Plaintiff Novus Partners ("Novus") commenced this action against defendants David Vainchenker ("Vainchenker") and the Corre Group ("Corre"), bringing claims for 1) breach of contract against Vainchenker; 2) tortious interference with contract against Corre; 3) misappropriation of confidential information against Vainchenker and Corre; and 4) injunctive and declaratory relief against all defendants. [*2]

On March 17, 2011, on a motion by Order to Show Cause seeking injunctive relief, I issued a temporary restraining order, modified on May 19, 2011, requiring Vainchenker to "comply with the confidentiality provisions of his April 8, 2009 Non-Disclosure and Invention Assignment Agreement" and enjoining him from soliciting any of plaintiff's employees or those customers or clients of plaintiff of which he was aware upon leaving Novus.

Defendants now move to dismiss plaintiff's claims of breach of contract, tortious interference with contract, and misappropriation of confidential information, pursuant to CPLR §§ 3211(a)(1) and 3211(a)(7).

The complaint alleges that Novus "provides hedge fund research and analysis to . . . hedge funds, family offices and other institutional investors." (Compl. ¶ 8.) Novus hired Vainchenker in April 2009. He worked there until late September 2010. (Compl. ¶ 19.) On April 8, 2009, Vainchenker signed a Non-Disclosure and Invention Assignment Agreement ("NDA"), (Compl. ¶ 15), in which he agreed that he would not: (1) "disclose Novus's Confidential Information to unauthorized parties or use this information to the benefit of himself or any other party or in any manner adverse to Novus," (Compl. ¶ 16, Ex. A at 1); (2) "engage, invest or participate in any business that is similar to those which the Company has created, has under development or are the subject of active planning from time to time during [his] engagement with the Company" for a year after leaving Novus (Compl. ¶ 17, Ex. A at 3); or (3) "divert or attempt to divert from the Company any business of any kind" or "solicit, induce, recruit or encourage any person engaged by the Company to terminate his or her engagement," for a year after leaving Novus. (Id.)

Under CPLR § 3211(a)(1), "a party may move for judgment dismissing one or more causes of action asserted against him on the ground that a defense is founded upon documentary evidence." A CPLR § 3211(a)(1) motion to dismiss "may be appropriately granted only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Goshen v. Mut. Life Ins. Co. of NY, 98 NY2d 314, 326 (2002). Documentary evidence includes "judicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable' . . . [T]o be considered documentary,' evidence must be unambiguous and of undisputed authenticity." Fontanetta v. Doe, 73 AD3d 78, 84-86 (2d Dept. 2010) (citations omitted).

Under CPLR § 3211(a)(7), "a party may move for judgment dismissing one or more causes of action asserted against him on the ground that the pleading fails to state a cause of action." "In the context of a motion to dismiss pursuant to CPLR § 3211, the court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference. Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss." EBC I, Inc. v. Goldman Sachs & Co., 5 NY3d 11, 19 (2005) (citations omitted). Allegations made upon information and belief "are to be considered true for the purposes of a motion to dismiss pursuant to CPLR 3211(a)(7)." Roldan v. Allstate Ins. Co., 149 AD2d 20, 40 (2d Dept. 1989) (citations omitted). However, "factual allegations which fail to state a viable cause of action, that consist of bare legal conclusions, or that are inherently incredible or unequivocally contradicted by documentary evidence, are not entitled to such consideration." Leder v. Spiegel, 31 AD3d 266, 267 (1st Dept. 2006), aff'd, 9 NY3d 836 [*3](2007) (citations omitted).

First, defendants move to dismiss the breach of contract claim in its entirety, arguing that the plaintiff does not allege damages with the necessary specificity. Defendants also argue that the claim for breach of the confidentiality provision of the NDA is not adequately alleged; that no breach of the non-compete provision is possible, given the absence of a geographic restriction (which, they claim, invalidates the entire NDA); and that the non-solicitation clause is invalid because it places an undue burden on Vainchenker.

Defendants also move to dismiss the tortious interference claim, arguing that the contract is over-broad and invalid, making interference impossible. Finally, defendants move to dismiss the misappropriation claim, arguing that Novus does not adequately allege that it possesses trade secrets or that Vainchenker took these alleged secrets.

Breach of Contract Claim

I first address the motion to dismiss the breach of contract claim.

Novus has alleged that Vainchenker: (1) breached the "confidentiality provisions of [the NDA] and his Employee Acknowledgement of Confidentiality Obligations by divulging confidential information that has clearly been used to form [Corre], and is using that confidential information for his own commercial advantage to compete with Novus," (Compl. ¶ 39); (2) breached "the non-compete provisions of [the NDA] by forming and working at [Corre], a direct competitor of Novus, within one year of his termination of employment with Novus," (Compl. ¶ 38); and (3) "breached the non-solicitation provision of [the NDA] by soliciting Novus clients and employees to join him at [Corre], a direct competitor of Novus, within one year of his termination of employment with Novus." (Compl. ¶ 37.)

To state a claim for breach of contract, plaintiff must allege: "the existence of a contract, the plaintiff's performance under the contract, the defendant's breach of that contract, and resulting damages." See JP Morgan Chase v. J.H. Elec. of NY, Inc., 69 AD3d 802, 803 (2d Dept. 2010) (citations omitted).

Defendants first argue that the contract is overly broad because plaintiff fails to allege damages with the necessary specificity. However, "to survive a pre-answer motion to dismiss pursuant to CPLR 3211(a)(7), a pleading need only state allegations from which damages attributable to the defendant's conduct may reasonably be inferred." Fielding v. Kupferman, 65 AD3d 437, 442 (1st Dept. 2009) (citations omitted). Therefore, plaintiff's failure to allege damages with the necessary specificity does not preclude its claim for breach of contract.

1) Confidentiality Provision of the NDA

I turn then to Vainchenker's alleged breach of the confidentiality provisions of the NDA. Vainchenker agreed in his NDA not to "disclose the Confidential Information, directly or indirectly, at any time during or after my engagement by the Company . . . for my personal benefit, for the benefit of any other person for the benefit of any other person or entity, or in any manner adverse to the interests of the Company." (Compl. Ex. A at 1.) The NDA defines confidential information as "all of the trade secrets, know-how, ideas, business plans, pricing information, the identity of and any information concerning customers or suppliers, computer programs (whether in source code or object code), [*4]procedures, processes, strategies, methods, systems, designs, discoveries, inventions, production methods and sources, marketing and sales information." (Id.)

Novus alleges that Vainchenker breached the confidentiality provisions by divulging and using at Corre its client list and its holdings-based analysis, a research tool which helps hedge funds with hiring and investment decisions.

Novus maintains that its client list is a trade secret that Novus expended significant time and expense over the past four years to develop and safeguard," (Compl. ¶ 50), and that "Novus has gone to significant lengths to protect its client data . . . [and] has cautiously built the business with the specific intention not to make its existence known to others in the industry." (Compl. ¶ 12.) Novus also alleges that Vainchenker had access to its client list and client data, (Compl. ¶ 20), which he is using at Corre. It also asserts that its client list is made up of businesses that Novus had to attract to "an entirely new category in the Alternative Investment Industry." (Compl. ¶ 9.)

When a business's customers can be easily determined, its client list is usually not a trade secret. See Ronald W. Freeman, P.C. v. Zhu, 209 AD2d 213, 214 (1st Dept. 1994). A client list created through "widespread canvassing of an obvious and highly competitive market," is insufficient to warrant trade secret protection. Leo Silfen, Inc. v. Cream, 29 NY2d 387, 394 (1972). However, when a business has invested considerable time and money in building a customer list out of customers whose interest in that service would not have been known without this effort, trade secret protection may attach. See Town & Country House & Home Serv., Inc. v Newbery, 3 NY2d 554, 560 (1958) (house-cleaning service's list of customers was a trade secret, where it had expended considerable effort to identify homemakers who were interested in such services). For purposes of this motion, plaintiff has sufficiently alleged that its client list is a trade secret. Moreover, the complaint has sufficiently alleged that defendants have disclosed plaintiff's client list in breach of this provision, (see Compl. ¶¶ 50, 51), for purposes of stating a claim.

Novus further alleges that Vainchenker breached his confidentiality obligations by taking and using its holdings-based analysis software at Corre. Novus claims that its analytical software is a trade secret because it is the product of "more than four years of continuing and ongoing research that has pioneered an entirely new research methodology and category in the Alternative Investment Industry," (Compl. ¶ 9) and that "Novus has cautiously built the business with the specific intention not to make its existence known to others in the industry," (Compl. ¶ 12), and carefully guards its holdings-based analysis and client list through various security measures and restrictions, (Compl. ¶ 26). Novus claims that its holdings analysis is "an entirely new research methodology" within the Alternative Investment Industry, (Compl. ¶ 9), and that it expended considerable effort and expense over the past four years to convince its clients to switch to an entirely novel concept. (Compl. ¶ 24.) Novus further alleges that "it is the Holdings Analysis that Vainchenker obtained from Novus that is central to Vainchenker's new business at [Corre]," (Compl. ¶ 21), which is demonstrated by Corre's distribution of "marketing materials to current Novus clients that include sample analyses identical to those offered by Novus." (Compl. ¶ 29.)

These allegations are sufficient to state a claim that defendants breached their confidentiality obligations with regard to the holdings analysis, for purposes of this motion to dismiss.

[*5]2) Non-Competition Provision of the NDA

I turn now to Vainchenker's alleged breach of the non-compete provisions of the NDA. In section four of the NDA, Vainchenker agreed that he would not "engage, invest or participate in any business that is similar to those [sic] which the Company has created, has under development or are the subject of active planning from time to time during my engagement with the Company" until a year after leaving the company. (Compl., Ex. A at 4.) Novus alleges that Vainchenker "breached the non-compete provisions of the [NDA] by forming and working at [Corre], a direct competitor of Novus, within one year of his termination of employment with Novus." (Compl. ¶ 38.)

Defendants argue that the NDA is unenforceable because it has no geographic restriction, is unreasonably broad, and would prevent Vainchenker from soliciting the business of any hedge funds whatsoever.

A non-compete agreement is reasonable only if it: "(1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public." BDO Seidman v. Hirshberg, 93 NY2d 382, 388-89 (1999) (citations omitted) (emphasis in original). Such a restrictive covenant will only be enforced when it is "reasonable in time and area."Id. at 389. An employer's legitimate interests include preventing misappropriation of trade secrets and confidential customer lists, and preventing competition by a former employee whose services are unique or extraordinary. Id. It is important that a non-compete clause be no greater than required to protect an employer's legitimate interests, as "a covenant unrestrained by any limitations keyed to uniqueness, trade secrets, confidentiality or even competitive unfairness, is unenforceable." Ashland Mgmt. Inc. v. Altair Investments NA, LLC, 59 AD3d 97, 121 n. 1 (1st Dept. 2008), aff'd as modified, 14 NY3d 774, 925 N.E.2d 581 (2010). "[T]he likely inevitability of even inadvertent disclosure is sufficient to establish a real risk of irreparable harm." IBM v. Papermaster, 08-CV-9078(KMK), 2008 WL 4974508, at *10 (S.D.NY Nov. 21, 2008).

Defendants argue that the non-compete clause is invalid because it does not contain any geographic limitation. However, the lack of a geographic limitation does not automatically invalidate a non-compete clause. "An otherwise valid restrictive covenant [which] does not contain a geographic limitation may, if warranted by equity . . . [be interpreted in] conformity with the intent of the parties." Deborah Hope Doelker, Inc. v. Kestly, 87 AD2d 763, 765 (1st Dept. 1982). Therefore, the absence of a geographic restriction alone does not automatically invalidate the entire NDA.

Novus has sufficiently alleged that Vainchenker had access to information crucial to its business, and Novus therefore has a legitimate interest in preventing him from using that information to the detriment of Novus. Therefore, it has adequately pled a breach of the non-competition provision for purposes of this motion. It would be premature to decide whether or not the provision is overbroad, as that determination depends on questions of fact.

3) Non-Solicitation Provision of the NDA

I now turn to Novus's allegation that Vainchenker violated the non-solicitation provisions of the NDA by soliciting Novus employees and clients. (Compl. ¶ 37.) In the NDA, Vainchenker agreed not to "directly or indirectly, whether as owner, sole proprietor, [*6]partner, shareholder, director, member, consultant, agent, founder, co-venture partner or otherwise [ ] do anything to divert or attempt to divert from the Company any business of any kind, including, without limitation, solicit or interfere with any of the Company's customers, clients, members, business partners or suppliers." (Compl. Ex. A at 3.)

Novus alleges that Vainchenker breached the non-solicitation provision "by soliciting Novus clients . . . to join him at [Corre], a direct competitor of Novus, within one year of his termination of employment with Novus."^[FN1] (Compl. ¶ 37.)

An employer has a legitimate interest in "preventing former employees from exploiting or appropriating the goodwill of a client or customer . . . created and maintained at the employer's expense, to the employer's competitive detriment," Crown It Servs., Inc. v. Koval-Olsen, 11 AD3d 263, 265 (1st Dept. 2004) (quoting BDO Seidman, 93 NY2d at 392). However, this provision would bar Vainchenker from dealing with any Novus client, whether or not he had a relationship with that client while employed at Novus. See Scott, Stackrow & Co. v. Skavina, 9 AD3d 805, 806 (3d Dept. 2004) ("A covenant will be rejected as overly broad . . . if it seeks to bar the employee from soliciting or providing services to clients with whom the employee never acquired a relationship through his or her employment"); See also Good Energy, L.P. v. Kosachuk, 49 AD3d 331, 332 (1st Dept. 2008) (non-compete is unreasonable if it aims to prevent defendant from dealing with former employer's entire client base, including clients that were not serviced by defendant during his employment). Furthermore, since Novus has not identified to Vainchenker all of its clients, this restriction would prevent Vainchenker from soliciting any hedge funds whatsoever, for fear of unwittingly soliciting a Novus customer. Therefore, the non-solicitation provision of the contract is clearly overly broad.

Novus also alleges that, "on or about March 3, 2011, Vainchenker met with a current employee of Novus and solicited him to join Vainchenker at Novus" (Compl. ¶ 28), in violation of the non-solicitation provision. Novus has adequately alleged a breach of the NDA provision concerning non-solicitation of Novus's employees.

Inasmuch as part of the first cause of action is defective, and in order to ensure clarity of the pleadings, the first cause of action will be dismissed without prejudice to replead it in accordance with this decision.

Tortious Interference with Contract Claim

Defendants also move to dismiss the second cause of action, in which Novus alleges that Corre tortiously interfered with the contract between Vainchenker and Novus by "intentionally interfering" with the contract and causing a breach by "hiring Vainchenker and continuing to employ him in violation of Vainchenker's contract with Novus." (Compl. ¶ 47.)

Novus further alleges that on March 10, 2011, Novus sent a letter to the Corre, "advising [it] that Vainchenker was a former employee of Novus, and [had signed an NDA] not to solicit Novus's clients or employees or otherwise compete with Novus for a period of one year [after leaving] Novus, or otherwise use Novus's confidential information at any time." (Compl. ¶ 31; Ex. D.) This letter also advised Corre that if it continued to employ [*7]Vainchenker, knowing about his breach of contract, it would be tortiously interfering with that contract. (Id.)

Tortious interference with contract requires: (1) the existence of a valid contract between the plaintiff and a third party; (2) defendant's knowledge of that contract; (3) defendant's intentional procurement of the third-party's breach of the contract without justification; and 4) actual breach of the contract, and damages resulting from the breach. Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 424 (1996) (citations omitted).

Since the breach of contract claim survives this motion to dismiss, at least in part, and Novus has sufficiently alleged that Corre employed Vainchenker with knowledge of Vainchenker's NDA and the other elements, Novus has sufficiently alleged a claim for tortious interference against Corre.

Misappropriation of Confidential Information Claim

Defendants also move to dismiss the third cause of action for misappropriation of confidential information. Because Novus considers its client list and data, which it alleges to have been misappropriated, to be trade secrets, I will treat this count as one for misappropriation of trade secrets.

"To establish a claim for misappropriation of trade secrets, a plaintiff must show that it possesses a trade secret, and that defendant is using that trade secret in breach of an agreement, confidence, or duty, or as a result of discovery by improper means." Sylmark Holdings Ltd. v. Silicone Zone Intl. Ltd., 5 Misc 3d 285, 297 (Sup. Ct. 2004).

A trade secret is "any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." Ashland Mgmt. Inc. v. Janien, 82 NY2d 395, 407-08 (1993) (citations omitted). Key factors considered in determining whether information is a trade secret include:

(1) the extent to which the information is known outside of [the] business; (2) the extent to which it is known by employees and others involved in [the] business; (3) the extent of measures taken by [the business] to guard the secrecy of the information; (4) the value of the information to [the business] and [its] competitors; (5) the amount of effort or money expended by [the business] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

A claim for misappropriation of software that is a trade secret requires "evidence that plaintiffs copied or used [defendant's] software in order to prepare their own software . . . . Plaintiffs' access to [defendant's] software is certainly not proof that they misappropriated it." Falconwood Corp. v. In-Touch Techs., Ltd., 227 AD2d 215, 216 (1st Dept. 1996) (citations omitted). However, "[i]f the parties entered into a confidentiality agreement and the proprietary information at issue constitutes a trade secret, whether defendants' use of that information was a result of casual memory is irrelevant." Ashland Mgmt. Inc. v. Altair, 59 AD3d at 102-03.

As discussed above, Novus has sufficiently alleged that its client list and holdings analysis were trade secrets. For purposes of this motion, the complaint adequately alleges [*8]that Vainchenker took this information, and that he is now using it at Corre.

Accordingly, it is:

ORDERED that the defendant's motion to dismiss is granted in part and denied in part; insofar as that portion of the first cause of action that concerns the non-solicitation provisions of the NDA is dismissed without prejudice, and the remainder of the motion is denied; and it is further

ORDERED that plaintiff is granted leave to serve an amended complaint within 20 days after service on plaintiff's attorney of a copy of this order with notice of entry.

Dated: 9/7/2011_____________________________

J.S.C.