Massachusetts Court Clarifies Meaning of Indirect Contact In Regards to Enforcing Non-Solicitation Agreements

Massachusetts law strongly disfavors the use of non-competes. In fact, as of October 2018, non-competes are only capable of being enforceable in Massachusetts if they satisfy stringent requirements. Read about the law here. And complying with those requirements does not automatically mean the non-compete is enforceable. Read more about that here. As a result, employers are using noncompetes with much less frequency.

Not so with non-solicitation agreements. Those agreements are not covered by the 2018 non-compete law and tend to me much more likely to be enforced by courts. Typically, non-solicits prohibit solicitation of former co-workers and former customers. Read more about that here. As to the latter, they generally bar “direct and indirect” solicitation of former customers. What is and is not ‘direct’ solicitation is generally straightforward. What is and is not ‘indirect,’ not so much. Thankfully, a Massachusetts court recently provided helpful guidance on what is ‘indirect’ contact in the non-solicit context.

What is Considered ‘Indirect’ Solicitation When Enforcing Massachusetts Non-Solicitation Agreements?

John Tuccinardi worked for Townsend Oil, Co. (“Townsend”) as a salesman. Townsend and Mr. Tuccinardi were parties to a non-solicitation agreement that stated Tuccinardi may not “solicit or attempt to solicit, directly or indirectly,” any client or customer of Townsend in order to engage in any business similar to those offered by Townsend.

Tuccinardi resigned from Townsend in October 2019 and began working for a direct competitor, Devaney Energy (“Devaney”) as a sales representative. Devaney creates and maintains mailing lists and sends out mailers to solicit new business. Devaney sent a number of mailers out to potential customers after Tuccinardi’s arrival that list Tuccinardi as the contact person for more information. These mailers include Tuccinardi’s name, email address, and phone number. Devaney has taken 19 customers from Townsend since Tuccinardi joined Devaney.

In late 2019, Townsend sued Tuccinardi for breach of the non-solicit and Devaney Energy for facilitating Tuccinardi’s breach of that agreement. In essence, Townsend argued that Devaney’s mailers amount to indirect solicitation by Tuccinardi.

Before addressing this argument, the Court provided helpful context regarding restrictive covenants in Massachusetts, noting that:

An employer may enforce a non-competition or non-solicitation agreement only to the extent necessary to protect the employer’s legitimate business interests—which include guarding against the release or use of trade secrets or other confidential information, or other harm to the employer’s goodwill, but do not include merely avoiding lawful competition. Protection of the employer from ordinary competition ... is not a legitimate business interest, and a covenant not to compete designed solely for that purpose will not be enforced. That is because the right of employees to use their knowledge, experience, and skill to compete against their prior employer promotes the public interest in labor mobility and the employee’s freedom to practice his profession and in mitigating monopoly.

The Court then rejected Townsend’s argument. Read the full opinion here. The Court agreed that the Devaney mailers were certainly solicitation as they advertised Devaney’s services and provided specific contact information. The Court disagreed, however, that these were indirect solicitations by Tuccinardi because Townsend could not establish that Tuccinardi himself had anything to do with the design or distribution of these mailers. Instead, the Court credited Devaney’s evidence demonstrating that they frequently sent mailers like the ones at issue and that Tuccinardi had no input into who received them.

The Court then addressed Townsend’s argument that Tuccinardi violated the non-solicitation agreement every time he took or returned a call from a current Townsend customer. The Court disagreed with the notion, and underscored that customer-preference matters in the non-solicitation context:

If a Townsend customer decides they are or may be interested in switching their business to Devaney, and they contact Devaney or even directly contact Tuccinardi at Devaney, it is not at all clear that Tuccinardi would violate his non-solicitation obligations by accepting that business or explaining Devaney’s current offer to new customers. The verb “solicit” typically means “to seek to obtain by persuasion, entreaty, or formal application.” THE AMERICAN HERITAGE DICTIONARY, 2d Coll. Ed. at 1163 (1985). Where the customer is doing the seeking, it is not clear that such an interaction violates the contractual prohibition on solicitation of Townsend customers. Once again, the Court must construe the contractual ambiguity against Townsend.

Lastly, the Court considered Townsend’s claim that the fact that customers left Townsend and joined Devaney as a result of the mailers proved that Tuccinardi violated the non-solicit. The Court rejected that argument, and again provided pro-employee reasons:

If a customer decides to switch from Townsend to Devaney because they are personally loyal to Tuccinardi, that means that the goodwill as to that customer belongs to Tuccinardi, not Townsend. That provides no lawful basis to bar Tuccinardi from competing against Townsend. Goodwill is a company’s or an employee’s positive reputation in the eyes of its customers or potential customers. It has long been recognized that goodwill may sometimes attach to an employee who maintains distinctly personal or professional relationships with customers, so that the business entity possesses little of it. A non-competition or non-solicitation agreement is enforceable only “to protect the employer’s good will, not to appropriate the good will of the employee.

This case provides another helpful way for employees to minimize the potential impact of non-solicitation agreements. Employment attorney Benjamin Steffans has extensive experience advising employees regarding their non-compete non-solicit agreements. If you have questions regarding the enforceability of a non-compete or non-solicit agreement call us today for a free consultation.