The SJC further found that the lower court’s expansion of the anti-raiding provision’s term constituted an abuse of discretion because the court made no finding that damages are inadequate. Accordingly, the Automile restrictive covenant was not rendered unenforceable simply because it protected an interest not recognized in traditional employment settings. This is because, unlike employer-employee relationships, parties to buyer-seller transactions are more likely to have equal bargaining power. Significantly, the Court noted that the necessary element of a legitimate business is more liberally applied here because the interest arose out of the Parties’ agreement for the repurchase of McGovern’s interest in Prime rather than in connection with their employer-employee relationship.

The SJC found that the anti-raiding provision was supported by a legitimate business interest of preventing raiding of employees. The SJC transferred the appeal from the appellate court to the SJC to address both issues. McGovern appealed this decision, arguing that anti-raiding provisions do not serve a legitimate business interest (one of three elements necessary to enforce a restrictive covenant) and that the court abused its authority by extending the anti-raiding period. The Superior Court found the anti-raiding provisions legally enforceable, declined to reverse the hires, and extended the anti-raiding period by another year. Prime brought an action against McGovern in Superior Court seeking reversal of McGovern’s hires and monetary damages. Again, McGovern breached the anti-raiding provision by hiring at least 3 more former Prime employees. To avoid litigation over McGovern’s breach, the parties entered into a second, more comprehensive restrictive covenant that extended the anti-raiding provision to August 2018. Subsequently McGovern hired at least 15 former Prime employees despite the restrictive covenant’s anti-raiding provision. After his departure, McGovern started McGovern Motors consisting of six dealerships. As part of the repurchase, McGovern entered into a restrictive covenant containing an “anti-raiding” provision stating that McGovern would not directly or indirectly hire or solicit any of Prime’s employees or consultants for 18 months. After McGovern’s termination, Rosenberg and Abrams sought to repurchase McGovern’s interest in Prime in October 2016. In 2015, McGovern and the other owners of Prime (Rosenberg and Abrams) had multiple disagreements, leading to McGovern’s termination.

In Automile the Defendant, Matthew McGovern, was an executive and minority owner of Prime Motor Group (“Prime”). The SJC recently addressed the scope of such covenants in the context of the repurchase of a minority’s interest in a closely held corporation its Janudecision in Automile Holdings, LLC v. One area specifically excluded from the MNAA, however, are employee non-solicitation covenants. Non-competition agreements are a much discussed topic in Massachusetts today, particularly with the recent enactment of the Massachusetts Noncompetition Agreement Act (“MNAA”).

Automile motors llc