Service Systems Corp. v. Harris

• Decision Date: 23 February 1973
• Citation: 41 A.D.2d 20,341 N.Y.S.2d 702
• Parties: SERVICE SYSTEMS CORPORATION, Respondent, v. James F. HARRIS, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 702

341 N.Y.S.2d 702

41 A.D.2d 20

SERVICE SYSTEMS CORPORATION, Respondent, v. James F. HARRIS, Appellant.

Supreme Court, Appellate Division, Fourth Department.

Argued Jan. 11, 1973.

Decided Feb. 23, 1973.

[41 A.D.2d 21] Joseph A. Martino, Albany, for appellant.

Saperston, Wiltse, Day & Wilson, Buffalo, for respondent; Herbert J. Lustig and Bruce D. Drucker, Buffalo, of counsel.

Before GOLDMAN, P.J. and DEL VECCHIO, WITMER, SIMONS and HENRY, JJ.

OPINION

GOLDMAN, Presiding Justice:

Defendant appeals from an order which granted a preliminary injunction to his former employer which restrained him from violating a restrictive covenant not to compete comtained in the contract he executed when he entered respondent's employment.

The respondent corporation has for many years engaged in the business of providing building maintenance services to industries and institutions. The appellant has had many years of experience as a supervisor and management executive in the kind of business operated by respondent.

On February 1, 1971 the respondent entered into a contract with the appellant to serve as regional director of respondent's Albany office. He also had responsibility for operations and sales in territory extending into northern New Jersey. The one year employment contract designated appellant as management executive at an annual salary of $19,500. Insofar as pertinent, the contract provided that the appellant recognizes that respondent had invested much time and money in developing standards, controls, techniques and practices unique in the business and agrees that, for a period of 3 years subsequent to the termination of his employment, appellant would not solicit the maintenance of any building which had been managed or supervised by the respondent during a period of 18 months preceding the termination of his employment, assuming that appellant had been involved in the operation or solicitation of the facilities during the 18-month period. An additional restriction applied to customers of the respondent in the geographical area to which appellant was assigned or which he supervised or worked in during any part of a 9-month period preceding employment termination.

As a result of appellant's solicitation, respondent began serving a large shopping center and office development known as Stuyvesant Plaza, Inc. in Albany. At the end of January 1972, Stuyvesant notified respondent that it was making other housekeeping arrangements as of March 1, 1972. Two days after reception of such notice, appellant notified respondent of his resignation and informed it that he was taking the Stuyvesant account. According to the moving papers, appellant had been carrying on a disparaging campaign against his employer, indicating that all top personnel in the maintenance department were leaving and also that respondent would be unable to service Stuyvesant. Appellant began servicing Stuyvesant on March 1, 1972.

Respondent sought a preliminary injunction in March 1972 for enforcement of clause sixth of the agreement providing for non-competition for 3 years after employment termination and also for a non-disclosure of confidential information; injunctive relief preventing the appellant directly or indirectly from soliciting respondent's customers and from disparaging respondent; and respondent also sought an accounting for proceeds wrongfully diverted by appellant and for all damages sustained by respondent. Special Term granted the respondent's application for a preliminary injunction pending the final determination of the action.

The issue is whether the restrictive covenant is enforceable by injunctive relief. A resolution of that problem depends upon two factors: (1) whether the provisions of the covenant are reasonable in scope and (2) whether the services performed by the appellant are unique or extraordinary. On this record both questions must be answered in the affirmative.

Employment contracts with restrictive covenants have not always been looked upon with favor by the courts. They were considered as contracts in general in restraint of trade and void as against public policy (Diamond Match Co. v. Roeber, 106 N.Y. 473, 479--484, 13 N.E. 419, 420--423). With changing economic conditions, it eventually became clear that contracts restricting a person from carrying on a particular business were not per se to be regarded as in restraint of trade and, therefore, void (Wood v. Whitehead Brothers Co., 165 N.Y 545, 550--551, 59 N.E. 357, 358--359; Kaumagraph Co. v. Stampagraph Co., 235 N.Y. 1, 138 N.E. 485).

Postemployment restraints present an effective method of preventing unscrupulous competition by employees who may attempt to appropriate valuable trade information and to take advantage of customer relationships for their own unfair personal gain. On the other hand, these covenants restrict the economic mobility of employees and their personal freedom. There are certainly policy considerations which necessitate looking with disfavor upon approving the loss of a man's ability to earn a living and courts are careful to balance the interests of employer, employee and the public welfare. Employers should be afforded reasonable protection from the pirating of their business by disloyal employees who agree by contract to refrain from such unfair activities (Bates Chevrolet Corp. v. Haven Chevrolet, Inc., 13 A.D.2d 27, 213 N.Y.S.2d 577; 16 A.D.2d 917, 229 N.Y.S.2d 168, affd. without opinion 13 N.Y.2d 644, 240 N.Y.S.2d 759, 191 N.E.2d 290; Millet v. Slocum, 4 A.D.2d 528, 167 N.Y.S.2d 136, affd. without opinion 5 N.Y.2d 734, 177 N.Y.S.2d 716, 152 N.E.2d 672; Lynch v. Bailey, 300 N.Y. 615, 90 N.E.2d 484; Murray v. Cooper, 268 App.Div. 411, 51 N.Y.S.2d 935, affd. without opinion 294 N.Y. 658, 60 N.E.2d 387; Foster v. White, 248 App.Div. 451, 290 N.Y.S. 394, affd. without opinion 273 N.Y. 596, 7 N.E.2d 710; Super Maid Cook-Ware Corp. v....