Archives Restrictive Covenant Denied as Overbroad

Not unique employee, no geographic restriction, no injunction.


S.G. Cowen Securities Corp. v. Messih, N.Y.L.Jnl., 5/24/00 (S.D. N.Y.):

In the spring of 1999, Cowen hired Messih, a California resident, to be its Managing Director of Technology in its San Francisco office. They entered into an employment contract which expired on January 1, 2001 and which contained a covenant not to compete and a clause requiring that disputes be resolved in arbitration before the NYSE.

The contract also had a New York choice of law clause.

Messih soon became unhappy with his choice of employer and, after nine months, resigned to work as an investment banker for Banc of America Securities. Cowen initiated a special proceeding in New York state court pursuant to CPLR §6502, seeking temporary injunctive relief in advance of arbitration.

The court issued an ex parte TRO enjoining Messih from working for Banc of America or any other Cowen competitor anywhere in the world for the life of the contract. Messih removed the case to this Court and moved to dissolve most of the injunction.

He conceded the points on confidentiality and solicitation, in a declaration promising compliance. Thus, the case boiled down to whether Cowen could simply prevent Messih from plying his profession as an investment banker until January 2001. (Cowen did counter by agreeing to pay Messih’s $20,000 per month salary and his benefits during the life of the injunction.)

The District Court concluded there was little likelihood of success on the merits because California law, which it decided should be applied, disfavors the enforcement of covenants not to compete. Even under New York law, it found, the prospects for success were dim because the lack of a geographic limitation was unreasonable and Messih was not a unique employee.

(Guest contributor Paul J. Dubow: Two points are worth noting. First, if Messih had solicited Cowen clients or provided his new employer with Cowen’s confidential information, he would not have prevailed. Second, what would have happened if Cowen had not filed in state court and instead asked the arbitrator to issue an injunction followed by expedited arbitration?) (SAC Ref. No. 2000-13-001)


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