The First Circuit Court of Appeals issued its most significant decision to date on non-solicitation provisions in restrictive covenants by upholding a preliminary injunction in Corporate Technologies, Inc. v. Harnett, No. 13-1706 (August 23, 2013). The court affirmed a decision from the District of Massachusetts granting a preliminary injunction to an employer whose former employee used a targeted email blast to announce his new position with a competing company. In upholding the injunction, the court took a much broader view of the meaning of “solicitation” than that argued by the defendant employee and shed light on the “hazy” line separating “actively soliciting” business from “merely accepting” it.
Brian Harnett, an account/executive salesman, signed an agreement containing non-solicitation and non-disclosure provisions when he joined the former employer nearly a decade earlier. Upon leaving to work for a competitor, Harnett sent an email to a “targeted list of prospects,” approximately 40 percent of whom were customers of his former employer. Based on their receipt of the email, customers contacted Harnett and at least one of the former employer’s customers eventually competed a sale with Harnett’s new company. Harnett also had significant business contacts with at least four of his former employer’s customers.
Harnett argued that because the customers were the ones initiating contact, subsequent business activity could not be considered solicitation. The court, however, held that solicitation “can take many forms” and found Harnett’s argument unpersuasive. In forming its opinion, the court noted:
[t]he 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.
The court determined that in solicitation cases, placing an emphasis on who made the initial contact would undermine the former employers’ bargained-for protections, as the term “initial contact” has an “amorphous nature” and can easily be “manipulated.” Instead, the court announced a belief that the identity of the party making the initial contact should be “just one factor” in “drawing the line between solicitation and acceptance.”
The First Circuit’s decision follows Massachusetts appellate case law. In Alexander & Alexander, Inc. v. Danahy, the Appeals Court of Massachusetts also took a broad view of solicitation and described the difference between accepting and receiving business as “more metaphysical than real.” Alexander v. Alexander, Inc. v. Danahy, 488 Mass. App. Ct. 23, 30 (Mass. App. Ct. 1986).
The Corporate Technologies, Inc. decision is likely to be relied upon by employers seeking to enforce non-solicitation clauses, especially in the First Circuit. It also offers important lessons for employers in the hiring context. Employers should advise newly hired employees with non-solicitation agreements to be careful in their dealings with former customers. Seemingly innocuous email blasts may violate their non-solicitation agreements, even if a former customer reaches out to them first.