In Renaissance Nutrition, Inc. v. Jarrett, 2012 WL 42171 (WDNY) (January 9, 2012), Renaissance, a vitamin and pre-mix company serving the dairy industry, alleged that two former top-level employees violated a five year “non-recruitment” or “anti-raiding” clause. In short, Renaissance alleged that these employees resigned in tandem with plans to develop a rival company, Cows Come First, and then actively recruited three other former Renaissance employees to join them in their new venture. The former employees moved for summary judgment arguing, in part, that the non-recruitment clause was invalid, because it did not protect a legitimate business interest. Renaissance responded by arguing that New York courts have upheld recruitment clauses like the one at issue here and that the clause was proper in scope because it only limited the defendants from purloining its employees not from engaging in business generally.
After noting that there appeared to be only one New York case discussing the applicable standard for enforcing a non-recruitment covenant (and no appellate authority), the District Court decided to apply the “overriding requirement of reasonableness” used to analyze non-compete covenants in New York. In its “reasonableness” analysis, the District Court required that Renaissance make “an enhanced showing” that its interests in protecting its client relationships outweigh the former employees’ interests in free competition, by demonstrating that: “(1) the employees diverted by defendants posed a substantial risk that if they left, their customers would follow, (2) the departed employees would engage or did engage in competitive business with Renaissance, and that (3) it provided substantial resources and assistance in cultivating the customer base such that it would be unfair to allow employees to steal those customers to compete with it.” The District Court ultimately held that Renaissance had a legitimate interest in the protection of client relationships developed at its expense and denied defendants’ motion for summary judgment.