Employment – NDA – Trade secrets

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Where a plaintiff has moved for a preliminary injunction against three former employees (1) to prevent their use or disclosure of the plaintiff’s trade secrets and confidential information and (2) to comply with the noncompete and non-solicitation provisions of their non-disclosure agreements, the motion should be allowed to the extent that it seeks to enjoin the use and disclosure of trade secrets and confidential information.

“Plaintiff FrontRunner HC, Inc. (‘FrontRunner’) filed this lawsuit against Defendants Waveland RCM, LLC, Waveland Technologies, LLC (together, ‘Waveland’); Dean Paluch (‘Paluch’), Jordan Levitt (‘Levitt’) and Tony Altieri (‘Altieri’) (collectively, the ‘Individual Defendants’) alleging that while the Individual Defendants were FrontRunner employees, they misappropriated trade secrets and confidential information from FrontRunner, solicited FrontRunner clients on behalf of their new employer, Waveland, and continued this conduct after the termination of their employment with FrontRunner. … FrontRunner has moved for a preliminary injunction against both Waveland (now dismissed) and the Individual Defendants to enjoin their use or disclosure of its trade secrets and confidential information, preserve hard devices and devices on which same might be stored and comply with the non-compete and non-solicitation provisions of the Individual Defendants’ NDAs. …

“In seeking its preliminary injunction, FrontRunner contends that it is reasonably like to succeed on the following claims: theft and misappropriation of its trade secrets (Counts I and IV), breach of the non-disclosure, non-solicitation and non-compete obligations in the NDAs (Counts II and III) and tortious interference with FrontRunner’s contractual relations (Counts VIII, IX, and XIV). …

“In Counts II and III, FrontRunner alleges a breach of contract claim and breach of the implied covenant of good faith and fair dealing claim against the Individual Defendants for violations of their nondisclosure, non-compete and non-solicitation obligations under the various NDAs. … At the outset, the Court notes that the Individual Defendants have agreed ‘not to disclose any FrontRunner Confidential Information they currently possess’ to address any claim under the nondisclosure provision of the NDAs. … The Court, therefore, focuses its analysis on allegations that the Individual Defendants breached their non-compete and non-solicitation obligations under the NDAs. …

“Even assuming, however, there was a valid contract between Paluch and FrontRunner, the non-solicitation and non-competition provisions in the (unsigned) Paluch NDA have expired. …

“… Altieri’s employment ended August 27, 2019, … thus his non-solicitation and noncompetition periods expired twelve months later, on August 27, 2020. Accordingly, since Altieri’s NDA has expired by its own terms. …

“As to Levitt, he does not dispute that his NDA with Frontrunner is a valid contract and that the non-solicitation and non-competition provisions of the NDA has not expired. … Instead, he argues that his non-competition and non-solicitation agreements, which were signed ‘as a condition’ of his 2019 Compensation Plan, … cannot be enforced because FrontRunner made material changes to his employment in his 2020 Compensation Plan and refused to grant him stock options. … Material changes to employment may void previously signed restrictive covenants. …

“… It is at least a plausible defense that the 2020 Compensation plan created a new employment contract between Levitt and FrontRunner. …

“Even assuming his NDA is still in effect, FrontRunner has not established that Levitt breached his non-solicitation and non-competition obligations. … Here, given the conflicting affidavits and deposition testimony, the Court cannot conclude, at the preliminary injunction juncture, that FrontRunner has established that it is sufficiently likely to prevail on its claim that Levitt solicited Quadax.

“FrontRunner makes no other specific allegations against Levitt regarding solicitation. … Given that FrontRunner has not presented evidence that Levitt has communicated with FrontRunner’s clients — aside from Quadax, which is in dispute, the Court cannot conclude that FrontRunner has shown a substantial likelihood on the merits that Levitt breached his non-solicitation agreement, even assuming it were enforceable.

“… Here, FrontRunner alleges that Levitt breached his non-competition agreement by working at Waveland. … Levitt’s NDA limits Competitive Business in part to businesses that have ‘competed with Company in the 12 months preceding Officer’s employment.’ …

“Levitt argues that Waveland is not a Competitive Business because Waveland did not compete with FrontRunner in the twelve months preceding Levitt’s employment with FrontRunner. …

“… Given these disputes, the Court cannot conclude that FrontRunner has met its burden that Waveland is a Competitive Business as defined in Levitt’s NDA.

“For these reasons, Frontrunner has not shown a reasonable likelihood of success on its breach of contract claims as to the Individual Defendants. …

“Although, as discussed above, whether Paluch and Levitt had valid NDAs with FrontRunner at the time of the alleged misconduct here is at least debatable, Massachusetts courts do not define the scope of a confidential relationship ‘by looking exclusively to the parties’ express agreements.’ Diomed, Inc. v. Vascular Solutions, Inc., 417 F. Supp. 2d 137, 145 (D. Mass. 2006) (finding that plaintiff was entitled to argue that defendant’s duty of confidentiality extended beyond the scope of the NDA). The information on Altieri’s USB and the information that Paluch and Altieri forwarded to Waveland was information that was confidential and proprietary to FrontRunner, and information that could be of use to Waveland. …

“Accordingly, the Court finds that FrontRunner is reasonably likely to succeed on its misappropriation of trade secrets claims against the Individual Defendants. …

“For the foregoing reasons discussed above, the Court allows FrontRunner’s motion for preliminary injunction to the extent that it seeks to enjoin the Individual Defendants from use and disclosure of trade secrets or confidential information, but otherwise denies the motion.”

FrontRunner HC, Inc. V. Waveland RCM, LLC, et al. (Lawyers Weekly No. 02-456-20) (28 pages) (Casper, J.) (Civil Action No. 20-10230-DJC) (Dec. 11, 2020).

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