‘The Massachusetts Law Reporter 381 ‘Cite a8 24 Mass. I, Rem. No. 18, 381 (September 15, 2008) Robert D. Whitty misappropriated town property but that said decisions be REVERSED as tothe abeolte ental of pension benefits to Robert. Whit. Puree {115 ORDERED that the mater be REMANDED tothe ‘Bamstable County Retirement Association ora deter. ‘mination aa tothe amount misappropriated, the cots of nvesugauon and the net reurement benefits ie bert D- Wait. tary. Hip Rogal & Hobbs of Massachusetts LIC et ol. ‘Thomas W. Sheppard et ai. Superior Court, Suffolk, SS ‘No. O7S549BLS2 Memorandum Dated January 7, 2008 Contracts ~ Construction - Nencompete Agree- ‘ments ~ Court Grants Preliminary Relief to Ea. {force Noncompete Agreements Executed by = ‘Group of Departing Employees Who Had Executed ‘Their Agreements in Connection with an Earlier Sale of Their Personal Businesses to the Em: ployer, But Denies Rellef with Respect to Another Group Who Had Executed Agreements Only In Exchange for Continued Employment. The pr ‘mary jurifeaton fora noncompete agreement be- tween a rink management company and tte fmplayees ts the protecuon of customer goodwill weve. n that type of business customer goodwill {s generally developed troughs personalized service land special relationships developed by indidual ‘players therelore each employee retains an iter testin the customer goodvl as wel asthe employer ‘This action involves the enforcement of woncanpete agreements against several former empinyees ho Tete emplayerin a block to commence acompeting business. The employees fll nt two general eate {oes One group consists of employees who fad ‘executed noncompete agreements as part of the con ‘Stderation for an eae sale of User Inmurance esses tothe plait. The opinion grants sancti Fale with respect to this group. because the ex Ployer had pusehased any customer goodwil belong Ing to these employees as part of the acqulston of their former businesses, The second group consists ‘of employees whose only consideration fr excesting 4 noncompete agreement was continued employ. ‘neni which provides an neque payment or he ‘ood tha they developed with customers through {hes personal elfrs Panaicar, Jum J erRoDUCTION “This action presents the plaints effort to enforce restrictive covenants in agreements wih ite former ‘rplayers.Belore the Court fs the pists motor for preliminary injunction. After hearing, and etext ‘of voluminoe mates este by beth ses, the Court concludes aa fallow. ‘BacKGROUND ‘The record before the Cour. consisting ofthe vr ‘ed complaint and adits subated by both siden, provides the following factual background. The pats ‘IMs, Hi, Rogal & Hobbs Cormpany PHRH Company) land its subatdiary. Hubs, Rogal & Hobbs of Maseachs sets LIC (HR or HRI of Massachucet, provide ‘ek management and insurance service for bsiness fnd individual clients. tH Company te the eighth largest insurance intermediary inthe United States, apd the tenth largest in the word I has 120 offices in the United States and the United Ringlorn, and Feported reverse of711 millon dollar for 2008, HH focuses on property and casualty insurance and ern ployee benefits consulting Im 2002, HRH acquired Hobbs/ORJ Acquistion ‘Corp. (Hobi' Hobbs had acquired ONetl megan ‘and Jordan Insurance Agency Ine. (OFT in Decem ber 1998. Defendants Alan Breiman and J. Brent Finnegan had been owners of OFS prior tos eqs. ‘uon by Hobbs. in connection with thet ele of thelr business to Hobbs, each of them ane an employ sent agreement with Hobbs proving for gusranter ‘mployment for lve Years, alncreared compensation, Sand prohibiting each fom sling exaplayees of the company and from solcting or aecepana business from Its customers for a peviad of two Years afer ‘ermination of their employment. Each agreement dened “company” “Hebbs/OFi Acquistion Corp, fd any ofits eubsidiarte, including OF, afte ot cessor." and farther provided that would inure {o.. the successors and aigns of the Company Defendants Thomas Bowen, Joan Cantuel, and The reo Fiyan were employees but not owmere of OF) at the te of ts sale to Hobe, Each of thopsigned an ‘employment sgreement containing the sume rete: tive covenants In 2004, Hobe merged into HAE. 1m 2008, HRI acquired Sheppard Riley Coughlin. Inc. (SRC. Defendant Thomas Sheppard sas he largest shareholder of SRC. and recehed some sic ‘lion dollars a result ofthe acquit, Defendant Charles Robinson wan sso a shareholder of SR; he ‘eel approximately 8600.000 from ts sale. Defen ‘dant Steven Richarde was an emplayee of SR. but pot a shareholder ‘An astet purchase agreement governed the acq- ston of SRC. and inchuded a provision prohibiting Sheppard from solicting or acepling, other than on behalf of HR, “eny’ rik management raurance, ‘bond busines rom any othe customers of Seller a ‘ofthe February 28,2003, date ofthe purchase, fr 8 eriod of ve years om that date. The ase porchase ‘Agrement also mide reference to an employment ‘gpeement exceated by Sheppard, for which fe was ald separate consiration of 100,000. The ep ‘ent agreement made Sheppard present of RH, Sin profubited him fom engaging n he “inaurance fageney business” in specie’ Masaachsets and382 Tie Massachusetts Law Reporter Cte as 24 Mass LF. No 18, 982 (September 18, 2008) ‘Rhode Island counties fer thee years following termi- ‘tion ofis employment wih HR, from sleting oF Scvepling customers or proapective customers of REE fs ofthe ime of his termination forthe same three- {Year peo. and from hiring or soli any of RUT players ior one year aftr his termination! The fgpeement granted the employer the option to seck liquidated damages i case of breach, according to 8 forma provide, Robinson also signed both the asset purchase aggeement and an employinent agreement. His em ployment agreement guaranteed hn employment or {vo years at higher compensation than he had pre ‘loualyreceed, but pratated him fom sling or ‘Sept eustmers of HR fortwo year ater terms fhation ous employment and frm uring or sling Riv employees or one year Richards nied asinilar ‘employment agreement, guaranteeing him employ ment for one year at increased compensation, but Preubiting him rom sleting or accepting customers [TTR or wo years ater termination, and rombiring ‘or solicting HRE employees for one year Defendant Kevin Connelly became employed by [HRI in 2004. neue of 2007, he signed a-Nonpracy and Confdendalty Agreement.” which prohbts fm from salting or accepting HRI customers, and rom ing or sling es employes, fortwo Years ater termination of his employment In eddigon to the Prohibitions rected, each of the emplayment agree ents includes provisions baring ust or daclowute af heemployer’s trade secrets and content informa: ‘on, slong sth provisions sthoriangenfrcement by snjuneave rele During thelr employment with HRH, each of the snaividual defendants interacted directly with customers and potential customers, and formed Strong relationships with them or continued prexist {ng retonshipn. Some of Uhave custaer rele ships began sith referrals from within HRI, but fthers-moet appears Irom Use asa subit {edarose ftom networking and solittation efforts made by the Indwidval employees. Robert Lckhart was president of HRH Company {kom 2003 o 2005, and was involved ints aequstson [Of SRC and hiring of Sheppard. He had anon compe ‘Sin agreement wide HRE Company. which expired tm February 20072 In September 2006, Lockhart founded Kinloch Holdings, which he describes in his alldayt a6 "a new, venture capital backed insurance brokerage based in New York City.” made up of two subsidiaries Kinloch Partners, Ine. and Kinloch Cn Sulkin (eolieetwely, "Kinloch. Lockhart formed inloch Partners by acquiring a preexisting insur lance brokerage rm in New York through that entity Kinloch offers property and casually insurance and felated products and services. Lockhart formed Kinloch Conaulngin Apr 2007 by purchasing Nex Yerkolce of HRI Kinloch Consulung offers employee benefits plane and related consulting services. As of December 12, 2007, Kinloch employed 105 ini alsin ts two New Yorkers, and had ma revere ‘of approximately 27 alion dallas, “pacing 1 just {side the lap 100 brokerage firms in the United States” according to Lockhur'saftdavt- In September 2007, Kinloch began preparing to stablis @ Boston office, It made arrangements (© [purchase @ smal insurance brokerage inthe Boston fares. and expects to close thal deal Jamuary 2008. ‘ochart began reruting brokers, agents, ad other Personnel in the Boston aren. First among hem was ‘Thomas Sheppard. whom Lockhart had known when he worked at HRUL Sheppard and Lockhart agreed ‘that Sheppard would leave HR to work for Kini, land that, acording to Lockhart’ afl, Sheppard ‘would work in Kinloe's New Yor ole so ast be ‘utside the geographic range of his non-competition ‘agreement with RH, and would "Yoous on manage rent of Kinlot’s operations and busing relation ‘hips sth providers: ch as iurance cormpantes= Sheppard’ afldsvit pats somewhat dleenty: he ‘seer that he wl work in New York “or the near term. “focusing on developing relationships wit in sSuranee compares and oer powders. aa well {ereng Kinloch New York and natonal cent base" Between September and early December, Lokhart saleted alist of oer HRH employees, most but not ‘ll of whom he knew from his time at HR, to leave THRE and join Kinloc's new Boston cfc. 13 his ‘iscussions with those employees who had employ tent agreements with HR containing retreive coe ‘nant Lockhart promised that Kinloch would provide ‘Sefenae and indemmaietion. Although both Lackhart ‘and Sheppard assert that Lockhart ial Une reer Ing humeeir without assistance irom Shepp ‘Sheppard does acknowledge that he spoke with Rab tnson abot his plans, as well a ith two other HEE ‘employees, Tom Rey and Michael Heiberg, who did Riley's afldavt states that Sheppard tld Raley he “needed to bea part of” suggested ry meet ih Lockhart, laciseed with him dete of Rsiochs plan to hire key people from HR, and told fey how fected he was about the plan. Feinbergs adait States that Sheppard tld hi he would eecewve aeall from Lockhart, and that he should take the all Feinberg me wih Locsrt because of his beet “that ‘Sheppard apparently thought twas impertant that | meet with hin. Sheppard gave Pebsberg “the clear tmpreasion that he wanted me to bea part ofthe team {hat was going to work for he Kinloch Companies” ‘Toe aféanite submitted indiate alo that Leckhart told at leat some of hi eer of Sheppards pn 2 fmove to Kinloch, and used that information a2 a inducement. (On December 12, 2007. twenty four emplayees of "HRI submited resignations to Sheppard. and imme eosThe Massachusetts Law Reporter 383 ‘teas 24 Maso, L: Rem. No. 18, 8 (September 15, 2008) ‘lately began working for Kinloch. The employees resignation letters were in virtually Identical frm, ach including a statement to the effec that “should You nead to reach me direc for sr reason, you may ‘ontact me through my atorney. Brandon F White of ‘he lawfirm of Foy loag LLP Attomey White rep resents al defendants inthis action. ‘Sheppard himself resign from HRH on December 13,2007, notifying HRI Company's president by tle phone. e departed that day, without having notified [IR of te others resignations. He let hel resign tion letters fn a sealed envelope on his desk? ‘Sheppard sored at Kinloes Boston ofc forthe ‘net two days and then reparted tots New York fice the following Tuesday. On that date, according o is fda he "met with an inaurance compart’ in New York ani jooked at an apartment” Sheppard does not claim that he has eave from hs home in Wesley, for that he plans to do 30. After their departure from HRI, the employees notified their client of ther transition, by eal and Im some instances by tephone or im person, and Kinloch sent al ofthe employees cents “wedding ple" announcement by e-mail Sheppard met with tne cent, TA Realy. on the morning ofthe same dy quired in purchasing SRC. Bach of he defendant trmployees denis seit ary of Ue HRE cents or ny other HR employees and dents taking or sig fny confdental tsormadion from HR, sithoug Some acknowledge having kept their cient contact Information. The afidavits submited indicate that ‘several of the defendant employees met with cents, land several of them acknowledge having sccepted bhustnens fom cients who responded to their notifies: ton. One such cent, ITR later reported to ley that ithad wansfered ts busines after having bee told by Sheppard, Robinson and Richards, inceuratly ‘that “substantially all ofthe indivuaie who service the ITR account had ined the Kinloch companies" ‘On December 13, 2007, the day afer theemployes’ rae depart, Alan Bretman telephoned HRI em ployee Denise Stevenson, told her that he thought Kinloch woul be interested ner and suggested that she could obtain mare information frm Kinlct's Wwebste. Stevenson registered on the website, and ceived aob ofler by e mall She and Breiman met for lunch the nest day: he answered er questions About Kinloch and the terms of the ofler, sd added certain terms, including indemnifcation. She ac pte the aller and went to Kinloch Boston ofice \whete she observed Une roup of former ARH exp 5, along with boards showing iste of HRH clients Spd information about the status of efots to enlist ‘hemo transfer thet business a Kisach. Soon there [Breiman telephoned HRH employee Stuart Rubin: stein on Sunday. December 16.2007. Bratman a Serta that he did 0 in response to alls from Fubinstan, and urging from Stephenson, Bretman agreed to a salary for Rubinstein, as well as ler Terms, including indemnifeation and defense for clams by HR. A ew day ater. Brent Finnegan called Rubenstein with an inereased offer, Rubinstein de lined the ofler and stayed a HR, Within the week ater the employees’ departure, some twenty-four cente who were previously served by one or more of the departing employees submited “orokerof record” leterstranserrng Uae business ‘fom HRB! Kinloch, of otherwise noted HR of such a tater Atleast five of those clients wore mong those acquired from SR. December a ikely line for tanstuons in the insurance business, since many customers renew thelr property and casualty ‘nsurance polices during the month of Decembe [IRE led this acsion on December 20, 2007. The verified complaint calms breach of contract, breach ‘Ofdusay duly. and unjust enrichment aginst each ‘ofthe mine employee defendants, breach of fdulary ‘uty by Kinloch tortious interference with contrac. ‘ual relatons by Sheppard, Breiman. and Kinloch, il conspiracy by all defendants, olan of Ge ‘SBA by Kintoeh, Sheppard, and Bretman, aod uns ferichment or constructive trust against Kinloch? ‘The complaint seeks preliminary and permanent i Junctive rele anddumages: The Court ested anorder ‘of notice, and heard argument on the request for preliminary injunetion on Friday, December 21,2007 DISCUSSION A party seeking & preliminary i st show that (1) sucess is lkely on the meri: (2) Irreparable harm wl realt rom dental ofthe inne: ‘Wt and (9) heriskof ireparable harmo the moving party outweighs any sila sk of harm tothe oppor” Ingpary” Cate Whitacre Department of ab Heel. 4140 Mass. 360, 337 (2006) (Spina, 4. concuring. (ung Packaging Indus. Group Ine. v. Cheney. 380 Mass. 609, 616-17 (1960) Here, to warrant lauance ofa preliminary injunction againet former employ: fees. HRH must show. fist. leelnood hat wl preva at cal im showing both that the restive Covenants inthe employment agreements are enforee- fable against each of them and that each ax ile {those provisions, and second, that in the absence of an njuncuon between now andthe dene o tal. wil Suffer harm sufficiently severe and wreparabe io oat- ‘weigh dhe harm that an injunction wil impose on the Sefendants © As to Knloe, HRE must som, in ade ton to enforceability and breach by the employees, IWkeldhood that wil etoceed tn proving that Risch has encouraged or indeed that Breach, and dso by Improper means or fr an improper mou, or that ftherise engaged tm unfair competition or unfir oF ‘eneptive acts or practices