Opinion
No. 219-2017-CV-00411
04-11-2018
Richard Solito, Jesse Kells and Matthew Will v. Direct Capital Corporation And C.I.T. Bank, Cross-claim Plaintiff v. Richard Solito, Jesse Kells and Matthew Will And Direct Capital Corporation and C.I.T. Bank, v. Ascentium Corporation
ORDER
Richard Solito ("Solito"), Jesse Kells ("Kells") and Matthew Will ("Will"), (collectively the "Former Employee Plaintiffs"), all former employees of Direct Capital Corporation ("DCC"), have brought an action against DCC for the purposes of, inter alia, challenging restrictive covenants which DCC asserts are applicable to them. DCC is a subsidiary of Capital Direct Group, Inc., which is a subsidiary of CIT Bank, NA ("CIT"), which is a subsidiary of C.I.T. Group, Inc. DCC has filed Counterclaims seeking a declaratory judgment and alleging breach of contract against the Former Employee Plaintiffs and theft of trade secrets against Solito. CIT has filed Cross-claims alleging that the Former Employee Plaintiffs violated their duty of loyalty to DCC and CIT while working for DCC. DCC and CIT have filed a Complaint against Ascentium Capital, LLC ("Ascentium") alleging intentional and improper inference with contracts, misappropriation of trade secrets, and civil conspiracy.
DCC has moved to dismiss Count I of the Former Employee Plaintiffs' Complaint, which alleges violations of RSA 358-A, the New Hampshire Consumer Protection Act ("CPA"). The Motion is GRANTED. The Former Employee Plaintiffs have moved to dismiss the allegations made against them in the Cross-claim by CIT asserting a breach of the duty of loyalty. The Motion is GRANTED with Leave to Amend. The Cross-claim against Solito for violation of the common law duty of loyalty is DISMISSED to the extent it is alleging that Solito misappropriated confidential information as such a claim is preempted by the NHUTSA. Finally, Solito moves to dismiss Counterclaims II and III against him by DCC and Ascentium Capital, LLC ("Ascentium") moves to dismiss Count I of the Complaint against it by DCC and CIT. Solito and Ascentium's motion is based upon the alleged invalidity of a restrictive covenant signed by Solito in 2013. For the reasons stated in this Order, the Motion is DENIED.
I. The RSA 358-A Claim Brought by the Former Employee Plaintiffs
In ruling on a Motion to Dismiss, the Court must treat all well-pleaded facts in a Complaint as true, and construe all reasonable inferences therefrom in favor of the plaintiff. Mt. Springs Water Co. v. Mt. Lakes Vill. Dist., 126 N.H. 199, 200 (1985). When considering the Motion, the Court must determine whether the facts as pleaded are sufficient under the law to set forth a cause of action. Brzica v. Trustees of Dartmouth College, 147 N.H. 443, 450 (2002). However, the Court cannot accept bare conclusions of law. Beane v. Dana S. Beane & Co., 160 N.H. 708, 711 (2010). The Court therefore considers the allegations in the Complaint, Counterclaims and Cross-claims as true for the purposes of determining these Motions.
Solito, Kells and Will are all former employees of DCC and now work for DCC's competitor, Ascentium. (Compl. ¶ 7.) In 2007, DCC had all employees sign an agreement containing noncompetition, nondisclosure and nonsolicitation covenants (the "2007 Agreement"). (Id. ¶ 9.) Kells and Will are parties to the 2007 Agreement. (Id.) In 2013, the 2007 Agreement was determined to be unenforceable by the New Hampshire Superior Court. (Id. ¶ 10.) Later that same year DCC presented its employees with a new nondisclosure and nonsolicitation agreement (the "2013 Agreement") and asked employees to sign it. (Compl. ¶ 11.) Solito signed the 2013 Agreement. (Compl. ¶ 12.) Kells and Will declined to sign the 2013 Agreement. (Id.) In June 2017, Will executed a Restricted Stock Unit Award Agreement which contained an exhibit with restrictive covenants which was presented to him by DCC. (Id.) Will alleges that he was "duped" into signing the Agreement. (Id.)
Following their departures from DCC, Solito, Kells and Will each received letters reminding them of their obligations under their various agreements. (Compl. ¶¶ 11-13.) The Former Employee Plaintiffs allege that DCC has attempted to enforce its various agreements with former employees, including the Former Employee Plaintiffs, through litigation, and that this conduct constitutes unfair methods of competition and unfair and deceptive acts and practices affecting trade and commerce in the State under RSA 358-A, the Consumer Protection Act ("CPA"). DCC has moved to dismiss the Former Employee Plaintiffs' claim.
The New Hampshire Supreme Court has held that while the CPA statute broadly defines trade and commerce as "the advertising, offering for sale, sale, or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situate, and shall include any trade or commerce directly or indirectly affecting the people of this state," RSA 358-A:1, II, "the scope of the CPA is narrower than its broad language may suggest, and that it does not encompass isolated sales or contracts that are not undertaken in the ordinary course of a trade or business," Ellis v. Candia Trailers and Snow Equip., Inc., 164 N.H. 457, 465 (2012). In Hughes v. DiSalvo, 143 N.H. 576, 578 (1999), the Court stated that "[t]o determine whether the [CPA] applies to a particular transaction, we analyze the activity involved, the nature of the transaction, and the parties to determine whether a transaction is a personal or business transaction," and that "remedies under the [CPA] are not available where the transaction is strictly private in nature, and is in no way undertaken in the ordinary course of a trade or business." (emphasis added).
Noting that New Hampshire courts have often relied upon interpretation of the Massachusetts Consumer Protection Act in interpreting RSA 358-A, the United States District Court for the District of New Hampshire held in 1994 that the New Hampshire CPA does not provide a remedy for disputes arising out of an employment relationship between an employer and employee. Donovan v. Digital Equip. Corp., 883 F. Supp. 775, 786-87 (D.N.H. 1994); see Manning v. Zuckerman, 444 N.E.2d 1262, 1266 (Mass. 1983) ("Contract disputes between an employer and an employee, by contrast, are principally 'private in nature' and do not occur in the ordinary 'conduct of any trade or commerce' as contemplated by the statute."). The court further noted that the New Hampshire CPA tracks the language of the Massachusetts Consumer Protection Act, Mass. Gen. L. ch. 93A. Id. at 786.
Since 1994 when Donovan was decided, Massachusetts courts have continued to take the view that the Massachusetts CPA is not applicable to employment disputes. Psy-Ed Corp. v. Klein, 947 N.E.2d 520, 539 (2011); Informix, Inc. v. Rennell, 668 N.E.2d 1351, 1353 (Mass. App. Ct. 1996). Federal courts applying Massachusetts law have reached the same conclusion. See Debnam v. FedEx Home Delivery, 766 F.3d 93, 95 (1st Cir. 2014); Charest v. President & Fellows of Harvard Coll., Civil No. 13-11556-DPW, 2016 WL 614368, at *21 (D. Mass. Feb. 16, 2016); Bevington v. Comverse Tech., Inc., 796 F. Supp. 2d 257, 264-65 (D. Mass. 2011); Bolen v. Paragon Plastics, Inc., 754 F. Supp. 221, 227-28 (D. Mass. 1990). The New Hampshire Supreme Court has continued to look to Massachusetts precedent to determine the scope of the New Hampshire CPA. See, e.g., Hughes, 143 N.H. at 578. Following Massachusetts precedent, this Court has specifically held that employment relationships are outside the scope of the New Hampshire CPA because they are personal transactions. Coutu v. State, No. 2015-cv-488, 2016 N.H. Super. LEXIS 12, at *15 (Merrimack Cnty. Super. Ct. Sept. 23, 2016).
Similarly, the cognate Vermont Consumer Fraud Act has been interpreted to be inapplicable to employer-employee relationships, because such relationships are private in nature. Nashef v. AADCO Med., Inc., 947 F. Supp. 2d 413, 425-26 (D. Vt. 2013).
The Former Employee Plaintiffs attempt to distinguish their case from the many cases involving employee CPA claims by asserting that DCC's "conduct is much broader in scope and affects the 'open marketplace.'" (Pls.' Obj. to DCC's Mot. to Dismiss Count I, ¶ 17.) They argue that DCC's conduct, in "threatening the Individual Plaintiffs and numerous other departing and former DCC employees with onerous and illegitimate litigation based on covenants that have been judicially declared invalid or are void under New Hampshire statutory law, in order to chill and prevent them from engaging in lawful competition," is violative of the CPA. (Id. ¶ 20.) The Former Employee Plaintiffs argue that Ascentium never had any private or employment relationship with DCC, that DCC and Ascentium are distinct business entities and any dispute between Ascentium and DCC falls squarely within the realm of "trade or commerce" as defined by the CPA. (Id. ¶ 21.)
The Former Employee Plaintiffs rely upon a broad statement in Gallagher v. Funeral Source One Supply and Equip. Co., Civil No. 14-W-115-PB, 2015 WL 773737, at *3 (D.N.H. Feb. 24, 2015) ("I can find no basis in the CPA's plain text to conclude that CPA liability does not extend to abusive litigation practices") to support their argument. The Gallagher Court did not engage in an extensive analysis of what conduct would violate the New Hampshire CPA. Rather, it noted the CPA provides "that in any action or prosecution [under the CPA], the courts may be guided by the interpretation and construction given Section 5(a)(1) of the Federal Trade Commission Act . . . by the Federal Trade Commission and the federal courts." Id. at *4 (quoting RSA 358-A:13). The court then noted that the Federal Trade Commission has brought enforcement actions based on abusive litigation practices. Id. (citing Spiegel, Inc. v. FTC, 540 F.2d 287, 292-93 (7th Cir. 1976); FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244 (1972).)
In Spiegel, the Seventh Circuit held that a practice of suing out-of-state customers with whom Spiegel had dealt by catalog sales for relatively small amounts of money, exclusively in Cook County, Illinois, through use of a long-arm statute, constituted an unfair trade practice. 540 F.2d at 293-94. Similarly, in Sperry & Hutchinson, the United States Supreme Court held that Sperry & Hutchinson's practice of instituting litigation selectively against business entities that would affect its business model could violate the Federal Trade Commission Act, even though it expressed no opinion on the merits of the FTC's claim. 405 U.S. at 239. Both cases stand for the proposition that a policy of instituting litigation against competitors to injure competition could violate the Federal Trade Commission Act and therefore the FTC could lawfully enjoin such conduct.
The New Hampshire Supreme Court has not accepted claims that litigation tactics in a particular case, rather than in litigation strategy as a business tool, are violative of the CPA. See, e.g., Axenics, Inc. v. Turner Constr. Co., 164 N.H. 659, 676-77 (2013) (assuming, without deciding, that the CPA was applicable to unfair litigation tactics, the Court held there was no violation of the CPA where the plaintiff alleged the defendant's litigation tactics were "unfair" and were "designed to further delay the adjudication of [the plaintiff's] claim and make the litigation prohibitively expensive"); Turner v. Shared Towers VA, LLC, 167 N.H. 196, 209 (2014) (holding the defendants did not violate the CPA by requiring the plaintiff to honor his obligations under a loan agreement and promissory note, enforcing their rights under those documents by initiating a collection and foreclosure action upon default and rejecting the plaintiff's offer of compromise); Fat Bullies Farm, LLC v. Devenport, 170 N.H. 17, 28 (2017) (prospective purchaser's conduct of arriving at a property unannounced with an attorney and option agreement, misrepresenting its intentions for purchasing the farm, not recommending that the sellers obtain legal counsel, attempting to negotiate the selling price of the farm, failing to explain the meaning of the language in the option agreement, threatening and attempting to enforce the option agreement, and pursuing a contentious litigation strategy would not "raise an eyebrow of someone inured to the rough and tumble of the world of commerce").
Nonetheless, use of litigation strategy as alleged by the Former Employee Plaintiffs to unfairly compete as part of a business plan would seem to fall within the parameters of Spiegel and Sperry & Hutchinson. Ascentium appears to have made such a claim against DCC and CIT. (See Ascentium's Counterclaim ¶¶ 15-18 (Count I alleging unfair competition).) However, this claim belongs to Ascentium, and not to the Former Employee Plaintiffs. DCC has expressly stated that its Motion to Dismiss relates to Count I of the Former Employee Plaintiffs' Complaint and that it has not yet moved to dismiss the CPA claim brought by Ascentium. (Def.'s Reply Mem. in Support of Mot. to Dismiss Count I, at 1.) The fact that Ascentium may have an unfair competition claim based on litigation practices against DCC has no bearing on the viability of the CPA claim brought by the Former Employee Plaintiffs against DCC. See, e.g., Hanover Insurance Company v. Sutton, 705 N.E.2d 279, 294-95 (Mass. App. Ct. 1999) (While an employee of Hanover could not be liable to Hanover under the Massachusetts CPA Act for his conduct, a business to which the employee directed a corporate opportunity belonging to Hanover could be liable). The Motion to Dismiss Count I of the Former Employee Plaintiffs' Complaint must therefore be GRANTED.
II. The Former Employee Plaintiffs' Motion to Dismiss CIT's Duty of Loyalty Claim
The Former Employee Plaintiffs have moved to dismiss the Cross-claims brought against them by CIT for three reasons:
First, preparing to compete does not constitute a breach of the duty of loyalty. Second, while actual competition during employment can violate the duty of loyalty, the Defendants failed to plead that any such actual competition occurred. And third, CIT's assertion of a duty of loyalty claim based on an alleged misappropriation of the Defendants' confidential information is preempted by the New Hampshire Uniform Trade Secret Act ("[NH]UTSA"), RSA chapter 350-B.(Pls.' Mot. to Dismiss Cross-claims, ¶ 2.)
In order to consider the Motion to Dismiss, the Court must consider the actual language of the Cross-claims. The allegations against Solito are detailed. With respect to Solito, CIT alleges that:
100. While he was still employed by CIT bank, without DCC's permission and in violation of various DCC policies, Solito prepared a handwritten list of DCC customers he had contact with through his employment. . . .
101. While he was still employed by DCC, Solito also took pictures of computer screenshots containing some of DCC's confidential customer information, including information concerning customers Solito did business with through his employment. . . .
102. Solito made the handwritten list and took the screen shot pictures in order to circumvent protections in DCC's computer system designed to prevent the unlawful use and disclosure of DCC's confidential information.
103. In breach of his obligations under that 2013 Agreement, and in violation of RSA 350-B, Solito took the stolen DCC customer list and screen shot photos with him when he joined Ascentium.
104. During his exit interview, Solito falsely represented to DCC that he had not taken any of DCC's confidential information.
105. On information and belief, since leaving DCC's employ and beginning work with Ascentium, Solito has solicited, directly and/or indirectly, and made contact with or attempted to make contact with, many customers he worked with at DCC for the benefit of Ascentium. In his Complaint, Solito admits contacting the DCC customers on his stolen handwritten list. On information and belief, Solito also contacted the DCC customers captured by Solito's screen shot photos.
106. On information and belief, since leaving DCC and beginning employment with Ascentium, Solito has completed—on behalf of
Ascentium—at least six (6) transactions with DCC repeat customers with whom he either had contact, developed a relationship or about whom he deems significant information or understanding through his employment in the Retention Group.(DCC's Answer and Amended Counterclaims ¶¶ 100-106; CIT's Cross-claims ¶ 9.) The Cross-claim alleges that:
Solito owed a duty of undivided loyalty to his employer [DCC] and principal, [CIT]. . . . Solito breached that duty of loyalty by, among other things, preparing to compete and actually competing with DCC while still employed by DCC, and by taking DCC confidential information by surreptitious means aimed at circumventing the reasonable and substantial mechanisms put in place by DCC to protect that information.(CIT's Cross-claim ¶¶ 8-9.) The allegations against Kells and Will are far less specific. DCC merely alleges that both "breached [their] duty of loyalty by, among other things, competing and preparing to compete with DCC while employed by DCC." (CIT's Cross-claims ¶¶ 13, 17.)
The parties do not seriously dispute the controlling law. Under the Restatement (Third) Agency § 8.04 Competition:
Throughout the duration of an agency relationship, an agent has a duty to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principal's competitors. During that time, an agent may take action, not otherwise wrongful, to prepare for competition following termination of the agency relationship.The Former Employee Plaintiffs do not dispute that they are fiduciaries of DCC. It is settled that fiduciaries may make preparations to compete with the entity to which they owe allegiance, provided that in the course of making such arrangements they do not otherwise act in violation of their fiduciary duties. Meehan v. Shaughnessy, 535 N.E.2d 1255, 1264 (Mass. 1989); Chelsea Indus. v. Gaffney, 449 N.E.2d 320, 325-26 (Mass. 1983). But the issue of whether or not conduct was a permissible preparatory measure or impermissible measure is a question of fact which requires discovery and the totality of the circumstances to be considered. Cenveo Corp. v. Southern Graphic Systems, 784 F. Supp. 2d 1130, 1136 (D. Minn. 2011) (quoting Rehab Specialists, Inc. v. Koering, 404 N.W.2d 301, 3014 (Minn. App. Ct. 1987) ("[T]here is no precise line between acts by an employee which constitute prohibited 'solicitation' and acts which constitute permissible 'preparation.' Because of the competing interests, the actionable wrong is a matter of degree. Whether an employee's actions constituted a breach of the duty of loyalty is a question of fact to be determined based on all the circumstances of the case."); Maryland Metals, Inc. v. Metzner, 382 A.2d 564, 570 (Md. 1978) ("[T]he ultimate determination of whether an employee has breached his fiduciary duties to his employer by preparing to engage in a competing enterprise must be grounded upon a thoroughgoing examination of the facts and circumstances of the particular case.").
The allegations against Solito specifically state, in non-conclusory fashion, that he misappropriated confidential information from DCC and competed. The fact that the Cross-claim does not specifically name the individuals Solito solicited does not subject the claim to dismissal. See RSA 509:7. However, Solito argues that the breach of loyalty claim against him should be more properly characterized as a NHUTSA claim because the Act preempts claims that are based on the unauthorized use of information regardless of whether that information satisfies the statutory definition of trade secret, and seeks dismissal of the claim of breach of loyalty. RSA 350-B:7, I provides in substance that the NHUTSA displaces conflicting tort, restitutionary, and other state law providing civil remedies for misappropriation of trade secrets. "The purpose of the preemption provision is to preserve a single tort action under state law for misappropriation of a trade secret as defined in the statute and thus to eliminate other tort causes of action founded on allegations of misappropriation of information that may not meet the statutory standard for a trade secret." Mortgage Specialists, Inc. v. Davey, 153 N.H. 764, 776 (2006). The New Hampshire Supreme Court has held that a claim is preempted when it is "based solely on, or to the extent that it is based on, the allegations or the factual showings of unauthorized use of . . . information or misappropriation of a trade secret. Id. at 778 (quotation & citation omitted).
Here, the factual allegations in support of CIT's Cross-claim for breach of loyalty against Solito are based entirely upon his theft and use of confidential information, the same facts which are alleged in support of DCC's Counterclaim against Solito for theft of trade secrets in violation of the NHUTSA. Under these circumstances, CIT's breach of loyalty claim against Solito is preempted by NHUTSA. Stonyfield Farms, Inc. v. Agro-Farma, No. 08-CV-488-JL, 2009 WL 3255218, at *9 (D.N.H. Oct. 7, 2009); Wilcox Industries Corp. v. Hansen, 870 F. Supp. 2d 296, 308 (D.N.H. 2012). Therefore, CIT's breach of loyalty claim against Solito must be DISMISSED to the extent it is based on the allegation that Solito took DCC confidential information by surreptitious means aimed at circumventing the reasonable and substantial mechanisms put in place by DCC to protect that information.
DCC's passing reference to Solito's supposed use of goodwill, without elaboration, is not enough to survive dismissal. See Mortgage Specialists, Inc., 153 N.H. at 777 ("[T]he NHUTSA preempts claims that are based upon the unauthorized use of information, regardless of whether that information meets the statutory definition of a trade secret.").
CIT alleges, in conclusory fashion, that Will and Kells "breached [their] duty of loyalty" by among other things "competing and preparing to compete with DCC while employed by DCC." (CIT's Cross-claims ¶¶ 13, 17.) A plaintiff cannot rely upon legal conclusions, but must allege the facts which support those conclusions. Jay Edwards, Inc. v. Baker, 130 N.H. 41, 45 (1987); Baxter Int'l, Inc. v. State, 140 N.H. 214, 218 (1995). The allegations against Wills and Kells must be DISMISSED, with leave to amend. The Court notes that CIT's Cross-claim against Solito similarly alleges, in part, that Solito breached the "duty of loyalty by, among other things, preparing to compete and actually competing with DCC while still employed by DCC." (CIT's Cross-claim ¶ 8.) To the extent this allegation arises from facts that are distinguishable from Solito's misappropriation of confidential information, CIT has failed to allege such facts. Thus, CIT's Cross-claim against Solito is DISMISSED, with leave to amend.
III. Solito and Ascentium's Motion to Dismiss Based upon RSA 275:70 (2012)
The Motion to Dismiss the Second and Third Counterclaims against Solito and Count I of the Complaint against Ascentium are both premised upon the alleged invalidity of the 2013 Agreement, a restrictive covenant signed by Solito in 2013. Solito was employed by DCC from January 2008 to November 2016 when he resigned from DCC and thereafter began working at Ascentium. (DCC's Counterclaim ¶¶ 47, 61, 95, 98.) When first hired by DCC in 2008, Solito signed a noncompetition, nondisclosure and nonsolicitation agreement (the "2007 Agreement") that contained broad restrictive covenants. (Id. ¶¶ 24, 47.) In 2013, the New Hampshire Superior Court invalidated the 2007 Agreement in Direct Capital Corp. v. Balboa Capital Corp., 218-2011-CV-0184 (Aug. 14, 2013). As a result, in November 2013, DCC presented its existing employees with new noncompetition agreements (the "2013 Agreement"). (DCC's Counterclaim ¶¶ 29-30.) The 2013 Agreement imposed noncompete obligations on employees, including prohibiting them from soliciting or accepting any business from customers, funding sources, franchisors and vendors of DCC for 12 months after the termination of their employment. (Id. ¶¶ 34-36.) The 2013 Agreement "supersede[d] and replace[d] all prior and contemporaneous agreements between the parties, including the 2007 Agreements between DCC and its employees." Solito signed the 2013 Agreement in December 2013. (Id. ¶ 52.) At the time he signed the 2013 Agreement, he was an existing employee of DCC and was not changing his job classification. (Id. ¶ 125.) Solito and Ascentium therefore argue that the 2013 Agreement is void and unenforceable against Solito based on RSA 275:70 (2012) which was in effect between 2012 and 2014. To the extent that DCC and CIT's claims against Ascentium are based on the 2013 Agreement, Ascentium moves to dismiss Count I of DCC and CIT's Complaint, which alleges that Ascentium intentionally and improperly interfered with DCC's contracts, including the 2007 Agreement and the 2013 Agreement.
In 2012, RSA 275:70 was enacted and the 2012 version of the statute remained in effect until it was amended in 2014. The 2012 version provides as follows:
The statute was amended to its current form in 2014. It now provides:
Noncompete agreements. Any employer who requires an employee who has not previously been employed by the employer to execute a noncompete agreement as a condition of employment shall provide a copy of such agreement to the potential employee prior to the employee's acceptance of an offer of employment. A noncompete agreement that has not been disclosed to an employee as required by this section shall not be enforceable against the employee, but all other provisions of any employment, confidentiality, nondisclosure, trade secret, intellectual property assignment or any other type of employment agreement or provision shall remain in full force and effect.
Prior to or concurrent with making an offer of change in job classification or an offer of employment, every employer shall provide a copy of any non-compete or non-piracy agreement that is part of the employment agreement to the employee or potential employee. Any contract that is not in compliance with this section shall be void and unenforceable.RSA 275:70 (2012) (amended 2014).
DCC argues that the statute is not applicable. According to DCC, "[t]he plain meaning of the statute can logically be divided into three parts: (1) when it applies; (2) if it applies, what it then requires; and (3) the penalty for failure to comply." (DCC's Obj. to Solito and Ascentium's Mot. to Dismiss, at 5.) According to DCC, first, the statute applies to circumstances in which an offer of change in job classification or offer of employment is made. Id. DCC next argues that if RSA 275:70 applies, it "requires only one action: that employers provide a copy of 'any non-compete or non-piracy agreement' that will be a part of the employment agreement. Id. (emphasis in original). DCC asserts the final part of the statute provides that the penalty for failure to comply is the invalidation of the non-compete or non-piracy. Id.
Solito and Ascentium agree that the language of the statute is clear, but argue that the legislative history demonstrates the statute should be applied retrospectively:
Although the language of RSA 275:70 (2012) is clear, its legislative history punctuates the fact that the statute invalidated all restrictive covenants between employers and existing employees if the employers did not provide the agreements to the employees as a part of either the offer of initial employment or an offer of a promotion . . . .(Solito and Ascentium's Mot. to Dismiss Second and Third Counterclaims against Solito and Partial Motion to Dismiss Count I against Ascentium ¶ 10 (emphasis added).) But the Court can only examine the legislative history if it finds the language of the statute ambiguous. J.P. Morgan Chase Bank v. Grimes, 167 N.H. 536, 537 (2015) (citing Bedford Chapter-Citizens for a Sound Economy v. Sch. Admin. Unit #25, 151 N.H. 612, 614 (2004).) The concession by Solito and Ascentium that the language of the statute is clear means that the Court need not consider the legislative history. Solito has admitted that DCC did not offer to reassign him in 2013 and that the 2013 Agreement was in no way related to a change in classification. (Counterclaim, ¶ 55; Solito's Answer, ¶ 55.) The statute therefore does not apply to the 2013 Agreement as between Solito and DCC.
Moreover, even if the legislative history were considered it would not aid Solito and Ascentium. The legislative history of the bill shows that it was only intended to mandate disclosure. The Committee Report contains a statement of intent authored by the Chair of the House Labor, Industrial and Rehabilitation Services Committee, Representative Infantine, which provides:
The bill requires an employer to disclose any non-compete and or non-piracy agreements as part of an offer of employment. If not the agreement would be void and unenforceable. The amendment makes this also apply to internal promotions subject to a non-compete or non-piracy agreement.House Journal, Vol. 34, No. 21, at 1312-13. Moreover, testimony during the public hearing on the bill establishes that it is not applicable to circumstances such as those involved in this case. Prior to enactment of the bill, the New Hampshire Supreme Court had specifically held that continued employment is sufficient consideration to support a restrictive covenant. Smith, Batchedler & Rugg v. Foster, 119 N.H. 679, 683 (1979). If RSA 275:70 is interpreted as Solito and Ascentium suggest, then the legislature would have overruled Smith, Batchedler & Rugg v. Foster by enacting RSA 275:70. Solito and Ascentium have provided no authority for the proposition that the legislature intended to do so.
See House Committee on Labor, Industrial, and Rehabilitative Services, Public Hearing on HB 1270, Mar. 7, 2012 (statement of Rep. Keith Murphy) (stating "the bill is intentionally very narrowly tailored to address only cases of duress" such as when "someone has already quit their previous job and the new employer requires a contract on the first day of work, that's duress. . . ."). --------
Solito and Ascentium also argue that RSA 275:70 is protective legislation and that courts are required to construe it to effectuate its broad purpose of protecting employees. See Ichiban Japanese Steakhouse v. Rocheleau, 167 N.H. 138, 142-43 (2014). While this proposition of law is correct, it does not give the Court authority to disregard the plain meaning of the statute, and construe the statute in a way that the legislature never intended. It follows that the Motion to Dismiss Second and Third Counterclaims against Solito and Partial Motion to Dismiss Count I against Ascentium must be DENIED.
SO ORDERED
4/11/18
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice RBM/
RSA 275:70 (eff. 2014).