Reed, Roberts Assoc. v. Strauman

In Reed, Roberts Assoc. v. Strauman, 40 NY2d 303, 353 NE2d 590 (1976), the Court of Appeals ruled on the enforceability of a three-year noncompetition agreement signed by the former vice-president of a business consultancy. Adopting the Restatement of Agency standard, the Reed court stated that a restrictive covenant would only be specifically enforced in such context if it was "reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee." (40 NY2d at 307 .) The Reed court set forth a two-part test for determining whether a restrictive covenant serves the employer's legitimate interest within the context of the Restatement of Agency standard. Under the legitimate interest inquiry, the Reed court held that restrictive covenants will be enforceable only (1) "to the extent necessary to prevent the disclosure or use of trade secrets or confidential information," or (2) "where an employee's services are unique or extraordinary." (Id. at 308.) Under the first prong of its test, the Reed court determined that the vice-president's alleged use of the consultancy's "customer-list" was not actionable because the names and contact information of current and potential customers were easily ascertainable from public sources. (Id..) Further, the Court held that the defendant's intimate knowledge of plaintiff's business operation did not meet the "unique or extraordinary" standard. Rather, the Court stated that where knowledge is not deemed a protectable trade secret and there has been no misappropriation, an employee should not be inhibited from realizing his professional potential. (Id. at 309.) The Court of Appeals expressly stated that a former employee's knowledge of the intricacies of a former employer's business operation is not a protectable interest sufficient to justify enjoining an employee from utilizing his knowledge and talents in an area. The Court went on to say that, where the knowledge does not quality for protection as a trade secret and there has been no conspiracy or breach of trust resulting in commercial piracy, there is no reason to inhibit the employee's ability to realize his potential, both professionally and financially, by availing himself of an opportunity.