Plaintiffs Spinal Dimensions, Inc. ("SDI") and Eclipse Medical, LLC ("Eclipse") move by Order to Show Cause for a preliminary injunction against defendants Damian Chepenuk and David Nowetner to enforce non-compete, non-disclosure and non-solicitation clauses contained in employment and independent contractor agreements.

Plaintiff SDI is a company engaged in soliciting sales of medical devices throughout upstate New York, New York City, Long Island, parts of Connecticut and New Hampshire and all of Vermont. SDI solicits sales of certain Johnson & Johnson ("J&J") medical products through a sales representative agreement with DePuy Spine Sales Limited Partnership ("DePuy"), a J&J affiliate.

Plaintiff Eclipse also is engaged in the soliciting sales of medical devices and serves the same geographic territory as SDI. Eclipse sells products from other manufacturers that complement the line of products sold by SDI through its relationship with DePuy.

Defendants Nowetner and Chepenuk had been employed by plaintiff SDI until June 2007. Mr. Nowetner served as an SDI sales representative in the Central New York region, and his primary responsibility at the time of his departure was to service two large accounts in the Binghamton area. Mr. Nowetner enjoyed a pre-existing relationship with these accounts through his prior employment as a surgical assistant and technologist.

Mr. Chepenuk served as a sales manager for SDI in the Central New York region. In this capacity, he serviced a number of hospitals personally, and also supervised four or five sales representatives, including Nowetner. In addition to his employment duties for SDI, Mr. Chepenuk also served as an independent sales representative for plaintiff Eclipse.

In connection with their employment with SDI, both Chepenuk and Nowetner signed agreements that included post-employment covenants against competition, disclosure of SDI confidential information and solicitation of SDI employees, independent contractors, customers and others with whom SDI does business. Chepenuk also signed an independent contractor agreement with Eclipse that includes similar covenants.

Thus, the SDI employment agreement signed by each defendant includes provisions that: acknowledge the employee's receipt of "highly valuable, confidential and proprietary information" (¶ 8.1); covenant that the employee will protect and preserve such information during and at all times following the employment relationship (¶ 8.3); acknowledge "that SDI has a legitimate protectible interest in SDI's [confidential information], goodwill and specialized knowledge acquired by [the employee] during the course of this contract with SDI, and in SDI's near permanent customer relationships" (¶ 9.1); establish an 18-month duration for the post-employment covenants against competition and solicitation (¶ 9.5); establish the geographic scope of such covenants (¶ 9.6); covenant against post-employment competition (¶ 9.7); and covenant against post-employment solicitation (¶ 9.8).

The Eclipse independent contractor agreement signed by defendant Chepenuk includes post-employment covenants that prohibit, inter alia: the disclosure of Eclipse confidential [*2]information (¶ VII); the "solicitation or the attempt to influence or interfere with any person, employee or agent or independent contractor of [Eclipse] or doing business with [Eclipse], or in any way affect the business relationship existing between [Eclipse] and any such party" (¶ VIII [A] [4]); and the "direct or indirect promotion, sale, or sales administration of, or the solicitation, acceptance, or placement of contract of sale for any type of competitive implant devices" (¶ VIII [A] [5]). The latter two covenants are one year in duration and apply to the entire Eclipse sales territory (¶ VIII [A]). The Eclipse agreement also includes a "severability" clause, which reads as follows:

In the event that any part of the foregoing restrictive covenant shall be held to be unenforceable or invalid, the remaining parts thereof shall nevertheless continue to be valid and enforceable as though the invalid portions were not a part hereof. In the event that any of the provisions of the foregoing relating to the period or area of restriction shall be deemed to exceed the maximum period of time or area which a court of competent jurisdiction would deem enforceable, the time or area of the purpose of this paragraph shall be deemed to be the maximum time period or area.

(¶ VIII [B]).

According to defendants, on or about May 2007, they became concerned that a large customer in Binghamton was considering switching from the J&J products distributed by SDI to competing products distributed by Medtronic Sofamor Danek ("Sofamor"). The result of such a switch, defendants claim, would have been a significant diminution in their income from sales commissions. Thus, at some point in May 2007, both Nowetner and Chepenuk claim to have independently discussed the possibility of employment with representatives of Sofamor.

On June 3, 2007, Chepenuk accepted employment with Sofamor, and, on the following day, provided SDI with two weeks notice. On June 7, 2007, Nowetner also accepted a position with Sofamor and gave notice to SDI. According to their affidavits, these decisions were made independently and neither solicited or encouraged the other (or any other SDI employees) to leave SDI or to join Sofamor.

On June 20, 2007, plaintiffs moved by Order to Show Cause for preliminary injunctive relief to enforce the restrictive covenants set forth in the employment and independent contractor agreements signed by defendants. The injunction sought by plaintiffs on the basis of the SDI employment agreements would restrain defendants from:

a.working for Sofamor Danek, its subsidiaries or any other direct competitor in the Central New York area for a period of eighteen (18) months as required and provided for in the [SDI] Employment Agreement;

b.disclosing any further [SDI] confidential information to Sofamor-Danek or its subsidiaries; and

c.contacting, soliciting or otherwise interfering with the existing business relationships between [SDI] and its clients/customers, employees, independent contractors or other individuals with whom it does business.

The preliminary injunction sought by plaintiffs would also enjoin defendant Chepenuk, [*3]on the basis of his independent contractor agreement with Eclipse, from:

a.working for Sofamor Danek, its subsidiaries or any other direct competitor in the Central New York area for a period of (12) months as required and provided for in the Chepenuk-Eclipse Medical Independent Contractor Agreement;

b.disclosing any further Eclipse confidential information to Sofamor-Danek or its subsidiaries; and

c.contacting, soliciting or otherwise interfering with the existing business relationships between Eclipse Medical and its clients/customers, employees, independent contractors or other individuals with whom it does business.

This Court (Egan, J.) signed the Order to Show Cause in substantially the form it was presented, including an ex parte temporary restraining order ("TRO") substantively identical to the requested preliminary injunction. The Court set a return date of June 28, 2007 for the motion. On July 9, 2007, the case was transferred by the IAS judge to whom it was originally assigned to the Commercial Division, and the case was reassigned to the undersigned. Oral argument on plaintiffs' motion was held on July 26, 2007. This Decision & Order follows.

Standard for Preliminary Injunctive Relief

In order to obtain preliminary injunctive relief, the moving party must demonstrate "that irreparable harm will occur if the injunction is not granted, that such party has a likelihood of success on the merits, and that the balance of equities tip in its favor" (Marietta Corp. v Fairhurst, 301 AD2d 734, 736 [3rd Dept 2003] [citation omitted]). In determining whether plaintiff has met this standard, the Court is mindful that a preliminary injunction is a "drastic remedy which is not routinely granted" (id.).

Likelihood of Success on the Merits

A.SDI Non-Compete Clause

The preliminary injunction requested by plaintiffs would restrain defendants from violating a covenant not to compete contained in an employment agreement. It is well established that such covenants "are not favored" under New York law and will only be enforced through injunctive relief in limited circumstances (Morris v Schroder Capital Mgt. Intl., 7 NY3d 616, 620 [2006]). "Undoubtedly judicial disfavor of these covenants is provoked by powerful considerations of public policy which militate against sanctioning the loss of a man's livelihood'" (Reed, Roberts Assoc. v Strauman, 40 NY2d 303, 307 [1976], quoting Purchasing Assoc. v. Weitz, 13 NY2d 267, 271 [1963]).

Based on these considerations, specific performance of covenants not to compete is available only to protect against unfair competition (BDO Seidman v Hirshberg, 93 NY2d 382, 391 [1999]; see American Broadcasting Cos. v Wolf, 52 NY2d 394, 404 [1981]). Further, "a restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee'" (BDO, supra , at 389, quoting Reed, supra , at 307).

For the reasons set forth below, the Court finds that plaintiffs have demonstrated a [*4]likelihood of success in enforcing the SDI covenant not to compete with respect to accounts that defendants serviced or supervised, but not with respect to the Central New York geographic region.

1.Interpretation of the Covenant

Defendants argue that the preliminary injunction sought by plaintiffs exceeds the scope of the non-compete clause set forth in the SDI employment agreement. Specifically, defendants argue that the covenant against competition is limited to clients whom they serviced while employed by SDI. Plaintiffs disagree, contending that the covenant includes such clients, but also extends to the entire Central New York geographic region.

Section 2.1 of the parties' agreements provide that each defendant would be assigned a sales territory, set forth as Exhibit A to each agreement, "which will consist of a geographic area and/or specific hospitals and/or specific surgeons." Section 9.6 establishes the scope of the covenant not to compete, which is limited to: "(i) any sales territory assigned to the [defendant] during the course of this contract; and (ii) any accounts or surgeon customers to whom [he] called on or sold products to, serviced accounts form or came into contact with by assisting other sales representatives or otherwise carrying out his obligations under the Agreement, even if those accounts or surgeon customers were not within the specific assigned sales territory of the [defendant]" (¶ 9.6).

The exhibit attached to defendant Nowetner's employment agreement with SDI originally included three hospitals / medical groups: Our Lady of Lourdes - Neurosurgeons; Wilson and Binghamton General. A subsequent amendment eliminated the latter account. The top of the exhibit reads as follows: "Sales Territory - Central New York" (emphasis in original).

With respect to Chepenuk, the original exhibit attached to his employment agreement was captioned "Territory Manager - Central New York", also in bold type. The exhibit listed four accounts serviced personally by Mr. Chepenuk and identified four sales representatives, including Nowetner, and the accounts that each representative serviced. An amendment to this exhibit, which has the heading "Team Leader - Central New York (CNY)", show five sales representatives and the particular customers that each representative serviced.

The Court finds that plaintiffs are likely to succeed in establishing that the covenant against post-employment competition set forth in the SDI employment agreements includes, as a matter of contract interpretation, not only the specific customers serviced by defendants, but also the Central New York geographic region. As noted, supra , the SDI agreement provides that an employee's sales territory may consist of assigned accounts as well as a geographic region. Thus, the restrictive covenant protects SDI against competition with respect to both assigned customers and the assigned geographic sales territory. The exhibits establishing (and amending) defendants' assigned sales territory each begin with the employee's title, followed by a reference to the "Central New York" region. Thus, SDI's argument that the agreement protects it from competition in the entire Central New York region finds considerable support in the text of the employment agreements and in the attached exhibits.

However, this is not an issue that can be resolved as a matter of law on this motion. It may well be, as defendants argue, that the reference to the Central New York region was not intended as an assignment of geographic territory, but merely as a descriptive caption. Further, defendants may be correct in their contention that interpreting the agreements and exhibits to [*5]establish a sales territory covering the entire Central New York region may be fundamentally inconsistent with other aspects of the SDI employment agreements, particularly the compensation provisions. Nonetheless, at this early stage of the litigation, plaintiffs have demonstrated a sufficient likelihood of success with respect to the interpretation of the scope of the SDI covenant against competition.

2.Legitimate Employer Interest

Defendants contend that if the restrictive covenant is construed to cover the entire Central New York region, it is unsupported by a legitimate employer interest.

Courts in New York have enforced restrictive covenants based on an employer's "legitimate interest" in "the protection against misappropriation of the employer's trade secrets or of confidential customer lists, or protection from competition by a former employee whose services are unique or extraordinary" (BDO Seidman, supra , at 389; see Empire Farm Credit v Bailey, 239 AD2d 855 [3rd Dept1997]). A legitimate employer interest also may be found

[e]ven where . . . there is no showing that a former employee has obtained a competitive advantage through the misappropriation of confidential customer information or that the employee possessed unique or extraordinary abilities[. T]he employer retains "a legitimate interest in preventing former employees from exploiting . . . the goodwill of a client or customer, which had been created and maintained at the employer's expense, to the employer's competitive detriment" (BDO Seidman v Hirshberg, supra at 392). Thus, under such circumstances, an anticompetitive covenant may prevent the competitive use of client relationships that the employer assisted the employee in developing through the employee's performance of services in the course of employment (see id. at 392; see also Gelder Med. Group v Webber, 41 NY2d 680, 685, 363 NE2d 573, 394 NYS2d 867 [1977]). A covenant will be rejected as overly broad, however, if it seeks to bar the employee from soliciting or providing services to clients with whom the employee never acquired a relationship through his or her employment or if the covenant extends to personal clients recruited through the employee's independent efforts (see BDO Seidman v Hirshberg, supra at 393).

(Scott, Stackrow & Co., C.P.A's, P.C. v. Skavina, 9 AD3d 805, 807 [3d Dept 2004]).

Plaintiffs do not seriously contend that specific performance of the restrictive covenant is supported by the actual misappropriation of confidential SDI information or that the services of defendants are unique or extraordinary.^[FN1] Thus, to succeed in enforcing the restrictive covenant through specific performance, plaintiffs must demonstrate that such enforcement is necessary to protect SDI's legitimate interest in the customer goodwill and relationships that defendants [*6]developed through their employment with SDI.^[FN2]

Applying this principle, the Court finds that plaintiffs have demonstrated a legitimate employer interest in enforcing the restrictive covenant with respect to the accounts and customers upon whom they called, sold products to, serviced or otherwise developed professional relationships with in the course of their employment with SDI. Such an interest also extends to the clients of the sales representatives whom defendant Chepenuk supervised. While the Court recognizes that defendant Nowetner enjoyed pre-existing relationships with his assigned accounts through his prior employment as a surgical assistant and technologist, these relationships appear to have developed into customer-client relationships through his employment with SDI.

However, the Court is not persuaded, at least at this juncture, that SDI's legitimate interest in enforcement of the restrictive covenant extends to the entire Central New York region. The Scott, Stackrow decision makes clear that an employer does not, in general, have an interest in precluding former employers "from soliciting or providing services to clients with whom the employee never acquired a relationship through his or her employment (9 AD3d at 806). In the absence of proof that defendants developed professional relationships with other potential customers in the Central New York region through their employment with SDI, the Court finds that plaintiffs have failed to demonstrate the required likelihood of success on this prong of the requested preliminary injunction.

3.Inevitable Disclosure

In addition to arguing that the restrictive covenant is enforceable on the basis of SDI's interest in protecting existing customer relationships and goodwill, plaintiffs also contend that preliminary injunctive relief is warranted, at least with respect to defendant Chepenuk, under the doctrine of "inevitable disclosure". According to plaintiffs, Mr. Chepenuk had access to SDI confidential information regarding: business and marketing strategies; pricing information; the strengths and weaknesses of various sales representatives; customer preference data and other proprietary information essential to SDI's business. Plaintiffs contend that by accepting a similar position with a competitor, Mr. Chepenuk will necessarily use or disclosure that information in his new employment.

Defendants, in turn, asserts that plaintiffs have failed to establish that they would inevitably use SDI's trade secrets and other confidences in their new employment. Defendants further argue that what plaintiffs are actually seeking to do is to deny them the use of the professional skills that they have developed and which they use to earn a livelihood for themselves and their families.

Under the doctrine of "inevitable disclosure", a claim of trade secret misappropriation may be establishing by demonstrating that defendant's new employment will inevitably lead him to rely upon his former employer's trade secrets (see PepsiCo, Inc. v Redmond, 54 F3d 1262, [*7]1268-70 [7th Cir. 1995]). Disclosure is inevitable even assuming that the defendant acts in the best of faith (Lumex, Inc. v Highsmith, 919 F Supp 624, 636 [EDNY 1996]) ("even assuming the best of good faith, it is doubtful whether the [former employee] could completely divorce his knowledge of the trade secrets from any . . . work he might engage in"].

Factors to be considered in determining whether disclosure of trade secrets is inevitable include, but are not limited to: (1) the extent to which the new employer is a direct competitor of the former employer; (2) whether the employee's new position is nearly identical to his old one, such that he could not reasonably be expected to fulfill his new job responsibilities without utilizing the trade secrets of his former employer; (3) the extent to which the trade secrets at issue would be valuable to the new employer; and (4) the nature of the industry and its trade secrets. See Marietta, supra , at 737 (citing EarthWeb, Inc. v Schlack, 71 F Supp 2d 299, 310 [SDNY 1999], remanded, 205 F3d 1322 [2d Cir. 2000], affd 2000 WL 1093320 [2d Cir. 2000]).

A review of the cases applying the doctrine of inevitable disclosure reveals that it has been relied upon in two distinct contexts. First, proof of inevitable disclosure has been used as a surrogate for an express restrictive covenant not to compete. Thus, in PepsiCo v Redmond, even in the absence of an express restrictive covenant against post-employment competition and no proof of an actual misappropriation, a former employee was enjoined from working for a competitor (see id.).

In reversing a preliminary injunction issued under similar factual circumstances, the Third Department cautioned that reliance on inevitable disclosure to imply a restrictive covenant against competition is "disfavored" absent an actual misappropriation of trade secrets (Marietta, supra , at 737; see Doubleclick Inc. v Henderson, 1997 NY Misc. LEXIS 577 [1997]). Accordingly, while the Marietta decision suggests that proof of inevitable disclosure would not provide a basis for injunctive relief independent of an express restrictive covenant though it does not foreclose the possibility entirely, since the Court's decision ultimately rests on its holding that plaintiff failed to establish the existence of trade secrets it does not address a situation where, as here, the doctrine is used as a basis to support specific performance of an express restrictive covenant.

A number of recent trial court decisions, principally from federal district courts applying New York law, have used proof of inevitable disclosure as a basis for enforcing restrictive covenants (see e.g. Estee Lauder Cos. v Batra, 430 F Supp 2d 158 [SDNY 2006]; Lumex, Inc. v. Highsmith, supra ). In fact, the New York courts have long relied upon similar considerations in enforcing restrictive employment covenants, though necessarily not under the rubric of "inevitable disclosure". Thus, for example, in Eastman Kodak Co. v Powers Film Products, Inc., 189 AD 556, 561-62 (1919), the Fourth Department explained the basis for its reinstatement of an injunction providing for specific performance of a restrictive covenant as follows:

It is also apparent that the value of [the former employee's] services to the defendant company arises from his experience while in the plaintiff's employ, growing out of the practical application of these trade secrets and not otherwise. It is because of his special training and special knowledge that the defendant company must necessarily involve his bringing to its aid such knowledge as he has and which is entirely developed in connection with these secret processes. In this view, if he is permitted to enter this employ, injunctive relief in form against the imparting of such special knowledge is more than likely to prove inefficient. The mere rendition of the service [*8]along the lines of his training would almost necessarily impart such knowledge to some degree. [The former employee] cannot be loyal both to his promise to his former employer and to his new obligations to the defendant company.

In this context where the parties have agreed to an express restrictive covenant against post-employment competition the Court believes that proof of inevitable disclosure may be used to demonstrate a legitimate employer interest in enforcing the restrictive covenant. While there is some authority suggesting that the doctrine may also be "disfavored" in this context (see Colonize.com, Inc. v Perlow, 2003 US Dist LEXIS 20021 [NDNY 2003]), its application to such cases should not be controversial. Unlike the implied restrictive covenant at issue in Marietta, all that is sought in these cases is enforcement of an express agreement between the parties an agreement that the employer may well have been deemed necessary precisely because of concerns regarding the inevitability of disclosure (see e.g. Kodak, 189 AD at 562). And while proof of inevitable disclosure may demonstrate that the employer has a legitimate interest in enforcing the restrictive covenant, the movant must still demonstrate that the covenant is consistent with the well established public policy considerations that animate this area of law (see Reed, Roberts, 40 NY2d at 307).

In reviewing plaintiffs' claim of inevitable disclosure, several of the factors set forth in Marietta weigh in favor of plaintiffs. It is undisputed that defendants left SDI to work for a direct competitor. It is also undisputed that as a high-level sales manager, Mr. Chepenuk enjoyed broad access to SDI's proprietary business and customer information with respect to the Central New York region. Further, while defendants point to Mr. Chepenuk's role in overseeing new technology, defendants do not seriously dispute that some of these new technologies compete with at least certain products distributed by SDI.

However, several of the other factors relevant to plaintiffs' claim of inevitable disclosure necessarily involve particularized consideration of the specific trade secrets at issue. For example, the Court must determine, inter alia, the extent to which Mr. Chepenuk would necessarily use such secrets in his new position, the extent to which such secrets would be valuable to the new employer, as well the role that trade secrets play within the industry in which SDI and Sofamore compete (see Marietta, supra , at 738). Depending on its analysis of these factors, the Court may find that disclosure is not necessarily inevitable or that the competitive harm to the former employer caused by disclosure may not warrant injunctive relief (see International Paper Co. v Suwyn, 966 F Supp 246 [SDNY 1997]; see also Jay's Custom Stringing, Inc. v Jonghwan Yu, 2001 US Dist LEXIS 9298 [SDNY 2001]).

In this case, plaintiffs have not put forward sufficient evidence to apply fully the doctrine of inevitable disclosure. While plaintiffs broadly aver that the SDI business information that defendant Chepenuk had access to during his employment were in fact trade secrets, these conclusory allegations do not provide an adequate basis upon which to determine whether Chepenuk would necessarily recall and disclose such secrets in his new employment (assuming he acts in the best of faith), the value of the trade secrets to Sofamor, the harm to SDI that would be caused by disclosure and the role and nature of trade secrets within the industry in which SDI and Sofamor compete.

Even more fundamentally, plaintiffs must also that SDI's proprietary confidences represent trade secrets under New York law. As noted previously, "mere knowledge of the [*9]intricacies of a business is simply not enough" (see Marietta, supra , at 739 [pricing data and market strategies held not to constitute trade secrets]). On the other hand, strategic business information has, in some cases, been held to constitute a trade secret (see Estee Lauder, supra , at 175; PepsiCo, supra , at 1265 [discussing the valuable and sensitive nature of an employer's "Strategic Plan" and "Annual Operating Plan"]). In the absence of a clear demonstration that the business information that defendant Chepenuk had access to were trade secrets and proof that these trade secrets would inevitably be disclosed to his new employer, the current record fails to establish a likelihood of success on plaintiffs' claim of inevitable disclosure.

B.Eclipse Non-Compete Clause

Plaintiffs also seek specific performance of the non-compete clause contained in the Eclipse independent contractor agreement signed by defendant Chepenuk. That agreement broadly prohibits Chepenuk from selling any competing implant device within the Eclipse sales territory for a period of 12 months. However, the injunction sought by plaintiffs is narrower, prohibiting Chepenuk from working for Sofamor, its subsidiaries or any other direct competitor in the Central NY area during such period. Defendant argues that the restrictive covenant is fatally overbroad and that the Court should decline partial enforcement.

The Court agrees that plaintiffs have not succeeded in demonstrating a likelihood of success with respect establishing that the Eclipse covenant is reasonable in scope and necessary to protect its legitimate interests. As defendants note, the agreement is not limited to the devices sold by defendant Chepenuk nor the customers with whom he had ongoing relationships. Further, the Eclipse territory covered by the covenant includes New York, Vermont and portions of Connecticut and New Hampshire (see Battenkill Veterinary Equine v Cangelosi, 1 AD3d 856, 857-58 [3d Dept 2003]). Further, it is not apparent, at least not at this early stage of the litigation, how the Eclipse confidences acquired by Chepenuk in servicing the upstate New York region would allow his new employer to compete unfairly (assuming defendants and their employer adhere to the non-disclosure provisions, discussed infra, as they have sworn to do in affidavits submitted in connection with this motion) throughout the company's entire territory.

The issue then becomes whether it is appropriate to grant the more limited relief sought by plaintiffs.In BDO Seidman, supra , the Court of Appeals provided the following guidance:

We conclude that the Appellate Division erred in . . . declining partially to enforce the covenant to the extent necessary to protect [the former employer's] legitimate interest. The Appellate Division rejected partial enforcement or severance of the invalid part of the covenant, because "the court would thereby be required to rewrite the entire covenant" (247 AD2d, at 923). In Karpinski v Ingrasci (28 NY2d, supra , at 51-52), this Court expressly recognized and applied the judicial power to sever and grant partial enforcement for an overbroad employee restrictive covenant. The Court refused to give effect to the portion of the covenant which barred the practice of general dentistry, but enforced it respecting the practice of oral surgery, that being the employer's actual, specialized dental practice.

The issue of whether a court should cure the unreasonable aspect of an overbroad employee restrictive covenant through the means of partial enforcement or severance has been the subject of [*10]some debate among courts and commentators (see, Blake, op. cit., at 682-683). A legitimate consideration against the exercise of this power is the fear that employers will use their superior bargaining position to impose unreasonable anti-competitive restrictions, uninhibited by the risk that a court will void the entire agreement, leaving the employee free of any restraint (id.). The prevailing, modern view rejects a per se rule that invalidates entirely any overbroad employee agreement not to compete. Instead, when, as here, the unenforceable portion is not an essential part of the agreed exchange, a court should conduct a case specific analysis, focusing on the conduct of the employer in imposing the terms of the agreement (see, Restatement [Second] of Contracts § 184). Under this approach, if the employer demonstrates an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct, but has in good faith sought to protect a legitimate business interest, consistent with reasonable standards of fair dealing, partial enforcement may be justified (see, Blake, op. cit., at 633; Restatement [Second] of Contracts § 184 [1], [2]). We essentially adopted this more flexible position in Karpinski (supra ).

Here, the undisputed facts and circumstances militate in favor of partial enforcement. The covenant was not imposed as a condition of defendant's initial employment, or even his continued employment, but in connection with promotion to a position of responsibility and trust just one step below admittance to the partnership. There is no evidence of coercion or that the Manager's Agreement was part of some general plan to forestall competition. Moreover, no proof was submitted that [the employer] imposed the covenant in bad faith, knowing full well that it was overbroad. . . .

The Appellate Division's fear that partial enforcement will require rewriting the parties' agreement is unfounded. No additional substantive terms are required. The time and geographical limitations on the covenant remain intact. The only change is to narrow the class of BDO clients to which the covenant applies (cf., Karpinski v Ingrasci, supra [narrowing the scope of the prohibitive post-employment activity]). Moreover, to reject partial enforcement based solely on the extent of necessary revision of the contract resembles the now-discredited doctrine that invalidation of an entire restrictive covenant is required unless the invalid portion was so divisible that it could be mechanically severed, as with a "judicial blue pencil" (see, Blake, op. cit., at 681). The Restatement (Second) of Contracts rejected that rigid requirement of strict divisibility before a covenant could be partially enforced (see, Reporter's Note, Restatement [Second] of Contracts § 184, at 32). Thus, we conclude that severance is appropriate, rendering the restrictive covenant partially enforceable.

(BDO Seidman, 93 NY2d at 394-395).

In its recent decision in Scott, Stackrow (9 AD3d at 807-808), the Third Department applied these principles and declined partial enforcement of an overbroad restrictive covenant, reasoning:

Application of the factors set forth in BDO Seidman militates against partial enforcement here. Plaintiff has not demonstrated, or even argued, an absence of anticompetitive on its part, asserting instead that because the restrictive covenant can be partially enforced, it should be. It is undisputed, however, that plaintiff, from a superior bargaining position, required defendant to sign the employment upon hiring her and thereafter as a condition of continued employment as a staff [*11]accountant. There has been no showing that, in exchange for her signing the agreement, defendant enjoyed a fiduciary relationship, a position of increased responsibility within the firm or any other significant benefit beyond continued employment. Moreover, plaintiff continued to require defendant to sign the agreement after the issuance of BDO Seidman, which deemed unreasonable a similar anticompetition agreement prohibiting the solicitation of an accounting firm's entire client base and served as notice to plaintiff that the agreement at issue here was also overly broad.

As in Scott Stackrow, there has been no showing here that in exchange agreeing to the Eclipse restrictive covenant, defendant assumed a position of greater responsibility or trust, or otherwise obtained any benefit beyond the ability to continue to serve as an independent contractor for Eclipse. Further, the agreement became effective on March 1, 2006 years after Chepenuk began serving as a contractor to Eclipse and the overbreadth of the agreement was (or should have been) apparent at that point under well established decisional law. Further, unlike in BDO Seidman, substantive modifications to the scope of the restrictive covenant would be necessary for partial enforcement. Based on the foregoing, the Court concludes that plaintiffs have not met their burden of justifying partial enforcement in connection with the requested preliminary injunctive relief.

C.Covenant Against Disclosure

Plaintiffs also seek specific performance of the non-disclosure clauses contained in the SDI employment agreements and the Eclipse independent contractor agreement. The SDI agreements impose a duty upon defendants to preserve all information relating to its current or future business that is not generally and publicly known, including trade secrets, financial information, customer information, physician and supplier lists, surgeon preferences, pricing lists, vendor lists and marketing strategies. On this basis, plaintiffs seek a preliminary injunction barring defendants from the further disclosure of any such information to Sofamor or its subsidiaries. Plaintiffs rely on similar provisions of the Eclipse agreement in seeking to restrain defendant Chepenuk from disclosing any further Eclipse information to Sofamor and it subsidiaries.

Defendants do not dispute that they have an ongoing duty to refrain from disclosing SDI and Eclipse confidences. Indeed, each defendant avers that he has not disclosed confidential information to Sofamor and will not do so in violation of the relevant agreements. Further, Sofamor has directed defendants not to use or disclose any confidential information from SDI or Eclipse.

Based on the foregoing, plaintiffs have demonstrated a likelihood of success with respect to enforcement of these covenants.^[FN3]

D.Non-Solicitation Clauses

Finally, plaintiffs seek enforcement of the non-solicitation clauses set forth in the Eclipse and SDI agreements. The injunctive relief sought by plaintiffs would bar defendants from contacting, soliciting or otherwise interfering with existing business relationships between SDI and its clients/customers, employees, independent contractors or other individuals with whom it [*12]does business. Similar restraints would be imposed on defendant Chepenuk in connection with the Eclipse agreement.

The SDI employment contract prohibits defendants, for a period of 18 months following the termination of employment, from: (i) hiring any existing employee of SDI, or any person employed by SDI within one year of such termination; and (ii) solicit any SDI employee to leave the employment of SDI; and (iii) solicit or attempt to influence or interfere with any person, employee, agent or independent contractor employed or doing business with SDI, or otherwise affect the business relationship between SDI and such party. The Eclipse agreement prohibits defendant Chepenuk, for a period of one year following termination of such agreement, from soliciting or attempting to influence or interfere with any person, employee or agent or contractor of Eclipse or in any way affect the business relationship between Eclipse and any such party.

Again, defendants do not dispute their continuing contractual obligation to refrain from solicitation SDI and Eclipse customers and employees, but contend that the injunctive relief sought by plaintiffs is vague and over-broad.^[FN4]

The Court agrees with defendants that the non-solicitation injunction sought by plaintiffs is overbroad and unclear in certain respects. For the reasons set forth, supra , plaintiffs have demonstrated a likelihood of success in establishing a legitimate interest in protecting their existing customer relationships from unfair competition by defendants, but have not, at least on the present record, established that such relief must be extended to other SDI and Eclipse customers in Central New York and through the SDI/Eclipse geographic territory.^[FN5] Further, the proposed injunctions must be limited to the time period set forth in the agreements.^[FN6] With this refinements, plaintiffs are likely to succeed on the merits of enforcing the non-solicitation clauses.

Irreparable Harm

In addition to demonstrating a likelihood of success, a party seeking a preliminary injunction must also show, as a threshold requirement, the prospect of irreparable injury if such relief is not granted (see Town of Liberty Volunteer Ambulance Corp. v Catskill Regional Med. Ctr. 30 AD3d 739 [3rd Dept 2006]). Irreparable injury in this context means any injury for which a monetary award alone cannot be adequate compensation (see Winkler v Kingston Hous. Auth., 238 AD2d 711 [3rd Dept 1997]). Plaintiffs must also demonstrate that such an injury is more than just a mere possibility and, in fact, is likely and imminent absent injunctive relief (Golden v [*13]Steam Heat, 216 AD2d 440 [2nd Dept 1995]).

Plaintiff argues that courts have found irreparable harm in cases similar to this based on the difficulty in calculating an award of monetary damages that would successfully redress the loss of customer goodwill and long-term clients to a competitor (see e.g. Alside Div. of Associated Materials v Leclair, 295 AD2d 873 [3rd Dept 2002]). Defendants respond that the possibility of harm identified by plaintiffs is overstated and unsubstantiated. However, this contention is premised, at least in part, on the representation to the Court that defendants' new responsibilities for Sofamor "will not include any of their former accounts (including, for Mr. Chepenuk, the accounts of the sales representatives that he managed) . . ." (Memorandum of Law in Opposition to Preliminary Injunction, p. 24 [emphasis in original]). Defendants do not seriously dispute that plaintiffs would be irreparably harmed if defendants service their former customers on behalf of Sofamor during the applicable period (18 months under the SDI agreement; 12 months under the Eclipse agreement).

Defendants also contend that plaintiffs have failed to demonstrate an actual or imminent injury that would justify preliminary injunctive relief. They base this on their voluntary agreements to refrain from: servicing, soliciting or otherwise competing for their former accounts; disclosing SDI and Eclipse confidences to Sofamor; and soliciting current SDI and Eclipse employees or independent contractors. In view of the sworn assurances of defendants and their new employer on these points, defendants argue that plaintiffs have not demonstrated that injury is imminently threatened and likely to occur absent injunctive relief.

Plaintiffs, however, contend that defendants have already breached the non-disclosure and non-solicitation clauses. In making this argument, plaintiffs rely upon: (1) defendant Chepenuk having emailed confidential SDI information to an external e-mail account; (2) defendants having provided Sofamor a copy of their employment agreement, including attached exhibits providing confidential information concerning SDI sales territories, customers and detailed information concerning the compensation structure for SDI sales representatives and managers; and (3) the alleged activities of defendant Nowetner in soliciting defendant Chepenuk to leave the employ of SDI. Defendants, in turn, respond as follows: (1) Chepenuk had emailed documents to his personal email account, but only the information he needed to verify that he was fully compensated by SDI for his prior work; (2) the employment agreements were provided to Sofamor in good faith for the purpose of avoiding a breach of the restrictive covenants; and (3) Nowetner avers that he did not solicit Chepenuk's depature, and Chepenuk avers that he was not solicited by Nowetner.

Under the circumstances presented herein, the Court concludes that plaintiffs have demonstrated a sufficient prospect of irreparable harm as to warrant the issuance of preliminary injunctive relief. As the Third Department explained:

With regard to irreparable harm, the affidavits submitted by plaintiff demonstrate that it has endeavored to cultivate relationships with its customers to develop important repeat business and if defendants are permitted to compete unfairly by using plaintiff's confidential and proprietary pricing information to underbid it, plaintiff will not only lose business, but will also suffer a dilution of the good will it has developed with its customers. Such a loss of customer good will can constitute irreparable harm for preliminary injunction purposes (see, Adirondack Appliance Repair v Adirondack Appliance Parts, 148 AD2d 796). However, inasmuch as plaintiff's claim of injury is [*14]limited to the impact on its existing customer relationships, and because the noncompetition provisions of the agreement will be enforced only to the extent necessary to protect plaintiff from unfair competition (see, Columbia Ribbon & Carbon Mfg. Co. v A-1-A Corp., 42 NY2d 496, 499), we conclude that the scope of the preliminary injunction should be limited to plaintiff's existing customers.

(Alside, 295 AD2d at 874). In view of the potential harm to plaintiffs from unfair competition, the lack of an adequate remedy at law, the lack of an opportunity for plaintiffs to inquire into the facts and circumstances surrounding defendants' departure and their new employment through pre-trial discovery, and the absence of any real dispute on defendants' part concerning the substance of the proposed restraint (as narrowed by the Court), preliminary injunctive relief is appropriate.

Balance of the Equities

Plaintiffs trained defendants, provided them the opportunity for substantial earnings, gave them access to confidential and sensitive business information and allowed them to build new customer relationships and foster existing relationships through their employment. Defendants left their lucrative employment with plaintiffs (as they certainly are entitled to do), and went to work for a formidable, direct competitor, thus raising legitimate concerns on the part of plaintiffs regarding the possibility of unfair competition.

This possibility, however, was addressed in the SDI employment agreement and the Eclipse independent contractor agreement. As described, supra , these agreements include non-competition, non-disclosure and non-solicitation covenants for limited periods and recognize that specific performance of such covenants is necessary and appropriate. All plaintiffs seek is for defendants to abide by these agreements, which plaintiffs presumably insisted upon precisely for this type of eventuality (see e.g. Eastman Kodak Co. v. Powers Film Products, Inc., 189 AD 556, 561-62 [4th 1919] ["Quite evidently it was exactly this situation which led to the making of the contract."]).

Further, as discussing infra, plaintiffs are likely to succeed in their claim for specific performance of the SDI agreements, and plaintiffs have no adequate remedy at law for a violation of such agreements.

Further, this is not a case where the preliminary injunctive relief would preclude defendants from gainful employment. Indeed, the preliminary injunction, as narrowed by the Court, would not preclude defendants from working for Sofamor in their contemplated positions. Rather, it would "preserve the status quo pending resolution of the underlying dispute (see Bonnieview Holdings v Allinger, 263 AD2d 933, 935 [3d Dept 1999]). Thus, the preliminary relief does not implicate the powerful considerations of public policy that militate against depriving an individual of his livelihood (see Purchasing Assoc. v Weitz, 13 NY2d at 273; see also Continental Group, Inc. v Kinsley, 422 F Supp 838, 846 (D Conn 1976) ["A preliminary injunction that interferes with a person's gainful employment should never be ordered unless manifestly warranted."]).

In view of the foregoing, the Court finds that the balance of equities tips decidedly in favor of plaintiffs.

Undertaking [*15]

Finally, defendants argue that plaintiffs should be required to post an undertaking in connection with the issuance of a preliminary injunction. In general, courts must require a party seeking an injunction to post an undertaking. "[P]rior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in an amount to be fixed by the court, that the plaintiff, if it is finally determined that he or she was not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of the injunction" (CPLR 6312).

In this case, however, the SDI employment agreement expressly waives an undertaking, providing that "[defendant] waives his right to a bond in the event a court enters a temporary or preliminary injunction." Further, defendants have not established that they were coerced into signing the SDI employment agreement or did not otherwise validly waive their right to an undertaking. Accordingly, SDI is not required to post an undertaking.

The independent contract agreement between Eclipse and Chepenuk does not, however, contain a similar waiver. Accordingly, the Court must require Eclipse to post an undertaking to obtain preliminary injunctive relief. However, in view of the limited relief being granted to Eclipse and the strong likelihood of success, the Court exercises its discretion to set an undertaking of $5,000.

Accordingly,^[FN7] it is

ORDERED that defendants are preliminary enjoined, for a period of 18 months following the termination of their employment with SDI, from soliciting, servicing or otherwise doing business with any SDI accounts or customers that they called upon, sold products to or other serviced, either directly or through sales representatives who they supervised; and it is further

ORDERED that defendants are preliminary enjoined from disclosing any further SDI confidential information to Sofamor or its subsidiaries; and it is further

ORDERED that defendants are preliminary enjoined, for a period of 18 months following the termination of their employment with SDI, from contacting, soliciting or otherwise interfering with the existing business relationships between SDI and any of its accounts or customers that they called upon, sold products to or other serviced, either directly or through sales representatives who they supervised; and it is further

ORDERED that defendant Chepenuk is preliminary enjoined from disclosing any further Eclipse confidential information to Sofamor-Danek or its subsidiaries; and it is further

ORDERED that defendant Chepenuk is preliminary enjoined, for a period of one year following termination of the Eclipse independent contractor agreement, from contacting, soliciting or otherwise interfering with the existing business relationships between Eclipse and any of its accounts or customers that they called upon, sold products to or otherwise serviced, either directly or through sales representatives who they supervised; and it is further

ORDERED that plaintiff Eclipse shall post a $5,000 bond pursuant to CPLR 6312.

This constitutes the Decision and Order of the Court. All papers, including this Decision and Order are returned to plaintiffs' counsel. The signing of this Decision and Order shall not [*16]constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.

Dated: Albany, New York

August 9, 2007

RICHARD M. PLATKIN

A.J.S.C.