Outside Inhouse Lawyer Blog : New York & Seattle Corporate Dispute Lawyer & Attorney : Grace M. Healy : Outside counsel : King County, Tacoma, Bellevue

Given the current state of the economy, an upsurge in restrictive covenant cases seems likely.  Employees who either depend upon bonuses for much of their income, or are expecting a raise, generally become restless when there is no bonus or raise.  Alternatively, employees who worked for relatively small firms may decide to move on when they find themselves working for larger entities -- that twenty years ago would have been a completely different business.  Loyalty to the employer may be, well, not what it used to be. Of course, none of this is really new, it just seems more  pervasive.

In any event, a recent New York decision regarding investment advisors who left to set up their own business, Ashland Management Inc. v. Altair Investments, is really interesting.  It is the rare case where you read the Appellate Division majority opinion and say – absolutely correct -- and read the two-judge dissent and say – absolutely correct.  The facts recited by the majority strongly suggest wrongdoing; defendants allegedly were taking steps to grow their business while still on the plaintiff’s payroll and had hacked the defendant's computer.  The dissent seems to focus on the fact that New York historically doesn't like to restrain its citizens' ability to earn a living.

The opinions offer and discuss almost all of the issues that come up in these cases (except for measure of damages).  Comparing them gives a pretty good idea of the legal issues faced when they these cases are litigated.

I hope that at some point the case is heard by the Court of Appeals because it presents many issues that are critical to these cases -- the confidentiality of customer lists, the extent to which an agreement may be ‘blue-penciled’ by a court, whether a clause must contain a set duration – or if no duration is a duration, which may or may not be reasonable -- and the consideration necessary for imposing a restrictive covenant.  Questions that come up over and over in cases that are litigated frequently, usually at great speed.
 

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This is an 'heads up' for New York lawyers. 

As of April 1, 2009, New York lawyers will have new rules of conduct.  The Rules of Professional Conduct -- based on the ABA Model Rules --  will replace the current disciplinary rules. Here is a link to the announcement. 

The announcement highlights some changes and key points in the new rules.  I anticipate that New York City Bar Association and the New York State Bar Association -- and everyone else who gives legal seminars in NY -- will be giving CLE's on this.  The change was announced on December 17, I haven't seen seminars announced, yet.

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When I was in law school I clerked for a managing attorney who made his clerks – to our occasional frustration -- obey every procedural rule to the letter.  A case, Cornhusker Casualty Ins. v. Kachman,
handed down by the Washington Supreme Court last month shows that there is merit to strict compliance, even if you think that taking the rule one step further seems more effective.

The question presented by the case was whether a commercial auto insurance policy was effectively cancelled.  The Washington statute required actual delivery or mailing to the insured at its last known address.  Here, the insurer sent the notice of cancellation by certified mail. The letter was not received.  The cancellation was not effective – because the statute uses the term “mailed” not “certified mail”. 

One might argue that certified mail has a better chance of being received than first class mail.  (And, give the sender the comfort of a signed receipt in the file.) But, the court finds that certified mail places a duty on the recipient to either be at home or go to the post office, and is more relevant to the actual delivery option that was set forth in the statute. The bottom line is that the statute required mailing or receipt, neither one was present, and the policy was not effectively cancelled.

Since 2006 the statute has required the insurer to “deliver or mail,” and the court does not state if the change would affect its reasoning.  However, the case illustrates the fact that statutory procedures are to be followed; substituting your idea of an improvement is not a great idea.  


 

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