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Non-Solicitation Agreements And Contact Initiated By Former Customers: Can You Accept Their Business?

Do you have the right to conduct business with a former customer who initiates contact with you if you signed a non-solicitation agreement while working for a corporation, and you leave to work for a competitor? This is exactly the scenario the U.S. First Circuit Court of Appeals recently addressed in Corporate Technologies, Inc. v. Harnett, et al. 

The Defendant Brian Harnett worked as an account executive/salesman at Plaintiff Corporate Technologies, Inc. ("CTI") a provider of customized information technology solutions. When his employment commenced, Harnett signed a non-solicitation and non-disclosure agreement. The non-solicitation provision prohibited Harnett from "solicit[ing], divert[ing] or entic[ing] away existing [CTI] customers or business" for a period of twelve months following the cessation of his employment.

In October of 2012, Harnett left to work for the Plaintiff's competitor. Following his departure from CTI, former customers initiated contact with Harnett. Harnett then participated in sales-related communications and activities with some of his former CTI customers on behalf of his new employer. When CTI learned of Harnett's activity, CTI filed a civil action seeking injunctive relief and damages from Harnett. After an evidentiary hearing, the United States District Court for the District of Massachusetts granted a preliminary injunction to CTI. Harnett immediately appealed.

On appeal, Defendant Harnett argued that the customers initiated contact with him, and therefore, subsequent business activity cannot as a matter of law constitute solicitation. The First Circuit Court of Appeals disagreed with Harnett.

The First Circuit held initial contact is just one factor in the analysis as initial contacts by customers are necessarily preliminary, the sales process is sophisticated, and the products are custom-tailored. Therefore, the totality of the circumstances should be examined to determine if Harnett engaged in solicitation. Based on the record before the District Court, the First Circuit found no error in the District Court's determination that Harnett engaged in solicitation.

The Appeals Court held that:

The dispute between the parties turns on the distinction between actively soliciting and merely accepting business....The defendants seek to change the trajectory of the debate by insisting that, once a customer initiates contact with an employee who has switched his affiliation, all bets are off and subsequent business activity cannot as a matter of law constitute solicitation. This argument is simply a linguistic trick: creative relabeling, without more, is insufficient to transform what is manifestly a question of fact into a question of law.... Restrictive covenants are meant to afford the original employer bargained-for protection of their accrued good will...because initial contact can easily be manipulated - say, by a targeted announcement that piques customers' curiosity - a per se rule would deprive the employer of its bargained-for protection.

Therefore, former employees who execute non-solicitation agreements should be mindful that solicitation can still result from customer initiated contact. Simply because the customer contacts you first does not give you a license to accept their business. Courts will review the totality of the circumstances to determine if solicitation occurred and who initiated contact is simply one factor in the review.

Contact Attorney Mucci, an experienced employment law attorney, if you have questions about your non-solicitation agreement or enforcement of a non-solicitation agreement.

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