Summary Judgment Granted Against Enforcement Of Overbroad Non-Compete Agreement

Posted: July 7, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Summary Judgment, Breach of Contract

Summary Judgment Granted Against Enforcement Of Overbroad Non-Compete Agreement

On May 13, 2025, Justice Melissa A. Crane granted summary judgment to Steven Koenig, an accountant sued for alleged breaches of a non-compete agreement by his former employer, Prager Metis CPAs LLC (“Prager”). The case is Prager Metis CPAs LLC v. Koenig, Index No. 652000/2023.

Section 9.4(a) of Prager’s LLC agreement, which Koenig had signed, contained restrictive covenants prohibiting a departing employee, for two years from the later of such employee’s departure or last receipt of certain post-departure payments from the firm (the “Record Date”), from providing services to: i) any entity that had been a client of Prager or its or its affiliates during the 18 months prior to the Record Date, or ii) any potential client with whom that employee had contact during the 12 months prior to the Record Date. Sections 9.4(b&c) extended the two-year prohibition to include solicitation of Prager clients and potential clients covered by Section 9.4(a) and to solicitation for employment of persons who were Prager employees during the 18 months prior to the Record Date.

Justice Crane cited BDO Seidman v Hirshberg, 93 NY2d 382, 388-389 (1999), which held that “New York courts will enforce a restrictive covenant in an employment contract if is it reasonable, meaning ‘only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.’” She granted Koenig summary judgment dismissing the complaint because Prager had failed to identify sufficient evidence to create a triable issue of fact as to the reasonableness of any of these provisions.

As to soliciting or servicing clients:

“[D. Lori] Roth [Prager's global managing partner] testified that Koenig did not work with all of Prager's clients and that she did not know if Koenig ever worked with any clients of Prager's affiliates . . .. Roth also testified that Koenig was not permitted to work with any Prager clients, including those who had been his pre-existing or personal clients, after he left Prager . . .. [C. Joseph] Fox [Prager's general counsel] testified that he believed Prager had at least 10 affiliates . . ., and [Glenn] Friedman [Prager's chief executive officer] testified that Prager possibly had a half dozen affiliates (NYSCEF Doc No. at 143 at 199) . . ..

“Section 9.4 (a) is overbroad on its face because it ‘prohibit[s] [Koenig] from working with any of plaintiffs' ... [customers], even those [Koenig] had never met, did not know about and for whom [Koenig] had done no work’ . . . nor does it carve out an exception for those Prager clients for whom Koenig performed no work . . .[and] because it prohibits Koenig from servicing any Prager client that Koenig may have acquired through his own independent efforts.”

Slip op., pp. 8-9 (internal citation omitted).

The restrictive covenants also were geographically overbroad, as “Prager operates internationally, and section 9.4 (a) and (b) contain no geographical restriction.” Id., pp. 9-10. And “a prohibition against the solicitation of prospective clients is impermissible, as there is no protectable client relationship.” Id., p. 9 (collecting cases).

Finally, while:

“[a] covenant not to solicit employees is inherently more reasonable and less restrictive than a covenant not to compete’ . . . A restrictive covenant that forbids solicitation of employees must be tailored so that it protects against ‘the misappropriation of the employer's trade secrets or of confidential customer lists or competition by a former employee whose services are unique or extraordinary’”.

Id., p. 10 (quoting BDO Seidman, 93 NY2d at 389, other citations omitted).

Prager failed here as well:

there is no allegation in the amended complaint, and Prager's witnesses did not testify, that [Nicholas] Andujar, the Prager employee Koenig is alleged to have recruited, possessed confidential or property information, was a particularly valuable or unique employee, or provided services that Prager could not easily replace.”

Id., p. 11

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning contractual disputes or non-competition agreements.