Posts tagged with "corporation"

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment
Connecticut Bathworks Corp. v. Palmer, 2003 Conn. Super. LEXIS 2193

Connecticut Bathworks Corporation was a company servicing New Haven, Fairfield, and Litchfield counties that remodeled bathrooms via the installation of prefabricated acrylic bathtub liners and wall systems. The company employed Mr. Palmer from approximately the beginning of April 2001 to February 28, 2003 at which point Mr. Palmer voluntarily terminated his employment. He began to work for Re-Bath of Connecticut, a company in direct competition with Bathworks, the next day. The issue in this case is that Mr. Palmer signed a “Company Confidentiality Agreement” when he began to work for Bathworks that contained a covenant not to compete that prohibited him from “being employed by any business in competition with the plaintiff [Bathworks] within any county in which the plaintiff is doing business for a period of three years from the termination of his employment with the plaintiff”. This created a three-year prohibition on working for a competitor with the tri-county area of New Haven, Fairfield, and Litchfield.
Bathworks sued Mr. Palmer in Connecticut state court and requested an injunction to enjoin him from further violations of the non-compete agreement. The court analyzed the facts of the case, held in favor of Mr. Palmer, and denied Bathworks’s request for injunctive relief. The court’s decision ultimately came down to the issue of whether Mr. Palmer’s employment with Re-Bath would negatively affect Bathworks’s interests and business operations. Bathworks carried the burden of establishing the probability of success on the merits of the case and the court held that it failed to present sufficient evidence to indicate it would be directly and immediately harmed due to breach of the restrictive covenant.
Bathworks argued that Mr. Palmer acquired valuable trade secrets and information during his employment with the company and that his continued employment with Re-Bath would harm its operations. The court however found that Mr. Palmer, as an installer, did not have access to Bathworks’s confidential information or any trade secrets that would put the company at a competitive disadvantage. The court further noted that while Mr. Palmer was a skilled laborer, he was not a high-level executive, nor did he provide “special, extraordinary, or unique” services. Bathworks also failed to present any evidence to show that Mr. Palmer knew of or took part in the company’s sales/marketing activities or the development of a business strategy.
The court stated that its role in deciding the case was to balance the parties’ interest to fairly protect Bathworks’s business while not unreasonably restricting Mr. Palmer’s right to seek employment elsewhere. This agreement however, according to court, unnecessarily restricted Mr. Palmer’s right to work at another company because there was nothing about that employment which would disadvantage Bathworks in the industry. The non-compete agreement went beyond what was reasonably necessary to protect the company’s interests and as such, the court denied Bathworks’s request for an injunction.
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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Sufficient Consideration for At-Will Employees

Sufficient Consideration for At-Will Employees
Home Funding Group, LLC v. Kochmann, 2007 U.S. Dist. LEXIS 41376

Home Funding Group, LLC was a New York corporation with primary business operations in Connecticut that engaged in the residential mortgage brokerage business. The company employed Mr. Nicholas Kochmann and Mr. Patrick Dougherty in its New Jersey office. They worked for the company from January 2004 to May 1, 2006 and July 18, 2006 respectively. The company had both employees sign an Employment Agreement that contained non-compete and non-solicitation clauses to protect Home Funding’s business interests. The employees later signed an “Invention Assignment Agreement” stating that Home Funding was the sole owner of any invention connected to their employment and that it would maintain full intellectual property rights. The agreement stated that Connecticut law would govern any legal disputes and litigation in state and/or federal court. Both employees signed a new restrictive covenant in March 2006 that amended and superseded the 2004 Employment Agreement.
Misters Kochmann and Dougherty both voluntarily terminated their employment with Home Funding and Hamilton Financial, a direct competitor in the mortgage broker industry, hired them shortly thereafter. Home Funding sued its two former employees for breach of the non-compete agreements and requested they be enjoined from further employment with Hamilton Financial. Misters Kochmann and Dougherty asserted that the agreements were not legally binding on them because they lacked valid consideration, claiming that continued employment is inadequate consideration for a covenant executed after the start of employment. The federal court sitting in Bridgeport, Connecticut rejected this argument and held that the agreements were properly executed, contained adequate consideration, and were binding upon the parties.
The former employees argued that Connecticut law requires an employer to promise to something different from what it is already obligated to do when it wants to modify/amend a restrictive covenant with one or more of its employees. The court however applied Home Funding’s legal assertion that at-will employees may be terminated at any time at the employer’s discretion and thus continued employment amounted to adequate consideration to support a valid non-compete agreement. The court noted that in this case, Home Funding had the burden of proof at trial to demonstrate that the agreement was correctly executed and enforceable. Home Funding was able to provide such proof and the federal court held in its favor. Had Misters Kochmann and Dougherty not been at-will employees however, the court would have likely held that the agreement did not have the requisite consideration and could have invalidated the agreement in its entirety.
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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Test for Granting a Temporary Injunction for Breach of Connecticut Non-Compete

Test for Granting a Temporary Injunction for Breach of Connecticut Non-Compete
Group Concepts, Inc. v. Barberino, 2004 Conn. Super. LEXIS 1036

Group Concepts, Inc. is a Connecticut corporation that is in the business of condominium association management and has its office in Hamden. The company entered into a stock purchase agreement on September 11, 2002 to purchase Barberino Real Estate, Inc., a company that managed condominiums and other properties. Group Concepts had Ms. Tina Barberino sign a non-compete agreement as part of the acquisition transaction. In exchange for $84,500, Ms. Barberino agreed not to compete with Group Concepts “within the state of Connecticut until September 2004 and from soliciting any of the clients listed on schedule B of the stock purchase agreement for a period of three years”.
Ms. Barberino began to work at Ennis Property Management, Inc. on October 5, 2003 and competed directly with Group Concepts within the state of Connecticut. She contacted clients enumerated on schedule B of the stock purchase agreement and Group Concepts lost several accounts because of Ms. Barberino’s actions. Group Concepts sued Ms. Barberino in Connecticut state court for breach of the non-compete agreement and requested an injunction to prevent further violations of the restrictive covenant. The court granted Group Concepts’ request for an injunction and ordered the enforcement of the non-compete clause through September 30, 2004 and the non-solicitation clause through September 11, 2005, the respective dates as stated in the restrictive covenant.
In order for a court to grant a temporary injunction, the moving party must submit evidence that demonstrates: 1) it does not have an adequate legal remedy, 2) it would suffer irreparable injury absent the injunction, 3) it would likely prevail on the merits of the case, and 4) the injunction would balance the equities of the parties involved in the dispute. The court said it need not apply the entire test in this case and only analyzed the third and fourth components to hold that the agreement was enforceable and an injunction was warranted.
The court concluded that a preponderance of the evidence submitted by the parties indicated that Group Concepts would most likely prevail on the merits of its suit. The provisions of the non-compete agreement were reasonable and the facts of the case clearly pointed to a cognizant breach of the non-compete agreement. The court concluded that the overall fact pattern of the case demonstrated that Group Concepts would likely prevail on the merits and held that the company met this requirement for the granting of the injunction request.
The court also held that an injunction would balance the equities of the parties. The court felt that an injunction and enforcement of the non-compete was necessary to protect Group Concepts from experiencing a significant business hardship in connection to Ms. Barberino’s breach of the covenant. Group Concepts paid substantial consideration ($84,500) for its acquisition of Ms. Barberino’s company and relied on it to prevent Ms. Barberino from breaching the non-compete and non-solicitation provisions. An injunction would prevent Group Concepts from experiencing adverse business trends because of Ms. Barberino’s undeniably unlawful breach 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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