In Corporate Technologies, Inc. v. Harnett et al., the U.S. Court of Appeals for the First Circuit (Court) refused to adopt a bright line rule that would automatically prohibit claims of breach of a non-solicitation agreement when the initial contact is initiated by the customers. The case serves as a cautionary tale for employers who hire employees subject to valid non-solicitation agreements.
Brian Harnett, an IT salesman, signed a non-solicitation agreement when he joined Corporate Technologies, Inc. (CTI) in 2003. The agreement prohibited him from soliciting business from CTI's customers for a one year period following his departure from the company. In 2012, Harnett left CTI and joined its direct competitor, OnX. On Harnett's first day, OnX sent out an email to approximately 100 potential clients (40% of which were or had been CTI customers), informing them of Harnett's new association with OnX. The evidence showed that Harnett communicated with at least four of his CTI customers while at OnX. These customers reached out to Harnett after they received the email blast from OnX.
CTI filed for a preliminary injunction against both Harnett and OnX, claiming that Harnett violated his non-solicitation agreement and that OnX had interfered with Harnett's duties under the agreement. The U.S. District Court for the District of Massachusetts granted a preliminary injunction against Harnett but declined to do so against OnX. Harnett appealed and argued that because the initial contact had come from his former clients, and not him, he had not violated the non-solicitation agreement.
The First Circuit noted that it would look to sister jurisdictions and public policy considerations because the Massachusetts Supreme Judicial Court (SJC) had not yet confronted the issue. The First Circuit found that in the employment context, restrictive covenants are intended to "afford the original employer bargained-for protection of its accrued good will ….[and] according decretory significance to who makes the first contact would undermine this protection because that factor, standing alone, will rarely tell the whole tale." The First Circuit concluded that, if confronted with the question, the SJC would hold "that a per se rule vis-à-vis initial contact ha[d] no place in th[e] equation" in determining whether a violation of a non-solicitation agreement had occurred. Instead of a bright line rule, the First Circuit held that initial contact should be only one of the factors that courts look to when drawing the line between improper solicitation and permissible acceptance of business.
The First Circuit found that the District Court did not abuse its discretion in granting a preliminary injunction against Harnett based on the evidence of Harnett's meetings and communications with the CTI customers following the blast email by OnX. The District Court concluded that this evidence permitted a plausible inference that Harnett was enticing them to do business with OnX and not CTI. Given these activities, the First Circuit held that it was reasonable to infer that the email from OnX was "part and parcel of a pattern of solicitation."
Although the First Circuit decision is not technically binding on Massachusetts state courts, it provides guidance for employers who hire employees subject to non-solicitation agreements. Employers should think carefully before sending "announcement" emails to customers with which the employee worked at his prior company, as a court could later find that the email was part of a "pattern of solicitation." Employers also should develop plans regarding how to respond to requests that are truly initiated by the employee's former customers.