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View opinion on Leagle[A]n otherwise valid covenant will not be enforced if it is unreasonable in time, space or scope or would operate in a harsh or oppressive manner
Contracts II, Pages 1196–1204
American Broadcasting Companies v. Wolf
Court of Appeals of New York, 1981
Facts:
Defendant worked as a sportscaster for plaintiff, ABC. As part of his employment contract, he agreed to negotiate towards a new contract in good faith and to give plaintiff a right of first refusal. Before negotiations started, he talked to CBS and informed them of these conditions. ABC contacted him him as well, but they could not agree on a renewal contract.
A few months later, plaintiff contacted defendant and offered to meet substantially all of his demands. Plaintiff rejected the offer however because plaintiff delayed so long in making it and because he wanted to explore his options once the exclusive negotiation period ended.
When the exclusivity ended, plaintiff and CBS negotiated. Plaintiff agreed to do sports specials for CBS and CBS agreed to hold open an offer of employment for plaintiff until ABC's right of first refusal lapsed.
Plaintiff then informed ABC that he was resigning. They negotiated further, but defendant again refused plaintiff's offers. Plaintiff sued for breach of contract and sought specific enforcement and an injunction against plaintiff's employment with CBS.
Note:
The promise to negotiate was enforceable because it added the requirement of good faith. Defendant's contract with CBS was because he paid them $100.Procedural History:
Trial court found no breach of contract and noted that equitable relief would be inappropriate regardless.
Appellate Division concluded that defendant did breach both provisions of the contract, but that equity was unwarranted.
Issues:
Did defendant breach the contract?
If so, should equitable relief be granted?
Rules:
Specific performance is not available for contracts for personal services.
Courts sometimes will grant a prohibitory injunction to prevent an employee from working for another during the contract's duration, but only when the employee was furnishing a unique service, it is expressly stipulated or implied in the contract, and the employer is exposed to irreparable injury.
After the employment contract has terminated, equitable relief is only available to prevent tortious behavior or to enforce an express anticompetitive covenant.
Page 1201
Reasoning:
Courts have refused to order an individual to perform a contract for personal services—at first because of the difficulties of supervision, but later because of the Thirteenth Amendment prohibition involuntary servitude.
A negative injunction should not be granted, because that goes beyond what the contract says. It did not include a non-compete agreement. It would interfere with defendant's livelihood and inhibit free competition. Plaintiff may pursue monetary damages instead.
Holding:
The contract was breached, but equitable relief should not be granted. Affirmed with costs.
Dissenting Opinion:
: Defendant breached his obligation to negotiate in good faith, and equitable relief should be granted. Defendant was not allowed to accept positions with other companies until after the 90-day right of first refusal period. ABC promoted defendant and greatly increased his popularity, relying on these clauses. By breaching the contract, defendant was able to further increase his value to CBS at plaintiff's expense.
Defendant also agreed on the terms of his coming employment with CBS a month before leaving ABC, so he also breached the first-refusal clause.
The Appellate Division's order should be modified to include a 90-day injunction.