Court Amends Time Restriction for Engineering Firm Non-Compete Agreement

Court Amends Time Restriction for Engineering Firm Non-Compete Agreement

Maintenance Technologies International, LLC v. Vega, 2006 Conn. Super. LEXIS 136

Maintenance Technologies International, LLC (MTI) was a Milford, Connecticut based company that offered highly specialized engineering maintenance services to clients.  The company employed Mr. Daniel Vega as an engineer from February 25, 2002 to October 7, 2005.  His responsibilities for this position included conducting vibration analysis, infrared thermography, motor testing, and laser alignment.  He signed a covenant not to compete as part of his employment agreement with the company.  The restrictive covenant prohibited Mr. Vega, for a period of two years following termination, from engaging in competing business activities within one hundred fifty miles of MTI’s current principal place of business.  The agreement further stated that he could not own any stock in a competing business located within one hundred fifty miles of MTI’s principal place of business.

Mr. Vega informed his superiors that he would be voluntarily terminating his employment with the company due to family related issues and his personal ambition to finish his master’s degree in theology.  Once he quit MTI however, he began to work for Schultz Electric Co., a competing company with major offices in Connecticut, Maine, Massachusetts, and New Jersey.  MTI’s management interpreted this move as a violation of the non-compete agreement executed when Mr. Vega’s employment with the company started and sued him in Connecticut state court.  The company requested that the court enforce the provisions of the restrictive covenant in order to prevent any further violations of the agreement.  The court found in favor of MTI, granted the company’s request for an injunction, but amended the time restriction to be only one year, instead of the two-year period as stipulated in the agreement.

In reaching its decision, the court assessed whether MTI had a legitimate interest that needed protection and whether the restrictions in the non-compete agreement were reasonable in scope.  The court recognized that the company spent a great deal of resources on training its employees and this created a valid interest according to the court.  Furthermore, the employees were on the front lines with regard to the business relationships with MTI’s customer and had direct access to proprietary and confidential information.  The court held that a company’s employees and customer relationships are its most valuable assets and are worthy of protection under Connecticut law.  Injunctive relief, therefore, was reasonably necessary for the fair protection of the employer’s business interests.

Next, the court examined whether the specific restriction contained in the agreement were reasonable in scope.  The court held that they amounted to a reasonable and legitimate restriction of Mr. Vega’s ability to work.  They provided an adequate amount of protection to MTI while not overreaching and unnecessarily restricting Mr. Vega’s ability to secure future employment.  The limitations still allowed many viable career options for Mr. Vega.  The court did however slightly amend the time restriction.  It was concerned that the full two years could prove to be “somewhat inequitable” and reduced the restriction to one year, instructing the parties that they could submit arguments prior to the expiration of the one year regarding a potential extension to the full two years as stipulated in the covenant not to compete.

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.

Recent Decision Suggests Educational Support Orders May Not Be Applied Retroactively

A recent case decided by the Connecticut Appellate Court, suggests Educational Support orders entered pursuant to Connecticut General Statutes § 46b-56c may not be entered retroactively.  In Kleinman v. Chapnick, 131 Conn. App. 812 (2011), the parties had two children who were over the age of eighteen and enrolled as full-time college students.  During the divorce proceedings, the parties’ older daughter was a senior and their younger daughter was a freshman.  In February 2010, after the parties entered into a final agreement on custody and visitation, a two day trial ensued regarding financial issues.

As part of its decision, the Court ordered the husband to pay 100 percent of the statutory expenses for the education of the parties’ younger daughter beginning with the 2010-2011 school year.  As the Court did not enter an order with respect to the 2009-2010 school year, the wife filed a Motion to Clarify, Correct and/or Reargue.  The Court subsequently heard the wife’s motion, but declined to change its position.

On appeal, the Connecticut Appellate Court found that the husband made voluntary payments for the 2009-2010 school year that exceeded his statutory obligation under Conn. Gen. Stat. § 46b-56c.  More importantly, however, the Court held that Section 46b-56c contains no language authorizing retroactive application, pointing out that various provisions contained within the statute suggest that it is intended to apply prospectively only.  In a footnote, the Court further explained that child support orders cannot be retroactive, and an order for post-majority educational support is in fact an order for child support for college education.

Should you have any questions regarding educational support in the context of divorce proceedings, please feel free to contact Attorney Michael D. DeMeola.  He practices out of the firm’s Westport office and can be reached by telephone at (203) 221-3100 or email at mdemeola@maylaw.com.

Three-Year Restriction Found Unreasonable in CPA Non-Compete Agreement

Three-Year Restriction Found Unreasonable in CPA Non-Compete Agreement

Haims, Buzzeo & Co. v. Wikstrom, 2003 Conn. Super. LEXIS 2539

Ms. Nancy Wikstrom owned a certified public accounting firm, Wikstrom & Company, which she sold to Haims, Buzzeo & Co. (HBC) on January 1, 2001.  The purchase agreement outlined the obligations of the respective parties and contained a covenant not to compete.  Ms. Wikstrom was to stay on as an employee of HBC, continuing to work as a certified public accountant (CPA) and she agreed to bring her clients’ business to the firm.  The non-compete agreement prohibited her, for a period of three years following termination, from soliciting clients and engaging in competing business activities within the city of Stamford, Connecticut.  In exchange for these covenants, Ms. Wikstrom was to receive employment, $30,000 monthly payments to begin on January 1, 2010, and compensation for the sale of her former company’s good will and stock.

The merger of the two accounting firms did not go very well and Ms. Wikstrom left HBC in March 2002 due to dramatic differences in business personality and management style.  She proceeded to start her own accounting firm, the Wikstrom Group, located in Stamford that provided the same accounting services as HBC.  HBC interpreted these actions as clear violations of the non-compete agreement and sued Ms. Wikstrom in Connecticut state court for breach of the restrictive covenant.  The company specifically claimed that she had “actively and purposefully tried to induce her former clients to come with her to the new accounting practice she created, and otherwise attempted to hinder and damage the plaintiffs in their practice”.  Ms. Wikstrom however claimed that the agreement was unenforceable and that she did not violated any legally binding clauses contained in the purchase and employment agreements.

The court ultimately denied HBC’s request for an injunction preventing further violations of the non-compete agreement and concluded that the agreement was in fact unenforceable.  It reached this decision based on several factors: 1) HBS had failed to demonstrate it was likely to succeed on the merits of the case and 2) the company failed to prove that it had incurred irreparable harm because of Ms. Wikstrom’s actions.  After examining the facts of the case and the provisions of the non-compete agreement, the court held that injunctive relief was inappropriate and HBC was not entitled to an injunction restraining Ms. Wikstrom’s business actions.

The company was not able to meet the burden of proof required to demonstrate to the court that it was likely to succeed on the merits of the case.  Most notably, the court addressed the reasonability and enforceability of the restrictions contained in the restrictive covenant.  The geographical limitation was reasonable in scope but this was not true for the three-year time restriction.  This, according to the court, was unreasonable because Ms. Wikstrom had been practicing as a CPA for over thirty years, had many long-standing loyal clients, and needed income from her chosen profession to sustain herself.  The three-year period was too long, in the opinion of the court, and unnecessarily restricted her business actions and ability to pursue her occupation.

Furthermore, HBC did not demonstrate that it had incurred irreparable harm or that it was likely to do so in the future.  The only clients that left HBC where those that were clients of Wikstrom & Company prior to the merger of the two accounting firms.  The court noted that those clients would actually be harmed if an injunction was granted and held that its denial was the only way to maintain the status quo between the parties.  By denying the request for an injunction, the court permitted HBC and Ms. Wikstrom’s new company to carrying on their business activities as they had been doing the previous eighteen months (since Ms. Wikstrom voluntarily terminated her employment with HBC).

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.

Enforcement of a Non-Compete Agreement in the Salon Industry

Enforcement of a Non-Compete Agreement in the Salon Industry

Piscitelli v. Pepe, 2004 Conn. Super. LEXIS 3264

Ms. Francine Piscitelli owned and operated a hairdressing and beauty salon since 1985.  She employed Ms. Bernadette Pepe as a stylist from 1990 to July 31, 2004.  The salon moved and underwent a change in its trade name in 1997.  Ms. Piscitelli had Ms. Pepe sign an Employment Agreement on February 27, 1997 that contained a restrictive covenant.  The non-compete agreement prohibited Ms. Pepe for one year following termination from engaging in competing business activities, soliciting the salon’s employees, or soliciting the salon’s current clients.  The agreement designated a restricted area for the covenant not to compete: Branford, North Branford, East Haven, Guilford, and the portion of New Haven east of the waterway formed by the Quinnipiac River, New Haven Harbor, and Morris Cove.

Ms. Pepe signed a three-year lease on March 9, 2002 for a premise in North Branford to operate a full-service hair and nail salon.  Ms. Piscitelli learned of this in May 2004, confronted Ms. Pepe about the development, and Ms. Pepe confirmed what her boss had been hearing around the salon.  Ms. Pepe assured her boss that she would not be soliciting any of the employees or any current clients beyond her own.  Ms. Piscitelli was comforted by these assurances and allowed Ms. Pepe to continue to schedule appointments at the salon until she voluntarily terminated her employment on July 31, 2004.  In the following months, three stylists left the salon the work for Ms. Pepe at La Bella salon and Ms. Pepe solicited clients of her previous salon regarding the opening of her own salon.

Ms. Piscitelli sued Ms. Pepe in Connecticut state court for breach of the non-compete agreement.  Ms. Pepe however contended that the agreement was unenforceable because it: 1) lacked adequate consideration, 2) contained unreasonable restrictions, and 3) there was an adequate remedy at law, thus barring injunctive relief as an appropriate legal solution.  The court rejected these defenses, found in favor of Ms. Piscitelli, and granted her request for enforcement of the covenant not to compete.

While the agreement did not increase Ms. Pepe’s compensation, paragraph ten created additional consideration because it obligated the employer, Ms. Piscitelli, to pay for “certain courses in professional education and training”.  This benefit, according to the court, was adequate consideration in exchange for Ms. Pepe’s covenants.  Furthermore, the court concluded that the covenant not to compete was reasonable with respect to the time and geographical limitations contained therein.  The restrictions did not unnecessarily restrict Ms. Pepe’s ability to earn a living or secure future employment within the salon industry.  The restriction adequately protected Ms. Piscitelli’s legitimate business interests while not excessively harming Ms. Pepe’s career opportunities.  Lastly, the court disagreed with Ms. Pepe that there was an adequate remedy at law available for the case.  The court held that Ms. Piscitelli met the burden of proof to show the need for an injunction and concluded that injunctive relief was appropriate for the case.

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.

Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding

Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding

Fairfaxx Corp. v. Nickelson, 2000 Conn. Super. LEXIS 2340

Fairfaxx Corporation, a company based in Norwalk, Connecticut, employed Ms. Sarah Nickelson from January 1997 until she voluntarily terminated her employment on November 23, 1998.  Fairfaxx provided services for full and part-time employees to clients located in Fairfield and New Haven counties in Connecticut in addition to Putnam and Westchester counties in New York.  Ms. Nickelson first worked as a part-time receptionist for Fairfaxx at Aviator in Stratford, then as a temporary employee of Fairfaxx itself, and then hired on a permanent basis as a Personnel Consultant in May 1997.  He did not have an employment contract and as such, she was classified as an employee at will.  Seven months later, in December 1997, Fairfaxx’s employees, including Ms. Nickelson, were presented with a “Confidentiality and Non Compete Agreement”.  There was an understanding that the employees would be terminated should they refuse to sign the restrictive covenant.  Ms. Nickelson signed and returned the non-compete agreement on December 9, 1997.  The covenant not to compete prohibited Ms. Nickelson from recruiting candidates or soliciting clients in New Haven, Fairfield, Putnam, and Westchester counties for two years following her termination.

Ms. Nickelson moved in November 1998 and was promptly contacted by a recruiter concerning a job at Premier Staffing Solutions, a company in direct competition with Fairfaxx.  She was offered a position with Premier and accepted due to the shorter commute and higher commission rate.  She ended her employment with Fairfaxx on November 23, 1998 and immediately began to work for Premier.  Fairfaxx sued Ms. Nickelson in Connecticut state court for breach of the covenant not to compete and requested that the court enforce the restrictions contained therein.  Ms. Nickelson argued that the non-compete agreement was not a valid employment agreement and she was not obligated to abide by its restrictions.  The court ultimately found in favor of Ms. Nickelson, invalidated the non-compete agreement, and denied Fairfaxx’s request for injunctive relief.

The court came to this decision because the agreement lacked adequate consideration and the requisite signatures.  The non-compete agreement spoke of “mutual promises” but the court concluded that Ms. Nickelson received nothing in exchange for her covenants.  She had the same job, same salary, and same benefits after she signed the agreement as before its execution.  She was promoted to Manager of the Temporary Division at Fairfaxx in January 1998 but the court found that this was not in any way connected to the non-compete agreement and held that this could not be construed as consideration for the covenants that Ms. Nickelson gave to the company.

Furthermore, the court found that the non-compete agreement was not legally binding because it was only signed by Ms. Nickelson.  Fairfaxx noted that it clearly intended to sign the agreement and have its provisions become legally binding but did not actually know if someone from the company’s management had signed the covenant not to compete.  The agreement was designed to be a bilateral contract and would not become legally binding until both parties had signed.  The agreement contained signature blocks for Ms. Nickelson and Fairfaxx and required both in order for the restrictions/provisions to become effective.

In light of a missing requisite signature and inadequate consideration, the court held that the non-compete agreement was unenforceable and denied Fairfaxx’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.

Connecticut & Missouri Laws Apply the Same Tests to Determine the Enforceability of Non-Compete Agreements

Connecticut & Missouri Laws Apply the Same Tests to Determine the Enforceability of Non-Compete Agreements

H & R Block Eastern Tax Services, Inc. v. Brooks, 2000 U.S. Dist. LEXIS 19369

Mr. Donald Brooks worked for H & R Block Eastern Tax Services, Inc. as an Accounting Service Manager from December 30, 1996 when he sold his business assets to H & R Block until the company terminated his employment on May 31, 2000.  The closing for the Asset Purchase Agreement was contingent on the execution of an employment agreement.  Under the agreement, H & R Block employed Mr. Brooks on a year-to-year basis but had the authority to terminate him at any time without notice.  The employment agreement contained a covenant not to compete that prohibited Mr. Brooks for two years after termination from soliciting H & R Block’s clients and offering competing business services within a twenty-five mile radius of the company’s offices in the sales district where he worked.  The non-compete agreement also stated that Missouri law would govern the contract and any legal disputes.

Mr. Brook’s termination became effective on May 31, 2000 and he began providing accounting/tax services to former H & R Block clients.  The company sued him for breach of the covenant not to compete and requested that the court enforce the provisions of the agreement.  He claimed that the covenant was unenforceable and therefore his actions did not constitute a breach that entitled the company to any type of relief.  The federal district court found in favor of H & R Block and granted the company’s request for injunctive relief by enforcing the non-compete agreement executed by the parties at the beginning of Mr. Brooks’s employment.

In its legal analysis, the court evaluated whether to apply the choice of law provision and examined the reasonableness of the agreement.  The covenant designated Missouri law as the choice of law because that was the location of the company’s corporate headquarters.  The agreement stipulated that Missouri law would apply to disputes except when Missouri had no connection to the contract or when its law contradicted public policy of a state with a materially greater interest in the issue.  The court concluded that Missouri had similar laws and public policy with regard to contract, employment, and non-compete principles.  Both states (Connecticut and Missouri) enforce covenants that “impose reasonable restrictions” in order to safeguard the “protectable interests” of a former employer.  Furthermore, both states stress that enforcement of a restrictive covenant must balance the need to protect the employer from unfair competition without unnecessarily restricting the employee’s ability to secure future employment.  The court approved the use of Missouri law due to its similarities with Connecticut state law and the application of very similar tests to ascertain an agreement’s enforceability.

Next, the court analyzed whether the provisions in the agreement were reasonable limitations and did not excessively restrict Mr. Brooks’s ability to pursue his occupation following his termination from H & R Block.  The court found that the restrictions were temporary and spatially limited.  The agreement specifically prohibited “soliciting, diverting, or taking” business away from H & R Block and the restrictions inserted into the employment contract reflect this objective.  The language and provisions of the covenant restricted competing activities in the Greater Hartford Area but left Mr. Brooks free to practice in the majority of the state of Connecticut and the rest of the country.  These restrictions thus protected H & R Block’s legitimate business interests and did not create excessive hardships for Mr. Brooks.  The court found that the covenant not to compete was enforceable under the laws of both Missouri and Connecticut.

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 and Rejects “Ambiguous Language” and “Unreasonable Restrictions” Defenses

Court Enforces Non-Compete and Rejects “Ambiguous Language” and “Unreasonable Restrictions” Defenses

Century 21 Access America v. Lisboa, 2003 Conn. Super. LEXIS 2085

Century 21 Access America was a residential real estate sales company based in Milford, Connecticut that employed Ms. Nereida Lisboa as a salesperson from April 2002 until April 2003.  Her employment was contingent upon signing an Independent Contractor Agreement on April 24, 2002 wherein paragraph twelve constituted a non-compete clause.  The restrictive covenant prohibited Ms. Lisboa for a period of two years from working at a competing company located within fifteen miles of Milford, Connecticut.  Once Ms. Lisboa voluntarily terminated her employment with Century 21, she immediately began to work for William Raveis Real Estate, a direct competitor located directly across the street.  Century 21 sued Ms. Lisboa for breach of the non-compete agreement and requested that the court enforce the provisions of the covenant.

Connecticut courts have the authority to exercise equitable power to order a temporary injunction pending final determination of the order, upon the moving party demonstrating that it will incur irreparable harm in the absence of such an injunctive order.  The court found that an injunction was warranted and proper in this case and as such, granted Century 21’s request for an injunctive order to restrain Ms. Lisboa from further violations of the covenant not to compete.  Ms. Lisboa offered several defenses to invalidate the agreement, including a claim that the language of the agreement was ambiguous and another claim that the provisions were unreasonable.  The court ultimately rejected both of these assertions and held in favor of Century 21.

The challenging party bears the burden of proof to show that an agreement is invalid and should not be binding upon the signatory parties.  The court found no merit in Ms. Lisboa’s claim that the agreement was ambiguous and that she was not obligated to refrain from any specific business activity.  The court stated that “although the covenant is neither a model of clarity or precise craftsmanship, the defendant [Ms. Lisboa] fails to demonstrate how the covenant’s language, in and of itself, is ambiguous”.

The court further dissected Ms. Lisboa’s defenses and shot down her claim that the restrictions were unreasonable.  It is well established in Connecticut law that a company has a proprietary right to its clients and is thus entitled to protection for that right.  Century 21 had a legitimate business interest worthy of protection based on the fact that Ms. Lisboa could use information gained from Century 21’s client lists and the time she spent with the company to solicit business for herself and her new company to the detriment of Century 21.  The company was well within its rights to employ reasonable restrictions to protect this legitimate business interest.  Ms. Lisboa’s license to engage in the real estate industry is valid throughout the state of Connecticut and the covenant only restricted her business activities within a relatively small area with a fifteen-mile radius.  This, in combination with a limited time restriction, made the court conclude that the geographical restriction was in fact reasonable and enforceable.

The court identified a legitimate business interest that required protection and concluded that the provisions of the covenant not to compete were reasonable, leading it the grant Century 21’s request for injunctive relief in the form of enforcement of the non-compete agreement.

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.

Continued Employment is Inadequate Consideration in Absence of At-Will Employment

Continued Employment is Inadequate Consideration in Absence of At-Will Employment

Cost Management Incentives, Inc. v. London-Osborne, 2002 Conn. Super. LEXIS 3967

Cost Management Incentives, Inc. was a company that specialized in the placement of employees in the pharmaceutical industry.  This case addressed covenants signed by the company and two former employees, Ms. Yolanda London-Osborne and Ms. Kristen Herman.  The company presented the two employees with non-compete agreements in May 1996 after several years of employment.  The restrictive covenant contained a one-year non-compete clause and a two-year non-solicitation clause.  Neither woman was afforded the opportunity to consult with a lawyer to go over the agreement and both felt they were in jeopardy of termination should they refuse to sign.  The agreement did not offer anything in addition to their current salary and benefits.  Mr. David Hallen, the president and Chief Executive Officer of the company, gave them approximately five minutes to skim and sign the agreements, preventing the women from gaining a firm grasp on what their obligations were under the agreement.  The employees continued in their employment in same manner and with the same benefits until the company terminated them.

Cost Management sued the two former employees and asked the court to issue an order preventing any violations of the covenant.  Ms. London-Osborne and Ms. Herman both sought an order declaring that the agreement was unenforceable on the grounds of inadequate consideration and the inappropriate and egregious conduct of the company’s management.  Both former employees further contended that they did not breach the agreement and there was no indication that they were likely to do so.  The court found in favor of the former employees and held that the restrictive covenants were unenforceable because they lacked consideration and their provisions were so broad that they unnecessarily restricted their ability to procure future employment.

The restrictions in the agreement prohibited employment with any business enterprise engaged in facilitating temporary and/or permanent placement in the pharmaceutical industry for one year after termination.  The court found this specific nation-wide restriction to be reasonable since the company maintained national operations.  The court however found that the two-year non-solicitation clause was unreasonable and rendered the covenant unenforceable.  This was overly broad and restrictive since 70-75% of Cost Management’s business came from a mere six pharmaceutical companies.  The court commented that Cost Management should have tailored this clause to protect its legitimate business interests without placing such an extensive hardship on former employees.  Analysis of the covenants also led the court to hold that the provisions provided the employer with much more protection than was deemed necessary or permissible.

While the finding of unreasonable provisions is sufficient to invalid a restrictive covenant, the court went on to discuss the lack of consideration, a factor that also renders a non-compete agreement unenforceable.  Connecticut law indicates that continued employment is not adequate consideration for a non-compete agreement for employees that are not working on an at-will basis.  Continued employment is sufficient for employees working on an at-will basis but this was not the case with Ms. London-Osborne and Ms. Herman.

For these reasons, the court denied Cost Management’s request for injunctive relief and declared that the agreements were unenforceable and void under Connecticut law.

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.

Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement

Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement

Opticare, P.C. v. Zimmerman, 2008 Conn. Super. LEXIS 759

Opticare, P.C. was a company engaged in the business of offering optometry and ophthalmology services to patients.  A sister company, Opticare Eye Health Centers, Inc. was created in 1995 to provide management services to Opticare, operate an ambulatory surgical center, and own/operate retail eye-wear stores.  Opticare employed Dr. Neal Zimmerman as an ophthalmologist specializing in vitreoretinal surgery from April 1984 to November 10, 2006.  He signed several employment agreements with Opticare during his time as an employee with the company and each one contained a non-compete clause that would become effective upon Dr. Zimmerman’s termination.  The restrictive covenant stated that Dr. Zimmerman was prohibited for eighteen months after his termination from offering medical services at a competing company located with a restricted area that was a hexagon ranging from fifteen to thirty miles from where he practice his profession.  The non-compete agreements also specified that Dr. Zimmerman was required to provide one year notice of voluntary termination if he intended to continue to practice medicine in the state of Connecticut.

On September 6, 2006, Dr. Zimmerman provided a sixty-day notice of voluntary termination to Opticare’s management and shortly thereafter, five other physicians tendered their resignation from the company.  He began providing ophthalmological services on January 2, 2007 at a new office located in Prospect, Connecticut, a mere four miles from Opticare’s office in Waterbury and clearly within the prohibited area according to the non-compete agreement.  He testified that approximately 50% of his current patients were former patients of Opticare, his former employer.  Opticare sued Dr. Zimmerman for breach of the non-compete agreement and asked the court to grant injunctive relief by enforcing the restrictions enumerated in the agreement.

After weighing the evidence presented by the parties, the court held in favor of Dr. Zimmerman and concluded that the non-compete agreement was not enforceable.  Dr. Zimmerman admitted he violated the agreement based on the face value of its terms but raised questions regarding the legality of the covenant and argued that he was not obligated to refrain from further activities at his new practice.  The court weighed the evidence to evaluate whether Dr. Zimmerman’s breach of the agreement had any negative impact on Opticare’s business operations or that the company had incurred irreparable harm.  It ultimately found that Opticare failed to present sufficient evidence to prove that it experienced either of these detriments and the court noted that Opticare was “still in business and there was no showing that the business is close to ruination or has been permanently harmed in any way”.  Breach alone, according to the court, is insufficient to demonstrate that an injunction is necessary.  A moving party must demonstrate breach and incurred or imminent irreparable harm in order to be successful with a 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.

Enforcing Non-Competes Associated with Sale of Company and Goodwill

Enforcing Non-Competes Associated with Sale of Company and Goodwill

Kim’s Hair Studio, LLC v. Rogers, 2005 Conn. Super. LEXIS 1805

Ms. Dorothy Rogers owned a hair salon in Higganum, Connecticut called Dotties Creative Cuts and entered into an agreement to sell the company’s “assets, goodwill, and client lists” to Kim’s Hair Studio, LLC for the amount of $20,000.  This transaction essentially made Ms. Rogers a new employee of Kim’s hair Studio and as such, she was required to sign a non-compete agreement that prohibited her from offering competing services for twelve months after her termination within ten miles of 323 Saybrook Road, the primary work location of Kim’s Hair Studio.  The parties executed non-compete and confidentiality agreements on August 23, 2004.  Ms. Rogers did not like how the salon was being run by the company’s management and voluntarily terminated her employment in order to work at a new hair salon that was located a mere one-half mile away.  Ms. Rogers additionally removed a rolodex containing Kim’s Hair Studio’s client information and began to contact them to solicit their business.  Kim’s Hair Studio sued Ms. Rogers and requested that the court enforce the non-compete and confidentiality agreements.

The court granted the request for an injunction and ordered the enforcement of the agreements’ provisions.  It concluded that the restrictions were reasonable in scope and that Ms. Rogers’ action had amounted to a breach of the covenant between the two parties.  Kim’s Hair Studio had legitimate interests in executing non-compete agreements with its employees because its goodwill and client clients were essential assets that Kim’s Hair Studio invested resources in to acquire and maintain.  The restrictive covenants were designed to prevent the loss or infringement of these assets and ensure that Kim’s Hair Studio was not negatively affected due to an employee’s termination, whether voluntary or involuntary in nature.

The court reasoned that a party is entitled to an injunction restraining further breach of a restrictive covenant when it demonstrates that the other party has or is very likely to breach the agreement.  Additionally, the court noted Connecticut courts’ willingness to enforce a non-compete agreement when it is made in connection with the sale of a company and its goodwill.  These legal principles, in conjunction with reasonable and limited restrictions, allowed the court to conclude that the non-compete agreement between Ms. Rogers and Kim’s Hair Studio was valid and enforceable under Connecticut law.

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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