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Estee Lauder Cos. v. Batra - 430 F. Supp. 2d 158 (S.D.N.Y. 2006)

Rule:

New York law subjects a non-compete covenant by an employee to an overriding limitation of reasonableness. Courts must weigh the need to protect the employer's legitimate business interests against the employee's concern regarding the possible loss of livelihood, a result strongly disfavored by public policy in New York. A covenant that is reasonable in time and geographic scope shall be enforced to the extent necessary: (1) to prevent an employee's solicitation or disclosure of trade secrets; (2) to prevent an employee's release of confidential information regarding the employer's customers, or; (3) in those cases where the employee's services to the employer are deemed special or unique.

Facts:

Plaintiff, The Estee Lauder Companies, Inc., ("Estee Lauder"), a corporation with its principal place of business in New York, was engaged in the business of manufacturing and marketing skin care products. Defendant Shashi Batra, a former employee of Estee Lauder, was in charge of developing strategies for certain brands and carried out many of his duties from California. At the commencement of his employment, Batra signed an employment agreement ("Agreement"), which contained confidentiality, non-solicitation, non-competition provisions. In return for signing the Agreement, Batra received a $ 100,000 signing bonus. Batra later resigned from Estee Lauder to become a manager for a competitor of Estee Lauder. Batra filed an action against Estee Lauder in California state court seeking to obtain a declaration that the non-compete agreement was void under California law. Estee Lauder, in turn, filed an action in New York federal district court against Batra alleging breach of the non-compete agreement and theft of trade secrets. In district court, Estee Lauder moved by order to show cause for a temporary restraining order and preliminary injunction to restrain Batra from breaching the terms of the Agreement and from engaging in employment with the competitor. Batra filed a cross-motion seeking to have the district court abstain or alternatively for a stay.

Issue:

(1) Was Estee Lauder entitled to preliminary injunctive relief? (2) Was there a valid basis to grant Batra's motion for abstention?

Answer:

(1) Yes; (2) No.

Conclusion:

The court granted Estee Lauder's request for a preliminary injunction and denied the Batra's motion for abstention. In granting the injunction, the court applied the two-part test and ruled that: (1) the risk that Batra would disclose trade secrets to the competitor demonstrated that Estee Lauder would suffer irreparable harm absent an injunction, and; (2) Estee Lauder established a likelihood of success on its claim for breach of the agreement against Batra. In denying Batra's motion for abstention, the court noted there was a heavy presumption favoring the exercise of jurisdiction. Further, the court ruled, the extraordinary circumstances required for abstention under Colorado River were not present. The court determined that New York law applied to Estee Lauder's claim because California's interest in the dispute was not materially greater than that of New York.

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