U.S. District Court judge has rejected a request for injunctive relief in a case in which two business parties entered into a seemingly valid non-compete agreement that called for their disputes to be resolved in Massachusetts.

The defendant argued that a forum selection clause was unenforceable because the federal court in Boston lacked personal jurisdiction over the matter since he and his company were based in Canada and had no business operations in Massachusetts.

Judge George A. O’Toole agreed.

“[T]here is no evidence of ‘continuous and systematic’ activity by [the defendant] in Massachusetts,” the judge wrote. “Furthermore, there appears to be no specific jurisdiction because the claims here do not arise out of, or relate to, [the defendant’s] activities in Massachusetts.”

The seven-page decision is Maine Pointe, LLC v. Starr, et al.

A rarity

Day Pitney’s John P. McLafferty of Boston, who defended Gestion Velocitas and the company’s president, Peter Starr, said federal judges rarely issue decisions on non-compete provisions. Because non-competes typically involve issues of state law, most requests for injunctive relief are heard by judges in the Massachusetts Superior Court’s Business Litigation Session, he said.

Although O’Toole’s ruling covered only the preliminary injunction, McLafferty said, Starr could not be bound to the agreement since he was

not a party to the contract. As president, he signed it on behalf of the company and not as an individual.

“The court found at this early stage that the plaintiff did not demonstrate it had a legitimate business interest to protect, which is really the linchpin of any non-compete matter,” McLafferty said. “There was simply no showing that the [defendants] violated a legitimate trade secret … or any good-will interest the plaintiff had in actual or perspective clients.”

While the preliminary injunction was decided in the defendants’ favor, the plaintiff’s Braintree, Mass., lawyer, Jonathan Braverman of Baker, Braverman & Barbadoro, said the jurisdiction argument is still a live issue in the case. Because the question was not initially raised by the defendants, O’Toole gave Braverman additional time to research and brief the matter.

“We have now pointed out in our papers that the defendant had far more contact in Massachusetts than what was brought out at the preliminary injunction,” he said. “We have now presented the claim to the court and hope that the existence of this lawsuit will have a deterrent effect against the defendant in terms of going after clients.”

Timothy J. Ryan of Ryan & Downey in Springfield, Mass., who represents both employers and employees, said the federal court is one of limited jurisdiction. Therefore, the first question that must be answered in any suit concerns personal jurisdiction, he said.

“We’re all taught in our first-year civil procedure class that if the answer to that jurisdictional question is ‘no,’ you can say good-bye to the federal court,” Ryan said. “Just because you want to be there doesn’t mean they have to hear you.”

Boston lawyer David M. Conforto noted that courts have long allowed parties to a transaction to select the law governing their relationship, provided that enforcement of such an agreement is fair and reasonable.

Conforto said retired Massachusetts Superior Court Judge Allan van Gestel held in a 2001 BLS case that the doctrine of forum non conveniens controls such disputes. The doctrine says a court may refuse to take jurisdiction if there is a more appropriate forum available.

“The general rule is that you can contract around that by having a choice-of-law provision. Courts will generally defer unless there is a compelling reason not to,” Conforto said. “The compelling reason could certainly be that the employee has no contact in Massachusetts.”

O Canada

The plaintiff, Maine Pointe, is a consultancy firm that analyzes businesses and recommends ways to increase efficiency and competitiveness.

Defendant Peter Starr is a Canadian citizen who is president of Gestion Velocitas, a company based in Canada that provides sales management and consulting services.

When the company began providing services to Maine Pointe in 2005, the parties entered into a non-compete agreement. The agreement contained restrictive covenants that prohibited Gestion Velocitas from soliciting customers, enticing them to discontinue their relationships, or revealing any trade secrets or confidential information.

Any action arising from the agreement was to be “filed and adjudicated solely in a court of competent jurisdiction within the commonwealth of Massachusetts,” it stated.

Although Starr cultivated one client from New York for Maine Pointe, he primarily targeted Canadian companies.

In September 2010, Maine Pointe informed Starr it intended to terminate the agreement. The following month, Starr started working with a different consultancy firm.

In response, Maine Pointe filed suit in U.S. District Court in Boston claiming that Starr had wrongfully solicited two clients for the new consultancy firm. As part of its suit, Maine Pointe sought to enforce a preliminary injunction against Starr and his company.

‘Ordinary competition’

In denying Maine Pointe’s request, O’Toole said the evidence before him did not support a finding that the court had general or specific personal jurisdiction over Starr.

Starr works and resides in Canada, the judge said, and was hired primarily to solicit Canadian companies. O’Toole added that there was no evidence Starr had solicited any companies in Massachusetts.

“It is true that he signed the Agreement with Maine Pointe, and that the Agreement states that actions arising from [it] will be adjudicated solely in a Massachusetts court,” O’Toole wrote. “Nevertheless, Starr, in his individual capacity, is not a party to the Agreement.”

The judge also declined to issue an injunction against Gestion Velocitas because Maine Pointe had failed to demonstrate a substantial likelihood that it will succeed on the merits of the suit. Although the plaintiff alleged the defendants had contacted executives at two Canadian companies, the evidence did not sufficiently demonstrate Starr had disclosed trade secrets or confidential information, the judge said.

“The evidence suggests that Maine Pointe seeks to protect itself from ordinary competition,” O’Toole said. “The Court cannot enforce a covenant not to compete under such circumstances.”