The opinion of the court was delivered by: Debevoise, Senior District Judge
This matter concerns the enforcement of restrictive covenants in a series of employment and independent contractor agreements. Plaintiff, Ascencea, L.L.C. ("Ascencea"), instituted this action against former associates of Affiliated Mortgage Protection, L.L.C. ("Affiliated"), claiming that Defendants violated their confidentiality and non-compete agreements by leaving to work for a competing company, Peoples Protection Group, Inc. ("PPG"). Ascencea pleads that it is the successor in interest to Affiliated, and that Defendants Zisook and Seifert orchestrated a plan to recruit Affiliated's managers and sales force to work for PPG and steal Affiliated's confidential business information.
Presently before the court is Defendants Randall J. Zisook, Lori Zisook, People's Protection Group, Inc., United Home Protection, Inc., Maria Seifert, Eastern Seaboard, Inc., Daniel Zaborowski, and Michael Wsol's motion for summary judgment. For the reasons set forth below, Defendants' motion is GRANTED. Ascencea's Complaint is DISMISSED.
Ascencea is a company that markets mortgage protection insurance ("MPI"), a form of declining-benefit life insurance which pays off an insured's mortgage in full in the event he or she dies before the mortgage is fully paid. (Complaint ¶ 30).*fn1 Ascencea markets its services through "junk mail," sending specially designed advertisements called "lead letters" to large numbers of prospective purchasers. Id. at 33. Ascencea obtains its address lists from a variety of bulk mailing list vendors. Id. at 35. The "lead letter" advertisements direct recipients to contact Ascencea for more information about MPI. Id. at 34. All responses to Ascencea's advertisements are logged in a database and the "leads" are forwarded to regional managers who charge particular agents with closing sales from those leads. Id. The company conducts its business primarily through independent contractors operating in various territories throughout the United States. Id. at 31.
While MPI is a legal product, it is of dubious financial value to most mortgage holders. As such, sellers of MPI have often been criticized for employing misleading, predatory, or outright fraudulent tactics to make sales. These tactics are exacerbated by a crowded marketplace of MPI sellers competing over a limited number of customers who can be convinced to purchase the insurance.
Ascencea claims that its method of selecting useful leads from the large numbers of addresses available for sale is a sophisticated technique that took many years to develop. Id. at 35. Ascencea has also designed a training program and related materials to instruct its agents on how to close a sale more frequently. Id. at 38. Given the time, effort, and expense involved in developing its "leads" and "business practices," Ascencea considers both to be valuable trade secrets. Id. at 35. Concerned that its solicitation methods could be easily replicated, Ascencea requires its agents, managers, and consultants to execute confidentiality and non-compete agreements. Id. at 39.
Ascencea alleges that Defendants breached their non-compete agreements by, inter alia, soliciting Ascencea employees to leave the company, using Ascencea leads, marketing materials and other confidential information in their own solicitation, and otherwise competing against Ascencea in violation of their restrictive covenants. Id. at 70. Defendants vehemently dispute the validity of the contracts while denying that they stole anything from Ascencea. (Def. Br. 46). Defendants further argue that Ascencea should be barred from enforcing the non-compete agreements because it has engaged in a pattern of unethical conduct, including: violating insurance solicitation regulations, ignoring or circumventing the orders of state insurance regulators, and filing false "Vector" reports on Defendants to damage their ability to sell insurance. Id. at 21-25.
There is one critical factual wrinkle. Ascencea has only been in existence*fn2 since March of 2007 (Def. Ex. 9), and each of the confidentiality and non-compete agreements entered into by Defendants predates Ascencea's formation. (Complaint Exs. A, C, D, E, F, G, O, P). Defendants actually contracted with Affiliated, a company in the same business as Ascencea that was partially owned by one of the principals of Ascencea. (Def. Ex. 6). As it seeks to enforce the Affiliated contracts, Ascencea pleads that it is the successor in interest to Affiliated. (Complaint ¶ 3). Specifically, Ascencea alleges that Matthew A. Goldberg, a former principal of Affilated, bought out his former partner before forming Ascencea. Id. However no merger agreement, stock purchase agreement, assignment of rights, or other evidence signifying transfer of all corporate assets and liabilities has been provided to the court. Indeed, Affilated, the counterparty to Defendants' contracts, is still registered as a separate corporation under the laws of New Jersey. (Def. Ex. 6).
Defendants consist of two groups: (1) former employees and agents of Affiliated and Ascencea, and (2) former employee spouses and businesses started by former employees after leaving Ascencea. Their individual circumstances are as follows.
Defendant Randall Zisook ("Zisook") was employed, first by Affiliated and then Ascencea, from January 20, 2003 until on or about November 16, 2007. (Complaint ¶ 4). Zisook began as an agent and was later promoted, first to district manager, then to regional manager, and then finally to national marketing director. Id. On July 28, 2005, Zisook entered into a written Employment Agreement ("Zisook Agreement") with Affiliated. The Zisook Agreement states, in pertinent part:
7. Restrictive Covenants .
(b) In consideration of Employer's offer of employment to Executive pursuant to, this Agreement, Executive agrees that he shall not for a period of twenty-four (24) consecutive months following the termination of Executive's employment with Employer for any reason whatsoever within the United States
(i) directly or indirectly engage, participate or make any financial investment in or become employed by or render any services to or for any person or company in competition with the mortgage life insurance business conducted by Employer or any of its agencies, or any similar business (the "Business"), within any area in which Employer is doing business at such time (whether as an employee, independent contractor, five (5%) percent or greater owner, partner, lender, stockholder or otherwise);
(ii) Hire or enter into an independent contractor relationship, either directly or indirectly, any employee, manager, agent or consultant of the Company, in any capacity whatsoever, nor attempt to induce any such employee, manager, agent or consultant of the Company, to cease his or her business relationship with the Company or induce any such person, past or present, to furnish the Executive with information regarding vendors, agents or agencies, marketing materials, issued or pending business or any of the Company's marketing or sales practices;
(iii) directly or indirectly raid, entice, induce, solicit, canvass, or accept any business (of the type conducted by Employer) for any other person or company from any past, present or future (as defined below) agent, manager, consultant or customer of Employer with whom Executive had contact during his employment,
(iv) directly or indirectly employ or attempt to employ, engage or assist anyone else in employing or engaging in any competing business any of Employer's managerial, executive or sales employees, agents or agencies; or encourage any of such individuals to terminate their relationship with Employer;
(v) directly or indirectly request any present or future ("future," as used herein, shall mean at or prior to the time of termination of Executive's employment) entities with whom Employer has business relationships to curtail or cancel their business with Employer, or Mail any direct mail solicitations of a similar content to those used by the Company,
(vi) use or copy any of the Employer's sales materials flip charts, presentations, vendors, data sources, information or any materials whatsoever which originated from Executive's association with the Employer whether or not such materials are of a proprietary nature, (vii) directly or indirectly ...