Massachusetts Business Court Sanctions Company for Pursuing Frivolous Case to Enforce Noncompete Agreement

by Lee Gesmer on March 21, 2006

Noncompete Agreements. If I had a dollar for every time a client who had been sued asked me if they could recover attorney’s fees or damages if they won, I’d have, well, probably hundreds of dollars. Even when a lawsuit proves to be frivolous the Massachusetts courts have traditionally been extremely reluctant to turn the tables on a plaintiff and make it pay damages for the harm its suit has caused to the defendant.

Every once in a while, however, a judge shows some courage and punishes a company the judge concludes has brought a frivolous case. In January 2006 Judge Gants, in the Suffolk Business Litigation Session, turned the tables on Brooks Automation, a Massachusetts company with a billion dollar-plus market valuation, ordering it to pay over $600,000 in damages for bringing a frvolous lawsuit against a former employee. After a trial Judge Gants concluded that the suit was devoid of both any reasonable factual support or any arguable basis in law. A link to the decision is [here].

Judge Gants found that the suit, which Brooks brought against a former employee and a new company he had formed to compete with Brooks (but which was not, as yet, actually competing), had been filed with “reckless disregard” for its merits and to disrupt a potential relationship between the former employee and one of Brooks’ customers (Brooks actually emailed the complaint to the customer, Applied Materials, immediately after filing it, and before even serving it on the former employee).

After an expedited discovery and trial schedule (trial took place only two months after Brooks filed suit), the jury held that the employee had not stolen Brooks’ trade secrets and had not violated his noncompete agreement. The jury did, however, find that Brooks had intentionally interfered with the employee’s relationship with Applied Materials, and awarded the employee $200,000 in damages. Talk about your case backfiring.

The Judge then found that this interference was a violation of Mass. Gen. Laws. c. 93A (which makes illegal “unfair and deceptive acts or practices”), and trebled the $200,000 award. While not mentioned in the decision, the judge is almost certain to also award the former employee his attorney’s fees.

Importantly, the Judge made it clear that he intended to send a message: Judge Gants wrote that his decision was –

necessary to send a loud and clear message to Brooks and to any other corporation that seeks to abuse the right to sue in order to interfere with a competitor’s efforts to develop a contractual relationship with a coveted customer. A start-up company is especially vulnerable to such an abuse of process, since time, effort, and money are needed to defend even a frivolous lawsuit and all are generally in short supply in a start-up company. It is important to make clear to any corporation that contemplates crushing a vulnerable competitor by conjuring a frivolous lawsuit that it will pay dearly for its misuse of the judicial process.

One case does not make a trend, and cases like this do appear occassionally in the decisions of the Superior Court. However, because this decision originated with the Massachusetts Business Litigation Session it carries more weight, and sends a stronger message to the business community and the bar, than if it it had been decided by one of the non-Business Litigation Session judges. Massachusetts lawyers who are defending former employees (and their new employers) will be well served by studying this decision carefully and keeping its teachings (which have been greatly abbreviated here) in mind in defending cases of this sort. Of course, Brooks still has the right to appeal this decision. If it does, I’ll report the outcome.

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