After Joseph Bloch ended his relationship with Jackson Heights Care Center, LLC, d/b/a Regal Heights Rehabilitation and Health Care Center (JHCC), the parties entered into a settlement agreement wherein Bloch agreed not to disclose proprietary information secured during the course of his association with JHCC, "except 'pursuant to lawfully issued process.'"
In the event of the agreement's breach, Bloch agreed to pay "liquidated damages" totaling $75,000.
Several months after that agreement was executed, Modern Diagnostic Laboratory, Inc. (MDLI) and JHCC became embroiled in a dispute. A draft "subpoena" from MDLI's counsel was delivered to Bloch, who agreed to sign an affidavit on MDLI's behalf detailing JHCC's business practices; an act which breached Bloch's settlement with JHCC.
JHCC later requested and was awarded a money judgment against Bloch in the amount reserved by the parties' agreement. And on appeal, the Appellate Division, Second Department, affirmed.
The AD2 concluded that the draft "subpoena" did not qualify under the governing "lawfully issued process" exception since the document Bloch received did not actually "compel or demand" that he "act or refrain from acting." As the court observed:
The subpoena at issue was not "lawfully issued process" pursuant to the Agreement which compelled the defendant's disclosures to Modern Diagnostic. Legal process is designed to compel or demand that a party act or refrain from acting .... Although counsel for Modern Diagnostic mailed to the defendant a letter with a copy of a subpoena, the content of counsel's letter clearly indicated that the subpoena was not being served at that time. Therefore, the defendant was not compelled to disclose the information pursuant to lawfully issued process, and violated the Agreement by disclosing the plaintiff's business information in a private meeting with counsel for Modern Diagnostic. In opposition, the defendant failed to raise a triable issue of fact as to whether he violated the nondisclosure provision of the Agreement ....
So you see, silence is golden. (It was at least worth $75,000.)
For a copy of the Appellate Division's decision, please use this link: Jackson Hgts. Care Ctr., LLC v. Bloch