ABM Industry Groups, LLC v. Palmarozzo

• Court: Massachusetts Superior Court
• Writing for the Court: Kenneth W. Salinger, Justice of the Superior Court.
• Decision Date: 30 March 2017
• Docket Number: 1784 CV 00819-BLS2
• Citation: ABM Industry Groups, LLC v. Palmarozzo, 1784 CV 00819-BLS2 (Mass. Super. Mar 30, 2017)
• Parties: ABM Industry Groups, LLC v. Joseph Palmarozzo et al No. 136704

ABM Industry Groups, LLC v. Joseph Palmarozzo et al

No. 136704

No. 1784 CV 00819-BLS2

Superior Court of Massachusetts, Suffolk, Business Litigation Session

March 30, 2017

Filed March 31, 2017

MEMORANDUM AND ORDER DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION

Kenneth W. Salinger, Justice of the Superior Court.

ABM Industry Groups, LLC, seeks a preliminary injunction that would enforce restrictive covenants signed by Joseph Palmarozzo while he was working for ABM as a branch manager. ABM provides janitorial and building maintenance services at larger facilities and projects. It is a large publicly-traded company that generates roughly $5 billion in annual revenues. Palmarozzo left ABM in December 2016 to become the general manager at Compass Facility Services Inc., a much smaller company that generates around $15 million in annual revenues by providing janitorial services at relatively small facilities. Palmarozzo overseas CFS's operations; he has no responsibility for and no role in sales. ABM seeks an order that would bar Palmarozzo from working for CFS, compel Palmarozzo to comply with the non-competition and non-solicitation covenants in his ABM employment contract, and bar him from using or divulging any confidential information belonging to ABM.

The Court will DENY the motion for a preliminary injunction because ABM has not proved that it will likely succeed in proving that its non-competition agreement with Mr Palmarozzo is enforceable or that Palmarozzo has violated his non-solicitation or non-disclosure agreements.

1. Legal Standards

1.1. Motions for Preliminary Injunction

" A preliminary injunction is an extraordinary remedy never awarded as of right." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). To the contrary, " the significant remedy of a preliminary injunction should not be granted unless the plaintiffs had made a clear showing of entitlement thereto." Student No. 9 v. Board of Educ., 440 Mass. 752, 762, 802 N.E.2d 105 (2004). " Trial judges have broad discretion to grant or deny injunctive relief." Lightlab Imaging, Inc. v. Axsun Technologies, Inc., 469 Mass. 181, 194, 13 N.E.3d 604 (2014).

A plaintiff is not entitled to preliminary injunctive relief if it cannot prove that it is likely to succeed on the merits of its claim. See, e.g., Fordyce v. Town of Hanover, 457 Mass. 248, 265, 929 N.E.2d 929 (2010) (vacating preliminary injunction on this ground); Wilson v. Commissioner of Transitional Assistance, 441 Mass. 846, 858-59, 809 N.E.2d 524 (2004) (same). Nor may a plaintiff obtain a preliminary injunction without proving that it will suffer irreparable harm in the absence of such an order, and that such harm to the plaintiff from not granting the preliminary injunction would outweigh any irreparable harm that defendants are likely to suffer if the injunction issues. See, e.g., American Grain Products Processing Institute v. Department of Pub. Health, 392 Mass. 309, 326-29, 467 N.E.2d 455 (1984) (vacating preliminary injunction on this ground); Nolan v. Police Comm'r of Boston, 383 Mass. 625, 680, 420 N.E.2d 335 (1981) (same). " The public interest may also be considered in a case between private parties where the applicable substantive law involves issues that concern public interest[s]." Bank of New England, N.A. v. Mortgage Corp. of New England, 30 Mass.App.Ct. 238, 246, 567 N.E.2d 961 (1991). Under Massachusetts law, " [a] covenant not to compete contained in a contract for personal services" is only enforceable to the extent that it is consistent with the public interest. All Stainless, Inc. v. Colby, 364 Mass. 773, 778, 308 N.E.2d 481 (1974).

1.2. Non-Compete and Non-Solicitation Agreements

An employee's agreement not to compete with his or her employer by soliciting away customers or potential customers may be enforced under Massachusetts law only to the extent necessary to protect the employer's legitimate business interests--which include guarding against the release or use of trade secrets or other confidential information, or other harm to the employer's goodwill, but do not include merely avoiding lawful competition--and to the extent it is reasonable in scope in terms of the activities it restricts, the geographic limitations it imposes on those activities, and the length of time it is in effect. See New England Canteen Service, Inc. v. Ashley, 372 Mass. 671, 673-76, 363 N.E.2d 526 (1977); All Stainless, 364 Mass. at 773-80.

The employer has the burden of proving that the agreement protects legitimate business interests and thus is enforceable. New England Canteen Service, supra, at 675; Folsom Funeral Service, Inc. v. Rodgers, 6 Mass.App.Ct. 843, 372 N.E.2d 532 (1978) (rescript).

" Protection of the employer from ordinary competition . . . is not a legitimate business interest, " however, " and a covenant not to compete designed solely for that purpose will not be enforced." Marine Contractors, Inc. v. Hurley, 365 Mass. 280, 287-88, 310 N.E.2d 915 (1974); accord, e.g., Boulanger v. Dunkin' Donuts, Inc., 442 Mass. 635, 641, 815 N.E.2d 572 (2004), cert. denied, 544 U.S. 922, 125 S.Ct. 1662, 161 L.Ed.2d 480 (2005).

Thus, " [a]n employer may prevent his employee, upon termination of his employment, from using, for his own advantage or that of a rival and to the harm of his employer, confidential information gained by him during his employment; but he may not prevent the employee from using the skill and general knowledge acquired or improved though his employment." Abramson v. Blackman, 340 Mass. 714, 715-16, 166 N.E.2d 729 (1960); accord, e.g., Richmond Bros., Inc. v. Westinghouse Broadcasting Co., Inc., 357 Mass. 106, 111, 256 N.E.2d 304 (1970); Woolley's Laundry v. Silva, 304 Mass. 383, 387, 23 N.E.2d 899 (1939). " The 'right (of an employee) to use (his) general knowledge, experience, memory and skill' promotes the public interest in labor mobility and the employee's freedom to practice his profession and in mitigating monopoly." Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass.App.Ct. 254, 267, 400 N.E.2d 1274 (1980), quoting J.T. Healy & Son v. James A. Murphy & Son, 357 Mass. 728, 740, 260 N.E.2d 723 (1970); accord, Club Aluminum Co. v. Young, 263 Mass. 223, 226-27, 160 N.E. 804 (1928).

A contractual covenant restraining competition by a former employee " will be enforced 'only to the extent that is reasonable and to the extent that it is severable for the purposes of enforcement.' " Blackwell v. E.-M. Helides, Jr., Inc., 368 Mass. 225, 229, 331 N.E.2d 54 (1975), quoting All Stainless, supra, at 778.

2. Relief Sought Against Mr. Palmarozzo

ABM is not entitled to preliminary injunctive relief against Mr. Palmarozzo because it has not met its burden of proving that it is likely to succeed on its claims that Palmarozzo breached his non-competition, non-solicitation, or non-disclosure covenants.

2.1. Sufficiency of Consideration and Suggestion of Duress

At the outset, the Court notes that it is not convinced by Palmarozzo's arguments that his employment agreement with ABM is unenforceable for lack of consideration and because it was signed under duress. Nonetheless, the Court concludes that ABM has not met its burden of proving it is entitled to preliminary injunctive relief, as discussed in the following sections.

The written employment agreement that Palmarozzo accepted in 2015 was supported by adequate consideration, even though Palmarozzo had already been working for ABM for many years as an at-will employee and was not given any additional compensation in exchange for agree to non-competition, non-solicitation, and non-disclosure covenants.

Continued at-will employment is sufficient consideration to support a non-compete agreement in Massachusetts, just as it is sufficient consideration to support other contractual terms. Economy Grocery Stores Corp. v. McMenamy, 290 Mass. 549, 552, 195 N.E. 747 (1935) (covenant not to compete signed eighteen months after defendant began working for plaintiff as at-will employee " was not void for lack of consideration" because " it implied . . . a promise on the part of the plaintiff to employ the defendant" thereafter); accord Sherman v. Pfefferkorn, 241 Mass. 468, 473, 135 N.E. 568 (1922); see also Smith v. Graham Refrigeration Products Co., Inc., 333 Mass. 181, 186, 129 N.E.2d 884 (1955) (agreement to forego salary until employer's financial condition improved); Horner v. Boston Edison Co., 45 Mass.App.Ct. 139, 143, 695 N.E.2d 1093 (1998) (release of claims).

Since Palmarozzo was employed at will by ABM, his employer " could modify [the] terms [of employment] or 'terminate . . . [the employment] at any time for any reason or for no reason at all, ' with limited exceptions, such as public policy considerations." York v. Zurich Scudder Investments, Inc., 66 Mass.App.Ct. 610, 614, 849 N.E.2d 892 (2006) (enforcing change of incentive compensation terms for sales person employed at will), quoting Gram v. Liberty Mut. Ins. Co., 384 Mass. 659, 668 n.6, 429 N.E.2d 21 (1981).

The fact that Palmarozzo was told he could not continue to work for ABM if he did not sign the agreement does not show that the contract is voidable on the grounds of economic duress. See United Shoe Machinery Co. v. La Chapelle, 212 Mass. 467, 477, 99 N.E. 289 (1912) (same as to assignment of rights in shoe machinery made by employee in exchange for continued employment). A contract entered into under physical or economic duress that " deprives the victim of his unfettered will" is voidable. Cabot Corp. v. AVX Corp., 448 Mass. 629, 637, 863 N.E.2d 503 (2007). However, " [t]he assertion of duress must be proved by evidence that the duress resulted from defendant's wrongful and...