Spotlight Ticket Management Inc. v. Daigle
1:23-cv-10035
S.D.N.Y.Aug 28, 2024Background
- Plaintiffs (Spotlight Ticket Management, Inc. and SSSI Acquisition, Inc.) sued James Daigle, a former employee and seller of a business acquired by Spotlight, for breach of contract, breach of the implied covenant of good faith and fair dealing, and tortious interference with business relations.
- Daigle sold his company, Sports Systems, to Spotlight and became Head of Sales at Spotlight, signing various restrictive covenants in the related agreements (Asset Purchase, Inventions, and Separation Agreements).
- After resigning from Spotlight, Daigle started a consulting business and allegedly solicited Spotlight’s customers and competed with Spotlight, both before and after the effective date of a release contained in the Separation Agreement.
- The parties dispute the enforceability and scope of the restrictive covenants, the applicability of New York vs. Delaware law, and whether release provisions bar claims.
- Daigle filed a motion to dismiss all claims. The court grants the motion as to claims for breach of the implied covenant of good faith and fair dealing and for tortious interference, but denies it as to breach of contract claims (Counts I, III, and V).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Superseding effect of Separation Agreement | Separation Agreement reaffirms & incorporates prior agreements | Separation Agreement supersedes prior contracts | Prior contracts remain in effect; no supersession |
| Breach of release in Separation Agreement | Allegations from before release effective date are context, not claims | Inclusion of pre-release claims breaches release, barring enforcement | No material breach by inclusion; enforcement not precluded |
| Sufficiency of breach of contract allegations | Sufficient detail pled re: competitive activity post-release period | Insufficiently pled; activity not causally linked to lost opportunities | Claims survive motion to dismiss; plausible breach alleged |
| Enforceability of restrictive covenants | Covenants should be enforced or narrowed (blue-penciled) | Covenants are overbroad and per se unenforceable | Not per se unenforceable; enforceability a fact-bound question |
| Implied covenant of good faith and fair dealing (duplicative) | Implied claims distinct re: course of conduct and expectations | Duplicative of express breach of contract claims | Duplicative; dismissed |
| Tortious interference with prospective business relations | Breach of restrictive covenants constitutes wrongful means | No independent tort or wrongful means alleged | Dismissed; insufficient wrongful conduct alleged |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility requirement for complaints)
- Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458 (contract interpretation principles)
- Scutti Enters., LLC. v. Park Place Entm’t Corp., 322 F.3d 211 (elements of tortious interference with prospective business)
- Carvel Corp. v. Noonan, 3 N.Y.3d 182 (scope of wrongful means for interference with business)
- BDO Seidman v. Hirschberg, 93 N.Y.2d 382 (limits of enforceability for restrictive covenants in employment)
- Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364 (blue-penciling restrictive covenants under BDO Seidman)
- Harsco Corp. v. Segui, 91 F.3d 337 (elements of breach of contract under NY law)
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (elements of breach of contract under Delaware law)