On July 10, 2023, Justice Ruchelsman of the Kings County Commercial Division issued a decision in B N Textile Inc. v. Alhalabi, 2023 NY Slip Op. 32335(U), holding that a defendant’s solicitation of a former employer’s customers could be wrongful if it was a continuation of wrongful conduct while the defendant was an employee, explaining:
The plaintiff does not dispute that a former employee may solicit customers of the former employer. The plaintiff merely asserts that no such solicitation is permitted where the employee engaged in wrongful conduct.
In Starlight Limousine service Inc., v. Cucinella, 275 AD2d 704, 713 NYS2d 195 [2d Dept., 2000] the court reiterated that solicitation of an entity’s customers by a former employee or independent contractor is not actionable. However, the court qualified that rule and stated unless the customer list could be considered a trade secret, or there was wrongful conduct by the employee or independent contractor, such as physically taking or copying files or using confidential information. The plaintiff argues the court already concluded there were questions whether the defendant engaged in improper conduct thus surely the defendant engaged in wrongful conduct sufficient to permit discovery after the employment ended. The plaintiff stresses that the examples in Starlight constituting wrongful conduct are mere examples of wrongful conduct-not an exclusive list. The defendant argues no such improper conduct took place which would warrant post-employment discovery.
The seminal case dealing with solicitation of clients by former employees is Leo Silfen Inc., v. Cream, 29 NY2d 387, 328 NYS2d 423 [1972]). In that case the plaintiff company alleged that a former employee, the defendant Cream, wrongfully solicited the plaintiff’s customers by making copies of plaintiff’s secret and confidential customer files. The Court primarily dealt with whether customer lists are indeed trade secrets. Before addressing that issue the court observed that notably, plaintiffs did not attempt to sustain their allegation that Cream had made· copies of plaintiffs’ secret and confidential files, or used the recorded detail in those files with respect to each customer’s profile. The solicitation of plaintiffs’ customers was at most the product of casual memory, or, as defendants would have the court believe, coincidence. If there has been a physical taking or studied copying, the court may in a proper case enjoin solicitation, not necessarily as a violation of a trade secret, but as an egregious breach of trust and confidence while in plaintiffs’ service. Nor is there any allegation or evidence of other wrongful or fraudulent tactics employed by Cream in connection with the. solicitation of plaintiffs’ customers. If there had been, a court might award damages and enjoin further similar conduct as constituting unfair competition. Thus, the only issue for the Court to decide was whether such customer lists were in fact trade secrets.
Clearly, a former employee that engages in wrongful conduct, whether still employed or even after employment, of any variety, cannot shield herself from liability on the grounds she is permitted to solicit and compete with her former employer. The case of Mal Dunn Associates Inc., v. Kranjac, 14 5 AD2d 4 72; 535 NYS2d 430 [2d Dept., 1988] does not demand a contrary result. In that case the defendant Paulette Kranjac asked one of the clients if the client would continue to do business with her if she would
leave the plaintiff’s employment and start her own firm. The court held such preliminary inquiries did not amount to any breach of a duty on the part of Kranjac. In this case, however, the Verified Complaint alleges that Henri lied to the plaintiff and told plaintiff that COVID-19 had caused a slowdown in purchases. However, purchase orders were still made and Henri had the customers pay to accounts only controlled by Henri. While these allegations will be subject to discovery, at this juncture they surely allege wrongful conduct.Further, the other cases cited by the defendant only bolster the plaintiff’s arguments. In Ashland Management Inc., v. Atair Investments NA LLC, 14 NY3d 774, 898 NYS2d 542 [2010] the court reiterated the rule, not applicable here, that an employee may solicit clients upon termination. The court also noted that there were questions of fact regarding whether defendants breached their fiduciary duties by using plaintiff’s time and resources to form a new business and promote themselves while still working for plaintiff. Again, in 30 FPS Productions Int., v. Livolsi, 68 AD3d 1101, 891 NYS2d 162 [2d Dept., 2009] the court explained that an employee may even form a corporation while employed by another without breaching any fiduciary duty unless the employee makes improper use of the employer’s time, facilities, or proprietary secrets in doing so. The court held that the plaintiff demonstrated its prima facie entitlement to judgment as a matter of law on the cause of action to recover damages for breach of the duty of loyalty and fidelity by presenting evidence that the defendant, its former employee, utilized the plaintiff’s time and facilities to organize competing businesses while still in its employ. The plaintiff also presented evidence that the defendant, by soliciting a job from one of its prospective clients while he was still employed by it, and later performing the job after his resignation, secretly pursued and profited from an opportunity properly belonging to his employer. These cases highlight that Henri’s conduct, as alleged; surely raises legitimate questions whether he breached any duties, both while employed and after employment.
(Internal quotations and citations omitted).