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NATSOURCE LLC v. PARIBELLO

July 13, 2001

NATSOURCE LLC, PLAINTIFF,
v.
NUNZIO PARIBELLO, DEFENDANT.



The opinion of the court was delivered by: Leisure, District Judge:

OPINION AND ORDER

I. BACKGROUND

The employment agreement signed by Paribello and Natsource on November 8, 1999 contains the following provisions at issue here: (1) Subsection 4 allows Paribello or Natsource to terminate Paribello's employment at any time for any reason, but requires that the terminating party give at least 30 days written notice of the termination; (2) Subsection 7.1 provides that if Paribello terminates the employment, then Paribello is restricted from working for a competitor during his employment with Natsource and for three months following his termination date, but provides that Natsource will continue to pay Paribello his base salary until the three month period ends or until Paribello accepts employment with a non-competitor, whichever occurs first; (3) Subsection 7.2 provides that if Natsource terminates the employment, then Paribello is restricted from working for a competitor during his employment with Natsource and for one month following his termination date, but provides that Natsource will continue to pay Paribello his base salary until the one month period ends or until Paribello accepts employment with a non-competitor, whichever occurs first; (4) Subsection 7.4 prohibits Paribello for three months following his termination date from soliciting business from customers whom he serviced during the 180 days immediately preceding his termination date; and (5) Subsection 7.8 prohibits Paribello during his employment with Natsource and for 12 months following his termination from encouraging or agreeing with any Natsource employee to leave Natsource and accept employment with a Natsource competitor.

According to Stephen Touchstone, a Natsource manager, on June 27, 2001, Touchstone learned that Paribello intended to resign and accept a position with GFI, a Natsource competitor. When Touchstone confronted Paribello the next day, Thursday, June 28, 2001, Paribello confirmed the information and resigned from Natsource effective that day. According to Touchstone, Paribello also informed Touchstone that he intended to start work at GFI on Monday, July 2, 2001, and that he would be bringing another Natsource employee, Nick Ippolito, with him to GFI. Paribello, on the other hand, claims that he had no specific start date at GFI and that it was Ippolito, Paribello's brother-in-law, that solicited him to work for GFI. Paribello worked until between 1:30 and 3:00 p.m. and then surrendered his office keys and credit card and left Natsource. That afternoon, Andrew S. O'Connor, Esq., Natsource's attorney, informed Mark I. Reisman, Esq., Paribello's attorney at the time, that Natsource would bring an action against Paribello the next day to enforce the employment contract.

The next day, Friday, June 29, 2001, Paribello reported to work at Natsource. Touchstone instructed Paribello to take the day off and told him that Natsource would contact him regarding his employment status. Paribello then returned to his work area where he called several of his client traders and told them that Natsource was preventing him from working there or from going anywhere else to work. At about 9:00 a.m., Touchstone again asked Paribello to leave and take the day off, and Paribello complied. Touchstone testified that shortly after Paribello left Natsource's premises, Natsource received a telephone call from one of its largest customers served by Paribello, in which the customer told Natsource that it would no longer do business with Natsource because Natsource was treating Paribello harshly.

Later that day, Natsource received a letter from Paribello's attorney purporting to constitute 30-day written notice of Paribello's intention to terminate his employment agreement with Natsource, and stating that Natsource "breached its contractual and other obligations to him . . . [by] failing to pay him bonuses at the agreed upon rate and failing to remedy problems on the Natural Gas desk where he is employed." Letter from Mark I. Reisman, Esq., of Counsel to the law firm of Castro & Remer, P.C., Ossining, New York, dated June 28, 2001 [hereinafter, "Paribello Ltr #1"].

That same day, Mr. O'Connor sent a letter to Paribello's attorney denying the assertion that Natsource breached any contractual agreement and alleging that Paribello "breached his employment agreement with, and fiduciary obligations owing to, Natsource . . . [by] wrongfully encouraging Natsource employees to leave Natsource to work for a competitor and wrongful solicitation of Natsource customers." Letter from Andrew S. O'Connor, Esq., dated June 29, 2001 [hereinafter, "Natsource Ltr"]. The letter further demanded that Paribello "immediately cease all of his activities in violation of Natsource's rights," and instructed that Paribello not physically report to Natsource's premises. Id.

Paribello's new attorney, Simon Miller, Esq., of Greenberg Traurig, LLP, responded by letter that afternoon stating that by directing Paribello to cease any brokering activity and leave the trading floor that morning, Natsource terminated Paribello without notice or cause, in violation of the employment agreement. See, Letter from Simon Miller, Esq., dated June 29, 2001 [hereinafter, "Paribello Ltr #2"].

On Monday, July 1, 2001, the Court granted Natsource a Temporary Restraining Order, restraining Paribello from violating subsections 7.1, 7.4, and 7.8 of the employment agreement. On July 2, 2001, Natsource filed a complaint against Paribello, which Natsource amended on July 11, 2001 in which Natsource seeks (1) a declaration that Natsource is not in breach of the employment agreement; (2) damages sustained as the result of Paribello's breach of the employment agreement; (3) damages sustained as the result of Paribello's breach of his fiduciary duties owed to Natsource; and (4) a permanent injunction enjoining Paribello from violating subsections 7.1, 7.4, and 7.8 of the employment agreement. See Amended Complaint.

Natsource now moves the Court to issue a Preliminary Injunction, enjoining Paribello from (1) becoming employed by a competitor of Natsource during the pendency of this action up to October 29, 2001; (2) soliciting business, during the pendency of the action up to October 29, 2001 from any of Natsource's customers that Paribello serviced in the 180 days immediately preceding July 29, 2001; and (3) through the pendency of this action up to July 29, 2002, from encouraging, soliciting, or agreeing with any existing employee of Natsource to leave Natsource to become employed by a competitor of Natsource. See Order to Show Cause.

II. Discussion

A party seeking injunctive relief must establish: (a) irreparable harm to the movant, and (b) either (i) a likelihood of success on the merits of the underlying claim or (ii) sufficiently serious questions going to the merits of the claim as to make it a fair ground for litigation and a balance of the hardships tipping decidedly toward the movant. See Sweeney v. Bane, 996 F.2d 1384, 1387 (2d Cir. 1993); see also Inverness v. Whitehall, 819 F.2d 48, 50 (2d Cir. 1987).

A. Irreparable Harm

Irreparable harm is "thy single most important prerequisite for the issuance of a preliminary injunction." Bell & Howell: Mayima Co. v. Masel Supply Co. Corp., 719 F.2d 42, 45 (2d Cir. 1983). To prevail, the movant must establish not a mere possibility that it will be irreparably harmed, but "that it is likely to suffer irreparable harm if equitable relief is denied." Delphine Software v. Elec. Arts, 1999 WL 627413 at *2 (S.D.N.Y.) (citing Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 79 (2d Cir. 1990)). Irreparable harm is "injury for which a monetary award cannot be adequate compensation." Javaraj v. Scappini, 66 F.3d 36, 39 (2d Cir. 1995) (citing Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979)).

The Second Circuit has held that it is generally not possible to calculate monetary damages if an employee violates a non-compete clause because "it would be very difficult to calculate monetary damages that would successfully redress the loss of a relationship with a client that would produce an indeterminate amount of business in years to come." Ticor Title Ins. Co. v. C. Cohen, 173 F.3d 63, 69 (2d Cir. 1999). "If the unique services of [an] employee are available to a competitor, the employer obviously suffers irreparable harm." Ticor Tit. Ins. Co. v. C. Cohen, 173 F.3d 63, 70 (2d Cir. 1999).*fn1

If Paribello is allowed to work for a competitor of Natsource or solicit Natsource customers within the 120-day period, Natsource will be irreparably harmed. The customers have developed a strong relationship with Paribello over the year and ten months that he spent at Natsource. If Paribello is allowed to immediately work for a competitor, or otherwise solicit these customers, these customers are likely to follow him because of their unique relationship. Natsource, therefore, bargained for a contract provision allowing it a 120-day period after Paribello's termination to gain the customers' trust in other Natsource employees before those customers have the option of following Paribello to a competitor. According to Touchstone, it takes three to six months for brokers to develop strong relationships with traders. Natsource would be irreparably harmed if it did not receive the benefit of its bargain and its customers left Natsource to follow Paribello within the initial 120 days following Paribello's termination.

Natsource would also be irreparably harmed if Paribello were allowed to encourage other Natsource employees to leave Natsource to work for Natsource competitors within the next year. Natsource expends substantial resources to help its brokers develop customer relations, and the brokers are introduced to established customers. The brokers are encouraged to strengthen these relationships and Natsource supports the brokers by providing market intelligence and through relationships maintained on their desks. The loss of training and interference ...


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