Commercial Division Blog

Posted: May 13, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Category Commercial Division Justices

Restrictive Covenant Preventing Employee from Working for a Competitor Overly Broad and Not Necessary to Protect Legitimate Interest

On April 5, 2022, Justice Chan of the New York County Commercial Division issued a decision in Mission Capital LLC v. Javich, 2022 NY Slip Op 31162(U) holding that a motion seeking to prevent a former employee from working at a competitor should be denied, despite the existence of a restrictive covenant, where enjoining the employee from working at the competitor was broader than necessary to protect the employer’s business interests, stating:

Even if, for argument's sake, the non-compete had a reasonable geographic scope, plaintiff has failed to demonstrate the necessity of enjoining Javich from working at Fundible to support its legitimate interest. New York courts have held that an employer has a legitimate interest in preventing (i) misappropriation of the employer's trade secrets or of confidential customer lists; (ii) competition by a former employee whose services are unique or extraordinary; and (iii) exploitation by former employees of the goodwill of a client or customer which has been created and maintained at the company's expense, to the employer's competitive detriment (BDO Seidman, 93 NY2d at 389- 92). In reviewing Javich's services under the second category of the BDO Seidman standard, it cannot be said that that Javich's services are unique or extraordinary nor is the job considered a  learned profession [*10] (93 NY2d at 389; see also Briskin v All Seasons Servs., Inc., 206 AD2d 906, 906, 615 N.Y.S.2d 166 [4th Dept 1994] [holding that "[t]he fact that plaintiff was a knowledgeable and experienced sales representative does not establish that his skills were unique or that he was irreplaceable"]).

Under the first category of the BDO Seidman standard, defendants admit that Javich shared Javich's Contact List with Kauderer but assert that the information on the list is not confidential. Defendants claim that they agreed to delete it or have already deleted it (NYSCEF # 44, ¶ 13; NYSCEF # 48, ¶ 15). To the extent defendants still have access to Javich's Contact List, because of how computers store deleted information or otherwise, plaintiffs legitimate interest in protecting its confidential information can be protected with tailored enforcement of the non-disclosure and non-solicitation portions of the employment agreement, without overly burdening Javich, by enjoining his working at Fundible, as provided below (see e.g. Pure Power Boot Camp, Inc. v Warrior Fitness Boot Camp, LLC, 813 F Supp 2d 489, 507 [SD NY 2011] [finding overbroad non-compete provision to be "unreasonably burdensome to [d]efendants because its enforcement is likely to result in the loss of [employees'] ability to earn a living"]). Accordingly, the branch of plaintiffs motion seeking to enjoin Javich from working at Fundible [*11] is denied.

The attorneys at Schlam Stone & Dolan are well versed and frequently litigate issues related the enforcement of restrictive covenants. 

Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding these issues.

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