Arthur Young & Co. v. Black

• Decision Date: 11 October 1983
• Citation: 466 N.Y.S.2d 10,97 A.D.2d 369
• Court: New York Supreme Court — Appellate Division
• Parties: ARTHUR YOUNG & COMPANY, Plaintiff-Respondent, v. Robert W. BLACK, Defendant-Appellant. . As Amended

Page 10

466 N.Y.S.2d 10

97 A.D.2d 369

ARTHUR YOUNG & COMPANY, Plaintiff-Respondent, v. Robert W. BLACK, Defendant-Appellant.

Supreme Court, Appellate Division,

First Department.

As Amended Oct. 11, 1983.

C.B. Margolin, C.D. Liggio, New York City, for plaintiff-respondent.

J.T. Golenbock, New York City, for defendant-appellant.

Before SANDLER, J.P., and CARRO, ASCH, FEIN and ALEXANDER, JJ.

MEMORANDUM DECISION.

Order entered February 4, 1983 in Supreme Court, New York County, which granted plaintiff's motion for a preliminary injunction modified on the law and the facts and in the exercise of discretion, and the injunction is limited to those clients of plaintiff who were never formerly clients of defendant or his father, and the order is otherwise affirmed, without costs.

Plaintiff, a nationwide accounting firm with seven hundred partners, seeks to enjoin defendant, a former partner, from competing with it for the business of clients defendant serviced while in plaintiff's employ. It is alleged that the seven clients Black has approached are worth $150,000 in fees, with at least three of them already switching their $36,500 worth of business to defendant.

The non-competition clause which plaintiff wants enforced is part of the October 1, 1979 revision of Arthur Young's Articles of Partnership. Defendant signed it then, when he was a partner. The contested clause states in pertinent part:

... I further agree that for a period of two years after I withdraw from the firm that I will not without its prior written consent, provide professional services such as those provided by the firm to any client of the firm, or for the purpose of providing such professional services, solicit or participate in the solicitation of any client of the firm, which was a client of the firm any time during the twelve months prior to my withdrawal and for whom I provided any service in the five year period preceding my withdrawal. I further agree that prior to my withdrawal, without prior written permission of the firm, I will not discuss with any client of the firm my intention to withdraw from the firm (except if withdrawal is for retirement or to enter a business which does not compete with the firm) nor will I solicit any such client.

Defendant states that he was fired and did not "withdraw". In addition, we note that there is no allegation that defendant was privy to trade secrets or insider information, or that his services as an accountant are special, unique or extraordinary. See e.g. Columbia Ribbon and Carbon Mfg. Co. v. A-1-A Corp., 42 N.Y.2d 496, 398 N.Y.S.2d 1004, 369 N.E.2d 4. While "[e]ach case must, of course, depend, to a great extent, on its own facts," Karpinski v. Ingrasci, 28 N.Y.2d 45, 49, 320 N.Y.S.2d 1, 268 N.E.2d 751, it is not at all clear that the plaintiff would probably succeed on the merits. Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 386 N.Y.S.2d 677, 353 N.E.2d 590; Lynch v. Bailey, 275 App.Div. 527, 90 N.Y.S.2d 359, aff'd 300 N.Y. 615, 90 N.E.2d 484; People v. Canal Board, 55 N.Y. 390, 394-395. Compare Post v. Merrill Lynch, Pierce, Fenner & Smith, 48 N.Y.2d 84, 89, 421 N.Y.S.2d 847, 397 N.E.2d 358 (per Wachtler, J.); but see Handler & Lazaroff, Restraint of Trade and the Restatement (Second) of Contracts, 57 N.Y.U.L.Rev. 669, 717-720 (1982).

Moreover, without even reaching the merits, plaintiff has hardly shown that the loss of $36,500 worth of business from its $800 million revenues will cause it the "immediate and irreparable injury" required for the grant of an injunction (CPLR 6301). Rather, a balance of the equities shows defendant to be the party who will be seriously burdened by such a decree.

On the other hand, there is no reason not to enforce the injunction as to clients of plaintiff who had no contact with defendant or his father prior to defendant joining plaintiff's firm or as to clients brought into the firm and serviced by defendant after his joining plaintiff's firm. Although ultimately monetary damages would be compensation to plaintiff, we prefer to maintain a status quo that will encourage the parties to quickly resolve their differences at a trial on the merits.

All concur except SANDLER, J.P., who concurs in a memorandum, and ASCH, J., who dissents in a memorandum, as follows:

SANDLER, Justice Presiding (concurring):

I agree that the preliminary injunction should be modified to the extent of excluding from its scope those clients of the plaintiff who had been brought into the firm by the defendant and his father when they joined it, and those clients which the defendant himself thereafter brought into the firm.

Special Term was clearly correct in the conclusion that the non-competition clause in issue is on its face narrowly drawn, and one that in the usual situation would be enforceable. The problem arises from the undoubted fact that enforcement of the clause in accordance with its terms against this defendant will cause him very serious economic damage.

The defendant is a lifelong resident of Baltimore who has practiced accounting in that city all his professional life. It is clear that he was required to withdraw from plaintiff firm because of dissatisfaction with his performance. To deny defendant the right to service those clients who had been developed over many years by his father and himself is to inflict on him a grievous professional injury indeed.

I appreciate that it has been strongly argued that undue hardship is not a circumstance that may appropriately be relied upon to render invalid a non-competition agreement that would otherwise be valid. See Handler and Lazaroff, "Restraint of Trade and the Restatement (Second) of Contracts", 57 N.Y.U. Law Review 669, 717-739; but cf. Restatement (Second) of Contracts, § 188(1)(b). But that issue appears not to have been definitively resolved in this state, and I see no reason for our deciding it at this stage of the litigation.

Whatever conclusion may ultimately be reached after a trial, it seems to me that a balancing of the equities here clearly weighs against the issuance of a preliminary injunction to the extent to which it denies the defendant the right to serve what are in effect his clients. As to all other clients of the plaintiff firm, I agree that there is no valid reason not to sustain the injunction that was issued.

ASCH, Justice (dissenting):

I would affirm the order of Special Term enjoining defendant from...