Non-Competition/Solicitation Claims Sustained In Part Against Plaintiff’s Former Employee, Dismissed Against Employee’s New Employer, and Plaintiff’s Motion To Amend Denied

On May 29, 2024, Justice Melissa A. Crane granted one defendant’s motion to dismiss all claims, granted the second defendant’s motion to dismiss in part, and denied plaintiff’s motion to file a second amended complaint. Prager Metis CPAS LLC v Koenig, Index No. 652000/2023.

Plaintiff Prager Metis CPAS, LLC and defendant Adeptus Partners LLC are direct competitors as international advisory and accounting firms. Adeptus hired Steven Koenig, who was under contract to Prager. Prager brought claims against Koenig for breach of contract and breach of the implied covenant of good faith and fair dealing, alleging that that Koenig was soliciting and/or contacting with its clients and employees and disclosing Prager's trade secrets and confidential and proprietary information to Adeptus. It also asserted claims against both Koenig and Adeptus for unjust enrichment and tortious interference with prospective economic advantage/business relations.

Both defendants moved to dismiss all claims, and Prager moved for leave to amend its complaint to replace the unjust enrichment claim against both defendants with one for unfair competition, and to replace its tortious interference/prospective economic advantage claim against both defendants with one for tortious interference with contractual relations, against Adeptus only.

Prager’s breach of contract claim survived because it asserted the violation of undisputed contract terms, and Koenig’s defenses of anticipatory breach and overbreadth of the restrictive covenant raised factual issues not appropriate for resolution on a motion to dismiss. Gramercy Funds Mgt., pp. 13-18. Prager’s claim for breach of the implied covenant of good faith and fair dealing was dismissed as redundant of the contract claim. Id., pp. 19-20. Both defendants’ motions to dismiss the claims for unjust enrichment and tortious interference with prospective economic advantage/business relations were denied as moot because plaintiff had withdrawn those claims. Id., p. 20. Prager was denied leave to file a second amended complaint because its proposed pleading merely tracked the elements, and failed to provide the necessary supporting detail, as to unfair competition for both defendants (id., pp. 5-7), and as to tortious interference with contractual relations against Adeptus. Id., pp. 7-9.

The attorneys at Schlam Stone & Dolan frequently litigate motions to dismiss and counsel clients with respect to issues concerning commercial contracts and non-competition agreements. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.