Massachusetts Supreme Judicial Court Invalidates Choice-of-Law Provision in Non-Competition Agreement

Businesses and employees in Massachusetts routinely enter into non-competition, non-solicitation, and confidentiality agreements. These agreements are designed to protect the business from the wrongful disclosure and unauthorized use of the business’ confidential information, in the event an employee changes job and begins working for a competitor. These agreements almost always include a choice-of-law and forum-selection provision, which states that, in the event the business sues the former employee to enforce the non-competition, non-solicitation, and confidentiality agreement, the employee agrees that Massachusetts law will apply and that the suit will be heard in a Massachusetts court. Significantly, the Supreme Judicial Court, in a case captioned Oxford Global Resources, LLC v. Hernandez, recently ruled that the choice-of-law and forum-selection provision does not apply, and that the Massachusetts company must file suit in California to enforce its non-competition, non-solicitation, and confidentiality agreement against a former employee.

The plaintiff in that case, Oxford Global Resources, LLC (“Oxford”), is a technology recruiting and staffing company that is headquartered in Beverly, Massachusetts. In 2013, Oxford hired the defendant, Jeremy Hernandez, to work in an office that Oxford maintains in California. At the time he was hired, Mr. Hernandez signed a non-competition, non-solicitation, and confidentiality agreement. This agreement included a provision that “this Agreement will be governed by the laws of Massachusetts, without giving effect to the conflict of laws provisions thereof”, and the agreement further provided that any lawsuit involving the agreement must be filed in Massachusetts. Indeed, the agreement specifically stated that Mr. Hernandez “hereby waives any claims against or objections to” the requirement that any suit must be filed in Massachusetts.

In 2016, Mr. Hernandez quit working for Oxford, and began working for one of Oxford’s competitors located in California. Oxford then filed suit against Mr. Hernandez, alleging that Mr. Hernandez violated the terms of the non-competition, non-solicitation, and confidentiality agreement. Oxford filed this suit in Massachusetts, in accordance with the agreement’s aforementioned choice-of-law and forum-selection provision.

Mr. Hernandez filed a motion to dismiss Oxford’s suit on the grounds that Massachusetts was a forum non conveniens, and that California was a more appropriate venue for this litigation. (Within this context, “forum non conveniens” is a legal doctrine that allows a court to refuse to take jurisdiction over a matter, where there is a more appropriate forum available to the parties.) Oxford opposed this motion to dismiss, on the grounds that Mr. Hernandez explicitly waived any objection to litigation in Massachusetts when he agreed to the choice-of-law and forum-selection provision discussed above.

The Supreme Judicial Court ruled in favor of Mr. Hernandez, and ordered that Oxford’s lawsuit in Massachusetts must be dismissed because Massachusetts was a forum non conveniens. In reaching this decision, the Supreme Judicial Court first determined that the lawsuit should be governed by California law (despite the parties’ agreement to apply Massachusetts law), because “California has a much stronger interest than Massachusetts in deciding whether Hernandez breached his contract or committed a tort in trying to convince some of Oxford’s customers or consultants in California to use a competitor instead” and, by contrast, “Massachusetts has very little interest in the outcome of this lawsuit.” Because California has a much stronger interest than Massachusetts in the outcome of this dispute, the Supreme Judicial Court ruled that the parties’ choice-of-law agreement must be voided on public policy grounds.

The Supreme Judicial Court also voided the parties’ forum-selection agreement, and ordered that Oxford’s suit must be dismissed in Massachusetts and, if Oxford so chooses, re-filed in a California court. The Court reached this decision on the grounds that “a California court is at least as capable as a Massachusetts court to hear this matter and fairly decide it”, especially since “everything relevant to this case happened in California”, “all relevant witnesses are located in California and cannot be compelled to testify in Massachusetts”, “it will be easier and more efficient for both Hernandez and Oxford to try this case in California”, and “Hernandez will be unable adequately to defend himself unless the case is litigated in California”.

In sum, the Supreme Judicial Court, citing public policy considerations, overruled the parties’ own choice-of-law and forum-selection agreements and ruled that “in the interest of substantial justice this action should be dismissed on the ground of forum non conveniens so that the case can be resolved in a California court.”

The Oxford case is a significant decision for Massachusetts businesses that conduct business in other states, because the Supreme Judicial Court has clearly limited the ability of businesses and employees to rely upon their own choice-of-law and forum-selection agreements. Accordingly, while every case is dependent on its own set of unique factual circumstances, businesses in Massachusetts should confer with legal counsel in order to assess their rights and obligations in light of the Oxford decision.