Opinion ID: 779792
Heading Depth: 3
Heading Rank: 2

Heading: The Employee Choice Doctrine

Text: 45 The bedrock question in this case is whether Lucente quit or was fired. IBM contends that the district court's grant of summary judgment to Lucente on his breach of contract claim was erroneous because there are genuine issues of fact surrounding this question. We agree. 46 The parties agree on one thing: New York law governs this diversity action. New York courts disfavor restrictive covenants in the employment context and will generally enforce them only to the extent they are reasonable and necessary to protect valid business interests. BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854, 856-57, 712 N.E.2d 1220 (1999); Post v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 N.Y.2d 84, 421 N.Y.S.2d 847, 848, 397 N.E.2d 358 (1979). There is, however, one salient exception: New York courts will enforce a restrictive covenant without regard to its reasonableness if the employee has been afforded the choice between not competing (and thereby preserving his benefits) or competing (and thereby risking forfeiture). Post, 421 N.Y.S.2d at 848-49, 397 N.E.2d 358; Kristt v. Whelan, 4 A.D.2d 195, 164 N.Y.S.2d 239, 243 (1st Dep't 1957) (It is no unreasonable restriction of the liberty of a man to earn his living if he may be relieved of the restriction by forfeiting a contract right or by adhering to the provisions of his contract.), aff'd without opinion, 5 N.Y.2d 807, 181 N.Y.S.2d 205, 155 N.E.2d 116 (1958). 4 This employee choice doctrine assumes that an employee who elects to leave a company makes an informed choice between forfeiting a certain benefit or retaining the benefit by avoiding competitive employment. Kristt, 164 N.Y.S.2d at 243. 47 Although New York courts have not sketched out every detail of the employee choice doctrine, three strokes are bold and clear. First, an employer can rely on the doctrine only if it can demonstrate its continued willingness to employ the party who covenanted not to compete. Post, 421 N.Y.S.2d at 849, 397 N.E.2d 358. Second, when an employee is involuntarily discharged without cause, the employer cannot invoke the benefits of the doctrine. Id. Enforcing the non-competition provision under such circumstances would be unconscionable because it would destroy the mutuality of obligation on which a covenant not to compete is based. Id. Third, the factual determination whether an employee was involuntarily terminated is generally not appropriate for summary judgment. Id. 48 Applying these standards to the present case, the district court's grant of summary judgment on Lucente's breach of contract claim was erroneous. In finding that Lucente had been involuntarily terminated by IBM (and therefore that the employee choice doctrine was inapplicable), the district court resolved numerous factual discrepancies in Lucente's favor. In so doing, the court usurped the jury's province as fact-finder. 49 In concluding that Lucente was fired, the district court relied on selective and incomplete deposition testimony while ignoring substantial evidence that Lucente's departure from IBM was indeed voluntary. For example, the district court credited Lucente's testimony that Akers told him that IBM would not have a job for him when he returned from Tokyo. Akers, however, testified that he discussed with Lucente the different job opportunities that were available to him at IBM, including various senior staff jobs. (R. at 206-08). Further, Akers maintained that it was perfectly all right by me [for Lucente] to stay in the IBM Company if that was his choice. (R. at 206). Indeed, Akers was adamant that [Lucente] knew he had a job in IBM if he wished to stay. (R. at 208). While it is undisputed that Akers never offered Lucente a specific job at IBM, Akers stated that he was work[ing] on that. (R. at 206). That Lucente agreed to take a job at Northern Telecom before Akers offered him a specific job at IBM does not compel the conclusion that Lucente was involuntarily terminated. It may well undercut Lucente's claim of involuntary termination in the face of Akers's testimony that Lucente had a job at IBM if he wanted one. In any event, this is a jury question. 50 Likewise, the district court relied on selective testimony from Akers regarding his belief that it was in IBM's best interests if Lucente sought employment outside of the company. In so doing, the district court ignored Akers's testimony qualifying this statement in which he noted that IBM's best interest was served only insofar that [Lucente] find an opportunity that excites him, that energizes him, that gives him a chance to succeed from his point of view as opposed to working in the IBM Company knowing that he has topped out, at least temporarily. (R. at 209). 51 Moreover, the district court ignored evidence presented by IBM that Lucente's move to Northern Telecom was voluntary. It is undisputed that Northern Telecom offered an extremely lucrative compensation package to Lucente, with a base salary approximately $100,000 higher than his IBM salary. It is also significant that Northern Telecom offered Lucente the opportunity to succeed the CEO after a few years, an opportunity that Lucente acknowledged was highly unlikely at IBM. 52 Finally, it is undisputed that Lucente met with the CEO of Northern Telecom in the summer of 1990, several months before he began to sense that he was no longer in favor at IBM. The district court chose to credit Lucente's explanation that this meeting was merely an exploratory meeting arranged at the request of a headhunter. Lucente I, 117 F.Supp.2d at 345 n. 3. Putting aside the fact that the district court was required to construe all reasonable inferences in favor of IBM, the non-moving party, it is naive to believe that such a meeting is always so innocuous. It is equally plausible that long before he was replaced in Tokyo Lucente, who had expressed interest in becoming the CEO of some corporation, felt that he was not going to achieve that position at IBM and sought out a company to provide that opportunity. 53 In any case, the substantial evidence presented by IBM that it was willing to continue to employ Lucente upon his return from Tokyo, coupled with the evidence suggesting that Lucente's leap to Northern Telecom was long-planned and extremely advantageous to him, both in terms of monetary reward and career satisfaction, require that we reverse the district court's determination that the employee choice doctrine is inapplicable.