Identifying de facto Geographical Limitations in Connecticut Non-Compete Agreement
New Haven Tobacco Company operated a wholesale tobacco business and entered into an employment contract with Mr. Frank Perrelli in December 1980. As part of the contract, Mr. Perrelli signed a non-compete agreement wherein he agreed to “not directly or indirectly sell products similar to those of the Employer (New Haven Tobacco Co.) to any of the customers he has dealt with or has discovered and became aware of while in the employ of the Employer for a period of twenty-four months from the termination of his employment”.
In November 1981 Mr. Perrelli voluntarily left the employ of New Haven Tobacco and proceeded to start his own wholesale tobacco business. New Haven Tobacco sued to recover money damages and for injunctive relief in the form of a court order restraining Mr. Perrelli’s wholesale tobacco business activities.
The Court’s Decision
The trial court found in favor of Mr. Perrelli and denied New Haven Tobacco’s injunction application. It found that the agreement lacked geographical limitations and went against the public’s interest. New Haven Tobacco appealed to the Appellate Court of Connecticut claiming that the trial court erred when it held that the non-compete agreement was unenforceable. The Appellate Court reversed the trial court’s decision and found in favor of New Haven Tobacco. The Appellate Court held that the agreement in dispute focused not on Mr. Perrelli engaging in a certain business sector, but instead on the prohibition of transacting with a specific group of customers, namely those of his former employer, New Haven Tobacco.
By limiting the customers the agreement applied to, the agreement in essence instituted a geographical limitation. The customer list was local and de facto limited the agreement to the greater New Haven area. The Appellate Court also held that the trial court erred with regard to invalidating the non-compete agreement on the grounds of public interest. The trial court concluded that the provisions of the agreement aided in creating and maintaining a monopoly on the wholesale tobacco business and thus disadvantaged customers and was contrary to public interest.
The Appellate Court however found this assertion to be unsubstantiated and held that the non-compete agreement did not unreasonably interfere with the public’ interest. The enforcement of the non-compete agreement would not disadvantage the public or place hardships on individuals wishing to transact in the local tobacco wholesale industry.
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.