Court of Appeals Affirms Validity of Non-Compete Agreement in Breach by Title Insurance Executive
Ticor Title Insurance Co. v. Cohen, 173 F.3d 63
Mr. Kenneth Cohen worked for Ticor Title Insurance Company for seventeen years beginning in 1981 and ending with his resignation on May 5, 1998. He was a title insurance salesman that worked his way up in the company, starting as a sales account manager in 1981 and was promoted in 1987 to a senior vice president. His clients were almost exclusively real estate attorneys in large New York City law firms and he was exclusively responsible for key accounts for the majority of his career with the company. Ticor and Mr. Cohen signed an Employment Contract on October 1, 1995 that specified an employment term until December 31, 1999 but authorized Mr. Cohen to terminate employment without cause on thirty days’ notice. A non-compete clause prohibited Mr. Cohen from working for a business entity engaged in the sales or marketing of title insurance in the state of New York for a period of six months. The agreement contained consideration in the form of a pay raise with a guaranteed annual compensation of $600,000 ($200,000 base salary plus commissions), expense account privileges, and a personal six-person staff. These were outstanding job privileges and made Mr. Cohen uniquely situated within the company.
TitleServ, a direct competitor of Ticor, offered Mr. Cohen on job on April 20, 1998 and the next day he sent a resignation letter to his superiors at Ticor with an effective date of May 21, 1998. TitleServ agreed to pay him a $2 million signing bonus and a salary during the six-month period should a court enforce the non-compete agreement. Before penning his letter of resignation, Mr. Cohen mentioned his possible move to TitleServ to approximately twenty of his clients at Ticor. Mr. Cohen began work at TitleServ the same week his termination became effective at Ticor. Ticor sued Mr. Cohen in federal court, requesting the enforcement of the non-compete agreement and enjoining Mr. Cohen from working at TitleServ during the prohibited six-month period. The federal district court found in favor of Ticor and ordered the non-compete agreement to be enforced. Mr. Cohen promptly appealed the decision to the Court of Appeals for the Second Circuit that has jurisdiction over Connecticut, New York, and Vermont. The Court of Appeals affirmed the district court’s decision and held that the non-compete agreement was valid and enforceable.
The court held that equitable relief (in the form of enforcing the non-compete agreement) is necessary when damages would simply prove to be inadequate. Enforcement of the non-compete in this case is justified according to the court in order to protect Ticor’s confidential information and because Mr. Cohen breached his fiduciary duty when he asked a client to follow him to TitleServ. The restrictions of the covenant were reasonable in scope so as not to disproportionately or severely hinder Mr. Cohen’s livelihood. Finding that the agreement did not run contrary to the public’s interest, the court affirmed the lower court’s decision and ordered the non-compete agreement enforced.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.