Posts tagged with "direct competition"

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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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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Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding

Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding
Fairfaxx Corp. v. Nickelson, 2000 Conn. Super. LEXIS 2340

Fairfaxx Corporation, a company based in Norwalk, Connecticut, employed Ms. Sarah Nickelson from January 1997 until she voluntarily terminated her employment on November 23, 1998. Fairfaxx provided services for full and part-time employees to clients located in Fairfield and New Haven counties in Connecticut in addition to Putnam and Westchester counties in New York. Ms. Nickelson first worked as a part-time receptionist for Fairfaxx at Aviator in Stratford, then as a temporary employee of Fairfaxx itself, and then hired on a permanent basis as a Personnel Consultant in May 1997. He did not have an employment contract and as such, she was classified as an employee at will. Seven months later, in December 1997, Fairfaxx’s employees, including Ms. Nickelson, were presented with a “Confidentiality and Non Compete Agreement”. There was an understanding that the employees would be terminated should they refuse to sign the restrictive covenant. Ms. Nickelson signed and returned the non-compete agreement on December 9, 1997. The covenant not to compete prohibited Ms. Nickelson from recruiting candidates or soliciting clients in New Haven, Fairfield, Putnam, and Westchester counties for two years following her termination.
Ms. Nickelson moved in November 1998 and was promptly contacted by a recruiter concerning a job at Premier Staffing Solutions, a company in direct competition with Fairfaxx. She was offered a position with Premier and accepted due to the shorter commute and higher commission rate. She ended her employment with Fairfaxx on November 23, 1998 and immediately began to work for Premier. Fairfaxx sued Ms. Nickelson in Connecticut state court for breach of the covenant not to compete and requested that the court enforce the restrictions contained therein. Ms. Nickelson argued that the non-compete agreement was not a valid employment agreement and she was not obligated to abide by its restrictions. The court ultimately found in favor of Ms. Nickelson, invalidated the non-compete agreement, and denied Fairfaxx’s request for injunctive relief.
The court came to this decision because the agreement lacked adequate consideration and the requisite signatures. The non-compete agreement spoke of “mutual promises” but the court concluded that Ms. Nickelson received nothing in exchange for her covenants. She had the same job, same salary, and same benefits after she signed the agreement as before its execution. She was promoted to Manager of the Temporary Division at Fairfaxx in January 1998 but the court found that this was not in any way connected to the non-compete agreement and held that this could not be construed as consideration for the covenants that Ms. Nickelson gave to the company.
Furthermore, the court found that the non-compete agreement was not legally binding because it was only signed by Ms. Nickelson. Fairfaxx noted that it clearly intended to sign the agreement and have its provisions become legally binding but did not actually know if someone from the company’s management had signed the covenant not to compete. The agreement was designed to be a bilateral contract and would not become legally binding until both parties had signed. The agreement contained signature blocks for Ms. Nickelson and Fairfaxx and required both in order for the restrictions/provisions to become effective.
In light of a missing requisite signature and inadequate consideration, the court held that the non-compete agreement was unenforceable and denied Fairfaxx’s request for injunctive relief.
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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Contract Principles in Connecticut Non-Compete Agreements: Consideration and the Parol Evidence Rule

Contract Principles in Connecticut Non-Compete Agreements: Consideration and the Parol Evidence Rule
United Rentals, Inc. v. Bastanzi, 2005 U.S. Dist. LEXIS 45268

This federal case involved an employee, one Mr. Jeffrey Bastanzi that started his own company in direct competition with his employer while still in its employment, allegedly in violation of a non-compete agreement signed by both parties. Mr. Bastanzi worked for United Rentals, Inc. from July 2003 to March 30, 2005 as a salesperson in the company’s Gainesville, Florida office. United Rentals is a Delaware corporation with principle business operations in Connecticut that rents and sells equipment and contractor supplies (including but not limited to safety equipment, hand tools, anchoring systems, hard hats, and silk fencing). Mr. Bastanzi was provided with United Rentals’ “Business Ethics Policy” and “Conflict of Interest Policy” on the first day of employment wherein the latter contained a clause stating “no employee shall own or have an interest, directly or indirectly, in any competing enterprise or activity, which conflicts or might conflict with United Rentals’ interests, except with the written approval of the Chief Operating Officer”. Ten months into the job, on May 10, 2004, United Rentals had Mr. Bastanzi sign a “Confidentiality and Non-Competition Agreement” containing non-compete, non-disclosure, and non-solicitation clauses. The covenant established a duration of twelve months, a geographical limitation of seventy-five miles in any direction of United Rentals’ Gainesville office, and stipulated that the company be entitled to injunctive relief in the event Mr. Bastanzi violated the agreement.
United Rentals alleged that Mr. Bastanzi breached the agreement by operating his own competing business, B&S Industrial and Contractor Supplies, LLC, while still employed by the company and within the twelve months following his termination. Mr. Bastanzi started B&S with his wife in 2004 and began contacting United Rentals’ vendors to inquire about becoming a distributor for their products. B&S continued to grow at a steady pace and eventually Mr. Bastanzi’s co-workers informed management that he was operating a competing business on the side. United Rentals terminated Mr. Bastanzi after it conducted an investigation into the matter and found the allegations to be true. At this point Ms. Bastanzi began to work full time at his new company B&S, at that time making approximately $30,000.00 in monthly sales. United Rentals proceeded to sue Mr. Bastanzi for breach of the non-compete agreement to which he offered three defenses to the court: 1) the agreement lacked consideration, 2) he signed the restrictive covenant under duress, and 3) the agreement was incomplete.
The court found in favor of United Rentals, ordered the enforcement of the non-compete agreement, and invalidated all of Mr. Bastanzi’s defenses. It concluded that there was indeed adequate consideration in the non-compete agreement that would make it binding upon the parties. Mr. Bastanzi received continued employment at United Rentals at a mutually agreed upon salary plus the added benefit of a conditional severance package, while United Rentals in return received Mr. Bastanzi’s services and the benefit(s) of the restrictive covenant. Citing a previous federal case, Sartor v. Town of Manchester (312 F. Supp.2d 238 (D. Conn. 2004)), the court stated that, “Connecticut recognizes that continued employment is adequate consideration to support non-compete covenants with at-will employees”.
Next, the court concluded that Mr. Bastanzi did not meet the burden of proof with respect to his claim that he signed the agreement under duress. Mr. Bastanzi failed to impress upon the court that United Rentals committed any “wrongful act or threat” in conjunction with him signing the non-compete agreement. Courts have the authority to invalidate a contract/agreement if there is sufficient evidence that one or more of the parties engaged in fraud or wrongful acts, but in the face of insufficient evidence, the court would not invalidate the agreement between United Rentals and Mr. Bastanzi.
Thirdly, the court rejected Mr. Bastanzi’s claim that the non-compete agreement was an incomplete document and therefore not binding upon the parties. To come to this conclusion, the court applied a very important contract principle, that of the Parol Evidence Rule. The rule prohibits the use of evidence outside the content contained within the four corners of the contract/agreement concerning matters discussed and governed by the finalized document. Mr. Bastanzi told the court that he received oral representations from management before he was hired stating he would not have to sign a non-compete agreement with United Rentals. The finalized document signed by Mr. Bastanzi and United Rentals however did not reflect any of these oral representations and there was not sufficient evidence that the terms of the non-compete agreement were designed to render the alleged representations binding upon the parties. Considering this and applying the parol evidence rule, the court ultimately concluded that the agreement was complete and Mr. Bastanzi’s claim lacked merit.

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Ambiguous “General Release Agreement” and Global Restrictions Invalidate a CT Non-Compete

Ambiguous “General Release Agreement” and Global Restrictions Invalidate a CT Non-Compete
Connecticut Stone Supplies, Inc. v. Fresa, 2002 Conn. Super. LEXIS 4141

This case concerns Connecticut Stone Supplies’ (CSS) legal dispute with two former employees regarding the enforcement of their non-compete agreements. The company employed Ms. Amy Fresa from May 15, 2000 until April 4, 2002 as an Administrative Assistant. She began to work at the company as a temporary employee in connection with Reitman Personnel and the company officially hired her as a full-time employee on August 14, 2000. CSS had her sign an “Employee Confidentiality and Non-Competition Agreement” when it first hired her and then had her sign a “General Release and Settlement Agreement” when it terminated her employment. The restrictive covenant prohibited her from working at a competing company for a period of two years and additionally stipulated that she could not solicit CCS’s current of potential clients within a three hundred mile radius. She began to work for O&G, a company in direct competition with CSS, on August 2002. Mr. Travis Simms worked for the company from March 29, 2000 until January 22, 2011 at which time he also began to work for O&G. He signed a non-compete agreement in the same manner as Ms. Fresa but did not execute a General Release Agreement upon termination. CSS sued both former employees in Connecticut state court and sought to enforce their respective non-compete agreements.
Ms. Fresa and Mr. Simms argued that the non-compete agreements were not binding upon them because the covenants lacked consideration and their terms were unreasonable. Ms. Fresa additionally contended that the General Release Agreement “extinguished any rights that might exist under it [the non-compete agreement]”. The court found in favor of Ms. Fresa and Mr. Simms and held that their restrictive covenants with CSS were not enforceable. The court analyzed the General Release Agreement and found that it contained ambiguous language that created an unintended benefit for CSS. The company, according to the court, should not be allowed the benefit of enforcing the agreement merely because of an unintended, ambiguous clause in an employment agreement that it had drafted. The court used this analysis to determine that Ms. Fresa’s non-compete was unenforceable.
The court relied on a different analysis to conclude that Mr. Simm’s non-compete agreement with CSS was unenforceable. Here the court examined the restrictive provisions of the non-compete agreement to determine whether they were limited and reasonable in a manner that the agreement fairly balanced the interests of the parties involved. While there was a geographical restriction associated with the non-solicitation clause (three hundred miles), the non-compete clause did not have a geographical limitation and as such “means [the employee] cannot compete anywhere in the world against the plaintiff for a period of two years from termination”. The court found this to be completely unacceptable and held that the global prohibition on competitive employment was “patently and grossly unreasonable”. CSS stated that is conducted business all throughout the state of Connecticut but failed to offer any evidence that it carried out global operations or that a worldwide prohibition on competing employment was necessary to protect its legitimate interests. The court invalidated Mr. Simm’s non-compete agreement in light of the unreasonable and oppressive nature of the provisions contained in agreement that he executed with CSS.
Browse > Home / Employment & Labor Law / Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry
Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry

October 25, 2011 · Print This Article
Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry
Grayling Associates, Inc. v. Villota, 2004 Conn. Super. LEXIS 1859
Grayling Associates, Inc., an executive recruiting agency for large national insurance companies, employed Mr. Albert Villota from October 2002 to April 8, 2004. The parties executed a non-compete agreement at the start of Mr. Villota’s employment that prohibited him from working at a competing firm within a one hundred mile radius of Grayling’s Connecticut office for a period of two year after his termination. He began to work at a direct competitor, Park Avenue Group, Inc. (PAG), after he voluntarily terminated his employment with Grayling. The company sued Mr. Villota in Connecticut state court and sought the enforcement of the provisions contained in the non-compete agreement.
The court found in favor of Grayling and granted the company’s request for injunctive relief. It enjoined Ms. Villota from working at PAG or other companies in competition with Grayling until April 8, 2006, the end of the two-year period as stipulated in the non-compete agreement. The court went on to confirm that the time and geographical restrictions in the agreement were reasonable so that they properly balanced the interests of the parties.
The major point of contention in the case focused on the one hundred mile radius restriction. Grayling was based in Hartford, referred to by many in the business world as the “insurance capital of the world” and as such, the nature of its services was very dependent on its location and proximity to the city. Many of the nation’s most prominent insurance firms have their headquarters in Hartford and Mr. Villota’s actions within the vicinity of the city could negatively affect Grayling’s business interests and operations. Grayling noted that the non-compete agreement allowed for the application of the “blue pencil rule” that would allow the court to modify the terms of the geographical restriction. The court held that the restriction was enforceable as stated in the agreement and enforced the one hundred mile radius provision to protect Grayling’s legitimate interests.
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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