Posts tagged with "competing business activities"

Court Enforces Non-Compete Agreement to Protect Employer’s Business Interests

Court Enforces Non-Compete Agreement to Protect Employer’s Business Interests
Webster Bank v. Ludwin, 2011 Conn. Super. LEXIS 127

Webster Bank is regional commercial bank with headquarters in Waterbury, Connecticut that provides financial services to customers in Connecticut, New York Rhode Island, and Massachusetts. The company employed Mr. Michael Ludwin as a dual employee with UVEST Financial Services from January 2007 until the company terminated his employment in June 2010. Mr. Ludwin signed a new employment agreement with Webster when he became a dual employee wherein the agreement contained a covenant not to compete. The agreement, executed on February 7, 2009, prohibited Mr. Ludwin, for a period of one year following termination, from engaging in competing business activities within twenty-five miles of Webster Bank’s “base of operation”. Additionally, he was obligated to refrain from soliciting Webster’s customers and to “treat as confidential the names and addresses of customers” (non-disclosure clause).
Webster terminated Mr. Ludwin in June 2010 and on July 9, 2010 he began to work for Harvest Capital, LLC, a Wethersfield, CT based financial consulting firm. Webster’s counsel sent Mr. Ludwin a letter reminding him of his obligations under the non-compete agreement contained in his employment contract and demanded that he observe the enumerated restrictions. The bank sued Mr. Ludwin in Connecticut state court for violation of the covenant not to compete when Mr. Ludwin failed to curtail his activities and requested that the court issue an injunction preventing any further breaches of the agreement. The court granted Webster’s request and ordered that Mr. Ludwin “cease and desist from competing with the plaintiffs within a twenty-five mile radius of Hamden and Milford, Connecticut for a period to end on June 30, 2011” and further ordered him to return any and all customer lists that he removed from Webster’s premises.
The court held that injunctive relief was necessary if it was to maintain the status quo between the parties. Webster presented sufficient evidence to demonstrate that it would experience irreparable harm from Mr. Ludwin’s actions in the absence of an injunction. Its customer lists and relationships are valuable business interests that are integral to the success of the company and as such the court identified that Webster had a legitimate business interest that was afforded protection under Connecticut law. Furthermore, the court concluded that the agreement had reasonable provisions that did not excessively favor one party over the other or unnecessarily stifle their future business activities.
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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Application of FINRA Rules & Regulations for Bank’s Non-Compete Agreement

Application of FINRA Rules & Regulations for Bank’s Non-Compete Agreement
Webster Bank, N.A. v. Cahill, 2009 Conn. Super. LEXIS 1672

Webster Bank is a regional commercial bank with business operations in lower New England that employed Mr. Daniel Cahill from April 11, 2995 to February 12, 2009. He was hired as a teller in the bank’s Bristol, CT office and was promoted to a financial consultant in 2001 to work for Webster Investment Services, the securities division of Webster Bank. The bank entered into a corporate arrangement with UVEST in 2007 and Mr. Cahill (and similar employees) had to sign a dual employment agreement. The contract detailed the terms of his employment and contained multiple restrictive covenants. Mr. Cahill was prohibited from engaging in competing business activities within twenty-five miles of his base of operations for one year following his termination and was subject to an indefinite non-disclosure clause for Webster and UVEST’s confidential and proprietary information.

Mr. Cahill faxed in a letter of resignation to Webster on February 12, 2009 and the next day began working for RBC Bank in its Hartford, CT office where he essentially performed the same duties as he done during his employment with Webster. Webster sued Mr. Cahill in Connecticut state court for the enforcement of the restrictive covenants contained in the dual employment agreement. Mr. Cahill admitted that RBC was a direct competitor of Webster, that his new office is within the twenty-five mile radius prohibited area, that he had taken with him a list of 2,900-3,000 Webster customers, and had send solicitation letter on RBC’s stationary to all of those customers. Of these solicitations, 350-400 accounts transferred their assets to RBC, amounting to a loss of approximately $5 million in assets under management for Webster.

Mr. Cahill admitted that he violated the terms of the dual employment contract but argued that the court should not enforce the non-compete agreement because he was a “licensed and registered securities dealer and a financial representative”, and therefore the rules and regulations of Financial Industry Regulatory Authority (FINRA) governed and he had done nothing wrong. He contended that under FINRA regulations, in an agreement referred to as the “Protocol”, he was permitted to take a copy of the customer list when he moved from Webster to RBC. These regulations permit taking a copy of names, addresses, phone numbers, and email addresses but not account numbers. The court found the assertion that it lacked jurisdiction unpersuasive and noted that FINRA was not controlling since neither Webster Bank nor UVEST were signatory members of the “Protocol”.

The court concluded that it did have jurisdiction over the case and next looked to whether the non-compete agreement was valid and enforceable under Connecticut law. Webster had a legitimate business interest that the court held warranted protection in the form of an injunction to restrict Mr. Cahill’s activities. An injunction, according to the court, was necessary to maintain the status quo and protect the interests of the parties involved in the legal dispute. The court held that the restrictions were reasonable in scope and did not overtly favor one party over the other. After establishing a need for an injunction and the reasonableness of the restrictions, the court ordered the 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.

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Court Enforces Non-Compete Clause Against Real Estate Agent

Court Enforces Non-Compete Clause Against Real Estate Agent
Century 21 Access America v. McGregor-Mclean, 2004 Conn. Super. LEXIS 3239

Century 21 Access America is a national real estate company that employed Ms. Tori McGregor-Mclean as a real estate agent in it Bridgeport, CT office from July 2003 to June 16, 2004. Her employment contract, dated July 7, 2003, contained a non-compete clause that prohibited her for a two-year period following termination from engaging in competing business activities within a fifteen-mile radius of 3850 Main Street, Bridgeport, CT. Ms. McGregor-Mclean voluntarily terminated her employment on June 16, 2004 and began to work for Buyer’s Capitol Real Estate, a company located outside of the fifteen-mile radius in Stamford, CT. Century 21 did not have a problem with her new employment because the office was located outside of the prohibited area but issues arose when Ms. McGregor-Mclean began accepting listings within the fifteen-mile radius. Century 21 sued Ms. McGregor-Mclean in Connecticut state court for violation of the non-compete clause and requested that the court issue an injunction to enforce the agreement.
The court found that Ms. McGregor-Mclean’s activities with her new real estate agency were in fact violations of the non-compete agreement and it ordered that the provisions be enforced. The plain language of the non-compete clause stipulated that Ms. McGregor-Mclean was prohibited from carrying out any direct or indirect competing business activities within the defined fifteen-mile radius. She was in breach of the agreement because she accepted five listings within the prohibited area- it is inconsequential as a matter of law that her office was located outside of the fifteen-mile radius. Under the agreement, she was prohibited from having a physical business presence and transacting individual deals within the defined area. The court identified the unlawful breaches of the non-compete clause, concluded that the agreement was valid and reasonable, and issued an injunction to enjoin Ms. McGregor-Mclean from further violations of 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.

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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.

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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.

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