Bessemer Trust Co., N.A. v. Branin
675 F.3d 130
2d Cir.2012Background
- Branin sold Brundage's assets, client accounts, and good will to Bessemer in 2000; he initially remained but soon left to join Stein Roe and compete with Bessemer.
- Branin touted his ability to move Bessemer clients to Stein Roe and proposed transferring roughly $1.5–$1.8 million of annual revenue.
- Before leaving, Branin did not initiate contact with clients; after joining Stein Roe, Stein Roe planned to solicit his former clients and kept Branin's fee schedule.
- Palmer family and other Branin-era clients moved to Stein Roe in 2002, with Branin participating in meetings and facilitating the transition.
- District court found liability only for the Palmer account; the case was remanded after the New York Court of Appeals answered our certified question about permissible conduct by a seller of good will; damages unresolved pending remand.
- This appeal concerns whether Branin’s conduct violated New York law governing solicitation of former clients after sale of good will, and the appropriate standard of review on remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is further solicitation by the seller of good will improper under Mohawk after sale? | Branin engaged in active steps to move clients; violated Mohawk. | New York law permits some assistance in active development if not direct solicitation. | Vacate liability; remand to apply NY law per NY Court of Appeals guidance. |
| May a seller aid a new employer by tailoring presentations to former clients? | Tailored presentations and dog-and-pony show aimed at clients were improper. | Court allows tailored information and participation in meetings to respond to inquiries. | Remand needed to determine whether Branin's role was limited to factual responses and permissible. |
| Does initiation of contact by the seller matter under NY law? | Initiation by Branin shows improper solicitation. | Initiation is relevant but not dispositive; responses to inquiries allowed. | Per NY law, initiation is a factor; district court erred in its assessment; remand required. |
| What about damages on remand? | Damages decision reserved; to be addressed if liability is affirmed on remand. |
Key Cases Cited
- Mohawk Maintenance Co. v. Kessler, 52 N.Y.2d 276 (N.Y. 1981) (implied covenant not to solicit former customers; broad prohibition on active solicitation)
- Von Bremen v. MacMonnies, 200 N.Y. 41 (N.Y. 1910) (implied covenant arising from sale of good will)
- Bessemer Trust Co., N.A. v. Branin (Bessemer V), 16 N.Y.3d 549 (N.Y. 2011) (New York Court of Appeals: seller may not actively solicit; may respond to inquiries and assist in plan development)
- Bessemer Trust Co., N.A. v. Branin (Bessemer IV), 618 F.3d 76 (2d Cir. 2010) (certified question to NY Court of Appeals; framework for evaluating solicitation)
- Commodity Futures Trading Comm'n v. Walsh, 658 F.3d 194 (2d Cir. 2011) (remand to district court consistent with NY law guidance)