Allied Adjustment Service v. Heney

• Decision Date: 13 November 1984
• Docket Number: No. 84-115,84-115
• Citation: 125 N.H. 698,484 A.2d 1189
• Parties: ALLIED ADJUSTMENT SERVICE v. George F. HENEY, d/b/a Southern New Hampshire Investigations.
• Court: New Hampshire Supreme Court

Page 1189

484 A.2d 1189

125 N.H. 698

ALLIED ADJUSTMENT SERVICE v. George F. HENEY, d/b/a Southern New Hampshire Investigations.

No. 84-115.

Supreme Court of New Hampshire.

Nov. 13, 1984.

Devine, Millimet, Stahl & Branch P.A., Andrew D. Dunn, on the brief and orally, and Martha V. Gordon, on the brief, Manchester, for plaintiff.

Bossie, Kelly & Hodes P.A., Manchester (Robert F. Bossie, Manchester, on the brief and orally), for defendant.

BATCHELDER, Justice.

Petitioner Allied Adjustment Service (Allied) appealed the superior court's denial of an injunction against the defendant, George F. Heney, a former employee of Allied, under a covenant not to compete which is governed by Massachusetts law.

On November 3, 1983, Allied brought a petition for temporary and permanent injunction in superior court. On November 28, 1983, the Court (Dalianas, J.) temporarily enjoined Heney from soliciting or accepting assignments from Allied's clientele. Heney cross-petitioned for rescission of the employment agreement. The court, after a hearing, denied Heney's cross-petition for rescission. The court found the non-competition clause to be ancillary to a valid employment contract and a reasonable restraint of trade. Allied's request for a permanent injunction, nonetheless, was denied on the ground that Allied had shown no trade secrets or confidential information and had not demonstrated injury to its good will by Heney's conduct.

The question on appeal is whether the trial court erred in finding that the plaintiff produced no evidence of injury to Allied's good will by Heney's action. We hold that the record warrants the trial court's finding injury to good will and therefore remand for a new trial.

Allied is a Massachusetts corporation engaged in the business of insurance investigation and adjustment of claims in New Hampshire, Massachusetts, Vermont, Maine, and Connecticut. Heney was employed as manager of Allied's Manchester, New Hampshire office from April 21, 1980 to September 23, 1983.

Allied and Heney signed two employment contracts, one on April 10, 1980, and the other on October 4, 1982. Both contained similar non-competition clauses. The 1982 contract, which superseded the 1980 contract, prohibited Heney, during his employment at Allied and for twenty-four months thereafter, from soliciting or accepting business from Allied's clientele. The effect of the restriction was limited to those of Allied's clients located within a fifty mile radius of Manchester. Allied's clientele was defined as "insurance companies, self-insurers, insurance agents, attorneys, and other business organizations or persons" that had retained Allied's services and been served by the Manchester office. The contract recited that Allied's clientele was the exclusive property of Allied and that all information used to solicit those clients was confidential. The contract further specified that questions pertaining to the validity, construction, execution and performance of the agreement are to be construed according to Massachusetts law.

Heney began doing business as Southern New Hampshire Investigations (SNHI) while still employed by Allied. On September 15, 1983, Heney and Lisa Lynch, his partner at SNHI, leased office space for SNHI. That same day, Heney tendered his notice of termination to Allied. On September 20, 1983, Heney, under SNHI's letterhead wrote to approximately thirty-five insurance companies advising them that he was offering investigative and adjusting services on an independent basis, and soliciting their business for SNHI. On September 23, 1983, Heney left Allied's employ and thereafter devoted his exclusive efforts to SNHI's investigative and adjusting work.

Where parties to a contract select the law of a particular jurisdiction to govern their affairs, that choice will be honored if the contract bears any significant relationship to that jurisdiction. Restatement (Second) of Conflict of Laws § 187; Cf. Consolidated Mut. Cas. Co. v. Radio Foods Co., 108 N.H. 494, 496-97, 240 A.2d 47, 49 (1968) (choice of law in a contract case, absent an express choice, is governed by the intention of the parties and their reasonably justified expectations). The parties selected the law of Massachusetts, which bears a relationship to the controversy as the state of incorporation and the place of business of Allied.

The granting or denial of specific performance of a contract rests within the sound discretion of the trial court depending on the circumstances of each case. Gulf Oil Co. v. Rybicki, 102 N.H. 51, 52, 149 A.2d 877, 879 (1959). "[T]he decree will be sustained unless it appears upon the record to have been unsupported by the evidence or to have been based upon untenable grounds." Id.

Under Massachusetts law, "[a] covenant not to compete contained in a contract for personal services will be enforced if it is reasonable, based on all the circumstances. In determining whether a covenant will be enforced, in whole or in part, the reasonable needs of the...