227 A.D.3d 45
N.Y. App. Div.2024Background
- Twitchell Technical Products, LLC (Twitchell) and Mechoshade Systems, LLC (Mechoshade) co-developed specialized fabrics for solar roller shades under two distribution agreements from 1989, covering North America and the rest of the world.
- The agreements included restrictive covenants prohibiting Twitchell from selling certain fabrics and substantially similar products in the window shading market post-termination.
- In 2019, Mechoshade terminated the agreements; Twitchell then filed for declaratory judgment seeking to invalidate the restrictive covenants as unenforceable.
- Mechoshade counterclaimed, seeking a declaration affirming its exclusivity rights and an injunction against Twitchell violating those covenants.
- Twitchell moved to dismiss the counterclaims for failure to state a claim and based on purported documentary evidence; the lower court denied the motion, and Twitchell appealed.
Issues
| Issue | Twitchell's Argument | Mechoshade's Argument | Held |
|---|---|---|---|
| Whether restrictive covenants in the agreements are enforceable | Covenants are overly broad, indefinite, lack geographic/temporal limits; thus, unenforceable | Covenants protect a legitimate business interest (investment/co-development); are enforceable, at least in part | On current record, not enough evidence to dismiss; factual issues remain; motion to dismiss denied |
| Whether attached website printouts are documentary evidence under CPLR 3211(a)(1) | Printouts from websites demonstrate covenants are unenforceable | Printouts are not proper documentary evidence; can be controverted; reliance improper | Website printouts are not proper documentary evidence; only contract qualifies |
| Whether restrictive covenants can ever be partially enforced | Cannot be partially enforced; every aspect is overly broad | Court has power to sever/partially enforce in commercial contracts | Courts have power to partially enforce overly broad restrictive covenants in such contracts |
| Whether lack of geographic/temporal limitations automatically voids covenant | Absence renders covenant facially overbroad/unreasonable | Not necessarily determinative—reasonableness is context-specific | Indefinite duration/geographic scope renders covenant overly broad, but severance may be possible |
Key Cases Cited
- BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (N.Y. 1999) (establishes test for enforceability and partial enforcement of restrictive covenants in employment agreements)
- Purchasing Assoc. v. Weitz, 13 N.Y.2d 267 (N.Y. 1963) (addresses enforceability of restrictive covenants in different contract contexts)
- Karpinski v. Ingrasci, 28 N.Y.2d 45 (N.Y. 1971) (reasonableness analysis for covenants not to compete)
- Guggenheimer v. Ginzburg, 43 N.Y.2d 268 (N.Y. 1977) (standards for dismissal under CPLR 3211(a)(7))
- Whitebox Concentrated Convertible Arbitrage Partners, L.P. v. Superior Well Servs., Inc., 20 N.Y.3d 59 (N.Y. 2012) (what constitutes documentary evidence under CPLR 3211(a)(1))
- Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364 (N.Y. 2015) (court's authority to sever and enforce partially restrictive covenants in employment contracts)