Plaintiff IDG USA, LLC (“IDG”), a Georgia company with its principal place of business in North Carolina, commenced an action against a former employee, Kevin J. Schupp (“Schupp”), a New York resident, alleging breaches of a Non-Compete Agreement, breach of a Confidentiality Agreement, unfair competition, and theft of trade secrets.
In a 12 page decision, IDG USA, LLC v. Schupp, Slip Copy, 2010 WL 3260046 (W.D.N.Y. Aug.18, 2010), the District Court granted IDG's Motion for a temporary restraining order and preliminary injunction, enjoining Schupp from: (1) working for any competitor of IDG within 50 miles of IDG's Amherst, New York office, (2) soliciting orders from IDG’s identified “major” customers with whom Schupp had had contact , and (3) disclosing or using confidential information and/or trade secrets of IDG. The court also denied Schupp’s Rule 12(c) cross-motion to dismiss the Complaint, expressly finding that IDG’s allegations that Schupp used his knowledge of IDG's major, revenue-generating customers and its pricing policies for the benefit of his new employer, and disclosed information regarding IDG’s Amherst Office's control over pricing issues to one of those customers were sufficient to render the causes of action plausible for purposes of a Rule 12(c) analysis.
The Complaint alleged that IDG is a national distributor and supplier of industrial materials, has a Northeast Division, with a principal office in York, Pennsylvania, an a regional office in Amherst, New York, which is responsible for the company's customer base in upstate New York and western Pennsylvania. It was further alleged that in 1998, IDG acquired Schupp’s previous employer, AFL, and retained most of AFL's employees including Schupp, whom immediately began working out of IDG's Amherst, New York office as a Sales Associate. IDG claimed that Schupp serviced many of IDG's major revenue generating clients, most, if not all of whom were assigned to Schupp by IDG, which had preexisting relationships with the clients.
The operative agreements before the District Court were a Non-Compete Agreement (the “NCA”) and a Confidentiality Agreement, entered into between IDG and Schupp. The Court found that Schupp received “additional compensation in the amount of Three Thousand Dollars ($3,000) in consideration for his execution, delivery, and performance of th[e] [NCA] .” Notably, the Court found that the NCA restrained Schupp, for the period of one year from the date of the termination of his employment with IDG, from accepting employment with any competitor of IDG, for work similar to that he performed at IDG, within a fifty (50) mile radius of any office to which he was assigned during the twelve months prior to the termination.
The Complaint went on to allege that on January 14, 2010, Schupp voluntarily terminated his employment without advance notice, and that within days after his resignation he commenced employment as a sales representative with Abrasive-Tool Corp. (“Abrasive”), a company that sells many of the same products as IDG and offers customers similar services. It was shown that Schupp worked out of Abrasive's Buffalo office, which is within ten miles of IDG's Buffalo office. The Court found that Schupp had solicited orders on behalf of Abrasive from long-standing, major revenue producing clients he was assigned to service and entertain during his employment with IDG, and further disclosed to an IDG customer confidential information regarding its Amherst Office's control over pricing issues.
Of primary interest, the District Court found that IDG had demonstrated the threat of irreparable harm by Schupp’s conduct by reason of: (a) Schupp’s contacting three “Major Customers” of the company” (identified by the Court as customers whose purchases from IDG exceeded $25,000 in the previous twelve months) and quoting prices for Abrasive's goods and services to one of these Major Customers; (b) three Major Customers requesting pricing information and quotes from IDG, something they had not required in the previous ten years; (c) another Major Customer informing IDG that it would no longer do business with IDG; and (d) the fact that the month following Schupp's resignation from IDG, IDG experienced a reduction in its sales to ten of the thirteen Major Customers which had been serviced by Schupp.
Specifically, the Court held:
Here, IDG has sufficiently demonstrated that Schupp violated paragraph 7(a) of the NCA when he commenced work at Abrasive, as a sales associate in its Buffalo office, immediately after resigning from IDG. Likewise, IDG has sufficiently demonstrated that Schupp immediately began soliciting orders on Abrasive's behalf from IDG's Major Customers in violation of the NCA's paragraph 7(b). Schupp does not dispute IDG's attestations in this regard. In addition, the NCA expressly provides that “if Schupp is permitted, after cessation of his employment with [IDG], to trade upon th[e] training and th[e] confidential information which he had received by virtue of his position of trust and confidence with [IDG] ... irreparable damages will result to [IDG],” and that “any breach of the [NCA's] covenants ... would not be readily or appropriately compensable in damages” Courts have found that such language in an employment agreement “ ‘might arguably be viewed as an admission by [the former employee] that plaintiff will suffer irreparable harm were he to breach the contract's non-compete agreement.’ ” On the evidence presented at this juncture, including the NCA's provisions, Schupp's conclusory assertion that any damage to IDG can be rectified by a monetary award is rejected.
Finally, the Court rejected Schupp’s argument that IDG had “materially breached” the NCA by reducing his annual salary from that stated in the NCA, prior to his resignation. IDG argued that because the salary reduction was not a “material breach,” Schupp was not excused from performance of his obligations and, in any event, Schupp waived any breach when he continued to work for IDG after his salary was modified. The District Court found IDG's contentions that it did not materially breach the agreement and that Schupp acquiesced to a modification of the NCA consistent with New York decisional authority involving employment agreements similar to the NCA, citing: In re Footstar, Inc., 04-22350, 2007 Bankr.LEXIS 2302, at *12-13 (S.D.N.Y. July 6, 2007); Hanlon v. MacFadden Publications, 302 N.Y. 502, 505, 99 N.E.2d 546 (1951)); Bottini v. Lewis & Judge Co., 211 A.D.2d 1006, 1007-1008, 621 N.Y.S.2d 753 (3d Dep't 1995); Dwyer v. Burlington Broadcasters Inc., 295 A.D.2d 745, 745-746, 744 N.Y.S.2d 55 (3d Dep't 2002); Gebhardt v. Time Warner Entm't-Advance/Newhouse, 284 A.D.2d 978, 978-9, 726 N.Y.S.2d 534 (4th Dep't 2001); Bottini, 211 A.D.2d at 1007-1008, 621 N.Y.S.2d 753; and Mosely v. Island Computer Prods., 2006 U.S. Dist. LEXIS 6437, 2006 WL 318815, at *2-4 (E.D.N.Y. Feb.9, 2006).