Governo Law Firm LLC v. Bergeron

487 Mass. 188

166 N.E.3d 416

GOVERNO LAW FIRM LLC

v.Kendra Ann BERGERON & others.¹

SJC-12948

Supreme Judicial Court of Massachusetts, Suffolk.

Argued January 6, 2021.

Decided April 9, 2021.

Kurt B. Fliegauf, for the plaintiff.

Peter F. Carr, II, Boston, for the defendants.

Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, & Georges, JJ.

WENDLANDT, J.

Over the course of more than two decades representing clients in asbestos litigation, the plaintiff Governo Law Firm LLC (GLF) systematically created the contents of a research library, a treasure trove of materials amassed from GLF's own matters as well as other sources, that gave it a competitive edge in attracting and providing legal services to clients in this specialized field. GLF also built electronic databases to render the library readily searchable, facilitating retrieval of the information. In the fall of 2016, these proprietary materials were taken by a group of nonequity employees at GLF (attorney defendants) as they prepared to start a new law firm, the defendant CMBG3 Law LLC (CMBG3), in case their planned purchase of GLF proved unfruitful. The attorney defendants took turns secretly downloading the library and databases, as well as GLF's employee handbook, other administrative materials, and client lists, onto high-capacity "thumb drives";² the attorneys then surreptitiously removed these materials from GLF's offices. They subsequently made an offer to GLF's sole owner, David Governo, to buy GLF, stating that they would resign if the offer were not accepted that day. Governo rejected the offer that same day and locked the attorney defendants out of GLF's computer systems. The next day, the attorney defendants opened for business under the previously incorporated CMBG3, where they used the stolen materials and derived profits therefrom.

GLF filed a complaint in the Superior Court asserting claims against its former employees and CMBG3. A jury found some or all of the defendants liable on the claims for conversion, breach of the duty of loyalty, and conspiracy,³ and none of the defendants liable for unfair or deceptive trade practices in violation of G. L. c. 93A, § 11. The jury awarded GLF $900,000 in damages, calculated based on the defendants’ net profits. The judge then issued a permanent injunction enjoining the defendants from using the library and databases, and ordering those materials removed from the defendants’ computers.

In GLF's appeal from certain of the judge's instructions at trial, as well as his posttrial rulings, we first address the question whether the attorney defendants, who misappropriated proprietary materials from their employer during their employment, and subsequently used those materials to compete, may be liable for unfair or deceptive trade practices pursuant to G. L. c. 93A, § 11, for actions that were, in part, taken while still employed by GLF. We conclude that that they, and their new firm, may be. Because the judge erroneously instructed the jury that the defendants’ preseparation conduct was not relevant to GLF's claim under G. L. c. 93A, § 11, and because GLF has shown that its rights were affected thereby, the matter must be remanded for a new trial on the G. L. c. 93A, § 11, claim. We next address the scope of the permanent injunction. Although the jury found that the defendants were liable for conversion of GLF's proprietary materials, the judge issued a permanent injunction precluding the defendants’ use of only a subset of these materials. We conclude that the judge abused his discretion. Finally, we consider GLF's claims with respect to pre- and postjudgment interest. We conclude that prejudgment interest was not required under G. L. c. 231, § 6H, but that GLF is entitled to postjudgment interest.

1. Background. We recite the facts in the light most favorable to GLF. See Linkage Corp. v. Trustees of Boston Univ., 425 Mass. 1, 4, 679 N.E.2d 191, cert. denied, 522 U.S. 1015, 118 S.Ct. 599, 139 L.Ed.2d 488 (1997).

In 2016, the attorney defendants -- each a nonequity partner at GLF -- were considering acquiring GLF from its sole owner, Governo. GLF was a law firm that specialized in representing insurance companies in asbestos litigation. While the attorney defendants considered a potential purchase, they simultaneously pursued the possibility of starting their own firm, the defendant CMBG3.

In October of 2016, three of the attorney defendants began downloading materials from their GLF computers onto high-capacity thumb drives. The attorney defendants kept the copying secret from Governo, believing that, had he been aware of it, Governo would have prevented the copying.⁴ One of the attorney defendants indicated that it would have been to CMBG3's business detriment not to copy the material.

The materials copied included three different types of information: a research library, databases, and administrative files. The research library contained over 100,000 documents relevant to asbestos litigation, including witness interviews, expert reports, and investigative reports, and was known within GLF as the "8500 New Asbestos Folder" (8500 folder). The library was developed by GLF over a period of twenty years, at a cost of more than $100,000.⁵ According to testimony by GLF's expert, these materials were "extremely valuable" and provided a competitive advantage to GLF over other law firms within the field of asbestos litigation.

The second category of copied materials, the databases, organized the GLF resources from the 8500 folder and elsewhere into categories, sortable by multiple criteria, such as legal theory or client. One database, for instance, housed all materials related to the state-of-the-art defense as it is used in asbestos litigation.⁶ Another database contained literature, historical information, and scientific information concerning talc, a potential cause of mesothelioma.⁷ These databases, which, like the research library, were developed at a cost of over $100,000, were, according to GLF's expert, also extremely valuable and provided GLF a competitive advantage. The third category of copied documents, the administrative files, included a manual on office procedures, an employee handbook, marketing materials, and client lists.

Once the materials were downloaded onto the removable electronic devices, the defendants took the devices from GLF's offices. After one of the attorney defendants had removed some materials himself, he sent a text message to another attorney defendant informing the attorney that she should bring a gym bag when she removed materials, in order not to arouse the suspicions of building security. The attorney defendants then uploaded the copied information onto a laptop computer they had purchased for their new law firm.

The attorney defendants incorporated CMBG3 on November 1, 2016. On November 18, 2016, they "hijack[ed]" the scheduled GLF partners’ meeting and offered Governo $1.5 million in cash, plus net profits for some of the attorneys’ work performed through the end of the year, to buy GLF.⁸ The attorney defendants gave Governo until 5 P.M. that day to respond and told Governo that if he rejected their offer, they would resign in thirty days.

Governo rejected the offer that same day. Two days later, on November 20, 2016, Governo sent an electronic mail message to the attorney defendants asking them to confirm that they had not taken and were not in possession of any GLF data. The attorney defendants did not respond. Governo then secured the attorney defendants’ computer login information so they could not access the GLF computer systems.⁹ The last day the attorney defendants were employed by GLF was November 20, 2016.

By November 21, 2016, the attorney defendants were officially operating CMBG3. They accessed GLF's materials (now on CMBG3's laptop) to assist in their representation of clients in paid legal work for CMBG3. An analysis of the laptop computer suggested that users of it interacted with tens of thousands of the files.

2. Discussion.¹⁰ a. General Laws c. 93A, § 11. GLF first maintains that the judge provided an erroneous instruction to the jury in connection with GLF's G. L. c. 93A claim. The instruction provided:

"Conduct is part of trade or commerce, as a general matter, if it takes place in a business context and it's not personal or private in nature. But by law an employee and employer are [not] in trade or commerce with each other for purposes of the statute. That means that [G. L. c.] 93A does not apply to anything a defendant did toward the Governo Firm while they were still employed there. So anything that happened before the 20th of November, 2016, whether it was negotiations, copying of materials, anything else[,] that's all irrelevant for purposes of [the G. L. c. 93A claim]. Instead for this claim the Governo Firm must prove the defendants did something to compete with the Governo Firm after they left that firm that was unfair or deceptive. So given the evidence in this case, the Governo Firm must convince you that the defendant[s] used confidential information or documents belonging to the Governo Firm, to compete against that firm in an [unfair] or deceptive manner and that they did so after their employment at the Governo Firm had [ended]."

GLF asserts that the instruction was erroneous because it precluded the jury from considering a critical aspect of the misconduct of the attorney defendants, that is, their copying and taking GLF's proprietary materials while they were GLF's employees.¹¹

In examining whether an instruction "adequately explain[s] the applicable law," Kelly v. Foxboro Realty Assocs., LLC, 454 Mass. 306, 316, 909 N.E.2d 523 (2009), we consider the "adequacy of the instructions as a whole," Selmark Assocs., Inc. v. Ehrlich, 467 Mass. 525, 547, 5 N.E.3d 923 (2014). "We review objections to jury instructions to determine if there was any error, and, if so, whether the error affected the substantial rights of the objecting party" ...