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Business Merchant Solutions v. Arst (noncompete 2006)

Business Merchant Solutions v. Arst (noncompete 2006)

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Published by: gesmer on Mar 24, 2011
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Superior Court of Massachusetts. MERCHANT BUSINESS SOLUTIONS, LLC dba Merchants Bankcard Systems v. Jonathan D. ARST. No. 06067. Feb. 14, 2006. MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION RICHARD F. CONNON, Justice. *1 This matter comes before the Court on a motion by the Plaintiff, Merchant Business Solutions, LLC (Merchant) seeking preliminary injunctive relief against the Defendant Jonathan D. Arst. BACKGROUND In October of 2004, the Plaintiff Merchant Business Solutions hired the Defendant Jonathan Arst, promising that during the first year of employment he could earn upwards to $100,000. Within the year, the Defendant earned approximately $13,000 and was dismissed by the Plaintiff who now seeks an injunction prohibiting the Defendant from a career in sales by virtue of a non-compete agreement that was executed at the beginning of his employment. The Plaintiff in its Independent Sales Agent Agreement acknowledged that it currently possessed certain recruiting and sales contracts and registrations known as ISO Agreements with MasterCard International, VISA and First National Bank of Omaha, as well as other financial transaction

processors. The Plaintiff had authorized Defendant and Defendant had accepted full responsibility of controlling all of Defendant's own business activities, including but not limited to all contracts of vendors, suppliers, et cetera. However, at no time should Defendant or any of Defendant's agents be in contact either directly or indirectly with the banks and/or processors unless otherwise directed by the Plaintiff. As part of the Independent Sales Agreement, there was contained under clause number 7, titled “Non-Competition” that Defendant acknowledged the importance of maintaining the absolute confidentiality or information relating to the Plaintiff's business and agrees not to disclose to anyone other than the Plaintiff the trade secrets and confidential proprietary information of the Plaintiff, included but not limited to this agreement, all devices, processes, records, business relationships, lists or other data pertaining to customers, distributors or suppliers, formulas, improvements and any other such information regarding the operation of the Plaintiff's business. Under 7.2 that Defendant agrees that during the term of Defendant's relationship with Merchant that Defendant shall not without the Plaintiff's express prior written consent directly or indirectly engage in any activity which is or may be competitive with or which might place Defendant in a competing position to that of the Plaintiff in any activity where the Plaintiff does business. Under clause 7.4, Defendant agrees that in the event Defendant voluntarily or involuntarily violates any of the provisions contained in this non-competition agreement, as herein stated, then the Plaintiff shall be immediately entitled to injunctive relief against Defendant, whether damages, real or

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actual, can be proved. Furthermore, the Plaintiff shall be entitled to any and all reasonable attorneys fees or court costs incurred as a result of any action against Defendant for such action. Under clause 7.5, the provisions within this non-compete provision are void if the Plaintiff violates terms of this agreement and fails to remedy such violation within 60 days after being notified per section 15 herein. This is the agreement that was signed by Jonathan Arst as the Independent Sales Agent. The Agreement was not signed by the Plaintiff. *2 Shortly after his involuntary termination from the Plaintiff, the Defendant involved himself in a competing business, establishing his own company, where he was designed as president. DISCUSSION In order to prevail on its request for a preliminary injunction, the Plaintiff bears the burden of showing its likelihood of success on the merits; that it will suffer irreparable harm if the injunctive relief sought is not granted; and that its harm, without the injunction, outweighs any harm to the Defendant from him being enjoined. GTE Products Corp. v. Stewart, 414 Mass. 721, 722-23 (1993); Packaging Industry Group, Inc. v. Cheney, 380 Mass. 609, 61617 (1980). Before assaying these issues, it is appropriate to canvas the relevant elements of the Massachusetts law dealing with the enforcement of non-competition agreements. Employee covenants not to compete generally are enforceable only to the extent that they are necessary to protect the legitimate business interests of the employer. Novelty Bias Binding Company v. Shevrin, 342 Mass. 714 (1961). Such

legitimate business interests might include trade secrets, other confidential information or the good will of the employer that was acquired through dealings with its customers. See All Stainless, Inc. v. Colby, 364 Mass. 773 (1974). Protection of the employer from ordinary competition, however, is not a legitimate business interest and a covenant not to compete designed solely for that purpose will not be enforced. Richmond Brothers, Inc. v. Westinghouse Broadcasting Company, Inc., 357 Mass. 106, 111 (1970). A non-competition agreement to be enforceable also must be reasonable in geological scope and length of time, in other words, must be reasonable in time and space. See Blackwell v. E.M. Helides, Jr., Inc., 368 Mass. 225, 228; Becker College of Business Administration and Secretarial Science v. Gross, 281 Mass. 355 (1933). Here, the protection for the Plaintiff was that the agent or the Defendant for a period of two years would not compete with the Plaintiff. However, the agreement itself has no geological limits. An unlimited, countrywide area, or the area where the Plaintiff does business, is simply not acceptable. The net effect would be that the Defendant would be enjoined from competing with the Plaintiff within the Continental United States and beyond. The Court must also consider and balance the harm to the Plaintiff from failure to grant the injunctive relief it seeks. Contracts like the one before me here, “are scrutinized with particular care because they are often the product of unequal bargaining power and because the employee is likely to give scant attention to the hardship he may suffer later on through the loss of his livelihood.” Sentry Insurance v. Firnstin, 14 Mass.App.Ct. 706 (1982). The burden is on the Plaintiff to

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show that the non-competition part of the agreement is necessary to achieve some protectable purpose other than a mere shelter from ordinary competition. See Richmond Brothers, Inc. v. Westinghouse Broadcasting Corp., 357 Mass. 106 (1970). It would appear that all the Plaintiff is seeking is to prevent the Defendant from ordinary competition. In considering all of the circumstances before this Court, the Defendant is an employee of some eleven months who earned a salary of approximately $13,000, had a customer base of approximately 30 customers, all the noncompetition agreement achieved was to protect Plaintiff from ordinary competition. Moreover, the Defendant signed the Merchants Bankcard Independent Sales Agreement; however, the agreement was not signed by Merchant Business Solutions, LLC. Additionally, it would appear from the documentation that was submitted by the Plaintiff that the Defendant was an employee of Tender Corp. LLC, with a location at East Falmouth, Massachusetts, and not an employee of the Plaintiff Merchants Business Solutions. *3 For all these reasons, the Plaintiff's Motion for a Preliminary Injunction is DENIED. Mass.Super.,2006. Merchant Business Solutions, LLC v. Arst Not Reported in N.E.2d, 2006 WL 696582 (Mass.Super.) END OF DOCUMENT

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