The First Circuit Court of Appeals held that although an initial contact between a former employee and a customer was not a decisive factor, persistent contact does violate employee’s non-solicitation agreement. Corporate Technologies, Inc. v. Harnett, et al., Case No. 13-1706 (1st Cir. August 23, 2013) (available here). Corporate Technologies, Inc. (“CTI”) sued former employee Harnett to prevent him from doing business with CTI’s customers in violation of the signed CTI-Harnett non-solicitation agreement. The lower court had granted a preliminary injunction restraining Harnett from doing business with those customers, and the injunction extended to Harnett’s current employer, co-defendant OnX USA LLC (OnX). Defendants appealed the preliminary injunction. The First Circuit affirmed the injunction.
For 10 years, Harnett worked as an account executive and salesman for. At the time Harnett was hired, he signed a non-solicitation and non-disclosure agreement with CTI. In 2012, Harnett left CTI to work for OnX. At OnX, Harnett had sales-related communications and activities with CTI customers. CTI sued, alleging tortious interference with contractual rights and advantageous customer relations and moved for preliminary injunction, which was granted. The injunction restricted Harnett from engaging in any marketing or sales efforts for one year with respect to the CTI customers he had formerly serviced. The injunction also required OnX to withdraw any bids that Harnett had helped to develop for those customers. OnX and Harnett appealed.
“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” which is an abstract distinction. Corporate Technologies, Inc., Slip Op. P. 6. Defendants argued that the customers had contacted Harnett, and thus he was allowed to deal with them without violating the non-solicitation contract. However, the customers only contacted Harnett after he sent out a mass email stating that he was leaving CTI for OnX. Thus, Defendants’ 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.” Corporate Technologies, Inc., Slip Op. Pp. 7-8.
CTI’s non-solicitation and non-disclosure agreement was created to protect CTI’s established good will. Allowing Harnett to do business with CTI customers solely because they contacted him first would undermine this protection. Further, initial contact can be easily manipulated, such as by sending out a mass email to a large group of people, including some CTI customers. The First Circuit also pointed out that the initial contact tends to be preliminary, and thus unlikely to lead to any business without further solicitation. Harnett’s actions, testimony, calendar, and email all show significant business communications with at least four of his former CTI customers on behalf of OnX. “This persistent pattern of pursuing patronage permits a plausible inference that he was urging those customers to do business with OnX rather than CTI (in other words, an inference that he was trying to entice them away).” Corporate Technologies, Inc., Slip Op. P. 11. As such, the First Circuit affirmed the preliminary injunction.