Retention of Confidential Information is a Clear Breach of Non-Compete According to Connecticut Court

Retention of Confidential Information is a Clear Breach of Non-Compete According to Connecticut Court

TyMetrix, Inc. v. Szymonik, 2006 Conn. Super. LEXIS 3865

Mr. Peter Szymonik worked for TyMetrix, Inc. from July 2002 to March 10, 2005 as the Director of Client Services and then as Vice President of Technical Operations beginning in January 2004.  TyMetrix was a technology company that provided web-based systems for its clients in order to implement electronic invoicing, performance management metrics, matter & document management, budgeting, forecasting, and generating other business reports.  The company’s typical clients included the legal departments of Fortune 500 companies, law firms, and insurance companies.  The company operated within the United States but at the time had potential clients in the United Kingdom and Australia.  Mr. Szymonik signed an employment agreement in July 2002 and the document contained several post-employment restrictive covenants.  The non-compete agreement prohibited him from: 1) retaining, using, or disclosing any confidential information, 2) working for a competing enterprise for two years following termination, 3) soliciting TyMetrix’s clients (current or prospective) during those two years, and 4) soliciting or hiring any TyMetrix employee during those two years.

TyMetrix terminated Mr. Szymonik on March 10, 2005 and he proceeded to form a new company, SpectoWise, Inc., on July 5, 2005 where he served as its president.  In his capacity as the president of the new company, he solicited several TyMetrix clients and employees to join his firm and even hired at least one former TyMetrix employee.  TyMetrix also asserted that Mr. Szymonik retained copies of some of the company’s confidential information.  He claimed that he was only retaining the information to assist in litigation with TyMetrix and had not used its content in connection with the business operations of his new company or for any other personal gain.  TyMetrix sued Mr. Szymonik in Connecticut state court and asked the court to grant injunctive relief by enforcing the provisions of the July 2002 non-compete agreement.

The court found in favor of TyMetrix, concluded that Mr. Szymonik had indeed breached a valid non-compete agreement, and ordered the covenant enforced.  Mr. Szymonik presented several defenses that the court ultimately rejected in its legal analysis.  He asserted that his new company, SpectoWise, offered very different services from TyMetrix and further argued that the non-compete was unenforceable because the company wrongfully terminated his employment.  As for the claim that the companies were vastly different, the court analyzed SpectoWise’s marketing material and discerned that it was abundantly clear the companies essentially offered the same services to their clients.  Furthermore, the court held that Mr. Szymonik’s termination was not in bad faith and did not go against public policy.  He failed to present any evidence to demonstrate that TyMetrix had violated any “expressed statutory or constitutional provision or judicially derived public policy” when it terminated his employment.  The court also held that Mr. Szymonik’s retention of TyMetrix documents was unlawful on its face and was a clear breach of the non-compete agreement.  It was irrelevant why Mr. Szymonik retained the documents because the mere fact that he still possessed the confidential information was a violation of the employment agreement.

The court’s legal analysis of the dispute indicated that there was in fact a breach of the non-compete agreement and that TyMetrix was likely to succeed on the merits of its claim.  These two factors led the court to find in favor of the employer (TyMetrix) and ordered the enforcement of the restrictive covenant that the parties had executed in July 2002.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Court Enforces Non-Compete for Breach Within the Courier Services Industry

Court Enforces Non-Compete for Breach Within the Courier Services Industry

Express Courier Systems, Inc. v. Brown, 2006 Conn. Super. LEXIS 3784

Express Courier Systems, Inc. was a company that provided courier services to large hospitals, laboratories, and other medical facilities throughout New England, New York, and New Jersey.  The company provided high-efficiency route planning, dispatch services, monitored courier performance, and analyzed customer feedback.  One of the company’s biggest accounts was with Stamford Hospital with whom it had a contract since 2000.  Express Courier generally recruited its couriers through Contractor Management Services, LLC (CMS), an independent third-party human resources firm.  Express Courier employed Misters Seymour Brown, Chip Joseph, and Moses Stephenson as independent contractors from 1999, 2002, and 2005 respectively, as couriers in connection with its contract with Stamford Hospital.

In December 2005, the company required that these employees register and become members of CMS if they wished to continue to provide services as independent contractors.  As part of the registration process with CMS to continue their employment with Express Courier, the three employees signed non-compete agreements that prohibited them from working at a company providing the same or similar services within the “Standard Metropolitan Statistical Area of the Eastern Seaboard” to an entity that was a client in the preceding six months for a one-year period following termination.  Additionally, the agreements stated that Express Courier was entitled to injunctive relief in the event of a breach of the non-compete agreements.

Stamford Hospital informed Express Courier in September 2006 that it was terminating its services except for those associated with the hospital’s laboratory.  At the same time, Misters Seymour, Joseph, and Stephenson informed Express Courier that they had accepted positions with Xerox.  The employees said that the offers were “too good to refuse” and that their last days would be September 30, 2006.  All three men began to work for Xerox on October 1, 2006 where their positions were very similar to their previous ones at Express Couriers and they were paid to perform very similar services.  Express Courier saw these actions as clear violations of the non-compete agreements and sued its three former employees in Connecticut state court where it sought an injunction enforcing the provisions of the restrictive covenants.

All three defendants claimed that their work as Xerox employees was vastly different from the services they provided as Express Courier employees but the court rejected this argument and concluded that they were performing the same services as they had done while still employed by Express Couriers.  The court established that there was a clear breach of the agreements’ provisions but next had to determine if the provisions were in fact reasonable, a requirement for enforcement under Connecticut law.  The restrictive covenants, according to the court provided Express Courier with a reasonable degree of protection while simultaneously not preventing the former employees from securing future employment.  The Eastern Seaboard is a large geographical area but even this restriction was severely limited by only applying to Express Courier’s clients in the six months prior to an employee’s termination.

In light of a clear breach of the non-compete agreements and a finding that they contained reasonable restrictions, the court found in favor of Express Courier and granted the company’s request for injunctions enjoining the former employees from providing services to Stamford Hospital in connection with their new employment with Xerox.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Ambiguous “General Release Agreement” and Global Restrictions Invalidate a CT Non-Compete

Ambiguous “General Release Agreement” and Global Restrictions Invalidate a CT Non-Compete

Connecticut Stone Supplies, Inc. v. Fresa, 2002 Conn. Super. LEXIS 4141

This case concerns Connecticut Stone Supplies’ (CSS) legal dispute with two former employees regarding the enforcement of their non-compete agreements.  The company employed Ms. Amy Fresa from May 15, 2000 until April 4, 2002 as an Administrative Assistant.  She began to work at the company as a temporary employee in connection with Reitman Personnel and the company officially hired her as a full-time employee on August 14, 2000.  CSS had her sign an “Employee Confidentiality and Non-Competition Agreement” when it first hired her and then had her sign a “General Release and Settlement Agreement” when it terminated her employment.  The restrictive covenant prohibited her from working at a competing company for a period of two years and additionally stipulated that she could not solicit CCS’s current of potential clients within a three hundred mile radius.  She began to work for O&G, a company in direct competition with CSS, on August 2002.  Mr. Travis Simms worked for the company from March 29, 2000 until January 22, 2011 at which time he also began to work for O&G.  He signed a non-compete agreement in the same manner as Ms. Fresa but did not execute a General Release Agreement upon termination.  CSS sued both former employees in Connecticut state court and sought to enforce their respective non-compete agreements.

Ms. Fresa and Mr. Simms argued that the non-compete agreements were not binding upon them because the covenants lacked consideration and their terms were unreasonable.  Ms. Fresa additionally contended that the General Release Agreement “extinguished any rights that might exist under it [the non-compete agreement]”.  The court found in favor of Ms. Fresa and Mr. Simms and held that their restrictive covenants with CSS were not enforceable.  The court analyzed the General Release Agreement and found that it contained ambiguous language that created an unintended benefit for CSS.  The company, according to the court, should not be allowed the benefit of enforcing the agreement merely because of an unintended, ambiguous clause in an employment agreement that it had drafted.  The court used this analysis to determine that Ms. Fresa’s non-compete was unenforceable.

The court relied on a different analysis to conclude that Mr. Simm’s non-compete agreement with CSS was unenforceable.  Here the court examined the restrictive provisions of the non-compete agreement to determine whether they were limited and reasonable in a manner that the agreement fairly balanced the interests of the parties involved.  While there was a geographical restriction associated with the non-solicitation clause (three hundred miles), the non-compete clause did not have a geographical limitation and as such “means [the employee] cannot compete anywhere in the world against the plaintiff for a period of two years from termination”.  The court found this to be completely unacceptable and held that the global prohibition on competitive employment was “patently and grossly unreasonable”.  CSS stated that is conducted business all throughout the state of Connecticut but failed to offer any evidence that it carried out global operations or that a worldwide prohibition on competing employment was necessary to protect its legitimate interests.  The court invalidated Mr. Simm’s non-compete agreement in light of the unreasonable and oppressive nature of the provisions contained in agreement that he executed with CSS.

Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry

Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry

Grayling Associates, Inc. v. Villota, 2004 Conn. Super. LEXIS 1859

Grayling Associates, Inc., an executive recruiting agency for large national insurance companies, employed Mr. Albert Villota from October 2002 to April 8, 2004.  The parties executed a non-compete agreement at the start of Mr. Villota’s employment that prohibited him from working at a competing firm within a one hundred mile radius of Grayling’s Connecticut office for a period of two year after his termination.  He began to work at a direct competitor, Park Avenue Group, Inc. (PAG), after he voluntarily terminated his employment with Grayling.  The company sued Mr. Villota in Connecticut state court and sought the enforcement of the provisions contained in the non-compete agreement.

The court found in favor of Grayling and granted the company’s request for injunctive relief.  It enjoined Ms. Villota from working at PAG or other companies in competition with Grayling until April 8, 2006, the end of the two-year period as stipulated in the non-compete agreement.  The court went on to confirm that the time and geographical restrictions in the agreement were reasonable so that they properly balanced the interests of the parties.

The major point of contention in the case focused on the one hundred mile radius restriction.  Grayling was based in Hartford, referred to by many in the business world as the “insurance capital of the world” and as such, the nature of its services was very dependent on its location and proximity to the city.  Many of the nation’s most prominent insurance firms have their headquarters in Hartford and Mr. Villota’s actions within the vicinity of the city could negatively affect Grayling’s business interests and operations.  Grayling noted that the non-compete agreement allowed for the application of the “blue pencil rule” that would allow the court to modify the terms of the geographical restriction.  The court held that the restriction was enforceable as stated in the agreement and enforced the one hundred mile radius provision to protect Grayling’s legitimate interests.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

 

Court Invalidates Non-Compete Designed to Prevent Employment with Company’s Clients

Court Invalidates Non-Compete Designed to Prevent Employment with Company’s Clients

Innovative Financial Services, LLC v. Urban, 2005 Conn. Super. LEXIS 775

Ms. Shelley Anne Urban worked as a full-time employee at Innovative Financial Services, LLC (IFS) from March 24, 2003 to January 17, 2004.  The company provided outsourced bookkeeping, accounting, and administrative services to approximately forty local businesses.  The parties executed a six-page Employment Agreement that stipulated she could not accept employment from a client of the company without the company’s prior written consent.  Ms. Urban had previously signed a “Confidentiality and Non-Competition Agreement” with IFS when she was only a part-time employee.  This prior agreement stated that she was prohibited from providing services to IFS’s past, current, or prospective clients in Hartford county (Connecticut) and Middlesex county (Massachusetts) for a period of one year after termination.  Both of the agreements stated that IFS would be “entitled to injunctive relief in the event of a breach”.

Ms. Urban began to work for the Law Office of William A. Snider two days after her voluntary termination from IFS where she proceeded to perform accounting and bookkeeping services for the business.  The law firm was a prior IFS client and Ms. Urban worked on the firm’s account as an IFS employee in the later part of 2003.  IFS sued Ms. Urban and requested that the Connecticut state court enforce the non-compete agreements and enjoin her from further employment at the Law Office of William A. Snider.  The court denied the company’s request and refused to enforce the agreements between IFS and Ms. Urban.

The court acquiesced that the provisions contained in the agreements were reasonable in scope and did not blatantly favor one party over the other.  The court did not deny the injunction based on unreasonable provisions, but on the basis that Ms. Urban’s actions did not constitute a breach that would disadvantage or harm IFS.  The court stated that injunctive relief is more appropriately applied to prevent a former employee from working for a competing company rather than a former client.  Ms. O’Neil, the owner and president of IFS, did not indicate that Ms. Urban’s actions caused irreparable harm to her company and even testified that she interpreted the non-compete agreements to prevent former employees for “starting up a business to compete against me”.  The court had no choice but to deny the request for injunctive relief in the absence of evidence demonstrating that Ms. Urban’s past or future actions would harm IFS’s business interests.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry

Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry

Grayling Associates, Inc. v. Villota, 2004 Conn. Super. LEXIS 1859

Grayling Associates, Inc., an executive recruiting agency for large national insurance companies, employed Mr. Albert Villota from October 2002 to April 8, 2004.  The parties executed a non-compete agreement at the start of Mr. Villota’s employment that prohibited him from working at a competing firm within a one hundred mile radius of Grayling’s Connecticut office for a period of two year after his termination.  He began to work at a direct competitor, Park Avenue Group, Inc. (PAG), after he voluntarily terminated his employment with Grayling.  The company sued Mr. Villota in Connecticut state court and sought the enforcement of the provisions contained in the non-compete agreement.

The court found in favor of Grayling and granted the company’s request for injunctive relief.  It enjoined Ms. Villota from working at PAG or other companies in competition with Grayling until April 8, 2006, the end of the two-year period as stipulated in the non-compete agreement.  The court went on to confirm that the time and geographical restrictions in the agreement were reasonable so that they properly balanced the interests of the parties.

The major point of contention in the case focused on the one hundred mile radius restriction.  Grayling was based in Hartford, referred to by many in the business world as the “insurance capital of the world” and as such, the nature of its services was very dependent on its location and proximity to the city.  Many of the nation’s most prominent insurance firms have their headquarters in Hartford and Mr. Villota’s actions within the vicinity of the city could negatively affect Grayling’s business interests and operations.  Grayling noted that the non-compete agreement allowed for the application of the “blue pencil rule” that would allow the court to modify the terms of the geographical restriction.  The court held that the restriction was enforceable as stated in the agreement and enforced the one hundred mile radius provision to protect Grayling’s legitimate interests.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment

Connecticut Bathworks Corp. v. Palmer, 2003 Conn. Super. LEXIS 2193

Connecticut Bathworks Corporation was a company servicing New Haven, Fairfield, and Litchfield counties that remodeled bathrooms via the installation of prefabricated acrylic bathtub liners and wall systems.  The company employed Mr. Palmer from approximately the beginning of April 2001 to February 28, 2003 at which point Mr. Palmer voluntarily terminated his employment.  He began to work for Re-Bath of Connecticut, a company in direct competition with Bathworks, the next day.  The issue in this case is that Mr. Palmer signed a “Company Confidentiality Agreement” when he began to work for Bathworks that contained a covenant not to compete that prohibited him from “being employed by any business in competition with the plaintiff [Bathworks] within any county in which the plaintiff is doing business for a period of three years from the termination of his employment with the plaintiff”.  This created a three-year prohibition on working for a competitor with the tri-county area of New Haven, Fairfield, and Litchfield.

Bathworks sued Mr. Palmer in Connecticut state court and requested an injunction to enjoin him from further violations of the non-compete agreement.  The court analyzed the facts of the case, held in favor of Mr. Palmer, and denied Bathworks’s request for injunctive relief.  The court’s decision ultimately came down to the issue of whether Mr. Palmer’s employment with Re-Bath would negatively affect Bathworks’s interests and business operations.  Bathworks carried the burden of establishing the probability of success on the merits of the case and the court held that it failed to present sufficient evidence to indicate it would be directly and immediately harmed due to breach of the restrictive covenant.

Bathworks argued that Mr. Palmer acquired valuable trade secrets and information during his employment with the company and that his continued employment with Re-Bath would harm its operations.  The court however found that Mr. Palmer, as an installer, did not have access to Bathworks’s confidential information or any trade secrets that would put the company at a competitive disadvantage.  The court further noted that while Mr. Palmer was a skilled laborer, he was not a high-level executive, nor did he provide “special, extraordinary, or unique” services.  Bathworks also failed to present any evidence to show that Mr. Palmer knew of or took part in the company’s sales/marketing activities or the development of a business strategy.

The court stated that its role in deciding the case was to balance the parties’ interest to fairly protect Bathworks’s business while not unreasonably restricting Mr. Palmer’s right to seek employment elsewhere.  This agreement however, according to court, unnecessarily restricted Mr. Palmer’s right to work at another company because there was nothing about that employment which would disadvantage Bathworks in the industry.  The non-compete agreement went beyond what was reasonably necessary to protect the company’s interests and as such, the court denied Bathworks’s request for an injunction.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Covenants Not To Compete in Franchise Agreements

Covenants Not To Compete in Franchise Agreements

Pirtek USA, LLC v. Zaetz, 408 F.Supp.2d 81

Pirtek USA, LLC was a franchise company that operated as a business system “consisting of the sale, assembly and installation of industrial and hydraulic hoses, fixed tube assemblies and related components and services”.  Pirtek entered into a Franchise Agreement with Mr. Irwin Zaetz in September 1999 to license him to operate a Pirtek business.  The agreement contained a non-compete clause that prohibited Mr. Zaetz from operating or working for a competing business within a limited geographical area for a two-year period after the termination of the franchise agreement.  Pirtek and Mr. Zaetz terminated their franchise agreement on April 22, 2005 and the parties went their separate ways.  Pirtek was able to sell that particular franchise to another party, Ms. Ashely Geddes, while Mr. Zaetz and his son proceeded to operate their own business, Hose Medic.  This new company provided many of the same services as Pirtek franchises and covered the same general geographical area.  Additionally, the registered address for Hose Medic was the same one Mr. Zaetz used to register his franchise with Pirtek.

Pirtek alleged that Mr. Zaetz used his son’s company as a front to avoid the enforcement of the covenant not to compete.  More specifically, the company alleged that Mr. Zaetz used Pirtek’s proprietary information to help his son base the new company on the Pirtek business model.  Pirtek sued Mr. Zaetz in federal court and requested that the court issue a temporary injunction to prevent further contractual violations while the court tried the case.  The court denied its request and refused to issue a temporary injunction.

Pirtek sued on three accounts, claiming that Mr. Zaetz breached the non-compete by 1) operating a competing hose installation and repair business, 2) infringing on its intellectual property rights, and 3) violating several post-termination provisions of the franchise agreement.  The court found that Pirtek did not meet the burden of proof necessary to show that Mr. Zaetz was in breach of the non-compete.  Pirtek asserted that their business interests were threatened by Mr. Zaetz’s use of the words “hose”, “assembly”, and a graphic of a cog when advertising and discussing the new company.  This, according to this court, was an unfounded assertion because the words were too general to create confusion among consumers and negatively affect Pirtek’s business operations.  Pirtek was not able to establish that it had suffered any hardship or was likely to do so in the future if an injunction was not issued.  Imminent harm, according to the courts, is a requisite factor for granting a temporary injunction, and a court is not obligated to grant one if this crucial factor is missing.

The court pointed out however that the denial of the temporary injunction did not necessary mean that Pirtek would not be able to obtain a permanent injunction later.  It counseled Pirtek that later stages of litigation could result in the enforcement of the covenant.  It noted that Pirtek had some strong evidence to present and use in subsequent stages of the case but that its current request must be denied because it “failed to demonstrate irreparable harm”.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Sufficient Consideration for At-Will Employees

Home Funding Group, LLC v. Kochmann, 2007 U.S. Dist. LEXIS 41376

Home Funding Group, LLC was a New York corporation with primary business operations in Connecticut that engaged in the residential mortgage brokerage business.  The company employed Mr. Nicholas Kochmann and Mr. Patrick Dougherty in its New Jersey office.  They worked for the company from January 2004 to May 1, 2006 and July 18, 2006 respectively.  The company had both employees sign an Employment Agreement that contained non-compete and non-solicitation clauses to protect Home Funding’s business interests.  The employees later signed an “Invention Assignment Agreement” stating that Home Funding was the sole owner of any invention connected to their employment and that it would maintain full intellectual property rights.  The agreement stated that Connecticut law would govern any legal disputes and litigation in state and/or federal court.  Both employees signed a new restrictive covenant in March 2006 that amended and superseded the 2004 Employment Agreement.

Misters Kochmann and Dougherty both voluntarily terminated their employment with Home Funding and Hamilton Financial, a direct competitor in the mortgage broker industry, hired them shortly thereafter.  Home Funding sued its two former employees for breach of the non-compete agreements and requested they be enjoined from further employment with Hamilton Financial.  Misters Kochmann and Dougherty asserted that the agreements were not legally binding on them because they lacked valid consideration, claiming that continued employment is inadequate consideration for a covenant executed after the start of employment.  The federal court sitting in Bridgeport, Connecticut rejected this argument and held that the agreements were properly executed, contained adequate consideration, and were binding upon the parties.

The former employees argued that Connecticut law requires an employer to promise to something different from what it is already obligated to do when it wants to modify/amend a restrictive covenant with one or more of its employees.  The court however applied Home Funding’s legal assertion that at-will employees may be terminated at any time at the employer’s discretion and thus continued employment amounted to adequate consideration to support a valid non-compete agreement.  The court noted that in this case, Home Funding had the burden of proof at trial to demonstrate that the agreement was correctly executed and enforceable.  Home Funding was able to provide such proof and the federal court held in its favor.  Had Misters Kochmann and Dougherty not been at-will employees however, the court would have likely held that the agreement did not have the requisite consideration and could have invalidated the agreement in its entirety.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Requisite Proof to Demonstrate Irreparable Harm in Connection to Breach of Non-Compete

Requisite Proof to Demonstrate Irreparable Harm in Connection to Breach of Non-Compete

VBrick Systems, Inc. v. Stephens, 2009 U.S. Dist. LEXIS 45835

VBrick Systems, Inc. was a Delaware corporation with primary business operations based in Wallingford, Connecticut that provided networked streaming video products and services.  The company employed Mr. Robert Stephens as its Army Federal Territory Manager from July 2005 until April 1, 2008 when he tendered his resignation from the company and began to work at Optibase, Inc as its Director of Federal Sales.  Optibase is a direct competitor that also sells networked video products and services to government, military, and private sector customers.

Mr. Stephens traveled to Connecticut after he was hired by VBrick to attend a training session at the company’s headquarters and signed an employment agreement that contained non-compete and non-disclosure clauses.  In the agreement, he agreed to refrain from working at a competing company during an eighteen-month period after his termination from VBrick.  The non-disclosure covenant stipulated that Mr. Stephens be legally obligated to maintain the confidential nature of VBrick’s business operations and information that he had access to during his employment with the company.  The employment agreement stated that Connecticut law would govern any legal disputes but failed to enumerate any geographical limitations for the restrictive covenants.

VBrick alleged that Mr. Stephens breached the covenants by accepting a position with a competitor within eighteen months of his termination and by using VBrick’s proprietary information in his role as an Optibase employee.  VBrick sued in federal court and requested that the court enforce the provisions contained in the restrictive covenants.  The court ultimately found in favor of Mr. Stephens and denied VBrick’s request for injunctive relief.  The court found that VBrick did not meet the burden of proof to demonstrate that it would suffer irreparable harm if the court did not issue an injunction.

The court held that VBrick failed to present adequate and convincing evidence that Mr. Stephens actually possessed or had access to any of its trade secrets or confidential information.  He had familiarized himself with the products he was marketing and selling by using the company’s training programs and corporate website, both of which are accessible by the public.  Additionally, VBrick did not convince the court that Mr. Stephens’ action as an Optibase employee had “affected or will significantly affect VBrick’s sales or revenues”.  This meant that VBrick was unable to show that it had been adversely affected by Mr. Stephens’ actions or that it was likely to be in the future.  VBrick’s testimony offered evidence to the contrary when it stated before the court that its sales and revenues remained strong despite Mr. Stephens’ termination and the national economic downturn.  In light of inadequate evidence to show that Mr. Stephens’ action at Optibase created an imminent danger for VBrick’s business operations, the court had no option but to deny VBrick’s request for injunctive relief.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Two-Prong Test for Temporary Injunction for Breach of Non-Solicitation Agreement

 

Two-Prong Test for Temporary Injunction for Breach of Non-Solicitation Agreement

Integrated Corporate Relations, Inc. v. Bidz, Inc., 2009 Conn. Super. LEXIS 2212

 

Integrated Corporate Relations, Inc. was a Westport-based parties relations and public consulting firm that contracted with Bidz, Inc., a California corporation, to perform various investor relations services.  The agreement between the companies contained a non-solicitation clause that prohibited Bidz from soliciting, hiring, or otherwise engaging any of Integrated’s personnel during the agreement and for one year following its termination.  Integrated stated that this was their standard practice with clients in order to protect its legitimate business interests and the resources it had spent to develop its business model.  It also claimed that it incurs a hardship when an employee leaves because it must find a suitable replacement.

Integrated hired Mr. Andrew Greenebaum in 2003 as an at-will employee at the company’s Los Angeles office to work as a Senior Managing Director where he was the primary manager of Bidz’s account.  Mr. Greenebaum worked in this capacity until his resignation on February 27, 2009 at which point he founded his own company, Addo Communications, Inc. with another former Integrated employee.  Bidz terminated its business relationship with Integrated on March 30, 2009 and shortly thereafter contracted with Mr. Greenebaum and Addo for investor relations services.  Integrated sued Bidz when it learned of this new business relationship and claimed that Bidz had violated the non-solicitation agreement in their contract.  The company requested equitable relief and called for the enforcement of the restrictive covenant.  Integrated requested a temporary injunction while the case was being decided in order to prevent further violations of the agreement.  The court’s holding in this case pertains to the issue of whether to grant a temporary injunction.

The court outlined that the primary purpose of a temporary injunction is to “preserve the status quo until the rights of the parties can be finally determined after a hearing on the merits”.  Connecticut courts will generally grant temporary injunctions when the moving party: 1) demonstrates “it is likely to succeed on the merits of its case” and 2) that it will “suffer immediate and irreparable harm if the injunction is not granted”.  The court concluded that Integrated failed to meet either of these requirements and denied the company’s request for a temporary injunction.

The court concluded that Integrated lacked a meritorious claim regarding a breach of the employment contract by Bidz contracting with one of its former employees.  The non-solicitation agreement in question is one between a consulting company and a client, not between a company and its employee(s).  Integrated failed to present any case from any jurisdiction in the United States where a court recognized this business arrangement as an interest that warranted legal protection.  This, according to this court, meant that Integrated lacked a legitimate business interest that a temporary injunction would be necessary to protect.  Additionally, Integrated failed to present evidence that Bidz had actually “solicited” Mr. Greenebaum and purposefully induced him to terminate his employment with Integrated.  The court used these two factors to hold that that Integrated would most likely not succeed on the merits of its case.

The facts of the case also led the court to conclude that Integrated would not experience imminent and irreparable harm if it failed to issue an injunction.  The court held that this was requisite for granting a temporary injunction and commented “Connecticut law supports a distinctly moderated level of proof required to establish the elements of irreparable harm”.  Even though Connecticut courts require only a “moderated level of proof”, the moving party must demonstrate some degree of imminent, irreparable harm.  The only loss that Integrated could demonstrate was that two employees terminated their employment and started their own company.  They were both at-will employees however and could have done so at any point in time, regardless of Bidz’s action.

In conclusion, the court held that Integrated failed to meet the requirements that would warrant a temporary injunction against Bidz to prevent it from transacting with Mr. Greenebaum and his company Addo.

If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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