Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Is Your Choice-of-Law Provision “Truly Obnoxious?”

Author: Joel N. Kreizman

Date: January 13, 2016

Key Contacts

Back

How is your Choice-of-Law Provision?

New York businesses may want to review the choice-of-law provisions in their non-competition and non-solicitation agreements. In a recent decision, the New York Court of Appeals refused to enforce the choice-of-law provision in an employment agreement purporting to apply Florida law after finding that “applying Florida law on restrictive covenants related to the non-solicitation of customers by a former employee would violate the public policy of this state.”

Choice-of-Law Provision

The Facts of the Case

Plaintiff Brown & Brown of New York, Inc. (BBNY) recruited defendant Theresa A. Johnson to leave her former job to work for BBNY. On Johnson’s first day, she signed an employment agreement containing a Florida choice-of-law provision and a non-solicitation provision. The non-solicitation provision precluded Johnson, for two years following her termination of employment, from directly or indirectly soliciting, accepting or servicing any person or entity “that is a customer or account of the New York offices of [BBI and BBNY] during the term of this Agreement,” as well as certain prospective customers.

After working for BBNY for several years, Johnson was terminated. Less than one month later, she began working for defendant Lawley Benefits Group, LLC, a competitor of BBNY.

Shortly thereafter, BBNY filed suit to enjoin alleged violations of the agreement by Johnson and to recover damages against both Johnson and Lawley. The lower courts dismissed the claims related to the non-solicitation provision, finding that that the Florida choice-of-law provision was unenforceable.

The Court’s Decision

The New York Court of Appeals agreed that the Florida choice-of-law provision was unenforceable as against public policy. In reaching its decision, the state’s highest court acknowledged that parties are generally free to reach agreements on whatever contractual terms they prefer. However, it also emphasized that courts will not “enforce agreements…where the chosen law violates ‘some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.'” The court also noted that the public policy exception is reserved “for those foreign laws that are truly obnoxious.”

In this case, the court compared Florida and New York law concerning restrictive covenants in employment agreements. While it found similarities with respect to the extent that they both require restrictive covenants to be reasonably limited in time, scope and geographical area, and to be grounded in a legitimate business purpose, it also noted several key differences that made Florida’s law incompatible with the rationale behind New York’s restrictive covenant jurisprudence. As the opinion explains:

Considering Florida’s nearly-exclusive focus on the employer’s interests, prohibition against narrowly construing restrictive covenants, and refusal to consider the harm to the employee — in contrast with New York’s requirements that courts strictly construe restrictive covenants and balance the interests of the employer, employee and general public — defendants met their “‘heavy burden’ of proving that application of Florida law[to the non-solicitation provision of the parties’ agreement] would be offensive to a fundamental public policy of this State.”

Message for New York Businesses

In light of the court’s decision in Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364 (2015), New York employers should be sure to evaluate the applicable laws of any jurisdiction named in a choice-of-law provision. If the laws are vastly different, particularly with respect to the burdens placed on employers vs. employees, they may be deemed unenforceable.

Message for New Jersey Businesses

The New Jersey Supreme Court, since at least 1992, has similarly held that choice of law contractual provisions that violate New Jersey’s public policy will not be enforced.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Rule 26 Expert Discovery: When an Expert Witness Uses AI, Is It Discoverable? post image

Rule 26 Expert Discovery: When an Expert Witness Uses AI, Is It Discoverable?

Case law following the 2010 amendments to Federal Rule of Civil Procedure 26 offers guidance on how courts are likely to address whether an expert witness’s AI records are subject to discovery. Key Takeaways Rule 26 Expert Discovery After the 2010 Amendments This article addresses the question courts and lawyers have faced in recent cases: […]

Author: Chris Seelinger

Link to post with title - "Rule 26 Expert Discovery: When an Expert Witness Uses AI, Is It Discoverable?"
How Expert Witness AI Use Ends Up in Discovery post image

How Expert Witness AI Use Ends Up in Discovery

“Show how 3M is 0% at fault.” The absurd tale of how a 350-page ChatGPT history for 3M’s expert witness was produced during a deposition is more likely than you think. It’s an inevitable trend, and an unsettled question for federal courts as experts make generative AI part of their workflow. Key Takeaways Expert Witness […]

Author: Chris Seelinger

Link to post with title - "How Expert Witness AI Use Ends Up in Discovery"
The Screenshot Problem: Why Nothing Is Really Private Anymore post image

The Screenshot Problem: Why Nothing Is Really Private Anymore

Screenshots have changed the risks of electronic communications. The screenshot problem is that messages intended for one person or a small group can be copied, forwarded, preserved, and ultimately presented to opposing counsel, regulators, journalists, customers, or a jury. Businesses should recognize that a truly private digital conversation is increasingly unreliable and ensure their policies, […]

Author: Sean M. Pena

Link to post with title - "The Screenshot Problem: Why Nothing Is Really Private Anymore"
BESS Project Agreements: Allocating Risk Among Developers, EPC Contractors, and Equipment Suppliers post image

BESS Project Agreements: Allocating Risk Among Developers, EPC Contractors, and Equipment Suppliers

Developers, engineering, procurement, and construction (EPC) contractors, and equipment suppliers each play a critical role in completing a BESS project. However, when equipment costs rise, deliveries are delayed, or regulations change, determining who bears the financial consequences can become contentious. Well-drafted project agreements are essential to sound risk allocation. Key Takeaways This article is Part […]

Author: Nicholas Wall

Link to post with title - "BESS Project Agreements: Allocating Risk Among Developers, EPC Contractors, and Equipment Suppliers"
IP Infringement: What Steps Can You Take If You're Affected? post image

IP Infringement: What Steps Can You Take If You're Affected?

IP infringement occurs when someone uses your intellectual property without your permission or beyond the scope of the permission you granted. Common examples of IP infringement include copying a product’s patented features or using a trademarked logo in a way that is likely to confuse consumers about the source or affiliation of goods or services. […]

Author: Michael Mietlicki

Link to post with title - "IP Infringement: What Steps Can You Take If You're Affected?"
Public Allegations, Unfinished Investigation: What New Jersey Businesses Should Do Next post image

Public Allegations, Unfinished Investigation: What New Jersey Businesses Should Do Next

When facing public allegations of wrongdoing, companies should not let the speed of the public conversation dictate the speed of an investigation. An investigation designed to confirm a preferred narrative rather than establish the facts can create serious problems later, particularly if litigation, regulatory scrutiny, or employment claims follow. Key Takeaways When public allegations surface […]

Author: Sean M. Pena

Link to post with title - "Public Allegations, Unfinished Investigation: What New Jersey Businesses Should Do Next"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.
“If you would like to submit a file, please email it directly to info@sh-law.com.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!