Hilb Order Motion for Preliminary Injunction by bx10fCla


									NORTH CAROLINA                                          IN THE GENERAL COURT OF JUSTICE
                                                            SUPERIOR COURT DIVISION
MECKLENBURG COUNTY                                                07 CVS 19339



               v.                                                           ORDER



           Before the Court is Plaintiffs’ Motion for a Preliminary Injunction. After considering the

Court file, the briefs and exhibits submitted by the parties, and the arguments of counsel, the

Court GRANTS the Motion in part.


           “A preliminary injunction      is an extraordinary measure taken by a court to preserve the

status quo of the parties during litigation. It will be issued only (1) if a plaintiff is able to show

likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain irreparable

loss unless the injunction is issued, or if, in the opinion of the Court, issuance is necessary for the

protection of a plaintiff's rights during the course of litigation.” Redlee/SCS, Inc. v. Pieper, 153

N.C. App. 421, 423, 571 S.E.2d 8, 11 (2002) (emphasis in original).

           The protection of customer relations against misappropriation by a departing employee is

well recognized as a legitimate interest of an employer, whether analyzed under North Carolina

or New York law.1 See United Labs., Inc. v. Kuykendall, 322 N.C. 643, 651, 370 S.E.2d 375,

381 (1988); Support Sys. Assocs., Inc. v. Tavolacci, 522 N.Y.S.2d 604, 606 (N.Y. App. Div.

    The parties agree that the Employment Agreement at issue in this case is governed by New York law.
       When the propriety of injunctive relief is a close question, the Court should consider the

relative convenience and inconvenience to the parties in determining whether to grant relief.

Setzer v. Annas, 286 N.C. 534, 540, 212 S.E.2d 154, 158 (1975). In the end, however, a party

need only show a likelihood of success on the merits, “not success itself, which may be

determined by a different fact finder . . . . It is entirely possible that a party may prove

entitlement to a preliminary injunction, yet still lose the case on the merits.” Linear Prods., Inc.

v. Marotech, Inc., 189 F. Supp. 2d 461, 467 (W.D. Va. 2002).

       In this case, the parties contest a number of issues. First, Defendant insists he never

signed the Employment Agreement that forms the basis for Plaintiffs’ request for injunctive

relief. In support of that claim, Defendant has filed the affidavit of a handwriting expert, who

opines that the purported signature of Defendant on the Employment Agreement dated 28

September 1999 is not genuine.

       Nevertheless, as to this issue, Plaintiffs have shown a likelihood of success on the merits

based on the following evidence: (1) the sworn affidavits of two witnesses indicating that

Defendant executed the Employment Agreement in their presence; and (2) Defendant’s 2002

affirmation of the original agreement, when he executed an amendment to the Employment

Agreement that specifically referenced the contested document.

       Defendant also takes issue with the scope of the Employment Agreement. To be

enforceable under New York law, a restrictive covenant in an employment agreement must be

(1) reasonable in time and area; (2) necessary to protect the employer’s legitimate interests; (3)

not harmful to the general public; and (4) not unreasonably burdensome to the employee. BDO

Seidman v. Hirshberg, 712 N.E.2d 1220, 1223 (N.Y. 1999) (citing Reed, Roberts Assocs., Inc. v.

Strauman, 353 N.E.2d 590, 593 (N.Y. 1976)). New York law, however, allows a trial court to

“blue pencil” the terms of a restrictive covenant to cure what would otherwise be an overly broad

agreement. UBS PaineWebber, Inc. v. Aiken, 197 F. Supp. 2d 436, 445 (W.D.N.C. 2002) (citing

Giller v. Harcourt Brace & Co., 634 N.Y.S.2d 646, 648 (N.Y. Sup. Ct. 1995)).

        The Employment Agreement prohibits Defendant, for three years immediately following

his termination of employment with Plaintiffs, from soliciting the following:

        (a)         “Customers,” defined as those customers of Employer for whom there
                    is an insurance policy or bond in force or to or for whom Employer is
                    rendering services as of the date of termination of Employee’s

        (b)         “Known Customers,” defined as those customers with whom
                    Employee had personal contact, or for whom Employee handled
                    insurance or bonds, or whose names became known to Employee, in
                    the course of the performance of his/her employment duties for
                    Employer; and

        (c)         “Prospective Customers,” defined as those parties known by Employee
                    to have been solicited for business within any Prohibited Service
                    within the twelve (12) month period preceding the date of termination
                    of Employee’s employment, by an employee (including Employee) or
                    agent of Employer and with or from whom, within the twelve (12)
                    month period preceding the date of termination of Employee’s
                    employment, an employee (including Employee) or agent of Employer
                    either had met for the purpose of offering any Prohibited Service or
                    had received a written response to an earlier solicitation to provide a
                    Prohibited Service.2

        At least one New York court has enforced a three year non-solicitation covenant. See,

e.g., Serv. Sys. Corp. v. Harris, 341 N.Y.S.2d 702 (N.Y. App. Div. 1973) (finding three-year

non-solicitation clause reasonable in prohibiting former maintenance supervisor from soliciting

accounts that had been managed or supervised by the employer during the eighteen-month period

preceding employee’s termination). Since the decision in Harris, however, the New York Court

of Appeals has made clear that covenants purporting to prohibit solicitation of an employer’s

 The Employment Agreement also prohibits Defendant from accepting an invitation from any of these three
categories of customers.

entire client base are unenforceable. See BDO Seidman v. Hirshberg, 712 N.E.2d 1220, 1224–25

(N.Y. 1999). Thus, it appears that the non-solicitation restrictions in the Employment

Agreement here are too broad. Despite this, however, the Court concludes Plaintiffs are entitled

to some relief to protect their legitimate business interests.

          After carefully reviewing the Employment Agreement, the Court will modify it so as to

preliminarily enjoin Defendant from soliciting, during the pendency of the trial of this case (but

in no event not longer than three years from the date Defendant resigned his employment with

Plaintiffs), those customers who were actual clients of Defendant during his employment with

Plaintiffs, that is, those customers for whom Defendant provided services.3 See BDO, 712 N.E.2d

at 1224–25 (authorizing modification of overly broad restrictive covenant along similar lines).4

The Court concludes that this modification will protect Plaintiffs’ legitimate business interests,

will not work an undue hardship on Defendant, and is not otherwise harmful to the general



          The Court GRANTS Plaintiffs’ Motion for a Preliminary Injunction in part. Defendant

is hereby preliminarily enjoined, during the pendency of the trial of this case (but in no event not

longer than three years from the date Defendant resigned his employment with Plaintiffs), from

soliciting those customers who were actual clients of Defendant during his employment with

Plaintiffs, that is, those customers for whom Defendant provided services. This injunction will

be enforceable only upon the posting by Plaintiffs of a bond in the amount of $75,000.00.

  Defendant and his new employer are not barred from servicing such customers, but any such services may only be
provided at the customer’s initiative.
  The BDO Seidman court also excluded from the reach of the covenant those “personal clients of defendant who
came to the firm solely to avail themselves of his services and only as a result of [defendant’s] own independent
recruitment efforts, which BDO neither subsidized nor otherwise financially supported as part of a program of client
development.” 712 N.E.2d at 1225. In this case, however, the evidence of record suggests there is no reasonable
method for differentiating this category of clients from those Defendant serviced during his tenure with Plaintiffs.

       Within five (5) days of the entry of this Order, Defendant shall also return all

Confidential Information to Plaintiffs, as that term is defined by the Employment Agreement,

including, but not limited to, the so-called “dead file” report referenced in paragraphs 31–36 of

the Defendant’s affidavit dated 21 December 2007.

       SO ORDERED, this the 29th day of January, 2008.

                                             /s/ Albert Diaz
                                             Albert Diaz
                                             Special Superior Court Judge


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