Robert N. Brown Associates Inc. v. Fileppo

Order, Supreme Court, New York County, entered June 11, 1971, denying summary judgment, modified on the law, and the motion granted to the extent of directing the defendants to account to plaintiff for business diverted from the plaintiff to the defendants during the period of Fileppo’s employment with the plaintiff, and otherwise denied, with costs to abide the event. The defendant Fileppo was employed by plaintiff as salesman pursuant to written contract dated December 31, 1960. Fileppo was made vice president and secretary and employed as salesman at a weekly salary of $150, later increased to $200, plus an expense account of $50, and one third of plaintiff’s profits. He resigned as employee on March 21, 1968, but remained an officer, director and stockholder of plaintiff. Fileppo was required to devote all his time to the business of the corporation and covenanted not to engage directly or indirectly in any other business. Fileppo was permitted to be “ interested in any non-competitive business ”. In 1965, Fileppo acquired stock and became the principal of Graphein Associates, Ltd. Thereafter, and prior to his resignation from plaintiff’s employ, Fileppo obtained printing orders from customers of the plaintiff and turned them over to Graphein. Fileppo’s said conduct constituted a breach of his contractual obligation not to engage in any other business and to devote all his time to plaintiff’s business. Implicit in the employer-employee relation is that the employee will not compete with his employer. (Hercules Packing Corp. v. Steinbruckner, 28 A D 2d 635, app. dsmd. 20 N Y 2d 757.) Moreover as an officer of the plaintiff he was under an obligation not to compete with or profit personally at the expense of_the plaintiff. (Foley v. D’Agostino, 21 A D 2d 60, 66, 67.) The provision in the employment contract that Fileppo might “be interested in any non-competitive business ” is subject to the proviso that such interest “ does not- infringe upon [Fileppo’s] duties and time under the terms of this agreement.” It is not a grant to Fileppo either of the right to compete with plaintiff or to utilize his time and effort therefor. The moving affidavit alleges, and Fileppo does not deny, that he did not disclose to plaintiff his interest in defendant, Graphein Associates, Ltd., or that he was turning over to it printing orders he had obtained. Such covert conduct bespeaks guilty knowledge of Fileppo’s obligation not to compete with plaintiff and to devote all his time to plaintiff’s business. Even if Fileppo had first offered the orders to 516 plaintiff and it had refused them, which is not the case, he was not free to divert them to a competitor for his profit without the express consent and approval of the plaintiff. (Foley v. D’Agostino, supra, pp. 67-68.) It is not a matter of defense that the orders diverted to Graphein may have been of insignificance or no value to the plaintiff as claimed in substance by Pileppo. This may be a factor relevant on the damages, if any, sustained by plaintiff; it does not affect the plaintiff’s right to an accounting. Plaintiff-appellant is clearly entitled to an accounting based on the contract’s definition of the relationship of the parties. The objections of our brethren to such an accounting really sum up to no more than objections to certain items of business of which, it is asserted without real contradiction, defendant-respondent deprived plaintiff by diverting them elsewhere. If these items are actually outside the contract’s purview, the accounting will award plaintiff nothing for them, but their existence cannot deprive plaintiff of its contract-based right to have an accounting. The collateral agreement of December 31, 1960 granting Pileppo the option to purchase stock of Daly & Watins, Inc., is no defense to the plaintiff’s action grounded on breach of the contract of employment and Fileppo’s obligation as employee, officer and director of plaintiff not to compete with it. Defendant Pileppo may institute a plenary suit for damages for the-alleged breach of the stock option agreement, if he be so advised. Concur -— Markewich, Murphy and McNally, JJ.; Kupferman, J., dissents in a memorandum, and MeGivern, J. P., concurs in the dissent in a memorandum, as follows: