Corporate Techs., Inc. v. Harnett

• Decision Date: 23 September 2013
• Docket Number: No. 13–1706.,13–1706.
• Citation: 731 F.3d 6
• Parties: CORPORATE TECHNOLOGIES, INC., Plaintiff, Appellee, v. Brian HARNETT; OnX USA LLC, d/b/a OnX Enterprise Solutions, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

731 F.3d 6

CORPORATE TECHNOLOGIES, INC., Plaintiff, Appellee,

v.Brian HARNETT; OnX USA LLC, d/b/a OnX Enterprise Solutions, Defendants, Appellants.

No. 13–1706.

United States Court of Appeals,First Circuit.

Sept. 23, 2013.

Michele A. Whitham, with whom Christopher Hart, Elizabeth M. Holland, and Foley Hoag LLP were on brief, for appellants.

Kevin J. O'Connor, with whom Kelley A. Jordan–Price, Mark A. Bross, and Hinckley, Allen & Snyder, LLP were on brief, for appellee.

Before HOWARD, SELYA and LIPEZ, Circuit Judges.

SELYA, Circuit Judge.

Businesses commonly try to protect their good will by asking key employees to sign agreements that prohibit them from soliciting existing customers for a reasonable period of time after joining a rival firm. When a valid non-solicitation covenant is in place and an employee departs for greener pastures, the employer ordinarily has the right to enforce the covenant according to its tenor. That right cannot be thwarted by easy evasions, such as piquing customers' curiosity and inciting them to make the initial contact with the employee's new firm. As we shall explain, this is such a case.

I. BACKGROUND

This is an interlocutory appeal growing out of a business dispute. Below, the district court granted a preliminary injunction that restrained defendant-appellant Brian Harnett, a former employee of plaintiff-appellee Corporate Technologies, Inc. (CTI), from doing business with certain customers to whom he had sold products and services while in CTI's employ. The preliminary injunction extended to other matters as well; for example, it included an order that defendant-appellant OnX USA LLC (OnX), a competitor of CTI and Harnett's current employer, withdraw certain bids on which Harnett had toiled.

The defendants appeal from the issuance of the preliminary injunction. After careful consideration, we affirm.

The pertinent facts are catalogued in the district court's rescript, see CTI v. Harnett ( CTI I ), 943 F.Supp.2d 233, 235–37, No. 12–12385, 2013 WL 1891308, at *1–2 (D.Mass. May 3, 2013), and we assume the reader's familiarity with that account. For present purposes, a sketch of the origin and travel of the case will suffice.

For nearly a decade, Harnett worked as an account executive/salesman at CTI, a provider of customized information technology solutions to sophisticated customers. Because CTI regards many of the details of its business operations as proprietary, it insisted that Harnett sign an agreement (the Agreement) that contained non-solicitation and non-disclosure provisions when he came on board. Harnett obliged.

In October of 2012, Harnett jumped ship to work for OnX. The record makes manifest that, following his departure from CTI, Harnett participated in sales-related communications and activities with certain of his former CTI customers on behalf of OnX.

CTI was not pleased. It lost little time in repairing to a Massachusetts state court, where it alleged that Harnett's actions transgressed the Agreement and that OnX's encouragement of those actions constituted tortious interference with CTI's contractual rights and advantageous relationships. CTI's suit sought both money damages and injunctive relief.

The defendants removed the case to the United States District Court for the District of Massachusetts based on diversity of citizenship and the existence of a controversy in the requisite amount. See28 U.S.C. §§ 1332(a), 1441(a). When they answered the complaint, the defendants denied that they had committed either a breach of contract or a tort. Harnett also interposed a counterclaim (immaterial to the issues on appeal).

CTI sought a preliminary injunction based on affidavits, deposition testimony, and documentary proffers. The defendants opposed the motion, submitting evidence of their own. In due course, the district court granted a preliminary injunction. See CTI v. Harnett ( CTI II ), No. 12–12385, 2013 WL 3334979, at *1–2 (D.Mass. May 3, 2013). Its decree restrained Harnett from engaging “in any marketing or sales efforts ... for a period of twelve months” with respect to several CTI customers whom he formerly had serviced. Id. at *1. With regard to those customers, it also compelled the defendants to withdraw any bids that Harnett had helped to develop. See id.

This timely appeal followed. Notwithstanding its interlocutory character, we have jurisdiction under 28 U.S.C. § 1292(a)(1). Because the issues are time-sensitive, we expedited briefing and oral argument.

II. ANALYSIS

In determining whether to grant a preliminary injunction, the district court must consider: (i) the movant's likelihood of success on the merits of its claims; (ii) whether and to what extent the movant will suffer irreparable harm if the injunction is withheld; (iii) the balance of hardships as between the parties; and (iv) the effect, if any, that an injunction (or the withholding of one) may have on the public interest. See Ross–Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir.1996).

In this diversity case, the law of Massachusetts supplies the substantive rules of decision. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Crellin Techs., Inc. v. Equipmentlease Corp., 18 F.3d 1, 4 (1st Cir.1994). The district court found that factors two through four of the preliminary injunction paradigm counseled in favor of, or at least were consistent with, the grant of injunctive relief. See CTI I, 943 F.Supp.2d at 242–46, 2013 WL 1891308, at *7–10. The defendants, by their silence, have acquiesced in these findings.¹See, e.g., Ross–Simons, 102 F.3d at 16 (addressing only those prongs of the preliminary injunction paradigm challenged by the appellant).

But the four factors are not entitled to equal weight in the decisional calculus;rather, “[l]ikelihood of success is the main bearing wall of the four-factor framework.” Id. The defendants have staked their appeal entirely on the perceived fragility of this main bearing wall, decrying the district court's determination that CTI was likely to succeed on the merits of its claims.

Our standard of review is familiar. When assaying a trial court's ruling on a motion for a preliminary injunction, “we scrutinize abstract legal matters de novo, findings of fact for clear error, and judgment calls with considerable deference to the trier.” New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir.2002). We will disturb the ruling below only if the court abused its discretion. See id.

Abuse-of-discretion review is respectful but appellate deference is not unbridled. For one thing, a material error of law invariably constitutes an abuse of discretion. See Rosario–Urdaz v. Rivera–Hernandez, 350 F.3d 219, 221 (1st Cir.2003). For another thing, an abuse of discretion “occurs when a material factor deserving significant weight is ignored, when an improper factor is relied upon, or when ... the court makes a serious mistake in weighing [the relevant factors].” Indep. Oil and Chem. Workers of Quincy, Inc. v. Procter & Gamble Mfg. Co., 864 F.2d 927, 929 (1st Cir.1988).

A. Breach of the Non–Solicitation Agreement.

The non-solicitation provision contained in the Agreement prohibits Harnett from “solicit[ing], divert[ing] or entic[ing] away existing [CTI] customers or business” for a period of twelve months following the cessation of his employment. The dispute between the parties turns on the distinction between actively soliciting and merely accepting business—a distinction that the Massachusetts Appeals Court aptly termed “metaphysical.” Alexander & Alexander, Inc. v. Danahy, 21 Mass.App.Ct. 488, 488 N.E.2d 22, 30 (1986).

The defendants argue that because the customers in question initiated contact with Harnett, he was thereafter free to deal with them without being guilty of solicitation. CTI demurs. It points out that the customers only contacted Harnett following their receipt of a blast email announcing his hiring by OnX. This email was sent to a targeted list of prospects, approximately forty percent of whom were (or at least, had been) CTI customers. The record shows numerous interactions between Harnett and the customers after initial contact—and CTI touts these interactions as compelling evidence that Harnett engaged in solicitation.

The line between solicitation and acceptance of business is a hazy one, and the inquiry into where this line should be drawn in a particular case is best executed by the district court. See Reliance Steel Prods. Co. v. Nat'l Fire Ins. Co., 880 F.2d 575, 576 (1st Cir.1989) (observing that fact-intensive inquiries are “the staples of a trial court's diet, and comprise an unappetizing ... bill of fare for appellate digestion”). This is especially true at the preliminary injunction stage—a stage at which the district court is required only to make an estimation of likelihood of success and “need not predict the eventual outcome on the merits with absolute assurance.” Ross–Simons, 102 F.3d at 16. Consistent with this structure, our task is merely to determine whether the district court's conclusion falls within a range of reasonably probable outcomes. See id.

The defendants seek to change the trajectory of the debate by insisting that, once a customer initiates contact with an employee who has switched his affiliation, all bets are off and subsequent business activity cannot as a matter of law constitute solicitation. This argument is simply a linguistic trick: creative relabeling, without more, is insufficient to transform what is manifestly a question of fact into a question of law. See Fed. Refin. Co. v. Klock, 352 F.3d 16, 27 (1st Cir.2003).

To be sure, Massachusetts trial courts have accorded varying degrees of significance to initial contact depending on the facts at hand, compare Oceanair, Inc. v. Katzman, No. 00–3343, 2002 WL 532475, at *6 (Mass.Super.Ct. Jan. 22, 2002) (treating initial contact as crucial), with McFarland v. Schneider, ...