FTI CONSULTING, INC. v. PRICEWATERHOUSECOOPERS

Citation Codes

Equivalent Citations

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Docket Number

3974.

Attorney(S)

Hogan Hartson LLP, New York (Sanford M. Litvack of counsel), for appellant. Bondy Schloss LLP, New York (S. Robert Schrager of counsel), for respondent.

Judges

Peter Tom
David B. Saxe
David Friedman

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Smart Summary

Factual and Procedural Background

Plaintiff FTI Consulting, Inc. purchased the Business Recovery Services (BRS) unit from defendant PricewaterhouseCoopers LLP through an asset purchase agreement. This agreement contained a restrictive covenant prohibiting the defendant from engaging in any business in the United States that provided services similar to those offered by the BRS unit for a period of three years. After the closing of the asset purchase, the defendant allegedly continued to provide BRS-type services and used the term "Business Recovery Services" in its Internet advertising. Plaintiff sought and was granted a preliminary injunction enjoining defendant from offering BRS services on new matters. The Supreme Court of New York, Appellate Division, First Department, affirmed this order on appeal.

Legal Issues Presented

Whether the restrictive covenant in the asset purchase agreement prohibits defendant from providing any BRS-type services post-closing, including those not narrowly defined as BRS business in the agreement.
Whether the defendant's use of the term "Business Recovery Services" in Internet advertising violates the marketing restriction agreed upon by the parties.
Whether plaintiff demonstrated a likelihood of irreparable harm justifying a preliminary injunction.

Arguments of the Parties

Defendant's Arguments

The defendant contended that the asset purchase agreement defines BRS business narrowly, excluding the post-closing services at issue from the scope of the restrictive covenant.

Plaintiff's Arguments

Plaintiff argued that the restrictive covenant unambiguously prohibits not only BRS business as narrowly defined in the agreement but also any BRS-type services.
Plaintiff maintained that the defendant's continued use of the term "Business Recovery Services" in marketing created the impression that BRS-type services were still provided by defendant, violating the marketing restriction.
Plaintiff asserted that the defendant's breach caused irreparable harm through loss of goodwill, which is difficult to quantify.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
W.W.W. Assocs. v. Giancontieri, 77 N.Y.2d 157, 162	Unambiguous agreements must be enforced according to the plain meaning of their terms.	The court applied this principle to interpret the restrictive covenant broadly to include all BRS-type services, not just those narrowly defined.
Hay Group, Inc. v. Nadel, 170 A.D.2d 398	Irreparable harm includes loss of goodwill that is not readily quantifiable.	The court relied on this precedent to support the finding that breach of the restrictive covenant caused irreparable harm justifying injunctive relief.

Court's Reasoning and Analysis

The court analyzed the restrictive covenant in the asset purchase agreement and determined it unambiguously prohibits the defendant from engaging in any BRS-type services in the United States for three years post-closing. The court rejected the defendant's narrower interpretation, emphasizing that the plain language of the agreement must be enforced. The court found that defendant's use of the term "Business Recovery Services" in Internet advertising violated the marketing restriction, as it fostered the impression that such services continued to be offered by defendant and related entities. The court also found that plaintiff demonstrated a likelihood of success on the merits and irreparable harm, particularly through loss of goodwill, which is difficult to quantify. Additionally, the court noted that any delay by plaintiff in seeking relief did not prejudice the defendant or cause a change in its position.

Holding and Implications

The appellate court unanimously affirmed the Supreme Court's order granting plaintiff a preliminary injunction enjoining defendant from offering Business Recovery Services on new matters and finding that defendant's use of the term in marketing violated the agreed marketing restriction.

The decision directly enforces the restrictive covenant and marketing restrictions agreed upon by the parties, protecting plaintiff's purchased goodwill and business interests. No new legal precedent was established beyond the application of established contract interpretation and injunctive relief principles.

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FTI CONSULTING, INC., Plaintiff-Respondent, v. PRICEWATERHOUSECOOPERS LLP, Defendant-Appellant.

Plaintiff effectively purchased defendant's Business Recovery Services (BRS) unit. The asset purchase agreement contained a restrictive covenant barring defendant, for a period of three years, from engaging in any business providing services in the United States "of the type" then offered by BRS. Inasmuch as it appears that subsequent to the closing of the asset purchase agreement, defendant continued to provide BRS-type services, plaintiff has shown a likelihood of prevailing upon the merits of its claim that the restrictive covenant was violated. While defendant maintains that the agreement defines BRS business sufficiently narrowly to exclude from the definitional ambit the post-closing services at issue, the restrictive covenant's proscription unambiguously extends not only to BRS business, as defined in the agreement, but more broadly to the provision of any BRS-type services, and an unambiguous agreement must be enforced according to the plain meaning of its terms ( see W.W.W. Assocs. v. Giancontieri, 77 N.Y.2d 157, 162). The motion court also properly found, for the purposes of the motion, that the use of the term "BRS" in the marketing restriction clause of the asset purchase agreement could be interpreted as an abbreviated form of the term Business Recovery Services and that the complained-of Web pages fostered the impression that BRS-type services continue to be provided by all the firms in PricewaterhouseCoopers' global network, including defendant, in violation of the marketing restriction.

Defendant agreed that the restrictive covenants were "an essential part of the parties' bargain" and that a breach "could adversely affect both the value of the transaction and the goodwill of the Business." Nevertheless, there is evidence indicating that defendant, well after the closing, continued to tout its experience in the area of business recovery services, thus compromising the value of the goodwill sold to plaintiff. Under these circumstances, the Judicial Hearing Officer properly found that the agreement's breach entailed irreparable harm, the loss of goodwill not being readily quantifiable ( see Hay Group, Inc. v. Nadel, 170 A.D.2d 398).

While the record indicates that plaintiff had knowledge of defendant's position respecting the scope of the restrictive covenant long before this action was commenced, it appears that plaintiff required time to investigate the matter closely before deciding to litigate, and there is no showing that defendant changed its position as a result of any delay by plaintiff in seeking injunctive relief ( see id.).

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.