Dynesha Henderson, Plaintiff, v. Tejal Patel, Defendant.

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Civil Court, City of New York.

Dynesha Henderson, Plaintiff, v. Tejal Patel, Defendant.

005034/2016

Decided: April 20, 2018

Matthew Porges, 641 President St., Suite 205, Brooklyn, NY 11215 appeared on behalf of the plaintiff. John Dore of Court Square Law Project, 2 Court Square, at CUNY School of Law, Long Island City, NY 11101 appeared on behalf of defendant.

Recitation, as Required by CPLR 2219(a), of the Papers Considered in the Review of this Motion:

Notice of motion to reargue 1

Affirmation in opposition 2, 3

Reply 4

Memoranda of Law 5, 6

Plaintiff moves for an order: 1) pursuant to CPLR 2221(d) for leave to reargue the order dated October 19, 2017, granting defendant's motion for summary judgment; and 2) upon reargument, denying summary judgment to defendant.

Plaintiff's motion to reargue was granted and heard on February 21, 2018. When the Court originally heard oral argument on defendant's motion for summary judgment on October 19, 2017, plaintiff did not submit the Memorandum of Law which contained all of plaintiff's arguments nor any exhibits annexed to the Memorandum of law, which notably included deposition transcripts. In opposition to the motion, plaintiff submitted only an Affirmation in Opposition which lacked substance and consisted solely of various additional exhibits (excluding deposition transcripts). Accordingly, the Court granted defendant's motion for summary judgement. In support of the instant motion to reargue, plaintiff provided the Memorandum of Law but again did not provide any deposition transcripts.

Plaintiff, Nesh Mind Body Soul, Inc. which is in the business of "yoga instruction and education" was incorporated on July 22, 2014. On January 21, 2015, the parties entered into a written agreement pursuant to which defendant would provide yoga instruction to plaintiff's clients at the rate of be $20 per class.

The agreement contains a non-compete clause which states "For so long as [defendant] shall work for [plaintiff] and for a period of six (6) months after termination from [plaintiff] for any reason, [defendant] shall not solicit business from customers, clients and prospective clients of [plaintiff]. Nor shall [defendant] conduct business activities that are the same as or similar within the non-compete geographic area defined below...."

The "non-compete geographic area" is explicitly defined in the agreement as the area "within a 3-mile radius of NESH Mind Body Soul Inc. located at 350 Tompkins Ave. Brooklyn, NY 11233."

On or about March 1, 2015, plaintiff moved from 350 Tompkins Avenue on to 521 Halsey Street, Brooklyn, NY 11233.1 On June 26, 2015, plaintiff closed the 521 Halsey Street location and began offering yoga classes with defendant at a park located at 70 Chauncey Street in Brooklyn.2

On September 23, 2015, defendant emailed an invoice to the plaintiff for yoga classes defendant taught on 8/17/15, 8/23/15, 8/30/15 and 9/14/15 in the amount of $80 and an additional $80 for "creative work." Plaintiff requested that defendant reduce the invoice from $160 to $80 which plaintiff agreed to pay by October 31, 2015.3 Plaintiff admits that it has not paid the $80 of the $160 invoice.4

During the Fall of 2015, the parties conducted an online marketing campaign called the "Mind Body Challenge" to gain "potential clients." The campaign consisted of plaintiff sending yoga instruction e-mails to "potential clients" viewing the site with links to YouTube videos of yoga classes taught by defendant with meditation narrated by plaintiff.5

Plaintiff sent the emails to the "potential clients" explicitly on behalf of "NESH AND TEJAL YOGA" which is the "co-brand" combination of plaintiff's logo, NESH" and defendant's logo, "TEJAL YOGA".6

The contact information of people who registered for the "Mind Body Challenge" was saved in a Google document that both plaintiff and defendant could access.

The "Mind Body Challenge" terminated on December 18, 2015.7 Defendant contends that she informed plaintiff that she could no longer work with plaintiff as defendant had accepted a position at another yoga studio  8 which plaintiff claims is a competitor.9

Plaintiff commenced the within action premised on breach of contract alleging that defendant violated the non-compete agreement in two respects. First, defendant allegedly worked for plaintiff's competitor, in violation of the non-compete clause from November 2015 through August 2016.10 Second, defendant solicited plaintiff's "potential clients" on or about January 11, 2016, using the client list which the parties shared on the Google document while pursuing the "Mind Body Challenge."11

Defendant moves for summary judgment on the basis that: 1) the non-compete clause became invalidated when plaintiff relocated from the geographic location specified in the noncompete clause; 2) the non-compete clause is unenforceable as the list of "potential clients" referenced by plaintiff does not constitute trade secret; and 3) plaintiff invalidated the agreement by the material breach of not paying defendant for classes taught.

As the party moving for summary judgment, defendant has the initial burden of coming forward with sufficient proof to make out a prima facie case (Zuckerman v. City of New York, 49 NY2d 557 [1980]. The burden then shifts to plaintiff to produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact (Gesuale v. Campanelli & Associates, P.C., 126 AD3d 936, 937 [2nd Dept., 2015]).

At the outset, the issue is whether the non-compete agreement remains valid and enforceable even though plaintiff closed and moved to a location other than 350 Tompkins Avenue, Brooklyn, NY 11233 which is explicitly defined as the "geographic area."

Noncompetition agreements are judicially disfavored because of public policy considerations against the loss of a person's livelihood (Brown & Brown, Inc. v. Johnson, 25 NY3d 364, 370 [2015]. Accordingly, a covenant not to compete must be strictly construed and should not be extended beyond the literal meaning of its terms (Gramercy Park Animal Ctr. v. Novick, 41 NY2d 874 [1977]).

In the case at bar, the agreement explicitly defines the "Non-Compete Geographic Area" as a single location at "350 Tompkins Avenue in Brooklyn." In strictly construing the agreement, the noncompete clause does not apply to 521 Halsey Street or the park located at 70 Chauncey Street in Brooklyn, or any other location not specified in the agreement.

As plaintiff moved from the "Non-compete Geographic area" specified in the January 25, 2015 agreement on March 1, 2015, the defendant has established as a matter of law that the non-compete agreement is invalid and unenforceable warranting dismissal.

In addition to the foregoing, the non-compete agreement is invalid on the basis that the client list which the parties shared on the Google document is not a trade secret and thus not entitled to protection."12

A non-compete agreement will be enforced only to the extent that it is reasonable and necessary to protect valid business interests, including client lists that are demonstratively genuine "trade secrets" which are entitled to protection (BDO Sediman v. Hirschberg, 93 NY2d 382, 389 [1999]).

A trade secret is a "compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it" (Ashland Management, Inc. v. Janien, 82 NY2d 395, 407 [1993] (quoting section 757 of Restatement of Torts, comment b)). Among the factors to be considered in determining whether there is a genuine trade secret are the amount of effort or money expended in developing the secret matter, the extent of measures taken to safeguard the secret, the extent to which the information is known outside the business, and the possible value of the information to competitors (id.).

As to client lists, where the customers are readily ascertainable outside the employer's business as prospective users or consumers of the employer's services, trade secret protection will generally not attach (Boosing v. Dorman, 148 A.D. 824, 827, affd. 210 NY 529; Tepfer & Sons v. Zschaler, 25 AD2d 786, 787; Hudson Val. Propane Corp. v. Byrne, 24 AD2d 908, 909; Abdallah v. Crandall, 273 A.D. 131, 133-134; Goldberg v. Goldberg, 205 App. Div. 435, 438-439; Scott v. Scott, 186 App. Div. 518, 524-525, 527; McLean v. Hubbard, 24 Misc 2d 92, 96-97, affd. 11 AD2d 1084). A client list would constitute a trade secret where customers are discoverable only by extraordinary effort, especially where the customers have been secured by years of effort and advertising effected by the expenditure of substantial time and money (Leo Silfen, Inc. v. Cream, 29 NY2d 387, 393 [1972]).

In the case at bar, plaintiff does not submit any evidence that it invested substantial time and money in developing the list of "potential clients" or any evidence to substantiate that the list is entitled to protection as a trade secret. Quite contrary, plaintiff is a young corporation formed on July 22, 2014. The record is devoid of any evidence regarding when plaintiff began operating as a business prior to entering into the teaching agreement with defendant on January 25, 2015. After the signing of the agreement plaintiff relocated its business twice and on September 25, 2015 became partners with defendant. Plaintiff does not establish that it compiled a list of "potential clients" through substantial time, effort and expense prior to becoming partners with defendant.

Moreover, plaintiff does not submit any evidence to establish any of the factors used to determine whether the "potential client" list is a trade secret, and therefore entitled to protection. Rather, plaintiff contends that the list constitutes "trade secret" on the basis that it not "readily ascertainable" from sources outside the business.13

The remainder of plaintiff's contentions are conclusory and irrelevant to the factors utilized to assess whether the list constitutes a trade secret. Plaintiff paraphrases deposition transcripts in claiming that defendant "merged" the client list shared on the Google document with defendant's own list of clients and solicited plaintiff's clients and "prospective clients"14 . However, plaintiff does not provide the deposition transcripts nor attempt to explain how said testimony, even if accurately paraphrased would establish that the "potential client list" is entitled to protection as a trade secret.15

Based on the foregoing, defendant demonstrated as a matter of law that the list of "potential clients" is not a trade secret rendering the non-compete clause further unenforceable.

Moreover, plaintiff is precluded from enforcing the non-compete agreement as plaintiff admittedly materially breached the agreement by failing to pay any portion of defendant's invoice dated September 25, 2015. Restrictive covenants are unenforceable if the employer breached its contract (Elite Promotional Marketing, Inc. v. Stumacher, 8 AD3d 525 [2d Dept., 2004]).

The subject invoice sought payment in the sum of $160, which included $80 for four classes taught  16 and an additional $80 for "finance/creative work" performed on 8/7/15, 8/24/15, 8/25/15, 8/28/15, 8/30/15, 8/31/15, 9/1/15, and 9/8/15.17 Plaintiff argues that defendant should reduce the bill from $160 to $80  18 effectively conceding to owe defendant $80 which plaintiff admits has not been paid to date.19

Plaintiff's failure to pay defendant for classes taught in August and September of 2015 constitutes a material breach of the agreement which renders the non-compete clause further unenforceable.

Based on the foregoing, defendant has made a prima facie showing that the noncompete clause is not enforceable. Plaintiff has not submitted sufficient evidence to rebut defendant's prima facie case.

ORDERED that, upon reargument, defendant's motion for summary judgment is granted.

The above constitutes the decision and order of the Court.

Dated: April 20, 2018

_________________________________

ODESSA KENNEDY

Judge of the Civil Court

FOOTNOTES

1.   Patel affidavit, para. 10

2.   Patel affidavit, para. 11

3.   Patel affidavit, para. 17

4.   Plaintiff's Responses to Defendant's Notice to Admit, para. 1

5.   Patel affidavit, para. 22

6.   Plaintiff's Response to Defendant's Notice to Admit, para. 7

7.   Plaintiff's Responses to Defendant's Notice to Admit, para. 5

8.   Patel affidavit, para. 25

9.   Complaint, para. 22

10.   Complaint, paras. 22, 24

11.   Complaint, paras. 26-29

12.   The Court notes that plaintiff's Memorandum uses the plural form "client lists," there is only a single client list annexed as an exhibit to the Memorandum. There is no evidence of any other client list.

13.   Plaintiff's Memorandum of Law, p. 7

14.   Plaintiff failed to provide the transcript despite an email request from the Court.

15.   Plaintiff's Memorandum of Law, p. 8

16.   Plaintiff's Memorandum of Law, exhibit G

17.   Id.

18.   Plaintiff's Responses to Defendant's Notice to Admit, para. 1

19.   Plaintiff's Responses to Defendant's Notice to Admit, para. 2

Odessa Kennedy, J.