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SD Protection, Inc. v. Del Rio

July 20, 2007

SD PROTECTION, INC., PLAINTIFF,
v.
EDWARD DEL RIO, DEFENDANT.



The opinion of the court was delivered by: Nicholas G. Garaufis, District Judge

MEMORANDUM & ORDER

Plaintiff SD Protection, Inc. ("SD"), a provider of chaperone and supervision services, alleges that Defendant Edward Del Rio ("Del Rio"), whom SD employed in 2005 as its seasonal District Field Manager, breached the non-compete and non-solicitation covenants in the parties' "Regional Manger Compensation/Contract" (the "Contract"). (Compl. ¶¶ 6, 10, 12, 19.) SD seeks monetary damages, a declaratory judgment, and an injunction barring Del Rio from soliciting SD's clients and competing with SD's business. (Id. ¶¶ 23, 26.)

Del Rio has moved to dismiss this action pursuant to Fed. R. Civ. P. 12(b)(1) and (6). Del Rio argues under Rule 12(b)(1) that the court must dismiss this case because (1) the complete diversity requirement is not satisfied and (2) SD does not have standing to sue under N.Y. Bus. Corp. L. § 1312(a). (Defendant's Memorandum of Law in Support of Defendant's Motion to Dismiss ("Def. Mem.") at 5-7.) Del Rio argues under Rule 12(b)(6) that, for three reasons, SD fails to state a claim for which relief can be granted. First, Del Rio argues, SD is not licensed to provide security services in New York as required by N.Y. Gen. Bus. L. § 70.2, and thus is not entitled to enforcement of its contracts. (Id. at 4.) Second, the Contract is not signed by either party, and therefore violates the Statute of Frauds.*fn1 (Id. at 9.) Third, the non-compete covenant is unenforceable because it imposes an unreasonable temporal and geographic restraint and does not defend any legitimate protectable interest. (Id. at 9-13.)

For the reasons set forth below, I deny Defendant's motion to dismiss.

I. Background

Because Defendant moves to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and (6), "the court must accept all factual allegations in the complaint as true and draw inferences from those allegations in the light most favorable to the plaintiff." Jaghory v. New York State Dept. Of Educ., 131 F.3d 326, 329 (2d Cir. 1997).

SD is a Florida corporation. (Compl. ¶ 1.) SD provides chaperone and supervision services for tour operators providing tour services to students and schools. (Id. ¶ 6.) The company monitors and supervises the touring students at hotels, thus ensuring that these students are "safe and accounted for, and comply with hotel room curfew requirements when on tour." (Id. ¶ 7.)

Del Rio is a citizen and domiciliary of the state of New York. (Id. ¶ 2.) In or about January 2005, SD employed Del Rio as its "seasonal District Field Manager for the New Jersey District" for the 2005 tour season. (Id. ¶ 10.) Following completion of this tour season, in or about January 2006, SD and Del Rio entered into the Contract for services to be performed during the "2006 student tour season year."*fn2 (Id. ¶ 12.) The Contract, which refers to SD as the "Corporation" and Del Rio as the "Manager," further provides, in relevant part:

1. (a) At all times while this agreement is in force, and after its expiration or termination, Manager agrees to refrain from disclosing the Corporation's client list, trade secrets, or other confidential material. Any and all activities that occur within the form of operation, but not limited to personnel, is considered Corporation property and strictly confidential. . . .

2. The undersigned Manager to this agreement is contractually obligated not to compete with Corporation in any and all forms in any manner, directly or indirectly[,] or enter into the Student Tour Industry business during the life of the contract and a period of five years after completing his last contract. . . .

3. For the purpose of this non-compete waiver, competition is defined as soliciting or accepting employment by, [or] rendering professional services to, any person or organization that is or was a client or takes inquiry into becoming a client of Corporation during the term of the Manager's contract with the corporation. Any potential client that is referred to the Manager during the term of this agreement is the client of the Corporation. (Id. ¶ 13.)

The Contract was not signed by either of the two parties, though Del Rio and Sandra Mercado, the president of SD, communicated by email with regard to the Contract. (Compl. Ex. A.) In one email, Del Rio wrote, "Your offer is accepted. I am at your service and at your disposal. . . . Thank you for your vote of confidence and I wouldn't let you down. Forever at your service. Eddie." (Id.) In another email, he wrote, "I have absolutely no intention of ever competing with you and your company or the service the company provides."*fn3 (Id.)

In or about June 2006, during Del Rio's term as SD's District Field Manager, SD learned that Del Rio had solicited or accepted employment in the student tour industry from SD's clients and had utilized SD's confidential information, client lists, and trade secrets. (Id. ¶¶ 15-16.) SD believes that Del Rio also disclosed this information to third parties. (Id. ¶ 17.) As a result, SD filed this lawsuit against Del Rio, seeking damages in an amount equal to three and a half times the amount received by Del Rio as compensation for services provided to SD's clients in the course of competing with SD, $70,000 in liquidated damages, a declaratory judgment decreeing that the Contract is enforceable, and an injunction barring Del Rio from further conduct in violation of the Contract. (Id. ¶¶ 23-24, 26-27.) Del Rio moved to dismiss the Complaint pursuant to Fed. R. Civ P. 12(b)(1) and (6). (Defendant's Notice of Motion to Dismiss the Complaint ("Def. Not. Mot.").)

Additional facts will be set forth as they become relevant.

II. Discussion

Del Rio moves to dismiss this action on four grounds. First, he argues that the court must dismiss this case because (1) Plaintiff does not have standing to sue under N.Y. Bus. Corp. L. § 1312(a) and (2) this action does not satisfy the complete diversity requirement of 28 U.S.C. § 1332. Second, he argues that the Contract is unenforceable under N.Y. Gen. Bus. L. § 70.2 because SD is not licensed to provide security services in New York. Third, he argues that the Contract is unenforceable under N.Y. Gen. Oblig. L. § 5-701 because it violates the Statute of Frauds. Fourth, he argues that the ...


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