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.
