Posts tagged with "cutpa"

Connecticut Non-Compete Prohibits Client Solicitation in Investment Services Industry

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

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

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

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

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

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

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

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

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

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

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

Physician Adequately Alleges Violation of CUTPA Against His Former Counsel

In a recent decision, the Superior Court for the Judicial District of Stamford/Norwalk held that a plaintiff physician adequately alleged a violation of the Connecticut Unfair Practices Act against his former counsel.  More specifically, the Court held that, as alleged, the defendant law firm’s actions were entrepreneurial in nature, and, thus, were not subject to immunity which ordinarily attaches to conduct involving legal representation.

In reaching its decision, the Court relied on the following facts, as alleged in the plaintiff’s complaint:

In this action, the plaintiff has brought suit against the defendants Yale-New Haven Health Services, Greenwich Hospital, MCIC Vermont, Inc. and the law firm of Heidell, Pittoni, Murphy & Bach, LLP (the defendant).[1]The operative pleading, which is the plaintiffs amended complaint dated August 20, 2010, alleges the following relevant facts. Until January 3, 2008, the plaintiff was employed by Yale-New Haven Health Services as the director of the emergency services department at Greenwich Hospital. On August 4, 2006, the plaintiff met and treated a patient during the course of his employment. Subsequent to this treatment, the patient initiated a medical malpractice lawsuit against Greenwich Hospital and five physicians including the plaintiff. As a result of this lawsuit, the plaintiff was contacted by Y ale-New Haven Health Services and told that he could be provided a defense in the Sousa lawsuit pursuant to an undisclosed insurance policy provided by MCIC Vermont, Inc. The plaintiff was further told that the defendant law firm would represent all five of the physicians who were defendants in the underlying lawsuit, as well as Greenwich Hospital. According to the complaint, the plaintiff was not told that he had a right to obtain independent counsel or that he had the ability to object to any settlements. There was no written retainer agreement between the plaintiff and the defendant law firm. The plaintiff further alleges that the defendant law firm never informed him of any potential conflicts of interest arising from this joint representation. In fact, upon meeting with one of the defendant’s partners, the plaintiff was told that it was “not necessary” for him to obtain independent counsel because in “most cases,” settlements were covered entirely by the subject insurance policy and that individual physicians were “very rarely” reported to the National Practitioners Data Bank pursuant to 45 C.F.R. § 60.5.

According to the plaintiff, “throughout the representation [the defendant] failed to exercise the degree of skill and learning commonly applied to protect a client in Plaintiffs position as independent from the competing interests of common clients, including [Greenwich Hospital].” Specifically, the plaintiff alleges that the defendant failed to inform him in a timely manner of the occurrence of the deposition of the plaintiff in the underlying case, which deprived him of an opportunity to be present and provide input. The plaintiff further alleges that he was not told for nine months that the defendant had obtained the services of an independent medical expert. In November 2009, the plaintiff was informed that the case was settled on his behalf and that he would not be reported to the National Practitioners Data Bank. When the plaintiff asked whether he could object to the settlement, the plaintiff was told that he could not because of the contractual arrangement between MCIC Vermont, Inc. and Greenwich Hospital or Yale-New Haven Health Services. The plaintiff was further informed that he would not be named as a payor of the settlement proceeds. Several weeks later, however, the plaintiff was in fact told that he would be named in the settlement and reported to the National Practitioners Data Bank. The reason for this decision was because of an independent expert opinion that the plaintiff was not told about until after the settlement. None of the other physicians represented by the defendant were reported to the National Practitioners Data Bank. On December 22, 2009, the plaintiff eventually obtained independent counsel and the defendant has refused to turn over relevant documents to the plaintiffs new attorneys.

As a result of all of this conduct, the plaintiff alleges the following claims: (1) legal malpractice against the defendant; (2) breach of fiduciary duty against the defendant; (3) breach of fiduciary duty against MCIC Vermont, Inc.; (4) breach of contract against Greenwich Hospital; (5) breach of contract against Yale-New Haven Health Services; (6) breach of the covenant of good faith and fair dealing against Greenwich Hospital; (7) breach of the covenant of good faith and fair dealing against Yale-New Haven Health Services; (8) breach of the covenant of good faith and fair dealing against MCI C Vermont, Inc.; (9) violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42-1a et seq. (CUTP A), against the defendant; (10) negligence against MCIC Vermont, Inc.; (11) violations of CUTP A against MCIC Vermont, Inc. and (12) violations of the Connecticut Unfair Insurance Practices Act, General Statutes § 3Sa-S15 et seq. (CUlPA) against MCIC Vermont, Inc.

On August 20, 2010, the defendant filed a motion to strike and a memorandum of law in support of its motion (Dkt. Entries 107.00 and 10S.00).  As originally filed, the defendant’s motion sought to strike counts one and six, as well as the prayer for relief associated with count one, which were located in the plaintiffs revised complaint dated August 5, 2010. The plaintiff filed a memorandum of law in opposition to this motion on September 2, 2010 (Dkt. Entry 112.00). Following the filing of the defendant’s motion to strike, on August 23, 2010, the plaintiff filed a request for leave to file an amended complaint, as well as a proposed amended complaint. This complaint is now the operative complaint in the case.2  In this amended complaint, the plaintiff added a new cause of action against the defendant for breach of fiduciary duty and changed the numbering of the counts that are directed to the plaintiff. As a result, on October 4, 2010, the defendant filed a supplemental motion to strike and supporting memorandum of law addressing count two (Dkt. Entry121.00 and 123.00). The plaintiff further filed a memorandum of law in opposition to this supplemental motion to strike on November 5, 2010 (Dkt. EntryI28.00). When read together, the defendant’s original and supplemental motions to strike request that the court strike all of the counts levied against the defendant in the plaintiffs amended complaint dated August 20, 2010. These are counts one, two and nine. The defendant is also moving to strike the portions of the prayer for relief associated with count one that seek punitive damages and attorney’s fees. The court heard argument in this matter at short calendar on December 6, 2010.

From a legal perspective, the Court reasoned as follows:

“The purpose of a motion to strike is to contest … the legal sufficiency of the allegations of any complaint … to state a claim upon which relief can be granted.” (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In a motion to strike, “the moving party admits all facts well pleaded.” RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381,383 n.2, 650 A.2d 153 (1994). Therefore, “[i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied.” (Internal quotation marks omitted.) Batte-Homgren v. Commissioner o/Public Health, 281 Conn. 277,294,914 A.2d 996 (2007). Nevertheless, “[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.” (internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, supra, 262 Conn. 498. When deciding a motion to strike, the court must “construe the complaint in the manner most favorable to sustaining its legal sufficiency.” (internal quotation marks omitted.) Sullivan v. Lake Com pounce Theme Park, Inc., 277 Conn. 113, 117,889 A.2d 810 (2006).

The defendant first moves to strike count nine alleging CUTP A on the ground that the plaintiff fails to allege facts involving the entrepreneurial aspects of the defendant’s law practice.3 In its memorandum of law, the defendant argues that all of the allegations in this count arise from the defendant’s legal representation of the plaintiff and that such allegations cannot form a legally cognizable CUTPA claim against a law firm. As a result of this immunity from CUTPA liability, the defendant argues that count nine is legally insufficient. In response, the plaintiff argues that he alleges facts involving the defendant’s “engaging and disengaging of clients, its billing practices and fees.” Specifically, the plaintiff contends that he alleges actions taken by the defendant in order to secure the plaintiff as a client and prevent him from obtaining independent counsel. Furthermore, the plaintiff argues that he alleges facts involving the defendant’s improper billing practices. Consequently, the plaintiff contends that count nine sets forth a legally viable CUTPA cause of action.

“[I]n general, CUTPA applies to the conduct of attorneys…. The statute’s regulation of the conduct of any trade or commerce does not totally exclude all conduct of the profession of law. . .. Nevertheless, [the Connecticut Supreme Court has] declined to hold that every provision of CUTPA permits regulation of every aspect of the practice of law…. [The Supreme Court has] stated, instead, that, only the entrepreneurial aspects of the practice of law are covered by CUTPA. … [P]rofessional negligence that is, malpractice does not fall under CUTPA.” (Citations omitted; internal quotation marks omitted.) Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 781, 802 A.2d 44 (2002). “Our CUTPA cases illustrate that the most significant question in considering a CUTP A claim against an attorney is whether the allegedly improper conduct is part of the attorney’s professional representation of a client or is part of the entrepreneurial aspect of practicing law.” Id. “The ‘entrepreneurial’ exception is just that, a specific exception from CUTP A immunity for a well-defined set of activities-advertising and bill collection, for example.” Id., 782; see also Haynes v. Yale-New Haven Hospital, 243 Conn. 17,34-38,699 A.2d 964 (1997) (stating that CUTPA can apply to the professions of law and medicine, but only for entrepreneurial aspects such as solicitation of clients and billing).

In paragraph fourteen of count one, which is incorporated by reference into count nine, the plaintiff alleges that “at the outset of the representation, [he] inquired as to whether he needed separate counsel and was told it was ‘not necessary,’ especially as in ‘most cases,’ settlements were covered entirely by [MCIC Vermont, Inc.] on behalf of [Greenwich Hospital] and [Yale-New Haven Health Services] ….” As further alleged in paragraphs thirty-two and thirty-three of count nine, “[t]he representation of all individual physicians and [Greenwich Hospital] in the Sousa lawsuit, while purposefully overlooking potential and actual conflicts of interest, permitted [the defendant] to bill numerous hours above and beyond what it would have been able to bill if it only represented one physician or one hospital” and “[i]t is and/or was [the defendant’s] pattern and practice to increase billable hours, regardless of its ethical obligations to its individual clients.” If read in a light most favorable to the pleader and accepted as true, these allegations suggest that the defendant failed to divulge a potential conflict of interest in order to convince the plaintiff to have it represent him in the Sousa lawsuit and that this was done so that the plaintiff could over-bill its clients. As stated by one Superior Court judge, “the solicitation of a client is more apt to involve the entrepreneurial, as opposed to the representational, aspects of a legal practice because such an activity more often involves conduct occurring before the creation of the attorney-client relationship.” (Emphasis in original.) Tracey v. Still, Superior Court, judicial district ofAnsonia-, Milford at Derby, Docket No. CV 054001883 (March 23, 2006, Stevens, J) (41 Conn. L. Rptr. 101, ‘ 104); see also Anderson v. Schoenhorn, 89 Conn. App. 666, 674,874 A.2d 798 (2005) (stating that “the conduct of a law firm in obtaining business and negotiating fee contracts does fall within the ambit of entrepreneurial activities”).

The allegations of count nine also directly implicate the defendant’s billing practices in that the plaintiff alleges that the defendant over-billed as a result of its representation of multiple clients in the Sousa lawsuit. Cf. Proskauer Rose, LLP v. Lindholm, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 07 5005353 (May 19, 2008, Tobin, J) (45 Conn. L. Rptr. 503, 505) (striking CUTP A counterclaim because of the defendant’s failure “to allege any wrongdoing on the plaintiffs part other than over-billing. There are no claims that the plaintiffs bill, for example, included time incurred in working for other clients …. Without such allegations claims of over-billing necessarily involve only the professional judgment of the plaintiff as to how to staff the defendant’s case ….”). Consequently, although it is a close call, the court finds that the plaintiff alleges enough facts regarding the solicitation of clients and billing practices to arguably place this matter within the entrepreneurial exception to the CUTP A immunity afforded to attorneys.

Additionally, the defendant argues that count nine is legally insufficient because the plaintiff fails to allege causation. In its memorandum of law, the defendant argues that there are no facts alleged indicating that the defendant’s actions were the proximate cause of the plaintiffs injuries. In response, the plaintiff argues that he alleges sufficient facts in the amended complaint to establish the causation element because he alleges that he suffered injury “as a result” of the defendant’s conduct.

CUTP A provides in relevant part that: “Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action in the judicial district in which the plaintiff or defendant resides or has his principal place of business or is doing business, to recover actual damages ….” General Statutes § 42-110g (a). “Our courts have interpreted § 42-110g (a) to allow recovery only when the party seeking to recover damages meets the following two requirements: First, he must establish that the conduct at issue constitutes an unfair or deceptive trade practice .. . . Second, he must present evidence providing the court with a basis for a reasonable estimate of the damages suffered …. Thus, in order to prevail in a CUTPA action, a plaintiff must establish both that the defendant has engaged in a prohibited act and that, ‘as a result of this act, the plaintiff suffered an injury. The language ‘as a result of requires a showing that the prohibited act was the proximate cause of a harm to the plaintiff.” (Citations omitted; emphasis in original; internal quotation marks omitted.) Scrivani v. Vallombroso, 99 Conn. App. 645, 651-52,916 A.2d 827, cert. denied, 282 Conn. 904, 920 A.2d 309 (2007).

In paragraph thirty-seven of count nine, the plaintiff alleges that he “has suffered damages as a result of [the defendant’s] conduct, including but not limited to damage to his professional reputation, loss of prospective economic advantage, loss of future earnings, and diminished value in the professional marketplace.” With this allegation, it can be seen that the plaintiff alleges that he suffered specific damages “as a result” of the defendant’s acts that are prohibited under CUTP A. The “as a result of” phrasing tracks the language of§ 42-1 10g (a) and that used by the Appellate Court in Scrivani. At the motion to strike stage, the plaintiff need only allege causation in order to have a legally sufficient cause of action. The plaintiff here alleges that he suffered specific harm “as a result of’ the defendant’s alleged violation of CUTPA; that sufficiently alleges the causation element. See, e.g. Myers v. Ocean Trace Development, Superior Court, judicial district of Fairfield, Docket No. CV 00 0375476 (May 3, 2002, Gallagher, J.) (stating that the plaintiffs “adequately allege causation by alleging that [they] suffered damages ‘as a result’ of the defendants’ recklessness”). Accordingly, this court denies the defendant’s motion to strike count nine.

FOOTNOTES

1.   As Heidell, Pittoni, Murphy & Bach, LLP is the only defendant that is a party to the motion to strike that is presently before the court, it alone will be referred to as “the defendant” is this memorandum.

2.  After the plaintiff filed the request for leave to file this amended complaint, the defendant filed an objection. This objection was overruled by the court, Jennings,      JTR., on September 22, 2010. Another defendant in this case later filed a request to revise this amended complaint, to which the plaintiff filed an objection. All of the plaintiffs objections were sustained by the court, Karazin, JTR., on October 14, 2010.

3.  The various counts will be addressed in the order that they are raised in the defendant’s two memoranda of law in support of its motions to strike, even though this is not the numerical order set forth in the amended complaint.