869 F. Supp. 2d 407
S.D.N.Y.2012Background
- Boart Longyear and Prosonic were involved in a Stock Purchase Agreement with Alliance and Lehman, and various Affiliates were parties to related provisions.
- The SPA included a five-year non-compete and a non-solicitation clause; the non-compete ended in 2011 and defined the Business.
- Boart Longyear alleges Lehman and the Affiliates designed and marketed a competing sonic drill rig using Boart Longyear’s acquired proprietary information.
- Allegations include failure to provide backup files, retention of Boart Longyear documents, and use of retained materials to compete with Boart Longyear.
- The complaint asserts damages including lost customers, goodwill, and indemnification for breaches of the SPA; the Affiliates were challenged on agency grounds.
- The court granted in part and denied in part the defendants’ Rule 12(b)(6) motion, dismissing some claims (notably against Affiliates and implied covenant) and allowing others (non-compete breach and indemnification) to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the Affiliates properly pled as liable under agency theory? | Boart Longyear asserts Lehman could bind the Affiliates. | Affiliates require distinct assent and control; Lehman’s roles do not bind them contractually. | Affiliates dismissed; no binding agency structure shown. |
| Does Boart Longyear plead a breach of the Non-Solicitation clause? | Former Prosonic employees solicited during Non-Solicitation period harmed Boart Longyear. | Solicitation must occur while Boart Longyear employees are employed; allegations concern former employees. | Dismissed for lack of current-employee solicitation; replead allowed. |
| Does Boart Longyear plead a breach of the Non-Compete clause? | Lehman and Affiliates competed with a portion of the sonic drilling business using Boart Longyear’s technology. | Non-Compete requires active competition in the drilling services field; must be tied to specific services. | Sufficient to plead breach; causes irreparable damage and supports breach of contract. |
| Is the claim for breach of the implied covenant of good faith and fair dealing duplicative? | Count II rests on a different predicate (retention and use of property). | Redundant with the breach of contract theory. | Dismissed as redundant; not independent. |
| Can indemnification survive with one surviving breach? | Indemnification clause covers breaches; surviving breach supports indemnification. | If all breaches fail, indemnification fails. | Indemnification survives as tied to the surviving Non-Compete breach. |
Key Cases Cited
- Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir.2010) (plausibility standard in Iqbal aplicado)
- I qbal v. Ashcroft, 556 U.S. 662 (S. Ct. 2009) (pleading must state a plausible claim)
- Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73 (2d Cir.2002) (no separate claim for implied covenant when breach of contract exists)
- Cuoco v. Moritsugu, 222 F.3d 99 (2d Cir.2000) (amendment futility when no facts to cure pleading deficiency)
- Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F. Supp. 2d 258 (S.D.N.Y.2004) (permitted alternative pleading under Rule 8(d)(3))