The Gloves are Off

Well, at least we know ONE is.

So, a few weeks ago, completely out of the blue, we get a letter from one of our favorite competitors. And it goes a little something like this:

Re: Mr. H – Former Junior Systems Administrator
Breach of Employment Agreement – NON SOLICITATION

Dear DreamHost:

Please be advised that this office represents the interests of Add2Net, Inc. d.b.a. Lunarpages (hereinafter “Lunarpages”) in the above referenced matter. Please direct any further communications concerning the issues raised herein to this office from this point forward.

The purpose of this letter is to address certain actions we are aware of and various legal obligations of our client’s former employee Mr. H and Dreamhost as his current employer.

Specifically, we have contacted Mr. H recently to remind him of his ongoing contractual obligations under his Employment Agreement and Conflict of Interest / Code of Ethics agreement with Lunarpages, dated on or about January 31, 2006 (the “Agreements”). Please find a copy of these agreements enclosed herewith for your review and file.

By agreeing to Non-Competition, Trade Secret and Non-Solicitation obligations in his Agreement, Mr. H has covenanted not to engage in or participate, directly or indirectly, in any business that is in competition with Lunarpages. He has futher agreed in no uncertain terms that he “shall not” induce or attempt to induce Lunarpages employees to terminate their employment with Lunarpages or to solicit Lunarpages employees for other employment.

Certain information that has come into our possession causes us to believe that Mr. H has, with the apparent knowledge and approval of Dreamhost, engaged in a campaign to use certain trade secret information including employee listings to solicit Lunarpages employees and induce them to terminate their existing employment with Lunarpages and accept employment with Dreamhost and/or New Dream Network, LLC.

By this letter, we hereby demand that you immediately Cease and Desist from any further activity contrary to the provisions of Mr. H agreement or that wold cause a violation of statute or common law. Furthermore, we ask that you immediately turn over any and all Lunarpages employee records, data and information including Lunarpages telephone and/or address lists. Furthermore, within 5 days of the date of this letter we hereby demand that you provide your written assurance of your intent to honor the terms of the aforementioned documents and instruct your employee accordingly.

Furthermore, in an effort to mitigate the damages that have already been caused by Mr. H-ings on behalf of and/or for the benefit of Dreamhost we demand that within this time frame Mr. H-ings provide a detailed list of each individual Lunarpages employee whom he has contacted or have attempted to contact in violation of the above provisions.

Please be advised that if we do not receive the requested assurances or if the above mentioned contact with our employees should continue we will have no alternative but to take immediate action including procuring injunctive relief to enforce the rights of our client as against Mr. H-ings and Dreamhost / New Dream Network, LLC. Please be advised that the relevant agreements also provide that we may recover our attorney’s fees and costs necessary to enforce the terms of the agreement.

We look forward to your cooperation in this regard.

Very Truly Yours

Professional Lunarpages Lawyer Guy

Lunarpages Professional Lawyer Guy

None of us had any idea what they were talking about. I mean, we knew that “Mr H.” (as we have been calling and shall continue to call him in this post) used to work at Lunarpages, but we also have employees who used to work at Powweb, IPowerWeb, Interland, Affinity, and just about every other web host in LA!

He’d never told us a thing about Lunarpages, in fact I even specifically remember him once saying to me something to the effect that he “wouldn’t feel it appropriate to discuss details of his previous employer with a competitor.”

Even when I turned The Machine all the way up to 50 he still wouldn’t talk!

Whatta guy!

Anyway, we weren’t entirely intimidated by this letter. Here’s what our lawyer sent back:

Re: Mr. H., Add2Net, Inc dba Lunarpages, New Dream Network LLC
Dispute re activities of Mr. H.

Dear Professional Lunarpages Lawyer Guy:

I represent New Dream Network, LLC (“NDN”). This is in response to your letter to NDN, which my client has passed to me for handling. Please address all future communications to me.

Initially, it is not clear from your letter whether we are discussing a “Mr. H.” or a “Mr. H.-ings.” You have used both spellings repeatedly in your letter.

Additionally, it is unclear to me what you are requesting. Your demand that NDN “immediately Cease and Desist from any further activity contrary to the provisions of Mr. H’s agreement or that would cause a violation of statute or common law” is too vague to convey any idea what you are requesting. Are you demanding that NDN fire Mr. H? If so, please state so clearly. Exactly what do you believe NDN has done that is in violation of what particular law? State specifically what evidence or information you are relying upon.

Furthermore, I do hope you understand and appreciate that the non-compete clause in Mr. H’s employment agreement is hopelessly unenforceable in California, at least to the extent that it purports to restrict Mr. H’s ability to pursue his chosen career with competitors of Lunarpages after his employment there has ended, except to the extent necessary to protect legitimate trade secrets. See California Business & Professions Code §16600 et seq. and the numerous cases applying that statute.

With respect to any non-solicitation clause, at least one court has held that such clauses are unenforceable under §16600. See Liberty Mutual Ins. Co. v. Gallagher & Co., No C94-3384 MHP, 1994 U.S. Dist. LEXIS 18412 (N.D. Cal. Dec. 19, 1994) (unpublished). In any event, applying basic First Amendment principles, no court would enjoin Mr. H from, for example, telling a few of his friends who continue to work at Lunarpages that he is happier at NDN and that NDN is a better place to work than Lunarpages and that they may wish to consider applying for employment at NDN, regardless of what his previous employment agreement with
Lunarpages provided. If you are claiming that such isolated conversations would violate some provision of law in California, or that the employment agreement at issue validly prohibits such isolated conversations, please state so clearly so that we will all be on the same page, and provide any authority you have to support your position.

With respect to any alleged trade secrets, please specify what specific information you believe is at issue here that qualifies for trade secret protection under Cal. Civil Code §3426.1 which is the applicable law, and state the measures which your client took to maintain the confidentiality of that information per §3426.1(d)(2). As you probably know, merely reciting within an employment agreement that something is a trade secret hardly makes it so. See Thompson v. Impaxx, Inc., 113 Cal. App. 4th 1425, 1430, — Cal. Rptr. 3d — (2003) (“The recitals alone do not establish anything. Labeling information as a trade secret or as confidential information does not conclusively establish that the information fits this description.”) Once you have identified with particularity the supposed trade secrets at issue, then we can have an informed discussion regarding whether that information qualifies as protectable trade secrets under §3426.1, and whether Mr. H has attempted to give any such information to NDN.

In any event, NDN has not received any list of Lunarpages’ employees. If Mr. H has told one or more friends who continue to work at Lunarpages that NDN is a better place to work, he has done so without any encouragement or participation from NDN.

The portion of your letter that concerns me the most is the portion in which you state, “We have contacted Mr. H recently to remind him of his ongoing contractual obligations under his Employment Agreement . . . ” Because you seem to be laboring under the false belief that a non-compete agreement with an employee is enforceable in California, and you seem to have taken that position in your letter, I presume that you have attempted to persuade Mr. H into believing that working for NDN constitutes a violation of an enforceable non-compete clause. If that is correct, then Lunarpages has, through you its counsel, attempted to intimidate NDN’s lawful employee Mr. H, and have wrongfully interfered with NDN’s relationship with its employee, and have thereby engaged in unfair competition under Business & Professions Code §17200 et seq. Please provide Lunarpages’ assurances that it will cease and desist its attempts to intimidate and to interfere with NDN’s employees in the future, and that it will send a letter to Mr. H advising him that under California Business & Professions Code §16600, non-compete agreements that purport to restrict post-employment competition are invalid. Such a letter will be necessary to undo the damage that apparently has already been done by Lunarpages’ deceitful and wrongful conduct. Please send the required corrective letter to Mr. H, and provide those assurances to me, by May 7 at the latest.

I look forward to receiving your clarifications and your assurances. In the meantime, please call me if you have any questions.

Very truly yours,
Awesome DreamHost Lawyer Guy

DreamHost Awesome Lawyer Guy

And I must say, I think Awesome DreamHost Lawyer Guy makes some good points!

  1. In California at least, non-compete and non-solicit agreements, especially for regular employees, are pretty much unenforcable.
  2. If you want to keep your employees from leaving to your competitors, do it the American way, not the Communist way! I.E., by competing for their “business” by creating a nice place to work; not by being lazy and attempting to make it “illegal” for them to work elsewhere!
  3. When writing letters to your lawyer friends, be sure to get details like the name of the person in question right.. or else your lawyer friends will tease you!

Anyway, we never heard back from them. I guess that means they consider the issue dropped.

Well, we don’t!

Our honor has been impugned! How dare they imply that we try and steal their employees! P-shaw, as if! Our employees are already the best and we get em the old fashion way, by hiring friends and family members!

You guys pushed this thing too far. The only way to settle it now is in court!

The basketball court, that is!

That’s right, to settle this thing once and for all we hereby do officially challenge Lunarpages to a basketball game! You pick the time, we’ll pick the place. And the place is here.
And the time is “sometime before June 15th…” or we will declare DreamHost the winner!

AND, winner take all. Or rather, winner gets to offer jobs to anybody they want on the losers.

We’re not afraid. Because we know they wouldn’t accept!

And we also know we’re going to win!

A Lunarpages has NEVER beaten a Dreamhost in the entire history of web hosting tournaments.

Perhaps you haven’t heard of a little something we call The Dream Machine?