In the latest chapter of an ongoing dispute between Aon Risk Services and Alliant Insurance Services (stemming from Alliant’s hiring of dozens of Aon employees and accepting millions in annual revenue from former Aon clients), on January 10, 2013, the New York State Supreme Court, Appellate Division, First Department issued a decision upholding key rulings of the trial court that enforced Aon’s restrictive covenant agreements. Aon Risk Services, Northeast, Inc., et al v. Cusack, et al, Index no. 551673/11 (1st Dep. January 10, 2013.)
Specifically, the Appellate Division rejected the forum non conveniens argument advanced by a California-based individual defendant, Peter Arkley. The court found that Arkley had previously engaged in business activities in New York, and had involved himself in the lawsuit even before he was named as a co-defendant. Further, the court credited the trial court’s conclusion that Arkley’s previously-filed declaratory judgment action ion California was merely:
a preemptive measure undertaken to gain a tactical advantage so as to negate the force and effect of the restrictive covenants, which the parties and freely agreed upon,
and not entitled to deference. The Appellate Division also upheld the parties’ contractual choice of Illinois law. The court noted that, “New York courts are willing to enforce parties’ choice of law provisions” and generally to construe agreements to give effect to the parties’ intent. And finally, the court upheld the preliminary injunction barring business relationships with certain former Aon clients and solicitation of Aon employees.
Beyond the flurry of motions and decisions in this case that make it great entertainment (see Justice Fried’s decision from December 20, 2011, 34 Misc. 3d 1205A, 946 N.Y.S. 2d 65, 2011 N.Y. Misc. LEXIS 6392), this decision highlights the efficacy and importance of choice of law clauses in restrictive covenant agreements. It also highlights the willingness of New York courts to hear non-compete cases involving former employees living and working outside of New York. Accordingly, employers should consider using choice of forum and choice of law clauses in their agreements, to maximize consistency and enforcement of their agreements.