Smith was retained by health insurance broker GHS to service its clients and to locate new business for it. Smith signed a non-compete agreement that he would not solicitinsurance business from any of GHS’s insurance accounts for three years following the termination of his employment.

After terminating Smith for cause, GHS sued him for actively soliciting and servicing their clients in violation of the agreement. Smith argued that the non-compete agreement is unenforceable as a matter of law, contending that:

The insurance customer lists are not protectable as a trade secret;
That the customers he serviced were otherwise discoverable through public sources, and;
That soliciting business based on casual memory is not actionable as a violation of a non-compete covenant.

The New York County Supreme Court ruled that GHS has proven a protectable interest and has validly pleaded its claim for breach of contract. The court noted that GHS’s interest in protecting goodwill is a legitimate basis to enforce the non-compete covenant regardless of whether Smith misappropriated confidential information.

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