A new lawsuit in the medical marijuana industry raises questions about the enforceability of noncompetes under Massachusetts’ new statute. On August 26, 2020, Alternative Compassion Services, Inc., (“ACS”) filed a federal lawsuit against its former Chief Operating Officer, Defendant Matthew Radebach (“Radebach”).

ACS is a medical marijuana dispensary that distributes medical marijuana and marijuana products in Massachusetts. Contingent on its job offer, Radebach agreed, in writing, to refrain from performing the same type of services performed as Chief Operating Officer for any third party, including without limitation, as a consultant. Radebach also agreed to refrain from directly or indirectly disclosing Confidential Information or Trade Secrets to any person or entity outside of the Company. The complaint alleged that Radebach “clandestinely” worked as a Chief Operating Officer for another competitor and also consulted with another company in the medical marijuana industry all at the same time he was the Chief Operating Officer for ACS. Further, the complaint alleges that Radebach disclosed ACS’ confidential information to these entities including, but not limited to granting other competitors’ access to ACS’ Dropbox file.  According to the Complaint, not only did Radebach breach his fiduciary duties, but he also breached his employment contract and misappropriated ACS’ trade secrets and confidential information.

It will be interesting to see what ACS claims as its trade secrets that were misappropriated. Massachusetts law requires that all Registered Marijuana Dispensaries, such as ACS, submit a “management and operations profile” before being licensed.  This profile, which is subject to release pursuant to a public records request, potentially includes some of ACS’ alleged trade secrets. In fact, ACS’ profile is publically available here. Another issue that may prove thorny for ACS is Massachusetts’ extensive Noncompetition Agreement Act which greatly limits non-compete contracts (previously covered here). Jointly, these two issues may cause ACS’ case to take a big hit