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BMC Software, Inc. v. Mahoney

United States District Court, D. Minnesota

June 9, 2015

BMC Software, Inc., Plaintiff,
v.
Christopher Mahoney, Defendant.

MEMORANDUM AND ORDER

PAUL A. MAGNUSON, District Judge.

This matter is before the Court on BMC's Motion for a Preliminary Injunction.[1] For the reasons that follow, the Court grants the Motion to the extent ordered below.

BACKGROUND

This case centers on the enforceability of a noncompete agreement. BMC Software, Inc. is bringing the lawsuit against a former, top-performing regional sales manager, Christopher Mahoney, for leaving the company to work at its biggest competitor as a global sales manager. Many of the relevant facts are disputed. A. Background on BMC

BMC develops, sells, and maintains software for companies around the world. (Hardy Decl. (Docket No. 8) ¶ 3.) The more than 800 software products, spread across five product lines, are designed to optimize and monitor companies' system applications. (Id. ¶¶ 3, 6.) BMC offers its software through offices in 30 countries, including the United States and Canada. (Id. ¶ 3.)

B. Mahoney's Employment at BMC

During his employment with BMC, Mahoney held different positions in various locations, first as a corporate account manager in Canada and then as a regional sales manager in the United States.

1. Corporate Account Manager in Canada

In January 2010, BMC Software Canada, Inc., a subsidiary of BMC, hired Mahoney as a corporate account manager in Canada. (Olmo Decl. (Docket No. 11) ¶ 7; Mahoney Aff. (Docket No. 16) ¶ 10.) Before he started the position, Mahoney signed two contracts with BMC Canada: (1) an employment agreement, which addresses compensation and other terms of the position (Mahoney Aff. Ex. 1); and (2) a confidentiality agreement, which includes nondisclosure and noncompete provisions and is, for the purposes of this Motion, identical to a confidentiality agreement that he would sign in 2012 (Olmo Decl. Ex. A).

As a corporate account manager, Mahoney sold software to customers in Eastern Canada. (Mahoney Aff. ¶ 17.) To enable him to do so, BMC Canada gave Mahoney access to, according to BMC, substantial and detailed confidential information. (Andrew Decl. (Docket No. 10) ¶ 6.) For example, Mahoney could view sales plays, differentiation statements, and financial data about existing and new products; contact information and contract data for current and prospective customers; and contact information for decisionmakers of resale partners. (Id. ¶¶ 7-10.) He also participated in a three-month training course that exposed him to the "MEDDIC" sales process. (Id. ¶ 12.) Mahoney disagrees that this information was confidential, contending that it was publicly available and generally known in the industry. (Mahoney Aff. ¶ 17.)

2. Regional Sales Manager in the United States

In September 2012, BMC offered Mahoney a promotion to sales manager for the Midwestern region of the United States. (Olmo Decl. ¶ 9; Mahoney Aff. ¶¶ 20-21.) He accepted the offer and moved, along with his wife and two children, to Minnesota. (Mahoney Aff. ¶¶ 23, 26-28.) Unlike his position in Canada, Mahoney's new employment was at will. (Id. Ex. 4.)

A month later, in October 2012, BMC sent Mahoney another confidentiality agreement, the version at issue here. (Pham Decl. (Docket No. 18) ¶ 6.) That confidentiality agreement contains several relevant provisions. (Olmo Decl. Ex. B.) First, a definition section recognizes the confidential nature of information related to software, business procedures, legal rights, marketing plans and customer lists, employment data, and third-party proprietary information. (Id. at 1.) Next, an obligations clause acknowledges that BMC would give Mahoney access to that confidential information throughout his employment. (Id.) Further, a nondisclosure clause explains that Mahoney would not disclose and prevent the disclosure of the confidential information during and after his employment. (Id. at 2.) And finally, a noncompete covenant pledges that Mahoney would not engage in either of the following activities for one year after leaving BMC:

[1] solicit or sell products or services that are competitive with any existing BMC product or service, or any product or service under development at the time of [his] employment with BMC, to any customer of BMC for which [he was] personally responsible or with whom [he] had direct contact by virtue of [his] employment with BMC in the two years preceding [his departure]; [or]
[2] take part in, become employed for the purposes of, or assist with any research, development, or marketing of any products or services that are competitive with any existing BMC product or service, or any product or services under development at the time of [his] employment with BMC,

within the geographic scope of the United States. (Id. at 3-4.) The confidentiality agreement selects Texas law to govern its provisions. (Id. at 6.) Though at the time Mahoney believed the agreement was not enforceable against him, he signed it in November 2012. (Id.; Mahoney Aff. ¶ 36.)

BMC compensated Mahoney with not only salary, benefits, and bonuses, but also incentive pay as reflected in deferred compensation agreements. (Olmo Decl. ¶ 11, Ex. C.) The deferred compensation agreements grant Mahoney specific stock units and cash awards subject to a vesting schedule and other terms. (Id. Ex. C.) In particular, the latest agreement includes a claw-back provision that allows BMC to recover some of the awarded compensation if Mahoney violated certain noncompete conditions. (Id. at 3-4.) The agreement also contains a merger clause that states the agreement "constitutes the entire agreement between [Mahoney] and [BMC] with respect to the subject matter of" the agreement. (Id. at 9.) The deferred compensation agreements likewise select Texas law to govern their provisions. (Id.) Mahoney signed the agreements in November 2012 (two weeks before he signed the confidentiality agreement), May 2013, July 2013, October 2013, May 2014, and December 2014. (Olmo Decl. ¶ 12.)

Beyond the above facts, the parties cannot seem to agree on much else about Mahoney's tenure as regional sales manager. The parties dispute the magnitude of his role. BMC alleges that Mahoney oversaw the company's top 40 customer accounts in Minnesota, Illinois, Wisconsin, and Iowa. (Hardy Decl. ¶ 4.) BMC contends, however, that because those customers have a national presence and Mahoney was the only regional sales manager who covered the accounts, his role was effectively national in scope. (Id.) BMC further alleges that Mahoney interacted with 26 employees and led a sales force of seven employees. (Id.) Mahoney counters that his customer base reached to North Dakota and South Dakota as well, but that BMC reduced his coverage to 29 accounts in April 2014. (Mahoney Aff. ¶¶ 34, 37.)

The parties dispute Mahoney's duties in that role. According to BMC, Mahoney was responsible for sales of and involved in marketing and go-to-market strategies for four of the company's five product lines. (Hardy Decl. ¶¶ 6-7.) BMC emphasizes that he contributed to and participated in high-level and confidential leadership development opportunities aimed at "organizational restructuring into a matrixed organization to support specific go-to-market strategies." (Kidder Decl. (Docket No. 9) ¶ 9; see also Hardy Decl. ¶ 9.) According to Mahoney, he worked strictly in a sales capacity and had no involvement with marketing or go-to-market strategies. (Mahoney Aff. ¶ 22.) In other words, he insists that he merely directed his team to take BMC's available products and marketing strategies and apply that information and their skills to sell the products. (Id.) Mahoney also avers that the leadership practices were announced to all employees and implemented with customers, or were commercially available sales training, and therefore not confidential. (Id. ¶¶ 35, 39-43, 56, 73-75, 78-86.)

The parties dispute the level of Mahoney's access to confidential information, and whether that information was confidential, in the new role. BMC alleges that Mahoney could obtain additional information related to the U.S. market, including expanded customer lists, employee data on his direct reports, area sales forecast and pipeline information, and territory-specific plans and strategies. (Hardy Decl. ¶ 5.) Mahoney counters that the information he had access to while in the United States was no different than the information he had access to while in Canada.

The parties dispute what drove Mahoney's success at BMC. Mahoney posted sales numbers of 225% of his quota and increased the Midwest business 295% annually. (Kidder Decl. ¶ 9.) BMC urges that Mahoney's access to its confidential information and training on its unique leadership practices fueled his success. (Id.) Mahoney points to his own years of experience as a salesperson and ...


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