Did PWP State Cognizable Cause of Action Against Former Employee
Perella Weinberg Partners LLC sued Michael A Kramer for breach of an agreement not to solicit PWP’s employees. Supreme Court denied Kramer’s motion for partial summary judgment dismissing the complaint and granted PWP’s motion for summary judgment. Kramer appealed.
Supreme Court properly granted PWP’s motion for summary judgment to the extent of declaring that the personnel non-solicitation covenant was enforceable. The enforceability of the personnel non-solicitation clause was determined using a three-factor test. A personnel non-solicitation covenant is reasonable and therefore enforceable if it: (1) is no greater than is required for the protection of the legitimate interest of the employer; (2) does not impose undue hardship on the employee; and (3) is not injurious to the public. A violation of any prong renders the covenant invalid.
PWP sufficiently established that its personnel non-solicitation clause satisfied all three factors. As to the first factor, an employer has a legitimate interest in enforcing a personnel non-solicitation covenant if its employee has cultivated or developed personal relationships with clients through the use of the employer’s resources. In this case, PWP sufficiently established that the employees solicited client relationships while employed by PWP and using PWP’s resources. PWP submitted records showing that the solicited employees spent eight years working for PWP; the solicited employees utilized expense accounts to support their work with PWP’s clients; the solicited employees were tasked with forging relationships with PWP’s clients, and those employees were paid substantial compensation by PWP to do so before they were terminated.
The court also properly found that the personnel non-solicitation clause did not impose undue hardship on the employees and was not injurious to the public. To the extent that Kramer argued that the clause was too broad to be enforced as written, the court had the power to sever and grant partial enforcement for an overbroad employee restrictive covenant.
The court should have granted Kramer’s motion for summary judgment dismissing PWP’s claims for breach of the client non-solicitation provision regarding Monsanto and Caesars because Kramer submitted evidence establishing that he did not solicit either client and PWP failed to present evidence sufficient to raise an issue of fact. With regard to Monsanto, its general counsel testified at his deposition that Kramer did not solicit Monsanto, but that Monsanto sought him out s because its relationship with Kramer long pre-dated Kramer’s employment at PWP. PWP proffered no evidence to rebut the general counsel’s statement and it could not defeat summary judgment by asserting the hope that cross-examination or impeachment would overcome the sworn statement. Similarly, with regard to Caesars, the documentary evidence demonstrated that Kramer did not attempt to solicit Caesars. Rather, it was Caesars that sought a way to keep Kramer involved on the project, and that urged a negotiation, ultimately unsuccessful, to have PWP and Kramer work together.
However, the court properly declined to grant Kramer’s motion for summary judgment dismissing PWP’s claims for breach of the client non-solicitation provisions as to Fidelity Management and Research Co. and the creditors of Alpha Natural Resources, Inc. The evidence presented raised issues of fact as to whether Kramer solicited Fidelity and the Alpha creditors’ business. Specifically, Fidelity’s managing director averred that Kramer called him prior to leaving PWP’s employ and informed him of his plans to leave, stating his expectation that several of his colleagues would be leaving with him and continue to work together at another firm. Kramer did not point to any evidence showing that there was no solicitation of Fidelity. Further, in an email, Kramer contacted a senior lender to Alpha and offered to pitch his new company’s services, stating that he had unique insights and access to Alpha that he would like to share as well as direct access to Alpha’s senior management team. To the extent Kramer argued that the Alpha creditors could not be covered by the client non-solicitation clause because they were not PWP’s clients, that argument was unavailing. The client non-solicitation clause applied to prospective clients and the undisputed evidence established that the Alpha creditors were identified as prospective clients of PWP.