Posts tagged with "Confidential Information"

Non-Compete Enforceability: Must Protect Legitimate Interest & Not Be Punitive

Non-Compete Enforceability: Must Protect Legitimate & Not Be Punitive
Ranciato v. Nolan, 2002 Conn. Super. LEXIS 489

Historic Restoration and Appraisal, LLC (HRA) was engaged in the business of restoring primarily detached single-family homes that had suffered casualty damage from fire and/or water. The company employed Mr. Timothy Nolan to work as a project manager for jobs located throughout the state of Connecticut. Mr. Nolan’s employment began on November 18, 1996 and the company informed him shortly thereafter that his employment was contingent on the execution of a non-compete agreement. The parties signed the restrictive covenant on November 21, 1996 and it prohibited Mr. Nolan from performing the same services offered by HRA in the states of Connecticut, Massachusetts, and Rhode Island for a period of three years. The agreement did not affect Mr. Nolan’s ability to offer painting or home improvement services that were not in connection to fire and/or water damage. In exchange for this employment restriction, the agreement stipulated that Mr. Nolan’s annual salary would be $48,500. He felt that he would be fired if he failed to sign the agreement and signed it without consulting a legal professional.
HRA fired Mr. Nolan on January 24, 1997 after repeated incidents of discovering that he was receiving lewd and inappropriate materials via the company’s fax machine. He began to work for McGuire Associates shortly after HRA discharged him and performed marketing and business development services in the capacity of his new position. Unlike HRA, McGuire is a preferred builder and the court held that it did not compete with HRA. The company sued Mr. Nolan in Connecticut state court and asked the court to enforce the non-compete agreement that the parties had executed. The Superior Court of Connecticut in New Haven rejected HRA’s request and held that the company “suffered no financial loss as a result of the defendant’s employment by McGuire”.
According to the non-compete agreement, Mr. Nolan can be in breach only if he works at a company that is “in competition with” HRA. While the court acquiesced that HRA and McGuire were both in the construction industry, it held that they performed significantly different services and were not in competition with each other for clients or projects. The industry classified HRA as a “fire chaser” because it received most of its jobs by monitoring police reports and fire scanners to alert them of individuals that needed repairs for fire and/or water damage. McGuire however was a preferred builder and provided services for not only single-family homes, but also commercial and municipal buildings. The courts interpreted the significant differences between the two companies as adequate evidence that Mr. Nolan was not “in competition with” HRA because of his new employment with McGuire.
Furthermore, the court discussed the reasons why a court would enforce a non-compete covenant, specifically referencing the legal system’s desire to balance and protect the parties’ interests. Courts generally grant injunctions to enforce a non-compete agreement when the plaintiff employer can provide adequate evidence that the former employee’s breach will result in adverse financial consequences. The court noted that this policy did not apply to the case since HRA had not suffered any financial loss or hardship and Mr. Nolan did not have any access to confidential information that would be harmful to the company should it be disclosed.
Additionally, the court concluded that the time and geographical restrictions in the agreement were unreasonable given the facts of the case. HRA did not have anything to lose because of McGuire employing Mr. Nolan because of the differences in their business operations and the court held that the restrictions, if enforced, would only serve to prevent Mr. Nolan from employment at another company. The policy to enforce non-compete agreements focuses on protecting the interests of the employer and not to punish the employee and excessively restrict future employment opportunities. Specifically, the court cited that HRA could only “benefit from protection in the New Haven area” and that the “tri-state restriction imposed on the defendant was not necessary to protect any legitimate interests of the plaintiff and, therefore, [the agreement] was not ‘reasonably limited’”.
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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Non-Compete Enforceability: Must Protect Legitimate Interest & Not Be Punitive

Non-Compete Enforceability: Must Protect Legitimate & Not Be Punitive
Ranciato v. Nolan, 2002 Conn. Super. LEXIS 489

Historic Restoration and Appraisal, LLC (HRA) was engaged in the business of restoring primarily detached single-family homes that had suffered casualty damage from fire and/or water. The company employed Mr. Timothy Nolan to work as a project manager for jobs located throughout the state of Connecticut. Mr. Nolan’s employment began on November 18, 1996 and the company informed him shortly thereafter that his employment was contingent on the execution of a non-compete agreement. The parties signed the restrictive covenant on November 21, 1996 and it prohibited Mr. Nolan from performing the same services offered by HRA in the states of Connecticut, Massachusetts, and Rhode Island for a period of three years. The agreement did not affect Mr. Nolan’s ability to offer painting or home improvement services that were not in connection to fire and/or water damage. In exchange for this employment restriction, the agreement stipulated that Mr. Nolan’s annual salary would be $48,500. He felt that he would be fired if he failed to sign the agreement and signed it without consulting a legal professional.
HRA fired Mr. Nolan on January 24, 1997 after repeated incidents of discovering that he was receiving lewd and inappropriate materials via the company’s fax machine. He began to work for McGuire Associates shortly after HRA discharged him and performed marketing and business development services in the capacity of his new position. Unlike HRA, McGuire is a preferred builder and the court held that it did not compete with HRA. The company sued Mr. Nolan in Connecticut state court and asked the court to enforce the non-compete agreement that the parties had executed. The Superior Court of Connecticut in New Haven rejected HRA’s request and held that the company “suffered no financial loss as a result of the defendant’s employment by McGuire”.
According to the non-compete agreement, Mr. Nolan can be in breach only if he works at a company that is “in competition with” HRA. While the court acquiesced that HRA and McGuire were both in the construction industry, it held that they performed significantly different services and were not in competition with each other for clients or projects. The industry classified HRA as a “fire chaser” because it received most of its jobs by monitoring police reports and fire scanners to alert them of individuals that needed repairs for fire and/or water damage. McGuire however was a preferred builder and provided services for not only single-family homes, but also commercial and municipal buildings. The courts interpreted the significant differences between the two companies as adequate evidence that Mr. Nolan was not “in competition with” HRA because of his new employment with McGuire.
Furthermore, the court discussed the reasons why a court would enforce a non-compete covenant, specifically referencing the legal system’s desire to balance and protect the parties’ interests. Courts generally grant injunctions to enforce a non-compete agreement when the plaintiff employer can provide adequate evidence that the former employee’s breach will result in adverse financial consequences. The court noted that this policy did not apply to the case since HRA had not suffered any financial loss or hardship and Mr. Nolan did not have any access to confidential information that would be harmful to the company should it be disclosed.
Additionally, the court concluded that the time and geographical restrictions in the agreement were unreasonable given the facts of the case. HRA did not have anything to lose because of McGuire employing Mr. Nolan because of the differences in their business operations and the court held that the restrictions, if enforced, would only serve to prevent Mr. Nolan from employment at another company. The policy to enforce non-compete agreements focuses on protecting the interests of the employer and not to punish the employee and excessively restrict future employment opportunities. Specifically, the court cited that HRA could only “benefit from protection in the New Haven area” and that the “tri-state restriction imposed on the defendant was not necessary to protect any legitimate interests of the plaintiff and, therefore, [the agreement] was not ‘reasonably limited’”.
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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Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants

Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants
Newinno, Inc. v. Peregrim Development, Inc., 2004 Conn. Super. LEXIS 1160

Mr. Russell Koch worked for Newinno, Inc., a consulting firm, where his employment was contingent upon several restrictive covenants contained in his employment contract. The main agreement between the parties was a non-disclosure covenant designed to protect Newinno’s confidential information and business interests upon Mr. Koch’s termination. The agreement had four main provisions such that Mr. Koch was: 1) prohibited from disclosing information about the company that “is not generally known in the industry which the company is or may become engaged”, 2) prohibited disclosing any information relating to actual or potential clients’ products, business plans, designs, or trade secrets, 3) prohibited disclosing information from the company’s “BrainBank”, and lastly 4) prohibited disclosing information relating to the company’s “lead/prospect and customer lists”. The agreement did not articulate any time or geographical restrictions, which became the main issue in the case and how Mr. Koch asserted that the covenant was not binding or enforceable. These provisions went into effect when Mr. Koch voluntarily terminated his employment at Newinno and began to work for one of its competitors, Peregrim Development, Inc..
Newinno sought to enforce the provisions and requested an injunction from the court to prevent Mr. Koch’s further employment at its direct competitor in order to prevent any breaches of the covenant by him disclosing confidential information. The court held in favor of Newinno and stated that the company had met the burden of proof to demonstrate that the facts of the case warranted injunctive relief. In its decision, the court explained that the issue at the heart of the case was not “whether a reasonableness standard should govern the enforceability of the parties’ confidentiality agreements, but rather concerns [regarding] the exact manner in which the test should be defined or applied”.
Connecticut courts are divided on whether to apply the same criteria and test used to assess non-compete agreements’ enforceability or resort to a more relaxed version of the reasonableness test. Non-disclosure/confidentiality agreements have traditionally enjoyed treatment that is more favorable under Connecticut laws in the courts than non-compete agreements. There are not any Connecticut cases, state or federal, that have held that the enforceability of confidentiality agreements hinges on the same standards and test that governs the enforceability of non-compete agreements. Overall, the courts have concluded that time and geographical restrictions are not necessary in order to enforce a non-disclosure agreement. This is very divergent from how the courts address the enforceability of non-compete agreements where they generally insist that those provisions are in the text of the agreement. This trend has led Connecticut courts to apply a modified version of the non-compete enforceability test where the legal analysis takes into account the “purpose of the confidentiality covenants and the specific information sought to be protected.
It is beneficial for an employee to know the difference in the enforcement trends and policies with regard to non-disclosure and non-compete agreements under Connecticut law. This is especially true when an employment contract contains both covenants and ensuing legal disputes question the validity of each. A party may succeed on the merits of the case with regard to the enforcement of one covenant and then fail on the merits for the other.
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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Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants

Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants
Newinno, Inc. v. Peregrim Development, Inc., 2004 Conn. Super. LEXIS 1160

Mr. Russell Koch worked for Newinno, Inc., a consulting firm, where his employment was contingent upon several restrictive covenants contained in his employment contract. The main agreement between the parties was a non-disclosure covenant designed to protect Newinno’s confidential information and business interests upon Mr. Koch’s termination. The agreement had four main provisions such that Mr. Koch was: 1) prohibited from disclosing information about the company that “is not generally known in the industry which the company is or may become engaged”, 2) prohibited disclosing any information relating to actual or potential clients’ products, business plans, designs, or trade secrets, 3) prohibited disclosing information from the company’s “BrainBank”, and lastly 4) prohibited disclosing information relating to the company’s “lead/prospect and customer lists”. The agreement did not articulate any time or geographical restrictions, which became the main issue in the case and how Mr. Koch asserted that the covenant was not binding or enforceable. These provisions went into effect when Mr. Koch voluntarily terminated his employment at Newinno and began to work for one of its competitors, Peregrim Development, Inc..
Newinno sought to enforce the provisions and requested an injunction from the court to prevent Mr. Koch’s further employment at its direct competitor in order to prevent any breaches of the covenant by him disclosing confidential information. The court held in favor of Newinno and stated that the company had met the burden of proof to demonstrate that the facts of the case warranted injunctive relief. In its decision, the court explained that the issue at the heart of the case was not “whether a reasonableness standard should govern the enforceability of the parties’ confidentiality agreements, but rather concerns [regarding] the exact manner in which the test should be defined or applied”.
Connecticut courts are divided on whether to apply the same criteria and test used to assess non-compete agreements’ enforceability or resort to a more relaxed version of the reasonableness test. Non-disclosure/confidentiality agreements have traditionally enjoyed treatment that is more favorable under Connecticut laws in the courts than non-compete agreements. There are not any Connecticut cases, state or federal, that have held that the enforceability of confidentiality agreements hinges on the same standards and test that governs the enforceability of non-compete agreements. Overall, the courts have concluded that time and geographical restrictions are not necessary in order to enforce a non-disclosure agreement. This is very divergent from how the courts address the enforceability of non-compete agreements where they generally insist that those provisions are in the text of the agreement. This trend has led Connecticut courts to apply a modified version of the non-compete enforceability test where the legal analysis takes into account the “purpose of the confidentiality covenants and the specific information sought to be protected.
It is beneficial for an employee to know the difference in the enforcement trends and policies with regard to non-disclosure and non-compete agreements under Connecticut law. This is especially true when an employment contract contains both covenants and ensuing legal disputes question the validity of each. A party may succeed on the merits of the case with regard to the enforcement of one covenant and then fail on the merits for the other.
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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Difference in Job Responsibilities and Knowledge Prevents Breach of Non-Compete Agreement

Tyco Healthcare Group v. Ross, 2011 U.S. Dist. LEXIS 49867
Difference in Job Responsibilities and Knowledge Prevents Breach of Non-Compete Agreement
Tyco Healthcare, through its subsidiary Covidien (a medical device manufacturer and distributor), employed Mr. Adam Ross as a design engineer in the company’s research and development division from November 14, 2006 to March 18, 2011. As part of his employment contract, Mr. Ross signed an “Employee Agreement regarding Confidential Information, Inventions, and Conflicting Employment” that specified that Mr. Ross could not divulge, in any capacity, any of Covidien’s confidential information that he was privy to during the time of his employment. He additionally agreed to not seek for or engage in employment with an industry competitor for two years after the termination of his employment. Mr. Ross began searching for a new job in 2010 and applied to Intuitive Surgical upon seeing a public advertisement. Mr. Ross was up front with Intuitive about the non-compete agreement and went so far as to engage an outside attorney for questions he had in relation to the non-compete agreement. Intuitive hired Mr. Ross as a design engineer in its Milford, CT office and he began his new job on March 21, 2011, a mere three days after leaving the employ of Covidien.
At this point, Covidien filed suit against Mr. Ross but stated that it was open to other solution besides litigation. Its main concern was the confidential industry information that Mr. Ross possessed because of his years at Covidien but it also wanted to enforce the two-year prohibition on employment with a competitor. The company submitted several proposals to avoid litigation: 1) asked Intuitive to refrain from hiring Mr. Ross, 2) was willing to retain Mr. Ross as an employee, 3) compensate Mr. Ross in the event he was not able to find employment as an engineer at a non-competitor. Mr. Ross and Intuitive ultimately turned down all of these offers, resulting in Covidien commencing further litigation activity. Covidien asked the court to restrain Mr. Ross from being employed at Intuitive or divulging any trade secrets acquired at Covidien.
The District Court of Connecticut found that the non-compete between Mr. Ross and Covidien was in fact enforceable on the grounds that it contained reasonable provisions and did not overly disadvantage one party. In addition to a valid and enforceable non-compete agreement, Covidien must be able to show breach in order for its request to be granted, and as such, the court turned to the issue of whether or not there was a breach of this agreement. In this matter, the court found that Mr. Ross did not breach the non-compete agreement despite gaining employment at a competitor of Covidien. This legal discussion focused on the fine details and responsibilities of the jobs at Covidien and Intuitive, concluding with the court emphasizing the differences. The projects, responsibilities, technology, and knowledge required/used/gained by the two jobs were so different that, according the court, there was not convincing evidence that Mr. Ross would be “performing ‘similar services’ at Intuitive, or that he will inevitably use and disclose confidential and proprietary information, in violation of his non-compete agreement”.
This decision demonstrates that upon close examination of very fine employment details, a court will not always find breach of a non-compete in light of gaining employment with a direct competitor of the previous employer and signatory to 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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Enforcing a Non-Compete Agreement to Protect Software Company’s Confidential Information

Enforcing a Non-Compete Agreement to Protect Software Company’s Confidential Information

Weseley Software Development Corporation v. Burdette, 977 F. Supp. 137

Mr. Wesley Burdette worked for Weseley Development Corporation first as a Logistics Analyst and then as a Senior Logistics Analyst from May 1993 to September 16, 1996. Weseley was a software development company based in Shelton, Connecticut whose focus product was a transportation and logistics management program referred to as TRACS (Tactical Routing and Consolidation System). Mr. Burdette played a significant role in the development and testing of TRACS versions 3.0 and 3.1. He worked with “customers and potential customers to evaluate, develop, tailor, and implement Weseley’s products” during his approximately three years of employment. He gave Weseley his two weeks notice on August 29, 1996 and planned to switch companies to work for Manugistics for the marketing and sales of its product titled MTP. Management reminded Mr. Burdette of the non-compete clause in his employment agreement that he had signed.
The most important covenants that he signed in conjunction with his employment contract were those not to compete or disclose confidential information. The agreement was signed on January 14, 1995 after Mr. Burdette was allowed time to consult with an attorney regarding any and all of the agreement’s provisions. The non-compete clause stipulated that he could not work for a competitor for a period of six months following his termination with Weseley or disclose confidential information for an indefinite period of time. The company sued Mr. Burdette to enforce the non-compete and asked the court to enjoin him from further employment with Manugistics. Mr. Burdette countered that the agreement was unenforceable because its provisions were unreasonable and that Weseley had only signed the agreement once litigation began.
The court found in favor of Weseley and enforced the non-compete covenant, enjoining Mr. Burdette from working for Manugistics for a period of six months as stated in the language of the agreement. It validated the agreement because there was adequate consideration in the form of “continued employment, an articulated paid vacation entitlement, a new entitlement to severance benefits, and stock options”. Furthermore, it found the limitations to be reasonable such that they fairly balanced Weseley’s desire to protect its business and Mr. Burdette’s desire to still be able to pursue his career. It was paramount that the court protected the company’s interests since Mr. Burdette had a great deal of access to proprietary research & development information that could have severely disadvantaged Weseley should Mr. Burdette have shared the information with Manugistics. Although the court stated that there was no evidence that he had already disclosed confidential information, it held that he would inadvertently draw upon his knowledge gained while employed at Weseley and eventually disclose some amount, however small it may be in, in the course of his new employment with Manugistics.
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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Change in Business Services/Products Doesn’t Invalidate a Non-Compete Agreement

Change in Business Services/Products Doesn’t Invalidate a Non-Compete Agreement

DiscoveryTel SPC, Inc. v. Pinho, 2010 Conn. Super. LEXIS 2683

In 2002, DiscoveryTel SPC hired Mr. Ismael Pinho as its chief financial officer (CFO) as an at will employee. The parties later executed an employment agreement on December 27, 2004 that would go into effect January 1, 2005. The employment contract modified Mr. Pinho’s employment from at will to a one-year automatic renewable basis and outlined his salary, incentive bonuses, vacation, personal days, insurances, severance package, and several restrictive covenants. Mr. Pinho was prohibited from directly or indirectly competing with DiscoveryTel by being involved in the purchase and/or sale of international voice and traffic data systems during the term of the employment agreement or during any period for which he was receiving severance pay. Additionally, the agreement stated that he was bound by an indefinite non-disclosure clause pertaining to DiscoveryTel’s confidential and proprietary information. In between 2004 and 2010, DiscoveryTel experienced a corporate reorganization and shifted its focus and the services it provided. By 2010, it was no longer engaged in the purchase and/or sale of international voice and data traffic but instead facilitated the sale of telephone traffic.
Mr. Pinho informed the president of DiscoveryTel in a May 21, 2010 letter that he had accepted a position with World Telecom Exchange Communications, LLC (WTEC) and would be starting at the new company on June 1, 2010. DiscoveryTel brought suit and requested that the court grant its request for an injunction to prevent any violations of the restrictive covenants in connection to Mr. Pinho’s new employment. Mr. Pinho did not have an issue with the non-disclosure clause in the employment contract but asserted that his mere employment with WTEC was not a violation of the non-compete agreement. He contended that the agreement did not prohibit working for a competitor but rather specifically from “being involved in ‘any business relating to the purchase and sale of international voice and data traffic’”. He went on to argue that engaging in this sector of the industry should not violate a non-compete agreement because DiscoveryTel was no longer engaged in that specific industry activity. Additionally, he argued that the agreement had inadequate consideration and was therefore unenforceable.
The court found these arguments unconvincing however and granted DiscoveryTel’s request for injunctive relief and restrained Mr. Pinho from working for WTEC until December 31, 2010 (the end of the current employment term) in order to prevent further violations of the non-compete agreement. It looked to the modification in the nature of Mr. Pinho’s employment (from at will to a contract renewable on an annual basis) and enhanced benefits (mainly the introduction of a severance package) in the employment agreement to conclude that there was sufficient consideration. Finally, the court analyzed whether Mr. Pinho’s activities as an employee of WTEC violated the covenant, taking into account DiscoveryTel’s reorganization and shift in focus. The court ultimately held that Mr. Pinho had indeed violated the non-compete agreement by working at WTEC and that a mere change in business services/products did not render the non-compete agreement invalid or release Mr. Pinho from its obligations.
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 Invalidates Non-Compete Contract for Unreasonable Restrictions

Court Invalidates Non-Compete Contract for Unreasonable Restrictions
Trans-Clean Corp. v. Terrell, 1998 Conn. Super. LEXIS 717

Trans-Clean Corp. was a company engaged in the business of restoring exteriors and interiors of commercial buildings. The company began to employ Mr. Alton Terrell as a salesman and manager in December 1990 in connection with the company’s acquisition of Travel Washer, Inc.. The parties executed an employment agreement that created a one-year term of employment, specified the compensation schedule, and contained a non-competition covenant. The non-compete agreement stated that Mr. Terrell was prohibited for two years following the completion of his employment contract or any renewal thereof from competing with Trans-Clean within sixty miles of the company’s main office in Stratford, CT. The parties negotiated a pay increase in 1993 and a new compensation schedule was created. Trans-Clean considered this a renewal of the original employment contract and held the belief that the non-compete agreement was still valid and in effect. Mr. Terrell however did not share the same view and did not treat the pay increase and new compensation schedule as a renewal of the original contract. While the parties had different interpretations of the pay increase, there were no direct discussions to clarify its characteristics.
Mr. Terrell suddenly resigned from Trans-Clean in September 1997 and proceeded to create his own commercial restoration company and solicited business from individuals/businesses on Trans-Clean’s customer list. Trans-Clean sued Mr. Terrell and asked the court to issue an injunction to enforce the non-compete agreement and prevent any further violations. The court had to tackle two central issues to decide the dispute: 1) whether customer lists are protected trade secrets and 2) the nature and reasonableness of the employment contract and non-compete agreement. It held that the lists were not trade secrets that entitled Trans-Clean to an injunction and further concluded that the non-compete agreement was unreasonable and unenforceable.
The court held that the customer lists were not trade secrets or confidential information that required protection. There was never a company policy to designate the lists as confidential information or maintain a degree of secrecy of customers or contact persons. Furthermore, each salesperson maintained his or her own personal contact lists and did not have any direct access to other sales representatives’ lists. Each salesperson had the responsibility of developing his or her list, maintaining business relationships, and collecting accounts. These lists did not amount to a business interest for which Trans-Clean was entitled to protection and injunctive relief.
Next, the court assessed the reasonableness of the covenant not to compete and found that its provisions, specifically the geographical restriction, were unreasonable and unenforceable. The sixty-mile radius restriction covered 75% of Connecticut, including the state’s six major metropolitan areas (Bridgeport, New Haven, Hartford, Waterbury, Stamford, and Danbury), and extended into parts of New York (including four out the five boroughs) and New Jersey. The restriction, according to the court, was overreaching and unnecessarily infringed on Mr. Terrell’s ability to purse his occupation and obtain future employment. He had twenty years of experience in the commercial restoration industry and it was the only field in which he had ever worked.
Lastly, the court analyzed whether the pay increase and modification of the compensation schedule amounted to a renewal of the original agreement. The court stated there was a “question of fact” that it needed to answer in order to decide the case. It noted that the writing drawn up by the company regarding the pay increase did not make any reference to the original employment contract and there was no apparent connection between the two writings. In the absence of any reference or connection, the court concluded that the pay increase was not a renewal or extension of the original employment contract. The court noted however that Mr. Terrell “should be bound by the non-compete agreement if that agreement is found to be reasonable”. The court’s earlier analysis revealed that the covenant was in fact unreasonable, thereby overriding Mr. Terrell’s obligation to abide by its provisions.
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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Implied Duty to Not Disclose Trade Secrets and Exceptions to the Rule

Implied Duty to Not Disclose Trade Secrets and Exceptions to the Rule

Booth Waltz Enterprises v. Kimlingen, 2004 Conn. Super. LEXIS 2682

Booth Waltz Enterprises was an automotive and industrial lubricant distributor based in Hartford, Connecticut that transacted with auto dealers, fleet owners, and public entities. Mr. Kevin Kimlingen worked for Booth Waltz as a sale representative from April 2000 to October 2003. Booth Waltz’s management was impressed by Mr. Kimlingen’s practice of “rolling”, the art of convincing his customers to follow him to a new employer. He “rolled” forty-five accounts to Booth Waltz within his first month at the company. Booth Waltz took advantage of Mr. Kimlingen’s talents to acquire many new clients when the company hired him but it was very cognizant that it would have to take measures to protect its interests given his history of mobility and “rolling” within the industry. In the summer of 2003, Booth Waltz prepared a non-solicitation agreement for its employees to better regulate the activities of its sales staff. Mr. Kimlingen expressed great reluctance to sign the restrictive covenant when he received it in October 2003 and Booth Waltz assumed he resigned from its employ when he failed sign the agreement or attend a mandatory staff meeting.
Mr. Kimlingen began to work for U.S. Lubes, a direct industry competitor, and he began “rolling” his Booth Waltz accounts to his new employer. Booth Waltz sued Mr. Kimlingen in Connecticut state court and sought injunctive relief to prevent any further solicitations of its customers. Booth Waltz argued that although Mr. Kimlingen may not have breached an actual restrictive covenant, his actions violated the Connecticut Uniform Trade Secrets Act, which by default prohibited certain competitive activities. The company argued that the customer lists Mr. Kimlingen took with him to his new employer was Booth Waltz’s sensitive and proprietary information. Former employees may compete with a former employer in the absence of a non-compete agreement, but her or she is still bound by a duty to not disclose trade secrets or confidential information acquired during his or her employment to the detriment of the former employer.
The court ultimately held that Mr. Kimlingen did not violate a covenant or implied duty by “rolling” clients from Booth Waltz to U.S. Lube. The vast majority of these account had long-standing relationships with Mr. Kimlingen that pre-dated his employment with Booth Waltz. The court concluded that these customer relationships were not property of Booth Waltz and the company had no authority or legal right to label the contact information as its proprietary information. The court noted, “in the absence of a covenant not to compete, an employee who possessed the relevant customer information prior to the former employment is free to use the information in competition with the employer after termination of the employment relationship” (Restatement (Third), Unfair Competition § 42, comment f).
The court denied Booth Waltz’s request for an injunctive in light of no legally binding restrictive covenant or an implied duty.
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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