ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, March 1, 2018

New York court rewrites auction house non-compete provision, applying Texas law

A recent case out of New York, Heritage Auctioneers & Galleries, Inc. v. Christie's, Inc., 651806/2014, deals with the world of luxury auctions. The plaintiff alleged, inter alia, that the defendant Rubinger breached the non-compete provision of his employment agreement when he resigned his position and went to work for Christie's Hong Kong office. The opinion is behind a paywall but the many points of contention between these companies has been documented in several places, including here, here, and here.

The employment agreement was governed by Texas law, so the court applied Texas law to determine that the non-compete provision was overly broad. The non-compete prohibited Rubinger from providing services for any business that participated, either directly or indirectly, in auctioning collectibles in North America in a manner competitive to the plaintiff's auction business. The problem was that the non-compete tried to prohibit Rubinger from providing any services for such business. As the court noted, Rubinger could have violated the agreement by working as a janitor at Sotheby's or in the mailroom at Christie's. The court therefore concluded that the non-compete was unreasonable. 

However, under Texas law, the court reformed the provision to be enforceable, rewriting the provision to prevent Rubinger from providing services to competitors identical to those he provided to the plaintiff. Because that was exactly what Rubinger was doing, he was in violation of this rewritten non-compete provision. 

The court found the time and geographic scope of the non-compete to be reasonable, and then found that the question of whether Rubinger's activities in Hong Kong violated it was a factual determination that could not be resolved. 

Rubinger's employment agreement also contained a non solicitation covenant. When Rubinger resigned from the plaintiff to move to Christie's, two of Rubinger's staff resigned on the same day to make the identical move. The court found the non solicitation covenant enforceable, but nevertheless dismissed the claim because the non solicitation covenant, by its terms, prohibited Rubinger from soliciting the plaintiff's employees after termination of his employment. Because Rubinger's solicitation of his staff took place prior to termination of his employment, it was not prohibited by the terms of the contract. 

There were many other claims in this complaint, including trade secret allegations and unjust enrichment. I focused on Rubinger's alleged breach of contract in this blog entry, but there were other aspects to the court's decision. 

https://lawprofessors.typepad.com/contractsprof_blog/2018/03/new-york-court-rewrites-auction-house-non-compete-provision-applying-texas-law.html

Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts, Web/Tech | Permalink

Comments

Post a comment

If you do not complete your comment within 15 minutes, it will be lost. For longer comments, you may want to draft them in Word or another program and then copy them into this comment box.