Veramark Technologies headquarters in Henrietta, New York. (DanielPenfield / Wikipedia)
Yielding to New York’s generally skeptical view of noncompete employment clauses, a Western District federal judge has refused to bar a sales executive from plying his trade with a rival of his former employer.
Judge Elizabeth Wolford of Rochester said New York clearly frowns on restrictive clauses that are any broader than necessary, particularly one that cites “customer goodwill” as the rationale.
“A broad noncompete that baldly prevents competition will not be enforced, particularly where the employer is already protected by a nonsolicitation agreement,” Wolford wrote in Veramark Technologies v. Bouk, 14-cv-6094. “This is the standard set forth by the New York Court of Appeals in BDO Seidman v. Hirshberg, 93 NY2d 382 (1999).”
The decision stemmed from an action Veramark Technologies Inc., a telecommunications expense management company, brought against its former vice president of sales, Joshua Bouk. Bouk had signed a noncompete clause agreeing not to use confidential information, compete with Veramark or solicit its customers or employees for 12 months after leaving the company.
Records show that shortly after signing the agreement, Bouk went to work for Cass Information Systems Inc., a competitor. Cass required Bouk to pledge that, in his new position, he would not use confidential materials belonging to Veramark or solicit Veramark’s customers or employees. Regardless, Veramark sought a preliminary injunction to stop Bouk from working for Cass.
Veramark argued that Bouk’s employment with Cass jeopardizes its customer relations. But Wolford said that “any notion that Mr. Bouk’s employment will threaten Veramark’s customer goodwill is specifically undermined” by the lack of any evidence Bouk has violated or intends to violate the nonsolicitation provisions in the agreement.
Further, Wolford found no significance in the fact that Bouk was already working for Cass at a time when he was still being paid by Veramark.
Court papers indicate that Bouk gave Veramark 30-days notice of his resignation on Jan. 17, 2014, and immediately revealed he was going to work for Cass. Bouk claims he was then told that Jan. 31 would be his last day and joined Cass on Feb. 3. According to Veramark, Bouk was paid through the 30-day notice period, Feb. 16.
“Plaintiffs appear to argue that the court should infer from this that Mr. Bouk is an untrustworthy individual and that his assurances that he will not violate the nonsolicitation provisions should not be accepted,” Wolford wrote. “These arguments are far too speculative.”
The judge said that absent evidence that Veramark would suffer irreparable harm unless an injunction is granted, “the law in New York does not favor terms in an employment agreement that seek to prevent an employee from pursuing his or her chosen vocation after termination of employment,” Wolford wrote. “Even if plaintiffs had demonstrated irreparable harm, a preliminary injunction would not be appropriate because plaintiffs do not have a likelihood of success in ultimately being able to enforce the noncompete portion of the agreement.”
Bouk is represented by Steven Cole of Leclair Korona Giordano in Rochester.
Jennifer Bogue and Seth Alan Rafkin of Cooley offices in San Diego and Manhattan, respectively, represent Veramark.