Columbia Ribbon & Carbon Mfg. Co., Inc. v. Trecker, 421 N.E.2d 497 (N.Y. 1981)
A restrictive covenant in an employment agreement that is unreasonably broad and not tailored to protect legitimate business interests such as trade secrets or confidential customer lists is unenforceable.
Summary
Columbia Ribbon sought to enforce a restrictive covenant against its former salesman, Trecker, to prevent him from working for a competitor. The covenant prohibited Trecker from selling similar goods within his former territory for two years. The court held the covenant unenforceable because it was too broad, lacking limitations related to uniqueness, trade secrets, confidentiality, or unfair competition. Columbia failed to demonstrate that Trecker possessed or used any confidential information, or that his services were unique. The court refused to rewrite the covenant to make it enforceable.
Facts
Trecker worked as a salesman for Columbia Ribbon, a company supplying consumables to the word and data processing industry. He signed an employment agreement with a restrictive covenant preventing him from disclosing customer information or competing with Columbia for two years after termination. After being demoted, Trecker left Columbia and joined a competitor, A-l-A Corporation. Columbia then sued to enforce the restrictive covenant, seeking to enjoin Trecker from competing anywhere in the United States and from soliciting former customers.
Procedural History
The trial court (Special Term) dismissed Columbia’s complaint on cross-motions for summary judgment. The Appellate Division affirmed the dismissal. Columbia appealed to the New York Court of Appeals.
Issue(s)
Whether a restrictive covenant in an employment agreement is enforceable when it is not reasonably limited temporally and geographically and is not necessary to protect the employer from unfair competition stemming from the employee’s use or disclosure of trade secrets or confidential customer lists.
Holding
No, because the restrictive covenant was too broad and not tailored to protect legitimate business interests such as trade secrets or confidential customer lists, and the employer failed to demonstrate the employee’s services were unique or that any confidential information was disclosed.
Court’s Reasoning
The court emphasized that restrictive covenants are disfavored because they can deprive individuals of their livelihood. Such covenants are only enforceable if reasonably limited in time and geography, and necessary to protect the employer from unfair competition arising from the employee’s use of trade secrets or confidential customer lists. The court noted that customer lists readily ascertainable from outside sources do not warrant trade secret protection. Referencing Purchasing Assoc. v Weitz, the court stated that injunctive relief may be available if the employee’s services are truly special, unique or extraordinary, even without trade secrets. Here, the restrictive covenant was deemed overly broad because it was not tied to uniqueness, trade secrets, confidentiality, or competitive unfairness; it simply restrained competition. Columbia did not provide sufficient evidence to show that Trecker disclosed any secret information, performed unique services, or caused any actual damage to the company. The court declined to rewrite the covenant, stating that Columbia’s evidence was insufficient to defeat summary judgment. As such, the court affirmed the lower court’s dismissal of the complaint. The court noted, “[T]here are ‘powerful considerations of public policy which militate against sanctioning the loss of a man’s livelihood’”.