Opinion
02-CV-0721E(Sc)
January 3, 2003
MEMORANDUM AND ORDER
This decision may be cited in whole or in any part.
Plaintiff Ikon filed this action October 9, 2002 against a former employee, Leichtnam, and his current employer, Doculegal, to enforce an employment agreement that purportedly prohibits Leichtnam from, inter alia, contacting Ikon customers. Ikon asserts claims for breach of contract, misappropriation of trade secrets, tortious interference with business relations, tortious interference with contractual relations, and breach of duty of loyalty and fiduciary duty. On November 14, 2002 Ikon moved seeking (1) a preliminary injunction enjoining defendants from contacting Ikon customers and engaging in unfair competition and (2) leave to take immediate discovery before the preliminary injunction hearing scheduled for January 31, 2003. Doculegal moved to dismiss the Complaint on November 15 and Leichtnam so moved on November 19. For the reasons discussed below, defendants' motions to dismiss will be denied and Ikon will be granted limited discovery as noted below. Leichtnam also cross-moved for denial of Ikon's motions for preliminary injunction and expedited discovery. Such will be denied without prejudice.
The first page of the Complaint indicates that Ikon is asserting claims for tortious interference with contractual relations and tortious interference with contractual relations, although the subsequent counts only reference tortious interference with business relations. The Court assumes that Count IV is intended to encompass both claims.
This Court temporarily denied plaintiff's motion for expedited discovery in an oral ruling December 20, 2002. Inasmuch as defendants' motions to dismiss will be denied, this Court will grant Ikon limited discovery as detailed below.
The Court will deny without prejudice Leichtnam's motions seeking denial of Ikon's motions inasmuch as the appropriate vehicle to oppose Ikon's motions is an opposition or objection — as opposed to a formal motion. Accordingly, new opposition papers will be required from Leichtnam that solely address his opposition to the preliminary injunction — as opposed to his arguments advanced in support of his motion to dismiss the Complaint.
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, this Court must "accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor" — Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.), cert. denied, 513 U.S. 836 (1994) — and cannot dismiss the complaint "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Accordingly, this Court must not consider whether the claims will ultimately be successful, but merely "assess the legal feasibility of the complaint." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998). Moreover, when reviewing a motion to dismiss, this Court must of course limit its review to the face of the Complaint and documents incorporated therein that are properly subject to judicial notice. See Newman Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 662 (2d Cir. 1996).
Ikon is engaged in the business of commercial copying and related document services; its customers include law firms, government agencies and private businesses. Ikon hired Leichtnam, who began working around May 22, 2000. Leichtnam was hired "out of college" and did not have prior experience in the document services industry. Ikon and Leichtnam entered an employment agreement dated May 23, 2000 (the "Employment Agreement") which provides, inter alia, that Leichtnam is prohibited — for a period of twelve months from the date of his termination — from contacting, causing to be contacted or communicating with "any specific accounts or customers for which [he] was responsible or with whom [he] had contact during" the twelve months before his termination. This no-contact or non-compete provision is limited to Erie County. The Employment Agreement also contained various confidentiality provisions concerning Ikon's proprietary information, which purportedly includes "customer lists or other information about [Ikon's] customers that has been obtained by or on behalf of [Ikon]." Leichtnam resigned from Ikon August 5, 2002 in order to accept employment with Doculegal, an Ikon competitor. On Doculegal's behalf, Leichtnam has allegedly contacted and/or obtained business from several Ikon customers whom Leichtnam serviced while at Ikon.
The defendants seek dismissal on several grounds, each of which the Court will discuss seriatim. Defendants contend that the Employment Agreement is unenforceable on the ground that it is indefinite because it contains no compensation terms. Defendants rely heavily on this Court's decision in Buffalo Crushed Stone v. R.J. Corman R.R. Corp., 2001 WL 392075 (W.D.N.Y. 2001). Buffalo Crushed Stone, however, is so far afield from the instant case that this Court declines even to address it here. Rather, this Court finds more persuasive case law holding that non-compete covenants and similar restrictive covenants are independently enforceable where an at-will employee receives continued employment as consideration. Although Leichtnam was a party to the Employment Agreement, he nonetheless remained an at-will employee because he did not have a specified term of employment. Indeed, under New York law, "unless the duration of an employment contract is set forth explicitly, the employment is at-will and can be terminated by either party at any time." Wright v. Cayan, 817 F.2d 999, 1002 (2d Cir.), cert. denied, 484 U.S. 853 (1987). Accordingly, Leichtnam's employment with Ikon was on an at-will basis inasmuch as there was no duration specified in the Employment Agreement. Likewise, in Int'l Paper Co. v. Suwyn, 951 F. Supp. 445, 448 (S.D.N.Y. 1997), a former high-level executive was deemed an at-will employee — despite the fact that he had signed a non-compete agreement — because his offer letter did not contain a specified duration of employment.
Although Leichtnam and Doculegal filed separate motions to dismiss, Leichtnam incorporated arguments verbatim from Doculegal's brief. See Leichtnam Mem. of Law., at 13 n. 1. Accordingly, for purposes of convenience, this Court will address the arguments as having been made by both defendants unless otherwise noted. This Court notes that Leichtnam's brief violated Rule 7.1(f) of the Local Rules of Civil Procedure, which prohibits the filing of briefs in excess of 25 pages without permission of the Court. Accordingly, this Court will not consider anything beyond page 25.
The Court does not address whether Leichtnam is estopped from contending that the Employment Agreement is not enforceable on the ground that it lacked terms concerning compensation in that Leichtnam labored under the Employment Agreement without complaint for over two years.
See e.g., Zellner v. Conrad, 589 N.Y.S.2d 903, 906-907 (2d Dep't 1992) (holding that forbearance of the right to terminate an at-will employee is sufficient consideration to support a non-compete agreement).
Indeed, the fact that Leichtnam resigned abruptly further evidences the at-will nature of the employment relationship that existed.
Inasmuch as Leichtnam was an at-will employee, the fact that the Employment Agreement did not contain compensation terms is irrelevant because it is an enforceable non-compete contract. Indeed, New York law recognizes that the continued employment of an at-will employee is adequate consideration for restrictive covenants such as those alleged here. See Int'l Paper, at 448 (finding that employment continued for a "substantial period" of less than two years after non-compete was signed, compelling the conclusion that the "Agreement was supported by consideration and is not rendered unenforceable"). Leichtnam was employed for a substantial period after he had signed the Employment Agreement, which was thus independently enforceable. Consequently, for purposes of this motion, the Employment Agreement contains enforceable restrictive covenants that do not fail for lack of definiteness. Accordingly, the Complaint will not be dismissed on this ground.
Defendants also contend that the Complaint must be dismissed to the extent that it alleges that defendants contacted clients that were readily identifiable through public sources. The Court declines defendants' invitation to dismiss on this basis because the Court would have to go well beyond the face of the Complaint to determine which clients are readily identifiable through public sources. Moreover, even assuming arguendo that this Court took judicial notice of the allegation that all relevant customers are readily identifiable through public sources, the Court is not prepared to rule as a matter of law that document service companies such as Ikon cannot have proprietary information related to its customers, the identities of which are publicly known. Accordingly, the Complaint will not be dismissed on this ground.
For example, personal contacts and spending habits of publicly known entities may nonetheless represent information that is not readily available from a public source of information. See e.g., Props for Today, Inc. v. Kaplan, 558 N.Y.S.2d 38, 39 (1st Dep't 1990) (holding that customer lists containing publicly known entities may nonetheless contain non-public information).
Defendants also contend that plaintiff's tortious interference with business relations claim must be dismissed because the Complaint fails to allege "wrongful means." It is not clear that the allegations of the Complaint fail to establish "wrongful means" as a matter of law. See e.g., Ivy Mar Co., Inc. v. C.R. Seasons Ltd., 1998 WL 704112, at *16-17 (E.D.N.Y. 1998) (noting that it was possible that defendant used "wrongful means" because of "evidence that the Jetmax defendants unfairly used customer information taken from the Companies to their advantage in competing with the Companies"). Indeed, "[d]ishonesty and unfair means are also sufficient to show wrongful means." Wedeen v. Cooper, 1998 WL 391117, at *3 (S.D.N.Y. 1998) (citing Goldhirsh Group, Inc. v. Alpert 107 F.3d 105 (2d Cir. 1997)). Accordingly, the Complaint will not be dismissed on this ground.
The allegations in the Complaint are somewhat ambiguous. See footnote 2 supra. Accordingly, it is not clear whether Ikon asserts the claim that it says it does or whether it is really asserting a claim for tortious interference with prospective business relations. Indeed, such are separate claims. See Astor-Holdings, Inc. v. Roski, 2002 WL 72936, at *15-21 (S.D.N.Y. 2002) (setting forth the respective standards for both types of claims); MDC Corp., Inc. v. John H. Harland Co., 2002 WL 31175246 (S.D.N.Y. 2002) ("The level of interference necessary to support a finding of tortious interference with prospective contractual relations or with contracts terminable at will is significantly higher than the level of interference necessary to support a finding of interference with an existing contract"). Such ambiguity, however, is not fatal at this point. Moreover, the Complaint, taken as a whole, certainly alleges that the customers doing business with Doculegal would otherwise have done business with Ikon. Accordingly, Defendants' other contentions with respect to this claim are without merit.
Defendants also claim that Ikon's trade secrets claim fails as a matter of law. This contention is also rejected. Although a closer question, some information allegedly misused by Leichtnam could constitute a trade secret. For example, Ikon's pricing would be a likely candidate for trade secret protection. See Gen. Elec. Co. v. Macejka, 675 N.Y.S.2d 420 (3d Dep't 1998) (holding that pricing and profit margins constitute trade secrets). Moreover, to determine whether the alleged customer preferences or the details contained on Ikon's customer list are publicly available information, this Court would have to go beyond the face of the Complaint, which is not permitted. See FRCvP 12(b); Newman Schwartz, at 662. Indeed, the cases cited by defendants do not involve motions to dismiss that were granted. Accordingly, the Complaint will not be dismissed on this ground.
Inasmuch as defendants' motions to dismiss will be denied and, in light of the injunction hearing scheduled for January 31, 2003 on Ikon's motion for a preliminary injunction, Ikon will be allowed to engage in the following discovery: (1) four depositions, (2) ten discovery requests, (3) ten interrogatories, and (4) any number of requests for judicial admission. Likewise, defendants may collectively engage in the following discovery: (1) two depositions, (2) ten discovery requests, (3) ten interrogatories and (4) any number of requests for judicial admission.
Accordingly, it is hereby ORDERED that defendants' motions to dismiss are denied, that Leichtnam's motions seeking denial of Ikon's motions for preliminary injunction and expedited discovery are denied without prejudice and that the parties are granted limited discovery as specified above.