Court Grants Preliminary Injunction Enforcing Restrictive Covenants Pending Trial

On November 26, 2019, the First Department issued a decision in UAH-Mayfair Mgt. Group LLC v. Clark, 2019 NY Slip Op. 08536, affirming the grant of a preliminary injunction enforcing a restrictive covenant pending trial, explaining:

In order to obtain a preliminary injunction, movant must show (1) a likelihood of ultimate success on the merits; (2) the prospect of irreparable injury if the provisional relief is withheld; and (3) a balance of equities tipping in its favor.

The IAS court did not abuse its discretion in finding that defendants violated the restrictive covenants in their various agreements with plaintiffs. Defendants effectively admitted to a number of violations at the evidentiary hearing.

Because these covenants arose from the sale of defendants' business, irreparable injury is presumed. In any event, the diversion of business from plaintiffs in this case would likely lead to damages that could not be calculated with reasonable certainty. For this reason also, plaintiffs are irreparably harmed.

The balance of equities favors plaintiffs. Defendants can pursue consulting work in the affordable housing field, but may not interfere with plaintiffs' relationship with former customers. Moreover, defendants were paid millions of dollars in connection with the sale of the business, and cannot now clawback the good will they sold.

(Internal citations omitted).

Non-compete provisions are subject to a number of limitations, but as this decision discusses, courts will in appropriate circumstances enforce them through an injunction before trial. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the enforcement of an employment contract.