Court Dismisses Claims Because Agreement Expired

In an Opinion, dated May 1, 2023, in Richmond Global Compass Fund Mgt., GP, LLC v. Nascimento, 2023 NY Slip Op 31448(U), Justice Andrew Borrok granted in part defendant’s motion to dismiss. The matter concerned, inter alia, claims for breach of an agreement’s non-competition and non-solicitation provisions. The Court explained:

The breach of contract claims predicated on the Letter Agreement's Non-Competition (Section 11) and Non-Solicitation (Section 10) provisions must be dismissed. The Plaintiffs' argument that these provisions were breached during the tail period to the Letter Agreement fails. As discussed above, Mr. Nascimento did not send a notice of resignation during the term of the Letter Agreement and Compass did not send a termination notice during the term of the Letter Agreement either. Mr. Kellner's emails where he acknowledged the lapse of the Letter Agreement are documentary evidence which utterly refutes any suggestion to the contrary and any suggestion that Mr. Nascimento was continuing to work under the same arrangement and subject to the same restrictive covenants. As the emails discussed above indicate, the parties were discussing an alternative arrangement where Mr. Nascimento would work as an Outsourced Chief Investment Officer. Even if this were not so (which it is), Mr. Kellner's May 20 Letter would also doom this claim as it purports to treat Mr. Nascimento's May 4^th email as a resignation letter which it was not for two reasons. First, the May 4 email is not a resignation letter. It is a letter merely acknowledging that there was no Letter Agreement in effect and that as of Thursday, April 30, the Letter Agreement had lapsed. Second, as of May 4, the term of the Letter Agreement had already expired. Thus, the restrictive covenants in Sections 10 and 11 were no longer applicable to Mr. Nascimento after April 30 and "breaches" of those covenants after that date are not actionable (Birch Tree Partners, LLC v Windsor Digital Studio, LLC, 95 AD3d 1154, 1155-56, 945 N.Y.S.2d 162 [2nd Dept 2012]; Gramercy Park Animal Ctr., 41 NY2d at 875).

The attorneys at Schlam Stone & Dolan frequently litigate non-compete and non-solicitation disputes. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such litigation.