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An appeals court in Brooklyn has clarified an aspect of New York state’s long-arm statute, saying state courts can have personal jurisdiction over a dispute involving an employment agreement signed out of state by employees who did not work in New York. The Appellate Division, 2nd Department’s unanimous opinion in Opticare Acquisition Corp. v. Castillo, 2004-03604, written by Justice Howard Miller, came in a lawsuit over three employees who left a Westchester, N.Y.-based distributor of optical products to join their company’s former owner in a new venture. The three employees had been branch managers of the company, Wise Optical Vision Group Inc., in Minnesota, California and Oregon. Each of them had signed a non-disclosure agreement. In February 2003, Opticare Acquisition Corp. acquired Wise. Wise’s former owner, Barry Weisfeld, later made an unsuccessful bid to re-purchase the company. After his bid failed, he set up a competing company and hired the three employees in question. Opticare sued, alleging violation of the employees’ non-disclosure agreements. It said the employees took account contacts, records of prior sales and customer credits, and purchasing information to Weisfeld’s new venture. The defendants motioned to dismiss the suit for failure to state a cause of action, but were denied by Westchester Supreme Court Justice Kenneth W. Rudolph. In affirming that ruling, the 2nd Department cited several decisions from the Court of Appeals and offered an expansive interpretation of their meanings. In George Reiner & Co. v. Schwartz, 41 NY2d 638 (1977), for example, the court upheld the exercise of personal jurisdiction in part because the employee had signed his employment contract in the state, meaning he had “transacted business” here within the meaning of CPLR 302(a)(1). The record in the Opticare suit did not specify where the employment agreements were signed, but the 2nd Department said such a fact was of no consequence here. “We conclude that even assuming [the agreements] were not made in New York, the appellants transacted business here by entering into agreements which, in each case, gave rise to substantial relationships, both substantively and temporally, with a New York employer,” Miller wrote. The 2nd Department also relied on Parke-Bernet Galleries v. Franklyn, 26 NY2d 13 (1970), in which the Court of Appeals sustained jurisdiction over an out-of-state defendant who participated in a New York art auction via an open phone line. If that one transaction was enough to trigger jurisdiction under CPLR 302(a)(1), the 2nd Department said, then there was no reason why the result should be different in the case of the three Wise employees. “Even assuming none of the appellants ever entered New York to conduct business on Wise’s behalf, it defies logic and common sense to conclude that they did not transact business here, especially when the 21st-Century technology undoubtedly available to them to go about their work, such as access via computer to data Wise maintained in New York, conferred upon them the benefit of employment with a New York company, while allowing them the option of living and physically working elsewhere,” Miller wrote. DUE PROCESS PROTECTION The 2nd Department added that the suit did not conflict with protections afforded under the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution. The court noted that if jurisdiction was not allowed, the plaintiff Opticare would be forced to take up several actions in different jurisdictions, creating inconvenience and judicial inefficiency. “In this case, there can be little doubt that the appellants purposefully directed their activities toward New York — the State in which their employer was headquartered,” Miller wrote. “Having allegedly caused that company injury, they should not claim surprise at having to answer in the courts of New York for their conduct.” Justices Stephen G. Crane, Gloria Goldstein and Peter B. Skelos concurred on the ruling. Bleakley Platt & Schmidt and Jennifer DiMarco, Jennifer B. Rubin and Lara M. Burnazian of Mintz Levin Cohen Ferris Glovsky & Popeo represented Opticare. Rachel Sims of Shapiro Forman Allen & Miller represented the defendant employees.

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