Non-competition Agreement; Constructive Discharge; Economic Duress; Preliminary Injunction
By: Michael D. Manzo | Staff Writer
Plaintiff Integra Optics, Inc. (“Integra”), a designer, manufacturer, and distributor of fiber optic networks and components, employed Defendant Jonathan Messina (“Messina”) as an account executive. As a liaison between the company and its customers, Messina had access to Integra’s proprietary and confidential information, including manufacturing costs, pricing policies, and discounting policies. After sixteen months of employment, Integra and Messina executed a non-competition agreement (“the Agreement”). The Agreement stipulated that Messina would neither provide nor assist another in providing conflicting services for competitors, including Defendant OSI Hardware, Inc. (“OSI”), anywhere in the world for one year. Messina also agreed not to use or disclose Integra’s proprietary information and acknowledged that the Agreement was “reasonable, proper, and necessitated by [Integra’s] legitimate business interests.” Six days after his resignation from Integra, however, Messina accepted a position with OSI.
Integra commenced an action against Messina and OSI and filed a motion seeking a preliminary injunction to enforce the terms of Agreement on the basis that Messina breached the Agreement by working for OSI). Messina and OSI opposed the motion and cross-moved for a declaratory judgment that the Agreement was unenforceable on three grounds: that (1) the Agreement was overly broad; (2) Messina was constructively discharged from his employment at Integra; and (3) Messina’s assent was the product of economic duress.
The Court held that Messina breached the agreement by accepting employment with OCI, but that the issuance of a preliminary injunction turns on whether the Agreement is enforceable in light of the Defendants’ allegations.
The Court denied Integra’s motion for a preliminary injunction because the evidentiary record raised doubt as to whether Messina exercised free will in entering into the Agreement. The Court also denied Messina and OSI’s motion because the evidentiary record was insufficient to prove economic duress. First, the Court concluded that the Agreement was not overly broad. In New York, non-competition agreements are valid when they are reasonable in time and geography, necessary to protect the employer’s legitimate interests, and unreasonably burdensome to the employee. Here, the Court reasoned that the Agreement’s one-year term fell “well within the prevailing notions of reasonableness” and its worldwide limitation on employment is commensurate with the global nature of the fiber optics market. In fact, the Agreement protected Integra’s legitimate interests because OSI was a similarly-situated competitor and the Agreement was “necessitated by [Integra’s] legitimate business interests.” Second, the Court found that Messina was not constructively discharged from Integra. Constructive discharge occurs when the employer deliberately makes an employee’s working conditions so intolerable that the employee is forced into an involuntary resignation. Here, the Court concluded that Integra’s adoption of a new commission and bonus plan, which caused a 60% reduction in Messina’s commissions, did not amount to constructive discharge as it was a good-faith effort to realign the compensation of its highly-paid account executives with its sales and marketing objectives.
Third, the Court determined that the evidentiary record is insufficient to reach a conclusion on Messina and OSI’s economic duress cross-claim. In New York, an economic duress claim will void an agreement if a contracting party demonstrates that his or her assent was compelled by a wrongful threat that precludes the exercise of free will. Here, text messages between Messina and his colleagues demonstrated that an Integra executive wrongfully threatened to withhold Messina’s commissions on several occasions. However, whether these threats precluded Messina from exercising free will is not clear because he acknowledged retaining legal counsel before contracting with Integra and played an active role in the Agreement’s negotiation. Integra also provided text messages demonstrating that Messina signed the Agreement because he wished to remain a highly-compensated employee and that he would resign if he “wasn’t making [this amount of] money.” Consequently, the conflicting evidenced prohibited the Court from reaching a conclusion on economic duress.
Integra Optics, Inc. v. Messina, Index No. 900610/2016 (Platkin, J.).