JUSTICE WHEAT delivered the Opinion of the Court.
¶ 1 The Fifth Judicial District Court, Jefferson County, granted the Montana Department of Corrections and Institutions' (the State) motion for summary judgment, concluding that the statute of limitations had expired. Julie Chriske (Chriske) appeals.
¶ 2 The sole issue is whether the District Court erred when it concluded that Chriske knew or should have known that smoking caused her lung disease before August 2, 2001.
BACKGROUND
¶ 3 From 1971 through 1973, Chriske attended the Mountain View School. Chriske alleges that Mountain View rewarded good behavior by giving cigarettes to the residents at the school. From 1973 to 1975, Chriske received periodic visits from State workers for aftercare after her release from Mountain View School. Chriske claims that the State aftercare workers allowed her to purchase cigarettes and occasionally ` supplied her with cigarettes. She alleges that the actions of the State I workers caused her to become addicted to cigarettes which led to her developing "various tobacco-related diseases."
¶ 4 Over the next few decades, Chriske smoked from one to four packs of cigarettes a day. During this time, she suffered lung problems, including a chronic cough, wheezing, and asthma. In October 1991, a St. Peter's Hospital emergency room physician diagnosed Chriske with "small airway obstruction" because her lung function was at 72% of expected. The physician recommended Chriske stop smoking and enrolled her in a smoking cessation program. This program required testing that showed Chriske suffered from shortness of breath and low blood oxygen saturation. As part of the program, Chriske filled out a questionnaire in which she stated that she "continued smoking despite knowledge of having persistent or recurrent physical problems that [were] caused or exacerbated by the use of the substance." A respiratory therapist also told Chriske that she should quit smoking to help alleviate her lung problems.
¶ 5 Although Chriske's training as an addiction counselor included information about tobacco addiction and she testified she knew about the link between smoking and lung disease as early as the 1980s, she continued to smoke cigarettes throughout the 1990s. During this time, her decreasing lung function began to affect her sleep. She stopped playing golf because it was too strenuous and walking or climbing a flight of stairs became a challenge for her. Chriske's long-time roommate, Sanna Yost, noticed a distinct wheeze in Chriske's breathing and a decline in her energy levels. Yost testified that she and Chriske discussed quitting smoking as a solution to her lung problems. Yost also testified that there is "no question" in her mind that Chriske knew about the potential adverse effect of smoking, including lung disease, for many years.
¶ 6 From the mid- to late-1990s, Chriske regularly discussed her lung I problems with Dr. James Burkholder, who then prescribed various smoking cessation medications. On at least a few occasions, Dr. Burkholder told Chriske that her asthma and breathing problems were caused by her smoking habit. In 1998, Chriske saw a nurse practitioner, Beth Sirr, who found that Chriske's lung function had decreased to 66% of expected. Chriske admitted to Sirr that her coughing increased with smoking. Sirr diagnosed her with "reactive airway disease," another term for asthma, and prescribed an inhaler and nicotine gum. Sirr testified that she would have told Chriske that smoking increased her risk of lung disease.
¶ 7 On August 2, 2001, Chriske visited Dr. Jeannie Brandt, an internist, complaining of fatigue. Dr. Brandt diagnosed Chriske with Chronic Obstructive Pulmonary Disease (COPD).
¶ 8 Chriske filed her complaint on August 2, 2004, claiming that it was not until August 2, 2001, when she was diagnosed with COPD that she learned her smoking caused her lung disease. The District Court granted partial summary judgment on Chriske's claims prior to 1973 under the then-existing principle of sovereign immunity.
¶ 9 The State then moved for summary judgment, arguing that the remainder of Chriske's claims were barred by the statute of limitations because Chriske knew her smoking caused her lung disease in 1991 at the latest when she was diagnosed with "small airway obstruction." Chriske reiterated her argument that she was not aware of the causal relationship between smoking and her lung disease until Dr. Brandt diagnosed her with COPD on August 2, 2001.
¶ 10 The District Court granted summary judgment in favor of the State. In a thorough and well-written analysis, the District Court concluded that Chriske failed to carry her burden to show that a genuine issue of material fact existed that she "both knew and should have discovered, through due diligence, that she suffered from a small airway obstructive tobacco-related disease before August 2, 2001."
¶ 11 Chriske appeals, asserting she had "no idea and had never been advised by a doctor that she was suffering from something [that] was irreversible and caused by smoking" until her diagnosis of COPD on August 2, 2001. Thus, according to Chriske, because she filed her complaint within three years of the diagnosis, the District Court erred when it determined that the statute of limitations had run.
¶ 12 The State again argues that the period of limitations began in at least 1991. The State asserts that by 1991 Chriske was subjectively aware of the causal relationship between smoking and her lung problems because she admitted as much during the smoking cessation program in 1991 and testified that she knew smoking caused lung disease as early as the 1980s. In addition, the State contends that a reasonable person in Chriske's circumstances would have known that her lung problems were caused by her smoking long before 2001 because healthcare providers had informed her several times that I smoking caused and exacerbated her breathing and lung problems.
STANDARD OF REVIEW
¶ 13 We review a district court's grant of summary judgment de novo, applying the same standard as the district court pursuant to M. R. Civ. P. 56. Kaeding v. W.R. Grace Co., 1998 MT 160, ¶ 15, 289 Mont. 343, 961 P.2d 1256. The movant must demonstrate that no genuine issues of material fact exist. Once the movant carries his burden, the burden then shifts to the non-moving party to prove, by more than mere denial and speculation that a genuine issue does exist. If the court determines that genuine issues of fact do not exist, it must then determine whether the moving party is entitled to judgment as a matter of law. Id. We review the legal determinations made by a district court as to whether they are correct. Id.
DISCUSSION
¶ 14 Did the District Court err when it concluded that Chriske knew or should have known that smoking caused her lung disease before August 2, 2001?
¶ 15 An action for personal injury must be commenced within three years from the time that the claim or cause of action accrues. Section 27-2-204, MCA. A claim or cause of action accrues "when all elements of the claim or cause exist or have occurred, the right to maintain an action on the claim or cause is complete, and a court or other agency is authorized to accept jurisdiction of the action." Section 27-2-102()1(a), MCA. Generally, the claimant's lack of knowledge of the claim or cause of action, or its accrual, does not toll the beginning of the period of limitations. Section 27-2-102(2), MCA. However, when the facts constituting the claim are by their nature concealed or self-concealing, the period of limitations does not commence "until the facts constituting the claim have been discovered or, in the exercise of due diligence, should have been discovered by the injured party. . . ." Section 27-1-102(3), MCA. The District Court concluded and the parties do not dispute that lung disease is, by its nature, self-concealing. Thus, the issue is whether Chriske filed her complaint more than three years after she discovered or, in the exercise of due diligence, should have discovered that her smoking caused her "various tobacco-related diseases."
¶ 16 Chriske argues that the statute of limitations did not begin to run I until her medical diagnosis of COPD on August 2, 2001, even though she was told by medical professionals for years that her smoking caused her lung problems. To support her argument, Chriske relies on Hando v. PPG Industries, Inc., 236 Mont. 493, 771 P.2d 956 (1989), and Nelson v. Nelson, 2002 MT 151, 310 Mont. 329, 50 P.3d 139. However, both Hando and Nelson are easily distinguished.
¶ 17 The plaintiff in Hando suspected for years that her exposure to I paint caused her physical illness, but physicians repeatedly told her that her physical problems were not related to the paint exposure. Hando, 236 Mont, at 495-96, 771 P.2d at 958. We concluded that the I statute of limitations began to run only when a physician finally confirmed Hando's suspicions. Hando, 236 Mont, at 502, 771 P.2d at 962. The opposite is true here. Chriske's healthcare providers warned her since the early 1990s that smoking caused lung disease.
¶ 18 Nelson is equally inapposite. Like Hando, Nelson suspected that I her physical ailments were the result of her exposure to chemicals while working on a ranch, but physicians repeatedly expressed uncertainty about the causal connection for years. Nelson, ¶ 5. We determined that the statute of limitations did not begin to run until a physician finally stated his belief that Nelson's exposure to chemicals was connected to her physical problems. We held that before the physician's diagnosis, Nelson lacked the knowledge about the causal link. Nelson, ¶ 18. Again, Chriske's situation is distinguishable because she was advised repeatedly throughout the 1990s about the causal connection between smoking and lung disease.
¶ 19 More applicable to this case is our decision in Kaeding, where we held that because the plaintiffs past medical records contained several references to asbestosis and the plaintiff admitted he knew that exposure to vermiculite could cause asbestosis, the statute of limitations began to run before the medical diagnosis of asbestosis. Kaeding, ¶¶ 23-24. Importantly, we said, "in Hando, this Court did not hold that a medical diagnosis must be rendered before the statute of limitations may run." Kaeding, ¶ 22.
¶ 20 Unlike the plaintiffs situation in Nelson and Hando, Chriske's healthcare providers confirmed that Chriske's smoking was causing her lung problems numerous times before 2001. Moreover, Chriske admitted she knew that smoking caused lung disease as early as the 1980s. Thus, Chriske's situation is more analogous to Kaeding and her I reliance on Nelson and Hando is misplaced. The District Court did not err when it concluded that Chriske had discovered or should have discovered that her smoking caused her lung disease prior to August 12, 2001.
CONCLUSION
¶ 21 Chriske failed to carry her burden to show that an undisputed issue of material fact existed that she discovered, or should have discovered in the exercise of due diligence, the causal relationship between smoking and her physical illness prior to August 2, 2001. The District Court was correct when it concluded as a matter of law that the statute of limitations had run by the time she filed her complaint.
¶ 22 Affirmed.
JUSTICES LEAPHART, RICE, COTTER and NELSON concur.
mail forwarded to Leibowitz the Aternity marketing inbound leads, which he thereafter e-mailed to himself.
In his own behalf, Leibowitz testified that he has no intention of disclosing any confidential information to KNOA. He would consider such an act to be "highly unethical." He explained that he was hired by KNOA because of his skills and reputation and "not to bring information from Aternity to KNOA." (Tr. at 425). He also stated that while he was interviewing with KNOA prior to being fired, he was not yet offered a job.
The Court notes the statement in the Leibowitz April 11, 2008 e-mail to Matz, "I got some very good G2 on KNOA this morning from a friend of mine who worked with me at GT Software who joined KNOA last week." (Dfts' Ex. J). It is revealing that as far back as April 2008, information regarding KNOA was described as G2, which is the code for military intelligence during World War II. Of importance, this e-mail also revealed that Leibowitz had information that could be used against Aternity. The testimony of Leibowitz with regard to the intense competition between Aternity and KNOA is compelling and convincing and will be recorded in this decision, in part, as follows: Q. And you made it a point, did you not, to tell Mr. Matz that you didn't give any information that could be used against Aternity? Correct? A. Correct. Q. So at that time you had information that could be used against Aternity; true? A. True. * * * * * Q. Is it fair to say that Mr. Matz was acknowledging this very good intelligence, or G2, on Knoa that you forwarded him? A. Correct. Q. And he thanked you for that intelligence on Knoa; right? A. Correct. Q. And the first thing he told you after you forwarded this intelligence on Knoa is, Knoa is definitely the competition to watch; right? A. As stated. Q. And so as of April 11th, not only were you seeking information on Knoa but your boss, the CEO of the company, as early as April of 2008, told you specifically that Knoa was the competition to watch; correct? A. Correct. Q. And then you respond to Mr. Matz further and you say: One other good point. If they start selling prospect — When you used the word "they" there, were you referring to Knoa? A. Yes. Q. So you wanted to respond to Mr. Matz and give him further ideas about Knoa? A. Right. Q. And that was Knoa, the competition to watch, as your CEO told you; correct? A. Yes. Q. And the first page of Exhibit J is an e-mail from November of 2008; correct? A. Correct. Q. And that's an e-mail from you to Mr. Matz; is that right? A. Correct. Q. And in that e-mail, you point out that Knoa has four pharma accounts, or pharmaceutical accounts; correct? A. Correct. Q. And your message to Mr. Matz about these pharmaceutical accounts was: I will do my best to get them unseated, and then there's a smiley face. Did I read that correctly? A. Right. Q. Meaning that you wanted to get these customers from Knoa for Aternity; true? A. True. (Tr. at 456, 458, 459).
Finally, in his testimony, while Leibowitz declined to concede that if this injunction was granted and he was precluded from selling KNOA software, he could still sell other types of software to all of the relationships that he had when he came to Aternity, it is apparent that this request for an injunction, if granted, could not prevent him from selling software to all of his prior customers.
The proof is clear and convincing that Leibowitz was aware that KNOA was a principal if not the main Aternity competitor. On December 2, 2009, Matz e-mailed the sales force. One subject was "KNOA — CONFIDENTIAL" and he stated that "the EUE market is a two horse race with Aternity and KNOA." The e-mail stated, in part: From: Trevor Matz Sent: Wednesday, December 02, 2009 3:56 PM To: Marcus Brown; Mark Leibowitz; Jeffrey Parillo; Paul Jones; Pryce Harrison Subject: Re: Knoa — CONFIDENTIAL Hi Team USA —
We've received some interesting news from two separate analyst sources indicating that Knoa is no fairing so well.
Today, I spoke with leading Forester APM analyst, JP Garbanni.He said that the EUE market is a two horse race with Aternity and Knoa. He then made a blanket statement that Knoa is "in trouble". He spoke with them a week or so ago and they seemed "confused as to where to go from here." He's working on a Market Update report this month on the end user experience management space and Aternity (and Knoa) will be featured in his research. Yesterday, Donna met with our Gartner AM and she shared some statistics around what Gartner's end user clients are searching on. We were able to extract details on the difference in searches between Aternity and Knoa — highlights include:
1. On the Gartner.com research site, Aternity has been searched for by Gartner clients 57 percent more times that Knoa
2. In terms of the size of the organizations searching on Aternity versus Knoa, Aternity received 288 percent more searches from large enterprises than Knoa
The combination of these two independent analyst firms confirms that Knoa's lifeline seems to be running out, or at least running low on gas.
PLEASE DO NOT FORWARD THIS EMAIL TO ANYONE AND DO NOT QUOTE ANY OF THE ABOVE TO ANYONE OUTSIDE THE COMPANY.
Best
Trevor
(Dfts' Ex. K). (emphasis supplied).
On December 2, 2009, Leibowitz responded to this e-mail regarding the "Subject: Knoa — Confidential": From: Mark Leibowitz Sent: Wednesday, December 02, 2009 4:41 PM To: Trevor Matz; Marcus Brown; Jeffrey Parillo; Paul Jones; Pryce Harrison Cc: Donna Parent; Jeanne O'Byrne Subject: RE: Knoa — CONFIDENTIAL I would recommend a campaign targeting their customers offering them a deep discount for switching to Aternity. Their customer base is pretty much listed on their website.
II. THE PARTIES CONTENTIONS
A. Defendant Aternity Contentions
Aternity contends that it is an industry-leading technology company in the EUE market. In particular, Aternity develops and licenses software designed to help Information Technology companies monitor their desktop performance and user productivity. Aternity's product is designed to transform every desktop into a self-monitoring platform that dramatically reduces business disruptions and increases user production. It provides preemptive problem detection, cause analysis and support capabilities, providing the companies who use their technology "with a path of constant improvement." Aternity markets its software to Global 1000 and Fortune 500 companies. It is an expensive software operation. Typical sales contracts with these customers range from $250,000 to more than $1 million.
The EUE market is a highly specialized market with two undisputed competitors, Aternity and KNOA. The analyst firm Forester Research results stated that there are "only two major desktop monitoring specialists: Aternity and KNOA software." Aternity and KNOA regularly compete head-to-head in major transactions in the EUE market.
Leibowitz began working for Aternity on February 7, 2007 as a Regional Account Manager. He was trained in all aspects of Aternity's product, sales, marketing and business strategies, including specific information on how to compete against KNOA. Leibowitz obtained detailed knowledge about Aternity's product, strategies, and plans. He was trusted with the Aternity trade secrets. Because of his access to Aternity's trade secrets and confidential information, Leibowitz was requested to execute Aternity's "Confidential Information, No Inconsistent Obligations and Inventions Assignment Agreement" ("the Agreement"). By signing this Agreement, Leibowitz expressly acknowledged that Aternity was going to entrust him with its trade secrets and confidential information, and he agreed never to disclose that information to anyone. The Agreement specifically provides that Aternity "developed, uses and maintains trade secrets and other confidential and proprietary information." He agreed that all such confidential information shall remain the sole property of Aternity and he will not disclose any of their confidential information.
Further; in order to protect Aternity's trade secrets and confidential information, Leibowitz also agreed not to work for any of Aternity's competition for a period of one year, in the following specific language:
twelve (12) months thereafter, I may not (whether as an employee, agent, servant, owner, partner, consultant, independent contractor or representative, stockholder or in any other capacity whatsoever) perform work on behalf of any person (including myself) or entity, other than the Company, that is competitive with any service or product offered or under development by the Company at any time during the one-year period preceding the termination of my relationship with the Company, or otherwise directly or indirectly compete with the products or services of the Company in the fields of system availability and performance management tools which perform early discovery of IT infrastructure problems and automated root cause analysis of such problems from an end user perspective, . . . without the express prior written consent of the Chairman of the Company.
Leibowitz further expressly agreed that his obligations to Aternity were reasonable and necessary to protect Aternity's trade secrets and confidential information and that Aternity would be irreparably harmed if he breached the Agreement.
Aternity further alleges that after Leibowitz was terminated, he contacted Aternity's customers, third-party vendors and current employees and "began making false allegations and disparaging remarks about Aternity and its officers in violation of the non-disparagement provision of the Agreement."
On May 17, 2010, Aternity received a letter from KNOA stating that it had hired Leibowitz as its Director of Global Sales, Financial Services and Telecommunications which, according to Aternity is essentially the same position he had with Aternity. Also, according to Aternity, Leibowitz has already contacted at least three Aternity customers, whose accounts he managed while at Aternity.
For all these reasons, Aternity contends that it has established threatened and actual irreparable harm and that Leibowitz will inevitably use and disclose Aternity trade secrets and confidential information, in performing his duties with KNOA, its major competitor. Aternity requests a preliminary injunction granting the relief initially requested.
B. Plaintiff Leibowitz Contentions
The plaintiff Mark Leibowitz contends that his initial employment agreement with Aternity provided that he would receive 10% commission on sales up to $1,500,000; 12% on sales between $1,500,001 and $2,000,000; and 15% on sales above $2,000,000. He was told that the Aternity software was market ready when it was not. The software did not become available until March, 2008. On January 21, 2008, under protest, the plaintiff signed the second employment agreement. His salary was increased to $125,000, but his commissions were reduced to 5% on the first $2,500,000 and 8% to 10% on sales above that amount. On December 17, 2008, again under duress and protest, the plaintiff signed the 2009 Compensation Plan. His salary remained the same but the commissions were once again reduced; this time from 2.6% to 5.6%. Finally, on January 7, 2010, again under duress and protest, the plaintiff signed the 2010 Compensation Plan. Again, the salary of $125,000 was the same but the commissions were 2.5% to 7.09%.
Matz terminated the plaintiff's employment on April 16, 2010, effective May 14, 2010. The plaintiff then went to work for KNOA. On May 18, 2010, the plaintiff commenced this action to receive the balance of his commissions and other relief. On May 14, 2010, KNOA's President Thad G. Eidman wrote to Matz, advising him that the plaintiff would abide by the terms of the Non-Compete Agreement.
The plaintiff contends that Aternity's application for a preliminary injunction must be denied for the following reasons:
1. The Non-Compete Agreement cannot be enforced because the defendants materially breached the plaintiff's initial employment agreement by forcing him to sign subsequent agreements that covered his salary and commissions.
2. The Non-Compete Agreement cannot be enforced because Aternity made material changes in the terms and conditions of the plaintiff's employment without securing a new Non-Compete Agreement.
3. The Non-Compete Agreement should not be enforced because it is overly broad, unreasonable, not supported by adequate consideration and violates public policy.
4. Aternity has not demonstrated a likelihood of success on the merits for the three reasons stated above; Aternity has not demonstrated the likelihood of irreparable harm; equitable relief should be denied based on the doctrine of unclear hand because the defendants breached the employment contract and refused to pay the plaintiff all the commissions he earned; the defendants violated the New York State Labor Law by failing to timely pay all the plaintiff's commissions, and by violating the New York Human Rights Law by discriminating against the plaintiff based upon his religion.
5. The defendants are not entitled to a preliminary injunction until they post a bond as is required by Rule 65(c) of the Federal Rules of Civil Procedure. A reasonable bond would be in an amount of $5,000,000.
III. DISCUSSION
A. The Choice of Law Provision and the Applicable Law
Here, the Agreement contains a Massachusetts choice of law provision. (The Agreement at ¶ 6[b]). As a general rule, choice of law provisions are valid and enforceable in New York. Accordingly, the enforceability of the non-compete provisions in the Agreement is governed by Massachusetts law. The Court finds that the rules of law in Massachusetts and New York regarding injunctive relief for trade secrets are substantially similar. In fact, the parties' memoranda of law assume that New York law "is in accord" with Massachusetts law (Dfts' Memoranda at p. 11) and "the issue of whether this court should grant a preliminary injunction is a question of federal procedural law . . . Therefore; the standards set forth in the decisions of the Second Circuit are controlling." (Pltf's Memorandum of Law at p. 10).
B. The Requests for Relief
The defendant Aternity has moved to enjoin Leibowitz from (1) working for Aternity's principal competitor KNOA, Software, Inc. for a period of one year, namely from May 10, 2010 through May 11, 2011, (2) soliciting any business from any existing or prospective customer of Aternity that is competitive with any service or product offered or under development by Aternity for that one year period, (3) using or disclosing any Confidential Information, as defined in paragraph 3 of the Agreement, (4) using or disclosing the Aternity Trade Secrets, and (5) disparaging Aternity and its officers, directors, shareholders, and employees.
C. The Legal Standards — Preliminary Injunctions
It is well-established in the Second Circuit that a party seeking a preliminary injunction must show "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief."Citigroup Global Markets, Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 25 (2d Cir. 2010) (citations omitted). 1. Irreparable Harm
Aternity contends that it will be irreparably harmed in the absence of an injunction because Leibowitz will inevitably use or disclose confidential information and trade secrets while working for KNOA. Leibowitz counters that the harm envisioned by Aternity is speculative.
The Second Circuit has emphasized that the irreparable harm requirement is "the single most important prerequisite for the issuance of a preliminary injunction." Rodriguez v. DeBuono, 175 F.3d 227, 234 (2d Cir. 1999). "Irreparable harm must be shown by the moving party to be imminent, not remote or speculative, and the alleged injury must be one incapable of being fully remedied by monetary damages." Reuters Ltd. v. United Press Intern., Inc., 903 F.2d 904, 907 (2d Cir. 1990) (internal citations omitted). Here, Aternity has no difficulty in meeting this burden.
Based upon the evidence presented at the hearing, it is clear that Leibowitz is either in possession of or has knowledge of various forms of Aternity confidential information and trade secrets. Aternity witnesses testified that during his tenure with the company, Leibowitz was entrusted with technical and confidential information about Aternity products and product development. It was also revealed that Leibowitz had access to confidential customer contact and pricing information as well as Aternity's marketing plans. Before he left Aternity, and knowing he was leaving, Leibowitz e-mailed various confidential documents and trade secrets to his personal address including: Aternity's 2010 Price Calculator; Aternity's Licensing Agreements for certain customers; so-called Proof of Concept Insights that were presented to customers; and confidential lists of prospective customers.
In the Court's view, it is inevitable that Leibowitz would either disclose or make use of this information during the course of his employment at KNOA, if he has not done so already. See Marcam Corp. v. Orchard, 995 F. Supp. 294, 297 (D.Mass. 1995) (finding irreparable harm, despite ex-employee's promise not to disclose confidential information, because it was "difficult to conceive how all of the information stored in [the employee's] memory can be set aside as he applies himself to a competitor's business and its products."). Indeed, Leibowitz explicitly acknowledged as much by signing the Non-Compete Agreement, which provides that "if [an employee] become[s] employed or affiliated with any competitor . . . it is inevitable that [the employee] would disclose [Aternity's] Confidential Information to such competitor." There is no serious question that the disclosure or use of this information would give KNOA, the major Aternity competitor, an unfair advantage in the niche EUE marketplace. It is also clear that Aternity would be irreparably harmed if Leibowitz used this information to gain an advantage in soliciting Aternity customers or to disparage the company and its officers. Under the circumstances, Aternity has clearly established that it would be irreparably harmed in the absence of the requested injunctive relief.
2. Likelihood of Success on the Merits
Aternity contends that it is entitled to an injunction because it is likely to succeed in proving that the Non-Compete Agreement is reasonable and enforceable. Aternity also maintains it is entitled to an injunction under the Massachusetts Trade Secrets Act, M.G.L. c. 93 § 42A. The Court will address the merits of these claims in turn.
a. The Plaintiff is an Employee at Will
There is no doubt that the plaintiff was an employee at will in his sales position at Aternity. He admitted this in his testimony. Under either New York or Massachusetts law, an employee at will could be terminated at any time and for any non-discriminatory reason. As stated in Jackson v. Action For Boston Community Development, Inc., 403 Mass. 8, 525 N.E.2d 411 (1988), "[e]mployment at Will is terminable by either the employee or the employer without notice, for almost any reason for no reason at all." See Cort v. Bristol-Meyer Co., 385 Mass. 300, 305, 431 N.E.2d 908 (1982).
b. Whether the Non-Compete Agreement is Enforceable Under Massachusetts Law
Leibowitz claims that Aternity committed a material breach of his initial offer letter and that Aternity's breach relieved him of the obligation to abide by the non-compete agreement. In particular, Leibowitz argues that Aternity breached the 2007 offer letter by "forcing him to sign subsequent agreements that lowered his salary and commissions . . ." Pl. Br. at 8. However, Section 6(e) of the Non-Compete Agreement provides that "[a]ny subsequent change or changes in [Leibowitz's] duties, salary or compensation will not affect the validity or scope of this Agreement." Therefore, under the plain terms of the contract, Leibowitz's obligation to honor the Non-Compete was unaffected by the revised agreements.
Furthermore, there is no indication that Aternity actually "breached" Leibowitz's initial offer letter. Leibowitz signed a new "Compensation Plan" in 2008 and again in 2009 and 2010. It is undisputed that these revised agreements changed his compensation structure, sales quota, and sales territory. However, it is difficult to perceive — and Leibowitz makes no convincing effort to explain — how he could agree to these revised agreements, sign the agreements and accept compensation under the agreements and now contend that the new agreements effectively breached the initial offer letter.
Leibowitz contends that he was forced to sign the new agreements under "economic duress", but this argument in unavailing. It is settled law in Massachusetts that "[a] party must complain promptly of coercive acts that allegedly forced it into the contract or the defense of duress is waived, and the contract ratified." Cabot Corp. v. AVX Corp., 448 Mass. 629, 642-43, 863 N.E.2d 503 (Mass. 2007) (emphasis added); see Beaconsfield Townhouse Condominium Trust v. Zussman, 49 Mass. App. Ct. 757, 733 N.E.2d 141 (2000) (observing that "[s]ilence, acquiescence, or performance of the contract are among the ways in which the defense of duress is waived . . ."). Here, Leibowitz entered into the revised agreements on January 21, 2008, December 17, 2008, and December 28, 2009. He signed all of the agreements. He continued to perform under these revised agreements until he was terminated and only formally raised the duress argument for the first time in connection with Aternity's instant motion. Under the circumstances, the Court finds that Leibowitz waived the defense of duress. See American Stop Loss Ins. Brokerage Servs. Inc. v. Prince, No. 01-0215, 2001 WL 173178 (Mass. Super. Feb. 14, 2001) (rejecting employee's claim that employer's changes to his commission structure left employer with "unclean hands" because employee accepted the commissions and continued to work at the company).
Next, Leibowitz contends that the Non-Compete Agreement became inoperative when Aternity made material changes to his employment. "Under Massachusetts law, `[e]ach time an employee's employment relationship with the employer changes materially such that they have entered into a new employment relationship a new restrictive covenant must be signed." Astro-Med, Inc. v. Nihon Kohden America, Inc., 591 F.3d 1, 16 (1st Cir. 2009) (quotingLycos, Inc. v. Jackson, No. 2004-3009, 2004 WL 2341335 (Mass. Super. Ct. Aug. 24, 2004)). This rule was first set forth in F.A. Bartlett Tree Expert Co. v. Barrington, 353 Mass. 585, 233 N.E.2d 756 (1968) ("FA Bartlett").
After FA Bartlett, Massachusetts courts have applied this rule where "the conduct of the parties clearly showed that they had abandoned and rescinded by mutual consent the earlier employment agreement containing the pertinent non-compete provision and had entered into a new employment relationship that included no such non-compete provision." Intertek Testing Servs. N.A., Inc. v. Curtis-Strauss LLC, No. 98-903-F, 2000 WL 1473126, at *6 (Mass. Super. Ct. Aug. 8, 2000). "In determining whether there has been a material change to the employment relationship, courts have considered it extremely significant that the employer sought to have the employee sign a new non-compete agreement." Iron Mountain Information Mgm't, Inc. v. Taddeo, 455 F. Supp. 2d 124, 132 (E.D.N.Y. 2006) (interpreting Massachusetts law).
Here, there is no indication that the parties abandoned the non-compete provision when they entered into the revised Compensation Plans. Significantly, after reaching new agreements with Leibowitz in three separate years, Aternity never sought to have Leibowitz sign a new Non-Compete Agreement. As noted above, there was no need for Leibowitz to sign a new Non-Compete Agreement because Section 6(e) of the existing agreement provides that "[a]ny subsequent change or changes in [Leibowitz's] duties, salary or compensation will not affect the validity or scope of this Agreement." In light of Section 6(e), the Court finds that the changes to Leibowitz's compensation, sales quota, and sales territory did not require the parties to execute a new Non-Compete Agreement.
Leibowitz also contends, in conclusory fashion, that the Non-Compete Agreement is unreasonable. In Massachusetts, "[a]n employer may enforce the terms of a non-competition agreement with a former employee when it demonstrates that the agreement: (a) is necessary to protect a legitimate business interest of the employer; (b) is supported by consideration; (c) is reasonably limited in all circumstances including time and space; and (d) is otherwise consonant with public policy." Stone Legal Resources Group, Inc. v. Glebus, No. CA025136, 2003 WL 914994, at *3 (Mass. Sup. Ct. Feb. 2003) (citing Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85, 102-03 (1979)).
Here, Leibowitz does not appear to dispute that the Non-Compete Agreement was designed to protect a legitimate business interest. He does maintain that the Non-Compete Agreement was without adequate consideration. However, it is well-established that where, as here, "a non-competition provision is signed at the beginning of employment there is sufficient consideration."Stone, 2003 WL 914994, at *5 (citing Slade Gorton Co. v. O'Neil, 355 Mass. 4, 9 (1968)). In this case, Leibowitz signed the non-competition provision on January 25, 2007, the same day he received the initial offer letter.
Although Leibowitz does not challenge the one-year duration or geographic scope of the Non-Compete Agreement, he does complain of its breadth insofar as it prevents him from soliciting existing or prospective Aternity customers. In determining whether the scope of a non-compete is reasonable, courts in Massachusetts "consider the nature of the business and the character of the employment involved, as well as the situation of the parties, the necessity of the restriction for the protection of the employer's business and the right of the employee to work and earn a livelihood." Stone, 2003 WL 914994, at *5 (quotingRichmond Bros., Inc. v. Westinghouse Broad. Co., Inc., 357 Mass. 106, 109 (1970)).
Here, there is no question that the restrictions the Non-Compete Agreement places on Leibowitz are necessary to protect Aternity's business. The evidence at the hearing clearly showed that Leibowitz is in possession of Aternity's customer contact lists, pricing information and trade secrets. If he is permitted to work for KNOA, Aternity's principal competitor, it is inevitable that he will use this information to solicit current and prospective Aternity customers.
On the other hand, an injunction that prevented Leibowitz from soliciting "prospective" Aternity customers would be quite broad. The Non-Compete Agreement defines "prospective customers" to include "all person and entities to whom [Aternity] has made efforts to sell products or services." By precluding Leibowitz from contacting existing and prospective Aternity customers, the injunction would likely prevent him from working in the EUE field for the next year.
Nevertheless, on balance, the Court finds that the proposed injunction is reasonable in its scope. If Leibowitz is able to use the confidential list of prospective customers to solicit their business, he could seriously hinder Aternity's business development. When considered alongside the fact that he has confidential knowledge about Aternity's pricing information and product weaknesses, it is clear that by allowing him to solicit existing and prospective customers, he could completely undercut Aternity.
In sum, the Court finds that the Non-Compete Agreement is enforceable under Massachusetts law because it is reasonable in scope, duration, and geographical limitation.
c. The Massachusetts Trade Secrets Act
The Massachusetts Trade Secrets Act, M.G.L. c. 93 § 42A, provides that "[i]n an action by an employer against a former employee . . . for the conversion of a trade secret and where such conversion is in violation of the terms of a written employment agreement between said employer and employee," the employer will be entitled to a preliminary injunction if it can show that the "employee is working in a directly competitive capacity with his former employer in violation of the terms of such agreement and that in violation of the terms of such agreement said employee has used such trade secret in such competition." M.G.L. c. 93 § 42A. The first issue to be determined is whether under Massachusetts law the information Aternity seeks to protect can be viewed as trade secrets.
Trade secrets include anything tangible or intangible that constitutes secret production or management information. Massachusetts General Law, Chap. 266 § 30. Under Massachusetts law, a trade secret is defined rather broadly to include "anything tangible or intangible or electronically kept or stored, which constitutes, represents, evidences or records a secret scientific, technical, merchandising, production or management information, design, process, procedure, formula, invention or improvement." M.G.L. 266 § 30. In deciding whether information qualifies as a trade secret, Massachusetts courts evaluate: "(1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and to his competitors; (5) the amount of effort or money expended by the employer in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others." Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840, 282 N.E.2d 921 (Mass. 1972).
The evidence at the hearing, related in detail above, clearly established all of the elements of a trade secret as to (1) Aternity's confidential customer contacts; (2) Aternity's pricing information; (3) technical information about Aternity's products, product development and future product releases; and (4) Aternity's competitive strategies and strategic future planning.
Further, the Court finds that Aternity has taken the required reasonable steps to ensure that this information remains confidential by, among other acts, requiring its sales force to sign Non-Compete Agreements, Confidential Covenants, and creating and enforcing valid and binding Non-Disclosure Policies. See Data General Corp. v. Grumman System Support Corp., 825 F.Supp. 340 (D. Mass. 1993) (pointing to confidential agreements from employees as a significant step in preserving confidential information).
d. The Non-Disparagement Request
As an added feature to its request for preliminary injunctive relief the plaintiff requests that the Court enjoin Leibowitz from "disparaging Aternity and its officers, directors, shareholders and employees." Neither party seems to have paid too much attention to this request, because it was not commented on in the three briefs submitted. This request by Aternity is, again, based on the language of the Non-Compete Agreement. At paragraph 3(e), it is stated:
(e) While employed with the Company and at all times thereafter, I will not make any statement that is professionally or personally disparaging about, or adverse to, the interests of the Company, any of its officers, directors, shareholders or employees including, but not limited to, any statement that disparages any person, product, service, financing, financial condition, capability or other aspect of the business of the Company or any of its officers, directors, shareholders or employees.
This is a troubling concept. It purports to ensure that Leibowitz will not make any statement that is "professionally or personally disparaging about, or adverse to the interests of the company; any of its officers, directors, shareholders or employees" and is practically unlimited in scope. Such a source of injunctive relief would be a fertile field for future interpretation and litigation. In the Court's view this form of injunctive relief is of necessity, ambiguous; and it is denied.
IV. CONCLUSIONS
Based on the evidence at the hearing and the law as reviewed by this Court, Aternity, Inc. has established, by clear and convincing evidence, that it is entitled to a preliminary injunction. Therefore, the motion by the defendant Aternity, Inc. for a preliminary injunction is hereby granted, on the following terms:
1. Leibowitz is enjoined for working for KNOA Software Inc. for a period of one year, commencing on July 19, 2010 and ending on July 15, 2011.
2. Leibowitz is enjoined from soliciting any business from any existing or prospective customers of Aternity in which such solicitation is competitive with any services or product offered by Aternity, for a period of one year, commencing on July 16, 2010 and ending on July 15, 2011.
3. Leibowitz is enjoined from using or disclosing any Confidential Information as defined in paragraph 3 of the Non-Disclosure Agreement signed by Leibowitz on January 25, 2007.
4. Leibowitz is enjoined from using or disclosing the Aternity Trade Secrets, as that term is defined in this decision.
V. IS SECURITY REQUIRED?
Under the federal rules, there is provision for the issuance of security, in the form of a bond, where a preliminary injunction of this kind is directed. Federal Rules of Civil Procedure 65(c), provides:
(c)
Security. The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. The United States, its officers, and its agencies are not required to give security.
The Non-Compete Agreement seems to eliminate the requirement of security, at paragraph 4 which provides:
In recognition of the foregoing, I agree that in the event of a breach or threatened breach of any of these covenants, in addition to such other remedies as the Company may have at law,
without posting any bond or security, the Company shall be entitled to seek and obtain equitable relief, in the form of specific performance, and/or temporary, preliminary or permanent injunctive relief, or any other equitable remedy which then may be available.
(emphasis supplied).
There is some authority that such immunity clauses should not supercede the Rule 65(c) protective bond provision. Traders Intern., Ltd. v. Scheuermann, No. H-06-1632, 2006 WL 2521336, at *10 (S.D. Tex. Aug. 30, 2006); Uncle B's Bakery, Inc. v. O'Rourke, 920 F.Supp. 1405, 1439 (N.D. Iowa 1996).
In the Court's view, this is one case where it would be far the better course to require a bond. Here, the Court is preventing the plaintiff from working for KNOA, his present employer, for a period of one year and preventing him from soliciting business from existing or prospective customers of Aternity for a period of one year and other restrictions. Counsel for the plaintiff is correct in advising the Court that Leibowitz may be deprived of his livelihood for one year and he may lose professional contacts that he developed over the last number of years. However, the evidence revealed that the plaintiff has prior customers who he can service without restraints and he may be able to obtain another position.
This is a court of equity granting equitable relief. In the event it is determined that Leibowitz was wrongfully enjoined, he should have a compensatory recourse. Accordingly, the Court directs that the defendant Aternity Inc. is directed to obtain and file a bond as security in the sum of $250,000 within ten (10) days of the date of this decision and order.
SO ORDERED.