Cliff v. R.R.S., Inc

In Cliff v. R.R.S., Inc. (207 Ad2d 17 [3rd Dept. 1994]) the Court found that the covenant at issue did not "fall squarely into any of the aforementioned categories." The categories referred to by the Court were 1) an implied covenant with the sale of a business and its goodwill, 2) an express covenant with the sale of a business and its goodwill and 3) a restrictive covenant in the context of an employment agreement. The Court went on to find that the covenant in question in Cliff v. R.R.S., Inc. "most closely resembles a contract that arises in an employment situation." The Court noted numerous facts that would indicate that the situation was analogous to an asset purchase or sales transaction. Specifically, the Court stated: In this regard we acknowledge, as plaintiff correctly points out, that the covenant here arose in the context of a sales transaction and was tied to the execution of the asset purchase agreement, not the date upon which defendant's employment terminated. Additionally, to the extent that defendant provided his own office equipment and manager, set his own hours and retained income for the eye examinations he performed, it is apparent that the traditional elements of an employer/employee relationship are lacking. In our view, however, both the interest the plaintiff seeks to protect (the goodwill he retained in his Potsdam office) and the activity he seeks to enjoin (direct competition from the defendant and his corporation in the sale of retail eye wear) are analogous to the activities and interests typically at stake in the employer/employee context. Inasmuch as plaintiff has made no showing that enforcement of the covenant is required to protect trade secrets or confidential customer lists. . .. . ., he has failed to demonstrate his likelihood of success on the merits and, as such, his request for a preliminary injunction should not have been granted. (Cliff v. R.R.S., Inc. at 20.)