Opinion
No. 11–37982.
2012-02-6
In the Matter of the Application of RICHARD MANNO & CO., INC., Petitioner, For a preliminary injunction in connection with an Arbitration pursuant to CPLR § 7502(c) v. Anthony MANNO and Anthony Manno & Co., Inc., Respondents.
Vishnick, McGovern, Milizio, LLP, Lake Success, NY, for Petitioner. Seth Rosenfeld, Esq., Franklin Square, NY, for Respondents.
Vishnick, McGovern, Milizio, LLP, Lake Success, NY, for Petitioner. Seth Rosenfeld, Esq., Franklin Square, NY, for Respondents.
THOMAS F. WHELAN, J.
The petitioner interposed this application pursuant to CPLR 7502[c] for preliminary injunctive relief pending determination of the issues set forth in an arbitration proceeding which the petitioner commenced against respondent, Anthony Manno. For the reasons set forth below, the instant application is denied and all temporary restraints issued against the respondents by prior orders of this court are hereby lifted and removed.
Respondent, Anthony Manno, was employed by the petitioner, a company which manufactures and sells steel fasteners and machined parts in the United States. In October of 2010, the petitioner and respondent, Anthony Manno entered into a severance agreement. In exchange for his resignation and the execution of a releases and other consideration, the petitioner agreed to pay Mr. Manno $100,000 .00 immediately and to pay future lump sum payments as well as monthly and other periodic payments for designated terms. The payments were conditioned upon Mr. Manno's freedom from engagement in acts defined as “Cause” in ¶ 9 of the severance agreement. If the petitioner, in its sole discretion, determined that Mr. Manno engaged in any of the acts defined as “Cause”, his post-employment benefits would be forfeited and the obligations of the petitioner to pay would terminate. The forfeiture provisions set forth in ¶ 9 are as follows:
9. Notwithstanding any of the other terms of this Agreement, the Company may terminate any and all remaining payment obligations hereunder at any time prior to the expiration of this Agreement for Cause, in which case all of the Company's obligations under paragraphs 1b, 1c, 1d, 1e and 1f shall cease. For purposes of this Agreement, the term “Cause” shall mean that in the judgment of the company you (i) have engaged in any business or practice or became employed in any position that the Company, in its sole discretion, deems to be in competition with the Company. Notwithstanding the foregoing, it is expressly agreed that you may go into business for yourself in competition with the Company, except that you agree not to do business with, be involved with or otherwise cooperate with or become employed by or with a domestic company which is a direct competitor of the Company; or (ii) have directly or indirectly solicited, induced, aided or suggested to any employee, customer or entity that you are aware is actively being solicited to enter into a relationship with the Company, or any vendor, agency or customer of the Company, to leave such employ, to cease discussions, to terminate such relationships or to cease doing business or in any way diminish the amount of business they doe with the Company [emphasis added].
The petitioner claims that in or about January of 2011, respondent Richard Manno formed his own company, namely, co-respondent, Anthony Manno & Co., Inc., which thereafter became engaged in the domestic manufacture and sale steel fasteners and machined parts in violation of subsection (i) of the above quoted ¶ 9 of the October 18, 2010 severance agreement. The petitioner further claims that the respondents have interfered with the business relations between the petitioner and its customers by engagement in the activities contemplated by subdivision (ii) of the above cited paragraph of the severance agreement. By reason of these perceived transgressions and violations of the severance agreement and a failure on the part of Mr. Manno to halt such business practices, the petitioner demanded arbitration on December 5, 2012.
On December13, 2011, the petitioner commenced this proceeding for injunctive relief restraining the respondents from engaging in the “domestic manufacture and sale of domestically manufactured steel fasteners and other machined parts that directly compete with the Petitioner's products”, pending determination of the arbitration proceeding. The petitioner further demands injunctive relief restraining the respondents from soliciting the petitioner's customers and from engaging in one or more of the activities contemplated by subdivision (ii) of the above cited ¶ 9 of the October 18, 2010 severance agreement. The respondents oppose the application and seek termination of the temporary restraints imposed by the terms of the December 13, 2011 order to show cause which served as the process paper in this proceeding.
The issuance of an injunction in aid of arbitration is governed by CPLR 7502[c]. Pursuant thereto, the Supreme Court may grant a preliminary injunction “in connection with an arbitration that is pending or that is to be commenced inside or outside this state” but such relief may be granted “only upon the ground that the [arbitration] award to which the applicant may be entitled may be rendered ineffectual without such provisional relief” (CPLR 7502[c] ). A party seeking relief under this provision must also make a showing of the traditional equitable criteria for the granting of temporary relief under CPLR article 63 ( see Winter v. Brown, 49 AD3d 526, 853 N.Y.S.2d 361 ; Matter of K.W.F. Realty Corp. v. Kaufman, 16 AD3d 688, 793 N.Y.S.2d 67 [2d Dept 2005] ). In this regard, it is clear that a party may obtain temporary injunctive relief only upon a demonstration of (1) irreparable injury absent the grant of such relief, (2) a likelihood of success on the merits, and (3) a balancing of the equities in that party's favor ( see W.T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517, 438 N.Y.S.2d 761[1981];Advanced Digital Sec. Solutions, Inc. v. Samsung, 53 AD3d 612, 862 N.Y.S.2d 551 ; Winter v. Brown, 49 AD3d 526,supra; New York City Off—Track Betting Corp. v. New York Racing Assn., 250 A.D.2d 437, 673 N.Y.S.2d 387 [2d Dept 1988] ).
Here, neither the petitioner's moving papers nor its submissions in reply established that the arbitration award which it seeks would be rendered ineffectual without the grant of some or all of the provisional relief demanded herein. The petitioner's demand for arbitration includes a demand for the forfeiture of monies paid under ¶ 1 of the severance agreement upon the application of the forfeiture provisions set forth in ¶ 9 thereof. It also includes demands for recovery of amounts already paid and “lost profits”. The petitioner's arbitration demand further includes a request for the issuance of a permanent injunction of the same type and scope demanded in this proceeding. Since no res or asset to which an arbitration award may attach has been shown to be in jeopardy of loss or destruction, no showing that an arbitration award in favor of the petitioner would be rendered ineffectual absent the granting of the restraints requested has been made.
Nor did the moving papers establish the petitioner's entitlement to injunctive relief under CPLR 6301. As indicated above, a party may obtain temporary injunctive relief only upon a demonstration of (1) irreparable injury absent the grant of such relief, (2) a likelihood of success on the merits, and (3) a balancing of the equities in that party's favor ( see W.T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517,supra; Winter v. Brown, 49 AD3d 526,surpa ). Factors militating against the granting of preliminary injunctive relief include: 1) that the movant can be fully recompensed by a monetary award or other adequate remedy at law ( see Mar v. Liquid Mgt. Partners, LLC, 62 AD3d 762, 880 N.Y.S.2d 647 [2d Dept 2009]; Dana Distr., Inc. v. Crown Imports, LLC, 48 AD3d 613, 853 N.Y.S.2d 111 [2d Dept 2008]; White Bay Enter. v. Newsday, Inc., 258 A.D.2d 520, 685 N.Y.S.2d 257 [1999] ); 2) that the granting of the requested injunctive relief would confer upon the plaintiff the ultimate relief requested in the action ( see Wheaton/TMW Fourth Ave. LP v. New York City Dept. of Bldgs., 65 AD3d 1051,supra; SHS Baisley, LLC v. Res Land, Inc., 18 AD3d 727, 795 N.Y.S.2d 690 [2d Dept.2005] ); and 3) that an alteration rather than a preservation of the status quo of the parties or res at issue would result from a granting of provisional injunctive relief ( see Board of Mgrs. of Wharfside Condominium v. Nehrich, 73 AD3d 822, 900 N.Y.S.2d 747 [2d Dept 2010] Automated Waste Disposal, Inc. v. Mid–Hudson Waste, Inc ., 50 AD3d 1072, 857 N.Y.S.2d 648 [2d Dept 2008]; Matter of 35 New York City Police Officers v. City of New York, 34 AD3d 392, 826 N.Y.S.2d 22 [1st Dept 2006] ).
Well established legal maximums provide that non-compete restrictive covenants in employment contracts are judicially enforceable only to the extent that such covenants pass the test of reasonableness ( see BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854 [1999] ). Under the reasonableness standard, a restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee ( see Reed, Roberts Assocs. v. Strauman, 40 N.Y.2d 303, 307, 386 N.Y.S.2d 677 [1976] ).
However, under certain limited circumstances, an exception known as the “employee choice doctrine”, renders the reasonableness standard inapplicable. Such circumstances arise when economic relief is sought by a former employer under the terms of a contract that provide a voluntarily departing employee with post-employment benefits conditioned upon such employee's compliance with a restrictive covenant. In Morris v. Schroder Capital Management International (7 NY3d 616, 825 N.Y.S.2d 697 [2006] ), the Court of Appeals explained that the employee choice doctrine is the result of distinctions between employment contracts that contain non-compete clauses and post-employment benefit contracts that condition receipt of such benefits upon a covenant not to compete. In this regard, the Court of Appeals stated as follows:
At the outset, we note that noncompete clauses in employment contracts are not favored and will only be enforced to the extent reasonable and necessary to protect valid business interests ( see BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854, 712 N.E.2d 1220 [1999];Post v. Merrill Lynch, Pierce, Fenner & Smith, 48 N.Y.2d 84, 421 N.Y.S.2d 847, 397 N.E.2d 358 [1979] ). We have recognized an exception to the general disfavor of noncompete provisions, however, in the “employee choice” doctrine. This exception applies in cases where an employer conditions receipt of postemployment benefits upon compliance with a restrictive covenant