DKC Group Holdings, LLC v. Reece, Inc.

2024 NY Slip Op 33825(U)

Opinion

DKC Group Holdings, LLC v Reece, Inc.

2024 NY Slip Op 33825(U)

October 25, 2024

Supreme Court, New York County Docket Number: Index No. 655014/2024 Judge: Melissa A. Crane

Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 10/25/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY

PRESENT: HON. MELISSA A. CRANE PART 60M Justice

----------------------------------------------------------------- ----------------X INDEX NO. 655014/2024 DKC GROUP HOLDINGS, LLC,DANA KEPNER COMPANY, LLC MOTION DATE 09/30/2024

Plaintiff, MOTION SEQ. NO. 001

- V -

DECISION + ORDER ON

REECE, INC.,

MOTION

Defendant.

------------------------------------------------------------------- --------------X

The following e-filed documents, listed by NYSCEF document number (Motion 001) 5, 23, 25, 26, 27, 28, 29, 30, 32,46,47,48,49,50 were read on this motion to/for INJUNCTION/RESTRAINING ORDER

Upon the foregoing documents, it is Plaintiff seeks a preliminary injunction: ( 1) stopping defendant and defendant's affiliates from soliciting or hiring any of plaintiffs employees, (2) preventing defendant and defendant's affiliates from soliciting plaintiffs clients, customers or vendors and (3) precluding defendants and their affiliates from using plaintiffs confidential information.

For the reasons discussed on the record, the court grants that part of plaintiffs application seeking an order preventing defendant and defendant's affiliates from soliciting plaintiffs employees. First and foremost, defendant Reece, Inc. signed an agreement with plaintiff on February 11, 2022 (later extended by Amendment to January 26, 2026). In that agreement Reece agreed not to:

"solicit for employment or employ any director, officer or employee of the Company [ie plaintiff] or any of its subsidiaries. The preceding sentence does not prohibit you from making general solicitations for employment by means of advertisements, public notices, or internal or external websites or job search engines that, in each case, are not directly or indirectly targeted at the Company or a director, officer or employee of the Company or any of its subsidiaries."

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NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 10/25/2024

At the hearing today, plaintiff established a likelihood of success that it will be able to prove that defendant violated this provision. Plaintiffs Ex. P is a recent email dated 9/11/2024 in which Bill Reno, plaintiffs former employee, sent Tommy Leaf, defendant's HR director, a list of persons who remained at plaintiff to target for employment with defendant. This email was sent as mass defections from plaintiff were occurring. Plaintiffs representative, Jack Schaller, testified that the resignations came in large groups over several days, all the week of September 9, 2024. The resignations were effective immediately, which Schaller testified was unusual. Most went into defendant's affiliates employ.

Defendant concurred that these employees were not particularly in possession of a unique skill set. Therefore, defendant's motivation in targeting plaintiffs employees is suspect. Defendant could have hired any reasonably competent adult to fill these spots. Why hire a massive number of people from plaintiff? Was it to cause disruption to a competitor?

Therefore, not only is plaintiff likely to prevail in demonstrating that defendant breached its contractual promise not to solicit plaintiffs employee's, but the balance of the equities favors plaintiff. The disruption to plaintiffs business is irreparable harm. Accordingly, the court grants that part of plaintiffs motion to stop defendant from directly soliciting plaintiffs employees.

However, the court stops short at direct solicitation. The parties' agreement allows for indirect solicitation that is general in nature (see above language). Therefore, should an employee of plaintiff come in defendant's door through an indirect solicitation, there is no breach of the agreement. Forbidding defendant from employing plaintiffs employees altogether would render the general solicitation carve out illusory. Therefore, the court denies that part of plaintiffs motion seeking an injunction against defendant hiring any employees of plaintiff.

655014/2024 DKC GROUP HOLDINGS, LLC ET AL vs. REECE, INC. Page 2 of 4 Motion No. 001

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NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 10/25/2024

The agreement also precludes defendant from using plaintiff's confidential information "that may be provided to you ... by or on behalf of the Company" including material provided for defendant to evaluate whether it wanted to purchase plaintiff. Therefore, defendant cannot use any information it may have fitting this description. Defendant claims it never received any such information, so it should not be difficult to comply with this directive.

Defendant also claims that it is its affiliate Fortiline who is soliciting plaintiff's employees, not defendant itself. As the agreement includes affiliates, this argument is not convmcmg.

However, the court denies that part of the motion that seeks an order preventing defendant and defendant's affiliates from soliciting plaintiff's clients, customers or vendors. First, the agreement does not preclude approaching clients, customers or vendors. Many of the clients are also defendant's. To the extent that certain employees, like Reno or Flick, have non competes with plaintiff, that dispute is before a different court in Arizona. It is not a basis to block defendant from contact in this case. Moreover, should plaintiff lose business because defendant solicited one of plaintiff's customers, that loss is compensable with money damages. This provides an additional reason not to issue an injunction (see Kazantzis v. Cascade Funding RMI Acquisitions Grantor Tr., 217 A.D.3d 410,412 [!81 Dep't 2023]).

Nevertheless, defendant is reminded it may not use any confidential information it obtained from plaintiff, either through the evaluation process or from defecting employees who may have breached their own agreements with plaintiff, to approach these clients, customers or vendors. The court has considered the remaining contentions of the parties and finds them unavailing.

655014/2024 DKC GROUP HOLDINGS, LLC ET AL vs. REECE, INC. Page 3 of 4 Motion No. 001

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NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 10/25/2024

Accordingly, it is

ORDERED THAT the clerk is directed to restore motion 1; and replace EDOC 23 with this decision and order; and it is further

ORDERED that the temporary restraining order [EDOC 32] is vacated to the extent inconsistent with this decision and order; and it is further

ORDERED THAT defendant directly or through its affiliates is preliminarily enjoined from directly soliciting any of plaintiffs directors, officers or employees; and it is further

ORDERED THAT defendant is precluded from using plaintiffs confidential information; and it is further

ORDERED THAT plaintiffs remaining requests for injunctive relief are denied.

202410~0D9GIAF4/0BABF.3A873C8

10/25/2024

DATE MELISSA A. CRANE, J.S.C.

~

CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

655014/2024 DKC GROUP HOLDINGS, LLC ET AL vs. REECE, INC. Page4 of 4 Motion No. 001

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