D. BROCK HORNBY, District Judge.
This case was tried before me without a jury on March 24 and 25, 2014, on the issue whether the plaintiff Securadyne Systems, LLC ("Securadyne") is entitled to a permanent injunction against the defendants Minuteman Security Technologies, Inc. ("Minuteman"), Jon Morton, Josh Scholl, and Angela Wilder under the Standards of Conduct Agreement ("SOCA") that the three individual defendants signed while Securadyne employees (they now work for Minuteman); or, conversely, whether these defendants are entitled to a declaratory judgment that they have no liability under the agreement because it is unenforceable.
1. Securadyne and Minuteman are security solutions integrators and providers to large enterprises (e.g., hospitals, colleges and industrial establishments). They compete with each other for business.
2. Morton, Scholl and Wilder worked for Surveillance Specialties Ltd. ("SURV") from approximately 2008 until Securadyne acquired SURV in 2012.
3. Effective August 31, 2012, Securadyne acquired SURV in a stock purchase transaction, and Morton, Scholl and Wilder became Securadyne employees with the same pay and benefits as they received previously at SURV.
4. On September 19, 2013, Minuteman offered employment separately to each of Morton, Scholl and Wilder.
5. Morton and Scholl gave Securadyne their notices of resignation on September 19, 2013.
6. Wilder gave her notice on September 20, 2013.
7. Morton, Scholl and Wilder all began working for Minuteman on October 4, 2012.
8. At the time Securadyne acquired SURV in 2012 and for much of 2013, Minuteman had no physical presence in Maine. Securadyne, on the other hand, then had approximately 16 employees in Maine.
9. Minuteman interviewed all three individual defendants in Portland, Maine on September 19, 2012, in a rented conference room. At the time, Minuteman did not have a built-out office in Maine, and these three became its first Maine employees. Shortly before that date, Minuteman interviewed the defendant Peter Green, Securadyne's Maine branch manager, but did not offer him employment. Minuteman also hired a fourth Securadyne employee at about the same time.
10. Morton and Scholl both had worked for other employers in the security integrator industry before they worked for SURV/Securadyne. They had acquired skills and earned certificates in that prior employment, had developed relationships with customers and contacts there, and had gained familiarity with those customers' security needs and installations. Before her work for SURV/Securadyne, Wilder had worked for only a short time in the security integrator industry as a temporary employee at a company that SURV acquired. Some of the Customers that Morton and Scholl serviced previously at other employers eventually became customers of SURV/Securadyne.
11. At Securadyne, Morton and Scholl both were senior technicians with a number of responsibilities in technical matters and sales support. Scholl was also a Project Manager. They delivered services to customers, met regularly with customers and were integral to customer relations. Morton had special expertise in video and Scholl in access control. Both assisted salespeople in the sales process by providing technical detail and help to prepare quotes. At Securadyne, Wilder was an operations and office manager and dispatched technicians and received phoned customer requests for service. She acted as the office point person for customers, taking service inquiries and problems and dispatching technicians. She spoke with every customer in Maine who had a service issue.
12. While at Securadyne, Morton and Scholl had material contacts with the customers who are listed by name on Exhibit 27. Wilder had contact with all customers, including these.
13. All three individuals were employees at will at Securadyne.
14. After Morton, Scholl and Wilder left Securadyne to work for Minuteman, a number of Securadyne's customers also left, some of them becoming Minuteman customers. Minuteman also has customers that were not previously Securadyne customers.
15. At Minuteman, some of Scholl's responsibilities are to visit customer sites, perform installations, service the access control systems, and maintain the security features of the customers—duties that he also performed at Securadyne. At Minuteman, he provides security services to entities that previously were Securadyne customers and that he serviced as a Securadyne employee, dealing with the same personal contacts at those customers. Scholl is almost always in the field with customers for Minuteman. At Minuteman, Morton visits customer sites, installs and services video and surveillance equipment, services access control systems and provides generalized sales support—duties that he also performed at Securadyne. Wilder has the Office Operations Manager position at Minuteman and performs essentially the same services that she performed at Securadyne, dealing with all phoned customer requests for service and dispatching technicians.
16. In recent years, Morton, Scholl and Wilder received bonuses from SURV/Securadyne. Morton received $2000, $625, and $2500 in 2011, 2012, and 2013 respectively; Scholl $2000, $2000, $625 and $2500 in 2010, 2011, 2012, and 2013 respectively; Wilder $2000; $1250, $3000 and $1500 in 2010, 2011, 2012 and 2013 respectively. Their annual wages apart from bonuses were respectively about $100,000, $65,000 and $50,000 per year. The decision to award bonuses and the bonus amount rested entirely in the discretion of SURV's owner and President, Arthur Bourque, while he owned the company.
17. Securadyne adopted a Standards of Conduct Agreement ("SOCA") in 2011 or early 2012 before it acquired SURV. Its President, Carey Boethel, a nonlawyer, drafted the SOCA by cutting and pasting from other agreements he had seen.
18. Justin Davis, who became Securadyne's Regional Vice President, and Peter Green, who became Securadyne's Maine branch manager, each signed the SOCA when Securadyne acquired SURV in the fall of 2012. Other employees were not then asked to sign the SOCA.
19. On Friday morning, February 8, 2013, RVP Davis sent an email to all New England Securadyne employees (Maine and Massachusetts) who previously worked for SURV telling them that they were required to sign SOCAs. The email stated: "We have pre-printed 2 copies of the document (see Casey W.
20. Davis's email also said: "It behooves all of us to get the forms signed as soon as possible as once I have them all in hand I will be in a position to fund and distribute the FY12 bonus monies."
21. Davis's email gave the following characterizations of the SOCA:
22. Before the Securadyne purchase, Morton and Scholl, but not Wilder, had signed SURV Nondisclosure, Non-Solicitation & Inventions Agreements as SURV employees. Exs. 37, 47.
23. Signing the SOCA that Securadyne distributed in February 2013 was a condition of continued employment with Securadyne.
24. Maine Branch Manager Peter Green called a meeting for Monday morning, February 11, 2013. Morton and Wilder, but not Scholl, were present at the meeting, as were others. Green distributed two printed copies of the SOCA to each attendee with their respective names on the agreement, told them the documents could not leave the room until they were signed, and that employees were required to sign them.
25. When Scholl came to the office later that Monday, Wilder presented the SOCA to Scholl telling him that he had to sign it. Scholl refused to sign it and went into Green's office and expressed his vehement unhappiness. Although Scholl refused to sign his name, he did sign his initials,
26. All three individuals testified that they felt under duress to sign the SOCA. There is no evidence that any of the three complained about the SOCA thereafter. I find that they signed because signing it was a requirement for retaining employment.
27. The SOCA's pertinent language, the enforceability of which is disputed, is identical for each of the three individuals and is as follows:
Ex. 35 ¶ F.
Near the beginning of the SOCA, "Customer" is defined as "any entity or person which has purchased products or services from the Company during the specified period." Ex. 35 at 1.
The SOCA also provides: "I hereby acknowledge that monetary damages would be insufficient to remedy a violation of this Agreement and I agree that, in addition to all other available remedies, any and all provisions hereof may be enforced by a court of competent jurisdiction by injunction or specific performance." Ex. 35 ¶ L.
28. Securadyne seeks to enforce the disputed provision only as follows, which amounts to a narrowing of the provision: "only as to customers with whom the Former Employees had material contacts during the two years prior to their resignation from employment with Securadyne." Pl.'s Pre-hr'g Mem. at 2 (ECF No. 68).
29. Much of the economic value of the security integration business, and an important factor in what Securadyne paid to acquire SURV, is the likelihood of future business from existing customers. Generally, Securadyne does not have formal contracts with customers. Instead, its business is derived from long-standing relationships with customers who place purchase orders with Securadyne as their needs arise. A particular customer's need for new security services may go "dormant" for a time (Securadyne's President's term), then unpredictably become active again, requiring new security advice, solutions, and ultimately service. Thus, if the breach of the SOCA provision were to cause the loss of customers or of business, the loss cannot be measured by particular sales or particular orders. Moreover, the loss of customers affects the morale of Securadyne employees and damages Securadyne's reputation among the rest of its customers, in ways that cannot be measured in damages. In addition, Securadyne invested significant time and resources in training and developing its employees toward certification for various products that it sells and in customer servicing. The resulting value of this knowledge and investment cannot be measured in dollars and the SOCA provision sought to protect this knowledge and investment in the event that an employee left Securadyne.
The parties all agree that Maine law applies to the enforceability of the SOCA provision and any remedy. Under Maine law and federal cases, four factors determine whether a permanent injunction should issue: success on the merits; irreparable injury; balance of hardships; and the public interest.
I conclude that the employment activities of Morton, Scholl and Wilder at
Minuteman breached much of one of the SOCA provisions that Securadyne seeks to enforce, namely, their agreement not to "[s]olicit, contact, service, deal or transact with any person that was a Customer of the Company at any time during the two (2) years preceding employment cessation for purposes of offering competing or similar products or services to those provided by the Company."
Under Maine cases, an employer can choose to narrow the scope of such a provision in seeking its enforcement and then a court must judge enforceability according to the narrowed provision—"only as [the employer] has sought to apply it and not as it might have been enforced on its terms."
The clause as Securadyne has narrowed it ("only as to customers with whom the Former Employees had material contacts during the two years prior to their resignation from employment with Securadyne"
This covenant is limited in time to two years, well within the permitted time limits.
This covenant is limited in scope. Although it does not refer to geography, Securadyne/SURV's customers were mostly located in Maine, and Securadyne seeks to enforce the clause only with respect to customers with whom the individual defendants had material contacts at Securadyne during the two years before their resignation.
Moreover, this SOCA provision is not a blanket non-compete agreement; it does not unreasonably limit these employees' employment opportunities. Morton and Scholl can use their technical expertise for Minuteman customers other than those they served at Securadyne and in locations other than Maine. Wilder is more limited at Minuteman since it seems unlikely that there is an effective way to exclude her from phone calls from Minuteman customers who previously were customers of Securadyne.
I conclude that no misrepresentation prevents enforcement of the SOCA provision that I have found the employees breached. First, Davis's email statement that the SOCA is not a noncompetition agreement is not a misrepresentation for the reasons I have just described; the clause limits their activity only as to particular customers. It is apparent that Branch Manager Green understood what the agreement signified—he testified that he warned Davis on Friday February 8 that the SOCA would provoke a huge outcry. Likewise, the testimony of Wilder, Green and Scholl about Scholl's reaction on being presented the agreement demonstrates that Scholl understood what it signified. No evidence was presented that Morton and Wilder did not understand its significance. For the same reasons, I conclude that Morton, Scholl and Wilder were not misled by Davis's email description of the SOCA as "almost identical" to the SURV nondisclosure agreement that they had signed previously (in fact, Wilder never signed such a document) or that it was an "update" of the SURV nondisclosure agreement. Ex. 14. Those were adequate cover-letter descriptions of a document that they were permitted to read before they in fact signed it.
Economic duress does not make the breached SOCA provision unenforceable. Maine has not yet adopted the doctrine of economic duress as a bar to contract enforcement.
An action for damages is not adequate to capture the injury to Securadyne that breach of this SOCA provision causes. I have outlined in my Findings of Fact the elements of loss that cannot be captured in a damage remedy. This court has stated that "customer good will" is "an immeasurable quantity which, once lost, may be difficult to reestablish."
Morton and Scholl are not foreclosed from using their skills in Maine or in the industry that they have chosen. In other words, they have other opportunities both at Minuteman and at other security integrators. Moreover, the limitation on their interactions with Securadyne customers is reasonably limited in time and scope. Wilder may be more limited in her ability to serve as Office Operations Manager at Minuteman
The Maine Law Court has accounted for any public interest in its decisions identifying, on public policy grounds, what type of covenant can be enforced and what cannot:
Securadyne has not supplied evidence to support its theory in the Complaint that Minuteman committed the tort of tortious interference with an advantageous business relationship
For all these reasons, I conclude that Securadyne has satisfied the permanent injunction requirements as to the three individual defendants. I
The plaintiff shall propose a judgment accordingly that complies with Fed. R. Civ. P. 65(d), and submit it to the defendants for review as to form and file it with the Clerk by April 18, 2014.
Thereafter, the Magistrate Judge shall convene a scheduling conference as his calendar permits to determine how the remainder of the case shall proceed.
Under Maine law, the interpretation of a contract, including whether or not its terms are ambiguous, is a question of law.