ACAS Acquisitions (Precitech) Inc. v. Hobert

• Decision Date: 03 May 2007
• Docket Number: No. 2006–224.,2006–224.
• Citation: 923 A.2d 1076,155 N.H. 381
• Court: New Hampshire Supreme Court
• Parties: ACAS ACQUISITIONS (PRECITECH) INC. v. Stephen C. HOBERT.

155 N.H. 381

923 A.2d 1076

ACAS ACQUISITIONS (PRECITECH) INC.

v.Stephen C. HOBERT.

No. 2006–224.

Supreme Court of New Hampshire.

Argued: Feb. 27, 2007.

Opinion Issued: May 3, 2007.

Orr & Reno, P.A., of Concord (Martha Van Oot on the brief and orally), for the plaintiff.

Sheehan Phinney Bass & Green, P.A., of Manchester (Edward A. Haffer on the brief and orally), for the defendant.

GALWAY, J.

The defendant, Stephen C. Hobert, appeals a decision of the Superior Court (Sullivan, J.) in favor of the plaintiff, ACAS Acquisitions (Precitech) Inc. (ACAS). We affirm.

The trial court found the following facts. In 1962, P. Donald Brehm founded Pneumo Precision (Pneumo) in Keene. The defendant joined Pneumo in 1982. In 1984, Brehm sold Pneumo to Allied Signal and started Toolroom Craftsmen. The defendant remained employed by Pneumo. Eventually, Toolroom Craftsmen became Precitech. In 1994, Brehm hired the defendant as sales manager for Precitech, which, by that time, was competing directly with Pneumo. Each of these companies manufactured and sold ultra-precision single-point and multi-axis diamond turning, grinding, grooving and milling machine systems.

In 1997, Brehm sold Precitech to Schroeder Ventures, which, by that time, had acquired Pneumo. As part of this sale, Brehm executed an agreement whereby he remained employed by Precitech until October 14, 1999, and was subject to a three-year, non-competition agreement thereafter. That non-competition agreement prevented Brehm from competing with Precitech and from soliciting Precitech employees to engage in activities competitive with Precitech.

In 1998, the defendant left Precitech to be the director of sales at Optical Filter Corporation. He returned to Precitech in late 1999 as the Vice–President of Sales and Marketing. In November 1999, as a condition of his reemployment, the defendant executed an employment agreement with Precitech. That agreement contained provisions requiring the defendant to maintain Precitech's trade secrets and to refrain from competing with Precitech. Additionally, Precitech had a written confidentiality policy of which the defendant was aware.

In 2001, Patrick Hurst, who at one time was an engineer with Precitech, formed Novus Technologies, L.L.C. (Novus) to design and manufacture ultra-precision tools and equipment. In June 2001, Hurst partnered with Brehm to form Accura Technics, L.L.C. (Accura). Brehm was involved in the founding of Accura more than one year prior to the expiration of his non-competition agreement with Precitech. Sometime after the founding of Accura, Novus ceased operations. Hurst and Brehm testified that, had Novus remained operational, it could have produced products that would have been competitive with those of Precitech.

During the summer and fall of 2001, the defendant, along with others at Precitech, prepared a Confidential Information Memorandum (the Memo) which identified Precitech's key customers, marketing strategies and future business plans, as well as important product and financial information to be used by investment bankers in connection with a possible sale of Precitech. In early 2002, the defendant presented the Memo and other information to American Capital Strategies, a potential buyer of Precitech and the parent to ACAS.

In April or May 2002, the defendant met with Brehm and was told that Brehm and Hurst were developing a company and that if the defendant had any interest in joining them, he should call Hurst. A short time later, the defendant met with Hurst and Brehm to discuss marketing strategies for Accura. Following this conversation, the defendant delivered a letter, dated May 30, 2002, to the office shared by Hurst and Brehm, which outlined potential marketing strategies for Accura. The trial court found that this letter clearly stated that the defendant intended to join Accura and that Accura would be in the business of manufacturing ultra-precision grinding machines competitive with those made by Precitech and would market those machines to Precitech customers. Moreover, the trial court noted that the defendant was aware of Precitech's interest in expanding into markets that he identified as potential markets for Accura and that the customers he identified to Accura were in such markets. Thus, the trial court found that the defendant, by aiding Accura, violated his 1999 employment agreement with Precitech.

In June 2002, ACAS purchased Precitech. In conjunction with that purchase, the defendant signed new employment, non-competition and nondisclosure agreements with ACAS. The new non-competition agreement states, in relevant part:

3. Non–Competition; Non–Solicitation

(a) While I am employed by [ACAS] and for a period of twenty-four (24) months after termination of my employment for any reason ..., I will not, whether alone or as a partner, officer, director, consultant, agent, employee or stockholder of any company or other commercial enterprise, directly or indirectly, engage in any line of business that represents at least 5% of the gross revenues of [ACAS] or any line of business which, to my knowledge was to be entered into and was planned by [ACAS] at any time during the period of my employment with [ACAS]....

....

(c) While I am employed by [ACAS] and for a period of twenty-four (24) months after termination of my employment for any reason ..., I will not, directly or indirectly, solicit, entice or induce (i) any Customer ... of [ACAS] to become a Customer of any other person or entity engaged in a Competitive Line or (ii) any Customer or Supplier ... to cease doing business with [ACAS] in a Competitive Line, and I will not assist any person or entity in taking any action described in the forgoing clauses (i) and (ii).

The non-disclosure agreement provides, in pertinent part:

1. Nondisclosure and Use of Proprietary Information (a) I will not at any time, whether during or after the termination of my employment, reveal to any person or entity any of the trade secrets or proprietary or confidential information of [ACAS] or of any third party which [ACAS] is under an obligation to keep confidential ... or other materials of any nature relating to any matter within the scope of the business of [ACAS] or concerning any of the dealings or affairs of [ACAS] ..., except as may be required in the ordinary course of performing my duties as an employee of [ACAS].

Additionally, under the terms of the defendant's employment agreement, ACAS could terminate him at any time with or without cause, or he could terminate his employment upon sixty days' notice. Further, the defendant negotiated a unique severance package, which provided that if he were terminated without cause within the first year he would be entitled to severance payments equal to twelve months' pay and a portion of his incentive bonus. If, however, he had been terminated for cause as defined in his employment agreement, he forfeited any right to severance pay. In addition to negotiating this severance package, the defendant was permitted to "cash out" the stock he owned in Precitech at the closing. Neither this severance package nor the "cash out" benefit was made available to any other officer or employee of Precitech.

In late 2002, ACAS and Brehm began corresponding because ACAS was concerned that Brehm might be violating his non-competition agreement. The trial court found that when responding to ACAS' correspondence, Brehm misled ACAS regarding his involvement in Novus and Accura, his intent to develop high-precision grinding and turning machines and his belief that Accura would not compete with ACAS. The trial court found that although Brehm testified that Accura would not compete with ACAS because Accura would not develop machines capable of the degree of precision attainable by ACAS machines, "all the documentary evidence establishes clearly that prior to this litigation commencing, Accura intended to compete in the ultra-precision field."

In August 2002, Accura began production of its 1210G machine. That same month, the defendant met with two different attorneys to obtain information about the enforceability of his non-competition agreement and his severance package. On October 14, 2002, Brehm's non-competition agreement expired, and within two months Accura had nearly completed its 1210G machine. Accura's website described the machine as capable of, among other things, super-precision grinding.

In December 2002, the defendant again wrote to Hurst about joining Accura. According to the trial court, this letter, among other things, implied that the defendant understood that being employed by Accura within two years of leaving ACAS would violate his non-competition agreement, but after consulting with an attorney he believed the non-competition agreement might be negotiable. Thus, the defendant proposed that if he and Accura could reach an agreement on employment, he would attempt to negotiate being released from his agreements with ACAS.

Later in December 2002, officers of ACAS met to discuss terminating the defendant for performance reasons. On January 7, 2003, the defendant was terminated without cause. Two days later, he met with Hurst, and on January 12, he wrote a letter to Hurst outlining various marketing strategies for Accura's products. The trial court found that this letter made it clear that the defendant "intended to use his knowledge learned at Precitech to help Accura compete in the ultra-precision area." Further, the trial court found that "[t]he letter is a blatant indication that [the defendant] intended to violate his fiduciary obligations and obligations under his Employment Agreement and Non–Competition Agreement to Precitech."

On January 13, 2003, the defendant again met with an attorney to discuss his obligations under his agreements with ACAS. The trial court found that the defendant was not forthcoming with his attorney and did not provide his attorney with numerous documents indicating that Accura intended to compete...