David Donatelli was an EMC Executive VP. He left EMC, and went to work for Hewlett Packard in California. EMC filed suit to enforce Donatelli’s one year non-compete agreement. Donatelli argued that the Massachusetts court should defer enforcement to California law, which is hostile to non-compete agreements.
Judge Stephen Neel, in Suffolk Superior Court in Boston, didn’t buy it. He held that California’s legislative policy against non-compete agreements does not trump Massachusetts common law, at least under the facts of this case.
Once he got past this major bump in the road, Judge Neel held that continued employment sufficed as consideration for a non-compete agreement (he also noted that the agreement recited that it had been signed “under seal,” magic words that favor enforceability in Massachusetts), held that the agreement was not overbroad, and issued the injunction.
Justice Neel did, however, hold a branch above the waters before Mr. Donatelli sank beneath the waves – he stated that Donatelli could move to modify the order if he could show that his job duties at at HP would not “overlap with products or services being developed, produced, marketed or sold by EMC.” However, since the entire purpose of Donatelli’s hire by HP (according to press at the time) was to head HP’s Enterprise Storage and Server Division, which would be competitive with EMC, it’s hard to see how Donatelli could both satisfy the judge and serve HP as intended.
If you’re wondering why legislation aimed at making non-compete agreements unenforceable in Massachusetts is unlikely to be passed, meditate on this case for a while.
Donatelli will almost certainly file a single-justice appeal – nothing to lose and a lot to gain.
We had a great CLE at the BBA on Wednesday evening. The lucky folks who attended received three hours of (almost) nonstop legal info, and we barely scratched the surface of the topics.
I spoke on CDA Section 230, which has seen a great deal of activity lately, and there are no signs it’s slowing down. Below, via scribd.com, are the slides and paper that I prepared for the program.
Now that Prof. Charlie Nesson has grabbed a lot of attention with his defense in the RIAA v. Tenenbaum case, it may be worth recalling this video, which was posted on YouTube in August 2006.
On January 26, 2009, in what may have been Judge Ralph Gants’ last opinion before departing Suffolk Superior Court for the Supreme Judicial Court on January 29, 2009, Judge Gants ruled on a number of issues in the New England Patriots lawsuit against StubHub.com. The claims are based on the fact that StubHub provides an online marketplace for the scalping of Patriot’s tickets, something that really pisses off the Patriots’ owners, who attempt to exercise a high degree of control over their ticket sales. The Patriots’ various causes of action arise out of their claim that the tickets are a “revocable license” with printed terms, and civil claims related to the Massachusetts anti-scalping statute, G. L. c. 140, Section 185A.
The discussion on 47 USC Section 230 is only a small part of the decision (which addresses a number of defensive theories set forth by StubHub on summary judgment, rejecting most of them) is as follows:
CDA immunity “applies only if the interactive computer service provider is not also an ‘information content provider,’ which is defined as someone who is ‘responsible, in whole or in part,’ for the creation or development of the offending content.” Roommates, 521 F.3d at 1162;47 U.S.C. § 230(f)(3). The Ninth Circuit has interpreted the term “development” as “referring not merely to augmenting the content generally, but to materially contributing to its alleged unlawfulness. In other words, a website helps to develop unlawful content, and thus falls within the exception to section 230, if it contributes materially to the alleged illegality of the conduct.” Roommates, 521 F.3d at 1167-1168. Here, as discussed earlier, there is evidence in the record that StubHub materially contributed to the illegal “ticket scalping” of its sellers. In effect, the same evidence of knowing participation in illegal “ticket scalping” that is sufficient, if proven, to establish improper means is also sufficient to place StubHub outside the immunity provided by the CDA.
The Ninth Circuit Roommates.com decision is, itself, debatable (and the dissent debates it quite credibly). In that case the 9th Circuit (en banc) held that because Roommates.com provided drop down menus that provided choices that violated the Fair Housing Act (children, sexual orientation), Roommates.com had lost immunity under Section 230. The drop down menus, the Ninth Circuit held, turned the web site into the “developer . . . at least in part” of the illegal information.
Although it’s not clear from Judge Gants’ decision, a look at the StubHub site shows that that StubHub fell directly into the Section 230 exception created by the Ninth Circuit. StubHub guides ticket sellers through a series of menu choices (sport/team/date), much in the manner that Rommates.com does. Assuming that the presence of the Patriots in this menu structure induces sellers to engage in illegal conduct by selling the tickets (Judge Gants used the Supreme Court’s copyright infringement decision in Grokster decision to argue inducement), StubHub fell directly under Roommates.com.
One must wonder whether StubHub could obtain immunity under 47 USC Section 230, going forward, by simply eliminating references to the Patriots and allowing sellers to fill in the Patriot’s name in free text. This would be analogous to the “open text box” (as opposed to the drop down menus) that the Ninth Circuit held was protected by Section 230 immunity in Roommates.com. The Patriots would have a difficult time getting past Section 230 if StubHub was purely passive. However, this would be a significant deviation from the system of identifying tickets to sell or buy created by StubHub, and I’m sure would result in fewer sales of Patriot’s tickets.
Here’s an interesting case out of the U.S. District Court, Northern District of Texas. In Harris v. Blockbuster the court refused to enforce an arbitration provision in Blockbuster’s online click-wrap agreement. The reason was that Blockbuster’s click-wrap contract was unilaterally modifiable by Blockbuster. Here is the key paragraph, which is still on the Blockbuster Online site as of today:
These Online Rental Terms and Conditions are subject to change by Blockbuster at any time, in its sole discretion, with or without advance notice. The most current version of the Online Rental Terms and Conditions, which will supersede all earlier versions, can be accessed through the hyperlink at the bottom of the blockbuster.com site. You should review the Online Rental Terms and Conditions regularly, to determine if there have been changes. Continued use of your BLOCKBUSTER Online membership constitutes acceptance of the most recent version of the Online Rental Terms and Conditions.
Yep, I’m sure many Blockbuster subscribers check Blockbuster’s online T&Cs regularly to see if they’ve changed. Shame on you if you don’t!
The court wrote:
The Court concludes that the Blockbuster arbitration provision is illusory . . . . There is nothing in the terms and conditions that prevents Blockbuster from unilaterally changing any part of the contract other than providing that such changes will not take effect until posted on the website. The Court concludes that the Blockbuster arbitration provision is illusory . . . .
There are a lot of online contracts like this, and if the N.D. TX decision is good law (which is questionable), their enforceability it in question.
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