Nixon Peabody v. Taylor Wessing France, 2008 NY Slip Op. 51885(U) (Sup. Ct. Monroe Cty. Sept. 16, 2008).
A trial court in upstate Monroe County, New York earlier this month granted summary judgment for law firm Nixon Peabody LLP (“Nixon”), which sought a declaratory judgment and injunctive relief as a result of alleged tortious interference with prospective business relations by French law firm Taylor Wessing France (“Taylor Wessing”).
On July 31, 2007, in anticipation of entering into merger discussions, the two firms had executed a Mutual Non-Disclosure Agreement (the “Agreement”) containing a non-solicitation provision stating that neither firm would “employ or offer partnership directly or indirectly” to any partners or attorneys of the other firm for a period of two years from the date of the agreement. The merger negotiations eventually broke down in October 2007. However, Taylor Wessing’s founding partner subsequently joined Nixon and brought with him a dozen of Taylor Wessing’s non-equity partners.
When Taylor Wessing sought to enforce the Agreement’s non-solicitation provision, Nixon filed this action, seeking a declaration that the Agreement was unenforceable and requesting injunctive relief preventing Taylor Wessing from interfering with its former partners’ right to join Nixon. Taylor Wessing brought suit against Nixon in New York County Supreme Court (subsequently consolidated with the Monroe County action and transferred to Monroe County) asserting claims for breach of the Agreement, aiding and abetting a breach of fiduciary duty, and tortious interference with contractual relations.
In a detailed decision that could have significant consequences for law firms engaged in merger or acquisition talks, the Monroe County trial court held that the Agreement was unenforceable as violative of New York State public policy. Citing to a 1989 New York case that “codified” ethics opinions by the ABA and the New York County Lawyers Association, the court noted that it is unethical for an attorney to include a restrictive covenant in an employment contract with another attorney. However, the court went on to observe that the policy “embraced” by this rule is not limited solely to employment agreements, and that this authority has been “woven into the fabric of New York case law.” The court concluded that the rationale behind the rule — protecting lawyers’ autonomy and the ability of clients to freely chose their counsel — applies to the Agreement in this case which, as the court characterized it, contained “an out-right prohibition[n] on the practice of law,” to which the affected non-equity partners had not agreed and of which they had no knowledge. The court also granted summary judgment in favor of Nixon on Taylor Wessing’s fiduciary duty and tortious interference claims. The slip opinion can be viewed here .