Our legal system is far from perfect. And, unfortunately, it frequently permits abuses.
In the context of restrictive covenants and trade secret claims, oftentimes it’s an overly-aggressive former employer bringing to bear resources far greater than the defendant’s to achieve some improper competitive purpose. For example, sometimes an employer may try to crush a fledgling competitor by advancing dubious (or downright frivolous) claims. It is often quite difficult for the defendant caught up in that whirlwind to extricate itself from the onslaught.
But sometimes the system works.
That appears to be what is happening in Macaroco v. Vanity Lab, LLC, C.A. No. 2173CV00426, Bristol County Superior Court.
The facts:
The facts as alleged by the former employee, Ms. Macaroco, are as follows.
Defendant Vanity Lab operates med spas. It hired Macaroco as an aesthetician in April 2019. On June 7, 2019, Macaroco signed a contract containing restrictive covenants, including nonsolicitation, nondisclosure, and noncompete covenants. Vanity Lab did not sign the contract. On May 25, 2021, Vanity Lab terminated Macaroco without cause.
Under the Massachusetts Noncompetition Agreement Act (which appears to have applied), the noncompete would have been unenforceable for various reasons. (For example, accordingly the allegations, it was unsigned by the employer, it was unsupported by any consideration beyond continued employment — no garden leave or other mutually agreed upon consideration, much less anything “fair and reason” — and Macaroco was terminated without cause. This issue was not part of the decision, however, so no additional guidance about the MNAA for us from this case.)
On June 3, 2021, Macaroco received a cease and desist letter dated June 1, 2021 from a New York law firm.
Typical of such letters, it cited to the restrictive covenants (including the noncompete), demanded that Macaroco cease and desist from continuing to work in her new business, and threatened that Vanity Lab would enforce its rights if she failed to comply with her contractual obligations.
The strategy:
In response, the would-be defendant went on the offensive.
Rather than wait to be sued, Macaroco filed a lawsuit against her former employer.
This is a tough strategic call that often presents itself. The decision is typically even harder, as it is generally coupled with a decision about whether to simultaneously seek a temporary restraining order or preliminary injunction prohibiting the employer from enforcing the putative restrictive covenants.
If the employee files, it will get clarity. It may also appear as the “good guy,” trying to avoid violating its agreement. On the other hand, the employee is guaranteed a lawsuit — that it may lose. And, the case will shift the burden of going forward and some aspects of the burden of proof, depending on how the case proceeds. For example, if the employee seeks a temporary restraining order or a preliminary injunction, it will have the burden of establishing entitlement to the requested relief.
The results:
Macaroco asserted claims for, among other things, tortious interference with advantageous business relations, trade libel (commercial disparagement), violation of G.L. c. 93A (Massachusetts’s unfair practices statute, which allows for treble damages and attorneys’ fees), and intentional and negligent infliction of emotional distress.
Vanity Lab moved to dismiss.
No surprise, the court rejected the emotional distress claims. Intentional infliction of emotional distress requires “extreme and outrageous” conduct. Negligent infliction of emotional distress requires some manifestation of physical harm. Neither were present here.
But, more interestingly, the court denied the motion to dismiss on the other claims.
Essentially, the court allowed the tortious interference and the 93A claim to survive based on the threat of enforcement in the cease and desist letter. While litigation privilege — not discussed — will typically insulate that type of conduct, Vanity Lab went further. It allegedly “contact[ed] third parties and claim[ed] that a restrictive covenant restricted [Macaroco’s] ability to practice her profession.” That conduct appears to have convinced the court that the line was crossed, similar to conclusions reached by the court in Brooks Automation, Inc. v. Blueshift Techs., Inc., 20 Mass. L. Rptr. 541, 547 (Mass. Super. 2006), aff’d, 69 Mass. App. Ct. 1107 (2007) (a seminal case in Massachusetts).
Although language in the court’s decision in Macaroco can be read otherwise, it is doubtful that the court would have reached the same conclusion if Vanity Lab had simply sent the C&D letter just to Macaroco and had not used it to try to convince clients to not work with Macaroco.
As to the disparagement claim, the court laid out the elements as follows:
[A] plaintiff must state facts sufficient to suggest that a defendant: (1) published a false statement to a person other than the plaintiff; (2) ‘of and concerning’ the plaintiff’s products or services; (3) with knowledge of the statement’s falsity or with reckless disregard of its truth or falsity; (4) where pecuniary harm to the plaintiff’s interests was intended or foreseeable; and (5) such publication resulted in special damages in the form of pecuniary loss.
Macaroco had claimed that Vanity Lab had made false and derogatory about Macaroco’s services to clients. The court concluded that although the allegations were “thin,” they were sufficient to support the claim.
The takeaways:
While this decision involved a motion to dismiss at the trial court level (and therefore is of little precedential value), it does offer some valuable guidance.
For the employee: In most instances it will not make sense to affirmatively institute legal proceedings. There are times, however, when it will. Here, as is often the case, there was also a wage claim. That will oftentimes be an independent reason to bring a lawsuit. Regardless, the option should always be considered.
For the employer: Think long and hard about whether your covenants are enforceable and how you plan to enforce them. Push too hard, and you may find yourself facing affirmative claims, liability, and the prospect of treble damages and attorneys fees.
*Thank you to Erika Hahn for finding this case!