Status of the case. A multi-count complaint filed in the D.C. District Court charged two former employees of the plaintiff with breaches of contract and tort violations. The defendants moved to dismiss. The court held that some of the eight counts stated causes of action, but one count the court did dismiss alleged that the defendants violated their covenant not to solicit the plaintiff’s employees. The court held that the covenant was too vague to be enforceable because it did not specifically identify the solicitations that were impermissible. Base One Technologies, Inc. v. Ali, Civ. Ac. No. 14-1520 (D.D.C., Jan. 20, 2015).
Base One’s business model. Base One was in the business of recruiting and staffing telecommunications and financial information management personnel for clients. The personnel that were recruited became employees of Base One. Each was assigned to work at a particular Base One client according to the client’s needs and the employee’s skill set.
Non-competition and non-solicitation covenant. The two defendants were hired by Base One to work on an extensive computer-related project for a specific Base One client. They both signed Base One’s employment agreements. Those agreements stated that employees are likely to be “the principal intermediary and personal contact” between Base One and the client. Further, recognizing that Base One’s employees frequently gain extensive knowledge of the client’s business and develop loyalties with the client, the agreements note that clients “might desire to place their IT business directly with” the employees — after the employees’ relationship with Base One has ended — rather than with Base One. Accordingly, the agreements mandate that during and for one year after termination of the Base One employment relationship, employees shall not “market any [competitive] type services” to a Base One client the employee was serving, and shall not “solicit, contact, represent, or offer to represent” other Base One employees.
Alleged violation and lawsuit. When the two defendants left the employ of Base One, they immediately went to work for the Base One client they had been serving. Base One filed a complaint which included what the court described as “a veritable cornucopia of claims.” Two counts alleged breach of contract. One averred that the defendants violated the non-solicitation covenant by soliciting each other to work for the Base One competitor (the second breach of contract count alleged contravention of the non-compete provision). The defendants’ motion to dismiss the former count was granted.
The court’s reasons for dismissing the count regarding prohibited solicitation. In the court’s view, the wording of the covenant “is so vague and ambiguous as to render it unenforceable. . . . Although the Court can perhaps guess that [Base One] meant to prohibit solicitation or contact for the purpose of employment elsewhere, the provision does not so specify.” Noting that the employment agreement contained a New York choice of law provision, and “Particularly in light of New York’s general hostility toward restrictive covenants in the context of employment, the Court will not redraft a poorly written, overbroad restraint in order to make it enforceable.”
Takeaways. A motion to dismiss, or for summary judgment with respect to, allegations based on a “vague and ambiguous” contract provision might be denied on the ground that the parties’ intent regarding the meaning of the provision is an issue of fact to be resolved at trial. See, e.g., Whelan Security Co. v. Kennebrew, 379 S.W.3d 835, 846 (Mo. Sup. Court 2012) (summary judgment inappropriate because “the lack of any language regarding the purpose of the employee non-solicitation clause prevents this Court from determining the purpose of the clause as a matter of law. The intent of the parties must instead be determined by the use of parol evidence, creating a factual issue for the trier of fact”). But the Base One court went a different route, granting the defendants’ Rule 12(b)(6) motion to dismiss the claim relating to a non-solicitation agreement which contained the identical ambiguity as in Whelan. The moral of the story is that two courts sometimes issue diametrically opposite rulings when presented with the same question of law.