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JC-13697.
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Susan Miele versus Foundation Medicine, Inc.
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Mertineit.
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Yes. Thank you.
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Good morning.
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May it please the court, Dawn Mertineit
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of Seyfarth Shaw on behalf
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of the appellant, Foundation Medicine.
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The Massachusetts Noncompetition Agreement Act
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was never intended to, and in fact does not apply
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to employee non-solicitation provisions
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such as the one at issue in this case.
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As the name of the act makes clear,
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the statute was intended to regulate noncompetes
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and the plain text of the statute provides
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that other restrictive covenants,
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including employee non-solicits
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such as the one at issue in this case,
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are not subject to the act's requirements.
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Now to be clear, that does not mean that covenants
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that are not subject to the act
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can simply say whatever an employer wants them to.
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It's not the case that anything goes.
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The parade of horribles suggested by the appellee
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will not come to pass because even restrictive covenants,
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whether it's noncompetes that are not subject to the act
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or employee non-solicit, such as the case here,
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if they are not subject to the act, they are still subject
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to Massachusetts common law on restrictive covenants.
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That means the covenant needs
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to be reasonably limited in scope.
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It needs to be no broader than necessary
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to protect a legitimate business interest of the employer.
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And it must be consonant with the public interest.
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Now, as I mentioned earlier-
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Is that the same thing that gets incorporated into
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Section 24L?
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I don't know how many different subsections this is,
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but I'm gonna say small Roman viii.
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Or is there a difference in what the common law prohibits
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and that section, subsection?
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So this, in the act,
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the common law requirements are incorporated.
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That is correct.
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There are additional requirements
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that are subject to noncompetes
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that are subject to the act.
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What I'm saying is this employee non-solicit provision
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is outside the scope of the act.
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It must still comply with the concept
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that it'd be consonant with the public policy
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and no greater than necessary.
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And is that something that would be,
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were we to agree with you on the issue
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that's been presented here,
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is the question of public policy still going
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to be a live issue on remand?
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Absolutely.
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Excuse me. On remand.
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I thought you meant with respect to covenants generally.
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The trial court in his order
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actually determined that the employee non-solicit here
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did support a legitimate business interest.
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I can't recall specifically
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whether he discussed public policy,
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but he did determine that the covenant
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was subject to the act and that is what
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we believe should be overturned in this case.
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So I guess the question I have is,
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I take it that the issue of whether
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the forfeiture provision is contrary to public policy
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or otherwise doesn't meet our common law test.
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That has not been litigated
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and that would be a live issue later on in the litigation.
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The issue of whether the forfeiture provision
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is contrary to public policy,
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there were multiple things briefed below
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and one of the issues
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was whether the forfeiture was appropriate.
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Ultimately, the judge below did not decide that issue
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because he determined that he could resolve the issue
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by finding the covenant within the scope of the trial.
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So I do believe that that might come up when it is remanded,
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if it is remanded back to the trial court.
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Just to rightsize the case,
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what is the issue before us?
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Well, there are a couple of issues.
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I believe the main issue is
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is an employee non-solicitation provision that is coupled
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with a forfeiture subject to the requirements
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of the Massachusetts Noncompetition Agreement Act.
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We submit that it is not,
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and there are a number of reasons for this.
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Okay, so that's one issue.
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What's the other issue?
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The other issue is even if you were to find
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that an employee non-solicit provision coupled
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with a forfeiture is subject to the act,
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does that change if that employee non-solicitation provision
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is part of a transition agreement
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or a separation agreement, which is another exception
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to the scope of the act here?
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So long as you give them seven days?
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Yes.
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And then finally the question is,
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even if notwithstanding the fact that this was part
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of a separation agreement where the appellee was given time
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to revoke and did not do so,
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would the covenant nonetheless comply with the act?
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Now again, we don't believe the covenant
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is required to comply with the act,
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but we find that if you were to, or we-
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The covenant,
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meaning the original covenant pre-act?
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The employee non-solicitation provision.
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Prior to the enactment of the act.
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Is that what that is?
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Or even after,
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I mean, the employee non-solicitation provision
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in this case was initially entered into in 2017
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before the act was implemented.
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Later, the appellee affirmed that covenant,
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the employee non-solicit, in her separation agreement
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and that separation agreement was signed
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after the act's October 1st, 2018 implementation date.
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And therefore...
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And therefore, I mean, we don't think it's relevant
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because again, we think employee non-solicits
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are not subject to the act.
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Right. But that's issue one.
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Okay, so I'm on issue three.
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I'm just trying to figure out what the issues are.
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Issue one is our forfeiture for violation
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of a non-solicitation clause
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under the act.
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If we answer no, end of case?
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Well, if you answer no, then the decision
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below gets overturned and we go back to the Superior.
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End of our case. On appeal.
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Yes. Yes, correct.
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And then there's a second issue.
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But then the third issue was what?
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The third issue is, if not withstanding the two exceptions
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to the act that we believe the non-solicit falls under,
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If we nonetheless
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think the act applies.
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Correct.
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Does this employee non-solicit provision
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still comply with the act's requirements?
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So it's an it's an alternative argument,
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which is-
Correct.
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They're all alternatives, right?
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Yeah, we comply.
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So if we decide
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that you're correct on the first issue,
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that the plain language
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removing non-solicitation is different,
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what's left in the case?
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Sorry, so we decide in your favor on the first issue,
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what happens, what's left in the case to decide?
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I'm confused a little bit.
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Forget about issues two and three.
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You say you win on issue one,
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we don't need to go to two and three.
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I'm just trying to understand what's left
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in the case after that.
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So when the case goes back to the superior court,
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we head to trial and we go in front of a jury
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to determine whether they believe that the appellee
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violated her employee non-solicitation provision,
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which we think she did.
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Right, I gotcha. Okay.
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So the concern here-
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Just another question.
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We have this unusual sort of walking,
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talking guide through the legislative history
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and the drafting process.
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I've never seen anything quite like that before.
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And the trial judge did not have the benefit of that.
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Is that right?
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I believe you are referring largely
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to the amicus brief of-
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Yeah, the back amicus brief.
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You are correct that the trial judge did not have that.
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Right, okay, so he doesn't have that.
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And again, it's not like this is a legislator describing
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what a legislator did.
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He's sort of the draft person for the legislature.
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I'm trying to figure out how we treat this.
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'cause it's incredibly informative,
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but it's a little different (chuckles)
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than anything I've seen before.
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I agree, Your Honor.
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I agree that it is very informative,
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but I don't think you need,
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even though I found it very useful,
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I don't think you need that amicus brief
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to find in FMI's favor.
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I understand that.
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But it helps clarify a lot of the things
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that the trial judge didn't...
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Trial judge intuited various things
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and this explains, well, okay,
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these two cases were out there
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and this issue about, you know, forfeiture, you know,
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forfeiture based on noncompetition
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versus forfeiture in general, all of that.
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But I'm just trying to figure out
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what we do with all of that.
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Well, I don't think it's necessary to rely on that
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because I think the statute, the text is very clear.
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The definition of a noncompetition agreement in the statute
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says that it includes forfeiture for competition clauses,
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but it expressly and explicitly excludes
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employee non-solicitation provisions.
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And in fact, everyone in this case agrees with that.
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The appellate does not deny that.
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The question is whether the forfeiture
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for competition provision changes that,
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and we believe that it does not.
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Forfeiture for competition clauses are definitionally
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a subset of noncompetition agreements.
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The statute says that noncompetition agreements
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include forfeiture for competition clauses.
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But again, as I mentioned, employee non-solicits
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are excluded from the definition of noncompetes.
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So it was not necessary for the legislature
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to say that a forfeiture for competition clause
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does not include a non-solicitation provision
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because again, a forfeiture for competition clause
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is already a subset.
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It's just within the broader scope of noncompetes
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and noncompetes definitionally by the statute
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exclude employee non-solicitation provisions.
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Excuse me, can I just interrupt
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on that distinction, which is obviously critical here?
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It seems a little interesting
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that the employee here is literally an HR professional.
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So practicing her profession,
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which we think of the difference between,
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it's like a noncompetition agreement precludes you
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from practicing your profession.
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And so her profession actually involves hiring people.
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So should we think about it at all differently?
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I noticed there was one place in your brief
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where you said, it would be in the reply, I think,
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it would have been permissible for her company
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to hire your employees.
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It's just that she would have to not participate.
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She would have to not do her job.
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Well, I disagree that that was her job,
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or at least the primary function of her job.
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And interestingly in the record, some of the solicitation
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that we believe violated her agreement
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occurred before she even started her first day
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at the new employer.
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So it wasn't that this was all in the context of her job.
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You know, as the chief people person
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or the chief HR executive,
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not only was she familiar with what these agreements meant
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and she voluntarily entered into the transition agreement,
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but more importantly,
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her job was much more than simply recruiting people.
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Well, and also she could recruit
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from anybody else other than FMI.
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I mean, this provision really is just
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about not poaching FMI's employees
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to go to your new employer or anywhere else.
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You know, the rest of the world is available.
270
00:11:29.880 --> 00:11:32.610
That's correct, and in addition, as I mentioned,
271
00:11:32.610 --> 00:11:36.030
obviously they had an HR function at the new employer.
272
00:11:36.030 --> 00:11:39.810
They had an HR function that someone solicited her.
273
00:11:39.810 --> 00:11:41.610
It didn't have to be the appellee
274
00:11:41.610 --> 00:11:46.020
who was involved in these third parties hire
275
00:11:46.020 --> 00:11:47.643
by the new employer.
276
00:11:50.040 --> 00:11:51.120
I'm just trying to understand.
277
00:11:51.120 --> 00:11:55.500
When I read the language of the non-solicitation,
278
00:11:55.500 --> 00:11:57.000
she said she would not "directly
279
00:11:57.000 --> 00:11:59.820
or indirectly solicit, entice, blankly, blank
280
00:11:59.820 --> 00:12:02.080
or persuade any other employee
281
00:12:04.980 --> 00:12:07.290
or facilitate the hire of any person
282
00:12:07.290 --> 00:12:09.270
who was employed or engaged by FMI."
283
00:12:09.270 --> 00:12:12.900
So she has to stay completely out
284
00:12:12.900 --> 00:12:16.080
of FMI hiring, right?
285
00:12:16.080 --> 00:12:16.913
Correct.
286
00:12:16.913 --> 00:12:18.660
Even if she's the director-
For one year, though?
287
00:12:18.660 --> 00:12:19.493
One year.
288
00:12:19.493 --> 00:12:20.326
And this was in exchange
289
00:12:20.326 --> 00:12:23.302
for approximately $1.5 million in separation-
290
00:12:23.302 --> 00:12:24.307
Well, I get it.
291
00:12:24.307 --> 00:12:26.970
And I get your point that she went out
292
00:12:26.970 --> 00:12:30.270
and actively pulled people right out of there
293
00:12:30.270 --> 00:12:33.960
as opposed to, like, somebody from FMI applied
294
00:12:33.960 --> 00:12:37.740
and went through the personnel process at the new place.
295
00:12:37.740 --> 00:12:41.430
But is Justice Wendlandt's understanding
296
00:12:41.430 --> 00:12:43.740
how it works in your view?
297
00:12:43.740 --> 00:12:44.670
'Cause I had the same question
298
00:12:44.670 --> 00:12:46.050
Justice Dewar had, which is okay,
299
00:12:46.050 --> 00:12:51.050
she's at the head of HR in this specialized industry.
300
00:12:51.540 --> 00:12:56.540
So she now has to state completely away from FMI.
301
00:12:59.700 --> 00:13:00.777
Is Ginkgo and FMI,
302
00:13:00.777 --> 00:13:05.611
are they both Boston-based biotech companies?
303
00:13:05.611 --> 00:13:07.020
I'm just trying to understand
304
00:13:07.020 --> 00:13:08.580
the logistics of this.
305
00:13:08.580 --> 00:13:10.643
I don't recall whether Ginkgo is. FMI is.
306
00:13:10.643 --> 00:13:13.110
I know where FMI is. I've walked by it.
307
00:13:13.110 --> 00:13:15.503
But the other place, is it Boston based too?
308
00:13:15.503 --> 00:13:18.150
I think it might be, but I'm not sure about that.
309
00:13:18.150 --> 00:13:21.150
But again, she agreed it was just for one year.
310
00:13:21.150 --> 00:13:25.980
And again, it was just limited to the employees at FMI.
311
00:13:25.980 --> 00:13:27.810
and moreover, Your Honor, the question
312
00:13:27.810 --> 00:13:29.677
of whether that is a permissible
313
00:13:29.677 --> 00:13:31.800
and reasonable covenant,
314
00:13:31.800 --> 00:13:33.204
that is something that can be handled by
315
00:13:33.204 --> 00:13:36.870
and should be handled by the trial court judge.
316
00:13:36.870 --> 00:13:39.450
The issue here is whether it is subject to the act.
317
00:13:39.450 --> 00:13:40.910
You know, that that was one
318
00:13:40.910 --> 00:13:42.090
of the questions I still had.
319
00:13:42.090 --> 00:13:45.300
Okay, so we have a statute that says non-solicits
320
00:13:45.300 --> 00:13:47.850
are not noncompetes under this act,
321
00:13:47.850 --> 00:13:51.360
but does that statute preserve the common law?
322
00:13:51.360 --> 00:13:54.060
Does it expressly say nothing here impacts
323
00:13:54.060 --> 00:13:57.030
the common law of non-solicits?
324
00:13:57.030 --> 00:13:58.320
Non-solicitation?
325
00:13:58.320 --> 00:13:59.190
Is there something in that?
326
00:13:59.190 --> 00:14:02.310
'Cause normally the statutes displace common law rights
327
00:14:02.310 --> 00:14:03.540
or often they do.
328
00:14:03.540 --> 00:14:06.600
So I am not aware of a clause in the statute
329
00:14:06.600 --> 00:14:08.380
that specifically says, as for any covenant
330
00:14:08.380 --> 00:14:10.853
that's not governed by this statute,
331
00:14:10.853 --> 00:14:15.480
the common law continues to be uninterrupted.
332
00:14:15.480 --> 00:14:17.670
But certainly I believe that that is the effect.
333
00:14:17.670 --> 00:14:20.408
This statute was only intended to regulate
334
00:14:20.408 --> 00:14:24.000
and only does regulate certain specific noncompetes.
335
00:14:24.000 --> 00:14:24.990
Not even all noncompetes.
336
00:14:24.990 --> 00:14:26.313
There are other exceptions as well.
337
00:14:26.313 --> 00:14:28.230
It's only certain noncompetes.
338
00:14:28.230 --> 00:14:31.080
Where there's nothing in the statute that says, oh,
339
00:14:31.080 --> 00:14:34.470
and by the way, the common law for the rest of the covenants
340
00:14:34.470 --> 00:14:37.260
that are not subject to this act, you know,
341
00:14:37.260 --> 00:14:39.717
that's not going to get extinguished by this statute.
342
00:14:39.717 --> 00:14:43.530
And the default rule is that the legislature needs
343
00:14:43.530 --> 00:14:47.700
to expressly abrogate the common law when it wants to do so.
344
00:14:47.700 --> 00:14:52.440
So the silence suggests that the law persists.
345
00:14:52.440 --> 00:14:53.583
Correct, Your Honor.
346
00:14:54.510 --> 00:14:56.010
You know, I just wanted to mention
347
00:14:56.010 --> 00:14:57.690
that I think the fundamental problem
348
00:14:57.690 --> 00:14:59.670
with the Superior Court's decision is
349
00:14:59.670 --> 00:15:01.860
that it really elevates the remedy
350
00:15:01.860 --> 00:15:03.990
over the conduct being disincentivized.
351
00:15:03.990 --> 00:15:08.160
So again, none of the litigants in this case dispute
352
00:15:08.160 --> 00:15:10.710
that employee non-solicits are not subject to the act.
353
00:15:10.710 --> 00:15:13.440
But what the trial court judge did was essentially say,
354
00:15:13.440 --> 00:15:15.900
when you couple that with a different remedy,
355
00:15:15.900 --> 00:15:17.730
that's now subject to the act.
356
00:15:17.730 --> 00:15:18.730
We disagree with that.
357
00:15:18.730 --> 00:15:20.280
And again, the trial judge doesn't have the benefit
358
00:15:20.280 --> 00:15:22.838
of this, again, walking, talking guide,
359
00:15:22.838 --> 00:15:25.920
which says "we were concerned
360
00:15:25.920 --> 00:15:29.223
about forfeiture agreements,
361
00:15:30.210 --> 00:15:34.200
but a forfeiture without a noncompete is enforceable,
362
00:15:34.200 --> 00:15:39.200
but a forfeiture with a noncompete isn't,"
363
00:15:39.270 --> 00:15:40.830
and that's what this was about.
364
00:15:40.830 --> 00:15:42.150
But again, none of that's presented
365
00:15:42.150 --> 00:15:43.800
to the trial judge, right?
366
00:15:43.800 --> 00:15:45.540
Correct, but again, as I said earlier,
367
00:15:45.540 --> 00:15:48.390
I don't believe you need that walking, talking guide.
368
00:15:48.390 --> 00:15:51.390
I think the statute is very clear that forfeiture
369
00:15:51.390 --> 00:15:53.670
for competition clauses are a subset
370
00:15:53.670 --> 00:15:55.560
of noncompetition clauses
371
00:15:55.560 --> 00:15:58.440
and noncompetition clauses under the statute
372
00:15:58.440 --> 00:16:00.543
do not include employee non-solicits.
373
00:16:02.040 --> 00:16:04.470
I recognize that I'm over time, so we rest on our briefs.
374
00:16:04.470 --> 00:16:05.303
Thank you very much.
375
00:16:05.303 --> 00:16:06.840
Very good. Thank you.
376
00:16:09.180 --> 00:16:10.530
Morning, Your Honors.
377
00:16:10.530 --> 00:16:14.310
Jeffrey Rosin with Lauren Bressman for Ms. Miele,
378
00:16:14.310 --> 00:16:16.320
may it please the court.
379
00:16:16.320 --> 00:16:20.670
The statute is very clear that covenants
380
00:16:20.670 --> 00:16:25.110
not to solicit are not included.
381
00:16:25.110 --> 00:16:28.143
Ms. Miele is challenging a different covenant.
382
00:16:29.280 --> 00:16:32.343
It is the covenant to forfeit money,
383
00:16:33.660 --> 00:16:35.220
which brings her within
384
00:16:35.220 --> 00:16:38.138
a different part of the statute.
385
00:16:38.138 --> 00:16:41.040
The words of the statute say
386
00:16:41.040 --> 00:16:43.290
in the first two exception
387
00:16:43.290 --> 00:16:47.490
covenant not to solicit is excluded.
388
00:16:47.490 --> 00:16:49.999
The covenant that is the problem here.
389
00:16:49.999 --> 00:16:51.900
I'm gonna say, a covenant not to solicit
390
00:16:51.900 --> 00:16:55.110
is not a covenant not to compete.
391
00:16:55.110 --> 00:16:57.450
It expressly excludes it from that.
392
00:16:57.450 --> 00:17:00.483
It's not a noncompetition agreement, Your Honor.
393
00:17:01.560 --> 00:17:03.750
And a noncompetition agreement
394
00:17:03.750 --> 00:17:07.350
is a forfeiture for competition agreement.
395
00:17:07.350 --> 00:17:11.940
Now, when FMI put together its 2020 agreement,
396
00:17:11.940 --> 00:17:15.600
it said if you violate the noncompete, the non-solicit,
397
00:17:15.600 --> 00:17:18.930
the confidentiality, anything,
398
00:17:18.930 --> 00:17:22.980
non-disparagement in our new agreement you will forfeit.
399
00:17:22.980 --> 00:17:27.110
Cheney, Pettingell, Kroeger, Danahy.
400
00:17:27.110 --> 00:17:30.060
But they're not saying they can enforce.
401
00:17:30.060 --> 00:17:33.570
They're saying we want the money back
402
00:17:33.570 --> 00:17:37.710
because she violated the covenant not to solicit.
403
00:17:37.710 --> 00:17:39.450
It's a different covenant, Your Honor.
404
00:17:39.450 --> 00:17:41.520
We would've wanted the money back
405
00:17:41.520 --> 00:17:44.070
had she gone to a competitor.
406
00:17:44.070 --> 00:17:45.690
And to answer Your Honor's question,
407
00:17:45.690 --> 00:17:46.523
Ginkgo and Cambridge-
408
00:17:46.523 --> 00:17:47.850
Well, that's now the,
409
00:17:47.850 --> 00:17:50.977
I mean, if they had tried to do that,
410
00:17:50.977 --> 00:17:55.020
that maybe would've been covered by the act
411
00:17:55.020 --> 00:17:58.053
and maybe prohibited if it wasn't reasonable.
412
00:18:01.140 --> 00:18:05.640
That doesn't eliminate the fact
413
00:18:05.640 --> 00:18:10.620
that your client entered into a forfeiture
414
00:18:10.620 --> 00:18:13.647
for solicitation clause.
Your Honor, she entered-
415
00:18:13.647 --> 00:18:16.410
And that's what's being enforced here.
416
00:18:16.410 --> 00:18:18.750
That's what's choosing to be enforced.
417
00:18:18.750 --> 00:18:20.020
Right, exactly.
The entire agreement.
418
00:18:20.020 --> 00:18:21.590
And so what?
Had to comply
419
00:18:21.590 --> 00:18:23.310
with the law, Your Honor.
420
00:18:23.310 --> 00:18:25.410
Oh, you're saying because one part
421
00:18:25.410 --> 00:18:27.123
of the agreement was void,
422
00:18:28.230 --> 00:18:30.180
that the whole agreement is void?
423
00:18:30.180 --> 00:18:31.580
I'm saying it's regulated.
424
00:18:32.508 --> 00:18:34.020
I'm statute is regulated.
'Cause one part
425
00:18:34.020 --> 00:18:36.810
of the statute, one part of the agreement was regulated
426
00:18:36.810 --> 00:18:40.620
under the new statute, the whole thing comes within
427
00:18:40.620 --> 00:18:41.490
the new statute?
428
00:18:41.490 --> 00:18:44.550
Even things that the statute says
429
00:18:44.550 --> 00:18:46.230
are not covered by the statute?
430
00:18:46.230 --> 00:18:47.190
Your Honor, I disagree
431
00:18:47.190 --> 00:18:48.270
that it's not covered because-
432
00:18:48.270 --> 00:18:49.760
No, no, that's my question.
433
00:18:49.760 --> 00:18:53.520
It is like what I don't understand that, but go ahead.
434
00:18:53.520 --> 00:18:54.690
That's correct, Your Honor.
435
00:18:54.690 --> 00:18:56.490
No, but yeah, can you explain it? (laughs)
436
00:18:56.490 --> 00:18:59.370
Yes, so the entire agreement
437
00:18:59.370 --> 00:19:02.880
from 2020 fell within the act
438
00:19:02.880 --> 00:19:06.270
because there is a forfeiture for competition clause in it.
439
00:19:06.270 --> 00:19:08.550
We argue in every way,
440
00:19:08.550 --> 00:19:11.880
but it's undisputed that there was a forfeiture
441
00:19:11.880 --> 00:19:14.670
for competition had Ginkgo been a competitor
442
00:19:14.670 --> 00:19:17.250
and had FMI tried to stop Miele
443
00:19:17.250 --> 00:19:18.690
from working for a competitor.
444
00:19:18.690 --> 00:19:21.540
FMI is choosing to try
445
00:19:21.540 --> 00:19:24.750
to stop her from soliciting.
446
00:19:24.750 --> 00:19:27.690
The solicitation covenant is excluded
447
00:19:27.690 --> 00:19:30.000
from the definition of noncompete.
448
00:19:30.000 --> 00:19:32.986
But there's a separate definition if you're looking
449
00:19:32.986 --> 00:19:36.450
to get back money for engaging in competitive activities.
450
00:19:36.450 --> 00:19:39.270
And one of the key parts of that definition, Your Honor,
451
00:19:39.270 --> 00:19:42.450
is the manner in which you seek enforcement.
452
00:19:42.450 --> 00:19:44.550
That's Kroeger, that's Danahy,
453
00:19:44.550 --> 00:19:47.040
that's even Cheney and Pettingell.
454
00:19:47.040 --> 00:19:51.150
If you read the actual noncompete non-solicit language
455
00:19:51.150 --> 00:19:54.660
in Cheney and Pettingell, this court's own precedent,
456
00:19:54.660 --> 00:19:55.890
it actually says-
457
00:19:55.890 --> 00:19:58.920
But doesn't it say that forfeiture
458
00:19:58.920 --> 00:20:03.000
for noncompete is not allowed,
459
00:20:03.000 --> 00:20:08.000
but a forfeiture in general, if you fire your associate
460
00:20:08.444 --> 00:20:12.150
and you tell her "if we fire you,
461
00:20:12.150 --> 00:20:15.150
payment is forfeited," that's okay.
462
00:20:15.150 --> 00:20:18.990
It's if you fire her and say she can't go work
463
00:20:18.990 --> 00:20:22.380
for Seyfarth Shaw, that's not okay.
464
00:20:22.380 --> 00:20:24.930
Isn't that what the conditions
465
00:20:24.930 --> 00:20:26.790
that the statute's talking about are?
466
00:20:26.790 --> 00:20:27.623
Yes, Your Honor.
467
00:20:27.623 --> 00:20:31.980
And in this Pierce decision, which was 2008,
468
00:20:31.980 --> 00:20:34.920
it's the "triggered by competing."
469
00:20:34.920 --> 00:20:35.887
How do you compete?
470
00:20:35.887 --> 00:20:37.020
"Triggered by competing,"
471
00:20:37.020 --> 00:20:40.020
the language in Cheney that the legislature
472
00:20:40.020 --> 00:20:41.250
is presumed to understand,
473
00:20:41.250 --> 00:20:42.840
the language in Pettingell,
474
00:20:42.840 --> 00:20:45.510
that the legislature is presumed to understand,
475
00:20:45.510 --> 00:20:50.510
says if, in Cheney, "if this employee joins a competitor
476
00:20:50.850 --> 00:20:53.490
or engages in activities which are harmful
477
00:20:53.490 --> 00:20:57.810
to the corporation," that's the Cheney language
478
00:20:57.810 --> 00:20:59.250
that built this statute.
479
00:20:59.250 --> 00:21:01.583
Can I ask one back up question?
480
00:21:01.583 --> 00:21:03.443
You were drawing a distinction
481
00:21:03.443 --> 00:21:07.320
about if they have a noncompetition agreement
482
00:21:07.320 --> 00:21:09.600
that's broader than non-solicitation,
483
00:21:09.600 --> 00:21:11.250
did you argue that to the trial judge?
484
00:21:11.250 --> 00:21:12.870
'Cause that's not what
485
00:21:12.870 --> 00:21:15.000
the motion judge's decision talks about.
486
00:21:15.000 --> 00:21:17.830
That if it's got multiple provisions
487
00:21:17.830 --> 00:21:20.928
and they're only enforcing one provision,
488
00:21:20.928 --> 00:21:23.010
they still lose.
489
00:21:23.010 --> 00:21:25.170
We argued that the whole thing was void, Your Honor.
490
00:21:25.170 --> 00:21:26.550
But I just wanna make sure,
491
00:21:26.550 --> 00:21:29.340
did you argue the point you're just raising now, which is-
492
00:21:29.340 --> 00:21:31.080
We think we did, Your Honor.
493
00:21:31.080 --> 00:21:33.240
We think we did. We argued the whole thing was void.
494
00:21:33.240 --> 00:21:35.520
But actually looking back, what we needed to say
495
00:21:35.520 --> 00:21:37.890
was that the whole thing was regulated.
496
00:21:37.890 --> 00:21:39.810
Well, how do you square that argument
497
00:21:39.810 --> 00:21:42.420
with part D of the statute that says "a court may,
498
00:21:42.420 --> 00:21:44.550
in its discretion reform or otherwise revise
499
00:21:44.550 --> 00:21:46.920
a noncompetition agreement so as to render it valid
500
00:21:46.920 --> 00:21:49.110
and enforceable to the extent necessary
501
00:21:49.110 --> 00:21:51.900
to protect the applicable legitimate business interests"?
502
00:21:51.900 --> 00:21:52.830
That sort of sounds like
503
00:21:52.830 --> 00:21:55.500
if there's a non-solicit part, that's okay.
504
00:21:55.500 --> 00:21:57.330
They can enforce that.
505
00:21:57.330 --> 00:21:59.550
Correct, Your Honor, and in hearkening
506
00:21:59.550 --> 00:22:03.420
back to your point, here, Miele is not at a competitor.
507
00:22:03.420 --> 00:22:05.520
She's not taking trade secrets.
508
00:22:05.520 --> 00:22:08.280
She's not soliciting customers of FMI
509
00:22:08.280 --> 00:22:12.180
and taking their secret formulas for their medical research.
510
00:22:12.180 --> 00:22:13.620
She is at a company
511
00:22:13.620 --> 00:22:16.170
and I think we are taking a leap of logic
512
00:22:16.170 --> 00:22:18.120
in the facts to think that she was out there
513
00:22:18.120 --> 00:22:20.847
trying to pluck people from her old company to join her.
514
00:22:20.847 --> 00:22:22.291
But that's a factual question.
515
00:22:22.291 --> 00:22:24.180
I mean, assuming the facts are
516
00:22:24.180 --> 00:22:26.490
that she poached people from FMI,
517
00:22:26.490 --> 00:22:28.380
this is sort of a basic assumption
518
00:22:28.380 --> 00:22:30.693
for the purposes of this appeal, I think.
519
00:22:31.950 --> 00:22:34.650
The question is, does the forfeiture
520
00:22:34.650 --> 00:22:39.060
for solicitation clause fall within the act?
521
00:22:39.060 --> 00:22:40.620
And Your Honor, the reason why it does
522
00:22:40.620 --> 00:22:43.110
is because there's language in that definition
523
00:22:43.110 --> 00:22:45.570
that says "the manner of enforcement."
524
00:22:45.570 --> 00:22:46.403
And that's the Kroeger-
525
00:22:46.403 --> 00:22:48.420
Which definition?
I'm sorry, Your Honor.
526
00:22:48.420 --> 00:22:50.910
Forfeiture for competition agreement.
527
00:22:50.910 --> 00:22:53.460
It says "the manner of enforcement."
528
00:22:53.460 --> 00:22:57.600
This court's decision in Cummings Property, right,
529
00:22:57.600 --> 00:23:01.380
in 2007, right before the Pierce case in 2008,
530
00:23:01.380 --> 00:23:04.380
looked at what was the manner of enforcement here,
531
00:23:04.380 --> 00:23:06.237
what's going on in Cheney
532
00:23:06.237 --> 00:23:09.030
and in Pettingell, those are cases,
533
00:23:09.030 --> 00:23:12.090
how are we enforcing this restriction
534
00:23:12.090 --> 00:23:13.680
on a competitive activity?
535
00:23:13.680 --> 00:23:15.600
Isn't the manner of enforcement here
536
00:23:15.600 --> 00:23:19.297
that they say
537
00:23:19.297 --> 00:23:21.360
"she was soliciting our employees,
538
00:23:21.360 --> 00:23:24.480
therefore we are triggering the forfeiture provision."
539
00:23:24.480 --> 00:23:26.340
That's the manner of enforcement.
540
00:23:26.340 --> 00:23:28.410
They're not saying "we're triggering this
541
00:23:28.410 --> 00:23:31.440
because she went to be the director of personnel
542
00:23:31.440 --> 00:23:33.930
at a biotech company up the street."
543
00:23:33.930 --> 00:23:35.640
But if the manner of enforcement
544
00:23:35.640 --> 00:23:37.990
is because she's engaging in competitive activities,
545
00:23:37.990 --> 00:23:40.069
which those are,
546
00:23:40.069 --> 00:23:41.370
then it isn't regulated.
That's a whole
547
00:23:41.370 --> 00:23:43.743
separate question, whether those are.
548
00:23:44.640 --> 00:23:45.870
That's the first thing
549
00:23:45.870 --> 00:23:48.330
That is, but that's regulated by the law.
550
00:23:48.330 --> 00:23:49.320
It's regulated.
551
00:23:49.320 --> 00:23:52.680
You need to 10 days before signing.
552
00:23:52.680 --> 00:23:54.510
Tell you that an attorney needs to sign it.
553
00:23:54.510 --> 00:23:56.820
It's just regulated.
554
00:23:56.820 --> 00:23:58.620
And so this agreement here was.
555
00:23:58.620 --> 00:24:00.183
Now, Your Honor,
556
00:24:03.120 --> 00:24:04.680
in both the Kroeger case,
557
00:24:04.680 --> 00:24:06.750
which is from the appeals court,
558
00:24:06.750 --> 00:24:09.540
this court's decision in Cheney,
559
00:24:09.540 --> 00:24:11.791
we look at what are we looking to do
560
00:24:11.791 --> 00:24:13.950
with the manner of enforcement?
561
00:24:13.950 --> 00:24:16.680
Are we looking to claim earned compensation,
562
00:24:16.680 --> 00:24:19.800
past compensation paid for past services?
563
00:24:19.800 --> 00:24:23.046
That's both Pettingell and Cheney. And it's Kroeger.
564
00:24:23.046 --> 00:24:27.000
So here, Miele, one of the things that's going on here
565
00:24:27.000 --> 00:24:30.000
is that she had vested stock options
566
00:24:30.000 --> 00:24:32.226
that were accelerated during the transition period.
567
00:24:32.226 --> 00:24:34.380
That's earned compensation.
568
00:24:34.380 --> 00:24:36.700
That's roughly 90% of what FMI is trying to get back
569
00:24:36.700 --> 00:24:38.490
But there's no question
570
00:24:38.490 --> 00:24:42.153
that there is a financial hit to your client.
571
00:24:43.470 --> 00:24:45.330
I'm confused as to why you're focusing
572
00:24:45.330 --> 00:24:46.620
on the manner of enforcement.
573
00:24:46.620 --> 00:24:48.600
Let's just assume that there's a financial hit,
574
00:24:48.600 --> 00:24:51.030
whether it's options or whatever.
575
00:24:51.030 --> 00:24:54.960
The question really is whether non-solicitation
576
00:24:54.960 --> 00:24:57.603
or forfeiture for solicitation,
577
00:24:58.500 --> 00:24:59.910
or I should say,
578
00:24:59.910 --> 00:25:03.000
that solicitation is a competitive activity
579
00:25:03.000 --> 00:25:04.440
within the definition
580
00:25:04.440 --> 00:25:06.900
of the forfeiture for competition clauses.
581
00:25:06.900 --> 00:25:08.520
Right, Your Honor, because in the manner,
582
00:25:08.520 --> 00:25:12.240
the manner of enforcement, this court's opinion in Coolidge,
583
00:25:12.240 --> 00:25:15.150
which is cited by Cheney,
584
00:25:15.150 --> 00:25:17.100
this court's opinion in Cheney itself
585
00:25:17.100 --> 00:25:19.873
and in Pettingell is such that if you're trying
586
00:25:19.873 --> 00:25:21.270
11:20 AM.
to get something out
587
00:25:21.270 --> 00:25:23.640
of your contract that's not reasonable,
588
00:25:23.640 --> 00:25:26.100
and that's what the Cummings Property case was.
589
00:25:26.100 --> 00:25:27.420
If you're trying to get something out
590
00:25:27.420 --> 00:25:30.420
of your restrictive covenant, that's not reasonable,
591
00:25:30.420 --> 00:25:33.060
this court, the courts will step in,
592
00:25:33.060 --> 00:25:34.710
say, "That doesn't work."
593
00:25:34.710 --> 00:25:36.120
And that's that manner
594
00:25:36.120 --> 00:25:39.750
of enforcement concept in the definition of
595
00:25:39.750 --> 00:25:41.340
forfeiture for competition.
What's your best-case
596
00:25:41.340 --> 00:25:44.100
for the proposition that the legislature
597
00:25:44.100 --> 00:25:46.920
when using the words "competitive activities"
598
00:25:46.920 --> 00:25:50.400
meant to include forfeiture
599
00:25:50.400 --> 00:25:52.620
for solicitation?
600
00:25:52.620 --> 00:25:54.990
Two cases, Your Honor, both from this court,
601
00:25:54.990 --> 00:25:57.450
one is Cheney, where on-
602
00:25:57.450 --> 00:25:58.770
Cheney, as I understand it
603
00:25:58.770 --> 00:26:01.320
was a forfeiture for competition
604
00:26:01.320 --> 00:26:03.637
And it actually, the clause that's being enforced
605
00:26:03.637 --> 00:26:06.570
"or engages in activities which are harmful
606
00:26:06.570 --> 00:26:08.250
to the corporation."
607
00:26:08.250 --> 00:26:11.760
And in Pettingell, Your Honor, this court's decision.
608
00:26:11.760 --> 00:26:14.010
It says "withdraws from the firm
609
00:26:14.010 --> 00:26:18.630
and engages in any activities which are in competition
610
00:26:18.630 --> 00:26:20.133
with the then current activities
611
00:26:20.133 --> 00:26:24.150
of the firm he shall forfeit."
612
00:26:24.150 --> 00:26:27.060
Those are the decisions that formed
613
00:26:27.060 --> 00:26:28.830
the basis for this definition
614
00:26:28.830 --> 00:26:33.030
that the legislature specifically put into the law.
615
00:26:33.030 --> 00:26:34.140
Specifically put into the law.
616
00:26:34.140 --> 00:26:37.650
And once again, we don't say that the covenant,
617
00:26:37.650 --> 00:26:41.040
the covenant not to solicit isn't addressed here.
618
00:26:41.040 --> 00:26:44.340
It's the other covenant that's addressed here
619
00:26:44.340 --> 00:26:47.290
and its manner of enforcement that's addressed
620
00:26:49.050 --> 00:26:51.963
I have a question as to the relationship between,
621
00:26:53.220 --> 00:26:55.530
well, I'll just say with respect to a couple
622
00:26:55.530 --> 00:27:00.030
of the provisions in the transition agreement
623
00:27:00.030 --> 00:27:03.033
and what effect, if any, they may have on anything.
624
00:27:03.930 --> 00:27:08.730
Subsection H of paragraph 10, other terms,
625
00:27:08.730 --> 00:27:10.653
talks about the entire agreement.
626
00:27:12.600 --> 00:27:15.540
It's the integration clause, essentially.
627
00:27:15.540 --> 00:27:19.293
It says "its supersedes any and all prior discussions,
628
00:27:19.293 --> 00:27:21.720
oral and written negotiations, understandings,
629
00:27:21.720 --> 00:27:24.870
et cetera, et cetera, et cetera, et cetera, includes,"
630
00:27:24.870 --> 00:27:26.764
and it also specifically identifies
631
00:27:26.764 --> 00:27:28.773
these previous agreements.
632
00:27:31.623 --> 00:27:34.020
Are we not supposed to take that at face value?
633
00:27:34.020 --> 00:27:38.043
And if so, what effect does that have?
634
00:27:39.180 --> 00:27:40.350
I may be wrong on this,
635
00:27:40.350 --> 00:27:44.400
but is the non-solicitation clause only in
636
00:27:44.400 --> 00:27:45.870
one of the earlier agreements,
637
00:27:45.870 --> 00:27:48.660
or is it also included somewhere
638
00:27:48.660 --> 00:27:49.950
in the transition agreement?
639
00:27:49.950 --> 00:27:53.640
Your Honor, it is only in the 2017 agreement.
640
00:27:53.640 --> 00:27:57.180
The transition agreement references the 2017 agreement
641
00:27:57.180 --> 00:27:59.910
and in our view, and the trial judge below agreed,
642
00:27:59.910 --> 00:28:01.203
added terms to it.
643
00:28:02.754 --> 00:28:03.587
So
644
00:28:05.460 --> 00:28:10.263
how do you then reconcile that position with subsection H?
645
00:28:11.160 --> 00:28:12.030
In subsection H?
646
00:28:12.030 --> 00:28:13.860
I'm sorry, Your Honor, again,
647
00:28:13.860 --> 00:28:16.200
from the actual agreement or from the-
648
00:28:16.200 --> 00:28:17.520
From the transition agreement,
649
00:28:17.520 --> 00:28:19.170
which says that it's supersedes
650
00:28:19.170 --> 00:28:20.970
and this is the entire agreement,
651
00:28:20.970 --> 00:28:23.910
It incorporates and reaffirms that agreement.
652
00:28:23.910 --> 00:28:26.530
The transition agreement in another section incorporates
653
00:28:26.530 --> 00:28:28.192
and reaffirms that agreement.
654
00:28:28.192 --> 00:28:30.060
Right. And then adds and it also reference those.
655
00:28:30.060 --> 00:28:31.353
Okay, so in your view,
656
00:28:32.760 --> 00:28:35.880
the non-solicitation provision survives
657
00:28:35.880 --> 00:28:39.540
despite this subsection H.
658
00:28:39.540 --> 00:28:42.330
It survives and it gets added too.
659
00:28:42.330 --> 00:28:44.820
And the added two is this other covenant
660
00:28:44.820 --> 00:28:45.840
that in our view brings it
661
00:28:45.840 --> 00:28:47.430
within the definition of a forfeiture for competition.
662
00:28:47.430 --> 00:28:50.880
Okay, so now then look at subsection C,
663
00:28:50.880 --> 00:28:52.710
which is severability.
664
00:28:52.710 --> 00:28:54.360
I mean, there's also modification in there,
665
00:28:54.360 --> 00:28:55.590
but I'm really only interested
666
00:28:55.590 --> 00:28:57.960
in the severability portion of it.
667
00:28:57.960 --> 00:29:00.240
So this is a pretty, you know,
668
00:29:00.240 --> 00:29:01.830
routine severability provision
669
00:29:01.830 --> 00:29:05.700
that says "if one provision is unlawful
670
00:29:05.700 --> 00:29:08.517
or unenforceable, the others still survive."
671
00:29:09.870 --> 00:29:13.800
Given that, I have a hard time, to be frank,
672
00:29:13.800 --> 00:29:17.430
understanding your argument that the whole agreement
673
00:29:17.430 --> 00:29:19.710
has to be seen as a competition agreement
674
00:29:19.710 --> 00:29:22.920
and therefore, a forfeiture for competition agreement,
675
00:29:22.920 --> 00:29:26.610
and therefore a problem under the act
676
00:29:26.610 --> 00:29:31.500
as opposed to looking to the specific provision
677
00:29:31.500 --> 00:29:34.590
that your client is alleged to have violated,
678
00:29:34.590 --> 00:29:37.530
which is the non-solicitation provision.
679
00:29:37.530 --> 00:29:42.530
Because this looks like you agreed to severability?
680
00:29:42.750 --> 00:29:44.910
Can you please talk about that a little bit?
681
00:29:44.910 --> 00:29:46.380
Thank you, Your Honor.
682
00:29:46.380 --> 00:29:48.600
That's what I would look to this court's opinion
683
00:29:48.600 --> 00:29:52.470
in Cummings Property that's in our brief on page 22.
684
00:29:52.470 --> 00:29:54.910
If there are breaches of an agreement
685
00:29:55.920 --> 00:29:58.593
and some of them are just simply not material,
686
00:30:00.180 --> 00:30:02.790
then the penalty that's at issue
687
00:30:02.790 --> 00:30:04.530
is scrutinized in light of that.
688
00:30:04.530 --> 00:30:06.720
And that's exactly what this court says
689
00:30:06.720 --> 00:30:08.430
in Cummings Properties.
690
00:30:08.430 --> 00:30:10.920
So to Your Honor's question,
691
00:30:10.920 --> 00:30:15.243
if the non-solicit is all you want to enforce,
692
00:30:16.380 --> 00:30:19.890
but it only has to do with two
693
00:30:19.890 --> 00:30:22.200
or three people reaching out to you,
694
00:30:22.200 --> 00:30:24.330
you responding to them,
695
00:30:24.330 --> 00:30:26.190
one of them coming to your company,
696
00:30:26.190 --> 00:30:27.930
another one going to a related company,
697
00:30:27.930 --> 00:30:30.750
a third one not even coming to your company at all,
698
00:30:30.750 --> 00:30:33.600
Cummings Property, and we think Pierce, Cheney,
699
00:30:33.600 --> 00:30:37.350
and Pettingell all say that's scrutinized here.
700
00:30:37.350 --> 00:30:41.220
And it's not just the alternative question below,
701
00:30:41.220 --> 00:30:42.630
after this court's ruling,
702
00:30:42.630 --> 00:30:44.291
it's this court's ruling under this statute.
703
00:30:44.291 --> 00:30:47.940
But why isn't what you're identifying there
704
00:30:47.940 --> 00:30:49.728
the question of whether there was a breach
705
00:30:49.728 --> 00:30:53.800
as opposed to whether this particular non-solicitation
706
00:30:55.020 --> 00:30:57.630
provision falls within the statute?
707
00:30:57.630 --> 00:30:59.340
Because, Your Honor, under that logic
708
00:30:59.340 --> 00:31:03.240
that I just presented, I would say that can't be severed.
709
00:31:03.240 --> 00:31:07.590
That is an immaterial breach. It is unreasonable.
710
00:31:07.590 --> 00:31:10.080
It's an unlawful restraint of trade.
711
00:31:10.080 --> 00:31:12.660
It's a forfeiture for a competitive activity
712
00:31:12.660 --> 00:31:15.660
that falls squarely within the definition of the law
713
00:31:15.660 --> 00:31:16.970
and this court should...
714
00:31:22.620 --> 00:31:25.680
You get there by coupling the non-solicitation provision
715
00:31:25.680 --> 00:31:27.360
with the forfeiture provision.
716
00:31:27.360 --> 00:31:28.950
Two different covenants, Your Honor.
717
00:31:28.950 --> 00:31:30.900
Sure, but what if you just looked
718
00:31:30.900 --> 00:31:33.060
at the non-solicitation covenant?
719
00:31:33.060 --> 00:31:35.700
If you just looked at the non-solicitation covenant,
720
00:31:35.700 --> 00:31:37.057
Ms. Miele has said below,
721
00:31:37.057 --> 00:31:39.687
"No issue. Prove your consequential damages."
722
00:31:40.883 --> 00:31:43.620
I think I understand your argument now.
723
00:31:43.620 --> 00:31:44.453
Okay.