Sale of Business “Good Will” and Subsequent Competition with Purchaser May Subject Seller to Perpetual Restrictions on Contacting Former Customers and Clients

A recent Second Circuit Court of Appeals decision provides guidance regarding New York law concerning permissible and impermissible competitive conduct by the seller of a business, including its “good will,” who — without giving a non-compete covenant — thereafter goes into competition with the purchaser. The Second Circuit was aided by New York’s highest court which answered certified questions concerning the proper interpretation of the so-called “Mohawk doctrine.” The Second Circuit held that, in perpetuity, the seller may not disparage the purchaser, may not actively solicit former clients/customers but may respond truthfully to factual questions posed by them on their own initiative, may not provide the new employer with information that is proprietary to the purchaser but may assist in developing a plan to attract former clients/customers, and may attend meetings with them but must take a largely passive role. Bessemer Trust Co., N.A. v. Branin, Docket Nos. 08-2462-cv(L) and 08-2677-cv(XAP) (2d Cir., Apr. 5, 2012).

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