J. H. Goldberg Co. v. Stern

53 A.D.2d 246, 385 N.Y.S.2d 427, 1976 N.Y. App. Div. LEXIS 13043
CourtAppellate Division of the Supreme Court of the State of New York
DecidedJuly 12, 1976
StatusPublished
Cited by11 cases

This text of 53 A.D.2d 246 (J. H. Goldberg Co. v. Stern) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
J. H. Goldberg Co. v. Stern, 53 A.D.2d 246, 385 N.Y.S.2d 427, 1976 N.Y. App. Div. LEXIS 13043 (N.Y. Ct. App. 1976).

Opinion

Dillon, J.

Embarking upon a new business venture, plaintiff J. H. Goldberg Co., Inc. (Goldberg) undertook the ownership and operation of a furniture and appliance store in the City, of Rochester, Monroe County, New York. On May 15, 1973 Goldberg entered into an employment contract with defendant Malvin S. Stern (Stern) under which Stern was employed as president and general manager for a two-year period at an annual salary of $50,000. Stern had substantial experience in the field of retail furniture and appliance sales ih Miami, Florida, but his only prior business activity in Monroe County was in radio and television repair. It is undisputed, however, that Stern’s prior experience motivated Goldberg to engage his services under the employment contract.

[248]*248Paragraph 10 of that contract constituted a restrictive covenant not to compete, in the following language:

"Employee further agrees that during the period of this agreement and for a period of one year after the termination thereof for any reason or for such period as Employee is receiving payments from the Company in the form of compensation or otherwise, whichever is longer, he will not, directly or indirectly, engage in the retail sale of furniture and/or appliances within the County of Monroe, State of New York, either for his own benefit or for the benefit of any other person, firm or corporation whatsoever other than the Company.”

Stern commenced employment pursuant to the contract and promptly hired as an employee Mrs. Maria Garcia, who had worked with Stern in a retail furniture and appliance business in Miami and who was expert in the Spanish language. Approximately 10% of Goldberg’s business was among Spanish-speaking people. Though the term of the agreement was two years, Goldberg continued to employ Stern until August 25, 1975, at which time Stern’s employment was discontinued because of dissatisfaction with the sales record of the business.

On November 5, 1975 Stern became the manager of Reliable Furniture Company, Inc. (Reliable) of which his wife was the record owner and which also is located in the City of Rochester. There is no doubt that Stern actively participated in the negotiations for the purchase of Reliable. He hired Mrs. Garcia in the new business enterprise and shortly thereafter he caused a letter of solicitation, over Mrs. Garcia’s name, to be broadly distributed among Spanish-speaking people in Monroe County.

On November 19, 1975 Goldberg procured a temporary restraining order at Special Term enjoining Stern: (1) from competing with plaintiff in violation of the agreement of May 15, 1973 and (2) from owning, operating or participating in any way in the management of Reliable. At trial there was testimony from a private investigator that during a continuous daily surveillance from November 28, 1975 to December 18, 1975, he observed Stern entering Reliable’s premises on five different occasions and remaining there for periods ranging from eight minutes to 35 minutes.

The trial court found that the restrictive covenant was enforceable; that Stern violated its terms in becoming associated with Reliable; and that Stern additionally violated the [249]*249temporary restraining order. The court adjudged that Stern be enjoined through December 17, 1976 from directly or indirectly engaging in the retail sale of furniture and/or appliances within Monroe County. It is from that judgment that Stern appeals.

While the restrictive covenant is subject to interpretation as to time (infra), it is first necessary to determine its general enforceability on the facts before us. That Stern undeniably violated the terms of the covenant in participating in the management of Reliable does not resolve the issue. Public policy demands that a man be afforded the opportunity to earn a livelihood. Any sanction eroding that opportunity is subject to the overriding limitation of reasonableness (Purchasing Assoc. v Weitz, 13 NY2d 267, 272). If that test is met and the employee’s services are found to be "’special, unique or extraordinary’”, the covenant may be enforced by injunctive relief (Purchasing Assoc. v Weitz, supra, p 272).

The multiple factors to be addressed in resolving the test of reasonableness were articulated by then Presiding Justice Goldman, writing for a unanimous court in Service Systems Corp. v Harris (41 AD2d 20, 23). In affirming Special Term’s issuance of a temporary injunction restraining a former management executive from competing in the business of providing building maintenance services, Justice Goldman wrote:

"Basic to the consideration of the problem are five factors: (1) the restriction must be necessary for the employer’s protection; (2) the time must be reasonable; (3) the geographical area must be reasonable; (4) the burden of the employee must not be unreasonable; and (5) the general public must not be harmed (Richards, Drafting and Enforcing Restrictive Covenants Not to Compete, 55 Marquette L. Rev. 241; Restatement, Contracts, § 516, subd. [f]). The facts of each case control as to whether a restrictive covenant is reasonable (Karpinski v. Ingrasci, 28 N Y 2d 45, 49; Clark Paper & Mfg. Co. v. Stenacher, 236 N.Y. 312, 321).”

Upon consideration of those factors applied to the record here, the issue of the enforceability of the restrictive covenant must be resolved in favor of Goldberg.

The restriction is necessary for Goldberg’s protection. Stern was given exposure to the furniture and appliance business in the Rochester area only through the employment contract with Goldberg. He hired employees, including Mrs. Garcia, and was relied upon exclusively by Goldberg’s owners to [250]*250establish the business operation, deal with suppliers and develop customer relationships. All of this was done at substantial expense to Goldberg, which now seeks to protect itself against Stern’s effort to take advantage of that background and information by engaging in the same kind of business in close proximity to the Goldberg store.

Admittedly, Goldberg’s owners were fledgling entrants into this highly competitive business and they relied heavily upon what they believed was Stern’s expertise. It is argued that Goldberg, having removed Stern from his position on the basis of declining sales and lack of success in the management of the business, should not now be heard to complain of Stern’s competitive efforts. Such an argument is not persuasive. Indeed, it can be urged with some logic that the financial condition of Goldberg’s business is further evidence of the need for restraint upon Stern, particularly in light of the latter’s aggressive efforts to solicit business among Spanish-speaking people through Mrs. Garcia.

The restrictions as to time and geographical area are reasonable, as is the burden upon Stern under the covenant. He is restrained only from engaging in the retail furniture and appliance business in Monroe County for one year. He is left to pursue his livelihood in any other community, including areas only a few miles from the City of Rochester. After the expiration of one year he may even resume his business in that city. Furthermore, Stern’s maximum income in the same kind of business in Florida had been $20,000 per year. His employment by Goldberg for more than two years at an annual salary of $50,000 surely will relieve substantially any adverse impact the covenant might impose.

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Bluebook (online)
53 A.D.2d 246, 385 N.Y.S.2d 427, 1976 N.Y. App. Div. LEXIS 13043, Counsel Stack Legal Research, https://law.counselstack.com/opinion/j-h-goldberg-co-v-stern-nyappdiv-1976.