CASPER, District Judge.
Plaintiff Aspect Software, Inc. has sued Gary Barnett ("Barnett"), its former Executive Vice President and Chief Technology Officer, alleging that Barnett breached his contract with Aspect Software when he accepted a position with a rival corporation. Aspect Software has moved for a preliminary injunction. For the reasons discussed below, Aspect Software's motion is GRANTED.
In ruling on a preliminary injunction, courts must state the factual findings or conclusions that support the court's ruling. Fed.R.Civ.P. 52(a)(2). The burden of providing a factual basis sufficient to justify a preliminary injunction rests with the party seeking the injunction. Nieves-Marquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir.2003). Unless the parties' competing versions of events are "in sharp dispute such that the `propriety of injunctive relief hinges on determinations of credibility,'" Rohm & Haas Elec. Materials, LLC v. Elec. Circuits Supplies, Inc., 759 F.Supp.2d 110, 117 (D.Mass.2010) (quoting Campbell Soup Co. v. Giles, 47 F.3d 467, 470 (1st Cir.1995)), the Court is free to accept as true "well-pleaded allegations [in the] complaint and uncontroverted affidavits." Id. at 114 n. 2 (quoting Elrod v. Burns, 427 U.S. 347, 350 n. 1, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976)).
Aspect Software is a Delaware corporation formed in 2005 with its principal place of business in Massachusetts. Aspect Software develops, licenses and sells customer
Barnett was the President and CEO of a telecommunications company called Aspect Communications. In 2005, Barnett's company was acquired by Concerto Software and the two companies formed Aspect Software (hereinafter "Aspect"). On September 30, 2005, Aspect hired Barnett to be its Executive Vice President of Research and Development, Chief Technology Officer, and Executive Vice President of Global Support. Barnett served on Aspect's Executive Management team and was one of the company's four Executive Vice Presidents. Barnett's job responsibilities at Aspect were described at length in the record, see Affidavit of Aspect's Chief Executive Officer James Foy, D. 1-2, 44-45 at ¶ 17,
Barnett signed an employment agreement ("Agreement") with Aspect that contained a provision entitled "Noncompete; Non-Solicitation" at section seven. The provision included the following language:
The Agreement also included the following provision, titled "Choice of Law," at section 17:
During the course of his employment, Barnett generated and was given access to information Aspect's complaint describes as trade secrets, including 1) strategic decisions concerning Aspect's "roadmap" for future technological advancement, 2) the design of Aspect's flagship "Unified IP" product and the timeline for its release to the public, 3) details of the relationship between Aspect and the Microsoft corporation as to both technical and strategic matters, 4) the internal structure of Aspect products' components as well as the strengths and weaknesses of individual components, 5) negotiations between Aspect and Aspect's clients, 6) marketing strategies and specific customer targeting objectives, 7) Aspect products' ability to deploy across multiple servers, 8) the interfaces used to connect Aspect products to third-party products, 9) functionality, strengths and weaknesses of Aspect products, 10) cloud computing technology strategies, 11) Aspect's use of Microsoft's SQL server for reporting and analytics and plans for future use, 12) Aspect's use of other Microsoft software and platforms, and 13) Aspect's research and development budgets and resources, including the quality of Aspect's individual employees and Aspect's fiscal constraints.
Avaya is a global telecommunications company that, according to an affidavit submitted by Alan Baratz, Avaya's Senior Vice President and President, Global Communications Solutions, self-identifies as "the world leader in the contact center business." Avaya is one of Aspect's main competitors.
Barnett and Avaya both claim that they took steps to protect Aspect's trade secrets before Barnett started his new job.
On April 21, 2011, after resigning from Aspect, Barnett relocated with his family to San Jose, California. On April 25, 2011, he started working in Avaya's Santa Clara, California office.
On April 27, 2011, Aspect filed the instant lawsuit in Suffolk Superior Court against Barnett alleging breach of contract and seeking injunctive relief and declaratory judgment. On May 3, 2011, Barnett removed the action to this Court. On May 9, 2011, Aspect submitted to this Court a draft injunctive order that would enjoin Barnett from working for Avaya for a period of one year (consistent with the "Protection Period" discussed in §§ 7(a) and (d) of the Agreement), from contacting Aspect's customers or potential customers for the same period of time, and from disclosing or using any of Aspect's trade secret information. On May 11, 2011, the Court permitted Avaya to participate in the case as an amicus curiae. That same day, the Court held a hearing on Aspect's motion for a preliminary injunction at which counsel for Aspect, Barnett and Avaya all appeared.
To obtain a preliminary injunction, Aspect "bear[s] the burden of demonstrating (1) a substantial likelihood of success on the merits, (2) a significant risk of irreparable harm if the injunction is withheld, (3) a favorable balance of hardships, and (4) a fit (or lack of friction) between the injunction and the public interest." Nieves-Marquez, 353 F.3d at 120 (1st Cir. 2003). "The sine qua non of this 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." New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir.2002).
Aspect and Barnett dispute whether Massachusetts law or California law should govern the analysis of the merits of Aspect's complaint. In a diversity action, the choice-of-law rules that apply are those of the forum state, in this case, Massachusetts. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). As a general rule, Massachusetts courts will give effect to a choice-of-law clause included in the contract itself. See, e.g., Morris v. Watsco, Inc., 385 Mass. 672, 674, 433 N.E.2d 886 (1982) ("Massachusetts law has recognized, within reason, the right of the parties to a transaction to select the law governing their relationship"). However, "Massachusetts courts will not honor the parties' choice-of-law if the application of that provision: `[1] would be contrary to a fundamental policy of a state; which has [2] a materially greater interest than the chosen state in the determination of the particular issue; and which ... [3] would be the state of the applicable law in the absence of an effective choice of law by the parties.'" Roll Sys., Inc. v. Shupe, 1998 WL 1785455, at *2 (D.Mass. Jan. 22, 1998)
Here, the Agreement includes a specific choice-of-law provision identifying the laws of the Commonwealth of Massachusetts as the relevant substantive law governing the Agreement. Barnett argues that this Court should not honor the choice-of-law provision because doing so would be contrary to what he characterizes as a fundamental policy of California, namely section 16600 of the California Business and Professional Code, which states that "[e]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." Barnett's argument fails to satisfy any of the three prongs which must be met before this Court may disregard a contractual choice-of-law clause.
First, while California's policy against non-competition covenants has been characterized as "fundamental," Roll Sys., 1998 WL 178455, at *2, that fundamental policy does not extend to contractual clauses that are designed to protect an employer's trade secrets. See Shipley Co., LLC v. Kozlowski, 926 F.Supp. 28, 30 (D.Mass. 1996) (citing to Muggill v. Reuben H. Donnelley Corp., 62 Cal.2d 239, 242, 42 Cal.Rptr. 107, 398 P.2d 147 (1965)) (Section 16600 "invalidates provisions in employment contracts prohibiting an employee from working for a competitor ... unless the[ provisions] are necessary to protect the employer's trade secrets"); see also Roll Sys., 1998 WL 1785455, at *2 n. 1 (discussing Shipley and the trade secret exception in California policy).
Second, California's interest in the determination of the particular issue at bar is either weaker than or, at best, equal to Massachusetts' interest. The non-compete clause was negotiated between a company with its principal place of business in Massachusetts and its employee, who worked at least in part in Massachusetts; any harm caused by a violation of the non-compete clause will be felt in Massachusetts. Even if the Court chose to credit in
Third and finally, California would not be the state of the applicable law in the absence of an effective choice-of-law by the parties. In cases where no choice-of-law provision applies, the Supreme Judicial Court has decided "not to tie Massachusetts conflicts law to any specific doctrine, but seek[s] instead a functional choice-of-law approach that responds to the interests of the parties, the States involved, and the interstate system as a whole," and looks to the Restatement (Second) of Conflict of Laws (1971) as an "obvious source of guidance." Bushkin Assocs., Inc. v. Raytheon Co., 393 Mass. 622, 631-32, 473 N.E.2d 662 (1985). The Restatement sets forth seven factors relevant to the choice of the applicable rule of law in absence of a contractual choice-of-law clause or statutory guidance from the forum state. One of those factors is "the protection of [the parties'] justified expectations" when entering into the contract. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(2)(d) (1971). Here, the Agreement was entered into by a Tennessee resident beginning work at a Massachusetts firm, with his work duties largely split between Massachusetts and Tennessee. Even absent the explicit Massachusetts choice-of-law clause in the Agreement, there is no basis for finding an expectation, justified or otherwise, that the Agreement would be governed by California law rather than the laws of Massachusetts or even Tennessee. Without engaging in a step-by-step analysis of the remaining six factors,
Accordingly, the Court will enforce the choice-of-law clause agreed to by the parties and will interpret the Agreement pursuant to the substantive law of Massachusetts.
Aspect's underlying complaint rests on a breach of contract claim, coupled with requests for injunctive and declaratory relief that are derivative of the breach of contract claim. Under Massachusetts law, to prove a breach of contract claim, a plaintiff must show: 1) existence of a valid and binding contract, 2) that the defendant breached the terms of the contract, and 3) the plaintiff has suffered damages
Here, the Agreement prohibits Barnett from "participat[ing] in any business in which he would be reasonably likely to employ, reveal or otherwise utilize trade secrets." Instead of quarreling with the scope and breadth of the non-compete clause, Barnett argues that the phrase "reasonably likely" is either vague and therefore unenforceable or ambiguous and therefore requiring the Court to resort to extrinsic evidence to determine the phrase's meaning. Barnett argues in the alternative that his employment with Avaya does not breach the Agreement's prohibition.
"In order to create an enforceable contract, `[i]t is a necessary requirement that [the] agreement ... be sufficiently definite to enable the courts to give it an exact meaning.'" Armstrong v. Rohm & Haas Co., Inc., 349 F.Supp.2d 71, 78 (D.Mass.2004) (quoting WILLISTON ON CONTRACTS § 4:18 (4th ed. 1990)); Hastings Assocs., Inc. v. Local 369 Bldg. Fund, Inc., 42 Mass.App.Ct. 162, 165, 675 N.E.2d 403 (1997) (noting that "a contract is not held to be unenforceable `if, when applied to the transaction and construed in light of the attending circumstances, the meaning can be ascertained with reasonable certainty'"). "Whether an alleged contract is legally enforceable in light of indefinite terms is a question of law for the court." Armstrong, 349 F.Supp.2d at 78. Similarly, "[w]hether a contract is ambiguous is a question of law. But a contract is not ambiguous merely because a party to it, often with a rearward glance colored by
The Court also finds that Aspect has carried its burden of showing that it is reasonably likely to prevail with regard to its assertion that Barnett breached the Agreement by accepting a position as Avaya's Vice President and General Manager, Contact Center Business Unit. As the Foy and Baratz declarations make clear, Aspect and Avaya are intense competitors in the customer contact center business, precisely the field in which Barnett has encyclopedic knowledge of Aspect's trade secrets. Avaya hired Barnett to work in that same field. Whether or not Barnett actually has "employ[ed], reveal[ed] or otherwise utilize[d]" Aspect's trade secrets in the course of his work with Avaya (or whether he will do so in the future), Aspect has established that at the time of his departure from Aspect it was at the very least "reasonably likely" that he would do so. That likelihood is sufficient to establish a breach of the Agreement.
The Court appreciates Barnett and Avaya's efforts to protect the integrity of Aspect's trade secrets. But even if these scrupulous efforts are wholly successful, they will merely reduce the harm that will flow from Barnett's breach of the Agreement; they will not erase the fact of the breach. Further, some of these efforts, such as those set forth in Baratz's e-mail to Barnett, lack the force of law; others, such as the trade secret protections written into Barnett's employment agreement, are backed by the force of contract law as to the bilateral relationship between Avaya and Barnett but cannot be enforced by Aspect.
The likelihood of irreparable harm is a necessary threshold showing for awarding preliminary injunctive relief. Matos v. Clinton Sch. Dist., 367 F.3d 68, 73 (1st Cir.2004). As a general rule, a breach of non-compete agreements tied to trade secrets concerns triggers a finding of irreparable harm. Lombard Med. Tech., 729 F.Supp.2d at 442 (D.Mass.2010). Under that general rule, Aspect's successful showing that it is likely to prevail on claim that Barnett violated the Agreement's non-compete clause designed to protect trade secrets would be sufficient to establish a significant risk of irreparable harm.
Barnett argues that he and Avaya have already taken sufficient steps to protect Aspect's trade secrets, removing the threat of irreparable harm and, accordingly, any need for preliminary injunctive relief. He points to the April 21, 2011 e-mail between Baratz and Barnett, the "Proprietary Information" and "Existing Restrictive Covenants" clauses in Avaya's employment offer to Barnett, and clause "F" of Barnett's Avaya Employment Agreement Regarding Intellectual Property. He has also offered to provide monthly confirmation to Aspect that he has neither used nor disclosed any non-public Aspect information.
The Court fully credits the sincerity of Barnett and Avaya's intent and the scrupulousness of their efforts. But given the extent of Barnett's experience at Aspect and the similarity between his positions at Aspect and at Avaya, "it is difficult to conceive how all of the information stored in [Barnett]'s memory can be set aside as he applies himself to a competitor's business and its products." Marcam Corp. v. Orchard, 885 F.Supp. 294, 297 (D.Mass. 1995). "On the contrary, what [Barnett] knows about [Aspect] is bound to influence what he does for [Avaya], and to the extent it does, [Aspect] will be disadvantaged." Id. Other courts in this district, faced with similar circumstances, have concluded that even sincere, scrupulous efforts by an employee and his or her new employer to protect a prior employer's trade secrets are insufficient to remove the threat of irreparable harm via disclosure of trade secrets. See id. at 297-98; see also Lombard Med. Tech., 729 F.Supp.2d at 442 (finding threat of irreparable harm from inevitable disclosure even where defendant "fully intended to protect [plaintiff's] confidential information"); C.R. Bard, Inc. v. Intoccia, 1994 WL 601944, at *3 (D.Mass. 1994) (holding former employee "could not and did not leave behind his special knowledge of plaintiff's operation, and in serving his new employer he will inevitably draw upon that knowledge").
"Any potential harm caused to [Aspect] by a denial of its motion must be balanced against any reciprocal harm caused to [Barnett and Avaya] by the imposition of an injunction." TouchPoint Solutions, Inc. v. Eastman Kodak Co., 345 F.Supp.2d 23, 32 (D.Mass.2004). "Non-competition agreements by their nature impose some burden on former employees. That fact alone does not make such covenants unenforceable." Lombard Med. Tech., 729 F.Supp.2d at 442 (citation and quotation marks removed). Here, Barnett acknowledged in clause 7(b) of his Agreement with Aspect that the Agreement's non-compete restrictions "do not impose an undue hardship on him ... due to the fact that he ... has general business skills which may be used in industries other than those in which [Aspect] and its affiliates conduct their business and do not deprive [Barnett] of his livelihood." Even setting this acknowledgment to one side, and taking seriously the disruption a preliminary injunction temporarily precluding Barnett from working for Avaya would cause to Barnett, his family, and (to a lesser extent) Avaya, the Court nonetheless finds that the harm a preliminary injunction would cause to Barnett is outweighed by the significant risk of irreparable harm to Aspect absent an injunction.
A preliminary injunction is not appropriate unless there is "a fit (or lack of friction) between the injunction and the public interest." Nieves-Marquez, 353 F.3d at 120. Massachusetts has a clear public policy in favor of strong protections for trade secrets. See Jet Spray Cooler, 377 Mass. at 166 n. 8, 385 N.E.2d 1349. The parties have not disputed Massachusetts' policy on this point and the Court finds no friction between the public interest and the issuance of a preliminary injunction in this case.
For the reasons discussed above, Plaintiff Aspect's Motion for Preliminary Injunction is GRANTED. Accordingly, it is hereby ordered that Defendant Gary Barnett shall be enjoined and restrained until further order of the Court from:
For the issuance of this injunctive relief, the plaintiff is required to post a bond pursuant to Fed.R.Civ.P. 65. In the exercise of its discretion, the Court imposes a bond of $500,000. The order of preliminary injunction will become effective upon the filing of the $500,000 bond by Aspect and its notice to Barnett of such filing. Because the parties have not yet stated their positions as to the appropriate amount of bond, the Court allows each party leave to file a motion to modify the bond amount within seven days. Once the order of preliminary injunction becomes effective, it will remain in effect while the Court considers any motion to modify the bond amount.
On May 27, 2011, the Court entered a preliminary injunction and order ("the Preliminary Injunction") in this case.
Barnett brings his motion pursuant to Federal Rules of Civil Procedure 52(b), 59(e) and 60(b)(6). Barnett asserts that the standards governing motions filed pursuant to these various rules are functionally similar, at least in the context of addressing the risk he fears of so-called "unwitting contempt."
Pursuant to Rule 52(b), "[o]n a party's motion filed no later than 28 days after the entry of judgment, the court may amend its findings — or make additional findings — and may amend the judgment accordingly." Fed.R.Civ.P. 52(b). "A Rule 52(b) motion is meant `to correct, clarify or amplify the [Court's] findings [and] is not meant to provide an avenue for relitigating issues on which the moving party did not prevail....'" Dash v. Chi. Ins. Co., 2004 WL 2337021, at *1 (D.Mass. Oct. 18, 2004) (quoting 9 Moore's Federal Practice § 52.60) (second alteration by the Dash court). Under Rule 59(e), "[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment." Fed.R.Civ.P. 59(e). "Rule 59(e) motions are granted only where the movant shows a manifest error of law or newly discovered evidence." Kansky v. Coca-Cola Bottling Co. of New Eng., 492 F.3d 54, 60 (1st Cir.2007). Finally, under Rule 60(b) (6), "[o]n a motion and just terms, the court may relieve a party or its legal representative from a final judgment, order or proceeding for ... any other reason that justifies relief." Fed.R.Civ.P. 60(b)(6). "[R]elief under Rule 60(b)(6) should be granted only under exceptional
Barnett argues that these standards are more relaxed when a party's motion for an amendment is motivated by an intent to avoid "unwitting contempt" and relies upon Regal Knitwear in support of his proposition. Def. Memo, D. 22 at 12. But Barnett has not offered, and the Court cannot find, any examples of a court in the First Circuit discussing either Regal Knitwear or the concept of "unwitting contempt" in conjunction with a motion under Rules 52(b), 59(e), or 60(b), let alone such a court in the Circuit relying on Regal Knitwear to alter the standard under which it reviews a motion brought under those rules.
Thus, even taking full account of Regal Knitwear, Barnett's burden is steep, regardless of which specific rule governs his motion: he may not relitigate issues on which he has failed to prevail in earlier proceedings before the Court, and he must either 1) persuade the Court that granting his motion would merely amplify (rather than alter) the intent behind the Preliminary Injunction, or 2) show that exceptional circumstances, a manifest error of law or newly discovered evidence cast doubt on the Preliminary Injunction as it currently stands.
Barnett does not argue that exceptional circumstances, a manifest error of law or newly discovered evidence require altering the Preliminary Injunction. Instead, Barnett argues that because the Preliminary Injunction prohibits him from "participating in any business in which he would be reasonably likely to employ, reveal
The Court is familiar with this argument. Barnett made a nearly identical argument four months ago when he opposed Aspect's Motion for a Preliminary Injunction enforcing Barnett's employment agreement with Aspect, see, e.g., Def. Memo in Opp., D. 6 at 19 (arguing that the language in Section 7 of the Agreement was too vague to be enforceable), 21 (arguing that given the vagueness and ambiguity in the Agreement, the Court should not enforce it against Barnett); Transcript of Motion Hearing, D. 8 at 40-41 (arguing that the "reasonably likely" language in the Preliminary Injunction, mirroring the language in the Agreement, is too vague to provide guidance to Barnett), 44 (discussing enforceability of the Agreement). This argument was unavailing, at least in the preliminary injunction context. See 787 F.Supp.2d at 128-29. To the extent Barnett is dissatisfied with the level of specificity regarding the restrictions on his work, the source of his dissatisfaction in the first instance is the employment agreement he entered into with Aspect, not the Preliminary Injunction. Barnett is precluded from using Rules 52(e), 59(b) or 60(b) to relitigate whether that agreement can be effectively enforced as a preliminary injunction. Dash, 2004 WL 2337021, at *1.
Additionally, Barnett's fear of "unwitting contempt" should be at least somewhat allayed by the procedural posture of this case. Aspect has not moved for an order of contempt. Were it to do so, it would have the burden of "establish[ing] by clear and convincing evidence that the putative contemnor violated the relevant court order," Goya Foods, Inc. v. Wallack Mgmt. Co., 290 F.3d 63, 77 (1st Cir.2002), a determination that is committed to the Court's discretion, see Project B.A. S.I.C. v. Kemp, 947 F.2d 11, 15-16 (1st Cir.1991) (stating that "[t]he trial court's ultimate finding on contempt is reviewed for abuse of discretion"), and will be made in regard to a concrete, non-hypothetical, set of facts. See Regal Knitwear, 324 U.S. at 15-16, 65 S.Ct. 478 ("No concrete case is before us. We have here an abstract controversy over the use of these words, and it is as sterile as abstract controversies usually are.... The Board is not here attempting to reach or to hold anyone in contempt by virtue of [the court] orders [at issue].... No one can be punished for contempt because of these words [in the order] until after a judicial hearing, in which their operation could be determined on a concrete set of facts").
For the reason set forth above, Barnett's Motion to Amend the Preliminary