Markovits v. Venture Info Capital, Inc.

129 F. Supp. 2d 647, 17 I.E.R. Cas. (BNA) 422, 2001 U.S. Dist. LEXIS 899, 2001 WL 87459
CourtDistrict Court, S.D. New York
DecidedFebruary 1, 2001
Docket00 CIV. 3030 RWS
StatusPublished
Cited by10 cases

This text of 129 F. Supp. 2d 647 (Markovits v. Venture Info Capital, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Markovits v. Venture Info Capital, Inc., 129 F. Supp. 2d 647, 17 I.E.R. Cas. (BNA) 422, 2001 U.S. Dist. LEXIS 899, 2001 WL 87459 (S.D.N.Y. 2001).

Opinion

OPINION

SWEET, District Judge.

Defendant Venture Info Capital, Inc. (“VIC”) has moved by order to show cause for a preliminary injunction preventing plaintiff Gary Markovits (“Marko-vits”) from disclosing VIC’s confidential information, and from competing with VIC, as per the terms of his employment and noncompetition agreement (“Employment Agreement”). Also pending is Mar-kovits’s motion for partial summary judgment to recover the value of his stock that was purchased by VIC in exercise of its option pursuant to the Employment Agreement and a Principal Shareholder’s Stock Restriction Agreement (“Stock Agreement”), after terminating Marko-vits’s employment. For the reasons set forth below, the motion for partial summary judgment will be granted, and the preliminary injunction motion will be granted in part.

The Parties

Markovits is a New York resident who was one of the founders and a principal shareholder of VIC before his termination.

VIC is a Delaware corporation in the business of consulting with technology companies regarding the use and protection of their intellectual property. VIC now does business as the IP Capital Group.

Third-party defendant Innovation Catalysts, Inc. (“ICI”) is a now-dissolved New York corporation of which Markovits was a principal.

Third-party defendant Edison IP Partners (“Edison”) is a New York corporation of which Markovits is a principal.

*650 Facts

The following facts have been established in three days of factual hearings before this Court.

Markovits, one of the founders of VIC, signed the Employment Agreement on March 6, 2000. The Agreement provided, inter alia, that, as VIC’s President and Vice President of Sales, Markovits would receive an annual salary of $200,000 plus benefits. Section 2.1 was a nondisclosure provision, which stated that Markovits,

shall not disclose to any other person (except as required by applicable law or in connection with the performance of his duties and responsibilities hereunder), or use for the Employee’s own benefit or gain, any Confidential Information relating to the business conducted by the Company.

Pltf. Mtn. Ex. B § 2.1. “Confidential information” was defined as including any information VIC treated as confidential, such as information regarding VIC’s development and marketing activities, products, strategic plans, and clients, but not including publicly known information or information that comes to the employee’s attention from a third party. Id. The nondisclosure provision applied indefinitely. Id.

Section 1.2 of the Agreement allowed VIC to terminate Markovits “for any reason at any time, provided that the Company pays to the Employee all Post Termination Payments.” Pltf. Mtn. Ex. C. (Emphasis in original.)

Although Markovits’s employment with VIC was “at will” pursuant to this Agreement, as this Court has previously held, see Brooks Aff. Ex. C at 9, the options available to both parties after his termination would depend on whether he was fired • for cause. Pursuant to the Stock Agreement, VIC has the option to purchase 66.67% of the stock of a terminated employee at a price schedule that takes into consideration the reason for the termination and the length of employment. Pltf. Mtn. Ex. A § 1.1. The Employment Agreement defines “Cause” as:

(a) conviction of, or plea of “nolo conten-dere” to, a felony or other crime involving moral turpitude, (b) fraud, material dishonesty, embezzlement, or other material misappropriation of property by the Employee, (c) willful neglect of a defined duty or malfeasance ..., (d) willful failure to comply with the provisions of this Agreement including Section 2, and (e) willful failure to comply with the reasonable and lawful instructions of the Board of Directors consistent with the provisions of this Agreement, provided, however, that the Board of Directors first provides the Employee with a written notice setting forth in reasonable detail the nature of the noncompliance and the Employee is given a reasonable opportunity to comply after the initial noncompliance. If the Company terminates the Employee for “Cause”, the Company must provide notice to the Employee setting forth in reasonable detail the nature of such “Cause.”

Pltf. Mtn. Ex. C § 1.2 (emphasis added). Thus, termination for cause required notice to the employee.

If termination was without cause, the Employment Agreement allowed VIC to:

elect, in its sole discretion, to enforce the provisions of Section 2.2 hereof for up to three (3) years from the date of such termination (the “Noncompetition Term”); provided that if the Company elects to enforce the provisions of Section 2, following the date of the Employee’s termination without Cause, the Company shall (i) notify the Employee in writing of its election in accordance with the notice provisions set forth herein, (ii) pay to the Employee 50% of such Employee’s base salary on a monthly basis and (iii) provide to the Employee, without cost, the health insurance and life insurance benefits set forth in Section 1.1.

*651 Id. § 1.2 (emphasis in original). VIC could stop making these payments at any time during the three-year noncompetition term, and Markovits would no longer be bound by the noncompetition clause. Id.

Section 2.2 of the Employment Agreement is a restrictive covenant precluding Markovits from competing with VIC during his employment and for three years thereafter, in the 48 contiguous states and Canada. Id. § 2.2(c). Enumerated restricted activities include luring VIC employees away and encouraging any client or supplier to change or end its relationship with VIC.

The most sweeping section of the non-compete covenant is § 2.2(c), which bars employees from competing with VIC, “directly or indirectly ... or undertaking] any planning for any business competitive with the Company or any of its affiliates.” Restricted competition includes, and is not limited to,

engaging] in any manner in any activity that is directly or indirectly competitive or potentially competitive with the business of the Company or any of its affiliates in the Restricted Territory as conducted or under consideration at any time during the Employment Term ... [and] accepting employment or a consulting position with any person who is, or at any time within 24 months prior to termination of the Employee’s employment has been or actively proposes to be, a customer of the Company or any of its affiliates.

Id.

With no prior notice, Markovits was terminated on April 5, 2000. Pursuant to the Employment Agreement, VIC has tendered 50% payment and continued Marko-vits’s insurance benefits to enforce the noncompete clause. In addition, VIC exercised its option to purchase Markovits’s stock. VIC invoked an option price of $0, the stated price after a for-cause termination pursuant to the Stock Agreement.

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Bluebook (online)
129 F. Supp. 2d 647, 17 I.E.R. Cas. (BNA) 422, 2001 U.S. Dist. LEXIS 899, 2001 WL 87459, Counsel Stack Legal Research, https://law.counselstack.com/opinion/markovits-v-venture-info-capital-inc-nysd-2001.