14 F. Supp. 3d 480
S.D.N.Y.2014Background
- DeWitt Stern employed Richard Eisenberg (2007–2013) as a senior producer, invested in his book of business, and required confidentiality and non-solicitation-type provisions in employment agreements.
- DeWitt paid Aon/AGRIS $425,000 in a settlement that, DeWitt alleges, permitted Eisenberg to solicit certain former Aon clients for DeWitt.
- Eisenberg later left DeWitt and went to Arthur J. Gallagher & Co. (Gallagher).
- DeWitt sued and obtained a preliminary injunction enforcing aspects of the Employment Agreement; DeWitt then sought leave to amend its FAC to add an unjust enrichment claim in the alternative.
- The motion to amend was unopposed on timeliness/prejudice; the Court evaluated futility only.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DeWitt may plead unjust enrichment in the alternative to contract claims against Eisenberg | DeWitt contends it purchased Eisenberg’s "book of business" (2007 contract + Aon settlement) and thus equitable restitution may be required if contractual provisions are unenforceable | Eisenberg contends the written agreements govern and bar quasi-contract recovery for the same subject matter | Granted as to Eisenberg — court permits unjust enrichment plead in the alternative because factual disputes may render contractual restrictions unenforceable and equity might require restitution |
| Whether DeWitt may plead unjust enrichment against Gallagher (Eisenberg’s new employer) | DeWitt alleges Gallagher benefited from Eisenberg’s misappropriated client relationships and should be liable in equity | Gallagher argues an employer who simply benefits from a former employee’s work/clients cannot be subject to unjust enrichment absent further wrongdoing | Denied as to Gallagher without prejudice — court finds New York precedent bars unjust enrichment where employer merely benefits from a former employee’s client relationships absent stronger allegations (may re-plead if discovery shows active inducement while Eisenberg remained DeWitt’s employee) |
Key Cases Cited
- Clark-Fitzpatrick v. Long Island R.R. Co., 70 N.Y.2d 382 (N.Y. 1987) (a valid written contract governing a subject ordinarily precludes quasi-contract recovery on the same subject)
- BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (N.Y. 1999) (employer may protect client relationships it fostered, but covenants cannot bar an employee from soliciting clients with whom relationships preexisted employment)
- Barbagallo v. Marcum LLP, 925 F. Supp. 2d 275 (E.D.N.Y. 2013) (discussing limits on enforcing restrictive covenants where employees had preexisting client relationships)
- Poller v. BioScrip, Inc., 974 F. Supp. 2d 204 (S.D.N.Y. 2013) (permitting unjust enrichment claim in the alternative where defendant may have benefited at plaintiff’s expense independent of contractual protections)