Lunt v. Campbell
23 Mass. L. Rptr. 145 (2007)
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Rule of Law:
A preliminary injunction to enforce a non-competition agreement will be denied if the moving party fails to establish a likelihood of success on the merits (including the enforceability and reasonableness of the agreement) or if the risk of irreparable harm to the moving party does not outweigh the harm to the opposing party, especially when there has been a significant delay in seeking enforcement.
Facts:
- Debora Lunt owned and operated Debora Lunt Hair Studio in Beverly Farms; Michelle Tobin worked for Lunt from 1995 until she resigned in January 2007, Melissa Campbell from 1990 until July 24, 2007 (with a prior interruption), and Gia Davis from 1998 until 2001 or 2003.
- Lunt encouraged Tobin and Campbell to develop their own clientele of repeat customers while they were employed at her salon.
- In July 1995, Lunt presented Tobin and Campbell with employment agreements containing non-competition and non-solicitation clauses that prohibited them from working for a competitor or soliciting customers in Essex County for two years after termination, stating refusal would lead to termination. Both signed these agreements without negotiation.
- After Tobin resigned in January 2007, she and Davis opened Gichelle's Hair Studio in Peabody, approximately ten miles from Lunt's salon.
- Lunt alleged Tobin had taken client records and failed to enter client phone numbers before her departure; Tobin denied these claims. Lunt sent Tobin a letter on March 28, 2007, asserting a contract violation.
- Campbell's employment with Lunt ended on July 24, 2007, after which she rented a chair at Gichelle's and contacted her former clients to inform them of her new location.
- Lunt alleged that both Tobin and Campbell solicited and serviced approximately ninety former Lunt clients at Gichelle's.
Procedural Posture:
- Debora Lunt filed an action on August 30, 2007, in the Massachusetts Superior Court, against Michelle Tobin, Melissa Campbell, and Gia Davis.
- Lunt's complaint alleged breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, breach of fiduciary duty, and interference with advantageous business relationships against Tobin and Campbell.
- Lunt further alleged misappropriation of confidential business information, unjust enrichment, and civil conspiracy against all three defendants, interference with contractual relations against Tobin and Davis, and violation of G.L.c. 93A against Davis.
- Lunt sought preliminary and permanent injunctive relief and damages.
- Lunt filed a motion for a preliminary injunction.
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Issue:
Should a preliminary injunction be granted to an employer to enforce non-competition and non-solicitation agreements against former employees when the enforceability and reasonableness of the agreements are questionable, the employees developed their own client goodwill, and the employer delayed in seeking relief?
Opinions:
Majority - Judith Fabricant
No, a preliminary injunction should not be granted because Lunt has not established a sufficient likelihood of success on the merits, nor has she demonstrated irreparable harm that would outweigh the harm to the defendants. The court found significant questions regarding the enforceability and reasonableness of the non-competition agreements. Specifically, the court questioned whether the client goodwill belonged to Lunt or the individual hairdressers, given that hairdressers are not fungible and often develop personal client relationships. It was also not apparent that mere customer names and telephone numbers, known to the employees, constituted confidential information belonging to Lunt. The two-year, Essex County restriction was deemed potentially unreasonable in time and scope for the hairdressing industry, especially since clients traveling a distance from Lunt's salon to Gichelle's suggested loyalty to the stylists rather than the salon itself. The court also noted that the agreements were signed during employment under threat of termination, with continued employment as the sole consideration, which weighs against equitable enforcement. Furthermore, Lunt failed to prove irreparable harm sufficient to outweigh the substantial harm an injunction would inflict on Tobin and Campbell. Lunt's eight-month delay in seeking relief against Tobin, during which Tobin invested in and established her new business, made an injunction inappropriate due to laches. For Campbell, an injunction would deprive her of her only means of support, as she was abruptly terminated. No basis was found for injunctive relief against Davis, who merely rented a chair to Campbell and was not alleged to have violated an ongoing agreement.
Analysis:
This case underscores the high burden on parties seeking preliminary injunctions, especially for enforcing non-competition agreements in personal service industries. It highlights that courts scrutinize the legitimacy of the business interest being protected (e.g., whether client goodwill belongs to the employer or employee), the reasonableness of the agreement's scope and duration, and the circumstances surrounding its formation (e.g., unequal bargaining power, sole consideration). The court's emphasis on Lunt's delay in seeking relief demonstrates the importance of acting promptly to establish irreparable harm. The decision serves as a reminder that boilerplate non-compete clauses may not be enforceable if they are overly broad or if the facts suggest that client loyalty follows the individual service provider.
