It happens. Your employee leaves to join a competitor. But you have rights under restrictive covenants of the employee’s non-compete, non-solicitation or confidentiality agreements. Should you let the new boss know? More importantly, if you do – will your “cease and desist” efforts come back to haunt you?
According to a recent Massachusetts’ Superior Court decision, your communications warning the new company of the potential for litigation may not be used against you. These warning letters may constitute a protected (and therefore, inadmissible) communication pursuant to the “litigation privilege.”
The “litigation privilege” is a legal protection traditionally afforded to attorneys for their communications made during the course of representation. This privilege provides protection that shields an attorney from civil liability to non-clients for communications made in the course of good faith litigation. The litigation privilege is often asserted in defense of defamation claims against an attorney for statements made during the course of litigation.
This privilege, however, does not just apply to attorneys’ communications or defamation cases. In August 2014, a Middlesex Superior Court judge found that the litigation privilege protected an employer’s cease and desist communication in an employment dispute. In Pegasystems, Inc. v. Manning, the Court recognized that “[t]he litigation privileged applies not only to statements by attorneys but also to ‘communications by a party’ as long as the other conditions of the privilege are present.”
In Pegasystems, an employee brought suit against his past employer after it sent a cease and desist letter to the employee and his new employer. The letter claimed that the employee misappropriated a customer list and solicited former co-workers in violation of restrictive covenants in the employment agreements. As a result, the employee was terminated from his new employment due to concerns about potential litigation. He sued the former employer for tortious interference with business relations, misrepresentation and violations of c. 93A. The court dismissed the claims because the litigation privilege prevented liability for the cease and desist communications.
The key to obtaining the protection afforded by the litigation privilege is to ensure that cease and desist statements are made in the context of litigation. Therefore, it is essential that such communications appropriately reflect serious contemplation of litigation to assure application of the privilege.
When prepared properly as a privileged document, the cease and desist letter can be an effective tool for avoiding litigation costs by prompting settlement discussions before litigation ensues. A carefully crafted cease and desist letter drafted by an attorney will save you both the headache and cost of future litigation.