Executive Summary: The right to enforce a covenant not to compete may be lost when the employer first violates the terms of the same agreement, says a New York appeals court. In Fewer v. GFI Grp. Inc. et al., 124 A.D.3d 457, 2015 WL 176227 (First Dep’t. Jan. 15, 2015), the Appellate Division covering New York County rejected GFI’s attempt to enforce the covenant not to compete contained in the employment agreement of former derivatives desk president Donald Fewer because GFI breached the terms of the same agreement by demoting Fewer before he resigned. That breach also cost GFI the chance use the “employee choice” doctrine as an independent basis for enforcement of its non-compete provision.
Articles Discussing Restrictive Covenants In New York.
NY Appellate Division Rejects Challenge to Forum and Choice of Law by California Defendant
In the latest chapter of an ongoing dispute between Aon Risk Services and Alliant Insurance Services (stemming from Alliant’s hiring of dozens of Aon employees and accepting millions in annual revenue from former Aon clients), on January 10, 2013, the New York State Supreme Court, Appellate Division, First Department issued a decision upholding key rulings of the trial court that enforced Aon’s restrictive covenant agreements. Aon Risk Services, Northeast, Inc., et al v. Cusack, et al, Index no. 551673/11 (1st Dep. January 10, 2013.)
New York Court: Plaintiff Must Identify Trade Secrets
A conundrum employers face when protecting trade secrets is the obligation to identify the very secrets to be protected in litigation. A critical issue in the context of discovery is the extent to which trade secrets must be disclosed and identified by the plaintiff. When the secret is something as technical and unique as a computer source code alleged to have been used to augment a competitor’s source code library, the requirement to identify the misappropriated secret with “reasonable particularity” early in the case may become the “case within the case.”
New York Clarifies Scope of Covenant Against Business Seller’s Solicitation of Former Clients
New York’s highest court has ruled that a business seller may solicit and regain former clients for his new employer without incurring liability for improperly soliciting business under certain circumstances. Bessemer Trust Co., N.A. v. Branin, No. 63, 2011 NY Slip Op. 3307, 2011 N.Y. LEXIS 602 (Apr. 28, 2011).
Court in New York Says No Trade Secret Protection for Outdated Information Available on Internet
Outdated information on a financial services industry recruiter’s database is not protectable as a trade secret where the company did not take adequate safeguards to protect the information and the information was available on the Internet, a federal district court in New York has ruled. Sasqua Group, Inc. v. Courtney, 09-cv-528 (ADS)(ETB), 2010 U.S. Dist. LEXIS 93442 (E.D.N.Y. Aug. 2, 2010) (report and recommendation), adopted, 2010 U.S. LEXIS 98621 (E.D.N.Y. Sept. 7, 2010). U.S. District Court Judge Arthur D. Spatt adopted, in its entirety, the report and recommendation of Magistrate Judge A. Kathleen Tomlinson.