Opinion
2014-10-23
WORLD WIDE POWER INDUSTRIES, Inc., et al., Plaintiffs–Respondents, v. Warren AZZARA, et al., Defendants–Appellants.
Kudman Trachten Aloe LLP, New York (Paul H. Aloe of counsel), for appellants. Wachtel Missry LLP, New York (Elliot Silverman of counsel), for respondents.
Kudman Trachten Aloe LLP, New York (Paul H. Aloe of counsel), for appellants. Wachtel Missry LLP, New York (Elliot Silverman of counsel), for respondents.
GONZALEZ, P.J., MAZZARELLI, ANDRIAS, DeGRASSE, CLARK, JJ.
Orders, Supreme Court, New York County (Charles E. Ramos, J.), entered May 8, 2014, and May 15, 2014, which, to the extent appealed from as limited by the briefs, preliminarily enjoined defendants Azzara, Battista and Higher Power Industries, Inc. from competing against plaintiffs, and directed plaintiffs to post an undertaking, unanimously reversed, on the law, with costs, and the orders vacated. Appeal from order, same court and Justice, entered May 21, 2014, which denied defendants' motion to vacate the injunction unanimously dismissed, without costs, as academic.
The individual defendants sold their shares in plaintiff Transportation Technology, Inc. to plaintiff World Wide Power Industries, Inc. pursuant to a stock purchase agreement. In addition to paying a sum of money at closing, plaintiffs were to make payments to said defendants, in monthly installments, in exchange for agreements not to compete. The non-compete agreements gave defendants the right to declare an event of default upon plaintiffs' non-payment of an installment, which triggered defendants' right to waive further non-compete payments and terminate the non-compete agreements. The parties obtained financing for the transaction from Webster Bank, pursuant to standby creditor agreements that gave the bank subordination rights over the other parties with respect to the loan collateral and the right to direct plaintiffs to cease making non-compete payments to defendants in the event that plaintiffs defaulted on the loan.
Plaintiffs defaulted on the loan. The bank directed them to cease making payments to defendants under the non-compete agreements, and, upon plaintiffs' non-payments, defendants waived their right to further payments and terminated the agreements. Plaintiffs sought to enjoin defendants from competing on the ground that defendants were not entitled to terminate their non-compete agreements based on the non-payment directed by the bank.
Plaintiffs failed to show a likelihood of success on the merits of their claim ( see Doe v. Axelrod, 73 N.Y.2d 748, 751, 536 N.Y.S.2d 44, 532 N.E.2d 1272 [1988]; Matter of Patrolmen's Benevolent Assn. of the City of New York, Inc. v. City of New York, 119 A.D.3d 1, 987 N.Y.S.2d 308 [1st Dept.2014]; see also Scotto v. Mei, 219 A.D.2d 181, 184, 642 N.Y.S.2d 863 [1st Dept.1996] ). The non-compete agreements gave defendants, without qualification or condition, the right to declare an event of default upon non-payment. Neither the bank's right to a priority in collection nor its right to direct plaintiffs, in the event of a default on the loan, to cease making payments to defendants limits or modifies defendants' right to declare an event of default and terminate the non-compete agreements in the event of a non-payment.