Dewitt Stern Group,Inc., v. Eisenberg, No. 1:2013cv03060 - Document 57 (S.D.N.Y. 2014)
Court Description: OPINION re: 48 MOTION to Amend/Correct the First Amended Complaint filed by Dewitt Stern Group,Inc.: For the reasons set forth above, Plaintiff's motion for leave to amend is granted with respect to Eisenberg and denied with respect to Gallagher without prejudice. (Signed by Judge Robert W. Sweet on 4/9/2014) (tn)
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UNITED STATES DISTRICT COURT STRICT OF NEW YORK SOUTHERN ---------------------- --- --- -x DEWITT STERN GROUP, INC., Plaintiff, 13 Civ. 3060 against OPINION RICHARD EISENBERG, Defendant. --- -------------------------------x A P PEA RAN C E S: Attorne for Plaintiff DeWitt GOLDBERG SEGALLA LLP 780 Third Avenue, Suite 3100 New York, NY 10017 By: Peter J. Bing, Esq. Attorney for Defendant Eisenberg OGLETREE, DEAKINS, NASH, SMOAK & STEWART, 1745 Broadway, 22nd oor New York, NY 10019 By: Aaron Warshaw P.C. (RWS) Sweet, D.J. Plaintiff DeWitt Stern Group Inc. \\ ("DeWitt" or aintiff") moves for permission to amend its First Amended Complaint ("FAC") to add a claim of unjust enrichment against Defendant Eisenberg ("Eisenberg" or "Defendant") and Arthur J. Gallagher & Co. ("Gallagher") (collectively, the "Defendants"). For the reasons set forth below, aintiff's motion is granted with respect to Eisenberg and denied as to Gallagher. Procedural History & Facts The procedural history and facts unde action were previously set forth in opinions by October 29, 2013. (See Docket No. background of this case is assumed. ying this s Court dated 39.) Knowledge of the general Certain facts are repeat in part as relevant to the instant motions. DeWitt is a privately held insurance brokerage and risk management firm, specializing (in part) in insurance r the entertainment industry, with its primary place of business operations and senior management located in New York. 1 senberg is an established insurance broker. chard Eisenberg ("Eisenberg Aff.n); , (Affidavit of 2-8.) was employed by DeWitt as From 2007 until May 6, 2013, Eisenbe a Senior Vice President and producer, with his primary respons ility to sell film insurance products and oversee handling of client accounts. senberg is currently employed by Gallagher. or to Eisenberg's employment at DeWitt, he worked at Aon/Albert G. Reuben Insurance Services, Inc. from 2001 until 2007. Aon/AGRIS, (Eisenberg f. 3, 10.) When he joined was purportedly compensated for the sale of his business, client accounts and goodwill $400,000. 5.) ~~ ("Aon/AGRIS n ) the amount of (Declaration of Charles Johnson, Eisenberg was so subject to a covenant not to compete with regard to the business accounts he (Eisenberg Aff. ~ ("Johnson Decl."); sold to Aon/AGRIS. 10.) In 2007, Eisenberg left Aon/AGRIS and joined DeWitt. In light of senberg's non-competes, DeWitt detailed in his contract that his employment would include "the purchase of [his] present and future book of business related to the 2 ~ insurance business," (see Eisenberg-DeWitt October 9, 2007 Agreement ("DeWitt Initial Contract")), and provided that DeWitt would assume the obligation to indemni against claims that might and defend Eisenberg asserted by Aon/AGRIS resulting from Eisenberg's "servicing or accepting new insurance applications for, and/or placing insurance on behalf of any clients." (DeWitt Initial Contract at 3.) Shortly a r Eisenberg left Aon/AGRIS for DeWitt, Aon/AGRIS filed a Cross-Complaint against DeWitt and Eisenberg alleging, among other things, that Eisenberg had breached the restrictive covenant provisions in his agreement, and that DeWitt had raided and tortiously interfered with its bus convincing customers to abandon their relation Aon/AGRIS and move instead to DeWitt. ss by ips with (Docket No. #37.) DeWitt alleges that in order to free Eisenberg from the restraints imposed by his contract with Aon/AGRIS, and to permit Eisenberg to lawfully solicit his former clients for DeWitt, DeWitt entered into a settlement w DeWitt paid Aon/AGRIS $425,000. Aon/AGRIS (Johnson Decl. ~ 6.) which According to DeWitt, as a result of this settlement, which Eisenberg signed, Eisenberg was permitted to sol 3 it the business he had tt and continue cultivating these sold to Aon/AGRIS for relationships on behalf of DeWitt. After Eisenbe senberg, in his (Id. at ~~ 7-8.) joined DeWitt, Plaintiff aIle city as Senior s that ce President and producer, had access to DeWitt's confidential information and trade secrets, including names and lists of accounts and clients, names of key account contacts, account characte pricing ormation, and application information. DeWitt asserts that in t senbe sties, Further, course of his work for DeWitt, was provided substantial support in his efforts to make former Aon/AGRIS clients DeWitt clients, t his book of business, including: (1) commissions earned on the business; reby building substantial compensation on (2) two II-time employees to assist him in servicing any business he could bring in; (3) offices he could work out of on both coasts; and (4) an apartment in California, half of which was pa he could lop ients on t west coast. for by DeW (Id. at ~ t so 8.) To protect DeWitt's investment in Eisenberg, DeWitt alleges that Eisenberg signed a series of with DeWitt, culminating his final loyment agreements reement, executed on or about October 9, 2012 (the "Employment Agreement"), the terms of 4 which provided that he could not utilize "confi DeWitt employment w and lists of accounts, formation relating to . .")); ("Biging [and] aration of Peter S. (Employment Agreement at On June 4, 2013, Plaintiff's motion injunction enforc it prohibi . names . ., customers, clients, names of key account contacts." Biging, s r any reason, and defined "Confidential lude "all Information" to rs after the termination of ast two Information" for at ial <J[ 5a.) a prel nary this agreement was granted, to the extent Defendant from Agreement (the "June 4 re violations of Employment preliminary injunction was r") . explicitly modeled on the terms of this agreement. PIa iff filed the First Amended Complaint ( "FAC") on June 18, 2013, and subsequently filed an order to show cause for sanctions on July 17, 2013. On October 29, 2014, DeWitt's motion for sanctions was ed. proh The Opinion reiterated t ted from soliciting clients wi "personal relationsh although Eisenberg was which he had deve sf( based upon the f employer, including a salary, support staff, 5 ial support of expenses, s Marsh USA Inc. v. Karasa ,2008 U.S. Dist. LEXIS 90986, *51-52 (S.D.N.Y. Oct. 30, 2008), Plaintiff failed to show that Defendant had solicited any clients that Defendant did not have a pre-existing relationsh sanctions were denied. might yie purcha with prior to DeWitt's assistance, The Opinion noted that while discovery further evidence on DeWitt's allegations that it Eisenberg's "book of bus ss," the Employment Agreement itself did not make any reference to DeWitt owning senberg's "book of business" or his pre-existing clients. Accordingly, until information regarding the book of business was produced, Eisenberg would be rest cted solely by the terms of the Employment Agreement, which does not prevent solicitation through non-confidential information or trade secrets with whom he had a pre-existing relationsh clients (October 29 Opinion at 11-13.) On January 15, 2014, amend the FAe to add a claim aintiff moved for leave to unjust enrichment. This motion was heard and marked fully submitted on April 2, 2014. Applicable Standard of Law 6 The standard governing motions to amend is a "permissive" one that is informed by a "strong preference for resolving disputes on the merits." See Williams v. Citigroup Inc., 659 F.3d 208, 212-13 (2d Cir. 2011) Green, 420 F.3d 99, 104 (2d r. 2005)); see also Pangburn v. Culbertson, 200 F.3d 65, 70 (2d Cir.1999) " (citing New York v. axed standard" for motions to amend). (referring to the Rule 15(a) provides . . when just that leave to amend shall be "freely give[nJ so requires." Fed. R. Civ. P. 15(a) (2). terms upon which such leave is to " rcumstances and 'freely given' is committed to the informed, careful judgment and discretion of the Trial Judge as superintends development of a cause toward its ultimate disposition." Freeman v. Continental Gin Co., 381 F.2d 459, 468 (5th Cir. 1967) (internal ci ta tions omitted) . The Supreme Court has stated that absent undue delay, bad fa , undue prejudice, or futility, the "mandate" under Fed. R. Civ. P. 15(a) (2) to freely grant leave to amend "is to be heeded." Forman v. Davis, 371 U.S. 178, 182 (1962); see also AEP Energy Servs. Gas Holding Co. v. Bank of Am. N.A., 626 F.3d 699, 725 (2d r. 2010) allow a party to amend ("The rule in this Circuit has been to s pleadings in the absence of a showing by the nonmovant of prejudice or bad i th. ") (quoting Block v. rst Blood Assocs., 988 F.2d 344, 350 (2d Cir.1993)). 7 If, on the other hand, the proposed amendment" ils to state a claim or would be subject to a successful motion to dismiss," or would th, or undue prejudice, a motion to cause undue delay, bad amend may denied. Kirk v. Heppt, 423 F.Supp.2d 147, 149 (S.D.N.Y. 2006); see also Lucente v. Int'l Bus. Machines Corp., 310 F.3d 243, 258 (2d Cir. 2002) (leave to amend should be denied where an amendment to a eading is futile, namely that "the proposed claim could not withstand a motion to dismiss") . Thus, the standard for leave to amend, while permissive, is by no means "automatic," Klos v. Haskel, 835 F.Supp. 710, 715 (W.D.N.Y. 1993), or a "mechanical absolute./I Freeman v. Continental Gin Co.! 381 F.2d 459, 468 (5th Cir. 1967). DeWitt's Motion for Leave to Amend the FAC to Plead Unjust Enrichment in the Alternative to its Contract Claims is Granted in Part and Denied in Part DeWitt contends that it should be allowed to amend the FAC to include a aim for unjust enrichment. ther party contests timeliness of the amendment, or any potential prejudice to Defendants or bad on the part of Plaintiff. potential As such, leave to amend turns on ility of Plaintiff's added claim. 8 ith A. Leave to Amend is Granted as to Eisenberg There is no dispute that "[tJhe existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter." erk- Fitzgerald v. Long Island R. Co., 70 N.Y.2d 382, 388 (N.Y. 1987) . The remaining issue is thus whether any portion of DeWitt's contract wi Eisenberg is by its terms unenforceable as written, and therefore allows Plaintiff the right to plead a claim for equitable relief in the alternative should certain provisions of the contract be und invalid. See, e.g., Dragushansky v. Nassar, 2013 U.S. Dist. LEXIS 12407, *21-24 (S.D.N.Y. Aug. 29, 2013) ("Although a plaintiff cannot ultimately recover under a cIa for breach of contract and unjust enrichment where a contract governs the subject matter at issue, a plaintiff can plead both causes of action in the alternative" should the contract be found enforceable) . 9 The contested provisions at issue relate to whether right to legally prevent Eisenberg from DeWitt has soliciting clients with whom he had a preexisting relationship tt through DeWitt's purchase of Eisenberg's prior to joining "book of bus ss." (Plaintiff's Memorandum in Support of Leave to Amend, "PI. Mem."; at 8-9.) Plaintiff contends the October 2007 DeWitt Initial Contract with Eisenberg speci cally contract for " purchase of [Eisenberg's] present and future book of bus related to t Insurance Business," (see DeWitt I ss ial Contract), and accordingly that DeWitt is entitled to preclude senberg preexisting re soli ting even those clients with whom he had a ionsh Further, DeWitt contends that whe it may prevent Eisenberg from solic depend not only on t also on evidence conce ing such clients 11 initial October 9, 2007 contract, but ng the Settlement Agreement between DeWitt and Aon/AGRIS as well as Gallagher's behavior while Eisenberg was still a DeWitt employee. asserts that the issue 11 turn on both As such, entially unenforceable provisions of a contract and evi of and extraneous to aintiff nce independent contract, and pleading unjust enrichment as an alternative form is relief is thus appropriate. 10 Union Bank, N.A. v. CBS Corp., 2009 U.S. (S.D.N.Y. June 9, 2009) st. ELXIS 48816 ("Because it has already become clear that at least one of the parties will argue that resolution of s dispute requires going outside the four corners of the parties' agreements, the Court cannot determine as a matter of law and at the inception of s litigation that this dispute will be resolved through application of the [written agreements at issue.] Accordingly, [the defendant's] motion to dismiss the [unjust enrichment cause of action] is denied. .,,)1. As a general rule, an employee cannot be prevented from soliciting clients with whom he had pre-existing relationships, or using information based on casual memory. See, e.g., Barbagallo, No. 11-CV-1358, 2013 WL 132711, at *19 smissing breach of rest ctive covenant claim because former employee had "pre-existing relationships" with all the clients at issue; "sensible clients llow the talent they trust, and not the organizations to which that talent is temporarily Defendants contend that "It is not plausible that DeWitt would be prevented from under the Employment Agreement due to well-established public icy concerns yet, at the same time, still be entitled to recover under able principles." (Opp. Brief at 11.) As an initial ~atter, equitable relief is meant to be pled in the alternative should contractual prove unenforceable. In any event, the unjust enrichment claim turns on evidence independent of and extraneous to the Employment Agreement, as well as provisions in the DeWitt Initial Contract, not solely the Employment Agreement. 1 11 attached. Clients are not dragged against their will one firm to another, but actively choose who they will retain professional services.") (collecting cases); Nebraskaland, Inc. v. Brody, No. 09-CV-9155 (DAB), 2010 WL 157496, at *3 (S.D.N.Y. Jan. 13, 2010) restrict ("BDO Seimand prevents Court from enforcing covenant" to retrain solicitation of customers with whom defendant had a "pre-existing relationships"); Good Energy, L.P. v. Kosachuk, 49 A.D. 3d 331, 332 (1st ' t 2008) (non-compete clause unenforceable because it prohibited former employee from working with clients who followed him due to his "pre-existing relationship" with them) . In BDO drnan v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854, 712 N.E.2d 1220 (N.Y.1999), for instance, the New York Court of Appeals found that an employer has a legitimate interest in protecting against an employee's "competitive use of raJ client re ionship which [ acquire through his per employer] enabled him to rmance of . . services for the firm's clientele during the course of his employment." Id., 392, 690 N.Y.S.2d 854, 712 N.E.2d 1220. However, employer's legitimate interest in cl instrumental in creating and fostering, contrast to an relationships it was the Court found that "[e]xtending [an] anti-competitive covenant to [the employer's] 12 clients with whom relationships with defendant did not develop through assignments to perform direct, substantive services . . . would constitute a restraint 'greater than lS needed to protect' these legitimate interests." Id. (citing Restatement [Second] of Contacts § 188[1] [al). Neither party cites any precedent allowing a provision of a contract to precl an employee from soliciting even those clients with whom the employee had a preexisting relationship. In fact, Plaintiff's cited precedent re which eit rs solely to cases in r such a provision was ultimately found invalid, or where the provision related only to precluding an employee from soliciting clients that were serviced or solicited first during his employment. See, e.g., Spinal Dimensions, Inc. v. Chepenuk, No. 4805-07, 2007 WL 2296503, at *6 (N.Y. Sup. Ct. Aug. 9, 2007) (the non-compete provision was unen rceable because "the agreement [wa]s not limited to the devices sold by defendant Chepenuk nor the customers with whom he had ongoing relationships.") i Johnson Controls, Inc. v. A.P.T. Critical Sys., Inc., 323 F.Supp.2d 525, 532 (S.D.N.Y.2004) (recognizing the enforceability of a non-servicing provision which restrained defendant from performing services directly or indirectly for the pla iff's existing customers who had been served or 13 defendant or by someone supervis solicited by de by the ndant during the defendant's employment); Portware, LLC v. Barot, No. 603738-05, 2006 WL 516816, at *5 (N.Y. Sup. Ct. Mar. 2, 2006) (finding employment agreement that barred defendant from "solic ing, communicating, or transacting business with customers or potential customers with whom he first developed a relationship" through and enforce s employment with plaintiff to be valid le). Accordingly, there remain issues of material fact as to existence of a remedy at law for certain of Eisenberg's actions, namely DeWitt's abil y, if it establishes that purchased Eisenberg's "book of siness," to prohibit Eisenberg from soliciting clients with whom or to joining DeWitt. language senberg had relationships In other words, if the contractual the October 2007 DeWitt Initial Contract is unenforceable, or if discovery yields evidence DeWitt purchased Eisenberg's book of business extraneously to and independently of the Employment Agreement, it is possible that senberg benefited from t use of Eis rg's client list, and that equity and good conscience might require restitution. 2 See 20efendants cited precedent in support of fut' are distinguishable in that the enforceabi and scope of the contracts in those cases were not in dispute. (See Plaintiff's Reply Memorandum, "Pl. Mem.n; at 5.); see 14 Poller v. BioScrip, Inc., 2013 WL 5354753, at 25, 2013) * (S.D.N.Y. Sept. (finding regardless of whether the information was was possible protected by the contractual provision, however, that defendant and his current employed "benefited, at the [former employer's] expense, from the use of the information, might require restitution. and that equity and good cons Accordingly, [the] unj ust enrichment claim" was allowed to stand in the alternative to the contractual claims). Thus, DeWitt's unjust enrichment claim may stand in the alternative to its contractual claims. LEXIS 89257 See, e.g., Usov v. Lazar, 2013 (S.D.N.Y. June 18, 2013) u.s. Dist. ("[W]hile a party generally may not simultaneously recover upon a breach of contract and unjust enrichment c im arising from the same facts, permissible to plead such claims as alternat it is still theories.") i Dragushansky v. Nasser, 2013 U.S. Dist. LEXIS 124074, *22 also Union Bank, N.A., v. CBS Corp., 2009 u.s. Dist. LEXIS 48816, *21 (S.D.N.Y. June 9, 2009) (noting that "[dlecisions interpret ClarkFitzpatrick have made clear that the predicate for dismissing -contract claims is that the contract at issue 'clearly covers the between the parties. '") . The fact that DeWitt relies on similar facts to establish the unjust enrichment claim is equally inapplicable. See Usov v. Lazar, 2013 U.S. Dist. LEXIS 89257 (S.D.N.Y. June 18, 2013) ("[WJhile a party generally may not simultaneously recover upon a breach of contract and ~njust enrichment claim aris from the same facts, it s still ssible to plead s~ch claims as alternative theories."); see also Dragushansky v. Nasser, 2013 U.S. Dist. LEX:S 124074, *22 (S.D.N.Y. Aug. 29, 2013) ("Although a aintiff cannot ultimately recover under a claim for breach of contract ust enrichment where a contract governs the subject matter at issue, a ff can plead both causes of action in the alternative") (citation omitted) . 15 (S.D.N.Y. Aug. 29, 2013) ("Although a plaintiff cannot ultimately recover under a claim for breach of contract and unjust enrichment where a contract governs the subject matter at issue, a plaintiff can plead both causes of action in the alternative") (citation omitted). B. Leave to Amend is Denied as to Gallgher With respect to Gallagher, precedent establishes that "an unjust enrichment claim is [] unavailable when an employer bene s from misappropriated material gleaned from the former employee of a competitor, even when the defendant-employer knows or induces such misappropriation." Barbagallo v. Marcum LLP, 820 F. Supp. 2d 429, 448 (E.D.N.Y. 2011); see also Wayne Thomas Salon, Inc. v. Moser, No. 603632/092010, 2010 N.Y. Misc. LEXIS 5015, *12 (N.Y. Sup. Ct. Oct. 12, 2010) (dismissing unjust enrichment claim; although the complaint alleged that former employee enriched fendant, his new employer, "by accepting client's personal contact information, viewi formation on the . client computer, stealing confidential information, informing clients of ient r resignation, and by soliciting [plaintiff's] clients," there was no "allegation that the plaintiff itself con red any benefit upon the . 16 fendants); Zeno Group, Inc. v. Charlotte Wray, No. 602632/06, 2008 N.Y. Misc. LEXIS 10229, *30 (N.Y. Sup. Ct. Sept. 26, 2008) ("The complaint states that fendants have been unjustly enriched in receiving the benef re ionships, s of employment and ient 'including that of a special and extraordinary employee who had access to the highly confidential and proprietary information of [plaintiffJ. ineffect [TJ s argument is . Defendants presumably paid [employeeJ for services, and d work in exchange for payment from clients. Nothing was 'bestowed' upon them."). If, ultimately, scovery yields evidence that Gallagher employed Eisenberg to actively soli t clients while Eisenberg was still an employee of Dewitt, Plaintiff may re-allege unjust enrichment against Gallagher at that time. See TOG USA, LLC v. Schupp, 2012 WL 5217223, *12 (W.D.N.Y. Oct. 22, 2012). Because aintiff by Gallagher establishing a s ils to suff iently allege actions ficient connection to DeWitt at this time, Plaintiff's motion to amend is dismissed as to Gallagher. CONCLUSION 17 For the reasons set forth above, Plaintiff's motion for leave to amend is granted with respect to Eisenberg and denied with respect to Gallagher without prejudice. It is so ordered. New York, NY April 2014 (f , 18
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