MILLENIUM CONSOLIDATED HOLDINGS LLC v. BLUEFIN CAPITAL MANAGEMENT LLC (2024)

Order, Supreme Court, New York County (Margaret A. Chan, J.), entered April 18, 2023, which, to the extent appealed from as limited by the briefs, denied defendant's motion to dismiss the first cause of action for tortious interference with contract upon applying New York law instead of North Carolina law, unanimously affirmed, without costs.

Plaintiffs, based in North Carolina, and their former employee (Zhou) entered into certain restrictive covenants, including that Zhou would not compete with plaintiffs’ business of trading in fixed income securities.  During the period set for noncompetition, Zhou became employed by defendant, based in New York, which, among other things, trades in fixed income securities.

Supreme Court correctly applied New York law upon finding no actual conflict between New York law and North Carolina law regarding tortious interference with contract (see Elmaliach v. Bank of China Ltd., 110 A.D.3d 192, 200, 971 N.Y.S.2d 504 [1st Dept. 2013];  SNS Bank v. Citibank, 7 A.D.3d 352, 354, 777 N.Y.S.2d 62 [1st Dept. 2004]).  Both states’ laws include the same elements (see Vigoda v. DCA Prods. Plus, Inc., 293 A.D.2d 265, 266, 741 N.Y.S.2d 20 [1st Dept. 2002], citing Lama Holding Co. v. Smith Barney, Inc., 88 N.Y.2d 423, 424, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996];  compare Wells Fargo Ins. Servs. USA, Inc. v. Link, 372 N.C. 260, 282, 827 S.E.2d 458 [2019]), and both allow a defense of economic interest to the element of proving actions without justification (see Foster v. Churchill, 87 N.Y.2d 744, 750, 642 N.Y.S.2d 583, 665 N.E.2d 153 [1996];  see also Residential Bd. of Millennium Point v. Condominium Bd. of Millennium Point, 197 A.D.3d 420, 421, 423, 153 N.Y.S.3d 1 [1st Dept. 2021];  compare Wells Fargo Ins. Servs., 372 N.C. at 284, 827 S.E.2d 458).  That in North Carolina “recruitment of employees from a business competitor is presumptively privileged competitive actively, absent an allegation of legal malice,” is irrelevant, as this action involves only the alleged interference with a former employee's covenant not to compete with plaintiffs, as opposed to a covenant barring solicitation of plaintiffs’ current employees by the former employee (see Wells Fargo Ins. Servs., 372 N.C. 260, 285, 263, 266–276, 827 S.E.2d 458;  see also Elmaliach, 110 A.D.3d at 200, 971 N.Y.S.2d 504).

Supreme Court also correctly denied the motion to dismiss as to plaintiff's tortious interference with contract claim (CPLR 3211[a][7];  see Vigoda, 293 A.D.2d at 266, 741 N.Y.S.2d 20).  The complaint sufficiently alleged a valid contract, whereby plaintiffs had a legitimate interest in the “protection against misappropriation of [their] trade secrets” (BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 389, 392, 690 N.Y.S.2d 854, 712 N.E.2d 1220 [1999], citing Reed, Roberts Assoc., Inc. v. Strauman, 40 N.Y.2d 303, 308, 386 N.Y.S.2d 677, 353 N.E.2d 590 [1976]).  It also sufficiently alleged a breach by Zhou of the restrictive covenant by accepting employment with defendant after plaintiffs objected, and even though the parties describe their own businesses as SEC-registered broker-dealers trading in fixed income securities with sophisticated counterparties instead of traditional customers;  defendant's knowledge of the contract;  and defendant's inducement of the ongoing breach thereof, including by aiding Zhou's statements to plaintiffs claiming compliance with the covenants (see Vigoda, 293 A.D.2d at 266, 741 N.Y.S.2d 20).  Further, the complaint sufficiently “plead[ed] allegations from which damages attributable to defendant[’s] conduct ‘might reasonably be inferred’ ” (Risk Control Assoc. Ins. Group v. Maloof, Lebowitz, Connahan & Oleske, P.C., 127 A.D.3d 500, 500, 7 N.Y.S.3d 112 [1st Dept. 2015]).

We have considered defendant's remaining contentions and find them unavailing.