First Circuit Decides Non-Solicitation Agreements Can Bar Initial Contact by Customers

The U.S. Court of Appeals for the First Circuit held in a recent case that non-solicitation agreements/clauses can bar contact between an ex-employee and the ex-employers clients even if those clients are the ones who initiate contact with the ex-employee; however, whether such contact would violate the non-solicitation is a fact-specific determination. Corporate Technologies, Inc. v. Harnett et al. involved a non-compete with a non-solicitation clause between CTI and Harnett. Harnett left for a competitor, OnX Enterprise Solutions. OnX made a blast email to the industry announcing Harnett’s hiring, after which Harnett was involved in communications with former clients of his at CTI regarding their coming over to OnX. CTI sued for an injunction against Harnett, alleging a violation of the non-solicitation clause. Harnett argued that no violation occurred, since CTI’s clients initiated contact, which did not violate the language of the clause. The First Circuit found that non-solicitation agreements are designed to protect the goodwill of the company, and that the intent of non-solicitations should not be easily defeated by technicalities such as having the client initiate the contact, especially where the interest and curiosity of the client is stimulated by the ex-employee and/or his or her new employer — as was the case here, the court found, when OnX publicly announced Harnett’s hiring, after which his former clients at CTI initiated their contact. The First Circuit concluded by holding that the party who makes initial contact should be only one factor of many in determining whether solicitation has occurred in violation of an agreement to the contrary, in order to give ex-employers the benefit of the protection they bargained for. Of course, it should be noted that this case was one of state law (Massachusetts law, to be specific) being decided in the federal courts on diversity jurisdiction. When a federal court hears a state law matter, it is obligated to decide the matter based on how the federal court believes (based on a review of the state statutory and case law) the state’s supreme court would decide the case were it before them — this can be somewhat tricky when, as was the case here, the issue has not yet been directly addressed by the state supreme court. Therefore, although the First Circuit’s opinion is not binding on Massachusetts courts, federal courts are usually not too far off the mark when it comes to interpreting a state’s law on a matter of first impression for the state’s supreme court. In the end, as the First Circuit’s opinion pointed out, the issue could have been avoided had the parties also agreed that Harnett would also not accept the business of CTI clients, even if they offered it. Such clauses may be viewed by some as too restrictive of the rights of customers to give their business to whomever they choose, but such clauses do give employers maximum protection of their goodwill.

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