NEW ENGLAND CIRCUIT SALES, INC., Plaintiff
SCOTT RANDALL and the INTERNET SHOPPING NETWORK, INC., Defendants.
CIVIL ACTION NO.: 96-10840-EFH
June 4, 1996
This matter is before the Court on the Plaintiff's, New England Circuit Sales, Inc. ("NECX"), Motion for a Preliminary Injunction against the Defendants, Scott Randall and the Internet Shopping Network, Inc. NECX is in the business of purchasing and selling electric components, focusing mainly on computer chips. NECX Direct was founded in 1995 as a division of NECX and is involved in the retail sale of computer electronic equipment over the Internet. The Defendant, Scott Randall, began working for NECX on June 27, 1994 as Director of New Business Development. He later was promoted to become General Manager of NECX Direct. On July 5, 1994, Randall signed an Employment Agreement which contained non-disclosure and non-competition clauses. On November 29, 1994, Randall signed another Employment Agreement for on-line service employees which contained identical non-competition and non-disclosure clauses. Pursuant to the Agreements, Randall agreed not to work for a competitor business for one year after the termination of his employment with the plaintiff and agreed not to disclose any trade secrets or confidential business information. These Agreements were necessary due to the competitive nature of the business and the fact that Randall would necessarily be privy to confidential information in the performance of his high level job. In February, 1996, Randall informed NECX that he was resigning. In March, 1996, Randall accepted an offer to be the President and Chief Operating Officer at the Internet Shopping Network, Inc., a direct competitor of the plaintiff's. Because the Defendant Randall breached the Employment Agreements by accepting the offer to become the President and Chief Operating Officer at the Defendant Internet Shopping Network, the plaintiff seeks to enjoin and restrain the Defendant Randall from working or being employed by the Internet Shopping Network, Inc., a direct competitor of the plaintiff, for a period of one year from the date of the termination of his employment with NECX and to order the Defendants Randall and Internet Shopping Network not to use, distribute, disclose or disseminate any confidential business information. For the following reasons, the Court hereby grants the Plaintiff's Motion for a Preliminary Injunction.
In order to grant a preliminary injunction, the burden is on the plaintiff to show "(1) that the plaintiff will suffer irreparable injury if the injunction is not granted; (2) that such injury outweighs any harm which granting injunctive relief would inflict on the defendant; (3) that plaintiff has exhibited a likelihood of success on the merits; and (4) that the public interest will not be adversely affected by the granting of the injunction." Jackson v. Fair, 846 F.2d 811, 814-15 (1st Cir. 1988). The plaintiff has met this burden.
The Plaintiff, NECX, will suffer irreparable injury if the injunction is not granted because the plaintiff does not have an adequate remedy at law. If confidential information is allowed to be revealed, the damage will have already occurred. There is no way to assess the amount of loss that the plaintiff will sustain due to the dissemination of highly confidential material. Similarly, with regard to the non-competition clause, it would be almost impossible to measure the plaintiff's damage if the defendant is allowed to go to work for a competitor. As Chief Judge Tauro pointed out in a similar case, "the task of quantifying the consequences of violating a non-competition clause is a particularly difficult and elusive one." Shipley Co., Inc. v. Clark, 728 F.Supp. 818, 827 (D. Mass. 1990) (quoting Kroeger v. Stop & Shop Companies, Inc., 432 N.E.2d 566, 573 (Mass.App.Ct. 1982). Furthermore, if a preliminary injunction is not granted, enforcement of the non-competition clause will be circumvented. The clause forbids the defendant from competing for a one-year period; since the trial will occur after the one-year period has expired, the clause will no longer be enforceable.
The potential injury to plaintiff outweighs any harm which granting injunctive relief would inflict on the defendant. The Agreement protects the legitimate business interests of the plaintiff and is reasonable in scope and time. This type of restriction does not prevent the defendant from working in the business industry, it only forbids him from working for a business which is substantially similar to or competitive with that of the plaintiff for a limited one-year period.
The plaintiff has exhibited a likelihood of success on the merits. Noncompetition agreements are enforceable in Massachusetts if they protect a legitimate business interest and are reasonable in scope. The defendant was exposed to highly confidential information relating to this currently fast-emerging, even revolutionary, industry, and therefore, the non-competition and non-disclosure clauses are necessary to protect the plaintiff's legitimate business interests. In deciding whether certain information is confidential and should be afforded protection, several factors are relevant including "the extent to which the information is known outside of the business, the extent of measures taken by the employer to guard the secrecy of the information, and the ease or difficulty with which information could be properly acquired by others." (Augat, Inc. v. Aegis, 409 Mass. 165, 169-170 (1991) (quoting Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972)). Through his employment with the plaintiff, the defendant learned all of the techniques NECX used to compete effectively in the on-line marketplace. The defendant became familiar with the computer programs and used them to assist in the collecting, organizing, re-formatting and re-presentation of the data and information all part of the content management aspect of the business. The successful content management techniques that the plaintiff has developed and the defendant has learned allow the plaintiff to market over 25,000 products in a way that is generally considered within the industry to be superior. Many Massachusetts courts have held that similar confidential information should be afforded protection as trade secrets. See, e.g., Marcam Corp. v. Orchard, C.A. No. 95-10527, Slip Op. at 5 (D. Mass. 1995); Kroeger v. Stop & Shop, 432 N.E.2d 566, 571 (Mass.App.Ct. 1982). The defendant plans to use the confidential information which he acquired while working for the plaintiff in his new capacity as President and Chief Operating Officer at the Internet Shopping Network, as evidenced by the April 30, 1996 press release relating to the Internet Shopping Network. The press release stated that the Internet Shopping Network was undergoing "a major site redesign." A portion of the press release reads:
The redesign includes changes in site navigation, graphics, format and content. ISN has designed a completely new Home Page that provides a better way for a customer to find and browse over 25,000 computer hardware and software products. This helps customers easily and quickly find the products they want to purchase.The defendants behavior violates both the non-disclosure and non-competition provisions of the Agreement, and thus, entitles the plaintiff to injunctive relief. Finally, the public interest will be served by granting the preliminary injunction. It is in society's best interest to recognize and enforce agreements which were voluntarily entered into and accepted. Allowing an individual to disregard such a promise would result in behavior which should not be condoned or encouraged. For the above reasons, the Court hereby grants the Plaintiff's Motion for a Preliminary Injunction against the Defendants, Scott Randall and Internet Shopping Network, Inc.
Overall site navigation has also been upgraded to help customers find products by "Subject Category" or by using an enhanced "Power Search" feature and will produce a list of the most relevant product or products, depending on the customer's interests.
"The new interface places primary importance on speed and ease-of-use from our customer's prospective," said Bill Rollinson, vice president of marketing. Customers can use the "information," "Power Search," "Orders Status" and "Edit Account" features on any page by "clicking" on the navigational bar.
Product information has been re-organized according to customer needs, and 12-additional "What's New" and "Hot Deals" sections have been included for every product category. Customers an find useful and up-to-date information in the "What's New" sections, as well as leading products for sale in each "Hot Deals" section.
ISN has reorganized product pages to offer the customer detailed and timely information on specific products. When viewing a product page, the customer receives complete specification information on that particular product, along with similar models, accessories and a complete product description as well as pricing, shipping and inventory availability information.
"We can't do enough to supply the demand that our customers have for specific product information, delivered in a clear, easy-to-use fashion," said Rollinson.
This is the first phase of ISN's complete site redesign aimed at giving customers the power and the information they need to purchase products quickly and easily from ISN.