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SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY
Charles Edward Ramos 53
PRESENT: PART
Jus tics
Index Number : 6 0 2 5 3 8 ~ 0 0 4
BUSINESS MANAGEMENT
INDEX NO.
vs
REYNISSON, HJALTI MOTION DATE
Sequerlce Nurnber : 001
MOTION SEQ. NO.
SUMMARY JUDGMENT
MOTION CAL. NO.
I he T O I I ~ W I I I Y popon-, .._ . - , motion to/for
PAPERS NUMBERED
Notice of Motion/ Order to Show Cause - Affidavits .- Exhibits ___
Answering Affidavits - Exhibits
Replying Affidavits .-. __ . .
Cross-Motion: I I Yes I 1 No
Upon the foregoing papers, it is ordered that
.U
Check one: 'J' FINAL DISPOSITION n NON-FINAL DISPOSITION
Check if appropriate: I 1 DO NOT PQST
SUPREME COURT OF THE STATE OF NEW YORK
comn OF NEW YORK:COMMERCIAL DIVISION
-X
BUSINESS MANAGEMENT INTERNATIONAL, INC.,
Plaintiff,
Index No. 602538/04
-against: -
IIiJALTI KEYNISSON, VALENTIN GVOZDEV,
WILLIAM KOPELCHECK, JOHANN HELGASON
arid LABYRINTH BUSINESS SOLUTION, LLC.,
Defendants.
-----_----_- __----------______-------
Charlea Edward Ramos, J . S . C . :
This dispute arises out of the alleged breach of. r,estrictive
covenants in an employment agreement and the alleged intentional
interference with contractual relationships. Defendants Hijalti
Reynisson, Jclhann Helgason, William Kopelcheck and Va1entri.n
Gvozdev and Labyrinth Business Solutions ("defendants") seek
sumiiiary judgment pursuant to CPLR 3212.
BACKGROUND
Plaintiff Business Management International's ( I I B M I " )
alleges that defendants breached contractual obligations arising
from agreements whi,ch, among other things, prohibit defendants
from: (1) working for another Navision provider f o r one year
a f t e r - termination f r o m BMI; (2) working within a sixty (60) mile
radius of any BMI office; (3) intentionally interfering with
contractual relationships; and (4) disclosing any EM1
confidential information. Specifically, BMI's underlying
complaint alleges five causes of action: (1) breach of contract;
(2) breach of contract by engaging in barred employment with a
N a v i s i o r i reseller and by sharing BMI's confidential information
with third parties; (3) intentional interference where Labyrinth
enticed Reynisson to terminate employment with BMI; (4)
intentional interference where Reynisson enticed Helgaaon to
terminate employment with BMI; (5) unauthorized use of trade
secrets where Kopelcheck and Gvozdev have taken BMI's
confidential information and disclosed it to Labyrinth in
furtherance of their goal of selling Navision software
modifications.
THE PARTIES
BMI, a Microsoft Naviaion Reseller based in New York,
provides soft-ware solutions through the licensing, use and
modification of Navision. Navision is an accounting software
program which Microsoft licenses and distributes to companies
such as BMI, who then insta1l.s t h e product at third party
end-users.
Defendants Gvozdev and Kopelcheck are former employees of
,
BMI and the founders of Labyrinth Business Solutions (I'LBS") and
like BMI, is a Navision software solution provider. BMI
maint.ains numerous offices in the Eastern region of t h e United
Stakes - Massachusetts, Connecticut, New York, New Jersey,
Pennsylvania, Maryland, South Carolina, Georgia, and F l o r i d a -
and in Canada.
Defendants Reynisson and Helgason are former employees of
BMI who emigrated, with t h e assistance of BMI, f r o t n Iceland to
the United States to work as computer programmers on the Navision
product for RMI in Massachusetts.
2
THE EMPLOYMENT AGREJZMENT
In March, 2002, Reynisson, signed an offer letter
("Reynisson Letter"), which set forth the terms of his
employment, including position, office location, salary, starting
date, and other benefits. Under the heading Employment
Agreement, tl-le perti.nent part of the Reynisson Letter s t a t e s :
Upon arrival in the United States and prior to the
start of employment, it is agreed that you will sign a
standard BMI Employment Agreement. The Agreement
includes the following terms:
-Employee will keep a l l BMI-related and client related
information cornpl.etely and permanently confidential.
-Employee will not accept employment from any BMI client for
one year after termination of employment.
-Employee will not accept employment from any Navision
solution provider within a sixty miles radius of any BMI
office w i t h i n N o r t h America f o r one year after termination
of employment,
Helgasoii signed a similar offer letter ("Helgason Letter"),
signed in March, 2002, which specifies the s a m e terms of
employment. According to the July 22, 2005 Reynisson Affidavit
and the July 22, 2005, Helgason Affidavit, Reynisson and Helgason
stated that they rejected the formal BMI employment agreement
and, t . h u s , never signed it. Further, BMI does not provide a
signed copy of either Reyniason's or Helgason's employment
agreeine ntl.
It is conceded that Reynisson negotiated a salary,
negotiated amendments to his employment terms, and l a t e r received
a salary raise.
On June 23, 2004, Reynisson announced that he was
terminating his employment with BMI. On July 29, 2004, Helgason
a l s o announced that he was terminating his employment with BMI.
3
Shortly thereafter, LBS hired defendants Reynisson and Helgason.
Both Reynisaon and Helgason state that they commenced employment
with LBS in August of 2004 out of LBS' Charlestown, Rhode Island
office .
THE N A V I S I O N AGREEMENT
BMI operates under the Microsoft Business Solutions North
American Partner Agreement ( "Navision Agreement" ) which specifies
C i terms of the licensing agreement between BMI and Microsoft
le
Under t h e heading "DEFINITIONS, the agreement provides :
I1
"Customization" means Derivatives and Modules.
"Derivatives" means those changes, modifications,
enhancements, revisions and alterations made by or on
beha1.f of Partner to the Software for each individual
Customer using Software Development Tools. llModulesll
means any computer software added to the Software
independently developed by or on behalf of the Partner
for one or more Customers using the Software
Development Tools.
Under the heading "PARTNERS ENGAGING IN CUSTOMIZATION,"
section A. , the subsection titled "Development Customizations"
provides :
Partner is hereby granted a license at no charge to use
each of Software Development Tools f o r the purpose of
developi.ng Customizations pursuant to the Software
License Agreement. Partner s h a l l be solely responsible
for and bear any and all liability for Customizations
with regards to any provision of such Customizations to
or use of such Customizationa by its Customers.
Under the heading "TERM AND TERMINATION," section F . , the
subsection titled "Code to Cuatomizations" provides:
Partner shall, without any compensation of any kind,
provide to Microsoft Business Solutions, in source and
object code, a l l customizationa for all Customers and
a l l materials necessary to permit Microsoft Business
Solutions to assure that the Customer is provided
Professional Services for the Software as modified.
4
MOVANT'S ARGUMENT
Defendants filed this motion seeking summary judgment on the
grounds that. (1) BMI has failed to provide evidence of a v a l i d
contract; (2) even if the agreement was proved, the contractual
restrictions are unenforceable; ( 3 ) Reynisson and Helgason never
violated the terms of the alleged agreement; and (4) no
confidential information or trade secrets were ever divulged.
F i r s t , defendants argue that Reynisaon and Helgason are n o t
s u b j e c t to the Employment Agreement because they never signed t h e
agreement. Defendants s t a t e that BMI cannot produce evidence of
a signed employment agreement. Specifically, defendants state
that BMI cannot produce the originals or copies of t h e signed
Employment Agreements. Therefore, defendants argue, Reynisson
and Helgason did not breach any contract because no agreements
existed.
Second.,defendants argue that the restrictions contained i n
the offer letters to which Reynisson and Helgason may have been
subject to are not enforceable because the restrictions are
unreasonable in area, not necessary to protect BMI's 1egitirnat.e
interests, harmful to t h e general public and unreasonably
burderisorne. In light of BMI' s numerous offices, d e f e n d a n t s argue
that t h e sixty (60) miles radius prohibition would effectlvely
preclude Keynlisson and Helgason from working f o r a Navisj.on
solution provider in the tri-state area and most of the
Northeast, from Washington, D.C. up t.o Manchester, Maine. Next.,
defendants argue that the restrictions are not necessary t.0
5
protect BMT’s legitimate interests because (1) no trade secrets
are at issue, ( 2 ) BMI does not allege that defendants are
disclosing confidential information about BMI customers or
solj.citing customers, and (3) BMI admits that Reynisson and
Elelgason were not unique.
To support i r s claim that trade secrets are not at issue,
defendants argue that the purported trade secrets are proprietary
to Navision, not BMI, and t h a t EM1 does not allege that trade
secrets have been stolen. Next, defendants contend that the
restrictions would be unreasonably burdensome to the employees
because the restrictions would prevent Reynisson and Helgason
from working in most of the tri-state area and much of the
North.east. Furthermore, the restrictions would harm t h e general
public because healthy competition would be stifled.
Accordingly, for the reasons above, defendants argue that the
restrictions are not enforceable.
Third, defendants argue that Reynisson and Helgason never
violated the geographical restriction because they were actually
employed outside of t h e sixty (60) miles radius prohibition.
Accordingly, Reynisson and Helgason did not breach the
contractual restricti o n s .
Fourth, defendants argue that the intentional interference
claim must f a i l because the contractual restrictions are not:
enforceable.
L a s t . l y , defendants argue that no defendant disclosed any
confident-ial information or trade secrets because no t r a d e
6
secrets exist:.
OPPONENT‘S ARGUMENT
BMI argues that defendants should be denied summary judgment
in t-heir favor because numerous material issues of fact remain
and the undisputed facts do not support a p r i m a facie showing of
the necessary facts to warrant sumtnary judgment.
First, BMI argues that even without signed agreements,
Rcyiiissori a i Helgason are bound to their agreements because (1)
rd
both parties performed and relied on the terms of the standard
HMI employment. agreemerit and (2) the separate documents may be
read together to satisfy the Statute of Frauds.
Second, BMI argues t h a t the restrictions upon Reynisson arid
Helgason are enforceable under a reasonableness test. BMI argues
that the restrictions(1) are no greater t h a n is required for the
protection of the legitimate interest of the employer; (2) do riot
impose undue hardship on t h e employee; and (3) are not injurious
to the public.’
BMI argues that. a sixty (60) miles r a d i u s prohibition is no
qr-eaLer t h a i required because courts have repeatedly found a
sixlry mile restriction f o r one-year’s time to be reasonable.
Ncxt, BMI argues that the restrictions a r e necessary to protect,
EM1 s legitimate interests because t h e terms (1) prevent
Reynisson’s and Helgason’s solicitation and disclosure of trade
’Although BMI identifies the three-prong test for
e s t a b l i . s h i n g reasonableness in e n f o r c i n g restrictive coveiiaiits,
RMT proceeds to list ten arguments without identifying which
prong of the test t h e y speak to.
7
secrets; (2) prevent defendants' release of confidential
information; ( 3 ) prevent the loss Reynisson's and Helgason's
special and unique skills to competitors; and (4) protect client
relationships developed by an employee at the employer's expense.
RMI argues that its Navision software modifications, referred to
as "Derivatives" and "Customizations" in the Navision Agreement,
demonstrate t-he ownership of trade secrets. Additionally, BMI
provides a list of what BMI considers trade secrets. With
respect, to protecting confidential information, BMI argues t h a t
its modifications created by Reynisson and Helgason are
confidential information belonging to both customers and BMI. In
regards to preventing the l o s s of Reyniason's and Helgason's
special and unique skills to competitors, RMI argues that
deposition statements made by a former employer and part owner of
BMI stating that Reynisson and Helgason were not unique employees
do not preclude a finding that t h e i r skills were in fact unique.
Nor do Reynisson's and Helgason's sworn affidavits stating that
they are readily replaceable preclude a similar finding. Rather-,
BMI argues, that if BMI could not immediately replace Heynj.sson
and Helgason with programmers capable of performing at
Reynisson's and Helgason's high level, they should be considered
unique. Lastly among its legitimate interests, BMI argues t h a t
protecting client relationships developed by employees at the
employer's expense constitute a legitimate interest.
Third, BMI argues that defendants have only addressed the
rion-competition covenant in the offer letters, ignoring two
8
additional covenants in the offer letters. BMI argues that
Reynisson’s or Helgaaon’a breach of any of the t w o remaining
covenants could serve as a basis to support its breach of
contract cause of action. Accordingly, BMI argues that
defendants’ failure to address either additional covenant proves
fatal to its motion for summary judgment.
Fourth, RMI also argues that Reynisson and Helgaaon breached
the geographic rest.ri.ctionbecause they began working wit.1ii.n the
restricted area, despite later moving outside of the restricted
area.
Lastly, BMI argues that it possesses trade secrets -
comprised of its computer code, customer l i s t s , customer
information, pricing policies, and business contracta - all of
which could have been taken by all defendants.
ANALYS IS
Summary Judgment Standard
It is well established that to prevail on a summary judgment
motion, the rnovant bears the burden of demonstrating entitlement
to judgment as a matter of law by presenting sufficient evidence
to show no material issues of fact exist. A l v a r e z v Prospect
Hosp., 68 NY2d 320, 324 (1986). Once the burden has been met,
the non-movant then bears the burden to present evidence
demonstrating the existence of a triable issue of fact. Id.
Inferences are to be made in t h e light most favorable to the
non-movant. F i s h a n v Beach, 214 AD2d 920, 9 2 2 (3rd Dept 1.995).
Validity of an Unsigned Contract
9
G e n e r a l StandardB
Defendants assert that the employment agreement is invalid
due to the absence of an BMI employment agreement f o r either
Reyriisson or Ilelgason containing their signatures. However, New
York “has long held that a contract may be v a l i d even if it j.s
n o t signed by the party to be charged, provided its subject
matter- does not implicate a statute - - such as the statute of
frauds (General Obligations Law § 5-701) -- that imposes such a
requirement . I J F’lores v L o w e r E. S i d e Serv. Ctr., I n c . , 4 N Y 3 d
363, 368 (2005). However, in determining whether a valid
contract exists in the absence of an signed agreement, courts
question whet-her it was the intention of the parties that a
signed writing was required before an agreement existed.
Validity of S i g n e d Employment Letter and Unsigned Employment
Agreement
T h i s Court concludes that a valid contract exists between
BMI and Reynisson and Helgason by reason of the signed letter
agreement. The f a c t that the parties did contemplate execution
of another more formal contract does not affect the existing
agreement, but it does limit the parties’ agreement to the letter
agreement only. The defendants’ unwillingness to ex,ecute a more
formal agreement bars enforcement of that document, absent,
exceptional circumstances not, present here.
Enforceability of Restrictive Covenants
General Standards
Defendants assert that if the courts were to find a valid
10
agreement, the restrictive covenant would not be enforceable
because the terms are not reasonable. With few exceptions, New
York courts are generally reluctant to enforce restrictive
covenants contained in employment agreements due to public policy
consider-ationa which militate againat sanctioning the l o s s of a
person‘s livelihood. P u r c h a s i n g A s s o c i a t e s , Inc. v W e i t z , 1 3
NY2d 267, (1963). Notwithstanding a valid contract, however,
restrictive covenants must be scrutinized for reasonableness in
order t.o be enforceable. See i d . Restrictive covenants are
generally enforceable only if t h e y meet the standard of
reasonableness. Reed, Roberts A s s o c i a t e s , Inc. v S t r a u m a n , 40
NY2d 303, 307 (1976). The Court of Appeals, in BDO Seidman v
Hirshbe.rg, 93 NY2d 382, 388-89 (1999), has articulated the
standard f o r determining the reasonableness of anti-competition
employment agreements. “A restraint is reasonable o n l y if it:
(1) is no greater than required[,] (2) f o r the protection of the
1,egitimate interest of the employer, (3) does not impose undue
hardship on t h e employee, and (4) is not injurious to the
public.” See id.
The first prong of t h e BDO Seidman test a s k s whether the
restraint is greater than is required. See id. In determining
whether a geographic restriction in an anti-competition covenant
is g r e a t e r than required, there is no bright line marking where
the geographic scope becomes overbroad. Compare Natsourcc LLC v
P a r i b e l l o , 151 F Supp 2d 465, 471 (SDNY 2001) (holding that a
restriction unlimited in geographic scope was reasonable and
11
necessary) w i t h Michael I. W e i n t r a u b , M. D . , P . C . v S c h w a r t z ,
131 A B 2 d 663, 665 (2nd Dept 1987) (finding that a restriction of
five miles was unreasonable and overbroad). Courts must weigh
the relative burdens between the employee’s poten.tia1 loss of
livelihood and the employer’s 1-egitimate interests - See G e l d e r
Medicyal Group v Webber, 41 N Y 2 d 6 8 0 , 685 (1977). In U n i s o u r c e
Worldwide, I n c . v V a l e n t i , 196 F Supp 2d 269, 27‘1 (SDNY 2002) ,
t h c Court. considered, among other things , the reasonableness of
the geographic limitations of an restrictive covenant. The terms
of t h e restrictions prohibited the employee‘s work activities:
“within New York City or within a 100 mile radius of
New York City or within any other marketing area
currently serviced by the Company, or within any other
marketing area which later comes under Employee’s
supervision or responsibility as part of the SWC
Division or Unisource.”
Td. Reasoning that the employer was a large company, which
serviced clients throughout the country, the court found the
geographic limitation to cover a l a r g e area and to be
unreasonable.
In the event this Court finds the geographic restriction
overbroad, BMT urges this Court to exercise partial enforcement
of the restrictive covenant. Partial enforcement may be allowed
when the employer can demonstrate an absence of overreaching,
coercive use of dominant bargaining power, or other
anti-competitive misconduct. BDO S e i d m a n at 394. As a threshold
matter, t h e employer must initially have acted in good faith to
protect a legitimate business interest. Id.
The second prong of the BDO Seidman test asks and whether
12
the restriction is necessary to protect a legitimate interest of
the employer. See id. A legitimate interest of the employer may
be any of the following where the former employee: (1)
misappropriated trade secrets; (2) disclosed confiden.tia1
customer information; ( 3 ) possessed unique or extraordinary
s k i . l l s , T i c o r T i t l e Ins. C o . v Cohen, 173 F3d 6 3 , 7 0 (2nd C i r
1998); or ( 4 ) exploited IIthe goodwill of a client or customer,
which had been created and maintained at the employer's expense,
t-o the employer's competitive detriment.'I Scott, S t a c k r o w 5; Co.,
C.P.A's, P.C. v S k a v i n a , 9 A D 3 d 805, 806 (3rd Dept 2004).
To demonstrate t h a t a restriction is necessary to protect an
employer's legitimate interest, the employer may show that the
former employee misappropriated trade secrets. The Court of
Appeals has stated that there is no general rule defining a trade
secret except f o r that found in t h e Restatement of Torts 5 757,
comment b. A s h l a n d Management v J a n i e n , 8 2 N Y 2 d 395, 4 0 7 (1993).
Trade secret determinations involve several considerations:
"(1) the extent to which the information is known
outside of [the] business; (2) the extent to which it
is known by employees and others involved in [thel
business; ( 3 ) the extent of measures taken by [the
business1 to guard the secrecy of the information; (4)
t h e value of the information to [the business] and
l i t s l competitors; (5) the amount of effort or money
expended by [the business] in developing the
information; ( 6 ) the ease or difficulty with which the
information could be properly acquired or duplicated by
others. I'
Restatement of Torts 5 757, comment b. Accordingly, "a trade
secret must first be secret: whether it is generally a question
of fact." A s h l a n d Management at 407.
13
Alternatively, to demonstrate that a restriction is
necessary to protect an employer's legitimate interest, the
employer may s h o w that the former employee disclosed confidential
customer' information. Another wa.y to demonstrate that a
restriction is necessary to protect an employer's legitimate
interest, the employer may show that the former employee
possessed unique of extraordinary skills. Lastly, to demonstrate
that a restriction is necessary to protect an employer's
legitimate interest, the employer may show that the former
employee exploited the goodwill of a client or customer to the
employer's detriment.
Returning to the ED0 S e i d m a n reasonableness test, the third
prong a s k s whether the restrictions impose any undue hardship on
rd
the employee a i the fourth prong asks whether the restrictions
are injurious to the public. See BDO Seidman at 3 8 8 .
The Reasonableness T e s t as Applied t o BMI's Restrictive Covenants
Irrespective of a valid agreement between the parties, the
rest-rictions of the anti-competitive covenants are unenforceable.
First, under- the reasonableness test, this Court must consider
whether the restrictions in t h e letter agreements (and reiterated
in the unsigned employment agreements) are greater than r e q u i r e d .
H c r c , the burden imposed on Reynisson and Helgason in the
enforcement. of the restrictions outweighs the relative burden
imposed on plaintiff in the absence of the restrictions. On the
one hand, the geographic restriction would effectively preclude
Reynisson a i Helrjason from earning their livelihood in at least
rd
14
i
cl.ever-i l l ) cities in North America. Further, within each of
those cities, Reyniason and Helgason would be precluded from
working for any Navision Reseller within a sixty (GO) miles
radius from any BMI office. As defendants state, the practical
effect, of t-lie geographic restriction covers virtually all of t.he
'Tri-State area and the most of the Northeast region. On the
other hand, RMI fails to show that a sixty (60) mile limitation
is r-ieccssary to protect its legitimate interests. As will be
discussed in further detail below, BMI f a i l s to show that the
sixty ( 6 0 ) m i l e limitation is necessary to (1) prevent
Reynissoin's and Helgason's misappropriation of trade secrets; (2)
prevent defendants' release of confidential information; (3)
prevent the l o s s of Reynisson's and Helgason' s special and unique
s k i J . l s to competitors; and (4) protect client relati-onships
developed by an employee at the employer's expense. Moreover,
just as the restrictive covenant in Unisource prevented the
employee from working within any mark-eting area serviced by t h e
empl.oyer-in cities throughout the country, t h e restrictive
covenants j.n this case prevent Reynisson and Helgason from
working f o r il Navision seller within the same city as one of l 3 M I
many offices nationwide. Similarly, just as the court in
U n i s o u r c e found the geographic limitation unenforceable f o r being
overbroad, this Court finds that the geographic limitation in
this case unenforceable for being overbroad.
With respect to BMI's argument for partial enforcement,
application of the BDO Seidman f a c t o r s militate against partial
15
enforcement in this case. As will be discussed in greater detail
below, BMI fails to demonstrate that its restrictions serve to
protect legitimate interests. Further, BMI fails to demonstrate,
or even argue, t,he absence of overreaching, coercive u s e of
dominant bargaining power, o r other anti-competitive conduct.
JUS^ as the plaintiff in Skavina asserted t h a t simply because
"the restrictive covenant can be partially enforced, it should
be," EM1 simi.larly argues. S k a v i n a at 8 0 7 . Accordingly, just. as
the court in S k a v i n a rejected this argument, so does this court.
I'd.
Next, under the reasonableness test, this Court must
consider whether the restrictions are necessary to protect BMI's
legitimate interests. Namely, this Court must determine whether
the restrictions are necessary in o r d e r for BMI to (1) prevent
Reynisson's and Helgason's misappropriation of trade secrets; (2)
prevent defendants' release of confidential information; (3)
prevent the loss Reynisson's and Helgason's special and unique
skills to competitors; and (4) protect client relationships
developed by an employee at the employer's expense. Defendants
argue th.at BMI cannot claim its Navision code constitutes a trade
secret because t h e Navision code is proprietary to Microsoft.
BMI responds that i t does not claim t h a t the Navision code itself
constitutes a trade secret, rather, that the cuatomizations and
derivative w o r k made for customers are proprietary to BMI and
consti.tu.te trade secrets, The Navision Agreement accords w i t h
BMI. As the Navision Agreement indicates, BMI's Navision
16
servi.ces consist of “changes, modifications, enhancements,
made by or on behalf of Partner to the
revi-sions and al.t>erations
Softwarc [RMT] for each individual Customer, If thus fallinq under
t h e definiticn of “Customizations,’by virtue of being a
“Derivative. If With respect to the rights of t h e custornizations,
the Navision Agreement also states “Partner [BMI] shall be sol.ely
responsible f o r and bear any and a l l liability for Customizations
with regards to any provision of such Customizations to or use of
such Customizations by its C~istomers.” Thus, the clear terms of
the Navisiorl Agreement state that the customizations and
derivative works made for customers are proprietary to HMI.
However, that fact t h a t the customizations and derivative
works made for customers may be proprietary to BMI does r i o t prove
that its code constitutes a trade secret. BMI fails to discuss
the relationship of BMI s customizations in light of the any
considerations identified by the Restatement of Torts for
defining a trade sccret. BMI does not present evidence (1) that
the i.nfor.rnaI:ion is riot generally known outside of its husincsu;
(2) that employees or others involved in BMI‘s business do not:
know t h information; (3) t-hat measures were taken. to guard the
;e
information‘s secrecy; (4) that the information possesses value
for HMI or BMI competitors; (5) that effort or money was expended
by BMI i n developi.ny the information; ( 6 ) that it w o u l d be
diffic:ult: for ot.her-sto acquire or duplicate the information.
T h u s , BMI c a n n o t demonstrate that the restrictions are necessary
to protect trade secrets because it has failed to demonstrate
17
that trade secrets exist.
Likewise, with the three remaining possibilities that may
demonst-rate that BMI’s restrictions are necessary to protect
legj-timate interests, BMI fails to demonstrate that material
issues o f fact exist. As defendants point out, EM1 does not
argue that defendants have disclosed confidential information or
have solicited customers. EM1 claims that its Navision
m0di.f cations \\woiildbe considered confidential information of
i
BMI’s customers as well as of BMI.” Yet, EM1 states neith.er what
disclosures were made nor what evidence supports this claim.
Accordingly, BMI does not demonstrate that the restrictions are
necessary to prevent Reynisson and Helgaaon from disclosing
confidential information.
Defendants also argue that BMI cannot demonstrate that
Reynisson and Helgason are unique or special.. To that, end,
defendants provide evidence from BMI’s former vice-president and
BMI’s current president, by way of the June 2, 2005 Fischer
deposition a n d the November 17, 2004 Schiff deposition, admitting
that Reynisson and Helgason are neither unique nor special
employees. Not only do BMI‘s former vice-president and current
president state that Reynisson and Helgason are not unique, but
Reynisson and Helgason themselves state t h a t their s k i . 1 I . s are
readily replaceable, In response, BMI argues that statements
made by a former BMI vice-president, the BMI president, Reyrlisson
rd
a i Helgason should not preclude a finding that Reynisson and
Helgason are unique. To advance this argument, however, B M I
18
con] e c t u r e s that “if there are no Navision programmers
immediately capable of performing at defendant‘s high level, then
th,eirskills and talents, and t h e relationships BMI has allowed
lir
t - e nto form wi,th clients, may certainly be called ‘ u , n i q u e . ‘‘I
Defendants have demonstrated that neither employee was unique t.o
be “of s u c h character as to make replacement impossible,”
Purchasing A s s o c i a t e s , Inc. v W e i t z , 13 NY2d 267, 274 (1963).
F’ur-ther, BMI fails to contradict defendants‘ assertj.ori that
Reynisson or Hclgason are unique. Accordingly, BMI does not:
demonstrate that the restrictions are necessary to prevent the
loss of unique employees because BMI f a i l s to show that Reynisson
or Helgason are unique employees.
A n d lastl.y, BMI a r g u e s that it must protect its client
relationships acquired by R e y n i s a o n and Helgason in the course of
their employment with BMI. BMI correctly expl.ains that
protection from exploiting the goodwill of a client constitutes I
;
legitirnatc interest,. However, BMJ neither explains how the
goodwill of a client will be exploited nor what evidence supports
s u c h a claim. Accordingly, BMI fails to demonstrate that the
r e s t r i c : t . i o n s a r e necessary to protect client relationships
devel.oper3 by an employee at the employer’s expense.
Under t h e third and f o u r t h prongs of the reasonableness
test, this Court must consider whether enforcing t h e restrictions
w o u l d be unduly burdensome to the employee and harmful to the
pub1.ic . Defendants state that enforcement of the restrictions
would effectively bar Reynisson and Helgason from working for
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Navision suppliers in virtually the entire Tri-State area and
much of the Northeast region. Further, defendants state the
enforcement of the restrictions would stunt healthy competition.
A c c o r d i n g l y , defendants demonstrate that the restrictions would
be unduly burdensome to Reynisson and Helqason and harmful to the
public. However, BMI addresses neither the third or fourth
prongs of the reasonableness test and, thus, fails to demonstrate
the existence of issues of fact as to the third and fourth
prongs.
Therefore, this C o u r t should conclude that, irrespective of
a valid agreements between BMI and Reynisson and Helgason, the
restrictive covenants in the agreement are not enforceable
because defendants demonstrate that no material issues of fact
exist as to the restrictions being unreasonable. Moreover, BMI
fails to demonstrate the existence of issues of fact exists as to
the reasonableness of the restrictionsV2
'Defendants argue that even if the court were to find a
valid contract and the terms of restrictive covenants
enforceable, Reynisson and Helgason did not breach the
contractual restrictions. Defendants claim Reynisson and
Helqason never violated the geographical restriction because they
were actually employed outside of sixty (60) miles radius
prohibition. Defendants have presented sworn affidavits testzing
to s u c h and have presented business c a r d s indicating employment
in Charlestown, Rhode Island. In response, BMI also argues that
Reyriissori a i Helgason breached the geographic restriction
rd
because they began working within the restricted area, despite
later moving outside of the restricted area. BMI argues that
Reynisson's and Helgason's H1-B immigration documenrs list
Uxbridge, Massachusetts as the office of employment. Defendants'
rejoinder argues that Uxbridge, Massachusetts was a planned
office that: fell through. Because this C o u r t finds that the
terms of the restrictive covenants are unenforceable, the
question of whether Defendants Reynisson and Helgason violated
the geographical restriction by their employment within sixty
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Intentional Interference
The intentional interference claims must be dismissed
because valid agreements do not exist between BMI and defendants
Reynj.ssori and Helgason prohibiting such interference.
Misappropriation of Trade Secrets
As discussed above, BMI fails to demonstrate that j.ts code
constitutes a trade secret. Notwithstanding the question of
whcther- trade secrets exist, BMI a l s o f a i l s to demonstrate the
existence of factual issues as to whether trade s e c r e t s were
actually misappropriated f o r t h e purposes of opposing defendanlrs’
summary judgment motion. Defendants state that Reynisson and
Helgason neither possessed trade secrets n o r divulged trade
secrets. Reynisson and Helgason have submitted sworn affidavits
maintaining t h a t they neither possessed confidential information
nor disclosed any confidenLial information. BMI fails to r a i s e a
question that Reynisson or Helgason possessed or divulged trade
secrets. Moreover, BMI fails to demonstrate that it possesses
trade secrets. BMI reiterates conclusory statements, without
evidentiary s u p p o r t , that it possesses trade secret information
“ w h i c h could have fallen into the hands of the human defendants
in this case, all of whom had access to such information by their
former employment with BMI.”
CONCLUSION
Accordingly, defendants’ motion for summary judgment is
granted -
( 6 0 ) miles of a BMI office is moot.
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The clerk is hereby directed to enter judgment dismissing
the c o m p l a i n t in its entirety. This s h a l l constitute t h e
decision and order of this C o u r t .
Dated: J a n u a r y 2 7 , 2006
Counsel are hereby directed to o b t a i n an accurate copy of I
this Court's opinion from the record room and not to rely on I
decisions obtained from the internet which have been altered in
the scanning process.
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