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Current Developments in the Commercial Divisions of the
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Posted: March 3, 2016

Summary Judgment Reversed Due to Fact Issues on Reasonableness of Restrictive Covenants

On March 1, 2016, the First Department issued a decision in Greystone Funding Corp. v. Kutner, 2016 NY Slip Op. 01442, reversing a grant of summary judgment dismissing claims for breach of non-competition and non-solicitation covenants, explaining:

Assuming, arguendo, that Post v Merrill Lynch, Pierce, Fenner & Smith mandates the invalidation of all restrictive covenants in an employment agreement upon the termination of the employee without cause, the record before us still does not demonstrate conclusively that defendant . . . was terminated without cause. In a prior appeal in this case, in which we reversed an order granting defendants’ motion to dismiss pursuant to CPLR 3211 on the ground of the uncertainty of the record as presently developed, we observed that it is possible that the dispute may be amenable to resolution on a more developed record and exploratory motion for summary judgment. Defendants moved for summary judgment shortly after our order was issued. However, their argument that [defendant] was terminated without cause was based on the same letters and emails as were submitted on the motion to dismiss. Thus, defendants failed to meet their burden on the motion for summary judgment of tendering sufficient evidence to eliminate any material issues of fact from the case.

Similarly, issues of fact still exist as to the reasonableness and enforceability of the restrictive covenants.

(Internal quotations and citations omitted).

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