United Capital
Source, LLC, Plaintiff,
against
Bryan Benisvy, Defendant.
|
602122/15
Moritt Hock & Hamroff LLP
Attorneys for Plaintiff
400 Garden City Plaza, Suite 202
Garden City, New York 11530
(516) 873-2000
Paykin, Richland & Falkowski, P.C.
Attorneys for Defendant
350 5th Avenue, 59th Floor
New York, New York 10118
(212) 561-5599
Randy Sue Marber, J.
Upon the foregoing papers, the Plaintiff's motion, brought by Order to Show Cause,
seeking an Order enjoining the Defendant from: (1) entering into the employ of or
rendering any services to any person, firm or corporation that is a customer, affiliate or
referral partner of Plaintiff, [*2]or is in the business in
competition with Plaintiff (including but not limited to, TransSwipe, Blackstone Capital
and/or any of their affiliated entities), nor engage in such business on his own account as
an individual partner, shareholder, director, officer, principal, agent, consultant, or in any
other relationship or capacity whatsoever, at any location within fifty (50) miles of
Plaintiff's principal office at 535 8th Avenue, 5th Floor, New York, New York 10018 for
a period of 12 months; (2) soliciting an customers or affiliates of Plaintiff (including
referral partners), to do business with him, or any other person or entity, in competition
with the type of service he performed for Plaintiff for a period of 24 months; (3)
disclosing or otherwise using Plaintiff's confidential information; and (4) retaining any of
Plaintiff's property, including, but not limited to, its confidential information, currently in
his possession, custody or control, is determined as hereinafter provided.
In support of its Order to Show Cause, the Plaintiff, United Capital Source,
LLC (the "Plaintiff" or "United Capital"), submits the Affidavit of Jared Weitz, founder
and Chief Executive Office of United Capital. In his Affidavit, Mr Weitz alleges that in
2011 he founded United Capital, which provides short-term funding to merchants. Mr.
Weitz states that United Capital's business model is based on its ability to identify leads,
which it does by implementing a digital marketing strategy that includes a search engine
marketing strategy and pay-per-click strategy ("Digital Marketing Strategy"). Mr. Weitz
alleges that United Capital's Digital Marketing Strategy is confidential, proprietary and a
trade secret of the company. Mr. Weitz states that United Capital's employees are
provided with confidential information including the Digital Marketing Strategy,
methods of obtaining clients, credit and financial data of its customers and the
underwriting guidelines of its outside lending sources. He states that his employees are
also provided confidential information about its outside lenders, including key contacts at
the lenders, their proprietary underwriting guidelines, their risk tolerance and the
financial wherewithal a client must have for each type of funding option. Mr. Weitz
alleges that such information is not publicly available and lenders only provide such
information to established and reputable companies that have an extensive book of
business. Mr. Weitz further states that approximately eighty (80%) percent of United
Capital's business are long-term, repeat clients, and as such, fostering such relationships
is a critical component of the business.
As to the allegations against the Defendant, Mr. Weitz alleges that in or
about August 2014, Christopher Fiumara, the CEO of TransSwipe, told him that the
Defendant was looking for a job in the business funding industry and recommended him
as a good fit for United Capital. He states that TransSwipe is engaged in bank card and
credit card processing services and devoted a small portion of its business to business
funding.
Mr. Weitz states that he hired the Defendant as an account executive in
August of 2014. He states that in October 2014, United Capital required the Defendant to
execute an employment agreement, dated October 20, 2014 (the "Employment
Agreement"), which contained covenants prohibiting soliciting of United Capital's
clients, customers and referral partners, and otherwise competing with United Capital.
Specifically, Mr. Weitz states that Section 15 (b) of the Employment Agreement
prohibited the Defendant from soliciting any of United Capital's customers or affiliates,
or otherwise doing business with anyone in competition with United Capital, for a period
of two years after his employment with United Capital. He states that Section 15 (c) of
the Employment Agreement prohibited the Defendant from entering the employ or
rendering services that are in competition with United Capital for a period of one year
after his employment, at any [*3]location within fifty
miles from United Capital's office in New York, New York. Section 15 (d) states that the
Defendant acknowledged and understands the prohibitions contained in the agreement
and that he was provided additional compensation in order to ensure compliance with the
Employment Agreement.
Mr. Weitz states that upon his arrival at United Capital, the Defendant was
eager to learn as much as he could about the funding industry and that he took the
Defendant under his wing in training him and overseeing his growth in the company. He
states that starting in 2015, the Defendants' attitude changed, he became withdrawn and
disinterested and on one occasion was caught taking pictures of his computer screen. Mr.
Weitz states that on February 24, 2015, the Defendant informed him that he was
resigning from United Capital to pursue a solar panel business with his uncle. Mr. Weitz
alleges that the Defendant's story about going into business with his uncle was a ruse
because on the same day he resigned he emailed National Locum Tenens, a referral
partner of United Capital, "to get started on the approval process as soon as possible."
(See Email annexed to the Affidavit of Jared Weitz as Exhibit "B")
Mr. Weitz alleges that the Defendant embarked on a competing business by
joining TransSwipe and contacting United Capital's existing clients, including Gateway
Auto Plaza, LLC, Jimmy's Bar and Grill and Brill Service Enterprises, Inc. Mr. Weitz
alleges that between March 3, 2015 and March 16, 2015, the Defendant attempted to
obtain payment for those clients from Merchant's Capital Group ("MCG"), which is one
of United Capital's funding sources. Mr. Weitz alleges that the Defendant tried to conceal
his identity by misspelling his first name and using a false last initial in his email
correspondence with MCG.
The Plaintiff's counsel states that on March 13, 2015, when United Capital
learned that the Defendant was working for TransSwipe, he sent a letter advising the
Defendant of his continuing obligations under the Employment Agreement. The
Defendant did not respond to that letter. (See letter annexed to the Order to Show
Cause as Exhibit "B") The Plaintiff's attorney also sent a letter, dated March 13, 2015, to
Mr. Fiumara that the Defendant was contractually precluded from providing services to
competitors and referral partners of United Capital, including TransSwipe and its
affiliates. (See letter annexed to the Order to Show Cause as Exhibit "C") By
letter, dated March 19, 2015, counsel for TransSwipe advised the Plaintiff's counsel that
the Defendant is not currently nor has he ever been an employee of TransSwipe.
(See letter annexed to the Order to Show Cause as Exhibit "D") Thereafter,
counsel for the Plaintiff sent an email, dated March 23, 2015, and a letter, dated March
25, 2015, to counsel for TransSwipe informing him of the Defendant's obligations under
the Employment Agreement and requesting assurances that the Defendant was not
providing services to United Capital's clients or otherwise competing with United
Capital. The Plaintiff's counsel did not receive a response to either.
The Plaintiff contends that it has met its burden for entitlement to a
preliminary injunction. First, the Plaintiff argues that it has shown its likelihood of
success on the merits for its claim for breach of the Employment Agreement and
restrictive covenants therein. Specifically, the Plaintiff contends that the Defendant's role
as an account executive gave him access to confidential information such as United
Capital's business strategies, methods of obtaining clients, credit and financial data of
customers and the underwriting guidelines of its outside lending sources. The Plaintiff
contends that such information is confidential as it is not known to anyone outside of the
company. The Plaintiff contends that because 80% of its business is from repeat
customers, United [*4]Capital has a legitimate interest in
protecting this information.
The Plaintiff further argues that enforcement of the restrictive covenant will
not impose an undue hardship on the Defendant because he acknowledged in the
Employment Agreement that he was receiving additional compensation as consideration
for the restrictive covenant. Finally, the Plaintiff argues that the restrictive covenant will
not injure the public. The Plaintiff argues that the funding business is not localized and a
merchant can turn to the internet to find companies that fit their needs in any
location.
Second, the Plaintiff contends that in the absence of a preliminary injunction
it will suffer irreparable harm. Specifically, the Plaintiff contends that the Defendant
agreed, in the Employment Agreement, that United Capital would be entitled to
injunctive relief to prevent him from breaching the restrictive covenants. However, even
without the waivers by the Defendant, the Plaintiff argues that it will suffer irreparable
harm without immediate injunctive relief. The Plaintiff contends that the Defendant
contacted its referral partner on the day of his resignation and continues to contact clients
of United Capital. The Plaintiff argues that the Defendant sought to get a "second
position" loan for one of United Capital's existing clients, which adds increased risk to
United Capital's ability to be repaid on the loan it made to that merchant.
Finally, the Plaintiff argues that the balance of equities weighs in its favor.
The Plaintiff argues that the Defendant explicitly agreed that United Capital would be
able to seek injunctive relief if he violated any of the covenants contained in the
Employment Agreement.
In opposition, the Defendant submits his Affidavit and the Affirmation of
Michal Falkowski, Esq., which contain differences from the facts contained in the
Plaintiff's moving papers. The Defendant alleges that in the Merchant Cash Advance
("MCA") industry, a UCC-1 Financing Statement is filed against each borrower to
protect the lenders' interest. However, the UCC filing provides information to other
MCA brokers, such as identity of loan candidates and information regarding the
outstanding loan. Additionally, the Defendant contends that MCA brokers advertise on
the internet and use the two most common methods, which are Search Engine
Optimization and pay-per-click campaigns. The Defendant argues that there is nothing
confidential about the internet advertising techniques used by the Plaintiff.
The Defendant asserts that in August 20, 2014 he was working at Jetty Bar
& Grill, which is owned by Mr. Fiumara. The Defendant was hired by United
Capital upon a recommendation by Mr. Fiumara, who had a relationship with Mr. Weitz.
The Defendant was hired as an account executive, which was the lowest position at the
company. The Defendant alleges that on October 20, 2014, approximately three months
after he started working at United Capital, and without any consideration, the Plaintiff
demanded that he sign the Employment Agreement, which he did. The Defendant alleges
that he finished as one of the top earning account executives each month. He further
alleges his success created jealousy and resentment among the other employees and that
Mr. Weitz told him he was a valuable contributor and to just "play the politics." The
Defendant alleges that the constant resentment and jealousy from others played a role in
his departure from United Capital in February 2015. The Defendant states that he had an
opportunity for an investment in a solar panel company with his uncle, but he decided it
would be best not to go into business with his uncle. The Defendant alleges that he
sought to pursue the merchant cash advance business on his own.
The Defendant alleges that prior to seeing the papers in this action, he had
never heard [*5]of Gateway Auto Plaza and Brill
Services Enterprises and he did not know they were former or current clients of United
Capital. He alleges that he has never been an employee of TransSwipe, but TransSwipe
did provide him with a temporary email address until he got his business off the ground.
The Defendant alleges that he never sought to conceal his identity and the misspelling of
his name in his email address was a mistake.
The Defendant further alleges that the restrictive covenant is unreasonable
and unduly burdensome. He states that United Capital is attempting to use the 50 mile
geographical limit as a punitive measure as it serves no legitimate purpose, because
United Capital solicits most of its business through the internet. The Defendant contends
that it has been extremely burdensome on him and that he cannot pay his rent or make
ends meet.
In Reply, the Plaintiff contends that the Defendant willingly entered into the
Employment Agreement, not under duress as the Defendant alleges. The Plaintiff asserts
that in October 2014, United Capital was undergoing changes and making efforts to
improve its internal structure and governance. The Plaintiff alleges that at that time it
required all employees that wanted to work at the company to sign the Employment
Agreement, that Mr. Weitz advised all employees to take their time to review the
Employment Agreement before executing it. Further, the Plaintiff contends that the
Defendant received an increase in base salary from $24,000 to $40,000 and an increase
in commission rate from 10% to 15% by agreeing to sign the Employment
Agreement.
The Plaintiff contends that the Defendant's assertion that he left United
Capital due to an untenable working environment is disingenuous and his story about
leaving to work for his uncle is specious. The Plaintiff further contends that the
Defendant breached his Employment Agreement by soliciting United Capital's customers
including Jimmy's, which was an account that he secured funding for while working at
United Capital.
The Plaintiff argues that the restrictive covenants are valid and enforceable.
The Plaintiff argues that the restriction that the Defendant cannot work for a competitor
for one year is a necessary restriction to protect its customers' confidential loan
information, including funding arrangements, loan balances and expiration dates. The
Plaintiff contends that because United Capital does business all over the United States, a
50 mile radius restriction is justified.
The Plaintiff argues that the Defendant's counsel, Mr. Falkowski's
Affirmation is not based on personal knowledge, and as such, should be stricken. The
Plaintiff argues that the Defendant's Affidavit concerning his access to information is
false in that he had full access to United Capital's client's social security numbers, tax
returns, bank records and credit reports. Additionally, the Plaintiff contends that the
Defendant was privy to United Capital's confidential Digital Marketing Strategy.
Finally, the Plaintiff argues that the balance of equities favors a preliminary
injunction, because in the Employment Agreement the Defendant acknowledged his
understanding of the restrictive covenants, he acknowledged the additional compensation
for signing the Employment Agreement, he agreed to the Plaintiff's right to injunctive
relief if he violated the restrictive covenants and he was referred by Mr. Fiumara who
was a competing merchant. Also, the Plaintiff contends that the Defendant's claim of
financial hardship is not credible because the restrictive covenant does not bar the
Defendant from competing in the merchant funding industry at all, only within 50 miles
from United Capital's New York City office. The Plaintiff contends that the Defendant
has other sources of income from his modeling career, as owner of BeniFitness, his [*6]personal training business and as a bartender and waiter at
several restaurants.
It is well settled that a Preliminary Injunction is a drastic remedy which will
not be granted absent a showing by the movant of a clear right of entitlement thereto,
which is established pursuant to the law and upon the undisputed facts as adduced in the
record. (Abinanti v. Pascale,
41 AD3d 395 [2d Dept. 2007]; Peterson v. Corbin, 275 AD2d 35 [2000])
The party moving for a Preliminary Injunction must establish a likelihood of success on
the merits, irreparable injury in the event the injunctive relief is denied and that a
balancing of the equities favors the granting of the injunction. (Aetna v. Capasso,
75 NY2d 860 [1990]; W.T. Grant Co., v. Sgroi, 52 NY2d 496 [1981]) Where the
moving party has an adequate remedy at law by "which his or her rights can be protected
and properly conserved", an injunction will not be granted. (67A NY Jur 2d, Injunctions
§24; Gaynor v. Rockefeller, 15 NY2d 120 [1965] at 132)
Here, the Plaintiff has established its likelihood of success on the merits of
its claims for breach of the Employment Agreement and restrictive covenants. It is
undisputed that the Defendant executed the Employment Agreement and while the
Defendant argues that he was forced to sign it under duress, he submits nothing to
support that assertion. On the contrary, the Plaintiff submits evidence to support its
assertion that all of United Capital's employees were asked to execute the Employment
Agreement and they were compensated for doing so.
As to whether the restrictive covenants contained in the Employment
Agreement are enforceable, an employee agreement not to compete is considered
reasonable if it: (1) is no greater than is required for the protection of the legitimate
interest of the employer, (2) does not impose undue hardship on the employee, and (3) is
not injurious to the public. (BDO Seidman v. Hirshberg, 93 NY2d 382) 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."
(Id.) However, a restrictive covenant will only be enforced to the extent necessary
to protect the employer from unfair competition which stems from the employee's use of
trade secrets or confidential customer lists. (IVI Environmental, Inc. v.
McGovern, 269 AD2d 497 [2nd Dept. 2000])
Here, although the Plaintiff has not established that its Digital Marketing
Strategy is considered a trade secret, it has established that the Defendant has used
confidential customer information to compete with the Plaintiff's business. The Plaintiff
has shown that the one year restriction is for the purpose of preventing the Defendant
from strategically targeting its clients with the knowledge and information he obtained
from United Capital.
The Plaintiff has further shown that the restrictions imposed by the
Employment Agreement do not impose an undue hardship on the Defendant, because he
willingly entered into the Employment Agreement and he was duly compensated for
doing so. Furthermore, the restrictions imposed by the Employment Agreement will not
impose injury on the public. The Defendant did not set forth any legitimate argument to
show that the restrictive covenants would impose undue hardship on him nor that it will
injure the public.
Accordingly, the Plaintiff established its likelihood of success on the merits.
As to the remaining elements necessary to obtain a preliminary injunction, the Plaintiff
has shown that it will suffer irreparable harm if a preliminary injunction is not granted.
As to the issue of irreparable injury, as a general proposition, a loss "which
is compensable by money damages, does not constitute irreparable harm." (EdCia Corporation v. [*7]McCormack, 44 AD3d 991 [2d Dept. 2007])
However, "[o]ne of the tests of irreparability is whether a litigant can obtain adequate
compensation by invoking the legal damage remedy." (Polling Transportation
Corporation v. A & P Tanker, Corp., 84A.D.2d 796 [2d Dept. 1981] at 797)
Further, the legal remedy which is available "must be as complete, practicable and
efficient as the equitable one." (Id.; see also Lesron v. Junior, Inc. v.
Feinberg, 13 AD2d 90 [2d Dept. 1961)
Irreparable injury may be shown through a loss of customers and permanent
loss of revenue and loss of referral business garnered from customers. (Bollengier v.
Gulati, 233 AD2d 721, 722 [3rd Dept. 1996]) Loss of goodwill associated with a
business, which is difficult to quantify, can constitute irreparable injury even if monetary
damages, as well as injunctive relief, are requested. (Frank May Assoc. v.
Boughton, 281 AD2d 673 [3rd Dept. 2001])
Here, the Plaintiff has shown that on the same day that the Defendant
resigned he contacted United Capital's referral partner to see if it was available to provide
funding to United Capital's existing clients. The Plaintiff showed that the Defendant
continued to attempt to obtain funding for an existing client on the same day he received
a cease and desist letter from the Plaintiff's attorney. Accordingly, the Plaintiff has shown
that the Defendant's actions, in violation of the Employment Agreement, have interfered
with and may continue to damage the Plaintiff's business. The Court finds that, based on
the facts and evidence submitted by the Plaintiff, the injunctive relief herein requested is
a more efficient remedy than that of monetary damages.
Finally, in balancing the equities, the court should consider various factors,
including the interests of the general public, whether the plaintiff was guilty of
unreasonable delay and whether the plaintiff has unclean hands. (Peconic Surgical Group, P.C. v.
Cervone, 31 Misc 3d 1240(A) [Sup. Ct. Suff. Cty. 2011]) Here, granting a
preliminary injunction, which would enjoin the Defendant from continuing to solicit the
Plaintiff's customers and compete with the Plaintiff, will not affect the interests of the
general public. Further, the Plaintiff acted promptly, in bringing this Order to Show
Cause seeking a temporary restraining order and preliminary injunction, upon
discovering that the Defendant may be in violation of the Employment Agreement.
Further, there is nothing to show that the Plaintiff has unclean hands. Finally, the balance
of equities favors the Plaintiff because the Defendant entered into the Employment
Agreement, for which he received compensation, and his continuing violation of the
restrictive covenants contained therein impose a risk of future injury to the Plaintiff.
Accordingly, it is hereby
ORDERED, that the Plaintiff's Order to Show Cause seeking an
Order enjoining the Defendant from: (1) entering into the employ of or rendering any
services to any person, firm or corporation that is a customer, affiliate or referral partner
of Plaintiff, or is in the business in competition with Plaintiff (including but not limited
to, TransSwipe, Blackstone Capital and/or any of their affiliated entities), nor engage in
such business on his own account as an individual partner, shareholder, director, officer,
principal, agent, consultant, or in any other relationship or capacity whatsoever, at any
location within fifty (50) miles of Plaintiff's principal office at 535 8th Avenue, 5th
Floor, New York, New York 10018 for a period of 12 months; (2) soliciting an
customers or affiliates of Plaintiff (including referral partners), to do business with him,
or any other person or entity, in competition with the type of service he performed for
Plaintiff for a period of 24 months; (3) disclosing or otherwise using Plaintiff's
confidential information; and (4) retaining any of Plaintiff's property, including, but not
limited to, its confidential information, currently in his [*8]possession, custody or control is GRANTED; and
it is further
ORDERED, that a Preliminary Conference (see 22 NYCRR
202.12) in this matter shall be held at the Preliminary Conference Part, located at the
Nassau County Supreme Court on July 29, 2015, at 9:30 a.m. This directive,
with respect to the date of the Conference, is subject to the right of the Clerk to fix an
alternate date should scheduling require; and it is further
ORDERED, that the Plaintiff's counsel shall serve a copy of this
Order upon the Defendant's counsel pursuant to CPLR § 2103 (b) 1, 2 or 3 within
ten (10) days of the date of this Order. PROOF OF SERVICE MUST BE FILED
WITH THE COURT.
This constitutes the Decision and Order of the Court.
All applications not specifically addressed herein are DENIED.
DATED:Mineola, New York
June 24, 2015
________________________________
Hon. Randy Sue Marber, J.S.C.