ORDERED that the motion by defendants for preliminary injunctive relief is determined as follows.

In 1995, the defendants purchased a limousine business from the plaintiffs pursuant to an asset purchase agreement. At the same time, the plaintiffs executed employment contracts with the defendants. The employment agreements contained restrictive covenants which, inter alia, precluded the plaintiffs from participating in any business providing limousine services in any state in which the defendants conduct business for three years after termination of employment. The plaintiffs commenced this action alleging that the defendants breached the employment agreements and seeking damages as well as a declaration that the restrictive covenants were unenforceable. The defendants asserted various counterclaims and now move for a preliminary injunction. The parties have resolved certain issues, however, the defendants seek an order enjoining the plaintiffs from soliciting customers and engaging in the limousine business.

It is well settled that one who sells a business to another has a legal duty to refrain

Index No.: 15245-03

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from acting to impair the "good will" transferred to the purchaser in exchange for part of the purchase price (see, Hyde Park Prods. Corp. v Maximilian Lerner Corp., 65 NY2d 316, 321; Mohawk Maint. Co. v Kessler, 52 NY2d 276). The law imposes upon the seller "a specific duty to refrain from soliciting his former customers after he has sold his business and the accompanying 'good will' to another" (Mohawk Maint. Co. v Kessler, supra at 285-286). This duty is not subject to a test of reasonableness and is indefinite in duration (see, Mohawk Maint. Co. v Kessler, supra; Slomin's Inc v Gray, 176 AD2d 934 [2d Dept 1991]). Here, the asset purchase agreement specifically included the sale of good will and customer lists. Therefore, the motion is granted to the extent that the plaintiffs are enjoined from soliciting their former customers (see, Slomin's Inc v Gray, supra).

With respect to the restrictive covenant, the test of reasonableness applies (see, BDO Seidman v Hirshberg, 93 NY2d 382). In this case, the covenant is extremely broad in that the plaintiffs are restricted from engaging in the limousine business in any state in which the defendants conduct business. In addition, the plaintiffs allege that the defendants breached the employment agreement by, inter alia, failing to pay wages. When a party benefitting from a restrictive covenant in a contract breaches that contract, the covenant is not valid and enforceable against the other party (see, Cornell v T.V. Dev. Corp., 17 NY2d 69; DeCapua v Dine-A-Mate, Inc., 292 AD2d 489 [2d Dept 2002]). Here, there are sufficient issues of fact such that it [*2]cannot be said that the defendants established a clear right to injunctive relief (see, Milbrandt & Co. v Griffin, 1 AD3d 327 [2d Dept 2003]). Accordingly, the branch of the motion seeking to enjoin the plaintiffs from promoting limousine and/or livery service in any manner is denied.

The defendants are required to post an undertaking pursuant to CPLR 6312(b). If the parties cannot stipulate to an appropriate amount, the parties shall submit papers to the Court regarding the amount of the undertaking no later than May 10, 2004.

DATED: April 2, 2004

J. S.C.