Investor Access Corp. v. Doremus & Co., Inc.

• Decision Date: 13 October 1992
• Citation: 186 A.D.2d 401,588 N.Y.S.2d 842
• Court: New York Supreme Court — Appellate Division
• Parties: INVESTOR ACCESS CORP., Plaintiff-Appellant, v. DOREMUS & CO., INC. and Robert Ferris, Defendants-Respondents.

Page 842

588 N.Y.S.2d 842

186 A.D.2d 401

INVESTOR ACCESS CORP., Plaintiff-Appellant, v. DOREMUS & CO., INC. and Robert Ferris, Defendants-Respondents.

Supreme Court, Appellate Division First Department.

Oct. 13, 1992.

Before MILONAS, J.P., and KUPFERMAN, ROSS, ASCH and RUBIN, JJ.

MEMORANDUM BY THE COURT.

Judgment of the Supreme Court, New York County (Harold Baer, Jr., J.), entered January 18, 1991 which, insofar as appealed from, dismissed plaintiff's complaint after a nonjury trial, affirmed, without costs.

This action was commenced by plaintiff Investor Access Corp. ("IAC") against its former employee, defendant Robert Ferris, and his present employer, Doremus & Co., Inc., seeking equitable relief and monetary damages arising out of the asserted breach of plaintiff's employment agreement with Ferris, which includes a noncompetition covenant. The complaint states that Crossland Savings, FSB engaged plaintiff to render public relations and investor relations services; that defendant Ferris was the senior account executive on the Crossland Account; that on or about February 11, 1988, Ferris left its employ to become vice president of Doremus; that in or about May 1988, Crossland informed plaintiff that it would take its account to a larger firm; and that, in or about June 1988, Crossland became a client of Doremus. The gravamen of the complaint is that Ferris "breached his contract with IAC in becoming an employee of Defendant Doremus and in servicing Crossland as a client of Defendant Doremus, in soliciting Crossland and procuring and securing Crossland as a client for Defendant Doremus, either during his employment with IAC or within twelve months of his departure."

In connection with his employment by plaintiff, Ferris signed an agreement not to compete with plaintiff which provides, in material part: "Should you cease to be an employee of Investor Access, for a twelve month period thereafter: a) You will not work in an external public relations or investor relations capacity for any company that is a client of Investor Access at the time of your departure or has been a client at any time during the twelve months prior to your departure; b) You will not solicit any organization that is then or that has been a client or prospect of Investor Access during the twelve months prior to your departure". Following a bench trial, Supreme Court held that the restrictive covenant is unenforceable.

Plaintiff's appellate brief is largely devoted to the attempt to demonstrate that its restrictive employment agreement is consistent with the public policy of this State as reflected in various appellate decisions. Plaintiff takes the position that, upon termination of his employment, Ferris was prohibited from soliciting or servicing any organization that was its client or prospective client during the twelve-month period prior to the date Ferris terminated his employment with plaintiff. While plaintiff advances both subdivisions a) and b) of the restrictive employment agreement as the basis for recovery, it avoids stating the precise language relied upon. In its brief, however, plaintiff cites this court's decisions in Mallory Factor v. Schwartz, 146 A.D.2d 465, 536 N.Y.S.2d 752, involving protection of trade secrets and Mallory Factor v. Jicka, 168 A.D.2d 344, 562 N.Y.S.2d 666, citing Mallory Factor v. Schwartz, supra in support of its claim for damages. In both cases, we upheld covenants providing that an employee would not solicit clients of his former employer for a limited period (18 and 24 months, respectively) following the termination of his employment.

The leading case in this area is Reed, Roberts Assoc. v. Strauman, 40 NY2d 303, 386 N.Y.S.2d 677, 353 N.E.2d 590, which this court construed in Gaynor & Co. v. Stevens, 61 A.D.2d 775, 402 N.Y.S.2d 398, to render an agreement not to " 'solicit, divert or take away' any of plaintiff's customers * * * unenforceable as a matter of law against a former employee unless (1) his services were 'unique' or 'extraordinary', or (2) to prevent his disclosure or use of trade secrets or confidential information (Reed, Roberts Assoc. v. Strauman, supra [40 N.Y.2d] p. 308 [386 N.Y.S.2d 677, 353 N.E.2d 590]" (see also, Garfinkle v. Pfizer, Inc., 162 A.D.2d 197, 556 N.Y.S.2d 322).

The Appellate Division, Second Department adopted this reasoning in Greenwich Mills Co. v. Barrie House Coffee Co., 91 A.D.2d 398, 459 N.Y.S.2d 454, which contains an informative discussion of the competing policy considerations in this area (91 A.D.2d at 400, 459 N.Y.S.2d 454), and of the application of the ruling in Reed, Roberts, supra, to various situations. The opinion concludes that even a mere nonsolicitation agreement, otherwise reasonable in scope, is unenforceable as a matter of law unless necessary to protect trade secrets of the former employer (91 A.D.2d at 402-403, 459 N.Y.S.2d 454).

In view of Supreme Court's explicit factual finding, after trial, that "Ferris did not solicit Crossland", which is not unreasonable under a fair interpretation of the evidence presented (Claridge Gardens v. Menotti, 160 A.D.2d 544, 554 N.Y.S.2d 193; see also, Nightingale Rest. Corp. v. Shak Food Corp., 155 A.D.2d 297, 547 N.Y.S.2d 61, lv. denied 76 N.Y.2d 702, 558 N.Y.S.2d 891, 557 N.E.2d 1187), it avails plaintiff little to establish that this covenant, subdivision b) of the restrictive employment agreement, is enforceable. If recovery is available, it must therefore be premised on subdivision a) of the agreement, relating to restrictions on the type of work Ferris could perform after leaving plaintiff's employ. This covenant prohibits "work in an external public relations or investor relations capacity for any company that is a client of Investor access" on the date employment ceased or within the preceding 12 months. The language can fairly be said to preclude Ferris from serving as an account representative for Crossland Savings, FSB, while in the employ of Doremus, as plaintiff contends.

Greenwich Mills Co. v. Barrie House Coffee Co., 91 A.D.2d 398, 402, 459 N.Y.S.2d 454, supra, noted that "a broad noncompetition covenant, as opposed to...