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Current Developments in the Commercial Divisions of the
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Posted: February 7, 2015

Absent Covenant not to Compete, Selling Business Owner Can Advertise New Business

On January 20, 2015, Justice Pines of the Suffolk County Commercial Division issued a decision in Weiner v. Artura, 2015 NY Slip Op. 30102(U), examining the obligation of the seller of a business not to solicit former customers.

In Weiner, the plaintiff and defendant asserted claims and counterclaims regarding a law firm merger. Both parties moved for summary judgment on the defendant’s counterclaim for breach of the merger agreement by soliciting former customers. The court ultimately denied both motions, finding that there were factual issues. In deciding the motions, the court explained the applicable standard:

The plaintiff, as the seller of goodwill of the firm, has a legal duty to refrain from acting to impair the good will transferred to the purchaser in exchange for part of the purchase price. Deliberate solicitation of a seller’s former customers breaches the duty against impairment of the goodwill transferred as part of the sale of the business. The purchaser is free to negotiate an express covenant, reasonably restricting the seller’s right to compete in a particular geographical area or field of endeavor. However, in the absence of an express covenant against competition, a seller of good will who lawfully competes with a purchaser may advertise to the public and not specifically aimed at the seller’s former customers is permissible under New York law.

(Internal quotations and citations omitted) (emphasis added).

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