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Totaro, Duffy, Cannova & Company, LLC v. Lane, Middleton & Company, LLC

A-2649-03T1 (N.J. Super. App. Div. 2006) (Unpublished)

NON-SOLICITATION—Close temporal proximity between when solicitation letters are mailed by one who is bound by a post-termination non-solicitation agreement and the time that person is engaged for future services by recipients of those letters is sufficient evidence of the economic harm experienced by the old company.

An accountant specializing in compliance accounting and financial and estate planning twice merged his private practice – once with another accountant in private practice, and later with a larger accounting firm. Upon this last merger, the accountant refused to sign a restrictive covenant, but did sign a non-solicitation agreement prohibiting the accountant from performing compliance accounting for anyone who was his client prior to this most recent merger. Problems arose in the relationship between the accountant and the new firm. The accountant accessed the firm’s client list and mailed to approximately 150 clients the following: (1) an announcement of the opening of the accountant’s private practice; (2) a fee schedule for services performed, including for compliance work; (3) a disengagement letter from the firm; and (4) a letter to separately engage the accountant. The lower court found that the accountant breached the non-solicitation agreement and awarded damages. The accountant appealed.

Although many of the clients who left the firm and retained the accountant were either friends, family members or clients with long-standing relationships with the accountant, the lower court found, and the Appellate Division agreed, that the close temporal proximity between when the accountant mailed his solicitation letters and the time the firm received the disengagement letter was sufficient evidence that the accountant’s mailing was the proximate cause of the economic injury suffered by the firm when the clients disengaged the firm and retained the accountant.

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