Rent-A-PC, Inc. v. March et al

Filing 26

Judge George A. OToole, Jr: OPINION AND ORDER entered denying 8 Motion for TRO; denying 8 Motion for Preliminary Injunction (Lyness, Paul)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 13-10978-GAO
RENT-A-PC, INC., d/b/a/
SMARTSOURCE COMPUTER & AUDIO VISUAL RENTALS,
Plaintiff,
v.
ROBERT MARCH, RONALD SCHMITZ, AARON COLE, and CCR SOLUTIONS, INC.,
Defendants.

OPINION AND ORDER
May 28, 2013
O’TOOLE, D.J.
The plaintiff Rent-A-PC, Inc. (“SmartSource”) asserts various contract and tort claims
against former employee defendants March, Cole, and Schmitz, and their new employer CCR
Solutions, Inc. SmartSource has moved for a preliminary injunction to prevent the defendants
from continuing their allegedly unlawful activities.
I.

Background
SmartSource is a company that provides short term rentals of audio visual, computer, and

other equipment. March, a Regional Sales Manager for the company, was terminated in October
2012. He joined CCR the following month. Cole, an Account Executive, and Schmitz, a National
Project Manager, resigned in January 2013 and joined CCR at some point thereafter.
SmartSource sent cease-and-desist letters to all the defendants, asserting that each of the
individual defendants had entered into restrictive covenant agreements with SmartSource and
putting CCR on notice of such agreements. The defendants did not respond to any of the letters.

On April 22, 2013, SmartSource filed suit and moved for injunctive relief, claiming that
the individual defendants had breached their employment agreements and that they and CCR had
tortiously interfered with SmartSource’s customer relationships and workforce. SmartSource
alleges that March solicited Cole to join CCR, and then March and Cole together solicited
Schmitz. SmartSource further contends that CCR is now working with at least six former
SmartSource customers and that in soliciting them, the individual defendants inevitably disclosed
confidential information. In response, the defendants argue, among other things, that the
restrictive covenants at issue are unenforceable or abrogated, that the covenants have not been
breached, and that they have not engaged in raiding or unfair competition.
II.

Legal Standard
“A preliminary injunction is an extraordinary and drastic remedy.” Munaf v. Geren, 553

U.S. 674, 676 (2008) (internal quotations omitted). The issuance of a preliminary injunction
depends on “(1) the likelihood of success on the merits; (2) the potential for irreparable harm if
the injunction is denied; (3) the balance of relevant impositions . . . ; and (4) the effect (if any) of
the court’s ruling on the public interest.” EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577,
581 (1st Cir. 2001) (citations omitted). “The sine qua non of this four-part inquiry is likelihood
of success on the merits: if the moving party cannot demonstrate that he is likely to succeed in
his quest, the remaining factors become matters of idle curiosity.” New Comm Wireless Servs.,
Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002) (citations omitted).
III.

Discussion
A.

Contract Claims Against Individual Defendants (Counts I, II, III)

March was hired by SmartSource in June 2006 as a Senior Account Executive. Prior to
commencing employment, he signed an offer letter containing the following provision:

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Confidentiality: During your employment or in the event that you leave our
employ, you agree to respect the confidentiality of information pertaining to the
business of Rent-A-PC, Inc. You further agree not to use such confidential
information in a manner harmful to Rent-A-PC, Inc. including, but not limited to,
not competing with Rent-A-PC, Inc. for a period of one year within 60 miles of
any Rent-A-PC location.
(March Affidavit, Ex. 1 (dkt. no. 17-1).)
In March 2007, March was promoted to Branch Sales Manager, and in April 2008, he
was promoted to Regional Sales Manager. He was then promoted in September 2010 to Regional
General Manager, and again in September 2012 to Regional Sales Manager. With each
promotion, March’s job responsibilities and compensation changed, and it is undisputed that
March’s final position at SmartSource was significantly different from his first position in terms
of scope, authority, duties, and pay.
In F. A. Bartlett Tree Expert Co. v. Barrington, 233 N.E.2d 756 (Mass. 1968), the
defendant signed a non-compete agreement upon his hire as a salesman in 1948. In 1960, his
employer introduced a new sales plan, which “made substantial changes in the defendant’s
remuneration and in his sales area.” Id. at 758. In 1965, the defendant was promoted to “district
sales manager in a new area with a new basis of remuneration.” Id. The Supreme Judicial Court
upheld the lower court’s ruling that the 1948 non-compete agreement was no longer operative
when the defendant resigned in 1966 because his relationship with his employer had changed so
materially that the original agreement had been effectively replaced, not merely modified. See
id.; cf. AFC Cable Sys., Inc. v. Clisham, 62 F. Supp. 2d 167, 173 (D. Mass. 1999) (non-compete
agreement voided where employee’s “title changed, his pay structure changed, his authority
increased, his unsupervised time on the road increased, and the focus of his work changed from
investigating a potential market to making sales.”).

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F. A. Bartlett is a significant problem for the plaintiff. March underwent several material
changes to his employment, but he did not sign any additional restrictive covenant agreements.
“Each time an employee’s employment relationship with the employer changes materially such
that they have entered into a new employment relationship a new restrictive covenant must be
signed.” Lycos, Inc. v. Jackson, 2004 WL 2341335, at *3 (Mass. Super. Aug. 25, 2004).
Although this is not the occasion for a definitive ruling, it may well be that, under F.A. Bartlett,
March’s 2006 confidentiality agreement has been abrogated, and he is not bound by any
restrictive covenants. SmartSource has not shown a sufficient likelihood of success on the merits
of its claims involving March to obtain injunctive relief.
Similarly, Cole experienced a material change in his employment relationship between
the time he entered into the restrict covenants that SmartSource seeks to enforce and his
resignation. He initially worked for All Service Computer Rental, Inc. (“ASCR”), first in the
inventory department and then in the sales department. He signed an agreement with ASCR in
2002 containing non-disclosure, non-competition, and non-solicitation provisions, at which time
he was an outside sales person.
SmartSource acquired ASCR in 2003. Although Cole’s official title never changed, it
appears from the materials submitted in connection with the present motion that his duties,
authority, and compensation may have changed substantially. As of his resignation, he had
become “one of SmartSource’s most successful account executives, earning approximately
$160,900 . . . in base pay in 2012” and was “the face of SmartSource to many of its customers.”
(Am. Compl. ¶¶ 42, 43 (dkt. no. 7).) Under F.A. Bartlett, such material changes could well mean
that Cole’s 2002 agreement with ASCR was no longer in effect. What is more, Cole’s agreement
was with ASCR, which was much smaller than SmartSource and much more limited in scope.

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Because his intent was to enter into restrictive covenants with this smaller company, it would be
inequitable to enforce these covenants against him in relation to SmartSource. Cf. Getman v. USI
Holdings Corp., 2005 WL 2183159, at *2 (Mass. Super. Sept. 1, 2005) (“[Getman] did not agree
not to compete with a much larger insurance brokerage firm such as USI. Since the scope of the
non-compete provision was materially changed when USI purchased Hastings-Tapley, this Court
finds that it may not be enforced against Getman.”).
As for Schmitz, the agreement that SmartSource seeks to enforce is a 2008 offer letter,
which Schmitz signed after SmartSource acquired his prior employer A.D. Handy. The offer
letter included confidentiality and non-solicitation provisions, but it did not contain a noncompete provision barring Schmitz from working for a competitor company upon termination of
his employment at SmartSource. Schmitz offers evidence that the A.D. Handy employees
bargained with SmartSource’s then-President to remove identical non-solicitation provisions
from their offer letters, although his offer letter was not changed.
Schmitz’s agreement would not be abrogated simply because other A.D. Handy
employees bargained to have their non-solicitation provisions removed. The circumstances do
suggest, however, that although the restriction may be legally enforceable, it may yet be
inequitable to enforce it.
In any event, SmartSource has failed to show that Schmitz is in breach of the agreement.
SmartSource alleges that Schmitz has solicited SmartSource customers and, in doing so, has
improperly disclosed confidential information. The only factual allegation offered in support is
that Schmitz was recently observed working for CCR at the John F. Kennedy Library, a former
SmartSource customer, which is insufficient to establish a likelihood of success in proving
breach. Further, in his affidavit, Schmitz explains the circumstances surrounding his resignation

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and his limited communications with the Library, including communications made with the
approval of and in the presence of his supervisor at SmartSource. SmartSource has simply not
met the requisite showing of likelihood of success on the merits as to the contract claim against
Schmitz.
B.

Tortious Interference Claims (Counts IV, V, VI, VIII, IX, XIII)

To prove tortious interference, a plaintiff must establish: “(i) the existence of a business
relationship between the plaintiff and a third party, (ii) of which the defendant is aware and (iii)
with which he intentionally and improperly interferes, (iv) causing an impairment of the business
relationship, to the plaintiff's detriment.” Bennett v. Saint-Gobain Corp., 507 F.3d 23, 33 (1st
Cir. 2007) (citations omitted). SmartSource alleges that March and CCR intentionally and
improperly interfered with its contractual relationships with employees by encouraging them to
leave SmartSource and work for CCR instead. However, SmartSource provides insufficient
evidence to support this allegation. Without broad speculation, the Court cannot determine that
SmartSource is likely to succeed on these claims.
C.

Chapter 93A and Unfair Competition Claims (Counts VII, X, XI, XII)

The same is true of these claims because they are premised on the factual allegation that
March, Cole, and CCR intentionally interfered with Cole and Schmitz’s employment
agreements. In light of the dearth of evidence of intentional interference, SmartSource is not
likely to prevail on these claims.

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IV.

Conclusion
SmartSource has not established a likelihood of success on the merits as to any of its

claims. Accordingly, it is unnecessary to address the other prerequisites to obtaining a
preliminary injunction.
The Amended Motion (dkt. no. 8) for a Temporary Restraining Order and Preliminary
Injunction is DENIED.
It is SO ORDERED.
/s/ George A. O’Toole, Jr.
United States District Judge

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