the Agreement to remove a number of customer accounts from Defendant's purview.18 Hal Thrasher, Plaintiff's Director of Sales for North and South America,19 notified Martin Georgia, the President and co-owner of Defendant,20 of this decision and promised to send him a proposed amendment to the Agreement for his review.21 Thrasher and Georgia did not discuss any further details of the amendment.22 Thrasher e-mailed Georgia an electronic document that was a draft letter amending the Agreement.23 Georgia inserted language into the document that removed the non-competition provision24 and sent at least one signed version back to Thrasher ("Amendment").25 Georgia expected Plaintiff and its legal staff to read the two-page document and did not explicitly inform Plaintiff of the insertion.26 Plaintiff counter-signed without knowledge that Georgia had made the changes and in reliance on the instructions that Plaintiff provided to Defendant.27

The Parties dispute the exact instructions provided by Plaintiff when Plaintiff sent the electronic document, and whether Defendant complied with those instructions. Plaintiff claims that Thrasher "advised" Georgia that if Georgia had any "proposed edits," then he should "mark up the document" and send it back "electronically" so that Plaintiff could approve or reject the proposed changes.28 If Georgia had no changes, he was "advised" to send two signed originals of the letter to Thrasher for Plaintiff to counter-sign.29 Defendant, however, claims that it did as instructed. That is, Georgia inserted language into the electronic version of the proposed amendment removing the non-competition provision and mailed a signed version to Thrasher.30 Neither Party has produced the original e-mail correspondence between Thrasher and Georgia.

C. Termination of the Agreement

Plaintiff, through the Amendment, re-assigned three major accounts from Defendant's responsibility to a competitor of Defendant's.31 In January 2010, Defendant notified Plaintiff that it intended to terminate the Agreement, effective March 11, 2010.32 Thrasher notified Georgia of Defendant's non-competition obligations in the Agreement. In response, Georgia advised Thrasher to look at the Amendment.33 This was the first time that Thrasher became aware of the phrase in the Amendment that had removed Defendant's non-competition obligations.34

Plaintiff has now been informed by customers that Defendant has arranged to sell a competitor's products that are similar to and competitive with Plaintiff's product line.35 At least one customer has notified Plaintiff that he was going to stay with the existing distributor (that is, Defendant) because Defendant told that customer that Plaintiff "fired" Defendant.36

Plaintiff allegedly wrote to Defendant to remind it of its obligations under the Agreement, which include its non-competition obligations.37 On February 9, 2010, Defendant allegedly notified Plaintiff that it believed that it had no ongoing non-competition obligation and that enforceability of the exclusion of section 12(f) was not affected by the fact that Defendant had not provided Plaintiff notice of the change to that section.38

III. Discussion

Despite the disagreement with regard to the facts, the Parties' competing versions of events are not in sharp dispute such that the "propriety of injunctive relief hinges on determinations of credibility."39 Given the need to balance speed and practicality against accuracy and fairness, along with the First Circuit's reminder that "an evidentiary hearing is not an indispensable requirement when a court allows or refuses a preliminary injunction" under Federal Rule of Civil Procedure 65,40 this court can proceed to rule considering the facts presented.41

As the Supreme Court has recently instructed, a "plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest."42 In general, injunctive relief is "to be used sparingly, and only in a clear and plain case."43 The burden is on the moving party to establish that consideration of these factors supports the issuance of a preliminary injunction.44

Here, all four factors weigh in favor of denying the request for a preliminary injunction.

A. Success on the Merits

The First Circuit has instructed that the "sine qua non of [the] four-part inquiry is likelihood of success on the merits: if the moving party cannot demonstrate that he is likely to succeed in his quest, the remaining factors become matters of idle curiosity."45 In this court's analysis, therefore, likelihood of success is the primary obstacle that Plaintiff must surmount.46

Plaintiff contends that it can establish likelihood of success on the merits in proving that Defendant's sale of competitive products breaches the non-competition provision of the Agreement. Plaintiff alleges that the only argument available to Defendant is that the Amendment should be enforced to include the purported deletion of the non-competition obligation in the Agreement. Plaintiff replies to this argument that the language deleting the non-competition obligation is unenforceable because it was placed there deceitfully and does not express the intentions of the Parties.47 Moreover, enforcing the non-competition provision is an appropriate remedy for Defendant's deceit.

Plaintiff's arguments fail for the following reasons.

1. Is the Amendment Unenforceable?

Plaintiff contends that Defendant's Amendment to the Agreement is unenforceable for two reasons. First, Defendant's Amendment was an act of fraud and deceit.48 Second, Defendant's act was a breach of contract.49 Both of Plaintiff's contentions fail, for the reasons explained below.

a. Fraud and Deceit

Plaintiff contends that Defendant committed fraud and deceit. Specifically, Plaintiff contends that the Parties agreed to amend the Agreement for the single narrow purpose of modifying Defendant's customer list, and Defendant had the intent to deceive because it did not notify Plaintiff of the change in the non-competition obligations.50 Plaintiff also claims that there was no discussion of or agreement to modify or remove Defendant's non-competition obligations as part of the Amendment.51 Plaintiff argues that Defendant should have flagged for Plaintiff any proposed changes and that by returning a signed Amendment, Defendant was indicating to Plaintiff that it had made no changes.52 By proceeding in this manner, Defendant allegedly expected that Plaintiff would possibly overlook the alteration.53

The tort of deceit requires a showing "that the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon the representation as true and acted upon it to his damage."54 A failure to disclose materials facts may constitute a false representation if a duty to disclose exists.55

Plaintiff is not likely to succeed on the merits of proving that Defendant committed fraud or deceit because Plaintiff has failed to show that Defendant violated a duty to disclose. Additionally, Plaintiff has failed to show that Defendant (a) made a false representation or (b) had a duty to disclose.

If there is no evidence of intent to deceive or of a misleading statement,56 and the terms "are expressed in the body of [the contract] in a way not calculated to escape attention," then the "law presumes, in the absence of fraud or imposition, that [a party] did read it, or was otherwise informed of its contents, and was willing to assent to its terms without reading it."57 This general presumption appears particularly appropriate for a case where a party should expect further revisions by another party, as is the case here, where Plaintiff sent an Amendment initiating a substantial reduction of Defendant's business by removing three accounts.

First, even if Defendant was possibly under a duty to disclose, Defendant did not violate its duty. The duty to disclose requires the exercise of "reasonable care."58 Although Defendant did not follow Plaintiff's advised or requested directions (to send changes electronically or in a Word document), Defendant still produced a document that did not conceal or hide the changes. In fact, the changes in the Agreement were there for Plaintiff to read.59 Plaintiff and its attorneys had a chance to review the changes before agreeing to the Amendment.60 Plaintiff therefore has not shown that Defendant would likely be subject to liability for not exercising reasonable care.

Second, and more importantly, Plaintiff was not under a duty to disclose. Plaintiff's intimation that section 551 of the Restatement (Second) of Torts applies in this case is not supported by the case law.61 Plaintiff supports this intimation by citing to Nota Construction Corp. v. Keyes Associates,62 in which a plaintiff subcontractor claimed misrepresentation and deceit in an architect's prepared plans and specifications. The Nota court recognized that it was possible for a jury to find that potential bidders were relying on the architect and that the architect in turn had a duty to notify potential bidders of specific information.63 Nota, however, is distinguishable from this case.64

Subsections 2(b) and 2(e) of section 551 the Restatement (Second) of Torts, which Nota quoted, are inapplicable here, even accepting Plaintiff's version of the disputed facts. Subsection 2(b) attaches a duty to disclose matters known to one that are necessary to prevent a partial or ambiguous statement of fact from being misleading.65 Subsection 2(b) is not applicable because Plaintiff has not alleged any misleading statement of fact made by Defendant.66 Subsection 2(e) is also inapplicable. Subsection 2(e) creates a duty if a party knows that the other party is going to enter into the transaction based upon a mistake as to basic facts.67

Neither the Restatement commentary68 nor Justice Qua's classic formulation of the nondisclosure duty in Swinton v. Whitinsville Savings Bank69 supports Plaintiff or the application of subsection 2(e). Defendant did not, for instance, take advantage of Plaintiff's ignorance in a shocking or extreme manner.70 Rather, Plaintiff was a large, sophisticated business with legal counsel, which had initiated the Amendment. Unlike in the Nota case, there was no false statement or other act preventing Plaintiff from acquiring information as to Defendant's change in the Agreement or Amendment. Rather, Plaintiff and Defendant were experienced companies engaging in a negotiation at arm's length. In sum, the law in Massachusetts reveals no duty to disclose under such circumstances.71

Plaintiff relies mostly on a Court of Appeals of Wisconsin case, Hennig v. Ahearn,72 which held that the evidence supported claims for intentional misrepresentation and reformation of the contract.73 In that case, Hennig negotiated an employment agreement with Ahearn.74 At the last minute, Ahearn altered a crucial provision in the final draft of the agreement but failed to point out the alteration.75 Hennig and his attorney did not notice the crucial alteration.76 Hennig signed the contract and, as a result, received substantially less compensation than he expected.77 The Wisconsin court, with reference to section 551 of the Restatement, determined that the conduct of the parties could give rise to a duty on Ahearn's part to point out his alterations in the agreement.78

But Hennig lacks persuasive force here for three reasons. First, Plaintiff points to no Massachusetts court that has applied Hennig. Second, the contract in Hennig was the product of a "long negotiation" during which alterations were expressly discussed among the parties and highlighted in successive drafts.79 No such extensive course of dealing existed here. The critical ingredient for subsection 2(e) that gives rise to a duty of disclosure—that the mistaken party reasonably expects disclosure—is therefore absent here. Third, unlike in Hennig, neither Party's version of the facts implicates a duty to disclose.80

Plaintiff alleges that Defendant engaged in fraud.81 Presumably Plaintiff is referring to fraud in the inducement. Plaintiff still has not shown a substantial likelihood of prevailing on the merits of this claim. Establishing fraud in the inducement requires establishing the elements of common law deceit,82 which, as explained above, Plaintiff has failed to show.83

b. Breach of Contract

Plaintiff has also asserted a breach of contract claim. Insofar as Plaintiff's contract claim is tied to Plaintiff's claim for fraud and deceit,84 Plaintiff is not likely to succeed on the merits. Namely, Plaintiff has not shown that Defendant engaged in fraud or deceit or otherwise breached its duties or obligations to Plaintiff so as to violate its contract.

Plaintiff asserts in its Complaint that Defendant has also breached a part of its Agreement by not paying for all products that Plaintiff delivered to Defendant.85 Plaintiff, however, has not established that it is likely to succeed on the merits of this claim for two reasons. First, Plaintiff does not make this particular argument (regarding money owed by Defendant) in its Motion for Preliminary Injunction or Memorandum in Support of the Motion. Given that the Parties have not argued this point, this court has an insufficient basis to adjudicate this argument. Second, even considering Plaintiff's argument, any such potential breach here could be remedied by calculable damages and would appear not relevant to the issue of an equitable remedy such as an injunction.

c. Other Claims

Plaintiff brings a number of other counts against Defendant. Plaintiff does not discuss these claims or counts in its Motion or Memorandum in Support, but this court will briefly address them.

Plaintiff brings a claim for breach of implied covenant of good faith and fair dealing against Defendant. Establishing a violation of the covenant of good faith and fair dealing requires at least bad-faith conduct.86 Although there is no single test for determining bad-faith conduct, courts have expressed a "variety of formulations to describe bad faith conduct."87 A showing of bad faith requires dishonest purpose, conscious wrongdoing, or unfairness beyond bad judgment or failing to abide by the terms of a contract.88 Moreover, Massachusetts courts do not allow the implied covenant of good faith and fair dealing to substitute for a party's failure to negotiate the terms that it desires.89

Plaintiff has not produced sufficient evidence to support a finding that Defendant acted in bad faith in deviating from Plaintiff's suggested course of action and modifying the Agreement.

Plaintiff also alleges a claim for unfair competition under chapter 93A of the Massachusetts General Laws. To prove an unfair competition claim under chapter 93A, a plaintiff "must establish that the alleged offending act was (1) within at least the penumbra of common law, statutory law or other established concepts of unfairness, (2) is immoral or otherwise unscrupulous, and (3) inflicted injury on another business."90 In assessing claims of unfairness, the Massachusetts courts have applied what is commonly known as the "rascality" test: the "`objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble world of commerce.'"91 A breach of a contract alone does not amount to a unfair act or practice under section 2 of chapter 93A of the Massachusetts General Laws.92

Plaintiff has failed to establish that Defendant's actions rise to the level of unfairness necessary for chapter 93A. As explained above, sophisticated businesses modifying a contract are expected to read the documents submitted from each side. Plaintiff presents no legal or commercial notion of unfairness under which Defendant's actions are unfair, particularly under chapter 93A or otherwise. Plaintiff therefore has not shown a likelihood of success on its unfair competition claim.

d. Reform Contract on Fraud and Mistake

Contract reformation is an appropriate equitable remedy if fraud, mistake, accident, or illegality exists.93 The general rule in Massachusetts is that "reformation of an instrument may be warranted not only by fraud or by mutual mistake, but also by a mistake of one party which is known to the other party."94

Plaintiff has not shown a likelihood of success on its claim for contract reformation based upon fraud or mistake for a few reasons. First, Plaintiff has not satisfied the Massachusetts rule such to warrant reformation of the contract. Plaintiff has not presented evidence of fraud, mutual mistake, or that Defendant was aware of Plaintiff's mistake. Second, for the reasons discussed above, Plaintiff's reliance on Hennig is misplaced.95 Third, given the above findings, it is inappropriate for this court to rewrite a contract executed freely by two sophisticated parties.96

2. Enforceability of the Non-Competition Provision

Plaintiff also contends that the non-competition provision is enforceable because it protects Plaintiff's legitimate business interests and is reasonable in scope and duration. Plaintiff argues that it will suffer immediate irreparable harm because Defendant will sell to customers with whom Plaintiff has accrued goodwill over the course of Plaintiff's and Defendant's relationship.97 Plaintiff also claims that Defendant is obligated to not disclose Plaintiff's confidential information.98

Under Massachusetts law, non-competition agreements are enforceable to the extent that they protect legitimate business interests and are reasonable in scope.99 The Supreme Judicial Court has explained, however, that a "covenant not to compete designed to protect a party from ordinary competition does not protect a legitimate business interest."100 A party seeking to enforce a non-competition provision a must show some additional interest, such as protection of confidential information.101 Whether information is confidential is not subject to a clear rule, but Massachusetts courts have provided six guiding factors:

Plaintiff's argument that Defendant is violating a covenant protecting its legitimate business interests fails for two reasons. First, Plaintiff puts the cart before the horse by presuming that the information at issue is confidential. Plaintiff does not provide evidence or sufficiently explain how the information in Defendant's possession constitutes protected trade secret or confidential trade information.103 Plaintiff does not, for instance, explain how that subject matter is unknown to others, nor does Plaintiff show that it pursued an "active course of conduct designed to inform" others that the information was to remain confidential.104 Plaintiff's desires or "unexpressed intentions" regarding confidentiality "cannot bind" the Defendant.105 Moreover, the non-competition requirement is not enforceable because Thrasher's affidavit is silent on any legitimate purposes of the non-competition provision, other than conclusory statements regarding protecting goodwill.

Second, Plaintiff has failed to show that the prior non-competition provision is valid and should be enforced by this court. There was no meeting of the minds that the non-competition provision would continue after the Amendment.106

In sum, Plaintiff has failed to show that it will likely succeed on the merits.107

B. Irreparable Harm

For a court to grant injunctive relief, a party must show that ongoing or future irreparable injury is likely in the absence of an injunction.108 This factor weighs heavily in the analysis as well.109 In fact, irreparable harm is "the essential prerequisite for equitable relief."110 Normally, "the fact of a relatively small and precisely quantifiable injury is sound evidence that preliminary equitable relief is not warranted since just such injuries can be remedied adequately by final judgment."111

Plaintiff claims that it will suffer irreparable harm absent an injunction because Defendant is appropriating Plaintiff's goodwill from its relationships with its customers and providing knowledge of Plaintiff's customers to Plaintiff's competitor.112 Plaintiff argues that the non-competition provision is meant to allow a reasonable period of time for Plaintiff to find a new distributor to manage sales to these customers without the relationships being appropriated.113 Plaintiffs also claims that the loss of goodwill and potential appropriation of confidential information is irreparable and injunctive relief is appropriate to prevent it.114

Plaintiff has failed to show that it is likely to suffer irreparable harm for several reasons. First, Plaintiff's losses are quantifiable and relatively small. Defendant's business constituted two million dollars a year of Plaintiff's total business and Plaintiff is a fifty-billion-dollar company.115 Second, the threat of Defendant selling to Plaintiff's customers and Plaintiff being unable to respond is not an immediate threat because the Plaintiff has been transitioning to a different distributor since 2008.116 Third, although it is true that the loss of goodwill is not easily quantified,117 Plaintiff does not explain how Defendant is appropriating Plaintiff's goodwill and confidential information. Plaintiff presents conclusory allegations118 and Thrasher's often "conclusory affidavit."119 But Plaintiff does not specify the type of confidential information that Defendant obtained.120 Additionally, Plaintiff may have goodwill in its relationships with customers, but Plaintiff has not explained how an injunction will affect the reputation that Plaintiff has with its customers for "promptness, fidelity[,] and integrity."121 Moreover, even assuming that any customers who remain with Defendant do so as a result of Defendant's improper solicitation,122 such a loss of customers (or customer goodwill) do not necessarily constitute irreparable injury.123

Plaintiff has not made a sufficient showing that Defendant's actions will result in a loss of goodwill or confidential information.124

C. Balance of Equities

The balance of equities tilts in favor of Defendant. That is, Plaintiff has not demonstrated that the status quo harm to Plaintiff would outweigh the harm to Defendant if this court issues an injunction.

In addition to Plaintiff's argument that it will suffer a loss of goodwill, Plaintiff argues that injunctive relief would not constitute "undue hardship" for Defendant.125 According to Plaintiff, Defendant could still distribute these products outside the Territory, or could distribute any other products anywhere.126

But Plaintiff's argument overstates the harm to itself and understates the harm to Defendant by overlooking the nature of Defendant's business. An injunction would be devastating to Defendant's business and employees. It would require Defendant to lay off all three of its employees and potentially shut down business, and it would put Georgia's home and assets in jeopardy.127 Moreover, there is lack of a comparable risk to Plaintiff given Plaintiff's size and wealth.128 Measured both comparatively and absolutely, therefore, Plaintiff has not shown that its loss, even including the unspecified allegations of loss of goodwill, outweighs devastating Defendant's business.

D. Public Interest

Plaintiff contends that the public interest is best served by issuing the injunction because, by requiring Defendant to honor its contractual obligations, it would not reward deceitful conduct.

This court finds that the public interest weighs in favor of Defendant. Namely, it is not in the public interest to put a small company out of business.129

IV. Conclusion

As explained above, Plaintiff has neither shown that it is likely to succeed on the merits nor that it likely faces irreparable harm. Moreover, the balance of equities tips in favor of Defendant and an injunction is not in the public interest. Plaintiff's Motion for Preliminary Injunction [# 3] is therefore DENIED.

AN ORDER HAS ISSUED.

ORDER

After a Hearing held on August 25, 2010, this court hereby orders that, for the reasons set forth in the accompanying Memorandum, Plaintiff's Motion for Preliminary Injunction [# 3] and Motion for Expedited Discovery [# 16] are DENIED.

IT IS SO ORDERED.