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New York Court Considers Oral Non-Compete Agreement

In James V. Aquavella, M.D., P.C. v. Viola, M.D., 914 N.Y.S.2d 498 (N.Y. App. 2010), the New York appellate court considered whether an oral noncompete clause was unenforceable pursuant to the statute of frauds. In 1998, Viola entered into an oral employment agreement with Aquavella. Aquavella argued that the 1998 oral agreement incorporated all the terms and conditions of a 1996 written employment agreement between Viola and Urban Oncology Service, P.C. The 1996 written agreement contained a noncompete clause prohibiting Viola from competing with Urban Oncology for two years after the termination of this employment. In 1995, Mr. Aquavella sold the assets of his practice to Equivision, Inc., which entered into a Services Agreement with Urban Oncology. Aquavella then became an employee of Urban Oncology. In 1998, after a dispute between Aquavella and Urban Oncology, Viola agreed to continue his employment at the practice with Aquavella as his employer. Id. at 500. In 2002, Viola left Aquavella and opened a competing practice within 300 yards of his former employer.

Aquavella sued, alleging that Viola breached the noncompete clause in the 1996 written agreement, that according to Aquavella, had been incorporated in its entirety as a term and condition of the 1998 oral agreement. The court of appeals held that because the noncompete clause spanned a period of two years, it could not be performed within one year, and was therefore subject to the statute of frauds. The court held that nothing written between the parties contained the essential term that the 1996 written agreement was incorporated into the parties’ 1998 oral agreement. Additionally, the court held that Aquavella had failed to establish that the 1996 agreement was validly assigned to Aquavella and was in effect when Viola opened his own practice. Id. at 502. Further, the court stated that Aquavella’s only evidence that the 1996 written agreement’s terms were incorporated into the 1998 oral agreement was Aquavella’s testimony at trial, which was inappropriate parole evidence. Id. at 504. Accordingly, the court held that Aquavella’s version of the 1998 oral agreement containing a noncompete provision was unenforceable and void under the statute of frauds.