Are Customer Lists Protected Under New York Law?
In the context of non-compete and non-solicit agreements, one of the questions that is at the center of many, if not most litigation arising out of these agreements is whether a former employer can ban their employee from contacting their customer list.
Stated differently, is a customer list protectable as a matter of New York law?
From the employer’s perspective, they have had numerous employees, using untold numbers of hours at their computers trying to generate qualified leads and customers for their business. It just wouldn’t seem fair if an employee could poach that client list on a whim, would it?
New York’s courts have made two (2) critical points on this issue:
First, “[A]n employer retains “a legitimate interest in preventing former employees from exploiting * * * the goodwill of a client or customer, which had been created and maintained at the employer's expense, to the employer's competitive detriment” (BDO Seidman v. Hirshberg, supra at 392, 690 N.Y.S.2d 854, 712 N.E.2d 1220).
This means that under the right circumstances, a customer list will be protectable.
There is a crucial caveat to this rule, however:
““[W]here the customers are not known in the trade or are discoverable only by extraordinary efforts courts have not hesitated to protect customer lists and files as trade secrets. This is especially so where the customers' patronage had been secured by years of effort and advertising effected by the expenditure of substantial time and money.” Leo Silfen, Inc., v. Cream, 29 N.Y.2d 387, 392–93, 328 N.Y.S.2d 423, 278 N.E.2d 636 (1972).
In other words, an employer’s customer list will only be protectable if the employer can demonstrate that the customer list isn’t readily available to the public, or something that can easily be gleaned from Google.