759 F. Supp. 2d 110
D. Mass.2010Background
- Plaintiff Rohm and Haas Electronic Materials, LLC and Defendant Electronic Circuits Supplies, Inc. had an exclusive distributorship arrangement governing a defined Territory in the Mid-Atlantic and Northeast, with Massachusetts law governing the Agreement.
- The Amended and Restated Distributor Agreement restricted Defendant from competing during the term and for 12 months after termination, and vested Plaintiff with all goodwill and trade secrets.
- An Amendment was drafted during negotiations to remove a non-competition provision; Defendant allegedly inserted the change and sent a signed version back without Plaintiff’s explicit discussion of the alteration.
- Plaintiff counter-signed the Amendment relying on its instructions, unaware that the non-competition clause had been removed.
- In January 2010 Defendant notified termination of the Agreement effective March 11, 2010, and Plaintiff learned of the removed non-compete through communications with customers.
- Plaintiff sought a preliminary injunction to prevent Defendant from selling competitive products to Plaintiff’s customers, but the court denied the motion after weighing the four-factor test.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Likelihood of success on the merits | Rohm and Haas argues Defendant breached the non-competition by selling competitive products. | Amendment validly removed the non-competition; enforcement should reflect the amended contract. | No likelihood of success; amendment defective and not enforceable as to non-compete. |
| Enforceability of the Amendment | Amendment was procured by deceit and is unenforceable to remove the non-compete. | Amendment was knowingly inserted and signed; Plaintiff failed to establish a duty to disclose. | Amendment unenforceable to the extent it rescinds non-compete; no fraud or breach shown to compel enforcement. |
| Irreparable harm | Loss of goodwill and potential misappropriation of confidential information would be irreparable. | Harm is quantifiable; no immediate or irreparable threat shown; goodwill issues speculative. | Plaintiff failed to show irreparable harm weighing in favor of injunction. |
| Balance of equities and public interest | Issuing injunction protects legitimate business interests and prevents deceit. | Injunction would devastate a small distributor and improperly rewrite sophisticated contracts. | Balance and public interest weigh in favor of Defendant; injunction denied. |
Key Cases Cited
- Campbell Soup Co. v. Giles, 47 F.3d 467 (1st Cir. 1995) (documentary evidence can defeat a motion for injunctive relief when facts are not in dispute)
- Winter v. Natural Resources Def. Council, Inc., 555 U.S. 7 (U.S. 2008) (four-factor test for preliminary injunctions; likelihood of success central to analysis)
- Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12 (1st Cir. 1996) (likelihood of success is the main bearing wall of the four-factor framework)
- Boulanger v. Dunkin' Donuts, Inc., 442 Mass. 635 (Mass. 2004) (non-compete enforceability requires legitimate business interests and reasonableness)
- Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835 (Mass. 1972) (confidential information and trade secrets—six guiding factors for confidentiality)
- Uno Rests., Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376 (Mass. 2004) (implied covenant and good faith cannot substitute for contract terms in sophisticated deals)