Shepard Davidson

the in-house advisor

April 2017


No doubt, having a properly drafted agreement is critical if you wish to prevent a former employee from competing against you or soliciting your customers. But, simply having a clear and straight-forward agreement may not be enough to persuade a court to enjoin someone from violating the terms of it. Rather, a plaintiff must show that a post-employment restrictive covenant is necessary to protect “legitimate business interests” before any injunctive relief will issue. Further, and as the Superior Court reconfirmed earlier this month in ABM Industry Groups, LLC v. Palmarozzo, making such a showing is not always easy to do.

Joseph Palmarozzo was a branch manager for ABM Industry Group, a large, public company that provides janitorial and maintenance services to large facilities. In connection with his job, Palmarozzo entered into an employment agreement that included non-competition, non-solicitation and non-disclosure obligations.

In December of 2016, Palmarozzo left ABM to become the General Manager of Compass Facility Services (“CFS”), a much smaller company than ABM, but one that also provided janitorial services. Shortly thereafter, ABM filed suit and moved for a preliminary injunction to prevent Palmarozzo from competing against ABM and soliciting its customers.

As a prelude to its

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It is standard practice in M&A transactions for the acquired business to assign all if its contractual rights to the purchaser. While that may sound good in theory, depending upon how the underlying contracts are drafted, they could have little or no value to the purchaser. Indeed, as the Massachusetts Superior Court’s decision in NetScout, Inc. v. Hohenstein confirms, this warning can be particularly important when the underlying contract involves an employee non-compete.

Carl Hohenstein was employed by a subsidiary of Danaher Corporation, and in 2011 he and Danaher entered into a contract that included a non-compete agreement. Four years later, NetScout acquired Danaher and its subsidiaries, and as part of that transaction (i) Hohenstein became a NetScout employee; and (ii) Danaher assigned its rights under the 2011 contract with Hohenstein to NetScout. Six years after that, Hohenstein left NetScout and began working for one of its competitors.

NetScout sued Hohenstein and moved for a preliminary injunction, asking the Court to bar him from competing against the company. While the Superior Court found that the non-compete agreement in the 2011 contract between Hohenstein and Danaher was enforceable, and that NetScout was entitled to enforce that contract as Danaher’s assignee, … Keep reading