954 F.3d 439
1st Cir.2020Background
- Timothy Day signed a Proprietary Information, Inventions Assignment, Arbitration and Restrictive Covenant Agreement (PIIA) with NuVasive on January 6, 2018; the PIIA contained a Delaware choice-of-law clause and post-employment nonsolicitation and noncompete restrictions limited for Sales Director-type roles to customers covered in the last 12 months of employment.
- Day left NuVasive on January 3, 2019 to work for Rival Medical (an exclusive NuVasive distributor), then later began working for Alphatec Spine, a NuVasive competitor; NuVasive notified Day of breach and sued in D. Mass., seeking a preliminary injunction enforcing the PIIA.
- The District Court applied Massachusetts choice-of-law rules, concluded the contract’s Delaware choice-of-law clause was enforceable, applied Delaware law, and found a reasonable likelihood of success on NuVasive’s breach-of-contract claim as to the nonsolicitation clause; it enjoined Day’s soliciting activity.
- Day appealed, arguing Massachusetts choice-of-law exceptions required applying Massachusetts law (which would defeat NuVasive’s likelihood-of-success showing) because (1) Delaware had no substantial relationship to the transaction and (2) applying Delaware law would violate Massachusetts fundamental policy (invoking the Massachusetts Noncompetition Agreement Act (MNCA) and the Massachusetts “material change” doctrine).
- The First Circuit reviewed choice-of-law de novo and the preliminary-injunction legal questions de novo (with factual findings for clear error) and affirmed the District Court’s enforcement of the Delaware choice-of-law clause and its injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of contractual Delaware choice-of-law clause under Massachusetts law | Day: MA should not enforce the clause; MA law should control | NuVasive: MA choice-of-law rules ordinarily enforce parties’ choice; Delaware has substantial relationship (NuVasive incorporated there) | Enforced: Delaware law governs under MA rules; clause valid |
| Whether applying Delaware law violates a Massachusetts fundamental policy so exception applies | Day: Application would contravene MNCA and MA "material change" doctrine, so MA law (which would bar relief) should apply | NuVasive: MNCA doesn’t apply (PIIA predated statute; MNCA excludes nonsolicitation); material-change doctrine doesn’t cover Day’s voluntary termination/move to distributor | Rejected: MNCA inapplicable; material-change doctrine not implicated; public-policy exception fails |
| Entitlement to preliminary injunction based on breach of nonsolicitation | Day: If MA law applies, NuVasive lacks likelihood of success | NuVasive: Under Delaware law it has reasonable likelihood of success on nonsolicitation claim | Affirmed: Under Delaware law NuVasive showed likelihood of success and injunction sustained |
Key Cases Cited
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (U.S. 1941) (federal courts in diversity apply forum state choice-of-law rules)
- Oxford Glob. Res., LLC v. Hernandez, 106 N.E.3d 556 (Mass. 2018) (Massachusetts enforces choice-of-law clauses in employment contracts subject to specified exceptions)
- Automile Holdings, LLC v. McGovern, 136 N.E.3d 1207 (Mass. 2020) (Mass. Noncompetition Agreement Act applies only to agreements entered on or after Oct. 1, 2018, and excludes nonsolicitation agreements)
- Nieves-Márquez v. Puerto Rico, 353 F.3d 108 (1st Cir. 2003) (factors required to obtain a preliminary injunction)
- Reicher v. Berkshire Life Ins. Co. of Am., 360 F.3d 1 (1st Cir. 2004) (choice-of-law determinations reviewed de novo)
- Cream of Wheat Co. v. Grand Forks Cty., 253 U.S. 325 (U.S. 1920) (corporate domicile is where a company is incorporated)
- Astro-Med, Inc. v. Nihon Kohden Am., Inc., 591 F.3d 1 (1st Cir. 2009) (discussion of the Massachusetts "material change" doctrine in restrictive covenant context)