The opinion of the court was delivered by: Lee H. Rosenthal United States District Judge
Alliantgroup, L.P., a Texas limited partnership, sued its former employee, Jeffrey Feingold, a Massachusetts citizen, in Texas state court. Feingold removed to this court on the basis of diversity jurisdiction. (Docket Entry No. 1). Alliantgroup asserted causes of action for breach of contract, breach of fiduciary duty, conversion, tortious interference, civil conspiracy, misappropriation of trade secrets, and violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. (Docket Entry No. 46).
Feingold's Employment Contract with Alliantgroup contained non-competition, nonsolicitation, and nondisclosure provisions. Alliantgroup alleged that Feingold violated these contract provisions when he left Alliantgroup and went to work for a competitor, Kahn, Litwin, Renza & Co. ("KLR"), which is based in Rhode Island. Alliantgroup also alleged that Feingold took customer lists and confidential or proprietary information and disclosed that information to KLR. On May 11, 2009, after a hearing, this court entered a preliminary injunction against Feingold, enjoining him from providing services to or soliciting clients to whom he provided certain services or attempted to provide services while he worked for Alliantgroup. (Docket Entry Nos. 48, 49).
Feingold has moved for summary judgment on Alliantgroup's claims. (Docket Entry No. 80). Alliantgroup responded and requested a continuance to take Feingold's deposition. (Docket Entry No. 83, 85). Feingold opposed the request for continuance. (Docket Entry No. 86). This court granted the continuance and ordered Feingold to determine whether he had any customer lists from Alliantgroup. (Docket Entry No. 87). Feingold responded that he had no customer lists from Alliantgroup. (Docket Entry No. 88). Alliantgroup supplemented its response, (Docket Entry No. 89), and Feingold replied, (Docket Entry No. 90).
Based on the record; the motion, the response, the supplemental response, and the reply; and the relevant law, this court grants Feingold's motion for summary judgment in part and denies it in part. A status conference is set for April 8, 2011 at 8:15 a.m. Counsel may participate by telephone.
The reasons for these rulings are explained below.
Alliantgroup is a national tax consulting firm based in Houston, Texas. Feingold was employed by Alliantgroup as a salesman working primarily in Massachusetts, Rhode Island, and New York from 2006 to January 2009. Feingold signed an Employment Agreement containing a covenant not to compete, a nondislosure provision, and an agreement to return his $25,000 retention bonus if he voluntarily resigned from Alliantgroup. The non-compete provides:
(a) Covenant to Not Solicit: During the Employment Term and until the date twelve months following the date FEINGOLD ceases to be employed by ALLIANTGROUP for any reason (the "Restricted Period"), FEINGOLD shall not in Massachusetts, whether on FEINGOLD's own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever ("Person"), directly or indirectly solicit or assist in soliciting in competition with ALLIANTGROUP's business any service which ALLIANT GROUP provides its actual Clients or prospective Clients at the time of termination.
(b) Covenant to Not Compete: During the Restricted Period, FEINGOLD shall not directly or indirectly:
(i) engage in any business that competes with the Business (or any businesses that ALLIANTGROUP or its affiliates conduct or have taken significant steps toward conducting at the time of FEINGOLD's termination of employment) within the State of Massachusetts (a "Competitive Business");
(ii) enter the employ of, or render any services to, or enter into any contractual agreement or relationship with any Person (or any division or controlled or controlling affiliate of any Person) that engages in a Competitive Business within the State of Massachusetts;
(iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant or transfer any business to, or in any other way facilitate any other Person's ability to engage in a Competitive Business within the State of Massachusetts; or
(iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between ALLIANTGROUP or any of its affiliates and customers, Clients, referring CPAs, suppliers, partners, members, investors, vendors or payors of ALLIANTGROUP. . . .
(e) Non-Solicitation of Contractors: During the Restricted Period, FEINGOLD will not, directly or indirectly, solicit or encourage any consultant then under contract with ALLIANTGROUP or its affiliates or any referring CPAs to cease working with or referring business to ALLIANTGROUP or its affiliates. (Docket Entry No. 81, Ex. A-1 at 7--8).
While at Alliantgroup, Feingold marketed Research and Development Tax Credit Studies. Under § 41 of the Internal Revenue Code, taxpayers are entitled to tax credits for expenses related to research and development. 26 U.S.C. § 14; 26 C.F.R. § 1:41-4; Trinity Indus., Inc. v. United States, 691 F. Supp.2d 688, 690--91 (N.D. Tex. 2010). The studies identified opportunities to claim the credits. Feingold marketed such studies directly to clients and to CPA firms who could refer clients to Alliantgroup. One of the CPA firms Feingold marketed the services to while with Alliantgroup was Margolin Winer & Evans. Feingold also created a list of Margolin clients for Alliantgroup to solicit business from. One of those clients was Mini-Circuits, located in New York.
On January 6, 2009, Feingold traveled to New York to "pitch" Alliantgroup's R & D Tax Credit services to Mini-Circuits. Feingold reported back to Alliantgroup. "First Margolin Winer client mtg today . . . They will sign [the engagement letter] next couple days (want kickoff call Tuesday) . . . $200K -- $700K credit. (Docket Entry No. 85, Ex. A3 (ellipses in original)). The record does not show, however, that this business was certain. "I was a salesman," Feingold testified at the preliminary injunction hearing on April 28, 2009. (Docket Entry No. 56 at 26). "I always thought something was going to close the next day. . . . I met the client once for an hour, there was a potential opportunity there, I got very excited about it. It was - the assessment that it was going to close sooner rather than later or - or definitely going to close versus not close at all was nothing more than that - that salesman's enthusiasm." (Id.).
On January 9, 2009, a few days after his meeting with Mini-Circuits, Feingold announced his resignation to Alliantgroup, effective January 16. (Docket Entry No. 85, Ex. A-5). Feingold committed to help in the transition of his work to others at the firm. Feingold wrote:
I have a number of outstanding proposals, as well as a few upcoming meetings, and I'll be happy to work with you . . . to help transition these. Also, I'll be happy to make some time, if needed, even after my exit date, to help ease the transition. I think we can make this a fairly seamless transition, though, and I'll be happy to help make that work to the best of my ability. I trust that you both know, from our time working together, that you can expect me to manage this change in a friendly and professional way.
Feingold accepted a position at KLR, which also did tax consulting work. KLR and Alliantgroup had worked together on providing R & D tax services to clients. Unlike Alliantgroup, KLR did not itself do the tax credit analysis. Instead, KLR identified clients who could benefit from R & D tax credits and referred them to Alliantgroup. If Alliantgroup performed work for the client, it paid KLR a referral fee. (Docket Entry No. 56 at 36). Feingold testified that he believed he would continue to work collaboratively with Alliantgroup while employed at KLR. (Id. at 61 ("My assumption . . . was that I'd continue to sell R & D aggressively and, in fact, a lot of that would get flipped to Alliantgroup. We had ongoing projects with Alliantgroup.")).
The next day, Saturday, January 10, Feingold wrote in an e-mail to two other Alliantgroup employees, Sonny Grover and Dhaval Jadav, that he expected the Mini-Circuits deal to "close Monday/Tuesday this week." (Docket Entry No. 85, Ex. A-6). Feingold started working for KLR on January 19. On February 3, Feingold spoke to Terry Strassberg at the Margolin CPA Firm.
Feingold e-mailed Bob D'Andrea and Paul Oliviera, co-workers at KLR, about his conversation:
I just got a call from Terry Strassberg, a Partner at [Margolin] in NY.
I'd done an R&D CPA for Terry's firm recently. I also reviewed tax returns, identified perhaps a half dozen (give or take) R&D credit opportunities, and met with one of them, Mini-Circuits. Probably a big credit. Terry reported that he met with David Mayer, my alliant counterpart in NY, but the firm wasn't impressed. He'd like to consider partnering with KLR for Margolin's R&D work.
Although my non-compete is specifically for MA, we have to consider any potential risk from 'interference' with alliantgroup relationships in other states. That said, Margolin clearly isn't going to work with Alliant going forward, regardless of potential involvement of KLR or not.
Terry would like to have a conference call with us ASAP - he's going to make a recommendation to his client, Mini-Circuits asap. . .
Please see attached list of clients under consideration for R&D at Margolin - 4 strong candidates, about a half dozen more possible. (Id., Ex. A-7). The e-mail was produced in this litigation without an attachment. Feingold testified that his references to reviewing tax returns, identifying R & D credit opportunities, and meeting with Mini-Circuits were to activities undertaken while he was an Alliantgroup employee. Feingold testified that he could not recall whether he had created a list of Margolin clients. Had he created such a list, he asserts that it would have been generated from his conversation with his contact at Margolin, after he left Alliantgroup. (Docket Entry No. 56 at 79).
The same day, February 3, 2009, Feingold received an e-mail from Alliantgroup's general counsel stating that Feingold was in breach of his agreement. On February 4, 2009, Alliantgroup sued Feingold in Texas state court, seeking a temporary restraining order and expedited discovery. A hearing was scheduled for February 5, 2009. Shortly before the hearing, Feingold retained a Houston attorney for the limited purpose of representing him at the hearing. Coe appeared at the hearing on Feingold's behalf and opposed Alliantgroup's requests for a temporary restraining order and expedited discovery. The state court judge denied Alliantgroup's request for a temporary restraining order but granted expedited discovery. The court ordered Feingold to appear in Houston for his deposition on or before February 11, 2009 and scheduled a temporary injunction hearing for February 20, 2009.
On February 6, Alliantgroup noticed Feingold's deposition for February 11 in Houston. His lawyer responded that "due to a number of prior commitments, it will be virtually impossible for me to present Mr. Feingold in Houston by February 11, 2009." (Docket Entry No. 10, Ex. C). She offered to make Feingold available for a deposition on or after February 13, 2009 and asked that the deposition be conducted via teleconference. Alliantgroup did not agree. (Id.). On February 10, 2009, Feingold moved for a continuance of the deadlines set by the state court judge. (Docket Entry No. 33, Ex. B).
Feingold then retained a Massachusetts lawyer, Christopher Bell, to represent him in the Texas litigation. On February 10, Bell wrote Alliantgroup and expressed his surprise that it had not agreed to the requested deposition changes "as a matter of professional courtesy." (Docket Entry No. 10, Ex. D). Bell told Alliantgroup that Feingold intended to file a "complaint with the Massachusetts Attorney Generals Office regarding Alliantgroup's violations of Massachusetts law. . . . Alliantgroup could be subject to criminal and civil forfeitures . . . ." (Id.). Bell stated that although he could not prevent Feingold from filing this complaint, he believed Feingold ...