Posts tagged with "competing services"

Court Grants Combination of Equitable & Legal Relief for Breach of Non-Compete Agreement

In Party Time Deli, Inc. v. Neylan, 2001 Conn. Super. LEXIS 2411, Mr. Michael Neylan and Mr. Robert Goldkopf entered into an agreement on November 29, 1996, wherein Mr. Neylan agreed to purchase Party Time Deli, Inc. for $110,000.00 in addition to executing a promissory note on December 1, 1996, for the amount of $35,000.00 as consideration for Mr. Goldkopf consenting to a non-compete agreement.  The restrictive covenant identified Mr. Goldkopf as the party “primarily responsible for the day to day operation of the business known as Party Time Deli, Inc.” and prohibited him from directly or indirectly engaging in a delicatessen-type business within the City of Stamford for three (3) years following the date of closing for Mr. Neylan’s purchase of the company.  The $35,000.00 promissory note served as consideration for the covenant not to compete and was to be paid over a period of four (4) years.

Mr. Neylan failed to deliver the full amount of the promissory note to Mr. Goldkopf because he asserted that Mr. Goldkopf violated the terms of the non-compete agreement by operating the concession stand at the Stamford Yacht Club during the summer months of 1998.  Mr. Goldkopf contended that his actions did not violate the agreements between the parties because they did not specifically state whether the Stamford Yacht Club concession was covered by the covenant’s prohibitions.  He further argued that he was owed the balance of the promissory note, valued at $18,903.94 at the time of trial.  Mr. Goldkopf sued Mr. Neylan to recover the balance of the promissory note and Mr. Neyland submitted a counterclaim for lost profits associated with Mr. Goldkopf’s alleged breach of the non-compete agreement.

The court concluded that Mr. Goldkopf had indeed violated the terms of the covenant not to compete when he operated the Stamford Yacht Club concession stand during the summer of 1998 and that Mr. Neylan was entitled to the enforcement of the agreement’s terms.  While the court decided that Mr. Neylan was required to pay the balance of the promissory note that served as consideration for the non-compete agreement, that amount could be offset by the amount of profits from Mr. Goldkopf’s activities from the summer of 1998.  The court determined that Mr. Goldkopf’s unlawful activities resulted in a $25,000.00 lost profit suffered by Mr. Neylan, the amount that offset the balance of the promissory notes.  Based on the claim and counterclaim of the dispute, the court concluded that Mr. Goldkopf owed Mr. Neylan $6,096.06, an amount calculated by putting the $18,903.94 balance on the promissory note against the $25,000.00 lost profits associated with unlawful activities.

While the typical relief for a case involving an alleged breach of a non-compete agreement is an injunction (equitable relief), this case is an example where the court exercised its authority to grant both legal and equitable relief.  The court ordered the enforcement of the non-compete agreement’s provisions and also awarded damages due to moneys associated with the agreement’s consideration and profits generated from activities that violated the agreement’s terms.

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.

Termination Does Not Invalidate a Non-Compete Agreement

Termination Does Not Invalidate a Non-Compete Agreement

Built In America, Inc. v. Morris, 2001 Conn. Super. LEXIS 2953

Mr. Michael Morris was the owner of Built In America, Inc. until he sold his entire stock in the company to Mr. Marc Costa in October 2000. The parties executed a Purchase and Sale Agreement that legally transferred the stock and ownership of the company. The transaction included an employment contract for an initial period of two years and a non-compete clause that became effective upon Mr. Morris’s termination from the company. The company terminated Mr. Morris in April 2001 and he proceeded to work in direct competition with his former employer. Mr. Costa and Built In America sued Mr. Morris for violation of the non-compete agreement and asked the court to enforce the agreement’s provisions. Mr. Morris argued that the restrictive covenant was null and void because the company had breached the employment agreement when it unlawfully terminated his employment.
The court found in favor of Built In America, ordered the enforcement of the covenant not to compete, and issued an injunction. There was no dispute over the reasonableness of the covenant, only a dispute over whether it became void when the company allegedly improperly terminated Mr. Morris. Built In America cited previous Connecticut cases, most notably Robert S. Weiss & Associates, Inc. v. Wiederlight (208 Conn. 525 (1988)), where the court held that termination did not invalidate a non-compete agreement. Furthermore, the court concluded that the company was justified with respect to its decision to terminate Mr. Morris’s employment, stating that his “behavior was so outrageous that one is left to believe he was inviting his discharge”. The court ultimately concluded that the covenant was legally binding and ordered its enforcement.
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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What’s In a Separation Agreement?

With the economy where it is, the employment lawyers in the Westport, Connecticut office of Maya Murphy, P.C. are frequently asked to review and negotiate separation agreements for terminated employees.  These agreements often appear similar in form and content but must be carefully scrutinized, as they can contain hidden “trip wires” that can have a profound and long-lasting effect on the former employee’s job prospects.  Here are some of the things to look out for.

Most separation agreements contain restrictive covenants—confidentiality, non-solicitation, or non-competition clauses.  The first two—confidentiality and non-solicitation—are typically non-controversial, as they often confirm pre-existing obligations owed an employer by a former employee.  The last—non-competition—is usually a point of contention, as it impacts directly the employee’s ability to find a new position.  We have blogged extensively on non-competes, their interpretation and enforceability, etc. and readers are invited to review those prior posts.  But other terms and conditions of a separation agreement deserve your attention, as well.

First of all, do not be surprised by the length of a separation agreement.  A federal statute called the Older Worker’s Benefit and Protection Act requires the inclusion of extensive release language, and such things as a 21 day review and seven day revocation period.  Here are some of the other things you should be on the lookout for:

  • Consideration:  Make sure all of the severance benefits are correct and clearly stated.  This includes severance pay, COBRA coverage, etc.  Do not leave anything to inference or implication.
  • Confirmation that No Claims Exist/Covenant Not to Sue: Notwithstanding the comprehensive release language, some separation agreements will also require the employee to state that he/she is not aware of any factual basis to support any charge or complaint and that the employee will forego suit, even if such a claim exists.
  • Non-disparagement: Both sides often agree that neither will say anything to disparage the other.  Sometimes (particularly in the financial industry), a separation agreement will contain a “carve out” for employer reporting to FINRA or the SEC.  In such a case, it is important to have the agreement state that as of the employee’s separation date, the employer was not aware of any reportable event or information that would warrant comment or notation on a Form U-5.
  • Governing Law:  Employment law does not travel well across state lines.  For example, California law is much different than Connecticut’s.  Large companies will sometimes have their separation agreements governed by the law of the state where it has its headquarters, irrespective of the actual place of work of the departing employee.
  • Acknowledgement of Non-Revocation: An employee has seven days within which to revoke acceptance of a separation agreement.  Some companies adopt a “belt and suspenders” approach and require the employee to acknowledge in writing a negative—that they have not revoked such acceptance.

The employment law attorneys in the Westport, Connecticut office of Maya Murphy, P.C. have extensive experience in the negotiation and litigation of all sorts of employment-related disputes and assist clients from Greenwich, Stamford, New Canaan, Darien, Norwalk, Westport and Fairfield in resolving such issues.  203-221-3100.

 

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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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Five Things that Make a Connecticut Non-Compete Enforceable

The Fairfield County employment lawyers here at Maya Murphy, P.C., have advised numerous residents of Greenwich, New Canaan, Stamford, Darien, and Westport about the enforceability of non-competition provisions contained in Employment Agreements or Separation Agreements. While every case, and the wording of every agreement, is different, there are five “constants” that Connecticut courts look to in deciding whether or not to enforce a non-competition clause. They are the starting point for any discussion or individual analysis of whether a particular non-compete may be enforceable as to you. Again, every case turns upon its own peculiar facts.

The key concepts are:
1. The reasonableness of the time restriction. As a general proposition, a time restriction of up to three years is generally found to be reasonable. That can vary, however, depending upon the industry involved. In the world of information technology, for example, a particular product’s “shelf life” may be measured in months, rather than years, and an IT employer may not need to put a former employee on the sidelines for a longer period of time (see #’s 3 and 4 below).
2. The reasonableness of the geographical restriction. An employer is entitled to no more non-competition protection than it requires. Stated differently, a company in Connecticut doing business only east of the Mississippi river should not be able to preclude a former employee from joining a competing company anywhere in the United States. The broader the geographical restriction the greater the judicial scrutiny.
3. The degree of protection afforded to the employer. An employer is generally entitled to protect its existing business and client or customer base, together with current and realistic plans for expansion. A hedge fund typically will not be able to prevent a former employee from working outside of the financial industry, and a start-up will not garner protection for grandiose or “pipe-dream” plans to capture an entire industry.
4. Does it unnecessarily restrict an employee’s ability to pursue his or her career? While non-competes are enforceable in Connecticut, Judges are reluctant to order an individual not to pursue his or her chosen profession or livelihood. In a severely depressed job market, the mere existence of a prior non-compete provision can sound the death knell of a job search and this enforceability aspect requires careful analysis by an experienced employment attorney. We at Maya Murphy can “compare and contrast” the language of a particular non-compete with the countless others we have seen before to advise you as to its likely enforceability, or whether an employer can be convinced to scale back its reach.
5. The degree to which it interferes with the interests of the public. Here, an extreme example best illustrates the point. We represented a pediatric cardiac surgeon in seeking to avoid a non-compete. Obviously, such skilled physicians are rare and society benefits greatly from the availability of their services. The public is best served by minimizing restrictions on their employment and maximizing the availability of their life-saving skill.

These five “constants” are viewed separately; a non-compete provision can (but need not) be rendered unenforceable if it violates even a single factor. The non-compete is viewed and evaluated in its entirety and courts may ascribe greater or lesser weight to a particular factor, but all enter into the final equation regarding enforceability.

The employment attorneys in Maya Murphy’s Westport, Connecticut office stand ready to assist you in determining whether, or to what extent, you may be subject to a non-compete contained in an Employment Agreement or Separation Agreement. No two cases are the same; there are always differentiating facts and circumstances. Thus, you should consult with an experienced practitioner to determine where you stand. For further information, call Robert Keepnews, Esq. at (203) 221-3100, or e-mail him at rkeepnews@mayalaw.com.

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Mere Inclusion of a Restrictive Covenant Does Not Invalidate Entire Contract

Mere Inclusion of a Restrictive Covenant Does Not Invalidate Entire Contract
Wes-Garde Components Group, Inc. v. Carling Technologies, Inc., 2012 Conn. Super. LEXIS 899
Wes-Garde Components Group, Inc. (“Wes-Garde”) and Carling Technologies, Inc. (“Carling”) executed an agreement on December 31, 1979 wherein Wes-Garde would receive “permanent favorable pricing” on certain electrical components manufactured by Carling, contingent upon maintaining annual threshold purchasing levels. The contract was amended on January 1, 1988 and it stayed in effect until 2008. The agreement between the two companies contained a covenant not to compete where Carling specifically agreed to refrain from entering the distribution market for certain electrical components.
Carling informed Wes-Garde on June 19, 2008 that is considered the agreement unenforceable and as such the company was under no contractual obligation to provide favorable pricing or abide by the non-compete provisions. December 1, 2008 marked the first date that Carling actually failed to provide favorable pricing, per the contract, while transacting with Wes-Garde. Wes-Garde ultimately sued Carling and requested that the court enforce the agreement. Carling moved for summary judgment on the grounds that the whole contract was unenforceable because it contained an “unreasonable restraint of trade” in the form of a mutual covenant not to compete. The Superior Court in the Judicial District of Hartford denied Carling’s motion for summary judgment and unequivocally rejected the argument that the mere inclusion of the mutual non-compete agreement necessitated the invalidation of an entire contract willingly executed by the parties. The details of a specific non-compete agreement may render that portion of the contract unenforceable but there is not a principle under Connecticut law espousing the idea that the mere presence of a restrictive covenant invalidates an entire agreement.
Wes-Garde opposed the motion for summary judgment on procedural grounds due to Carling’s failure to specify the ground on which it moved or make a specific reference to the covenant not to compete. Carling’s pleading did not establish specific facts or allegations regarding the non-compete agreement nor did they identify it as the grounds for moving for summary judgment. Carling failed to provide the court with the necessary information and the opportunity to evaluate the non-compete agreement based on its particular provisions. The court could have ruled on the enforceability of the non-compete agreement had Carling introduced specific facts or pleadings regarding those contractual provisions.
Carling’s defense, where a party alleges that the inclusion of a covenant not to compete invalidates a whole agreement, is universally rejected by courts in Connecticut and cannot be successfully argued as an avenue to render an entire agreement unenforceable.
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 Agreements Connected to Franchise Agreements

Court Enforces Non-Compete Agreements Connected to Franchise Agreements
Carvel Corporation v. DePaola, 2001 Conn. Super. LEXIS 1190

Carvel Corporation sells retail manufacturing licenses and related goods/services to franchises that operate Carvel ice cream stores. Misters Leopold and David DePaola operated two such Carvel stores in Waterbury, Connecticut. The two men contracted with Carvel on November 1, 1990 to obtain a retail manufacturer’s license for Carvel franchise store # 1578 for a period of ten years. The parties entered into non-compete and trade secrets agreements on March 22, 1991. Later that year, on September 11, 1997, the DePaolas entered into an agreement for a license for Carvel franchise store # 2704. Several restrictive covenants accompanied this second franchise agreement. The DePaolas were prohibited from operating ice cream stores within two miles of their previous Carvel locations for a period of three years following the abandonment or expiration of each respective license agreement. Additionally, the covenants stated that legal disputes would be “interpreted, governed, and construed pursuant to New York law”.
On October 31, 2000 the first license agreement expired but Carvel alleged that the DePaolas continued to operate that location as an independent ice cream store. The company learned a few weeks later that the DePaolas had begun to operate the second location in the same manner, as an independent ice cream store not classified as a Carvel franchise. Carvel Corp. sued the DePaolas for breach of the restrictive covenants and specifically claimed that they would disclose valuable and proprietary trade secrets during their current and future business activities. Carvel requested that the court issue two injunctions: one to order the DePaolas to cease using and to return any and all Carvel property and a second to cease the operation of their independent ice cream stores in order to comply with the non-compete agreements. The DePaolas were compliant with returning Carvel property but took issue with the company’s request that they cease their operations of the two ice cream stores. The agreement had a choice of law provision designating New York law as controlling, but the Superior Court of Connecticut sitting in New Britain was able to adjudicate the case because of the similarities in New York and Connecticut laws’ treatment of non-compete and other employment agreements.
The court found in favor of Carvel Corporation and ordered that the DePaolas cease their operations of their two independent ice cream stores in Waterbury, CT in order to comply with the non-compete agreement. To reach its decision regarding the enforceability of the underlying employment contract between the parties, the court analyzed whether Carvel had a legitimate business interest that warranted protection, the degree to which the restrictions were reasonable, and to what extent the restrictions would make the DePaolas bear occupational hardships.
The court held that Carvel did have a legitimate business interest that was threatened by the DePaolas’ continued business activities. While the company did not exercise physical control or have a leasehold interest over the stores, the company had an interest in its goodwill and name recognition that was connected to the customers of the DePaolas’ ice cream stores. Next, the court held that the restrictions, both time and geographical, were reasonable in scope and enforceable by an injunction. The stated purpose of the restrictions was to “prevent dilution of the exclusivity of the valuable Carvel know-how and Carvel trade secrets”. The restrictions enumerated in the non-compete agreement were firm enough to protect Carvel’s legitimate interest but limited enough so as not to unnecessary restrict the DePaolas’ economic activities.
The DePaolas claimed that should an injunction be issued, they would “lose both their income and their investment” because the “hardships would be immediate, devastating, and irreparable”. The court rejected this argument however and held that the DePaolas had entered into the agreements on their own accord without coercion and as such were responsible to bear the risk of hardships that may be the product of the agreements’ terms.
In light of a legitimate business interest and reasonable restrictions, the court granted Carvel’s request for an injunction restraining the DePaolas’ actions in order to prevent further violations of the legally binding non-compete agreements.
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 Agreements Connected to Franchise Agreements

Court Enforces Non-Compete Agreements Connected to Franchise Agreements
Carvel Corporation v. DePaola, 2001 Conn. Super. LEXIS 1190

Carvel Corporation sells retail manufacturing licenses and related goods/services to franchises that operate Carvel ice cream stores. Misters Leopold and David DePaola operated two such Carvel stores in Waterbury, Connecticut. The two men contracted with Carvel on November 1, 1990 to obtain a retail manufacturer’s license for Carvel franchise store # 1578 for a period of ten years. The parties entered into non-compete and trade secrets agreements on March 22, 1991. Later that year, on September 11, 1997, the DePaolas entered into an agreement for a license for Carvel franchise store # 2704. Several restrictive covenants accompanied this second franchise agreement. The DePaolas were prohibited from operating ice cream stores within two miles of their previous Carvel locations for a period of three years following the abandonment or expiration of each respective license agreement. Additionally, the covenants stated that legal disputes would be “interpreted, governed, and construed pursuant to New York law”.
On October 31, 2000 the first license agreement expired but Carvel alleged that the DePaolas continued to operate that location as an independent ice cream store. The company learned a few weeks later that the DePaolas had begun to operate the second location in the same manner, as an independent ice cream store not classified as a Carvel franchise. Carvel Corp. sued the DePaolas for breach of the restrictive covenants and specifically claimed that they would disclose valuable and proprietary trade secrets during their current and future business activities. Carvel requested that the court issue two injunctions: one to order the DePaolas to cease using and to return any and all Carvel property and a second to cease the operation of their independent ice cream stores in order to comply with the non-compete agreements. The DePaolas were compliant with returning Carvel property but took issue with the company’s request that they cease their operations of the two ice cream stores. The agreement had a choice of law provision designating New York law as controlling, but the Superior Court of Connecticut sitting in New Britain was able to adjudicate the case because of the similarities in New York and Connecticut laws’ treatment of non-compete and other employment agreements.
The court found in favor of Carvel Corporation and ordered that the DePaolas cease their operations of their two independent ice cream stores in Waterbury, CT in order to comply with the non-compete agreement. To reach its decision regarding the enforceability of the underlying employment contract between the parties, the court analyzed whether Carvel had a legitimate business interest that warranted protection, the degree to which the restrictions were reasonable, and to what extent the restrictions would make the DePaolas bear occupational hardships.
The court held that Carvel did have a legitimate business interest that was threatened by the DePaolas’ continued business activities. While the company did not exercise physical control or have a leasehold interest over the stores, the company had an interest in its goodwill and name recognition that was connected to the customers of the DePaolas’ ice cream stores. Next, the court held that the restrictions, both time and geographical, were reasonable in scope and enforceable by an injunction. The stated purpose of the restrictions was to “prevent dilution of the exclusivity of the valuable Carvel know-how and Carvel trade secrets”. The restrictions enumerated in the non-compete agreement were firm enough to protect Carvel’s legitimate interest but limited enough so as not to unnecessary restrict the DePaolas’ economic activities.
The DePaolas claimed that should an injunction be issued, they would “lose both their income and their investment” because the “hardships would be immediate, devastating, and irreparable”. The court rejected this argument however and held that the DePaolas had entered into the agreements on their own accord without coercion and as such were responsible to bear the risk of hardships that may be the product of the agreements’ terms.
In light of a legitimate business interest and reasonable restrictions, the court granted Carvel’s request for an injunction restraining the DePaolas’ actions in order to prevent further violations of the legally binding non-compete agreements.
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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Applying Basic Contract Principles to the Enforcement of Non-Compete Agreements

Applying Basic Contract Principles to the Enforcement of Non-Compete Agreements

North American Outdoor Products, Inc. v. Dawson, 2004 Conn. Super. LEXIS 2677

North American Outdoor Products, Inc. (NAOP) was a company created to facilitate sales of outdoor goods to mass retail merchants. The company marketed products such as instant garages, sporting goods, shelters, and canopies. Mr. Curt Dawson worked for NAOP in its sales and marketing department from February 1999 to April 2, 2004. He worked as the National Sales Manager for a period of time in Florida but returned to work in Connecticut when NAOP agreed in a January 2003 meeting to an annual raise of $25,000.00 and related moving expenses.
In March 2003, management requested that Mr. Dawson sign an Employee Agreement that contained and explained several restrictive covenants that would become effective upon termination. The agreement prohibited him from competing with NAOP for twelve months following termination as well as soliciting any entity that NAOP had transacted with in the three-year period prior to termination. Mr. Dawson signed and returned the employment and non-compete agreement on March 26, 2003 but a representative for the company did not sign the document at that time. A representative for NAOP only signed the document on March 20, 2004 when the company learned of Mr. Dawson’s intent to voluntarily terminate his employment.
NAOP brought legal action against Mr. Dawson and sought an injunctive order from the court to enforce the provisions of the non-compete agreement. Mr. Dawson however presented multiple defenses as to why the restrictive covenants were unenforceable: 1) lack of consideration, 2) unreasonable time and geographical restrictions, 3) unclean hands on the part of NAOP, and 4) lack of necessary signatures. The court found in favor of Mr. Dawson, held that the non-compete agreement was unenforceable, and denied NAOP’s request for injunctive relief.
Under Connecticut law, a non-compete agreement must have sufficient consideration to make the document legally binding upon the parties. For enforcement of a restrictive covenant, the employee must receive something in exchange for his or her covenant. The agreement at hand did not bestow any new benefit upon Mr. Dawson and stated that his continued employment was the consideration for the agreement. Connecticut courts have concluded however that “continued employment is not [sufficient] consideration for a covenant not to compete entered into after the beginning of the employment”. NAOP claimed that the raise and moving expenses promised in January 2003 demonstrated adequate consideration but the court rejected this notion because those promises bore no substantial connection to the written agreement from March 2003.
Furthermore, the court concluded that the covenant not to complete was unenforceable because of inherent ambiguities in its language. Courts cannot create a binding contract in the absence of a meeting of the minds between the parties. The plaintiff, in this case NAOP, bears the burden of proof with respect to demonstrating a meeting of the minds in order to prove its version/interpretation of the alleged contract. The court looked to the plain language of the agreement to ascertain whether it articulated clear and concise provisions that led to a meeting of the minds between Mr. Dawson and NAOP. The court concluded that the agreement was unclear about material details, namely the effective date of the provisions and the identification of the specific parties. The agreement was a bilateral document that required signatures of both parties in order to be complete and become legally binding. The absence of NAOP’s signature at the same time as Mr. Dawson’s thus rendered the agreement unenforceable.
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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