Summary
distinguishing between an employee's formation of a competitive corporation while still employed and actual operation of a competitive corporation, and finding that the former does not constitute breach of the duty of loyalty whereas the latter does
Summary of this case from Hahn v. OnBoard, LLCOpinion
Argued June 24, 1999
October 12, 1999
In an action to enjoin the defendants from diverting business from the plaintiff, for an accounting, and to recover damages based on, inter alia, claims of breach of duty of loyalty and trust, the defendants appeal from an order of the Supreme Court, Queens County (Thomas, J.).
ORDERED that the order is affirmed, with costs.
The complaint alleges, among other things, that, while he was still employed by the plaintiff, the defendant Errol Latmore secretly formed the corporate codefendant Combine Refrigeration, Inc., for the purpose of competing with the plaintiff, and that the defendants solicited the plaintiff's customers and diverted business from the plaintiff. In support of the defendants' motion for summary judgment, Latmore submitted an affidavit in which he denied having access to customer lists. However, he did not deny that he and the corporate defendant in fact competed with the plaintiff even while he was still an employee.
Under these circumstances, the defendants failed to demonstrate the right to judgment in their favor as a matter of law. "An employee may solicit an employer's customers only when the employment relationship has been terminated" ( Catalogue Serv. of Westchester v. Wise, 63 A.D.2d 895; Jones Co. v. Burke, 306 N.Y. 172; Scott Co. v. Scott, 186 App. Div. 518; Hercules Packing Corp. v. Steinbruckner, 28 A.D.2d 635; see also, Barrister Reporting Serv. v. Reinig, 169 A.D.2d 583). The cases relied upon by the defendants recognize only that an employee may form a corporation which will later compete with his or her employer after severance of the employment relationship ( e.g., Schneider Leasing Plus v. Stallone, 172 A.D.2d 739). Here, however, Latmore "was not just preparing to go into his own business; he was in business for himself while drawing a salary from a trusting employer" ( Maritime Fish Prods. v. World-Wide Fish Prods., 100 A.D.2d 81, 88).
Under these circumstances, we need not decide whether the Supreme Court correctly denied the defendants' motion solely on the basis that the motion was not supported by a copy of the pleadings ( see, e.g., Hamilton v. City of New York, 262 A.D.2d 283 [2d Dept., June 1, 1999]; Deer Park Assocs. v. Robbins Store, 243 A.D.2d 443; Lawlor v. County of Nassau, 166 A.D.2d 692; cf., Stiber v. Cotrone, 153 A.D.2d 1006).
BRACKEN, J.P., O'BRIEN, SANTUCCI, and GOLDSTEIN, JJ., concur.