The enforceability of non-compete agreements remains an active issue in New York courts, and a recent Queens County Commercial Division case, Cabrita v. Vitabyte, Inc., offers a good example of how judges can be willing to rein in aggressive enforcement tactics while still leaving restrictive covenants intact.
Background
In Cabrita v. Vitabyte, Inc., Simon Cabrita left his job as a technician for Vitabyte, Inc. (“Vitabyte”), a company that provides point of sale (“POS”) systems and services to restaurants. He went on to start his own venture, Cube It Corp., offering a broader array of technology services, from camera installation and audio/video equipment to networking, web design, and even 3D printing. However, before he left, Cabrita had signed two agreements with Vitabyte: an employment agreement with a two-year, nationwide, non-compete, and a separate non-compete/non-disclosure agreement with an increased three-year restriction. Importantly, both contracts specifically provided Vitabyte the right to seek injunctive relief for any perceived violations of these agreements.
The Dispute
Cabrita claimed that after his departure, and while pursuing his own venture, Vitabyte’s president went beyond simply relying on and enforcing the covenants. According to Cabrita, the president went further, warning customers not to do business with Cabrita, threatened lawsuits against those who did, and even accused him of sabotaging Vitabyte’s POS systems.
In April 2024, Cabrita filed suit seeking declaratory judgment that both agreements were unenforceable, along with preliminary and permanent injunctive relief. He also brought claims for tortious interference with prospective business relations, slander, and enforcement of a contractual clause that was meant to release him from the non-compete, or require Vitabyte to pay him, if it prevented him from finding comparable work despite diligent efforts on his part. Vitabyte responded with a cross-motion to dismiss the case in its entirety.
The Court’s Decision
Queens County Commercial Division Justice Leonard Livote skillfully split the decision. The Court declined to grant preliminary relief that would have prevented Vitabyte from enforcing the restrictive covenants outright, noting that such relief would effectively give Cabrita the ultimate result he was seeking before a trial occurred.
However, the Court found that Cabrita had made a sufficient showing, at this stage, that parts of the restrictions were overly broad. The nationwide scope of the employment agreement, and a provision in the non-compete/non-disclosure that barred doing business with any potential Vitabyte customer in any line of work, were not necessary to protect a legitimate business interest. Combined with allegations of threats to customers and disparaging statements about Cabrita’s conduct, these provisions supported a narrower injunction prohibiting Vitabyte from interfering with his customer relationships while the litigation proceeded.
On Vitabyte’s motion to dismiss, Cabrita’s claims for declaratory judgment that the agreements were unenforceable, for injunctive relief, and for slander all survived. His tortious interference claim was dismissed for failing to allege that Vitabyte acted solely out of malice or through illegal means. Finally, Cabrita’s claim under the “diligent efforts” re-employment clause failed because he had not alleged that he made any such efforts.
Takeaway
The result is essentially a win-win for both parties. It leaves Vitabyte free to attempt to enforce its non-compete provisions at trial, but bars it from threatening or intimidating Cabrita’s customers, or potential customers, in the meantime. Cabrita’s core claims remain intact, which in the end could ultimately render the restrictive covenants unenforceable. The decision serves as a reminder that, while New York courts often are reluctant to strike down reasonable non-compete agreements at the outset, they will intervene to police how those agreements are enforced pending a full trial.
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