Karpinski v. Ingrasci
268 N.E.2d 751, 28 N.Y.2d 45, 320 N.Y.S.2d 1 (1971)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Courts may modify an overly broad employee non-compete agreement by severing unreasonable terms—such as an excessive scope of prohibited activity—and enforcing the remaining reasonable portions of the covenant.
Facts:
- Dr. Karpinski, an oral surgeon, established a practice in Auburn, New York, and developed a referral network across five counties: Cayuga, Cortland, Seneca, Tompkins, and Ontario.
- In 1962, Karpinski hired Dr. Ingrasci, a recent graduate, to work in a new satellite office in Ithaca.
- Ingrasci signed a three-year employment contract containing a covenant that he would 'never practice dentistry and/or Oral Surgery' in the five specified counties after leaving Karpinski's employ.
- The contract also stipulated that Ingrasci would owe Karpinski $40,000 via a promissory note if he violated the non-compete clause.
- After the contract expired in 1968, the parties failed to agree on a new association, and Ingrasci terminated his employment.
- One week later, Ingrasci opened his own oral surgery practice in Ithaca, within the restricted five-county area.
- Following Ingrasci's opening, Karpinski's patient referrals from the area dwindled to almost nothing, forcing him to close his Ithaca office.
Procedural Posture:
- Dr. Karpinski (plaintiff) sued Dr. Ingrasci (defendant) in the New York Supreme Court, the state's trial court of general jurisdiction.
- The trial court found for Karpinski, granting an injunction to enforce the covenant and awarding $40,000 in damages.
- Ingrasci, as appellant, appealed to the Appellate Division, an intermediate appellate court.
- The Appellate Division reversed the trial court's judgment and dismissed the complaint, finding the covenant void as overly broad.
- Karpinski, as appellant, appealed the dismissal to the Court of Appeals of New York, the state's highest court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a restrictive covenant that is overly broad in the scope of activity it prohibits become entirely unenforceable, or may a court sever the unreasonable portion and enforce the remainder?
Opinions:
Majority - Chief Judge Fuld
No, a restrictive covenant that is overly broad is not entirely unenforceable; a court may sever the unreasonable portion and enforce the covenant to the extent that it is reasonable. Restrictive covenants are subject to an 'overriding limitation of reasonableness' due to public policy concerns about restricting a person's livelihood. In this case, the covenant's geographic scope (five counties) is reasonable as it precisely matches the area of the plaintiff's practice, and its unlimited duration is permissible for professional contracts where the area is limited. However, the covenant's prohibition on practicing all 'dentistry' is impermissibly broad because the plaintiff's practice is limited to 'oral surgery,' and the defendant should not be prevented from working in an area where he would not be in competition. Rather than voiding the entire covenant, the court has the power to sever the impermissible part ('dentistry') and enforce the valid part ('oral surgery'). Furthermore, the plaintiff is entitled to an injunction and actual damages suffered during the breach, not the full liquidated damages amount, as granting both would be grossly unfair.
Analysis:
This decision formally establishes the power of New York courts to apply a 'blue-pencil' or severance rule to overly broad restrictive covenants in employment contracts. Instead of the all-or-nothing approach of either enforcing a covenant as written or voiding it entirely, this ruling permits judicial modification. It allows employers to protect their legitimate business interests even if a contract term is imperfectly drafted, as courts can pare down an unreasonable restriction to an appropriate size. This precedent balances the employer's need for protection against the employee's right to earn a livelihood, encouraging more nuanced and equitable outcomes in non-compete litigation.
