December 4, 2013

Comment sought on proposed NY Commercial Division rule on use of interrogatories (due 1-29-14).

September 7, 2013

Motion to Pierce Corporate Veil Granted; Evidence Shows Corporation Sham Entity.

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August 29, 2013

NYSBA TICL Section 2013 Summer Meeting - Photo Wrap Up


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August 16, 2013

LEVELING THE PLAYING FIELD: New York's "Employee Choice Doctrine" Can Improve Employer Positioning in Non-Compete Litigation


One of the most disruptive scenarios for any company is the departure of a key employee who has signed up to work for a competitor. In addition to the significant emotional aspects of the situation, companies find themselves suddenly vulnerable and facing considerable unanticipated business risks. Has the employee taken competitively sensitive trade secret information developed over years of hard work? Will that information now be used against the company? Did the employee sign a non-competition agreement and, if so, will it stand up in court? Unfortunately, restrictive covenants in non-competition agreements are largely disfavored by the courts. The legal system favors free market competition unless an employer can show that the competitive restriction is reasonable (both in time and location) and that it has a compelling reason to seek enforcement. An employer often faces a costly and time-consuming uphill legal battle to enforce a restrictive covenant.

There is, however, a little-known doctrine in New York state that may allow an employer to improve its position in potential non-compete litigation: the "employee choice doctrine." The doctrine applies where an employer conditions receipt of post-employment benefits (including stock options, pension benefits, and deferred compensation bonuses) upon compliance with a restrictive covenant. Significantly, as a consequence of this bargained-for exchange, restrictive covenants under this doctrine are fully enforceable without regard to reasonableness, in cases where the employee leaves voluntarily or is terminated for cause. Under the doctrine, if an employee violates the terms of such a noncompetition provision, any post-employment benefits conditioned upon compliance with that restrictive covenant are deemed forfeited.

New York is one of the few states that permits application of the "employee choice doctrine," and a recent case in the Fourth Department (which covers Central and Western New York) reaffirmed its applicability and enforcement (Lenel Systems Intern., Inc. v. Smith).(FN1) Thus, this doctrine continues to provide businesses with an avenue for shielding the risks associated with the loss of a key employee by provisioning benefit packages for retention or other purposes, in exchange for restrictive covenants. By understanding the nuances of this legal doctrine, businesses can and should consider the importance of preparing broad and fully enforceable noncompetition and other restrictive covenants to place key employees on notice regarding the implications of potential resignation and subsequent engagement in a competing business. Although the doctrine does have certain limitations, it presents employers with a possible way to level the legal playing field in the event of future litigation.

FN1. Lenel Systems Intern., Inc. v. Smith, 106 A.D.3d 1536, 966 N.Y.S.2d 618 (4th Dept. 2013 applying the Court of Appeals' decision in Morris v. Schroder Capital Mgt. Intl., 7 N.Y.3d 616, 620, 825 N.Y.S.2d 697, 859 N.E.2d 503 (2006).


By Heath J. Szymczak, Esq. and Bradley A. Hoppe, Esq.

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DISCLAIMER: This site is for general informational purposes only and is not intended to provide legal advice. Please contact an attorney relative to the circumstances of your particular case. The use and receipt of the information offered on this web site is not intended to create, nor does it create, an attorney-client relationship.

July 25, 2013

Limit Costs, Delays in Business Litigation - Buffalo Law Journal Article

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July 11, 2013

Join the NYSBA TICL Section in Annapolis for its Summer Meeting (8/18 to 8/21). Sign up by July 19, 2013 for reduced rates. See link below.

TICL Section Summer Meeting Link

Summer Meeting Brochure

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April 23, 2013

Standardizing Efficiencies in Business Litigation

Article Link

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March 23, 2013

Event Honors Hon. John A. Michalek and Celebrates the Commercial Division


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(From left: Kathleen M. Sweet, Hon. John A. Michalek, Tracee E. Davis, and Daniel E. Sarzynski)


On January 1, 1993, New York began its grand "business court experiment" with only four New York's Supreme Court justices in New York County. Twenty years later, on January 30, 2013, members of New York's 8th Judicial District (consisting of the counties of Western New York) came together to celebrate the growth and success of the Commercial Division, and to honor the contributions made by the Honorable John A. Michalek toward its advancement. The event also welcomed the incoming Commercial Division Justice, the Honorable Timothy J. Walker. The ceremony was jointly sponsored by the Commercial and Federal Litigation Section and the Bar Association of Erie County (BAEC). The event was held in the beautiful and historic Hotel Lafayette in Buffalo, New York.

As pictured above, an award was presented to Justice Michalek by Tracee E. Davis, Chair of the Commercial & Federal Litigation Section; Kathleen M. Sweet, BAEC President; and Daniel E. Sarzynski, Chair, BAEC Commercial & Bankruptcy Law Committee. Even before there was a Commercial Division, Justice Michalek has been no stranger to Commercial Law, developing a record of distinguished jurisprudence. As Presiding Justice, his courtroom has been noted for its thoroughness and efficiency. Justice Michalek praised his staff and law clerks for their hard work and expertise. He also praised the high caliber of advocacy delivered by the local bar practicing in the Commercial Part. Justice Michalek welcomed Justice Walker as the incoming Presiding Justice and offered to assist him in making the transition, a tradition of collegiality that has been passed along with each new justice since the Commercial Part's inception.

Justice Walker also has extensive experience in commercial litigation, having represented individual business owners, as well as Fortune 500 and multi-national organizations, while in private practice. He thanked Justice Michalek for his contributions, as well has the hard work of the 8th Judicial District's Administrative Judge, the Honorable Paula L. Feroleto, who was also in attendance. He remarked that he was very pleased to see Tracee Davis, having recently met her in New York City at the NYSBA's Annual Meeting a couple of weeks earlier. He emphasized the importance of the support of the Commercial and Federal Litigation Section, and affirmed his commitment to Chief Judge Jonathan Lippman's goal of continuing to improve the Commercial Division to make New York a place where companies will prefer to do business.

Over one hundred members of the bench and bar, together with friends and family, were in attendance. The Commercial and Federal Litigation Section was very well represented, including several members who came in from outside of Western New York. Section Chair Tracee Davis flew in from New York City; David H. Tennant (immediate past Section Chair) and Sharon M. Porcellio (former Section Chair) came in from Rochester; and Mitchell J. Katz (Co-Chair of the Commercial Division Committee) came in from Syracuse. Also in attendance was the NYSBA President-Elect, David M. Schraver (also from Rochester), as well as immediate past NYSBA President Vincent E. Doyle III. The strong showing from the NYSBA leadership was a demonstration of support to the Western New York contingent and the Commercial Division itself.

From its humble beginnings, New York now has a state-wide Commercial Division consisting of twenty-seven justices in eight counties and two entire judicial districts. By all accounts, the Commercial Division has been a tremendous success. Many states have followed New York's example, with business courts now found in over nineteen states. In 2010, even Delaware, known for its venerable Court of Chancery, created a separate business court which resembles the New York model. Most recently, Michigan has created a business court which will open its doors this year. The Commercial and Federal Litigation Section is committed to the advancement of the Commercial Division through the tireless work of its various committees and working groups. It also stands ready to assist Chief Judge Lippman's "Task Force on Commercial Litigation in the 21st Century" in ensuring that New York's Commercial Division is the premier forum for the adjudication of business disputes in the Nation.


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(From left: Heath J. Szymczak, David H. Tennant, Tracee E. Davis, Sharon M. Porcellio, and David M. Schraver)


By Heath J. Szymczak, Esq.

Mr. Szymczak is a Partner at Jaeckle, Fleischmann & Mugel, LLP in Buffalo, New York. He also serves as Chair of the NYSBA Business Torts and Employment Litigation Committee (TICL Section) and as Co-Chair of the ABA Tortious Interference Sub-Committee (Business Torts Committee).

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February 6, 2013

The New York State Bar Association Torts Insurance & Compensation Law Section & the Young Lawyers Section Invite you to attend a Networking Event - Wednesday, February 20, 2013 6:00 p.m. - 8:00 p.m.

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The New York State Bar Association Torts Insurance & Compensation Law Section & the Young Lawyers Section Invite you to attend a Networking Event

Wednesday, February 20, 2013
6:00 p.m. - 8:00 p.m.

Li Greci's Staaten
697 Forest Avenue
First Floor
Staten Island, New York, 10310

Complimentary Hors d'oeuvres and Cocktail Hour

Hosted by:

Michael O'Brien and Ronald Balter of the TICL Section
&
Jeffrey Alfano and Stephanie Comas of the Young Lawyers Section

Come and join us at Li Greci's Staaten on Wednesday, February 20, 2013 for the TICL and YLS networking event. This event will be a great opportunity to meet and mingle with the attorneys of the Sections and to learn more about the Sections. Information will be available regarding membership opportunities and to become more active in the Sections.

Capacity for this event is limited to 40 attendees, if you wish to attend kindly RSVP by Monday, February 18, 2013 to:

Michael P. O'Brien
Email: mobrienlaw@gmail.com


Jeffrey Alfano 646.285.2361 718.675.7860
Email: Jeffrey.alfano@gmail.com


Accommodations for Persons with Disabilities: NYSBA welcomes participation by individuals with disabilities. NYSBA is committed to complying with all applicable laws that prohibit discrimination against individuals on the basis of disability in the full and equal enjoyment of its goods, services, programs, activities, facilities, privileges, advantages, or accommodations. To request auxiliary aids or services or if you have any questions regarding accessibility, please contact the New York State Bar Association at 800-582-2452 or pjohnson@nysba.org.

We hope to see your there! Questions: Pat Johnson,pjohnson@nysba.org or 518.487.5688.

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February 5, 2013

Crane Company Has Hard Time Getting Its Tortious Interference Claim Off The Ground

In Zinter Handling, Inc. v. General Electric Co., 01 A.D.3d 1333, 956 N.Y.S.2d 626, 2012 N.Y. Slip Op. 08617 (3d Dept. December 13, 2012), the plaintiff, a manufacturer of overhead crane systems, brought suit against one of its customers and one of its competitors. The dispute was based upon plaintiff's sale of its cranes (and the accompanying drawings and specifications of the cranes) to the defendant-customer. The customer subsequently disclosed the drawings and specifications to plaintiff's competitor, leading plaintiff to file suit alleging causes of action for (1) breach of contract; (2) unfair competition; (3) conversion; (4) defamation; (5) tortious interference with prospective business relations; and (6) injurious falsehood.

Notably, each crane was sold pursuant to the customer's purchase order. When the customer submitted a purchase order, the plaintiff would prepare a drawing for the customer's approval. Each drawing contained an "approval box" that stated "this drawing shall not be reproduced in part or in whole or used in any way without the written permission of [plaintiff]". According to the plaintiff, the language included in the drawings established that the plaintiff retained ownership of the drawings and design information. As a result, the plaintiff alleged that the customer's dissemination of the drawings and specifications to the plaintiff's competitor caused the plaintiff damages for which the customer and the competitor were liable.

The court disagreed, stating that the flaw in the plaintiff's argument is that the sale of each crane was governed by the terms of the customer's purchase order. Those terms included a provision that any information disclosed by the plaintiff in connection with the order shall not be deemed confidential or proprietary and shall be acquired by the customer free from any restrictions. Because the customer owned the drawings, it could not be held liable for disclosing them to anyone, including the plaintiff's competitors. As a result, the Appellate Division affirmed the trial court's grant of summary judgment in favor of the customer on the breach of contract causes of action. For the same reason, plaintiff's conversion claim failed. As for the unfair competition claim, the court held that it too failed because the customer was the rightful owner of the drawings and specifications. Accordingly, summary judgment was appropriate. Similarly, plaintiff's claim for tortious interference with prospective business relations also failed because the "wrongful use" element of that claim was lacking, again, because the customer, and not the plaintiff, was the rightful owner of the drawings and specifications. Finally, the Appellate Division, Third Department, held that there were questions of fact surrounding plaintiff's defamation and injurious falsehood causes of action and affirmed the trial court's denial of summary judgment as to those claims.

Sean C. McPhee, Esq.

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This site is for informational purposes only and is not intended to provide legal advice. The use and receipt of the information offered on this web site is not intended to create, nor does it create, an attorney-client relationship.