April 4, 2012
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Here is an unusual spin on Massachusetts non-compete law. As best I can understand the facts (which require a bit of “between the lines” reading) Trillium sued Cheung, a former employee of Trillium. Cheung had, it appears, released an employee from a non-compete agreement without company approval. Trillium’s suit asserted breach of fiduciary duty to the company. A trial ensued, but at the outset the judge observed that if the underlying non-compete agreement had not been enforceable the release had caused no harm to Trillium, and hence there had been no legal wrong committed by Cheung. In other words, the trial involved a concept that lawyers dislike greatly: a “trial within a trial.” (Think Russian nesting dolls). Here, the two trials involved the question of whether the non-compete was enforceable and, if so, whether Cheung acted illegally by releasing the employee from the agreement. The trial began with a jury proceeding, during which the jury was asked to decide the second of these issues first - whether Cheung had improperly given the employee a release from the non-compete. However, in an odd twist the parties agreed that the judge, not the jury, would rule on damages. Before doing so, however, the judge addressed the second issue (which, one would think, should have gone first), held that the non-compete agreement was unenforceable, and concluded therefore that Trillium had suffered no damages….
March 23, 2012
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Noncompete opinions from the Massachusetts Superior Court are few and far between, so the two decisions that have been issued so far this year — one from Judge Peter Lauriat sitting in the Suffolk Business Litigation Section (BLS), the other from Judge Thomas R. Murtagh in Middlesex Cournty — are worth noting. Both judges are respected judicial veterans, and each decision illustrates a legal principle basic to this controversial and often confusing area of law. The more note-worthy of the two cases is Judge Lauriat’s decision in Grace Hunt IT Soutions v. SIS Software, LLC. There are relatively few ways to wriggle out of a non-compete, but one that should be near the top of every lawyer’s list is the question whether there has been a “material change” in the employment relationship since the non-compete agreement was signed. If so, a “pre-change” non-compete may be unenforceable. In this case the court found that there had been such a change, and therefore it denied a motion for preliminary injunction to enforce the non-compete covenant against the defendants. Of course, what constitutes a “material change” can vary, depending upon the eye of the beholder, which in a preliminary injunction context is the judge. In this case Judge Lauriat concluded that a 20% cut in salary was enough of a change to satisfy this standard. Also, the employees had signed the non-compete with…