Earlier this month, a New York Appellate Court refused to dismiss a law firm's claims against a lawyer for breach of a non-solicitation provision in the lawyer's employment agreement.
According to the decision:
Plaintiff Feiner & Lavy, P.C., is a law firm that specializes in immigration law. Defendant Gadi Zohar, Esq. was a former associate attorney with plaintiff, and defendant Jihan Asli was its office manager for several years before joining Zohar's law firm, Zohar Law PLLC. Plaintiff alleges that defendants breached the terms of their employment agreements. According to plaintiff, Zohar entered into an employment agreement with plaintiff that included a requirement to maintain as confidential customer lists or other customer information, a noncompetition agreement, and a nonsolicitation agreement. According to plaintiff, the employment agreement prohibited Zohar from engaging in any business that conducts the same or similar business as plaintiff for a period of 36 months, within 90 miles of New York City or in the Israeli community. The agreement also purported to prohibit Zohar from directly or indirectly soliciting any business from customers or clients of plaintiff for a period of 36 months within 90 miles of New York City or in the Israeli community; or advertise on Israeli/Hebrew websites, TV or newspaper ads.
The lawyer sought dismissal of the law firm's complaint on summary judgment, arguing that the non-compete and non-solicitation clauses were unenforceable under Rule 5.6 of the New York Rules of Professional Conduct. Rule 5.6 prohibits lawyers from "participat[ing] in offering or making a partnership, shareholder, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship," except under certain circumstances that were not relevant to this case.
Reinforcing the well-established rule against lawyer non-compete agreements, the Court held that the non-compete provision here was "void and unenforceable." (citing Cohen v Lord, Day & Lord , 75 N.Y.2d 95 (1989). However, the Court refused to dismiss the claims for violation of the non-solicitation agreement, finding that "Defendants' submissions failed to establish that the nonsolicitation clause was unenforceable as an undue restriction on Zohar's ability to practice law." The court also held that Rule 5.6 did render unenforceable the law firm's confidentiality agreement with a paralegal that prohibited the paralegal from disclosing information about the firm's clients.
The Court's decision is a significant development in the growing body of case law related to lawyer mobility and lateral transitions. On one hand, the Court held strong to the rule that non-competition clauses in employment agreements are void as a matter of public policy. But on the other hand, the court's decision left open the possibility that a non-solicitation clause could pass muster under Rule 5.6 if the firm can show that it is not an undue restriction on the lawyer's ability to practice law. Although defending a non-solicitation provision may be an uphill battle for a firm depending on the facts, the decision provides a glimmer of hope for law firms looking to protect client relationships after a lawyer's departure from the firm.
The Court's decision is a significant development in the growing body of case law related to lawyer mobility and lateral transitions.