Opinion
016387/05.
Decided March 22, 2006.
Gerry E. Feinberg, Esq., White Plains, New York, Counsel for Plaintiff.
Peter S. Cohen, Esq., Plainview, New York, Counsel for Defendant.
ORDER
The follow papers were read on Defendant's motion to adjudicate Plaintiff in contempt:
Order to Show Cause dated December 16, 2005, and re-dated on January 4, 2006 and January 18, 2006;
Affidavit of Thomas Stone sworn to on December 13, 2005;
Affidavit of Peter S. Cohen, Esq. sworn to on December 14, 2005;
Defendant's Memorandum of Law;
Affidavit of Michael King sworn to on January 21, 2006;
Affidavit of Gerry E. Feinberg sworn to on January 31, 2006 Plaintiff's Memorandum of Law.
Defendant, Merchant Services, Inc. d/b/a EVO Merchant Services ("Merchant"), moves to adjudicate Plaintiff, Michael King ("King"), in contempt for failing to abide by the terms of a "So ordered" Stipulation dated November 17, 2005 ("Stipulation").
BACKGROUND
Merchant is in the gift card business. King was formerly employed with Merchant as its Vice-President pursuant to a written employment agreement.
While employed with Merchant, King had access to confidential customer contact and pricing information of Merchant's Independent Sales Organizations ("ISOs") and regional partners. As such, King's employment agreement contained a restrictive covenant preventing him from soliciting Merchant's ISOs or regional partners after termination of his employment.
On or about August 2, 2005, King's employment was terminated. King was eventually employed by Tendercard, a competitor of Merchant. King has brought this action against Merchant for breach of his written employment contract. In response, Merchant counterclaimed seeking, inter alia, injunctive relief and money damages for violation of the restrictive covenant prohibiting King from soliciting Merchant's ISOs.
On November 17, 2005, Merchant moved for a preliminary injunction enjoining King from soliciting Merchant's ISOs. The motion was resolved pursuant to a Stipulation entered into by King and Merchant which was "so ordered" by the Court. The Stipulation provided that "pending the determination of this action, plaintiff shall not directly solicit by mail, telephone, e-mail or face-to-face communication initiated by plaintiff any Independent Sales Organization, sales representatives, Regional Partners and merchants that have a contractual relationship with defendant."
The terms of the Stipulation were spread on the record in open court on November 17, 2005. As the Stipulation was placed on the record, this Court clarified the meaning of the restriction placed on Plaintiff by stating "[j]ust so that it is well understood, [this Stipulation] does not include any general advertisements in trade organizations, a website, a generally available website, the incidental contact at a trade show or similar non-pointed directed types of communication. [King] is free to continue in this business and he is free to have business in the event of such contacts. . . ." (Transcript, p. 3, l. 9 18). In open court, both attorneys agreed to the terms of the Stipulation.
Vision Payment Solutions ("VPS") is a regional partner of Merchant. Since July 6, 2003, VPS has had a written contractual relationship with Merchant to market Merchant's processing services. King claims that on February 23, 2004, Tendercard executed a written contract with VPS to provide gift card services. In the Fall of 2004, VPS was advised by Merchant that it had hired King to develop and sell proprietary check services for Merchant, and that he would be contacting VPS regarding this product. In the Spring of 2005, King came to VPS's office and met with Chief Marketing Officer Thomas Stone ("Stone") to discuss the check program he was developing for Merchant. In the Fall of 2005, Stone was informed that King had been terminated by Merchant.
According to King, on October 28, 2005, Stone contacted Tendercard by e-mail, and requested training assistance and marketing materials for VPS' "road show". Later that day, Tendercard informed Stone that it would send King to conduct training on Tendercard's products, and that King would contact Stone to discuss marketing materials. On October 31, 2005, King contacted via e-mail Stone to confirm that he would be working with Stone and VPS. On November 2, 2005, Stone contacted King via e-mail requesting that he telephone him. On November 5, 2005, King replied via e-mail to Stone that he left several messages for Stone. Later that same day, Stone e-mailed King requesting that King and he speak on Monday. On November 6, 2005 King e-mailed Stone informing him that he would call him on Monday. On November 14, 2005, Tendercard's marketing department sent VPS the materials Stone requested by DHL express shipping. All of this occurred prior to the Stipulation entered into by the parties.
On November 30, King e-mailed Stone requesting a meeting at VPS' office to discuss the materials sent regarding Tendercard's gift card product, and the private labeling and licensing of the gift card product. Thereafter, King telephoned Stone to discuss the Tendercard gift product and to confirm meeting dates for December 8 and 9, 2005. King met with Stone and his staff at VPS' office on both December 8 and 9, 2005 to discuss Tendercard's product.
Merchant asserts that King violated the terms of the "So ordered" Stipulation by contacting Stone via e-mail on November 30, 2005, by subsequently telephoning Stone, and by meeting with Stone on December 8 and 9, 2005.
By Order to Show Case dated December 16, 2005, Merchant seeks to have King held in contempt of court for violating the Stipulation based on these contacts.
DISCUSSION
Although Merchant does not specify whether it is moving for a civil or criminal contempt charge, Merchant's papers articulate its arguments based on the elements of a civil contempt charge. As such, the Court will evaluate Merchant's motion as one for civil contempt.
In order to obtain a civil contempt finding under Judiciary Law § 753(a), it is necessary to establish that: (1) there was an unequivocal and lawful mandate or order from the court in effect; (2) it is reasonably certain that the order has been disobeyed; (3) the party to be held in contempt had knowledge of the order even if it was not served upon him/her; and (4) the rights of a party to litigation have been prejudiced. Matter of McCormick v. Axelrod, 59 NY2d 574, 583 (1983).
A party can be found to be in civil contempt even if the disobedience with the court order is not wilful or deliberate. Yalkowsky v. Yalkowsky, 93 AD2d 834, 835 (2nd Dept. 1983) ("[i]ntent or willfulness is not required to hold a party in contempt for disobeying a court order or subpoena."). Failing to comply with the terms of a court order, without regard to motive, is punishable by contempt if it defeats, impairs or prejudices the rights of a party. Jim Walter Doors v. Greenberg, 151 AD2d 550 (2nd Dept. 1989). See also Ryan v. Caputo, 222 AD2d 438 (2nd Dept. 1995); and Great Neck Pennysaver. Inc. v. Central Nassau Publications, Inc., 65 AD2d 616 (2nd Dept. 1978) ("[i]t is not necessary that such disobedience be deliberate; rather, the mere act of disobedience, regardless of its motive, is sufficient to sustain a finding of civil contempt if such disobedience defeats, impairs, impedes or prejudices the rights of a party").
Applications to punish for civil contempt are addressed to the sound discretion of the court. Matter of Fishel v. New York State Div. of Housing and Community Renewal, 172 AD2d 835 (2nd Dept. 1991). On this motion, Merchant has established two of the four elements required to establish contempt; to wit: that the court issued a lawful order expressing an unequivocal mandate of the court; and that King had knowledge of the order. Based on the evidence submitted by the parties, however, Merchant has failed to establish that King disobeyed the Stipulation.
The Stipulation dated November 17, 2005 was "So ordered" by this Court, and, therefore, constitutes a lawful court order. CPLR 5014. See, Fuerst v. Fuerst, 131 AD2d 426 (2nd Dept. 1987) ("The court's so order[ing]' the stipulation without objection, pursuant to the request of the father's attorney, dispensed with the necessity for a written order to be served with notice of entry"). The Stipulation clearly and unequivocally expresses the intent of the parties that King was prohibited from directly soliciting communication, initiated by King, to any ISO, sales representatives, Regional Partners and merchants which had a contractual relationship with Merchant. The understanding between the parties, through their respective counsel, was that King could still engage in general advertisements, incidental contact at a trade show, or non-pointed directed types of communications. Furthermore, King would be allowed to continue in the business and was free to conduct business in the event of such contacts.
Merchant has also established that King possessed knowledge of the order. King does not deny that he had knowledge of the Stipulation. To the contrary, King acknowledges the existence of the Stipulation and its terms in his affidavit in opposition to the instant motion. Merchant has thus established the knowledge element of the contempt standard.
Merchant must also establish that King "disobeyed" the Stipulation. McCain v. Dinkins, 84 NY2d 216, 226 (1994). This, Merchant has failed to do. The evidence submitted by King supports the fact that Stone approached him for training assistance and marketing materials pursuant to a preexisting contractual relationship between VSP and Tendercard. Furthermore, the evidence supports the fact that this initial contact came prior to service of the Order to Show Cause and the subsequent Stipulation. King's e-mail to Stone sent on November 30, 2005, King's subsequent telephone conversation with Stone to confirm the December 8 and 9, 2005 meetings, and the December 8 and 9, 2005 meetings with Stone were related to Tendercard's service of its preexisting contract with VSP, particularly the request for training assistance and marketing materials. King merely serviced the preexisting contract between Tendercard and VSP within the scope of his employment duties for Tendercard. King's actions do not constitute direct solicitation of Merchant's Regional Partner. Therefore, it cannot be said to a reasonable certainty that King disobeyed the Stipulation. This is especially true when it is remembered that the Stipulation did not enjoin or limit King's ability to work for a competitor of Merchant.
The party bringing the application for civil contempt has the burden of establishing contempt by clear and convincing evidence. Vujovic v. Vujovic, 16 AD3d 490 (2nd Dept. 2005); and Rupp-Elmasro v. Elmasri, 305 AD2d 394 (2nd Dept. 2003). Merchant has failed to demonstrate that King was engaged in direct solicitation of VSP, in contravention of the Stipulation. Since Merchant's papers fail to establish one of the necessary elements for civil contempt, the application for contempt must therefore be denied. See, Hom v. Weintraub, 6 AD3d 579 (2nd Dept. 2004); and Cherico, Styx Assocs. v. Abramson, 235 AD2d 515 (2nd Dept. 1997).
Accordingly, it is,
ORDERED, that Defendant's motion to adjudicate Plaintiff in contempt is denied.
This constitutes the decision and Order of the Court.