Posts tagged with "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
Case Background

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.

Granting Temporary Injunction

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’s Decision

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.

Conclusions

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.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  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

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

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.

The Court’s Decision

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.

How the Court Reached its Decision

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.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  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 Upholds Non-Compete Agreement for Connecticut Tax Preparation Firm Employee

Hoffnagle v. Henderson, 2002 Conn. Super. LEXIS 901

Ms. Nancy Henderson worked for Mr. John Hoffnagle, as an accountant at the tax preparation business “Hoffnagle & Associates” in Bristol, CT from early 1995 to October 2001.  The parties executed an employment agreement on January 27, 1996, that dictated the rights and obligations of the parties and contained a non-compete clause that would become effective upon Ms. Henderson’s termination.

Mr. Hoffnagle gave Ms. Henderson a significant, but temporary raise as consideration for the provisions of the agreement.  The restrictive covenant prohibited Ms. Henderson from operating general bookkeeping, tax preparation, and tax filing business within five miles of the company’s office(s) for a period of five years.  Additionally, the agreement prohibited her from disclosing or using Hoffnagle’s client lists or other confidential information of past or present clients.

The Case

In 1997, Hoffnagle opened a second office in Terryville, CT and appointed Ms. Henderson to be the branch’s manager.  At this time, Mr. Hoffnagle began to prepare for retirement and officially separated the offices because they would be more lucrative to sell individually rather than as a two-office firm.  He transferred ownership of the Terryville office to ConnTax Corporation, a Chapter S corporation controlled by members of Mr. Hoffnagle’s family.

From January 2001 until her termination, Ms. Henderson was technically an employee of ConnTax and received all compensation and benefits from that company.  In October 2001, Mr. Hoffnagle sold the original Bristol office to an industry competitor.  Ms. Henderson and Mr. Hoffnagle discussed her purchasing the Terryville office but the deal ultimately fell through when they could not agree on a final price.  This prompted Ms. Henderson to terminate her employment and open her own business across the street from Hoffnagle’s Terryville location.

Mr. Hoffnagle sued Ms. Henderson and asked the court to enjoin her from continuing to operate her tax preparation business at its current location in clear violation of the non-compete agreement executed by the parties in 1997.  Ms. Henderson, however, contended that the agreement lacked consideration and was therefore not binding upon the parties.  She claimed that the temporary raise she received was not in connection with the restrictive covenant but was merely coincidental.

The Court’s Decision

The court rejected the assertion that the non-compete agreement and the raise were unrelated and concluded that the raise was indeed adequate consideration to make the agreement legally binding.  The court also concluded that the duration and geographical limitations were reasonable.  They were reasonable to protect Mr. Hoffnagle’s legitimate business interests and the limited scope of the geographical limitation did not unnecessarily restrict Ms. Henderson’s ability to make a living.  The court also noted that the consuming public would not be denied access to the services provided by the parties by enforcing the provisions of the non-compete agreement.

Ms. Henderson raised an interesting point, however, when she inquired about whether the court’s holding and enforcement of the non-compete agreement included “personal clients” to whom she provided tax preparation services outside of her role as an employee of Hoffnagle & Associates and later ConnTax.  The court concluded that she was not enjoined from continuing to service those “personal clients” because their inclusion on the list of prohibited clients would be unfair since those clients did not have an official relationship to any Hoffnagle business entity.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County. If you have any questions relating to you 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

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.

Violating the Employment Agreements

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.

The Court’s Ruling

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.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  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.

“Inevitable Disclosure Doctrine” Fails to Demonstrate Breach of Non-Disclosure and Non-Compete Agreements

EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299
EarthWeb, Inc. v. Schlack, 2000 U.S. App. LEXIS 11446

Mr. Mark Schlack worked for EarthWeb, Inc. from October 19, 1998 to September 22, 1999 as the company’s Vice President of Worldwide Content where he had overall editorial responsibilities for the company’s website.  EarthWeb was started in 2004 and had 230 employees nationwide that provided online products and services to business professionals in the information technology (IT) industry.  The company and Mr. Schlack signed an employment agreement on October 13, 1998 that contained non disclosure and non compete clauses.

The restrictions prohibited Mr. Schlack from being an employee of a business entity that directly competed with EarthWeb for a period of twelve months after his termination.  The agreement provided consideration in the form of Mr. Schlack’s salary, performance-based bonus, and stock options.  Mr. Schlack tendered his resignation in September 1999 and informed his superiors at EarthWeb that he had accepted a position with ITworld.com, a subsidiary of IDG, another business connected to the IT industry.

EarthWeb Takes Action

EarthWeb sued Mr. Schlack in federal court and asked it to grant a preliminary injunction to prevent him from working for ITworld.com.  EarthWeb sued in order to protect its confidential information and trade secrets related to several components of its business operations: 1) strategic content planning, 2) licensing agreements and acquisitions, 3) advertising, and 4) technical knowledge.

The company argued that an injunction and the enforcement of the non-compete agreement were necessary to prevent disclosure of its trade secrets and confidential business information.  The federal court denied EarthWeb’s request and the company appealed to the Second Circuit Court of Appeals (jurisdiction over Connecticut, New York, and Vermont).  At the appellate level, the court affirmed the district court’s decision and held that the denial of the injunction and enforcement was proper given the facts of the case.

How to Prove Irreparable Harm

The Second Circuit had previously held that a demonstration of irreparable harm is the “single most important prerequisite for the issuance of a preliminary injunction”.  Mamiya Co. v. Masel Supply Co., 719 F.2d 42, (1983).  Disclosure of trade secrets and confidential information has traditionally been sufficient to show irreparable harm so long as the harm is imminent.  The mere possibility of harm is insufficient and motions should be denied when the harm described in the complaint is remote and speculative.  This case did not involve actual theft or misappropriation of confidential information, only the possibility of future disclosure.

Mr. Schlack defended himself by asserting that the position awaiting him at ITworld.com was very different from his job at EarthWeb and that he would not have an occasion to divulge any of EarthWeb’s confidential information.  Additionally, he claimed that EarthWeb’s complaint overstated his responsibilities and he was nowhere close to being a senior executive with access to vast amounts of confidential information.

Shortcomings of EarthWeb’s Argument

EarthWeb had the burden to show that Mr. Schlack’s breach of the non-compete agreement would create irreparable harm.  The appellate court held that the company had failed to establish that an injunction was reasonably necessary to protect its business interests.  The company failed to produce any evidence that there was an imminent risk that Mr. Schlack would disclose EarthWeb’s confidential information while being employed at ITworld.com.

The court stated that EarthWeb had relied on the “Inevitable Disclosure Doctrine”; a theory the court rejected and commented should only be applied in the rarest of circumstances.  The doctrine heavily relies on speculation and “what ifs” to advance a request for injunctive relief for breach of a non-compete agreement.  This doctrine employed insufficient concrete evidence that there would be a disclosure of confidential information and both the district and appellate courts denied EarthWeb’s request for injunctive relief in the form of enforcing the restrictive covenant.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  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.

Where the Grantors Intend a Trust to be Modified Jointly, A Surviving Grantor May Not Make Unilateral Modifications After the Death of the Co-Grantor

Whitehouse v. Gahn, 84 A.D.3d 949  (N.Y. App. Div. 2011)

In a case before the Appellate Division of the Supreme Court of New York, a trust beneficiary appealed a New York Supreme Court decision that declared the trust amendment naming her as sole beneficiary to be void and unenforceable.  The Appellate Division affirmed the lower court ruling and remitted the case for an entry of judgment.

In their lifetimes, the mother and father, as grantors, established an irrevocable trust naming their three children as the beneficiaries of the trust estate, which consisted of the family home.  The trust instrument expressly reserved for the grantors a limited power of appointment to change or alter the remaindermen.  Approximately five months after the father died, the mother executed an amendment to the trust, naming the daughter as its sole beneficiary.  Less than one month after the amendment was executed, the mother died.  The two children who were removed as trust beneficiaries sought a declaratory judgment in the Supreme Court to declare the amendment void and unenforceable.  The court decided in their favor, and the daughter who had been named sole beneficiary appealed the decision.

According to New York case law, a trust instrument is to be construed as written and the grantor’s intent is to be determined solely from the unambiguous language of the trust instrument itself. Mercury Bay Boating Club v. San Diego Yacht Club, 557 N.E.2d 87 (N.Y. App. Ct. 1990); see Matter of Wallens, 877 N.E.2d 960 (N.Y. App. Ct. 2007); Matter of Chase Manhattan Bank, 846 N.E.2d 806 (N.Y. App. Ct. 2006).  The Appellate Division found that the terms of this trust instrument were unambiguous, and clearly expressed the grantors’ intent that their three children share the trust estate equally.  These unambiguous terms may not be altered by a separate provision of the trust which may allow the plural usage of “grantors” to be interpreted as a singular “grantor.”  The Appellate Division held that because the trust agreement allowed an amendment to be made with the joint consent of the grantors, a surviving grantor may not unilaterally amend the trust after the death of the co-grantor.  Therefore, because only the mother executed the amendment to the trust, it was void and unenforceable.

New York law permits a court to amend an irrevocable, unamendable trust if its grantor and all the beneficiaries consent to the amendment.  N.Y.  Estates, Powers and Trusts Law § 7-19.  Because that did not happen in this case, the Appellate Division found further reason to determine that the purported amendment was void and unenforceable.

The Appellate Division of the Supreme Court remitted the matter to the Supreme Court where it originated for entry of judgment declaring that the amendment to the trust was void and unenforceable, and that all three children were beneficiaries of that trust.

Should you have any questions relating to trusts, estate planning or personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.

Connecticut Non-Compete Prohibits Client Solicitation in Investment Services Industry

In Robert J. Reby & Co. v. Byrne, 2006 Conn. Super. LEXIS 2115, Mr. Patrick Byrne worked at Robert J. Reby & Co., a financial firm in Danbury, Connecticut, as a registered investment advisor from June 2005 to July 2005.  The company advises high net worth individuals and families in the areas of trusts, wealth management, and taxation.  Mr. Byrne signed an employment contract with Robert J. Reby & Co. wherein it contained a non-compete agreement that stipulated he be prohibited from soliciting the company’s clients or disclosing any of its confidential information in the event of his termination.  Following Mr. Byrne’s short employment with Robert J. Reby & Co. he began to work at Aspetuck Financial Management, LLC, a wealth management firm based in Westport.   Robert J. Reby & Co. alleged that Mr. Byrne solicited its clients for his new firm, Aspetuck, in direct violation of the non-compete agreement.  Mr. Byrne countered that the provisions of the non-compete were unreasonable in the sense that it placed an excessive restraint on his trade and prevented him from pursuing his occupation.

The court held that the non-compete agreement between Mr. Byrne and Robert J. Reby & Co. contained reasonable terms and was enforceable.  It failed to see any merits in Mr. Byrne’s claim that the agreement was too broad and created an insurmountable occupational hardship.  The provisions of the agreement only restricted a very small segment of Mr. Byrne’s occupational activities.  The terms he agreed to only prevented him from soliciting the specific and limited group of people that were clients of Robert J. Reby & Co..  The court held that the covenant was not a pure anti-competitive clause because it did not prevent him from engaging in the investment services industry as a whole.  This limited scope with regard to the prohibition levied upon Mr. Byrne caused the agreement to be reasonable and therefore enforceable.

The court also took time to discuss the public policy behind finding the non-compete agreement enforceable and establishing the legitimacy of the agreement.  Companies, according to the court, have a legitimate interest in protecting their business operations by preventing former employees from exploiting or appropriating the goodwill of its clients that it developed at its own, and not the employees’, expense.

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

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Court Uses Connecticut Law to Supersede Massachusetts Law in Application of Non-Compete Agreement

In Custard Insurance Adjusters v. Nardi, 2000 Conn. Super. LEXIS 1003, Mr. Robert Nardi worked at Allied Adjustment Services’ Orange, CT office beginning in September 1982 as the vice president of marketing, overseeing the adjustment of claims for insurance companies and self-insurers.  The company had Mr. Nardi sign non-compete and confidentiality agreements as a term of his employment.  The agreements established that he could not solicit or accept claims within a fifty-mile radius of Allied’s Orange office for a period of two years following his termination.  The agreements further specified that the names and contact information of Allied’s clients were the company’s confidential property.  The choice of law provision stated that Massachusetts law would be controlling (Allied had its headquarters in Massachusetts).  On September 1, 1997, Allied sold its business and all its assets, including its non-compete agreements, to Custard Insurance Adjusters.  Mr. Nardi became increasingly worried about future employment at Custard when the company restructured its compensation format, allegedly decreasing his annual income by 25%.  At this point, Mr. Nardi began to inquire about employment at other companies and in particular contacted Mr. John Markle, the president of Mark Adjustment, with whom he had a previous professional history.  He also arranged meetings between Mr. Markle and four other current Custard employees to discuss switching companies.  While the companies are competitors in the insurance industry, Mark’s business was restricted to the New England region while Custard operated nationally.  Custard terminated Mr. Nardi and asked the court to enforce the non-compete agreement.

The court first sought to tackle the issue of the choice of law provision since it designated Massachusetts law as controlling but this lawsuit was brought in Connecticut state court.  The court asserted its authority over the issue and case because it could not ascertain any “difference between the courts of Connecticut and Massachusetts in their interpretation of the common law tort breach of fiduciary obligation brought against a former officer of a corporation”.  The court emphasized that above all else, the legal issue at hand was that of contractual obligations and a company’s business operations.  It asserted its authority in this respect by stating it believed “that the Massachusetts courts interpret the tort of tortious interference with contractual and business relationships the same way our [Connecticut’s] courts do”.  Additionally, the court cited that the application of Massachusetts law would undermine Connecticut’s policy to afford legal effect to the Connecticut Unfair Trade Practices Act (CUTPA) and Connecticut Uniform Trade Secrets Act (CUTSA), two-state statutes used by Custard to sue Mr. Nardi.

Next, the court addressed the enforceability of the non-compete agreement signed by Mr. Nardi and Allied.  Mr. Nardi contended that the provisions of the agreement were only binding upon the signatory parties (himself and Allied) and that Custard lacked the authority to enforce its provisions.  He asked the court to deny Custard’s request to enforce the non-compete because it was “based on trust and confidence” between the signatory parties and “was thus not assignable”.  The court rejected this train of thought because the non-compete explicitly contained an assignability clause and it held that the non-compete covenant was properly and legally transferred to Custard under Massachusetts law.

Mr. Nardi based a substantial portion of his defense on the claim that Custard violated, and therefore invalidated, the agreement when it modified his compensation format.  He alleged that he was the victim of unjustified reductions in his professional responsibilities and compensation following Custard’s acquisition of Allied in 1997.  Mr. Nardi however was still an executive at the new company despite a reduction in rank and he himself had expressed excitement about becoming an executive at a national, instead of a regional, company.

The court ultimately found the non-compete to be valid and enforceable, therefore granting Custard’s request for injunctive relief.  It assessed the facts of the case and Mr. Nardi’s current position to amend the time restriction of the agreement, however.  Taking into account that he was starting a family and had a young child in conjunction with estimates that the full restrictions could amount to a 60-70% loss of business for Mr. Nardi, the court reduced the time limitation from two years to six months.  The court concluded that while the provisions were reasonable at face value, they could have unforeseen consequences that would have severely impaired Mr. Nardi’s ability to make a living in order to provide for his family.

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.

Legitimate Signature is Required for Enforcement of Non-Compete Agreement

In Stay Alert Safety Services, Inc. v. Fletcher, 2005 Conn. Super. LEXIS 1915, Mr. Christopher Fletcher began to work at United Rentals, Inc., a North Carolina company in the traffic safety and control industry, starting in February 2003.  He signed an employment agreement upon accepting the job offer wherein the agreement contained a non-compete provision.   According to the restrictive provisions, he was prohibited from working at a competing company located within two hundred miles for a period of two years after his termination.  The company felt it needed to protect its legitimate interests due to Mr. Fletcher’s access to its customer lists, cost information, and pricing schemes.  Mr. Fletcher’s employment was terminated on June 8, 2004, and he proceeded to start a new company, Traffic Control, with his wife.  He essentially performed the same services as he had previously in connection with his employment at United Rentals.

Stay Alert Safety Services, Inc., a company with headquarters in Greenwich, Connecticut, acquired United Rentals in January 2005 and its legal department concluded that Mr. Fletcher and other employees’ non-compete agreements were assignable and could be transferred to the possession of Stay Alert.  Stay Alert sued Mr. Fletcher in Connecticut state court for breach of the non-compete agreement and asked the court to enforce the restrictive covenant that he had signed with United Rentals.

The Superior Court sitting in Bridgeport found in favor of Stay Alert and ordered the enforcement of the non-compete agreement.  It held that the agreement’s provisions were reasonable given the circumstances of the case and that Stay Alert was entitled to injunctive relief because of the contractual breach.  Mr. Fletcher argued that he had not actually signed the non-compete agreement and therefore its restrictions were not applicable.  The court rejected this argument and noted that Mr. Fletcher’s signature appeared on page six of the employment agreement right above his typed name.  He claimed that it was not his signature so the court called in a handwriting expert to ascertain whether it was in fact his signature.  The expert, Dr. Marc Seiter, concluded that it was Mr. Fletcher’s signature and the court agreed with this finding.  A signed employment agreement coupled with reasonable provisions meant that the restrictive covenant was valid and enforceable.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County. If you have questions regarding non-compete agreements or any employment matter, contact Joseph Maya at 203-221-3100 or by email at JMaya@MayaLaw.com.

When is A Non-Compete Geographical Limitation Unreasonable?

In Braman Chemical Enterprise, Inc. v. Barnes, 2006 Conn. Super. LEXIS 3753, Ms. Valerie Barnes worked as an exterminator for Braman Chemical Enterprises, Inc. from November 5, 1990, to April 26, 2006.  On October 24, 1990, in preparation for Ms. Barnes beginning to work, the parties executed a non-compete agreement titled “Restriction Against Other Employment After Termination of Work With Braman Chemical Enterprises, Inc.” where it stated that Ms. Barnes was prohibited from working at any branch of a pest control business within fifty miles of the Hartford City Hall for a period of six months.  The company provided pest control services to commercial and residential customers in approximately ninety percent of Connecticut’s towns and cities.  Ms. Barnes worked the majority of her career with Braman servicing the area defined as east of New Haven, west of Guilford, south of Meriden, and north of the Long Island Sound.  She received training for her operator’s license while employed by Braman but obtained her supervisor’s license on her own time and at her own expense.

On April 26, 2006, Ms. Barnes voluntarily terminated her employment at Braman and formed a Connecticut limited liability company called “Bug One, LLC” based in Hamden that provided substantially identical services as her previous employer.  Braman sued Ms. Barnes in Connecticut state court to enforce the non-compete and enjoin her from further violations of the restrictive covenant’s provisions.  Ms. Barnes asserted that the geographical limitation in the agreement was unreasonable and provided an unnecessary amount of protection for Braman.

The court found Ms. Barnes’ argument to be meritorious and denied Braman’s request to enforce the agreement.  A non-compete agreement is analyzed in its entirety but a single unreasonable provision can be sufficient to invalidate the entire agreement and prevent enforcement.  Connecticut courts have traditionally tended to apply greater scrutiny to a non-compete agreement that creates a general restriction on a geographical area than agreements that focus simply on doing business with the employer’s clients.  Employers are legally allowed to protect themselves in a “reasonably limited market area” but may not overreach to the degree that the restriction prevents the former employee from practicing his or her trade in order to make a living.  While Braman contended that the geographical limitation was reasonably tailored to meet its legitimate business needs, the court held that the provision went well beyond the “fair protection of plaintiff’s [Braman’s] interests”.  The geographical area of fifty miles from Hartford City Hall placed an unreasonable restraint on trade for Ms. Barnes.  The court notes that the prohibited area covered roughly two million potential customers and an area of 7,850 square miles, covering parts of Connecticut, Massachusetts, Rhode Island, and New York.  To put this in perspective, the entire state of Connecticut is only 5,018 square miles.  This area as defined in the non-compete agreement was thus an unreasonable limitation and sufficient cause to invalidate the entire agreement.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  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.