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NY Court: You Can't Avoid Non-Compete By Racing to Court in Another State


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1/1/2016
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In a fascinating decision that was handed down this past Thursday, January 10, New York's Appellate Division, First Department held that even though the defendants had won the race to the courthouse and filed an affirmative action seeking to have a California court declare invalid their non-compete agreements with their former employer, Aon, that California action would be given no credence in New York.

At first blush, that would seem rather strange. After all, don't state courts usually accord deference to the decisions of their sister courts?

This case is different, explained the court, because the California action was filed the same day that they left Aon's employ, bringing with them a mass of employees and Aon's clients. Thus, the court found, "[T]he California action was a preemptive measure undertaken to gain a tactical advantage so as to negate the force and effect of the restrictive covenants, which the parties had freely agreed upon (see generally, L-3 Communications Corp. v SafeNet, Inc., 45 AD3d 1 [1st Dept 2007]; White Light Prods. v On the Scene Prods., 231 AD2d 90, 96-97 [1st Dept 1997])," and therefore, would be accorded no weight.

In my view, the next point made by the Court is the true basis for its decision:

"The record amply demonstrates that Arkley, when not subject to formal judicial restraint, has been inclined to solicit Aon's employees and customers, in addition to making apparent use of its proprietary and confidential information (see e.g. Clarion Assoc. v Colby Co., 276 AD2d 461 [2d Dept 2000]; Laro Maintenance Corp. v Culkin, 255 AD2d 560 [2d Dept 1998])."

In other words, the Court made clear its view that finding in the defendants' favor on this technical, procedural argument would frustrate fairness and justice.



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