Brown & Brown, Inc., et al., Appellants,v.Theresa A. Johnson, et al., Respondents. (AD No. CA 13-00340)BriefN.Y.May 6, 2015APL-2014-00103 Erie County Clerk’s Index No. I2011-605320 Appellate Division, Second Department Docket No. CA-13-00340 Court of Appeals of the State of New York BROWN & BROWN, INC. and BROWN & BROWN OF NEW YORK, INC., Plaintiffs-Appellants, – against – THERESA A. JOHNSON and LAWLEY BENEFITS GROUP, LLC, Defendants-Respondents. ADDENDUM TO REPLY BRIEF OF PLAINTIFFS-APPELLANTS LITTLER MENDELSON, P.C. 900 Third Avenue New York, New York 10022 Tel.: (212) 583-9600 Fax: (212) 832-2719 SATTERLEE STEPHENS BURKE & BURKE LLP 230 Park Avenue, Suite 1130 New York, New York 10169 Tel.: (212) 818-9200 Fax: (212) 818-9606 – and – WARD GREENBERG HELLER & REIDY LLP 300 State Street Rochester, New York 14614 Tel.: (585) 454-0700 Fax: (585) 423-5910 Attorneys for Plaintiffs-Appellants i Addendum Table of Contents Page Medi-Weightloss Franchising USA , LLC v. Medi-Weightloss Clinic of Boca Raton, LLC, No. 8:11-CV-2437-T-30MAP, 2012 WL 260902 (M.D. Fla. Jan. 3, 2012) .......................................................... ADD-1 Medi-Weightloss Franchising USA, LLC v. Sadek, No. 8:09-CV-2421-T-24MAP, 2010 WL 1837767 (M.D. Fla. Mar. 11, 2010) ...................................................... ADD-11 Portware, LLC v. Barot, No. 603738/05, 2006 WL 516816 (N.Y. Sup. Ct. Mar. 2, 2006) .................................................. ADD-20 Powers v. 31 E 31 LLC, No. 153, 2014 WL 5325471 (N.Y. Oct. 21, 2014) ................. ADD-26 Reliable Enterprises, Inc. v. Nagori Contracting Corp., No. 11355/10, 2014 WL 5001219 (2d Dep’t Oct. 8, 2014) ... ADD-31 Southwest Stainless L.P. v. Sappington, No. 07-CV-0334-CVE-PJC, 2008 WL 918706 (N.D. Okla. Apr. 1, 2008) ...................................................... ADD-33 ADD-1 Medi-Weightloss Franchising USA, lLC v. Medi-Weightloss ... , Not Reported in ... 2012 WL 260902 Only the Westlaw citation is currently available. United States District Court, M.D. Florida, Tampa Division. MEDI-WEIGHTLOSS FRANCHISING USA, LLC, et al., Plaintiffs, v. MEDI-WEIGHTLOSS CLINIC OF BOCA RATON, LLC, et al., Defendants. No. 8:u-cv-2437-T-30MAP. Jan. 3, 2012. Attorneys and Law Firms A. Brian Albritton, Morvarid M. Jones, Phelps Dunbar, L.L.P., Scott P. Weber, Scott Phillip Weber, P.A., Tampa, FL, for Plaintiffs. Alejandro Brito, Zarco, Einhorn, Salkowski & Brito, P.A., Miami, FL, for Defendants. REPORT AND RECOMMENDATION MARK A. PIZZO, United States Magistrate Judge. *1 Medi-Weightloss Franchising USA, LLC, Physician's Health Management, LLC, Medi lP Licensing, LLC, and Medi- Weightloss Clinics, LLC (collectively, "Medi") filed a verified complaint seeking preliminary and permanent injunctive relief as well as damages against Medi-Weightloss Clinic ofBocaRaton, LLC ("Medi-Boca"), Dr. Eliot Slater ("Dr. Slater"), and Paul Martinez ("Dr.Martinez") (collectively, "Defendants") for alleged violations of various agreements, which include provisions related to non-use and non-disclosure of confidential information, non-competition, confidentiality, and post-termination IP restrictions, as well as violations relating to their trademarks and service marks (doc. 1, 2). Amongst other relief, Medi seeks a preliminary injunction enjoining Defendants from continuing to operate a weightloss clinic in the same location as the former Boca Medi clinic in accordance with the non-compete terms in the parties' agreements, from disclosing or publishing Medi's confidential information, from using the word "Medi" in the name of any business or trade name for the business, from using the Medi-Program or Medi-System or any program confusingly similar to Medi's, from using any of Medi's proprietary or copyrighted information, and from competing unfairly with Medi in any manner whatsoever. In addition, Medi seeks to have Dr. Slater discontinue his services with the weightloss clinic currently in operation at the former Medic clinic. Defendants deny any wrongdoing, claim the motion for preliminary injunction is moot, and oppose the request (doc. 15). After consideration, I recommend Medi's motion for preliminary injunction be granted in part and denied in part. 1 A. Background As a franchisor of weightloss clinic businesses, Medi entered into agreements with Dr. Martinez and Medi-Boca allowing them to open and operate weightloss clinics utilizing the Medi trademarks, products, practices, methods, information, and software (doc. 1, Exhs.A, B). Specifically, in September 2007, Dr. Martinez entered into a Management Agreement and License Agreement with Medi to run a Medi licensed business. Subsequently, Dr. Martinez informed Medi he needed relief from the obligations under these agreements, so Medi agreed to a partial waiver of certain fees and a partial consolidation of other fees (id., Exh. G). When Medi-Boca became delinquent on fees due Medi, Medi sent a letter to Dr. Martinez in June 2010 informing him of the fees due, providing the time for curing any compliance defects, and addressing issues raised by Dr. Martinez in a prior e-mail, including Dr. Martinez's statement that: "The way I look at it we have two options. We can negotiate a new system of fees or we can completely part ways and I can run a weigh loss clinic completely separate from Medi Weightloss" (id., Exh. H-1). Following that, in July 2010, Medi sent Medi-Boca and Dr. Martinez a Legal Notice of Default and Termination ADD-2 Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... informing them that their repeated failures to comply with the parties' agreements without a settlement agreement being reached led to termination of the parties' agreements as of that date (id., Exh. H-2). *2 In August 2010, however, Medi-Boca and Dr. Martinez entered into a settlement agreement with Medi under which Medi- Boca agreed to convert its business relationship to a franchise, Medi agreed to waive some past due fees, and Medi-Boca and Dr. Martinez agreed to pay an amount due under a promissory note (id., Exhs. I, J). Later that month, Dr. Martinez executed a franchise agreement and a principal owner guaranty with Medi on behalf of Medi-Boca for the operation of the Boca Medi Clinic (id., Exhs. A, B). By entering into the franchise agreement, Medi-Boca and Dr. Martinez, as guarantor, explicitly agreed to be bound by confidentiality covenants, 2 post-termination trademark restrictions, 3 and non-competition restrictions 4 (id., Exhs. A, B). While operating the Boca Medi Clinic, Med-Boca engaged the services of Dr. Slater. Dr. Slater then entered into a confidentiality/non-competition agreement for professional staff in which he, too, agreed to be bound by essentially the same confidentiality covenants and non-competition restrictions (id., Exh. E). 5 During operation of the Boca Medi Clinic, both Dr. Martinez and Dr. Slater accessed the password-protected section ofMedi's website that provides access to Medi's "Advantage" software and other confidential information. To access the protected section, both Dr. Martinez and Dr. Slater had to agree to Medi's terms of use agreement, which requires, among other things, that the individual accessing that portion of the site be bound by the terms of the franchise agreement and use the information only for an authorized use, and both individuals agreed to those terms. See doc. 1, Exhs. D, F. Over the course of the next year, Medi-Boca again failed to make timely payments of fees due to Medi. As a result, Medi sent Medi-Boca and Dr. Martinez a legal notice of default detailing the past due fees and providing the time to cure (id., Exh. K). In August 2011, Medi required MediBoca and Dr. Martinez to execute a mutual settlement and amendment of contracts agreement in which they agreed, among other things, to pay back a consolidated debt on a monthly basis, to immediate termination of the franchise agreement upon failure to make timely payments and to be subject to all post-termination restrictive covenants therein, and that, upon breach of the settlement agreement, the non-breaching party shall have no adequate remedy at law and will therefore be entitled to seek and obtain preliminary and permanent injunctive relief and is entitled to such relief upon the filing of an affidavit (id., Exh. L). Subsequently, Medi-Boca failed to perform under the August 2011 settlement agreement. Accordingly, Medi sent Medi-Boca and Dr. Martinez a letter informing them that Medi-Boca was in default of the August 2011 settlement agreement and the franchise agreement and provided the time for compliance to cure the breach (id., Exh. M). Following that, Medi sent Medi- Boca a legal notice of termination informing it that the Franchise Agreement would be terminated at 5:01 p.m. on October 14, 2011, if payment of the past due amount was not made in full to Medi and that, after that time, Medi-Boca "must immediately completely de-identify, cease offering [Medi's] weight loss system, and shut down Boca's Medi-W eightloss Clinics® business" and that Medi-Boca was "bound by all post-termination and non-competition covenants in the Franchise Agreement" (id., Exh. N). Thereafter, on October 14, 2011, Medi terminated its franchise relationship with Medi-Boca and sent a final demand for payment to Dr. Martinez (id., Exh. 0). *3 After termination of the franchise relationship with Medi, Dr. Martinez opened and began operating another weightloss clinic in the same location as the prior Boca Medi Clinic. See id., Exhs. R, S. As a result, Medi sent a letter to Dr. Martinez regarding his operation of a competing business and continued use of Medi's marks and expressed its intent to fully enforce its legal rights against Medi-Boca (id., Exh. R). In addition, Medi sent a letter to Dr. Slater informing him of his obligations under his confidentiality and non-competition provisions and also informing him of Medi's intent to enforce its legal rights against Medi-Boca (id., Exh. P). As a result of these actions, Medi filed its verified complaint alleging that Medi-Boca and Dr. Martinez breached the franchise agreements (Count I); Dr. Slater breached the Medical Director Agreement (Count II); Medi-Boca and Dr. Martinez breached the Mutual Settlement and Amendment (Count III); Dr. Martinez and Dr. Slater breached the USE Agreement and its USE Restrictions (Count IV); all Defendants misappropriated Medi's trade secrets (Count V); all Defendants engaged in common ---------------------------- --------- ----- ADD-3 Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... law unfair competition (Count VI); all Defendants committed violations of the Lanham Act, including trademark infringement (Count VII), trademark dilution (Count VIII), and false designation of origin (Count IX); and Medi-Boca and Dr. Martinez owe Medi past due fees and charges as a result of the breach of the Boca Franchise Agreement and Mutual Settlement and Amendment (Count X). Accordingly, Medi seeks to enjoin Defendants from committing any further violations. In response, Defendants deny they have been or are breaching any agreements entered into with Medi (doc. 15). According to Dr. Martinez, he has since ceased using or displaying any Medi products and has removed any Medi logos or signage from his new weightloss clinic but concedes he is operating a new weightloss clinic in the identical location as the Boca Medi Clinic and admittedly displayed items or signs with the Medi logo after the termination of the parties' agreements and franchise relationship in October. Dr. Martinez contends Medi's restrictive covenants are not enforceable and Medi does not have any protected proprietary or confidential information or trade secrets. As for Dr. Slater, he contends he is no longer employed by or in any way affiliated with Medi-Boca or Dr. Martinez (doc. 15, Exh. 2). He asserts he owed a medical and ethical obligation to the patients under his care and who were receiving controlled substances and could not abruptly discontinue providing medical services to them without exposing them to withdrawal symptoms (id.). As of November 28,2011, Dr. Slater resigned from his position as medical director for the Boca Medi Clinic and has not engaged in any further activity with respect to that clinic since that time (id.). On December 13, 2011, the Court conducted a hearing on the motion for preliminary injunction and Defendants' response thereto. Both parties presented oral argument on the motion. The matter is now fully briefed and ripe for review. B. Standard of Review *4 The decision to grant or deny a preliminary injunction is within the discretion of the district court. Carillon lmporrers. Ltd. v. Frank Pesce Int'l Group Ltd., 112 F.3d 1125. 1126 (11th Cir.1997). In determining whether a preliminary injunction should issue, the district court considers whether the moving party has demonstrated (1) a substantial likelihood of success on the merits; (2) irreparable harm to the movant unless the injunction issues; (3) the threatened injury to the movant outweighs the potential harm the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not disserve or be adverse to the public interest. MacGinnitie v. Hobbs Group, LLC. 420 F.3d 1234, 1240 (11th Cir.2005). Since a preliminary injunction is an extraordinary and drastic remedy, a district court should not issue a preliminary injunction unless the movant clearly establishes the burden of persuasion as to each of the four prerequisites. Four Seasons Hotels and Resorts, B.~~ v. Consorcio Barr, S.A., 320 F.3d 1205, 1210 (11th Cir.2003). C. Discussion I. Likelihood of success on the merits The first factor in determining whether a preliminary injunction should issue is whether Medi can show a substantial likelihood it will prevail on the merits of its claims. Based on the record before the Court, Medi has shown a substantial likelihood of success on the merits of its claims for breach of its competitive restrictions, breach of its confidentiality restrictions and covenants, and violations involving the use of its intellectual property. a. competitive restrictions Section 542.335( 1 ), Florida Statutes, permits the enforcement of contracts restricting or prohibiting competition during or after the term of the restrictive covenant so long as such contracts are reasonable in time, area, and line of business. 6 In Florida, restrictive covenants may only be enforced where, as here, the restrictive covenants are set forth in a writing signed by the person against whom enforcement is sought. Fla. Stat. § 542.335(1 )(a). A party seeking to enforce a restrictive covenant must plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant and that the restriction is reasonably necessary to protect those legitimate business interests. Fla. Stat. § 542.335( 1 )(b) and (c). Legitimate ADD-4 Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... business interests include trade secrets, as defined in Fla. Stat. § 688.002( 4 ); valuable confidential business or professional infonnation that otherwise does not qualify as trade secrets; substantial relationships with specific prospective or existing customers, patients, or clients; customer, patient, or client goodwill associated with a specific geographic location or specific marketing or trade area; and extraordinary or specialized training. Fla. Stat. § 542.335(1 )(b). If the party seeking enforcement of the restrictive covenant establishes its prima facie case, the party opposing enforcement then has the burden of establishing the contractually specified restraint is overbroad, overlong or otherwise not reasonably necessary to protect the established legitimate business interests. Fla. Stat. § 542.335( 1 )(c). Florida law requires courts to construe restrictive covenants in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement and prevents courts from employing any rule of contract construction requiring the court to construe a restrictive covenant narrowly, against the restraint or against the drafter where legitimate business interests have been established. Fla. Stat. § 542.335(1 )(h). In determining the reasonableness of a restrictive covenant, courts should employ a balancing test to weigh the employer's interest in preventing competition against the oppressive effect on the employee. Miller Mechanical, Inc. v. Ruth, 300 So.2d II. 12 (Fla.l974). If valid, a restrictive covenant may be enforced by, but not limited to, temporary or pennanent injunctive relief. Fla. Stat.§ 542.335(l)U). *5 In this instance, Medi has shown its restrictive covenants are reasonable as to time. In Florida, a presumption exists that any restrictive covenant for six months or less is reasonable and for more than two years is unreasonable as to a fonner employee, agent or independent contractor. Fla. Stat. § 542.335(1 )(d). Similarly, any restrictive covenant for one year or less is reasonable and for more than three years is unreasonable as to a fonner distributor, dealer, franchisee, or licensee of a trademark or service mark. I d. Here, the competitive restrictions last for a period of two years commencing on the effective date of tennination or expiration of the franchise agreement (doc. 1, Exh. "A~). In Florida, t'.vo year terms have been found reasonable. See, e.g., Graphic Business Systems, Inc. v. Rogge, 418 So.2d 1084, 1087 (Fla. 2d DCA 1982) (finding agreement not to compete for two years after tennination of employment within 75 miles of the city was reasonable in both time and area); see also Tomasello. Inc. v. de Los Santos, 394 So.2d 1069, 1072 (Fla. 4th DCA 1981) (finding an agreement not to compete for a period of two years following tennination of employment facially reasonable). Thus, the restrictive covenants are reasonable as to time. Similarly, Medi has shown the competitive restrictive covenants are reasonable as to area and line of business. The competitive restrictive covenants in the franchise agreements prohibit operation of a competitive business in any capacity at the site of the Boca Medi Clinic, within the protected area, or through the practice; within twenty-five miles ofthe site of the Boca Medi Clinic; or within twenty-five miles of any other Medi-W eightloss Clinic business or its site, protected area, or market area in operation or under construction on the later of the effective date of the tennination or expiration (id., Exh. A). As to the geographic scope, the restrictive covenant is also reasonable. Indeed, Florida courts have upheld geographical restrictions covering a radius of 7 5 miles from the city where the defendant worked. See Rogge, 418 So.2d at 1087 (fmding agreement not to compete for two years after tennination of employment within 75 miles ofthe city was reasonable in both time and area). Moreover, the restrictions do not preclude Dr. Martinez or Dr. Slater from opening, operating or working in another weightloss clinic. The restrictions simply limit the geographic scope for a reasonable period of time. Accordingly, the restrictions as to geographic scope and line of business are reasonable. Medi has also shown it possesses legitimate business interests which warrant protection. Specifically, Medi seeks enforcement of iis competitive restrictions to protect its ability to sell its franchises; its right to ensure continued compliance with its agreements by other franchisees; its maintenance of the strength of the Medi-System and the value of its confidential information; its association of the locations where Dr. Martinez's competitive business is operating to Medi clinics; and the goodwill associated with its marks in the geographic region. Since Medi has established numerous legitimate business interests warranting protection, the burden now shifts to Defendants to show the competitive restrictions are overbroad, overlong or otherwise not reasonably necessary to protect the established legitimate business interests. Fla. Stat. § 542.335( I)( c); see Orkin Exterminating Co. v. Martin, 516 So.2d 970, 971 (Fla. 3d DCA 1987) (stating once a covenant not to compete has been shown to be facially reasonable, the burden shifts to the employee to show why the covenant is unreasonable as applied to him). Defendants have failed to meet this burden. ADD-5 Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... ·-----·--·------------------- *6 In addition to establishing the enforceability of its competitive restrictive covenants, Medi has further established a strong likelihood of success on its claim that Medi-Boca and Dr. Martinez have breached those competitive restrictive covenants. "For a breach of contract claim, Florida law requires the plaintiff to plead and establish: ( 1) the existence of a contract; (2) a material breach of that contract; and (3) damages resulting from the breach." Vega v. T-Mobi/e USA. Inc .. 564 F.3d 1256, 1272 (11th Cir.2009) (applying Florida law). Medi has presented evidence which tends to show a likelihood of success on each of these elements. First, Medi has provided a valid franchise agreement, a guaranty signed by Dr. Martinez, and a valid settlement agreement signed by Dr. Martinez (doc. 1, Exhs.A, B, L). See Fla. Stat.§ 542.335(1 ){a) ("A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought."). Second, Medi has shown Dr. Martinez has involved himself in a capacity with the operation of a competitive business thereby breaching both the franchise and settlement agreements (id., Exhs. R, S). Finally, Medi has shown it has suffered and will continue to suffer damage resulting from the breach of the agreements in the form of unwarranted competition and violation of its agreements. Accordingly, Medi has established a substantial likelihood of success on its breach of its competitive restrictions claims as to Medi-Boca and Dr. Martinez. Upon review of the assertions set forth in Dr. Slater's affidavit (doc. 15, Exh. 2), however, it appears the motion for preliminary injunction has become moot as to him. "A claim for injunctive relief may become moot if: (1) it can be said with assurance that there is no reasonable expectation that the alleged violation will recur and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation." Reich v. Occupational Safety and Health Review Cormn'n, 102 F.3d 1200, 1201 (11th Cir.1997). Here, Dr. Slater simply continued his care of patients in accordance with his ethical and medical obligations. He ceased doing so and ceased having any affiliation with Medi-Boca or Dr. Martinez as ofNovember 28,2011. Fu..rt.her, Dr. Slater, who is 81 years old, asserts that he engaged in steps to disassociate himself from the litigation as soon as he learned of it (doc. 15, Exh. 2). Given Dr. Slater's assertions, it appears that there is no reasonable expectation that the alleged violation will recur. b. confidential information and intellectual property restrictions Additionally, Medi has shown a substantial likelihood of success on its claims relating to breach of the confidential information and intellectual property restrictions as to Medi-Boca and Dr. Martinez. 7 Specifically, Medi asserts claims for misappropriation of trade secrets, common law unfair competition as to Medi's trademarks and service marks, and trademark infringement, trademark dilution, and false designation of origin under the Lanham Act. Indeed, the franchise agreement, terms of use agreement and operations manual all include provisions restricting the use of confidential and proprietary information, and the franchise agreement includes restrictions on the use ofMedi's intellectual property (doc. 1, Exhs.A, D, F). As discussed above, Florida recognizes as legitimate business interests both trade secrets and valuable confidential business or professional information that otherwise does not qualify as trade secrets. In Florida, a trade secret consists of information that ( 1) derives independent economic value from not being generally known to and not readily ascertainable by others who can obtain economic value from its disclosure or use and (2) is the subject of reasonable efforts to maintain its secrecy. See Fla. Stat. § 688.002( 4). In an action involving alleged trade secrets, "the plaintiff bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy." American Red Cross v. Palm Beach Blood Bank. Inc. 143 F.3d 1407, 1410 (11th Cir.1998) (applying Florida law). Information generally known or readily accessible to third parties does not qualify for trade secret protection. I d. *7 Further, in Florida, the elements of a common law unfair competition claim and a statutory trademark infringement claim are the same. Tally-Ho, Inc. v. Coast Community College Dist., 889 F.2d 1018, 1025-26 (11th Cir.1989). Namely, a plaintiff must show the following: (1) The plaintiff first adopted and used a certain name (or mark or symbol or logo or design) in a certain market or trade area, as a means of establishing good will and reputation and to describe, identify or denominate particular services rendered or offered by it (or goods made or sold by it) and to distinguish them from similar services rendered or offered (or similar goods marketed) by others, and -----------------·----------------------------- - ADD-6 Medi·Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... (2) through its association with such services or goods the plaintiffs tradename (or mark, etc.) has acquired a special significance as the name of the services rendered (or goods marketed) by the plaintiff in its trade area because plaintiffs tradename (or mark, etc.) (a) is inherently distinctive (fanciful, novel or arbitrary), or (b) while generic, descriptive, or geographic, plaintiffs tradename (or mark, etc.) has, by actual usage, acquired in a certain trade area, a secondary, special or trade meaning as indicating, describing, identifying or denominating the plaintiff as the source of certain services (or goods), and (3) the defendant has commenced, or intends to commence, the use of an identical or confusingly similar tradename (or mark, etc.) to indicate or identify similar services rendered (or similar goods marketed) by it in competition with plaintiff in the same trade areas in which the plaintiff has already established its tradename (or mark, etc.) and ( 4) as a consequence of the defendant's action, or threatened action, customer confusion of source or as to the sponsorship of the services (or goods) offered, or to be offered, by the defendant is probable (likely) or inevitable. Id at 1026 (quoting Am. Bank of Merritt Island v. First Am. Bank and Trust, 455 So.2d 443, 445-46 (Fla. 4th DCA 1984). Similarly, to prevail on a trademark infringement claim under the Lanham Act, a plaintiff must establish ( 1) it possesses a valid mark; (2) defendants used that mark; (3) defendants use of the mark occurred "in commerce;" (4) defendants used the mark in connection with the sale or advertising of any goods; and (5) defendants used the mark in a way likely to confuse consumers. North Am. Medical Cmp. 1'. Axiom Worlmvide, Inc., 522 F.3d 1211, 1218 (lith Cir.2008). Medi's false designation of origin and trademark dilution claims similarly focus on use ofMedi's marks in commerce with the likelihood of confusion or dilution. See 15 U.S.C. § 1125(a) (false designation of origin) and 1125(c) (dilution). As set forth more fully in its verified complaint and the franchise agreement, Medi has shown it possesses valuable confidential and proprietary information, trade secrets and other intellectual property warranting protection. See doc. 1 and Exh. A. Further, Medi has demonstrated it takes extraordinary efforts to maintain the secrecy of its trade secrets and confidential and proprietary information. Indeed, Medi required the Defendants to continually agree to maintain the confidentiality of the trade secrets and other confidential and proprietary information they received as a result of entering into the franchise agreement with Medi, the medical director confidentiality agreement, and the terms of use agreements. See doc. 1, Exhs. A, D, E, F. Medi has also shown that Medi-Boca and Dr. Martinez used forms, products, business cards and the program structure learned or obtained through the franchise agreements with Medi subsequent to termination of the agreements (id, Exh. S). Furthermore, Medi-Boca and Dr. Martinez do not attempt to argue that Medi does not have enforceable trademarks and service marks, and, in fact, openly admit to using Medi's marks in conjunction with their competing business after the termination of the parties' agreements in October 2011. Defendants similarly fail to dispute that the continued use of Medi's marks after termination of the parties' agreements and franchise relationship would likely cause customer confusion. Accordingly, Medi has shown it has a substantial likelihood of success on its claims relating to breach of the confidential information and intellectual property restrictions. 2. Irreparabie harm *8 As a prerequisite to the entry of a preliminary injunction, Medi must also establish it will suffer irreparable harm unless the injunction issues. MacGinnitie, 420 F.3d at 1240; Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir.2000) ("Significantly, even if Plaintiffs establish a likelihood of success on the merits, the absence of a substantial likelihood of irreparable injury would, standing alone, make preliminary injunctive relief improper."). In the context of a preliminary injunction, the asserted irreparable harm must be actual and imminent rather than remote or speculative. Siegel, 234 F.3d at 1176. Florida law provides that "[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant." Fla. Stat. § 542.335(1 )G). This presumption is rebuttable. Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1231 (11th Cir.2009) (citing JonJuan Salon, Inc. v. Acosta, 922 So.2d I 08 L 1084 (Fla. 4th DCA 2006). Defendants have failed to rebut the presumption of irreparable injury to Medi as a result of the violation of the restrictive i, ADD-7 Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... covenants. As such, the Court may presume Medi suffers and will continue to suffer irreparable harm due to Defendants' violations of the enforceable restrictive covenants in the parties' agreements. Notwithstanding, Medi has shown it has and will continue to suffer irreparable harm if a preliminary injunction does not issue. Namely, Medi has shown that if a preliminary injunction does not issue, it will have to compete with former franchisees and employees who agreed not to engage in such competition, will lose the exclusivity and confidentiality of its proprietary and confidential information, will suffer dilution and confusion associated with its intellectual property as well as its products and services, and will not be able to enforce its agreements with other franchisees. Accordingly, Medi has met its burden as to the irreparable harm prerequisite. Furthermore, as to the trademark claims, a strong showing of likelihood of confusion caused by trademark infringement may, by itself, constitute a showing of a substantial threat of irreparable harm. McDonald's Corp. v. Robertson, 147 F.3d 1301, 13 10 (11th Cir.1998). The Eleventh Circuit employs a seven-factor test for determining the likelihood of confusion between two marks. Tana v. Dantanna's, 611 F.3d 767, 774---75 (lith Cir.201 0) (setting forth the seven-factor test). Here, the factors way in favor of a finding that confusion by customers would be very likely given that MediBoca and Dr. Martinez used Medi's actual marks in continuing its weightloss clinic business. Although Medi-Boca and Dr. Martinez contend they started answering the phones without referencing Medi and informing customers they were no longer affiliated with Medi, they still utilized forms, products and signs which were emblazoned with Medi's marks in and around their clinic. Medi-Boca and Dr. Martinez also contend they have or are in the process of taking down all the Medi signs, meaning some of those signs remained for at least two months since termination of the parties' agreements and the franchise relationship, which likely caused customer confusion. Accordingly, having shown a strong likelihood of confusion because of Medi-Boca's and Dr. Martinez's use of Medi's actual marks, Medi has demonstrated it will suffer irreparable harm relating to its trademarks and service marks if a temporary injunction does not issue. 3. Balance of harm *9 Having demonstrated it will suffer irreparable harm, Medi must also establish that the threatened harm to it outweighs the harm a preliminary injunction may cause to Defendants. MacGinnitie, 420 F.3d at 1240. Here, the balance of harm tips in favor of Medi. Indeed, Medi seeks to enforce valid restrictive covenants and to preserve the integrity of its intellectual property to protect its legitimate business interests. As noted above, Medi currently suffers and will continue to suffer irreparable harm in the form of competition with former franchisees and employees who agreed not to engage in competition, loss of the exclusivity and confidentiality of its proprietary and confidential information, and likely dilution and confusion associated with its intellectual property as well as its products and services. Indeed, Florida law provides that courts must not consider any individualized economic or other hardship that might be caused to the person against whom enforcement of valid restrictive covenants is sought. Fla. Stat.§ 542.335(l)(g). Accordingly, the Court need not consider whether enforcement ofMedi's valid restrictive covenants will require Defendants to cease operating their competitive business or otherwise cause them economic hardship. Thus, as Medi-Boca and Dr. Martinez have failed to show any other potential or actual harm they may suffer if a preliminary injunction issues, the balance of harm weighs in favor of granting a preliminary injunction to Medi. 4. Public interest Finally, Medi must show the preliminary injunction would not disserve or be adverse to the public interest. MacGinnitie. 420 F.3d at 1240. Where an otherwise enforceable restrictive covenant exists, Florida law requires a court refusing enforcement of such provision on the basis that it violates public policy to specifically articulate the public policy violated. Fla. Stat. § 542.335(1 )(i). Further, Florida law requires the court to find the public policy requirements it articulates substantially outweigh the need to protect the legitimate business interests established by the person seeking enforcement. Id In this instance, entry of a preliminary injunction would serve the public interest by enforcing valid contractual provisions freely entered into by the parties, by promoting stability and certainty in business relationships, by enforcing non-compete covenants permissible 1/\lestlawNexr © 2014 Thomson Reuters. f'4o claim to oriainal U.S Government Works ADD-8 Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss ... , Not Reported in ... ---------------···-·---"·---- ,_,., --- under Florida law, by preventing confusion as to a trademark owner's rights to control the use of its marks, and by protecting confidential, proprietary and trade secret information of businesses. Defendants do not refute those contentions; rather, they argue it is against the public interest for an injunction to issue without substantial evidence warranting such an extraordinary remedy and denial ofMedi's motion will preserve the status quo until a final determination on the merits (doc. 15 at 22). As Medi has provided substantial evidence for a preliminary injunction, I find Defendants' blanket arguments to the contrary unavailing. Thus, Medi has demonstrated that entry of a preliminary injunction would in fact serve rather than be adverse to the public interest and would not violate any public policy. Accordingly, the public interest considerations support Medi's request for entry of a preliminary injunction. 5. Bond *10 Though Medi has met its burden as to the prerequisites for entry of a preliminary injunction, the Court may issue a preliminary injunction only if Medi provides security in an amount the Court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. Fed.R.Civ.P. 65(c). 8 The burden of establishing a iational basis for the a11.10unt of a proposed bond rests with the parry seeking securit-y. Continental Group, Inc. v. K~fr Property Mgmt .. LLC, No. 09-60202-CV, 2009 WL 3644475, at *6 (S.D.Fia. Oct. 30, 2009) ("The 'burden is on the party seeking security to establish a rational basis for the amount of a proposed bond.' "). The determination of the amount of the injunction bond, however, lies within the sound discretion of the Court. Carillon Importers. Ltd .. 112 F.3d at 1127 ("The amount of an injunction bond is within the sound discretion of the district court) (citation omitted). Medi requests the Court set the bond at $10,000 while Defendants failed to address the issue in their response to the instant motion but argued at the hearing that $10,000 would not be a sufficient amount to compensate Defendants if they are wrongly enjoined. In view of the strength ofMedi's case and the lack of any convincing argument by Defendants for a more onerous bond, I find Medi's proposed security sufficient. D. Conclusion A preliminary injunction is an extraordinary remedy to be used only when a party carries its burden as to the four prerequisites. Four Seasons, 320 F.3d at 1210. In this instance, Medi has carried its burden as to all four prerequisites as to Medi-Boca and Dr. Martinez but not as to Dr. Slater. Accordingly, it is hereby RECOMMENDED: I. Medi' motion for preliminary injunction (doc. 2) be GRANTED IN PART AND DENIED IN PART to the extent indicated below. 2. Defendants Dr. Martinez and Medi-Boca be enjoined as follows: a. Dr. Martinez and Medi-Boca, and their agents, servants, employees, attorneys, and any other persons or entities who are in active concert or participation with them not operate a Competitive Business, as defined in the parties agreements, in the same location or within twenty-five miles from the Medi-Boca Clinic, located at 555 N. Federal Highway, Suites 18- 20, Boca Raton, Florida 33432, or any other Medi-Weightloss Clinics Business; b. Dr. Martinez and Medi-Boca, and their agents, servants, employees, attorneys, and any other persons or entities who are in active concert or participation with them not disclose or publish to any party, or copy or use for such party's own benefit or for the benefit of any other party, any of Medi's confidential information as defined in the parties agreements; c. Dr. Martinez and Medi-Boca, and their agents, servants, employees, attorneys, and any other persons or entities who are in active concert or participation with them not use any ofMedi's marks, and any signs, slogans, symbols, logos, advertising materials, forms, products and other items bearing Medi's marks; '·Nestl8>wNexr «.o"J 2014 TlloF 'rioinal U.S Governrr.erH \/Vork~; ADD-13 Medi-Weightloss Franchising USA, LLC v. Sadek, Not Reported in F.Supp.2d (2010) ------"·-- ·---------·------------·---·---------· N ''''' '' C. Discussion I. Likelihood of success on the merits The first factor in determining whether a preliminary injunction should issue is whether Medi can show a substantial likelihood it will prevail on the merits of its claims. Based on the record before the Court, Medi has shown a substantial likelihood of success on the merits of its claims for breach of its competitive restrictions, breach of its confidentiality restrictions and covenants, and violations involving the use of its intellectual property. a. competitive restrictions Section 542.335(1 ), Florida Statutes, permits the enforcement of contracts restricting or prohibiting competition during or after the term of the restrictive covenant so long as such contracts are reasonable in time, area, and line of business. In Florida, restrictive covenants may only be enforced where, as here, the restrictive covenants are set forth in a writing signed by the person against whom enforcement is sought. Fla. Stat. § 542.335(l)(a). A party seeking to enforce a restrictive covenant must plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant and that the restriction is reasonably necessary to protect those legitimate business interests. Fla. Stat.§ 542.335(1)(b) and (c). Legitimate business interests include trade secrets, as defined in Fla. Stat. § 688.002(4); valuable confidential business or professional information that otherwise does not qualify as trade secrets; substantial relationships with specific prospective or existing customers or clients; customer or client goodwill associated with a specific geographic location or specific marketing or trade area; and extraordinary or specialized training. Fla. Stat. § 542.335( 1 )(b). If the party seeking enforcement of the restrictive covenant establishes its prima facie case, the party opposing enforcement then has the burden of establishing the contractually specified restraint is overbroad, overlong or otherwise not reasonably necessary to protect the established legitimate business interests. Fla. Stat. § 542.33 5( 1 )(c). Florida law requires courts to construe restrictive covenants in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement and prevents courts from employing any rule of contract construction requiring the court to construe a restrictive covenant narrowly, against the restraint or against the drafter where legitimate business interests have been established. Fla. Stat.§ 542.335(l)(h). If valid, a restrictive covenant may be enforced by, but not limited to, temporary or permanent injunctive relief. Fla. Stat. § 542.335(1 )(j). *4 In this instance, Medi has shown its restrictive covenants are reasonable as to time. In Florida, a presumption exists that any restrictive covenant for six months or less is reasonable and for more than two years is unreasonable as to a former employee, agent or independent contractor. Fla. Stat.§ 542.335(l)(d). Similarly, any restrictive covenant for one year or less is reasonable and for more than three years is unreasonable as to a former distributor, dealer, franchisee, or licensee of a trademark or service mark. Id Here, the competitive restrictions last for a period of two years commencing on the effective date of termination or expiration of the franchise agreements and a period of two years commencing on July 25, 2009, for the settlement agreement (doc. 1, Exhs. B, C, and H). Thus, the restrictive covenants are reasonable as to time. Similarly, Medi has shown the competitive restrictive covenants are reasonable as to area and line of business. The competitive restrictive covenants in the franchise agreements prohibit operation of a competitive business in any capacity at the site of the A von dale and Bell Medi clinics or through the practice, within twenty-five miles of the site of the Avondale or Bell Medi clinics, or within twenty-five miles of any other Medi-Weightloss Clinic business or Market Area in operation or under construction on the later of the effective date of the termination or expiration (doc. 1, Exhs.B, C). 6 The settlement agreement mirrors the prohibitions from the franchise agreements and prohibits operating a competitive business in any capacity at the Avondale and Bell Medi clinics or within twenty-five miles of the Avondale and Bell Medi clinics (doc. 1, Exh. H). These restrictions as to geographic scope and line of business are reasonable on their face and given the nature of Medi's business. Medi has also shown it possesses legitimate business interests which warrant protection. Specifically, Medi seeks enforcement of its competitive restrictions to protect its ability to sell its franchises; its right to ensure continued compliance with its agreements by other franchisees; its maintenance of the strength of the Medi-System and the value of the Medi-Confidential Information; its maintenance of the specialized training it provides to franchisees and clinic managers; its significant relationship with \N~st!.;:wNNe:i!t (C) ?Oi 4 Thom:,.un Reuter>: 1\lo daim io mioin;-11 t J S GovArnrnent \lvorh; ADD-14 Medi-Weightloss Franchising USA, LLC v. Sadek, Not Reported in F.Supp.2d (2010) existing and prospective customers; its association of the locations where the Fairs' competitive businesses are operating to Medi clinics; and the goodwill associated with its marks in the geographic region. Since Medi has established numerous legitimate business interests warranting protection, the burden now shifts to Brandy and Andra Fair to show the competitive restrictions are overbroad, overlong or otherwise not reasonably necessary to protect the established legitimate business interests. Fla. Stat. § 542.335(l)(c). The Fairs have failed to meet this burden and, in fact, offer no argument opposing Medi's contentions as to its legitimate business interests. *5 In addition to establishing the enforceability of its competitive restrictive covenants, Medi has further established a strong likelihood of success on its claim that Brandy Fair has breached the competitive restrictive covenants found in the parties' agreements. "For a breach of contract claim, Florida law requires a plaintiff to plead and establish: ( 1) the existence of a contract; (2) a material breach of that contract; and (3) damages resulting from the breach." Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1272 (11th Cir.2009). Medi has presented evidence which tends to show a likelihood of success on each of these elements. First, Medi has provided valid franchise agreements and a valid settlement agreement signed by Brandy Fair (doc. 1, Exhs.B, C, H). See Fla. Stat. § 542.335(l)(a) ("A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought."). Second, Medi has shown Brandy Fair has involved herself in some capacity with the operation of a competitive business and may now be providing patients the Medi system in their homes thereby breaching both the franchise and settlement agreements (doc. 42, Exhs. A-0 and doc. 44). Finally, Medi has shown it has suffered and will continue to suffer damage resulting from the breach of the agreements in the form of unwarranted competition, lost business, and confusion by potential and former customers (doc. 2, doc. 44). Accordingly, Medi has established a substantial likelihood of success on its breach of its competitive restrictions claims. b. confidential information and intellectual property restrictions Additionally, Medi has shown a substantial likelihood of success on its claims relating to breach of the confidential information and intellectual property restrictions. Indeed, the non-use and non-disclosure agreement, franchise agreements, settlement agreement, terms of use and operations manual all include provisions restricting the use of confidential and proprietary information and the franchise agreements and settlement agreement include restrictions on the use of Medi's intellectual property (doc. 1, Exhs.A-H). As discussed above, Florida recognizes as legitimate business interests both trade secrets and valuable confidential business or professional information that otherwise does not qualify as trade secrets. In Florida, a trade secret consists of information that (1) derives independent economic value from not being generally known to and not readily ascertainable by others who can obtain economic value from its disclosure or use and (2) is the subject of reasonable efforts to maintain its secrecy. See Fla. Stat. § 688.002(4). In an action involving alleged trade secrets, the plaintiff bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy. American Red Cross v. Palm Beach Blood Bank, Inc. 143 F.3d 1407, 1410 (11th Cir.l998) (applying Florida law). Information generally known or readily accessible to third parties cannot qualify for trade secret protection. I d. *6 As set forth more fully in its verified complaint, Medi has shown it possesses valuable confidential and proprietary information, trade secrets and other intellectual property warranting protection. See doc. 1. Further, Medi has demonstrated it takes extraordinary efforts to maintain the secrecy of its trade secrets and confidential and proprietary information. Indeed, Medi required the Fairs to continually agree to maintain the confidentiality of the trade secrets and other confidential and proprietary information they received as a result of their discussions regarding the possibility of operating a Medi franchise, of entering into a franchise agreement with Medi, and eventually terminating the franchise agreement with Medi. See doc. 1, Exhs. A- H. Medi has also shown that the Fairs have used and continue to use books, manuals, forms, medications, vitamins, and the program structure learned or obtained through the franchise agreements with Medi (doc. 44). Moreover, the record indicates the Fairs also obtained formulas from the same company Medi franchisees use and thereby held themselves out to be a Medi clinic (id. and doc. 2). Accordingly, Medi has shown it has a substantial likelihood of success on its claims relating to breach of the confidential information and intellectual property restrictions. 2. Irreparable harm ADD-15 Medi-Weightloss Franchising USA, LLC v. Sadek, Not Reported in F.Supp.2d (2010) As a prerequisite to the entry of a preliminary injunction, Medi must also establish it will suffer irreparable harm unless the injunction issues. MacGinnitie, 420 F.3d at 1240; Siegel v. LePore, 234 F.3d 1163, 1176 (II th Cir.2000) ("Significantly, even if Plaintiffs establish a likelihood of success on the merits, the absence of a substantial likelihood of irreparable injury would, standing alone, make preliminary injunctive relief improper."). In the context of a preliminary injunction, the asserted irreparable harm must be actual and imminent rather than remote or speculative. Siegel, 234 F.3d at 1176. Florida law provides that "[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant." Fla. Stat.§ 542.335(1)0). Neither Brandy or Andra Fair have attempted to rebut the presumption of irreparable injury to Medi. As such, the Court may presume Medi suffers and will continue to suffer irreparable harm due to Brandy and Andra Fair's violations of the enforceable restrictive covenants in the parties' agreements. Notwithstanding, Medi has shown it has and will continue to suffer irreparable harm if a preliminary injunction does not issue as to Brandy and Andra Fair. Namely, Medi has shown that if a preliminary injunction does not issue, it will have to compete with former franchisees and employees who agreed not to engage in such competition, will lose the exclusivity and confidentiality of its proprietary and confidential information, will suffer possible dilution and confusion associated with its intellectual property as well as its products and services, and will prevent Medi from enforcing its agreements with other franchisees. Accordingly, Medi has met its burden as to the irreparable harm prerequisite. 3. Balance of harm *7 Having demonstrated it will suffer irreparable harm, Medi must also establish that the threatened harm to it outweighs the harm a preliminary injunction may cause to Brandy and Andra Fair. MacGinnitie, 420 F.3d at 1240. Here, the balance of harm tips in favor ofMedi. Indeed, Medi seeks to enforce valid restrictive covenants against Brandy and Andra Fair to protect its legitimate business interests. As noted above, Medi currently suffers and will continue to suffer irreparable harm in the form of competition with former franchisees and employees who agreed not to engage in competition, loss of the exclusivity and confidentiality of its proprietary and confidential information, and probable dilution and confusion associated with its intellectual property as well as its products and services. In contrast, Brandy and Andra Fair do not contend they will suffer any harm if a preliminary injunction issues. Instead, they deny any wrongdoing and claim they have not violated any agreement with Medi. If in fact the Fairs were not engaging in activities which violate the restrictive covenants found in the parties' agreements, enforcement of the restrictive covenants would cause them no harm as they will remain free to continue on in that manner. Since, however, the record indicates they are operating a competitive business utilizing Medi's confidential information and marks, restraining the Fairs from engaging in activities which violate the valid restrictive covenants would not harm the Fairs because they freely entered into and agreed to be bound by the non-competition, non-use and non-disclosure provisions. Regardless, Florida law provides that courts must not consider any individualized economic or other hardship that might be caused to the person against whom enforcement of valid restrictive covenants is sought. Fla. Stat. § 542.335(l)(g). Accordingly, the Court need not consider whether enforcement ofMedi's valid restrictive covenants will require the Fairs to cease operating their competitive businesses or otherwise cause them economic hardship. Thus, as the Fairs have failed to show any other potential or actual harm they may suffer if a preliminary injunction issues, the balance of harm weighs in favor of granting a preliminary injunction to Medi. 4. Public interest Finally, Medi must show the preliminary injunction would not disserve or be adverse to the public interest. MacGinnitie, 420 F.3d at 1240. Where an otherwise enforceable restrictive covenant exists, Florida law requires a court refusing enforcement of such provision on the basis that it violates public policy to specifically articulate the public policy violated. Fla. Stat. § 542.335( 1) (i). Further, Florida law requires the court to find the public policy requirements it articulates substantially outweigh the need to protect the legitimate business interests established by the person seeking enforcement. Id. In this instance, Medi asserts entry of a preliminary injunction would serve the public interest by enforcing valid contractual provisions freely entered into by the parties, by promoting stability and certainty in business relationships, by enforcing non-compete covenants permissible under Florida Jaw, by preventing confusion as to a trademark owner's rights to control the use of its marks, and by protecting confidential, proprietary and trade secret information of businesses. Brandy and Andra Fair do not refute those contentions. ------·-·-------- ,._ .. ---·- ADD-16 Medi-Weightloss Franchising USA, LLC v. Sadek, Not Reported in F.Supp.2d (2010) Thus, Medi has demonstrated that upholding the valid restrictive covenants would in fact serve rather than be adverse to the public interest and would not violate any public policy. Accordingly, the public interest considerations support Medi's request for entry of a preliminary injunction. S.Bond *8 Though Medi has met its burden as to the prerequisites for entry of a preliminary injunction, the Court may issue a preliminary injunction only if Medi provides security in an amount the Court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. Fed.R.Civ.P. 65( c). 7 The burden of establishing a rational basis for the amount of a proposed bond rests with the party seeking security. Contintental Group, Inc. v. KW Property Mgmt., LLC, 2009 WL 3644475, at *6 (S.D.Fla. October 30, 2009) ("The 'burden is on the party seeking security to establish a rational basis for the amount of a proposed bond.' "). The determination of the amount of the injunction bond, however, lies within the sound discretion of the Court. Carillon Importers, Ltd.. 112 F.3d at 1127 ("The amount of an injunction bond is within the sound discretion of the district court) (citation omitted). Medi requests the Court set the bond at $10,000 while Brandy and Andra Fair argue $150,000 per Defendant would constitute a more appropriate bond. The Fairs, however, fail to offer any rational basis for that amount. Thus, given Brandy and Andra Fair's blanket denial of any wrongdoing or any affiliation with companies competing with Medi, a bond in the amount of $10,000 would provide adequate security to compensate Brandy and Andra Fair for any costs and damages sustained by them if wrongly enjoined or restrained. D. Conclusion A preliminary injunction is an extraordinary remedy to be used only when a party carries its burden as to the four prerequisites. Four Seasons, 320 F.3d at 1210. In this instance, Medi has carried its burden as to all four prerequisites. Accordingly, it is hereby RECOMMENDED: 1. Plaintiffs' motion for preliminary injunction (doc. 3) be GRANTED. 2. Defendants Brandy and Andra Fair be enjoined as follows: a. Brandy and Andra Fair, and their agents, servants, employees, attorneys, and any other persons or entities who are in active concert or participation with them, including, but not limited to A WCloss Corporation and A & E W ellness Corporation, shall not operate the Arizona Wellness Center, AWC, A WCloss, A & E Wellness Corporation or any other Competitive Business within twenty-five miles from the Avondale Medi Clinic, located at 10320 W. McDowell Road, Bldg. I, # 9031, Avondale, Arizona 85392, the Bell Medi Clinic located at 4319 W. Bell Road, Suite 8, Phoenix, Arizona 85053, or any other Medi-Weightloss Clinics Business. A Competitive Business includes any facility owning, operating or managing, or granting franchises or licenses to others to do so, any clinic or other business facility that offers physician monitored or non-physician supervised weight loss, weight management, nutritional or health products or services, and Practice Management Services or any other products or services that are the same or similar to the products and services offered by Medi-Weightloss Clinics Businesses. *9 b. Brandy and Andra Fair, and their agents, servants, employees, attorneys, and any other persons or entities who are in active concert or participation with them, including, but not limited to AWCloss Corporation and A & E Wellness Corporation, shall not disclose or publish to any party, or copy or use for such party's own benefit or for the benefit of any other party, any of the MediConfidential Information. Medi-Confidential Information includes, without limitation: i. Knowledge of operating results and fmancial performance for Medi-Weightloss Clinics Businesses other than those operated by Brandy or Andra Fair, the Medi-Weightloss Clinics System, and the know-how related to its use; ii. Plans, specifications, size and physical characteristics ofMedi-Weightloss Clinics Businesses; ADD-17 Medi-Weightloss Franchising USA, LLC v. Sadek, Not Reported in F.Supp.2d (2010) iii. Methods in obtaining licensing and meeting regulatory requirements; iv. Sources and design of equipment, furniture, forms, materials and supplies; v. Marketing, advertising and promotional programs for MediWeightloss Clinics Businesses; vi. Staffing and delivery methods and techniques for personal services; vii. The selection, testing and training of Managers/Medical Directors and other employees for Medi-W eightloss Clinics Businesses; viii. The recruitment, qualification and investigation methods to secure employment for employment candidates; ix. Medi-Weightloss Clinics Advantage software including all programs, tools and materials contained therein, such as the proprietary Medi-Weightloss Clinics Electronic medical Records software and knowledge of the information tracked by such software; x. All other computer software made available or recommended for Medi-Weightloss Clinics Businesses; xi. Methods, techniques, formats, specifications, procedures, information and systems related to and knowledge of and experience in the development, operation and franchising ofMedi-Weightloss Clinics Businesses, including but not limited to patient flow estimates, growth patterns, expenses, and pricing modules; xii. Knowledge of specifications for and suppliers of certain products, materials, supplies, furniture, furnishings and equipment; xiii. Recipes, formulas, preparation methods and serving techniques for products and services; xiv. Knowledge of operating results and fmancial performance ofMedi-Weightloss Clinics Businesses; xv. Information provided through Medi-W eightloss Clinics Business training, including but not limited to class presentations and handouts, video and audio presentations, WebNRs, Medi-Alerts, Medi-News, and in the field training; xvi. Information obtained through Medi-Weightloss Clinics compliance audits; xvii. Information contained in the Medi-Weightloss Clinics Business Manuals (Start Up, Operations, and Physician's Manual); xviii. Knowledge ofMedi-Weightloss Clinics proprietary MIC injection and B6/Bl2 injection; xix. Knowledge of the System and the know-how related to its use; *10 xx. Plans, specifications, size and physical characteristics for Medi-Weightloss Clinics Businesses; xxi. All other computer software Medi-Weightloss Clinics, LLC makes available or recommend for Medi-Weightloss Clinics Businesses; xxii. Medi-Weightloss Clinics Patient Package including all forms and sample forms provided by corporate. c. Brandy and Andra Fair and their agents, servants, employees and attorneys and any other persons or entities who are in active concert or participation with them, including, but not limited to A WCloss Corporation and A & E Wellness Corporation, shall not use any trademarks, service marks, trade dress or other designations or indicia which are likely to cause confusion, mistake or deception or suggest any affiliation between Brandy or Andra Fair and Medi. --------00 ___ •O••-•oo ·- ·-- 0-- ---------·-00--000--0- 0 0 ADD-18 Medi-Weightloss Franchising USA, lLC v. Sadek, Not Reported in F.Supp.2d (2010) d. Brandy and Andra Fair and their agents, servants, employees and attorneys and any other persons or entities who are in active concert or participation with them, including, but not limited to AWCloss Corporation and A & E Wellness Corporation, shall not use the Medi-Marks, and any signs, slogans, symbols, logos, advertising materials, forms, products and other items bearing the Medi-Marks. The Medi-Marks include, without limitation, those marks with serial number 77,606,851; serial number 3,634,854; serial number 3,617,270; serial number 3,326,228; serial number 3,404,655; and serial number 3,384,764. See doc. I,~~ 22-23. e. Brandy and Andra Fair and their agents, servants, employees and attorneys and any other persons or entities who are in active concert or participation with them, including, but not limited to A WCloss Corporation and A & E Wellness Corporation, shall not use Medi's trade secrets and confidential business information, including but not limited to the Medi- System and the know-how related to its use. The Medi-System includes the proprietary, physician-supervised weight loss, wellness, nutritional and weight management program, which operates using Medi's intellectual property and proprietary and confidential information. f. Brandy and Andra Fair and their agents, servants, employees and attorneys and any other persons or entities who are in active concert or participation with them, including, but not limited to A WCloss Corporation and A & E Wellness Corporation, shall not operate or do business under any name or in any manner that gives the general public the impression that Brandy or Andra Fair are in any way connected with Medi or that Brandy or Andra Fair have the right to use the Medi-Confidential information, Medi-Marks or MediSystem. g. Brandy and Andra Fair and their agents; servants; employees and attorneys and any other persons or entities who are in active concert or participation with them, including, but not limited to A WCloss Corporation and A & E Wellness Corporation, must cease of and remove the webpage: http://www.awcloss.com. h. Within fourteen (14) days, Brandy and Andra Fair shall return to Medi all copies ofMedi's manuals, marketing materials, forms, customer lists, and other confidential written materials used in the operation of a MediWeightloss Clinics Business. *11 3. Plaintiffs be required to provide a bond in the amount of$10,000. IT IS SO REPORTED. Footnotes The district judge referred the motion for preliminary injunction (doc. 3) for a report and recommendation. See 28 U.S .C.§ 636 and Local Rule 6.01. 2 Brandy and Andra Fair also agreed to confidentiality provisions provided in the operations manual and the terms of use agreements (id, Exhs. D, E). 3 The non-use and non-disclosure agreement dictates that Florida law shall govern and all disputes arising out of the agreement shall be subject to the exclusive jurisdiction of the state and federal courts located in or near Hillsborough County, Florida (id. ). 4 Brandy Fair signed both franchise agreements on behalf of Bionic as either the CEO or President. The franchise agreements dictate Florida law will apply (id ). 5 Brandy Fair signed the settlement agreement on behalf of herself individually and as President of Bionic. The settlement agreement dictates Florida law will apply (id ). 6 As the term "competitive business" is used in the franchise agreements, that term is defined as: any business (other than a MEDI-WEIGHTLOSS CLINICS Business operated under a franchise agreement with us) or facility owning, operating or managing, or granting franchises or licenses to others to do so, any Clinic or other business or facility that offers physician monitored or non-physician supervised weight loss, weight management, nutritional or health products and services, any Practice Management Services or any other products or services that are the same or similar to the Products and Services (including Other Services) then offered by MEDI-WEIGHTLOSS CLINICS Businesses. -----------------------------·-- .. .. --- " ...... ADD-19 Medi-Weightloss Franchising USA, LLC v. Sadek, Not Reported in F.Supp.2d (2010) 7 Sxee also Fla. Stat. § 542.335( I )(j) ("No temporary injunction shall be entered unless the person seeking enforcement of a restrictive covenant gives a proper bond, and the court shall not enforce any contractual provision waiving the requirement of an injunction bond or limiting the amount of such bond."). End uf Ducument ----------------------------------------------- V"''estlawNext' rf; 2014 Thomson Reuters. No claim \G orloinal U S Governmen: Works. ADD-20 Portware, LLC v. Barot, 11 Misc.3d 1059(A) (2006) ------------------··-·--·-815 N.Y.S.2d 495, 2006 WL 516816, 2006 N.Y. Slip Op. 50282(U) Unreported Disposition n Misc.3d 1059(A) (The decision ofthe Court is referenced in a table in the New York Supplement.) Supreme Court, New York County, New York. PORTWARE, LLC, Plaintiff, v. Sachin BAROT, Defendant. No. 603738/os. March 2, 2006. Attorneys and Law Firms Lawrence Peikes, Esq., Monica Bhattacharyya, Esq., Wiggin and Dana LLP, New York, for Plaintiff. Paul H. Pincus, Esq., Rubin, Bailin, Ortoli, Mayer & Baker LLP, New York, for Defendant. Opinion BERNARD J. FRIED, J. *1 Plaintiff Portware, LLC has filed this complaint against Defendant Sachin Barot, a former employee, alleging breach of contract and other causes of action, and moving for a preliminary injunction and temporary restraining order to enforce the non-competition, non-solicitation, and confidentiality covenants in Defendant's employment agreement. For the reasons that follow, I grant Plaintiff's motion for a preliminary injunction in part and deny it in part. PlaintiffPortware, LLC develops programmable, rule-based software for trading applications at financial institutions. Portware requires each of its customers to sign a confidentiality agreement, to safeguard the confidentiality of information about Portware's software and future development plans, as well as any information that the customer requests be kept confidential. The latter information may include information about how the customer plans to use the product and its specific trading strategies. Portware often enters into confidentiality agreements with a potential customer as soon as it begins to assess the customer's technical and services needs. The information about whether a particular financial institution uses Portware's software is generally not publicly available. From its fee arrangements with its customers, Portware earns about $10,000 and $60,000 per customer per month. Portware has a database of information about its customer relationships, including information about its normal pricing and special pricing for specific customers. On March 26, 2004, Portware hired Defendant Sachin Barot as an account manager. Barot's primary responsibilities were to sell Portware products and manage customer relationships. Barot received some training from Portware during the first several weeks or months of his employment. As a condition of his employment, Barot signed the Portware, LLC Employee Covenants Agreement ("Agreement"), which contained non-competition, non-solicitation, and confidentiality covenants. Specifically, the Agreement included the commitment that, for one year after termination of employment with Portware, Barot would not "engage in any business or other commercial activity" that would be "competitive in the United States" with Portware's business activities. It further provided that Barot "shall not, directly or indirectly ... communicate, solicit or transact any business with ... any of the customers or clients" of Portware or any prospective customers or clients" of Portware being solicited within twelve months of Barot's termination. ----------------------------------· ----~- .. ADD-21 Portware, LLC v. Barot, 11 Misc.3d 1059(A) (2006) 815 N.Y.S.2d 495, 2006WWL 516816, 2006 N.Y. Slip Op. 50282(U) -~,.-----------.- The Agreement further provided that Barot would use any confidential information acquired at Portware "only in the performance of [his] duties for the Company" and not "for [his] personal benefit, for the benefit of any other individual or entity, or in any manner adverse to the interests of the Company .... " The Agreement defined "confidential information" to include "trade secrets, know-how, show-how, technical, operating, financial, and other business information, ... other than information" that is generally available. *2 On August 10, 2005, Barot resigned from Portware. There is no allegation or evidence that Barot took with him copies of any records or files when he left. On August 12, Barot signed a Form of Acknowledgment that was attached as Exhibit A to the Agreement, in which he affirmed that he would continue to comply with the provisions of the Agreement. In late September 2005, Barot began working as a sales manager for FlexTrade Systems, Inc., a competitor of Portware. FlexTrade, like Portware, develops programmable, rule-based software for trading applications. At FlexTrade, Barot is responsible for identifying potential customers for its software. On October 20, 2005, Portware filed this complaint against Barot, alleging (1) breach of contract, (2) tortious interference with contractual relationships, (3) tortious interference with business expectancies, (4) misappropriation, and (5) unfair trade practices. Portware moved for a preliminary injunction and temporary restraining order (TRO) enjoining Barot for one year from soliciting customers whose accounts he managed while at Portware, or transacting business with any customers or potential customers ofPortware, and seeking money damages and attorneys' fees. I granted a TRO enjoining Barot from soliciting customers whose accounts he managed while at Portware, conditioned on a $300,000 undertaking, and pending the return date of Portware's motion for a preliminary injunction on November 21, 2005. With the parties' consent, I adjourned the preliminary injunction hearing in order to refer the matter for alternative dispute resolution. The parties were unable to reach a final settlement, however, and so the matter came back to this Court. On February 1, 2006, Defendant Barot filed a cross-motion for summary judgment, asking the Court to dismiss the complaint's first cause of action for breach of contract as a matter of law. After oral argument on Defendant's motion for partial summary judgment on February 8, 2006, I denied Defendant's cross-motion for partial summary judgment in its entirety, and ordered expedited discovery. On February 15, 2006, Portware filed an amended application for a preliminary injunction, in which it modified its previous application, in relevant part, to limit the injunction it sought to enjoining Barot from working for FlexTrade, rather than from working for any competitor of Portware. I held an evidentiary hearing on Plaintiff's motion for a preliminary injunction on February 17, 2006. At the hearing, Eric Goldberg, Portware's C.E.O., gave uncontroverted testimony that Barot had access to information about its pricing for particular customers or potential customers and information about Portware's planned product developments. He also testified that Barot, as an account manager, had access to information protected by Portware's confidentiality agreements, such as efforts made by Portware to get its software running at various clients, trouble-shoot pioblems, and customize its soft'.vare to the particular clients' needs. *3 A party seeking a preliminary injunction pursuant to CPLR § 6301 must show: "(1) a likelihood of success on the merits, (2) irreparable injury if provisional relief is not granted, and (3) that the equities are in his favor."J.A. Preston Corp. v. Fabrication Enterprises, Inc., 68 N.Y.2d 397, 406. 502 N.E.2d 197. 509 N.Y.S.2d 520 (1986). A. Likelihood of success on the merits 't..!;>sf!;::wNNeKt (0 ?014 Thomson RButers. No dalm to orioinal U.S. Government Works ADD-22 Portware, LLC v. Barot, 11 Misc.3d 1059(A) (2006) 815 N.Y.S.2d 495, 2006 WL 516-:::-81:-:::6~, 2::-::0~06~N.~Y"'"". s=lic-p -=o-p.-=5=02=8~2(-:-:-U,.-) --- Restrictive covenants in employment agreements are carefully scrutinized by courts in New York, because they are restraints on trade imposed by employers, which are usually in superior bargaining positions. BDO Seidman v. Hirshberg, 93 N.Y.2d 382,388,690 N.Y.S.2d 854,712 N.E.2d 1220 (N.Y.l999). To be enforceable under New York law, a restrictive covenant must satisfy the three-pronged test set forth in BDO Seidman v. Hirshberg. A restraint is reasonable if it (I) is no greater in time or area than is necessary to protect the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) does not injure the public. /d. at 388-89, 690 N.Y.S.2d 854,712 N.E.2d 1220.The only justification for imposing an employee agreement not to compete is to forestall unfair competition. It does not forestall/air competition. Seidman, 93 N.Y.2d at 391, 690 N.Y.S.2d 854, 712 N.E.2d 1220. The Court of Appeals in Reed, Roberts Associates. Inc. v. Strauman, 40 N.Y.2d 303,353 N.E.2d 590,386 N.Y.S.2d 677 (1976) explained that a restrictive covenant serves an employer's legitimate interests "to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information," or where an employee's services are "unique or extraordinary." Reed, Roberts, 40 N .Y.2d at 308, 386 N. Y.S.2d 677. 353 N .E.2d 590.Defendant has not contended or produced any evidence that Barot's services for Port-ware were unique or extraordinary. Therefore, at issue are Portware's interests only in the confidential information, customer relationships, and good will that Barot acquired or developed during his employment at Portware. Customer information is not considered confidential if it is readily discoverable through public sources. Id In Seidman, the Court expanded this test to protect an employer's legitimate interest as well, in certain circumstances, in the "good will" and relationships that an employee develops with the employer's client at the employer's expense during his employment. See Seidman, 93 N.Y.2d at 391.690 N.Y.S.2d 854,712 N.E.2d 1220. If a restrictive covenant is overly broad, a court may nonetheless partially enforce it, severing the unenforceable portions. Partial enforcement may be justified when the unenforceable portion is not "an essential part of the agreed exchange," and where the employer demonstrates "an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct," did not know that the covenant was overly broad, and "has in good faith sought to protect a legitimate business interest."Seidman, 93 N.Y.2d at 392, 394-95, 690 N.Y.S.2d 854, 712 N.E.2d 1220 (enforcing non-compete covenant only as to client relationships that employer enabled former employee to acquire through this employment). Other factors weighing in favor of partial enforcement are the imposition of the covenant in connection with a promotion to a position of responsibility and trust, see Seidman, 93 N.Y.2d at 394, 690 N.Y.S.2d 854, 712 N.E.2d 1220, rather than the imposition of the covenant in connection with hiring or continued employment. See Scott, Stackrow & Co. v. Skavina, 9 A.D.3d 805, 807,780 N.Y.S.2d 675 (3d Dept.2004) (upholding trial court's refusal to enforce employment agreement, where employer had required the defendant to sign it upon hiring her and thereafter as a condition of her employment). *4 Although Barot was required to sign the contract at the beginning of his employment, there is no evidence of coercion. I am aware of no caselaw indicating that imposition of a restrictive covenant in an employment agreement is coercive per se. The lawfulness of such a covenant must depend on the facts and circumstances under which it was imposed, and the extent of the restriction. Here, there is no evidence that Portware imposed the covenants in bad faith, knowing that they were overly broad. I credit Goldberg's testit11ony that after Barot's resignation, Goldberg received reports from Port-ware customers or potential customers that raised a reasonable concern that Barot might have disclosed Portware's confidential information to Portware customers or potential customers. Although this testimony is not admissible for the truth of the hearsay statements reported, I do credit it as evidence ofPortware's good faith in seeking to enforce the Agreement against Barot. 1. Confidential Information Covenant Portware contends that Barot has impermissibly disclosed and will continue to disclose confidential information about Portware, its software, and its customers to Flex Trade, causing Portware irreparable harm, and diminishing the value of its trade secrets and confidential information, and causing the loss of customer goodwill and business. Barot maintains that Portware's customer information is not confidential or proprietary, and that in any case he has not improperly used or disclosed it while at Flex Trade. 'JV'est!awNext r[; 704 4 Thorns~m Reulf:r::: No dsin' io oriqinal U.S Government Works 3 ADD-23 Portware, LLC v. Barot, 11 Misc.3d 1059(A) (2006) 815 N.Y.S.2d 495,2006 wC5H3816,2666.N.Y.Siip Op. 50282,(U)--- ----· ___ ., _____ ---· .. Portware has a legitimate interest in preventing Barot from disclosing or using confidential information that he learned at Portware, but it has no legitimate interest in preventing Barot from disclosing or using non-confidential information. I conclude that Barot had access to certain confidential information at Portware that could be utilized by him in his new position at FlexTrade. This information includes pricing information, information about Portware's implementation, trouble-shooting, and customization of its software, Portware's future development plans, and other information covered by confidentiality agreements between Portware and its customers and potential customers. I find that Portware's list of customers and their contact information is not the sort of confidential information protected under Seidman.Portware's allegations that this information is publicly unavailable are conclusory and insufficient to establish a likelihood that it constitutes confidential information. Accordingly, I find that the Agreement is valid and enforceable to the extent that it forbids Barot from disclosing or exploiting on behalf of FiexTrade Portware's confidential information, including technical information and customer-related information acquired by Barot as a consequence of his employment at Portware, with the exception of Portware's list of customers and their contact information. 2. Non-Solicitation Covenant *5 Portware contends that Barot has improperly solicited and will continue improperly to solicit business on FlexTrade's behalf during the twelve-month period following the end of his employment at Portware, causing Portware irreparable harm, and causing the loss of customer goodwill and business. Barot maintains that he has done nothing improper. Portware's legitimate interest in enforcing the non-solicitation covenant is to protect against Barot's competitive use of customer relationships that Portware enabled him to acquire through his position as account manager at Portware. Seidman, 93 N .Y.2d at 391,690 N.Y.S.2d 854, 712 N.E.2d 1220 (holding that an employer may legitimately seek to protect, in certain circumstances, the "good will" and relationships that an employee develops with the employer's client during his employment). Portware has no legitimate interest in preventing Barot from competing for the patronage of customers with whom he never developed a relationship while at Portware, customers with whom Barot had established a prior relationship prior to his Portware employment, and customers with whom Barot began a relationship after he left Portware. See Healthworld Cmp. v. Gottlieb, 12 A.D.3d 278, 786 N.Y.S.2d 8 (1st Dept.2004) (affirming grant of preliminary injunction enjoining defendants from soliciting or accepting business from clients or former clients of their former employer was limited to clients of former employer with whom the defendants had contact during their employment). In accord with the majority of courts, which have upheld twelve-month restrictive covenants, I find that the twelve-month time restriction in the Agreement is a reasonable length of time. See, e.g., Crown It Sen•s., Inc. v. Koval-Olsen, 11 A.D.3d 263, 264, 782 N.Y.S.2d 708 (1st Dept.2004) (enforcing restrictive covenant limited to twelve months after employee termination). Therefore, to the extent that the Agreement bars Barot from soliciting, communicating, or transacting business with customers or potential customers with whom he first developed a relationship at Portware, for a twelve-month period following the termination of his employment at Portware, I fmd that the Agreement is valid and enforceable. 3. Non-Competition Covenant Portware's chief demand is that Barot be prohibited from working for Flex Trade for the remainder of the twelve-month period following his August 2005 departure from Portware, pursuant to the non-competition covenant in the Agreement. Portware contends that, while working at FlexTrade, Barot will inevitably disclose confidential information and improperly solicit ADD-24 Portware, LLC v. Barot, 11 Misc.3d 1059(A) (2006) 815 N.Y.S.2d 495,2006 WL 516816·; 2006 N.Y-Siip Op.50.""28=-=2..,.(U""")--···---·---" ·---- ·--··--- business on FlexTrade's behalf, causing Portware irreparable hann and diminishing the value of its trade secrets and confidential information, and causing the loss of customer goodwill and business. The non-competition clause provides broadly that Barot may not "engage in any business or other commercial activity" that would be "competitive in the United States" with Portware's business activities. At oral argument and at the preliminary injunction hearing, Portware's counsel asked that these provisions be interpreted to apply only to FlexTrade, for purposes of this litigation. *6 Portware has a legitimate interest in protecting the customer relationships that Barot developed with Portware's customers and potential customers during the course of his employment. See Seidman, 93 N.Y.2d at 391, 690 N.Y.S.2d 854, 712 N.E.2d 1220; Crown It Services. Inc. v. Koval-Olsen, 11 A.D.3d 263, n2 N.Y.S.2d 708 (1st Dept.2004) (enforcing non-compete clause limited to former clients of the plaintiff to which its former contractor had been introduced directly or indirectly through the plaintiff). Consequentiy, Portware has a legitimate interest in enforcing the non-competition covenant, to the extent that it can show that Barot is engaging directly or has engaged directly in competing with Portware, for instance, if Barot has solicited Portware's customers or potential customers, or Barot has disclosed or used Portware's confidential information. In fact, however, Portware has not persuaded me that solicitation in violation of the Agreement is likely to have occurred or to be occurring. Although Portware contends that Barot has solicited business from UNX, Inc., a Portware customer, on behalf of Flex Trade, the only direct evidence it submitted in support of !Pis contention is the Declaration of Jeromee Job~Tlson, an employee at UNX, Inc., in which Johnson attested that Barot contacted Johnson on behalf of Flex Trade during Fall 2005. Barot testified at the evidentiary hearing, however, that he did not solicit UNX's business on behalf of FlexTrade, and that his communications with Johnson were social in nature. Johnson did not testify at the evidentiary hearing; moreover, Plaintiff has presented no reason why it did not call Johnson as a witness. Because Johnson's declaration was not subjected to cross- examination, I cannot fmd that Johnson's declaration rebuts Barot's testimony. Moreover, Portware has not persuaded me that disclosure of confidential information in violation of the Agreement is likely to have occurred or to be occurring. Goldberg testified at the hearing as to hearsay statements reported to him that Barot had disparaged Portware's implementation of software at Merrill Lynch Canada, a Portware customer, in conversations with personnel of Canada Pension Plan. I also received an affidavit by Dan Kaufman, a Portware salesperson, attesting to various hearsay statements regarding Barot's disclosure of Portware confidential information. Plaintiff submitted a January 2006 letter that it received from Merrill Lynch Canada, Inc. complaining that its use of Portware's software had been disclosed, but the letter makes no reference to either Barot, Canada Pension Plan, or the date of the alleged disclosure. Barot testified at the hearing, however, that he did not disparage Portware's implementation at Merrill Lynch Canada in conversations with personnel of Canada Pension Plan. Plaintiff has produced no witnesses who have controverted Barot's testimony. Plaintiffhas submitted no affidavit from Canada Pension Plan verifying what occurred. Consequently, I cannot find that Portware's hearsay affidavit, hearsay testimony, and non-specific letter have rebutted Barot's testimony that he did not improperly disclose confidential information. *7 Consequently, Portware is unlikely to prevail on its claim that Barot is engaging directly or has engaged directly in competing with Portware. Therefore, I will not enjoin Barot from working at FlexTrade. B. Irreparable Injury Courts will not grant a preliminary injunction unless the plaintiff shows that it cannot adequately protect its interests by a claim for damages. Willis of New York, Inc. v. DeFelice, 299 A.D.2d 240, 242, 750 N.Y.S.2d 39 (1st Dept.2002). In the absence of a restraint on Barot's solicitation of Portware's customers or disclosure of its confidential information, Portware would likely sustain a loss of business impossible, or very near to difficult, to quantify. Therefore, Portware has shown the irreparable ADD-25 Portware, LLC v. Barot, 11 Misc.3d 1059(A) (2006) 815 N.Y.S.2d 495, 2006WC5'T6816,2066 N.Y:siip"""O"""p-. 5::::::0:-:::282(u)-------------------- --------·- .. damage necessary to justify the issuance of a preliminary injunction enjoining Barot from disclosing Portware's confidential information and soliciting, communicating, or transacting business with customers or potential customers of Flex Trade with whom he first developed a relationship at Portware, for the remainder of the twelve-month period following the termination of his employment at Portware. C. Balance of Equities A plaintiff seeking an injunction must also show that the burden caused to the defendant by the imposition of the injunction is less than the harm caused to the plaintiff by the defendant's activities. Edgeworth Food Corp. v. Stephenson, 53 A.D.2d 588, 588, 385 N.Y.S.2d 64 (1st Dept.1976). Here, the record offers no basis to conclude that Barot has suffered or will in the future suffer significant professional hardship from the limited restraint on solicitation that I have imposed in a TRO, whereas Portware would likely suffer injury if the restraint were lifted. Therefore, the balance of equities with respect to the solicitation injunction favors Portware with respect to the preliminary injunction that I have ordered with respect to the non-solicitation and confidential information covenants of the Agreement. In accordance with the foregoing decision, Plaintiff's application for a preliminary injunction is granted in part and denied in part. The original $300,000 undertaking shall be maintained during the pendency of the preliminary injunction. It is further directed that the parties shall settle an order and that the parties shall appear for further proceedings in Part 60 on March 21, 2006, at 10:30 a.m. Paraiiei Citations 11 Misc.3d 1059(A), 815 N.Y.S.2d 495 (Table), 2006 WL 516816 (N.Y.Sup.), 2006 N.Y. Slip Op. 50282(U) End of Docunlt'nt 'NestiG!wNexr © 2014 Thomsvn Reuters. f\lc. claim to original U.S Government Works ADD-26 Powers v. 31 E 31 LLC, -- N.E.3d ---- (2014) 2014 N.Y. Slip Op. 0708if-----···---·---·-·-· ------------- ·--- .. '-·-·' '- -·-· '" --- N.E.3d ----, 2014 WL 5325471 (N.Y.), 2014 N.Y. Slip Op. 07084 This opinion is uncorrected and subject to revision before publication in the printed Official Reports. Alani Golanski, for appellant. Linda M. Brown, for respondents. Joseph W. Powers, & c., Appellant, v. 31 E 31 LLC, et al., Respondents. No.153 Court of Appeals ofNewYork Decided on October 21, 2014 New York State Trial Lawyers' Association; Defense Association ofNew York, Inc., amici curiae. OPINION OF THE COURT GRAFFEO, 1.: In this negligence case where plaintiff fell off the setback roof of an apartment building, we conclude that defendants failed to demonstrate their entitlement to summary *2 judgment on the grounds relied upon by the Appellate Division. We therefore reverse the Appellate Division order. I. In the early morning hours of August 23, 2008, plaintiff Joseph W. Powers and several others, all of whom had been consuming alcohol, visited a friend's apartment located on the second floor of a 13-story apartment building in Manhattan. During the visit, the group stepped through a window in the apartment to access the adjacent roof deck. The window opening was 17Yz inches wide by 31 inches tall, and the flat roof area was approximately five feet wide and extended the length of the building above the first floor. This setback portion of the roof abutted the exterior wall and railing of a structure behind the apartment building. In one area of the roof there was a 25-foot-deep air shaft situated between the two buildings. There was no railing, fence or parapet wall around the perimeter of the air shaft. The opening of the air shaft measured approximately six feet, four inches by eight feet, five inches. Plaintiff and the others walked around the setback roof for a few minutes and then re-entered the apartment through the window they had used earlier. After a time, the group realized that plaintiff was no longer with them. They undertook a search and discovered that plaintiff was lying unresponsive at the bottom of the air shaft. Apparently, plaintiff had re-exited the apartment through the window and fallen off the unguarded edge of the setback roof into the air shaft. As a result of this tragic accident, plaintiff sustained debilitating injuries. In 2010, plaintiff, through his guardian ad litem William T. Powers, commenced this personal injury action against the owners and managers of the apartment building, defendants 31 E 31 LLC and B & L Management Co., Inc. Plaintiff alleged that defendants had created and maintained a dangerous condition and negligently caused his injuries by failing to install a railing, parapet wall or fence around the perimeter of the air shaft. In support of his negligence claim, plaintiff further asserted that the absence of a guardrail violated the Multiple Dwelling Law and New York City Building Code. Defendants answered and, after discovery, moved for summary judgment dismissing the complaint, arguing primarily that plaintiffs accident was unforeseeable and that the 1968 and 2008 New York City Building Codes did not govern the condition of this particular roofbecause the construction of the apartment building predated those codes. Supreme Court denied defendants' ADD-27 Powers v. 31 E 31 LlC, -- N.E.3d •••• (2014) ---- ' ---·- ·---· -· --- ·-------- 2014 N.Y. Slip Op. 07084 motion, fmding their proof insufficient to demonstrate that the building codes did not require a protective guard on the setback roof and holding that there were questions of fact concerning foreseeability (38 Mise 3d 1211 [A], 3-5 lSup Ct, NY County 2012]). The court also rejected defendants' additional arguments that they could not be held liable on the basis that plaintiff had no memory of the accident and the air shaft was an open and obvious condition (see id. at 6-7). The Appellate Division reversed and dismissed the complaint (1 05 AD3d 657 (1st Dept 2013]). The court found that the 1979 certificate of occupancy submitted by defendants demonstrated that the building was grandfathered out of the 1968 and 2008 Building Codes and complied with the earlier regulations (see id. at 657-658). The court further concluded that defendants had no duty to mitigate the risk of an accident such as plaintiffs fall because, "given the nature and location of the setback, it was unforeseeable that individuals would choose to access it" (id. at 657). Because it disposed of the case on those grounds, the court did not reach defendants' alternative arguments. We granted plaintiff leave to appeal (21 NY3d 863 [2013]) and now reverse. The central issue before us is whether defendants' SUtTu-nary judt;.tuent proof was sufficient to refute plaintiff's allegations of negligence-- more particularly, plaintiffs assertion that the building codes required the erection of a railing or parapet on the setback roof. Defendants argue that the building was exempted from the 1968 and 2008 Building Codes, relying on an exception contained in the code in effect when the building was constructed in 1909. According to defendants, their summary judgment proffers, which consisted primarily of an expert affidavit and a certificate of occupancy issued by the City, established that the 1909 exception applied and that subsequent alterations to the building did not require updated compliance. Alternatively, defendants claim that, even if the 1968 Building Code governs, it does not mandate that the setback roof have a protective guard. Plaintiff counters that defendants failed to eliminate questions of fact concerning the applicability of the 1909 exception or whether the later conversion of the building to multiple dwelling use obligated defendants to bring the entire building into compliance with the 1968 Building Code. Plaintiff contends that, by granting defendants summary judgment, the Appellate Division assigned too much weight to the certificate of occupancy. We agree. Under the Multiple Dwelling Law, every open roof area of a multiple dwelling erected or converted to residential use after April 18, 1929 must be protected by a parapet wall or guard railing unless the department charged with code enforcement deems such protection unnecessary (see Multiple Dwelling Law§§ 9 [2]; 62 [1]). The parties agree that under the building code in effect in 1909, all exterior walls over 15 feet high-- except where finished with gutters-- were required to have two-foot parapet walls extending above the roof(see L 1982, ch 275, § 479; 1906 Building Code ofthe City ofNew York§ 43; 1899 Building Code of the City of New York§ 43). This exclusion for walls fmished with gutters was carried into subsequent building codes, which applied to new construction (see 1938 Building Code of the City of New York§§ C26-5.0, C26-444.0; 1916 Building Code ofthe City ofNew York§§ 4, 259). Thus, ifthe setback roof in this case had gutters in 1909, the lack of a railing would not necessarily indicate a violation of the early codes. By 1968, however, instead of excepting walls finished with gutters, the building code mandated that buildings which were "more than [22] feet in height and have roofs that are flatter than [20] degrees to the horizontal shall be provided with a parapet ... railing[,] or fence" of a specific height ( 1968 Building Code of the City of }~ew York [Administrative Code of City of ~JY] § 27-334). The 2008 Building Code contains a similar requirement (see NY City Building Code [Administrative Code of the City ofNY tit 28, ch 7] § 1509.8). In light of these code provisions, we reject defendants' claim that the 1968 and 2008 Building Codes require the installation of railings or parapets only on the highest roof of a building. Although the 1968 Building Code refers to a "parapet . . . railing[,] or fence" in the singular, it specifically provides that "words used in the singular include the plural, and the plural the singular" (1968 Building Code ofthe City ofNew York [Administrative Code of City ofNY] §§ 27-231, 27-334). The definition of "roof' in the 1968 Building Code refers to "[t]he topmost slab or deck of a building," but the term "building" must be construed as if followed by the phrase "or part thereof' (id. § 27-232). As the setback roof is the topmost slab of ----------- ADD-28 Powers v. 31 E 31 LLC, ·- N.E.3d -·· (2014) ..... __ , ___ ~~--~ ................. W.WY ,, _____ ... .._ _ .,., ___ .....,,.,,.. "'"""' "' _,,, .... ,_ N' V 2014 N.Y. Slip Op. 07084 "part ofthe building," it falls within the purview of section 27-334 (id.). Furthermore, although section 27-334 provides that protective guards may be located six feet inward from the face of the *3 exterior wall, this is not a mandatory condition (see id. § 27-334). Contrary to defendants' contention, a setback roof that is less than six feet wide requires a protective guard and, consequently, if the 1968 Building Code applies, the absence of a parapet or railing on the edge of the setback roof may run counter to the requirements of the code. Like its predecessors, the 1968 Building Code required existing buildings to conform to the new standards under certain circumstances (see generally id. subchapter 1, art 4). Here, the parties agree that the updated code governs the entire apartment building if post-1968 alterations were made to the structure that, within a 12-month period, cost more than 60% of the building's value (see id. § 27-115). The 1968 Building Code also provides that alterations resulting in changes to the occupancy or use classification, or the conversion to multiple dwelling use, may require that the entire building comply with the updated code requirements, depending on whether public safety and welfare are endangered (see id. §§ 27-118, 27-120). As the proponent of summary judgment, defendants bore the burden of"tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; see Winegrad v New York Univ. ivied. Ctr., 64 NY2d 851. 853 [1985]). Specifically, defendants needed to eliminate any doubt as to whether, under the foregoing regulatory scheme, the absence of a protective guard on the setback roof conformed to code. To that end, defendants should have established that the roof was finished with gutters in 1909 and that the 1979 conversion did not trigger an obligation to bring the entire building, including the unaltered setback roof, into compliance with the 1968 Building Code. In our view, defendants' proof fell short in both respects. In support of their motion, defendants submitted the affidavit of engineer Cornelius F. Dennis and a certificate of occupancy issued by the City in 1979. In the absence of the 1909 building plans, however, the engineer's assertion that the building was finished with gutters in 1909 was speculative (cf Ramos v Howard Indus., Inc., 10 NY3d 218, 224 [2008]; Diaz v New York Downtown Hasp., 99 NY2d 542, 544 [2002]). Although he opined that the 1979 conversion did not implicate section 27-115 or require that the building be brought into compliance with the 1968 Building Code, the engineer based his conclusion solely upon the estimated cost of the alterations cited in the permit application, without including the value of the building in 1979 1 • Dennis averred only that there was "no doubt in [his] mind" that the building was worth "some multiple of$2,300,000." These conclusory assertions are insufficient to demonstrate the absence of any material issue of fact (see *4 Vega v Restani Constr. Corp., 18 NY3d499, 503 [2012]). Nor does the 1979 certificate of occupancy satisfy defendants' burden to present a prima facie showing of entitlement to judgment as a matter of law, and our decision in Hyman v Queens County Bancorp. Inc. (3 NY3d 743 [2004]) does not hold otherwise. In Hyman, the plaintiff bore the burden of establishing that the proffered building code provision was in effect at.the relevant time and that updated compliance was required because the plaintiff had raised the building code in opposition to the defendant's summary judgment proof, which had shown there was no defective or dangerous condition on the premises (see id. at 744-745). In light of the certificate of occupancy presented by the defendant, paired with the absence of any indication that the stairway was defective, or any evidence that the proffered codes applied, the plaintiff in Hyman failed to raise a legitimate issue offact to defeat summary judgment (see id.). In this case, it was defendants' burden to prove at the outset that the absence of a railing did not violate the building regulations (see Lesocovich v I 80 Madison Ave. Corp., 81 N Y2d 982, 985 [ 1993] [holding that the defendant failed to establish that the updated building code did not apply]). On this record, defendants have not adequately demonstrated that the roof was finished with gutters in 1909, and the certificate of occupancy is inadequate to establish that the setback roof fully complied with all code mandates on the date of its issuance or 29 years later on the day of plaintiffs accident (see Solomons v Douglas Elliman LLC, 94 AD3d 468,470 [1st Dept 2012]; see generally Garrett v Holiday Inns, 58 NY2d 253. 262-263 [1983]; see also NY City Construction Codes [Administrative Code of the City of NY tit 28, ch 1] § 28-118.1). Hence, under the circumstances of this case, issues of fact concerning the roofs compliance with the building codes remain. 2 ,; ADD-29 Powers v. 31 E 31 llC, ·- N.E.3cl ··-- (2014) =:::-::-:-::-:-;-;-;::-::--::::---:::=::=-:----. -- --·--·------- 2014 N.Y. Slip Op. 07084 --------------·---- '" --· .. --·- Plaintiff also argues that, under our holding in Lesocovich v 180 Madison Ave. C01p. (81 NY2d 982 [ 1993 ], supra). the Appellate Division erred in concluding that there are no triable questions of fact as to whether his accident was foreseeable. Defendants posit that holding them liable for plaintiffs injuries would require the imposition of a new duty of care, and they claim that Lesocovich is factually distinguishable. Defendants' arguments are unpersuasive. It is well settled that, as landowners, defendants have "a duty to exercise reasonable care in maintaining [their] ... property in a reasonably safe condition under the circumstances" (Galindo v Town of Clarkstown. 2 NY3d 633, 636[2004]; see Basso v Miller, 40 NY2d 233, 241 [1976]). The existence and scope of this duty is, in the first instance, a legal question for the courts to determine by analyzing the relationship of the parties, whether the plaintiff was within the zone of foreseeable harm, and whether the accident was within the reasonably foreseeable risks (see Sanchez v State of New York, 99 NY2d 247, 252 [2002]; Di Ponzio v Riordan. 89 NY2d 578,583 [1997]; *5 Palsgrafv Long Is. R.R. Co., 248 NY 339.344 [1928] ["[t]he risk reasonably to be perceived defines the duty to be obeyed], rearg denied 249 NY 511 [ 1928]). The focus of our inquiry, therefore, is whether it was foreseeable that defendants' tenants and their guests would access the setback roof and be exposed to a dangerous condition from u'le absence of a railing or guard around the air shaft. ln Lesocovich, the plaintiff fell off a setback roof while visiting a friend's apartment and alleged that the fall was due to the absence of a railing or parapet (see 81 NY2d at 983). As here, the setback roof was not an area included in the tenant's lease, no permission had been obtained for her to use it and the landlord denied prior knowledge of its use. Also, the roof in Lesocovich was similarly accessible only through a window (see id. at 983-984). In that case, we denied the defendant's summary judgment motion, holding that reasonable minds could disagree as to whether the plaintiffs use of the roof was foreseeable (see id. at 985). Although the roof in Lesocovich may have been more suitable to recreational use, here, the setback roof was flat and of sufficient size and length to comfortably permit several individuals to stand or walk on it. Access to the roof was easily obtained through the hallway window, and neither plaintiff nor his friends had any difficulty exiting. In Lesocovich, the plaintiff had to climb on furniture to reach the small window leading to the roof; yet we still held that a jury could find the tenant's use of the window to access the roof foreseeable (see id. ). Here, the tenant of the apartment that plaintiff was visiting testified that he had stepped onto the roof through the window approximately 15 times in the two months preceding the accident to smoke cigarettes and that the previous tenant had often done the same. According to the resident, evidence of this use was visible because cigarette butts and garbage littered the roof. On this record, as in Lesocovich, reasonable minds could differ as to whether plaintiffs use of the roof and his resulting fall were foreseeable, thereby precluding the grant of summary judgment to defendants on that ground. Because we conclude that defendants failed to make a prima facie showing of entitlement to judgment as a matter of law with respect to whether the absence of a protective guard on the setback roof violated the building codes and whether the accident was foreseeable, we need not consider the sufficiency of plaintiffs opposing papers (see Alvare:::, 68 NY2d at 324).Accordingly, the order of the Appellate Division should be reversed, with costs, and the case remitted to the Appellate Division for consideration of issues raised but not reached on the appeal to that court. ***************** Order reversed, with costs, and case iemitted to the Appellate Division, Fiist Department, for consideration of issues raised but not determined on the appeal to that court. Opinion by Judge Graffeo. Chief Judge Lippman and Judges Smith, Pigott, Rivera and Abdus-Salaarn concur. Judge Read dissents and votes to affmn for the reasons stated in the memorandum of the Appellate Division (105 AD3d 657 [2013]). Decided October 21,2014 FOOTNOTES Copr. (c) 2014, Secretary of State, State ofNew York Wesr!awNext rfJ 2014 Thornson Reuters. No datrn io ociqinal U.S Government Works ADD-30 Powers v. 31 E 31 LLC, -- N.E.3d •••• (2014) 2014 N.Y. Slip Op. 07084 Footnotes Under section 27-119 of the 1968 Building Code, the cost of making alterations for purposes of applying section 27-115 must be determined by adding the estimated cost of the proposed alterations to the actual cost of any and all alterations made in the past twelve months (see 1968 Building Code of the City ofNew York [Administrative Code of City ofNY] § 27-119). The value of the building must be calculated, at the applicant's option "on the basis of one and one-quarter times the current assessed valuation of the building, as adjusted by the current state equalization rate, or on the basis of the current replacement cost of the building" (id.). 2 The record contains some indication that, in 1979. defendants elected to convert the building to multiple dwelling use under the I 968 Building Code. Plaintiff, however, makes no argument that this election necessarily required that unaltered parts of the building be brought into updated compliance pursuant to section 27-120 of the 1968 Code. Thus, we have no occasion to pass on that question. End of l)ncument Westl~wNexr © 2014 Thomson k<::ut.ers No dairn to oriqinal U.S Govemn1t0n: \fvorb ADD-31 Reliable Enterprises, Inc. v. Nagori Contracting Corp.,-- N.Y.S.2d .... (2014) 2014 N.Y. Slip Op. 06809 2014 WL 5001219 Supreme Court, Appellate Division, Second Department, New York. RELIABLE ENTERPRISES, INC., appellant, v. NAGORI CONTRACTING CORP., et al., respondents. Oct. 8, 2014. Synopsis Background: Subcontractor brought breach of contract action against contractor. The Supreme Court, Orange County, Bartlett, J., granted contractor's motion for summary judgment. Subcontractor appealed. Holding: The Supreme Court, Appellate Division, held that it was disputed whether subcontractor was entitled to recover in quantum meruit. Reversed. West Headnotes ( 1 ) (1] Judgment ~ Genuine disputes of material fact existed as to whether subcontractor was entitled to recover in quantum meruit for work allegedly performed for contractor, and whether contractor was entitled to defense of laches, precluding summary judgment on subcontractor's breach of contract claim. Cases that cite this headnote Attorneys and Law Firms Carol A. Sigmond, New York, N.Y., for appellant. Flora Edwards, New York, N.Y. (Catania, Mahon, Milligram & Rider, PLLC [Jay Jason and Rebecca Mantello], of counsel), for respondents. RUTH C. BALKIN, J.P., JOHN M. LEVENTHAL, CHERYL E. CHAMBERS, and SYLVIA 0. HINDS-RADIX, JJ. Opinion * 1 In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals from an order of the Supreme Court, Orange County (Bartlett, J.), dated June 19, 2012, which granted the defendants' motion for summary judgment dismissing the complaint. ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied. ADD-32 Reliable Enterprises, Inc. v. Nagori Contracting Corp.,- N.Y.S.2d --- (2014) 2014 N.Y. Slip Op. 06809-----·-------------------- The plaintiff was a subcontractor for a construction project at Stewart Airport in Newburgh. This action concerns a dispute over whether the plaintiff is due additional payments arising out of its work on the project. The parties dispute whether, among other things, the plaintiff was paid for all its work, which work was covered by the contract, which work was additional work not covered by the contract, the terms of the contract, and even which writing constitutes the contract. After extensive discovery, the defendants moved for summary judgment dismissing the complaint, and the Supreme Court granted their motion. In deciding a motion for summary judgment, the court's function is not to decide issues of fact, but to determine whether triable issues exist (see Marcum, LLP v. Silva, 117 A.D.3d 919, 920, 985 N.Y.S.2d 900; Ruttenberg v, Davidge Data S:vs. Ccnp .. 215 A.D.2d 191, 193, 626 N.Y.S.2d 174). In performing this function, the court must view the evidence in the light most favorable to the nonmovant (see Voss v. Netherlands Ins. Co .. 22 N.Y.3d 728, 734, 985 N.Y.S.2d 448; Marcum. LLP v. Silva. 117 AD3d at 919; Zinter Handling, Inc. v. General Elec. Co., 101 A.D.3d 1333, 1338, 956 N.Y.S.2d 626). Here, the defendants' motion should have been denied because their own submissions revealed the existence of triable issues of fact as to the plaintiffs causes of action and, insofar as may be applicable to the cause of action to recover in quantum meruit, the defense of laches (see Voss v. Netherlands Ins. Co .. 22 N.Y.3d at 734, 985 N.Y.S.2d 448; cf John Anthony Rubino & Co., CPA, P.C. v. Schwartz, 28 Misc.3d 1233[A], 2010 N.Y. Slip Op 51585[U] [Sup Ct, N.Y. County], affd84A.D.3d 599,923 N.Y.S.2d492). The defendants' remaining contention is without merit. Accordingly, their motion should have been denied without regard to the sufficiency of the plaintiffs opposition papers (see Vega v. Restani Constr. Corp., 18 N.Y.3d 499, 503, 942 N.Y.S.2d 13, 965 N.E.2d 240). ParaUel Citations 2014 N.Y. Slip Op. 06809 End of Documeni ---------------------------------·--- ·-·----- WestlawNext © ?0"14 Tlr.mson R0uters No daim to orioin:::~l U_S Government Works ADD-33 Southwest Stainless, l.P. v. Sappington, Not Reported in F.Supp.2d (2008) 2008 WL 918706 Only the Westlaw citation is currently available. United States District Court, N.D. Oklahoma. SOUTHWEST STAINLESS, L.P., and HD Supply, INC., Plaintiffs, v. John R. SAPPINGTON, William B. Emmer, Rolled Alloys, Inc., and Ronald L. Siegenthaler, Defendants. No. 07-CV-0334-CVE-PJC. April1, 2008. Attorneys and Law Firms Dawn Elizabeth Siler-Nixon, William E. Grob, Ford & Harrison, Tampa, FL, Dinita L. James, Ford & Harrison LLP, Phoenix, AZ, Donald Mitchell Bingham, James Ronald Polan, Riggs Abney Neal Turpen Orbison & Lewis, Tulsa, OK, for Plaintiffs. Jason Sean Taylor, Conner & Winters, Tulsa, OK, Justin D. Flamm, Timothy Patrick Reilly, Taft Stettinius & Hollister LLP, Cincinnati, OH, for Defendants. OPINION AND ORDER CLAIRE V. EAGAN, Chief Judge. *1 Now before the Court are Defendants' Motion for Summary Judgment and Brief in Support (Dkt.# 80), and Plaintiffs' Motion for Partial Summary Judgment and Memorandum of Law in Support Thereof(Dkt.# 82). Defendants move for summary judgment as to all six counts in the second amended complaint. Plaintiffs move for summary judgment only as to Count IV. For the reasons set forth below, the Court fmds that summary judgment for defendants should be granted as to Count II, granted as to breach of the Employment Agreements in Count I, and denied as to the remaining claims. I. Relevant Background The instant civil action arises from defendants' alleged breaches of virtually identical noncompete provisions contained in several agreements. Only a brief review of the relevant background is necessary. On January 24, 1997, defendants John R. Sappington ("Sappington"), William B. Emmer ("Emmer"), and Ronald L. Siegenthaler ("Siegenthaler") (collectively "former owners") sold their interests in Southwest Stainless L.P. ("Southwest") to HD Supply, Inc. ("HD Supply"). 1 As part of the conditions precedent to closing the sale, Emmer, Sappington, and Siegenthaler agreed to execute and deliver certain agreements to HD Supply. See Dkt. # 69-3, Acquisition Agreement, at 1-2. These agreements included: (i) Employment Agreements between Sappington and Emmer, and their new employer, Southwest, and (ii) Noncompetition Agreements between Sappington, Emmer, and Siegenthaler, and Southwest's new parent entity, HD Supply. See id. The parties agreed that "their respective representations, warranties, covenants and agreements" contained in the Acquisition Agreement "survive[ d) the Closing for a period of one (1) year from the Closing Date (the 'Indemnification Period.')." !d. at 4. All exhibits attached to the Acquisition Agreement, which included the Employment and Noncompetition Agreements, became a part of the Acquisition Agreement "as fully as though completely set forth herein." !d. The Employment and Noncompetition Agreements each contain nearly identical Noncompete Provisions. The Provisions state: ADD-34 Southwest Stainless, L.P. v. Sappington, Not Reported in F.Supp.2d (2008) During the time when the [former owner] is employed ... and for the Noncompetition Period ... the [former owner] specifically agrees that [he] shall not ... either directly or indirectly ... engage in any business within the States of Missouri, Texas, Oklahoma, Tennessee, Louisiana, Alabama and Florida (the "Geographic Area"), which competes in any manner with any business conducted by [Southwest] or [HD Supply] immediately prior to the Closing or during the term of[the former owner]'s employment with [Southwest] (or other affiliate of [HD Supply] ). For purposes of this Agreement, the term "Noncompetition Period" shall mean the later of three (3) years after the Closing Date, or one (1) year after the [former owner] no longer receives any compensation from [Southwest], or any affiliate of [Southwest]. *2 Dkt. # 69-3, Employment Agreement, at 32, 39; Dkt. # 69-3, Noncompetition Agreement, at 44-45, 48-49, 52-53. The Noncompete Provisions continue: The [former owner] agrees that so long as [former owner] is working for [Southwest] ... , the [former owner] shaii not undertake the pianning or organizing of any business activity competitive with the business of [] [Southwest] or [HD Supply]. The [former owner] agrees not to directly or indirectly solicit any of [] [Southwest]'s or [HD Supply]'s employees to work for [former owner] or for any business which is competitive with any business conducted by [Southwest or HD Supply] ... prior to the date on which [former owner]'s employment with [Southwest] ... is terminated within the Geographic Area and during the Noncompetition Period. !d. at 32, 39, 45, 49, 53. The parties agreed that the Employment Agreement, Noncompetition Agreements, and Acquisition Agreement would be governed by Florida law. See id. at 8, 35, 41, 46, 50, 53. Subject to certain provisions not relevant here, the fixed term of the Employment Agreements was three years, commencing on January 24, 1997 and ending on January 23, 2000. !d. at 29. The Employment Agreements specifically named HD Supply as a third party beneficiary. Id. at 34. The only survival language in the Employment Agreements was that the "[p]rovisions ... including [the Noncompete Provisions] ... shall survive termination of this Agreement by [Sappington or Emmer] or [Southwest]." !d. The Employment Agreements were not terminated as that term is defined in the Agreements. The parties did not include any other provision extending the enforceability of any term beyond January 23, 2000. The Noncompetition Agreements, on the other hand, contain no fixed term other than the Noncompetition Period and expressly state that "[t]he covenants of [former owner] under this Agreement shall be independent of any other contractual relationship between [HD Supply] and [former owner]." !d. at 50. They name Southwest as a third party beneficiary. !d. at 46. The Noncompetition Agreements provide that the Noncompetition Period "shall be extended by any length of time during which [former owner] is in breach of any of such covenants." !d. In the second amended complaint, plaintiffs allege that Emmer resigned from Southwest on March 8, 2007. Dkt. # 69, at 9. Sappington resigned on April 9, 2007. !d. After leaving Southwest, Sappington and Emmer began working for Rolled Alloys, Inc. ("Rolled Alloys"). !d. Plaintiffs allege that, during their employment at Southwest, both Sappington and Emmer engaged in negotiations with Rolled Alloys. !d. Plaintiffs further allege that, in the weeks following Sappington and Emmer's resignations, defendants used or disclosed Southwest's confidential, proprietary, and trade secret business information, solicited Southwest's employees to work for Rolled Alloys, and solicited, serviced, or accepted business from Southwest's current and former customers. !d. at 9-10. Plaintiffs claim that Siegenthaler and Rolled Alloys also initiated and facilitated the recruitment of Sappington, Emmer, and other Southwest employees to join Rolled Alloys' Tulsa office. !d. at 9. According to plaintiffs, Sappington's, Emmer's, and Siegenthaler's conduct violates the Noncompete Provisions in the Agreements, which Southwest and HD Supply have rights to enforce. ------------------- -·· vVP.st!awNext '0 2014 Thornsvn f~euters (\lo clain I tv Qriqir>al u.S Govern men; ·,norks ADD-35 Southwest Stainless, l.P. v. Sappington, Not Reported in F.Supp.2d (2008) *3 Plaintiffs assert six claims for relief. In Count I, plaintiffs allege that Sappington and Emmer breached the Employment Agreements and Noncompetition Agreements. Dkt. # 69, at 10. In Count II, plaintiffs allege that Siegenthaler, Sappington, and Emmer breached the Acquisition Agreement. !d. at 11. In Count III, plaintiffs allege that Sappington and Emmer tortiously interfered with Southwest's business relations. !d. at 11-13. In Count IV, plaintiffs allege that Sappington and Emmer breached their fiduciary duties of loyalty to Southwest. !d. at 13-14. In Count V, plaintiffs allege that Siegenthaler and Rolled Alloys tortiously interfered with Southwest's contractual relations. I d. at 14-15. Finally, in Count VI, plaintiffs allege that Siegenthaler, Sappington, Emmer, and Rolled Alloys misappropriated Southwest's trade secrets. Id at 15-17. Defendants seek summary judgment on all of plaintiffs' claims. Plaintiffs seek summary judgment only as to Count VI. II. Standard of Review Summary judgment pursuant to Fcd.R.Civ.P. 56 is appropriate where no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett. 477 U.S. 317, 322-23, 106 S.Ct. 254g, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lohhy. Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 ( 1986); Kendall v. Watkins, 998 F.2d 848, 850 (lOth Cir.l993). The plain language of Rule 56( c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 317. "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy and inexpensive determination of every action.' "I d. at 327. "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts .... Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Gnp .. 475 U.S. 574,586-87, 106 S.Ct. 1348,89 L.Ed.2d 538 (1986) (citations omitted). "The mere existence of a scintilla of evidence in support of the plaintiffs position will be insufficient; there must be evidence on which the [trier offact] could reasonably find for the plaintiff." Anderson, 477 U.S. at 252. In essence, the inquiry for the Court is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter oflaw." I d. at 250. In its review, the Court construes the record in the light most favorable to the party opposing summary judgment. Garratt v. Walker, 164 F.3d 1249, 1251 (lOth Cir.l998). III. Choice of Law *4 The Court begins with the parties' choice of law. The parties dispute whether Oklahoma or Florida law governs interpretation of the Noncompete Provisions. The Tenth Circuit has held that, in diversity cases, "federal courts must look to the forum state's choice-of-law rules to determine the effect of a contractual choice-of-law clause." MidAmerica Constr. Mgmt., Inc. v. Mastec N. Am .. Inc .. 436 F.3d 1257, 1260 (lOth Cir.2006). Here, the forum state is Oklahoma. The Agreements provide that Florida law governs their interpretation. See Dkt. # 69-3, Acquisition Agreement, at 8; Dkt # 69-3, Employment Agreement, at 35, 41; Dkt. # 69-3, Noncompetition Agreement, at 46, 50, 53. Oklahoma law determines, therefore, whether the parties' choice of Florida law is effective. MidAmerica Constr. Mgmt., 436 F.3d at 1260. This is a question of law for the Court. See Oliver v. Omnicare, Inc., 103 P.3d 626, 628 (Okla.Civ.App.2004) ("[T]he question of whether a covenant not to compete or non-competition provision is contrary to public policy is a question of law for the Court."). Under Oklahoma law, "a contract will be governed by the laws of the state where the contract was entered into unless otherwise agreed and unless contrary to the law or public policy of the state where enforcement of the contract is sought. " MidAmerica Constr. Mgmt., 436 F.3d at 1260 (quoting Williams v. Shearson Lehman Bros., Inc., 917 P.2d 998, 1002 (Okla.Civ.App.1995)) (internal quotation marks omitted) (emphasis in original); see generally 70 A.L.R.2d. 1292 (1960) ("The general rule is that the public policy of the forum, established either by express legislative enactment or by decisions of its courts, will not, as a IJV;:!stlawNext r,; ?014 Thomson RPuters No daim to orioin~l U S Government Works. ADD-36 Southwest Stainless, LP. v. Sappington, Not Reported in F.Supp.2d (2008) --------- ·-·----· ------· rule, be relaxed, even on the ground of comity, to enforce contracts which, though valid where made, contravene such policy."). Oklahoma courts have defined "[p]ublic policy [a]s synonymous with the policy of the law, expressed by the manifest will of the state which may be found in the Constitution, the statutory provisions, and judicial records." Oliver, 103 P.3d at 628; see Cameron & Henderson, Inc. v. Franks, 199 Okla. 143, 184 P.2d 965, 972 (Okla.l947) ("But the public policy ofthe state has been found in judicial records as well as in the statutes and Constitution."). Because the parties agreed to be governed by the law of Florida, this Court must first determine whether the application of Florida law to the interpretation of these agreements would violate the public policy of Oklahoma. MidAmerica Constr. Mgmt .. 436 F.3d at 1260. To do so, the Court must identify ifthere is a conflict between Florida and Oklahoma law. A. Florida law The enforceability of a covenant not to compete under the Florida Statutes is governed by FLA. STAT. § 542.335. Covenants not to compete must be "reasonable in time, area, and line of business." !d. § 542.335(1). The person seeking enforcement must prove "the existence of one or more legitimate business interests justifying the restrictive covenant." 2 !d. § 542.335(1) (b). The person seeking enforcement also must show "that the contractually specified restraint is reasonably necessary to protect the legitimate business interests." !d. § 542.335(l)(c). Once the person seeking enforcement establishes this prima facie case, the burden shifts to the person opposing enforcement to show that the restriction is "overbroad, overlong, or otherwise not reasonably necessary to protect" the legitimate business interests. !d. The covenant may be modified by a court if it is unreasonable as drafted. See id. The statute presumes that a three-year (or less) restrictive covenant executed by the seller of corporate stock is reasonable. See id. § 542.335(d)(3) and (e). *5 The Court finds that the Noncompete Provisions could be enforced under Florida law. The duration of enforcement does not exceed three years, the interests sought to be enforced are specifically enumerated in section 542.335( 1 )(b), and the seven-state geographic restriction could be reasonably necessary to protect the legitimate business interests of Southwest. In sum, Florida law presumes the noncompete provisions are reasonable. 3 The Court concludes, therefore, that the Noncompete Provisions do not appear to conflict with Florida law. Thus, the question becomes whether application of Florida law to the Noncompete Provisions violates Oklahoma law or public policy. B. Oklahoma law Oklahoma law voids all restraints of trade, except those made pursuant to the sale of goodwill or dissolution of a partnership. 4 See OKLA. STAT. tit. 15, § 217 ("Every contract by which any one is restrained from exercising a lawful profession, trade or business of any kind, otherwise than as provided by Sections 218 and 219 of this title, is to that extent void."). Here, the parties do not dispute that they executed the Agreements as part of the sale of Southwest stock, which included goodwill. See Dkt. # 80, at 17-18; Dkt. # 82, at 20; Dkt. # 69-2, at section 4.1.2. Thus, section 218 governs the Noncompete Provisions (absent application ofFlorida law). Section 218 provides: One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within a specified county and any county or counties contiguous thereto, or a specified city or town or any part thereof, so long as the buyer, or any person deriving title to the goodwill from him carries on a like business therein. Provided, that any such agreement which is otherwise lawful but which exceeds the territorial limitations specified by this section may be deemed valid, but only within the county comprising the primary place of the conduct of the subject business and within any counties contiguous thereto. OKLA. STAT. tit. 15, § 218. --------------------------.. -.-. ADD-37 Southwest Stainless, l.P. v. Sappington, Not Reported in F.Supp.2d (2008) In Eakle v. Grinnel Corp., 272 F.Supp.2d 1304,1312 (E.D.Okla.2003), the court applied Delaware law pursuant to the parties' choice oflaw. The seller of a security company agreed not to compete with the buyer in a similar line of business in Arkansas and Oklahoma for a period of five years from the date of sale. ld. at 1306. The seller later claimed that this noncompete agreement was unenforceable because, as drafted, it violated Oklahoma law. ld. at 1307. The seller claimed that the agreement's two- state territorial restriction contravened section 218. Jd. at 1311. The court agreed: "section 218 would preclude enforcement of the [noncompete agreement] in the Arkansas/Oklahoma region and that a modification consistent with section 218 would limit enforcement to a particular county ... and those contiguous thereto." I d. at 1311-12. Nevertheless, the court found that "[a] mere difference in the law is not sufficient to warrant the application of the public policy exception .... To hold otherwise would be to allow the exception to swallow the rule." I d. at 1312. That court held that if it were to apply Oklahoma law simply because the agreement's territorial restrictions exceeded section 218's geographic limitations, "the forum's law would always apply when a difference in respective states' laws could be shown." I d. The court determined that a "broader concept of public policy" must be violated before the forum state's laws would apply. Jd. In conclusion, that court found that enforcement of the noncompete agreement did not violate Oklahoma public policy or law because "Oklahoma nonetheless approves of the concept of non-compete agreements when the sale of goodwill is involved, albeit with certain geographic restrictions." I d. *6 This Court declines to follow Eakle's rationale. First, Eakle was decided prior to the Tenth Circuit's clear mandate that a choice-of-law clause is unenforceable if its application violates the law or public policy of Oklahoma as expressed in the state's constitution, statutes, or case law. MidAmerica Constr. Mgmt., 436 F.3d at 1260. Second, Eakle was decided prior to Oliver, 103 P.3d at 628, in which the Oklahoma Court of Civil Appeals held that the manifest will of the state may be found in the text of Oklahoma statutes. Third, to the extent Eakle relied on the Tenth Circuit's unpublished decision in Mirville v. Min•ille. I 0 Fed. Appx. 640 (lOth Cir.2001) (interpreting Kansas law), the Court notes that Mirville is merely persuasive authority and is superseded by MidAmerica Construction Management's subsequent (published) interpretation of Oklahoma law. Oklahoma law governs the interpretation of the Noncompete Provisions because the parties' choice of law "violate[s] the provisions of Oklahoma law with respect to contracts in restraint of trade." Oliver, 103 P.3d at 629. Section 218 plainly states that noncompete agreements may not restrict competition beyond "a specified county and any county or counties contiguous thereto, or a specified city or town or any part thereof." OKLA. STAT. tit. 15, § 218. Yet the Noncompete Provisions at issue here seek to restrict competition in seven states-a geographic region far broader than the narrow area permitted by the Oklahoma Legislature under section 218. The fact that section 218 permits courts to "blue-pencil" agreements that exceed this narrow geographic scope, moreover, does not negate the unequivocal fact that Florida law enforces restrictive covenants that Oklahoma law does not. The application of Florida law hinges not on whether the Noncompete Provisions would be enforceable if modified pursuant to Oklahoma law, but on whether the application of Florida law contravenes Oklahoma public policy as expressly manifested in section 218. Because the Court finds that it does, the Court concludes that Oklahoma law governs the interpretation of the Noncompete Provisions. The Noncompete Provisions are valid and enforceable insofar as they are consistent with section 218. As to the Noncompete Provisions' three-year (or less) period of enforcement, Oklahoma law enforces restrictive covenants with durations of up to five years. See Hartman v. Everett, 158 Okla. 29, 12 P.2d 543, 543-44 (enforcing five-year noncompete agreement); Herrington v. Hackler, 181 Okla. 396, 74 P.2d 388, 391 (Okla.l937) (enforcing portion of five-year noncompete agreement, notwithstanding the overbroad te11~torial restriction). Thus, the duration of the ~~oncompete Provisions is valid. As to the ~1oncompete Provisions' seven-state geographic restriction, the Court must limit enforcement to Tulsa County and those counties surrounding Tulsa County. 5 See Herrington, 74 P.2d at 391 ("The fact that the parties took in too much territory does not render the agreement wholly void, but is only void to the extent that it prevents the seller from engaging in a like business beyond the confines of the county."). The Court concludes, therefore, that the Noncompete Provisions as geographically modified are enforceable under Oklahoma law. IV. Analysis of Plaintiffs' Claims Westla~N'Next © 2014 Thomson 1-leuters. l\io clairn i0 oriqinal U.S Govern1(1en: Vvorb ADD-38 Southwest Stainless, LP. v. Sappington, Not Reported in F.Supp.2d (2008) ------ ---- "' '·--- -. "' '----- - ... - "'' *7 Defendants argue that no genuine issues of material fact exist with respect to plaintiffs' claims. Defendants submit that Count I fails because Sappington and Emmer have not violated the Noncompete Provisions, and Southwest and HD Supply have not suffered any damages. 6 Dkt. # 80, at 15. Defendants submit that Count II fails because the Acquisition Agreement contains no ongoing obligations, the record does not contain a claim that Sappington, Emmer, and Siegenthaler failed to satisfy the conditions precedent prior to closing, and all post-closing obligations expired in 1998. Id. at 17-18, 74 P.2d 38K Defendants submit that Count III fails because Southwest cannot satisfy the three elements of interference with business relations. /d. at 20, 74 P.2d 388. Defendants submit that Count N fails because Southwest offers no evidence that Sappington and Emmer breached a fiduciary duty ofloyalty. !d. Defendants submit that Count V fails because plaintiffs cannot show that Siegenthaler and Rolled Alloys maliciously and wrongfully interfered with the Agreements between Southwest and Sappington and Emmer. !d. at 22, 74 P.2d 388. Finally, defendants submit that Count VI fails because plaintiffs cannot show misappropriation of information which constitutes trade secrets. Id. at 23. 74 P.2d 388. In response, plaintiffs argue that genuine issues of material fact exist with respect to all claims except Count IV. According to plaintiffs, Sappington's and Emmer's employment by Rolled Alloys directly violates the Noncompete Provisions because these defendants are serving as agents for a local competitor of Southwest. Dkt. # 82, at 20. Plaintiffs also claim that Sappington and Emmer, while employed by Southwest, failed to disclose Siegenthaler's and Rolled Alloys' plans to open a branch in Southwest's "back yard." Id. at 21, 74 P.2d 388. Both plaintiffs and defendants support their motions with excerpts of contradictory deposition testimony. A. Count 1: The Employment Agreements and Noncompetition Agreements The interpretation of an unambiguous contract is a question of law for the courts. Ferrell Canst. Co., Inc. v. Russell Creek Coal Co., 645 P.2d 1005, 1007 (Okla.1982). "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." OKLA. STAT. tit. 15, § 154. Courts are to read the whole contract together, "so as to give effect to every part, if reasonably practicable, each clause helping to interpret the others." !d. § 157. Courts must deduce the parties' intent from "the four corners of the instrument. Where no ambiguity exists, intent must be determined from the words used, absent fraud, accident, or pure absurdity." Oral Roberts Univ. v. Anderson, 11 F.Supp.2d 1332, 1335 (N.D.Okla.1997) (citation omitted). The Court finds that summary judgment should be partially granted as to Count I. The Noncompete Provisions in the Employment Agreements are not enforceable because the Employment Agreements clearly expired by their own terms on January 23, 2000. The only survival language in the Employment Agreements was that the "[p]rovisions ... including [the Noncompete Provisions] ... shall survive termination of this Agreement by [Sappington or Emmer] or [Southwest]." Dkt. # 69-3, at 34. Yet here, Sappington, Emmer, and Southwest did not "terminate" the Employment Agreements, as that term is defined in the Agreements. The Employment Agreements expired by their own terms, at which time Sappington and Emmer became employeesat-will. See generally Wallace v. Mental Health Servs. of S. Okla., Inc., 33 P.3d 966, 967 (Okla.Civ.App.2001) ("[A]bsent an employment contract, Oklahoma is an 'at-will' employment state."). The Agreements contain no survival lan!rual!:e in the case of exniration. Thus. the Noncomnete Provisions did not survive their natural exniration. 7 The Court .... - .1. ~ J. - - - -- - - - J. concludes that summary judgment should be granted as to the alleged breach of the Employment Agreements. *8 As to the Noncompetition Agreements, the Court fmds that the Noncompete Provisions within these Agreements are enforceable. The Noncompete Provisions clearly state that the "Noncompetition Period" is the later of three years after closing, or one year after Sappington and Emmer no longer receive any compensation from Southwest or any affiliate. Plaintiffs brought suit against Sappington and Emmer for activity occurring while still employed and within one year of receiving compensation from Southwest. Further, both HD Supply and Southwest may enforce the Noncompete Provisions. "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it." OKLA. STAT. tit. 15, * 29. ----- -------------------··- -------"' ----- ADD-39 Southwest Stainless, L.P. v. Sappington, Not Reported in F.Supp.2d (2008) --------------·------------ The contract does not have to specifically name the third-party as a beneficiary; the contract only need "be made 'expressly for the benefit of a third person' and 'expressly' simply means 'in an express manner; in direct or unmistakable terms; explicitly; defmitely; directly.'" Keel v. Titan Constr. Corp., 639 P.2d 1228, 1231 (0kla.l981) (citation omitted). Here, the Noncompetition Agreements clearly state that Southwest is a third party beneficiary. Dkt. # 69-3, at 46. Thus, Southwest, in addition to HD Supply, may enforce the Noncompetition Agreements. As to whether Sappington and Emmer breached these enforceable Noncompetition Agreements, the Court finds that, when viewing the evidence in the light most favorable to the nonmoving party, genuine issues of material fact exist. Plaintiffs claim that merely working at the Rolled Alloys' Tulsa office constitutes breach of the Noncompetition Agreements. Dkt. # 82, at 18. They also offer circumstantial evidence in support of their claim that Sappington and Emmer are involved, at least indirectly, in Rolled Alloys' business with certain customers. Each side characterizes snippets of contradictory deposition testimony in an effort to circumvent the underlying genuine issue of material fact: whether defendants' conduct breaches the Noncompetition Agreements. Such characterizations are unavailing, however, because the Court may not make credibilit; determinations or weigh the evidence at tt1e sun1nutrj' judgment stage. See Burlington N. & Sante Fe Ry. Co. v. Grant. 505 F.3d 1013, 1022 (lOth Cir.2007) (noting that credibility determinations, the weighing of evidence, and the drawing of legitimate inferences must be done by the factfinder); Nat'! Am. Ins. Co. v. Am. Re- Ins., 358 F.3d 736, 743 (lOth Cir.2004) ("The district court ... should not determine whether it believes the movant's evidence; rather it must determine whether the nonmovant offered any specific facts that demonstrate the existence of a material fact to be tried."). The Court concludes, therefore, that summary judgment should be denied as to the Noncompetition Agreements in Count I. B. Count II: The Acquisition Agreement As to Count II, the Court finds that summary judgment for defendants should be granted. The parties do not dispute that the plain language of the Acquisition Agreement provides that Emmer, Sappington, and Siegenthaler were to execute and deliver the Noncompetition Agreements to HD Supply as a condition precedent to closing the sale. See Dkt. # 69-3, Acquisition Agreement, at 1-2; see also Dkt. # 82, at 20. Defendants fulfilled this pre-closing condition, and plaintiffs do not claim otherwise. Plaintiffs claim instead that the "interrelatedness" of the Agreements renders a breach of the Noncompetition Agreements a breach of the Acquisition Agreement. Plaintiffs support their contention with citations to two authorities. *9 Section 158 of Title 15 of the Oklahoma Statutes provides that "[s]everal contracts relating to the same matters, between the same parties, and made as part of substantially one transaction, are to be taken together." In Pauly v. Pauly, 198 Okla. 156, 176 P.2d 491, 493-95 (Ok1a.l946), the Oklahoma Supreme Court construed a quitclaim deed and memorandum of contract, which memorialized a contemporaneous verbal agreement between the same parties, as one contract. For three reasons, this Court finds that neither section 158 nor Pauly supports plaintiffs' contention. First, simply because the Court must construe the Acquisition Agreement and the Noncompetition Agreements together does not mean that an alleged breach of the Noncompetition Agreements constitutes a breach of the Acquisition Agreement. As stated above, Sappington, Emmer, and Siegenthaler fulfilled their pre-closing duty of executing and delivering the Noncompetition Agreements. Second, Pauly is distinguishable. Unlike in Pauly, the Noncompetition Agreements expressly state that "[t]he covenants of [former owner] under this Agreement shall be independent of any other contractual relationship between [HD Supply] and [former owner]." Dkt. # 69-3, at 50 (emphasis added). Third, were Southwest successful in conflating the separate Agreements into the Acquisition Agreement, the one-year survival period would preclude plaintiffs' claim. All post-closing obligations terminated in 1998. See Dkt. # 69-3, at section 8.1 ("[T]he parties hereto agree that their respective representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing for a period of one (1) year from the Closing Date (the 'Indemnification Period') (emphasis added)). 8 IJ'<'esti21WNex:l: rg;; 2014 Thomson M.0ulers. No claim to ofiqinal U.S. Government \1\/orks ADD-40 Southwest Stainless, L.P. v. Sappington, Not Reported in F.Supp.2d (2008) The Court concludes, therefore, that the plain language of the Acquisition Agreement precludes plaintiffs' claim. Plaintiffs cannot seek to hold defendants liable for breach of the Acquisition Agreement when the conditions precedent to closing indisputably have been satisfied. Thus, defendants are entitled to summary judgment as to Count II. C. The Remaining Counts As to Counts III through VI, the Court finds that genuine issues of material fact exist that preclude summary judgment. Both sides proffer characterizations of contradictory deposition testimony in support of their motions. As stated above, however, the Court may not make credibility determinations or weigh the evidence at the summary judgment stage. See Grant. 505 F.3d at 1022 (noting that credibility determinations, the weighing of evidence, and the drawing of legitimate inferences must be done by the factfinder); Nat'/ Am. Ins., 358 F.3d at 743 ("The district court ... should not determine whether it believes the movant's evidence; rather it must determine whether the nonmovant offered any specific facts that demonstrate the existence of a material fact to be tried."). The Court concludes, therefore, that summary judgment should be denied as to these claims. *10 IT IS THEREFORE ORDERED that Defendants' Motion for Summary Judgment and Brief in Support (Dkt.# 80) is granted in part and denied in part: it is granted as to Count II; it is granted as to breach of the Employment Agreements in Count I; it is denied as to breach of the Noncompetition Agreements in Count I; and it is denied as to Counts III through VI. IT IS FURTHER ORDERED that Plaintiffs' Motion for Partial Summary Judgment and Memorandum of Law in Support Thereof (Dkt.# 82) is denied. Footnotes To simplify for the purpose of this opinion, the Court refers to plaintiffs' predecessors according to the entities' current names. Three entities, Metals Incorporated, Stainless Tubular Products, Inc., and Metals, Inc.-GulfCoast Division, collectively known as the Metals Group, were acquired by Hughes Supply, Inc. and merged to created Southwest. See Dkt. # 69-2, Acquisition Agreement, at II; Dkt. # 69-4, Certificate of Merger, at 1. Hughes Supply, Inc. is the predecessor in interest to HD Supply. Dkt. # 69, at 2. 2 "Legitimate business interests" include: trade secrets, valuable confidential business information, substantial relationships with specific prospective or existing customers, customer goodwill associated with a specific geographic location or trade area and extraordinary or specialized training. Id § 542 .335(l)(b)1-5. Little question exists under section 542.335 that "an employer has a legitimate business interest in prohibiting solicitation of its customers with whom the employee has a substantial relationship. Where an employee ... gains substantial knowledge of his former employer's customers, their purchasing history, and their needs and specifications it follows that the employer has a legitimate business interest under the statute." N. Am. Prod. C01p. v. Atoore. 190 F.Supp.2d 1217, 1223 (M.D.Fia.2002). 3 Moreover, to the extent the temporal and geographic restrictions might be found "overbroad, overlong, or otherwise unreasonable," section 542.335(1)(c) permits modification of the restrictive covenant. 4 In 2001, the Oklahoma Legislature enacted OKLA. STAT. tit. 15, § 219A, which permits certain noncompetition agreements in the employment context. Section 219A is not applicable here, however, as the parties executed the Agreements prior to 200 I. 5 Defendants do not claim that the substantive breadth of the Noncompete Provisions is outside the meaning of"carrying on a similar business" as set forth in section 218. See Eakle. 272 F.Supp.2d at 1312. 6 Defendants also argue, albeit in prior briefing, that the Noncompete Provisions in the Employment Agreements are not enforceable because the Agreements expired by their own terms on January 23, 2000. Dkt. #53, at 3. 7 In a case such as this where the contractual terms are unambiguous, the Court need not examine the parties' subjective intent, whatever that may be. See OKLA. STAT. tit. 15. § 165 ("lfthe terms of a promise are in any respect ambiguous or uncertain, [they] must be interpreted in the sense in which the promisor believed, at the time of making [them], that the promisee understood [them]." (emphasis added)). 8 Plaintiffs' arguments pertaining to section 8.2 of the Acquisition Agreement are misplaced. See Dkt. # 82, at 21. Neither defendants nor this Court have referenced section 8.2 of the Agreement in discussing the unambiguous one-year survival term (section 8.1 ). ADD-41 Southwest Stainless, l.P. v. Sappington, Not Reported in F.Supp.2d (2008) ---------------- -- - -- End of Document VVestlawNexr rf:; 2014 Thomson Reuters No c!am1 to oriainaf iJ S Gov8rnmen: Works ,,