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Current Developments in the Commercial Divisions of the
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Posted: February 4, 2017

Court Issues Injunction Enforcing Covenant Not to Compete

On January 12, 2017, Justice Ash of the Kings County Commercial Division issued a decision in Shimon v. Paper Enterprises, Inc., 2017 NY Slip Op. 30101(U), issuing an injunction enforcing a covenant not to compete, explaining:

It is well established that covenants not to compete, which relate to the sale of a business and its accompanying good will, are accorded full enforcement when they are reasonable in scope and duration and are not unduly burdensome. The covenant not to compete is designed to work in conjunction with the implied covenant of the seller to refrain from soliciting his former customers and whether such a covenant is reasonable depends on the circumstances of each case. As a general rule, however, covenants not to compete pursuant to the sale of a business are not treated as strictly as those whose sole purpose is to limit employment. Moreover, New York courts have found three to five year restrictions to be reasonable in the context of the sale of a business.

. . . Where a movant is seeking injunctive relief in a suit to enforce a restrictive covenant that was given ancillary to the sale of a business, courts have held that the movant need not demonstrate actual loss of customers since irreparable harm is presumed to have occurred upon the demonstration of a likelihood of success on the merits.

Here, given the undisputed facts, the Court finds that PEl has established entitlement to the injunctive relief that it seeks. First, Shimon’s contention that he is not bound by the Asset Purchase Agreement is without legal support and is otherwise without merit. Secondly, Shimon fails to provide support for his argument that the geographic scope or duration of the subject restrictive covenant is overly broad. He fails to dispute that PEl’s business extends into the six-state Territory. Accordingly, there is no basis to deem the subject restrictive covenant unenforceable.

(Internal quotations and citations omitted).

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