PC Connection Inc. v. Sillich

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
PC Connection, Inc.,
v. Civil No. 22-cv-524-LM
Opinion No. 2023 DNH 057 P
Peter Sillich
O R D E R
On April 5, 2023, the court granted plaintiff PC Connection’s motion for
preliminary injunction without objection from defendant Peter Sillich. Doc. no. 28.
However, the court asked PC Connection to file a more specific proposed
preliminary injunction order or a brief explaining why the previously filed proposed
order was sufficient. PC Connection elected to file a new proposed preliminary
injunction order. Considering PC Connection’s motion for preliminary injunction,
its amended proposed order, the evidence submitted in support, and Sillich’s failure
to oppose the motion, the court finds the following facts and enters the following
preliminary injunction. See Fed. R. Civ. P. 52(a)(2) (requiring court to find facts
and state its conclusions of law when granting an interlocutory injunction); Fed. R.
Civ. P. 65(d).
BACKGROUND
For purposes of PC Connection’s preliminary injunction motion, Sillich has
not contested the relevant facts. PC Connection employed Peter Sillich as an
“account manager” from August 3, 2020, until July 28, 2022. PC Connection is a
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“value-added reseller of specialized IT products and services.” Doc. no. 6-8 (affidavit
of Margaret Murphy). At PC Connection, Sillich’s responsibilities included
developing PC Connection’s business relationships with customers. He identified
these customers’ IT needs and worked with PC Connection’s “technical and
engineering staff to develop customized IT solutions for customers.” Id. ¶ 11.
In the 12 months preceding the end of Sillich’s employment with PC
Connection, Sillich had “regular, direct contact with representatives and decision-
makers” for 120 PC Connection customers. Id. All of these businesses were actively
purchasing from PC Connection. The 120 businesses—referred to in this order as
the “covered customers”—are listed in the conclusion of this order.
Sillich agreed to a contract with PC Connection as part of his employment.
The contract (known as the “Employee Agreement”) contained restrictive covenants.
In particular, paragraph 4.3 of the Employee Agreement contained a non-
solicitation clause, which stated, in relevant part, as follows:
I agree that, during my employment and during the 18-
month period immediately following the termination of my
employment for any reason, I will not, directly or
indirectly, (a) solicit, encourage or induce any customer of
Connection to terminate or diminish its business
relationship or patronage with the Company; (b) seek to
persuade or induce any such customer or prospective
customer of Connection to conduct with anyone else any
business or activity which such customer or perspective
customer conducts or could conduct with the company; or
(c) accept business from any such customer.
Doc. no. 6-5 at 7. The non-solicitation clause limits its scope:
[T]hese restrictions shall apply (y) only with respect to
those Persons who are or have been a customer of
Connection at any time within the immediately preceding
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one-year period or whose business has been solicited on
behalf of the Company by any of its officers, employees or
agents within said one-year period, other than by form
letter, blanket mailing or published advertisement, and (z)
only if I have performed work for such Person during my
employment with the Company or have been introduced to,
or otherwise had non-incidental contact with, such Person
as a result of my employment, or other associations with
the Company, or have had access to Confidential
Information which would assist in the solicitation of such
Person.
Id.
Paragraph 9 of the Employee Agreement delays the 18-month term of the
non-solicitation clause “during any period” when Sillich is “in violation” of the
restriction. Id. at 11.
“Several weeks” after Sillich’s employment with PC Connection ended, a
representative from a PC Connection vendor told PC Connection that Sillich had
contacted the representative on LinkedIn. Sillich had asked the representative to
prepare a pricing proposal for Fullerton Tool. Fullerton Tool is a covered customer.
The vendor representative told PC Connection that Sillich had asked whether the
vendor could provide the same “special pricing arrangement” to Sillich that the
vendor had provided to PC Connection.
On September 1, 2022, PC Connection’s legal counsel wrote a letter to Sillich.
The letter referenced the Employee Agreement’s terms, told Sillich that PC
Connection had reason to believe he had violated those terms, and told Sillich to
stop violating them. Sillich responded that he was not employed, that he had not
solicited any covered customers, and that he agreed to comply with the terms.
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In the following weeks, Sillich sought price quotes from vendors for other
covered customers. These customers included Salt River Electric, Eco Energy, and
InterCambio Express.
On September 28, 2022, PC Connection sent a second cease and desist letter
to Sillich. In an email the same day, Sillich responded that he did not believe he
had any obligations to PC Connection, and he stated that some of his former PC
Connection customers were dissatisfied with their new PC Connection
representative. Sillich stated in the email that he had directed those customers to
PartnerOne IT, another IT services reseller. Sillich stated that he had begun
working for PartnerOne IT on September 22.
After PC Connection’s cease and desist letters, Sillich urged InterCambio
Express to transfer its business to Sillich’s new employer. Sillich and another
customer, Alberdingk Boley, Inc., also scheduled a meeting to discuss the purchase
of software.
DISCUSSION
“A preliminary injunction is an extraordinary remedy never awarded as of
right.” Winter v. Nat. Res. Def. Council, 555 U.S. 7, 24 (2008). The court must
examine even an unopposed motion for preliminary injunction to ensure that the
moving party has met the necessary elements for entering a preliminary injunction.
Doe v. Lee, 2023 WL 2904575, at *3 (E.D. Tenn. Apr. 11, 2023). A preliminary
injunction may issue if the moving party shows (1) its likelihood of success on the
merits; (2) the likelihood of irreparable harm absent interim relief; (3) the balance
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of equities weighs in the moving party’s favor; and (4) the injunction serves the
public interest. Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc.,
794 F.3d 168, 171 (1st Cir. 2015).
PC Connection has shown a strong likelihood of success as to enforcing
paragraph 4.3 of the Employee Agreement.
“[T]he law does not look with favor upon contracts in restraint of trade or
competition.” ACAS Acquisitions (Precitech) Inc. v. Hobert, 155 N.H. 381, 388-89
(2007). “Such contracts are to be narrowly construed.” Id. Nonetheless,
“[r]estrictive covenants are . . . valid and enforceable if the restraint is reasonable,
given the particular circumstances of the case.” Id. The reasonableness of such a
covenant is a matter of law for the court to decide. Id. The court must consider
three requirements: (1) whether the restraint is narrowly tailored to protect the
employer's legitimate interests; (2) whether its restrictions impose an undue
hardship on the employee; and (3) whether the restriction is injurious to the public
interest. Id. at 389, 394. Failure to meet any one of the three renders the restraint
unenforceable. Merrimack Valley Wood Prods., Inc. v. Near, 152 N.H. 192, 197
(2005).
“Covenants are valid only to the extent that they prevent employees from
appropriating assets that are legitimately the employer’s.” Concord Orthopaedics
Prof. Ass'n v. Forbes, 142 N.H. 440, 443 (1997). Legitimate interests include
confidential information communicated by the employer to the employee. ACAS
Acquisitions, 155 N.H. at 389. Legitimate interests also include “contacts
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developed during the employment”; “an employee’s special influence over the
employer's customers”; and “the employer’s development of goodwill and a positive
image.” Id. Courts look to the scope of the covenant’s restrictions on time, territory,
and prohibited activity in determining whether the restrictive covenant is tailored
to the employer’s legitimate interests. 54A Am. Jur. 2d Monopolies and Restraints
of Trade § 874, WestLaw (database updated Feb. 2023). To be enforceable in these
circumstances, a restrictive covenant must be limited to the “sphere of the
employee’s influence geographically” or within “the scope of the employee’s
customer contacts.” ACAS Acquisitions, 155 N.H. at 392; Concord Orthopaedics,
142 N.H. at 443 (“The legitimate interests of the employer generally extend only to
those areas in which the employee had actual client contact.”); Syncom Indus. v.
Wood, 155 N.H. 73, 80 (2007) (“It is well established in our case law that when the
legitimate interest an employer seeks to protect with a restrictive covenant is its
goodwill with customers, a covenant that restricts a former employee from soliciting
business from the employer’s entire customer base sweeps too broadly.”).
Through his employment with PC Connection, Sillich obtained information
about PC Connection’s customers’ IT needs as well as the pricing that PC
Connection could offer those customers from PC Connection’s vendors. Sillich also
developed goodwill with those customers. PC Connection has a legitimate interest
in precluding Sillich from using this information and goodwill to encourage those
customers to leave PC Connection. See ACAS Acquisitions, 155 N.H. at 392;
Merrimack Valley Wood Prods., 152 N.H. at 198 (“When an employee is put in a
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position involving client contact, it is natural that some of the goodwill emanating
from the client is directed to the employee rather than to the employer. The
employer has a legitimate interest in preventing its employees from appropriating
this goodwill to its detriment.”).
The non-solicitation provision in the Employee Agreement is tailored to that
interest. As pertinent here, it covers only the subset of customers who were PC
Connection customers in the last year of Sillich’s employment and who worked with
Sillich, with whom Sillich had non-incidental contact, or about whom Sillich
otherwise gained confidential information. Furthermore, for purposes of the
preliminary injunction, PC Connection only seeks to enforce the restrictive covenant
as to those accounts for which Sillich actually performed work in the last year (the
“covered customers”), which may be an even narrower subset.
The 18-month period to which the restrictive covenant extends after the end
of Sillich’s employment is reasonable under New Hampshire law. E.g., Concord
Orthopaedics, 142 N.H. at 444 (“The covenant’s duration of two years is also
reasonable. A covenant not to compete should last no longer than necessary for the
employees’ replacements ‘to have a reasonable opportunity to demonstrate their
effectiveness to customers.’”). PC Connection, however, has not shown at this stage
that the tolling provision, which would delay the 18-month period during the time
in which Sillich was in violation of the contract’s restrictive covenants, is
reasonable. Thus, at this time, the preliminary injunction entered by the court will
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not extend more than 18 months from the end of Sillich’s employment with PC
Connection.
The non-solicitation clause does not impose an undue hardship on Sillich.
ACAS Acquisitions, 155 N.H. at 394 (“Restrictive covenants ‘not only inure to the
benefit of the employer but to the employee as well, in that the latter may, by giving
a restrictive covenant, be able to place himself in a more advantageous position
economically.’”). Sillich can still be employed in his profession, and he can still
solicit non-covered customers for his new employer. It is not an unfair burden to
prohibit him from leveraging the information he gained through his employment
with PC Connection for a limited period of time.
The non-solicitation clause does not harm the public interest. See, e.g., HCC
Specialty Underwriters, Inc. v. Woodbury, 289 F. Supp. 3d 303, 320 (D.N.H. 2018)
(applying Massachusetts law). The public has an interest in the enforcement of
legally enforceable contracts, and, considering the undisputed evidence currently
before the court, this restrictive covenant does not unduly interfere with any public
interest in liberty of employment nor with free consumer choice. See id. PC
Connection is therefore likely to show that the non-solicitation clause is enforceable.
Sillich violated the plain terms of the non-solicitation clause because he
solicited, encouraged, or induced covered customers to terminate or diminish their
business relationships with PC Connection. Sillich also attempted to persuade
covered customers to do business with another company when those customers
could have conducted that business with PC Connection.
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PC Connection has shown that it is likely to suffer irreparable harm in the
absence of preliminary injunctive relief. “A showing of irreparable harm requires
‘an actual, viable, presently existing threat of serious harm’ that cannot adequately
be remedied through money damages alone.” E.g., Corporate Technologies, Inc. v.
Harnett, 943 F. Supp. 2d 233, 242 (D. Mass. 2013) (quoting Bio-Imaging Techs., Inc.
v. Marchant, 584 F.Supp.2d 322, 330 (D. Mass. 2008)).
The risk of disclosure of confidential information constitutes irreparable
harm. Id. at 242-43. A business’s price quotes “are indisputably confidential
information that no third party could easily obtain.” Id. at 240-41. Knowledge of
customers’ “anticipated future IT needs” is also confidential information. Id.
(“Unlike the kinds of basic information that, while not publicly available as a
technical matter, would be readily given upon basic inquiry such as contact
information, information about anticipated needs is not something to which
companies generally give access freely absent some kind of existing or anticipated
relationship with the asking party.”); see also Iron Mountain Information Mgmt.,
Inc. v. Viewpointe Archive Servs., Inc., 707 F. Supp. 2d 92, 112 (D. Mass. 2010) (“If
Congrave were to use his extensive knowledge of Iron Mountain’s business or his
relationships with Iron Mountain’s customers or his knowledge of customer’s needs
in his new position with Viewpointe, the plaintiff would undoubtedly suffer harm
that cannot be quantified in monetary terms. By its nature, the injury caused
would be irreparable.”). In addition, “ongoing breaches of a non-solicitation
agreement can separately constitute irreparable harm.” Corporate Technologies,
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943 F. Supp. 2d at 243. This is because it is “practically impossible to calculate the
extent of the damage” to the former employer if the former employee “were
permitted to poach his former clients in direct breach of his agreed-upon non-
solicitation provision.” Id. Loss of goodwill from solicitation in violation of a
restrictive covenant is irreparable harm which is not “purely economic.” Id.; Oxford
Global Resources, Inc. v. Guerriero, 2003 WL 23112398, at *11 (D. Mass. Dec. 30,
2003) (stating that damages can be calculated for goodwill, but they would not “fully
capture” the loss because it involves not just loss of sales, “but lost reputation”).
Sillich leveraged confidential information obtained in the course of his
employment to harm PC Connection’s goodwill with covered customers. The
evidence also shows that Sillich has solicited covered customers using that
information notwithstanding the terms of the Employee Agreement. The court
finds that PC Connection has shown that Sillich is likely to continue such misuse of
PC Connection’s confidential information unless enjoined. Thus, PC Connection has
shown that it is likely to suffer irreparable harm if an injunction is not issued and
that such harm cannot be remedied by money damages.
The balance of hardships weighs in favor of PC Connection. PC Connection
has a legitimate and strong interest in protecting its confidential information and
its accrued goodwill with covered customers. The preliminary injunction would only
prohibit Sillich from soliciting and doing business with the 120 covered customers;
he would still be permitted to work at his job and earn a living by soliciting and
doing business with any of the many other businesses that exist. See Corporate
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Technologies, 943 F. Supp. 2d at 244-45 (“Given this narrow scope, defendants will
not suffer severe hardship.”), id. at 244 (“Absent an injunction, CTI stands to lose
irretrievably aspects of its reputation and goodwill as well as the business of some
of its most significant clients.”). Furthermore, the injunction would only last for 18
months, after which time Sillich would be free to solicit those 120 businesses. Id.
(“Subject to the injunction, OnX stands only to lose the uncertain opportunity to
benefit in the next year from business with new clients in the narrow pool of
Harnett’s former accounts at CTI.”); Oxford Global Resources, 2003 WL 23112398,
at *12 (“[T]his question is not difficult to resolve. . . . If Oxford receives preliminary
relief, defendants will be prohibited from contacting a fairly tiny slice of the total
market. Given this narrow scope, defendants will not suffer severe hardship.”).
The public interest also favors PC Connection. The court has found that the
non-solicitation clause is likely enforceable, which includes a finding that it is not
against the public interest. And, “[t]here is a public interest in ensuring that
enforceable restrictive covenants are enforced.” HCC Specialty Underwriters, 289
F. Supp. 3d at 326; Oxford Global Resources, 2003 WL 23112398, at *12 (“As a
formal matter, the question (under federal law) whether a preliminary injunction
will harm the public interest is distinct from the prior question (under
Massachusetts law) whether enforcement of the covenant at all (i.e., in a suit for
damages) will harm the public interest. That said, I find that the same analysis
applies, and reincorporate by reference my findings above.”); Iron Mountain Mgmt.,
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707 F. Supp. 2d at 112-13 (“No negative impact on the public interest results from
holding Congrave to his obligations under the Agreement.”).
However, PC Connection’s proposed preliminary injunction (doc. no. 29, 29-1)
contains certain language that is insufficiently precise in relation to the claim for
which PC Connection has demonstrated a likelihood of success. Specifically, the
proposed preliminary injunction would enjoin Sillich from “[a]iding any other
reseller of IT hardware or software products or services, including without
limitation Partner One IT, in the solicitation of any of” the covered customers. Doc.
no. 29-1, ¶ 5.A.2. The court declines to include this language in its preliminary
injunction. Rather, the court’s preliminary injunction will track the language of the
contract to which the parties agreed.
In addition, PC Connection has not shown at this stage that it is likely to
succeed in showing that paragraph 9 of the Employee Agreement, which states that
the 18-month period of the contract’s restrictive covenants are tolled “during any
period” in which Sillich is in violation of those restrictions, is enforceable.
Accordingly, the preliminary injunction will last only for the 18-month period
immediately following the termination of Sillich’s employment, per paragraph 4.3 of
the Employee Agreement.
CONCLUSION
For those reasons, PC Connection has demonstrated its entitlement to a
preliminary injunction, which is entered as follows:
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1. With respect to the 120 businesses listed in paragraph 5 (the “covered
customers”), Peter Sillich is enjoined from directly or indirectly:
a. soliciting, encouraging or inducing any of those
covered customers to terminate or diminish its
business relationship or patronage with PC
Connection;
b. seeking to persuade or induce any of those covered
customers to conduct with anyone else any business
or activity that said account conducts or could
conduct with PC Connection; and
c. accepting business from any covered customer.
2. PC Connection is not required to post bond. Sillich has not made any
argument that the court should require PC Connection to post bond
under Federal Rule of Civil Procedure 65(c). Without any argument
from Sillich about the proper amount for a bond, the court finds that
he has waived the bond requirement.
3. This injunction shall terminate when the first of the following events
occurs: (a) the passage of 18 months from July 28, 2022, which was the
end of Sillich’s employment with PC Connection; or (b) the court’s
entry of a final judgment in this action.
4. Any party may move to modify or dissolve this preliminary injunction
at any time. On its own motion, the court may modify or dissolve this
preliminary injunction at any time.
5. The following businesses are the “covered customers”:
1. 3C TECHNOLOGY SOLUTIONS
2. AFC TOOL COMPANY INC
3. ALBERDINGK BOLEY
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4. ALDERMAN COMPANY
5. AMERITI MANUFACTURING COMPANY
6. AMMAR MUFLEH
7. ARDEN CORPORATION
8. ASAP LLC
9. ASHLAND CREDIT UNION
10. ATC LIGHTING & PLASTICS IN
11. BAUER CONTROLS
12. BCS ENGINEERING
13. BELIEVERS CHRISTIAN FELLOW
14. BERGERS TABLE PADS
15. BGR INC
16. BLACK & VEATCH
17. BLOSSOM CHEVROLET INC
18. BLUEWAVE INC
19. BOTT TECHNOLOGY
20. BRADY WARE & SCHOENFIELD INC.
21. BSSI
22. CANEY FORK ELECTRIC COOP
23. CAPITAL FORD INC.
24. CARLTON SCALE
25. CHASE MANUFACTURING, LLC
26. CHILDRENS MUSEUM
27. CINCINNATI VENTILATING CO
28. CITY BARBECUE
29. COMBINED PUBLIC COMMUNICAT
30. COMMUNICATION EXHIBITS
31. COMPUTER CREDIT INC
32. CORETEK, INC.
33. CUSTOM FOODS OF AMERICA IN
34. D&P COMMUNICATIONS
35. DEARBORN INC
36. DELTA ZETA FOUNDATION
37. DOMINICAN SISTERS OF PEACE
38. EAGLE ALLOY INC.
39. EASTMAN & SMITH LTD
40. ECO-ENERGY
41. ELM STREET DEVELOPMENT
42. ENABLING TECHNOLOGIES
43. EVERGREEN HEALTH LLC
44. EXODUS POINT
45. FAMILY SERVICE SOCIETY INC
46. FC INDUSTRIES
47. FIRST UNITED METHODIST CHU
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48. FRASIER MEADOWS MANOR INC
49. FULLERTON TOOL COMPANY INC
50. GENESIS PRODUCTS, INC.
51. GILMORE JASION & MAHLER
52. GLOBAL COMMERCIAL CREDIT
53. GRAND CANYON SCENIC AIRLINES
54. HERITAGE COMMUNITY OF KALA
55. HIGHLAND TECHNOLOGY SERVICES, INC.
56. HILLSBORO CHURCH OF CHRIST
57. HTNA
58. HURON COMMUNITY BANK
59. INTERCAMBIO
60. JENOPTIK AUTOMOTIVE NORTH
61. KEVIN WILLIFORD
62. KIWANIS INTERNATIONAL
63. LEGAL AID OF TENNESSEE
64. LEGEND MANAGEMENT GROUP
65. LIFE BRIDGES INC.
66. LINCOLN COMMUNITY HEALTH C
67. LIVING RESOURCES CORPORATI
68. LKLP COMMUNITY ACTION
69. LONG SCHAEFER & COMPANY IN
70. LOS ANGELES UNIVERSAL PRES
71. MARIANIST MISSION INC
72. MARSHALL SYSTEMS
73. MASSACHUSETTS BAR ASSN
74. MEREDITH-WEBB PRINTING CO.
75. MIDWEST TRUCK ACCESSORIES,
76. MILCO MANUFACTURING INC
77. MS ULTRASONIC TECHNOLOGY,
78. NASHVILLE CONVENTION AND V
79. NATIONAL RESTORATIONS LLC
80. NEUROSCIENCE ASSOCIATES
81. NORTHWAY ACADEMY
82. OAKLAND MANAGEMENT CORP
83. ONLINE INFORMATION SERVICE
84. OUTBOUND TECHNOLOGIES
85. PACE INCORPORATED
86. PEOPLES BANK
87. PEOPLES EXCHANGE BANK
88. PHI DELTA THETA
89. PLANWORX ARCHITECTURE PA
90. ROJECT HOSPITALITY
91. RAE-ANN HOLDINGS
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92. RECTOR HAYDEN REALTORS
93. REGIONAL CONSOLIDATED SERV
94. RICURA CORPORATION
95. ROCHESTER TELEPHONE CO INC
96. ROCIC
97. SALT RIVER ELECTRIC
98. SAMOA CORPORATION
99. SCUPPERNONT BOOKS
100. SEMCA JD
101. SHIFT TECHNOLOGY
102. SOUTHEASTERN MICHIGAN COMMUNITY ALLIANCE
103. SST LLC/SHOOTING STAR TECH
104. STAYWELL INSURANCE
105. TAGHLEEF INDUSTRIES INC
106. TASK FORCE TIPS INC
107. TECH FOCUSED, INC
108. TECHNET UC
109. THERMAL SOLUTIONS, INC.
110. THOMASVILLE DEXEL, INC.
111. TORRES ENTERPRISES CORP
112. TRISTAR BEVERAGE
113. TSP, INC.
114. TUBE FAB / ROMJAN ENGINEERING
115. VOSS AUTO NETWORK
116. WARSAW COIL COMPANY INC.
117. WICO METAL PRODUCTS
118. WILLIFORD INSURANCE
119. WMIB INC.
120. WTVQ-TV INC.
SO ORDERED.
__________________________
Landya McCafferty
United States District Judge
May 11, 2023
cc: Counsel of Record
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