Posts tagged with "enforce"

Connecticut Federal Court Applies Louisiana Law to Enforce Non-Compete to Protect Confidential Information

In United Rentals, Inc. v. Myers, 2003 U.S. Dist. LEXIS 25287, United Rental, Inc. was a Delaware corporation with principal business operations in Connecticut that employed Ms. Charlotte Myers in its Shreveport, Louisiana office from May 20, 2002, to March 7, 2003.  She signed an employment agreement with United Rentals on her first day of work that contained non-compete and confidentiality clauses that prohibited employment for a period of twelve months at any competing company located within one hundred miles of a United Rentals location where she worked.  The restrictive covenants further stated that the state and federal courts in Fairfield County, Connecticut would have jurisdiction in the event that legal proceedings ensued.  Upon her voluntary termination from United Rentals, Ms. Myers began to work at Head & Enquist Equipment, Inc., a competitor, at an office located approximately ten miles away from the United Rentals’ Shreveport office.  United Rentals contacted her to remind her of the restrictive covenants and her obligations under them but she continued her employment with Head & Enquist.  United Rentals sued Ms. Myers in Connecticut federal court for breach of the non-compete and confidentiality agreements and sought a court injunction to enforce their provisions.  The court found in favor of United Rentals and granted its request to enforce the non-compete agreement.

Ms. Myers presented various arguments to the court to persuade it to deny enforcement of the agreement, but the court ultimately found in favor of United Rentals.  She argued that Louisiana law should be controlling in the legal dispute, and further asserted that Louisiana law does not permit “choice of law” clauses in employment agreements.  The court investigated Ms. Myers’ contention and explained that the proper procedure to determine if a “choice of law” clause is permissible is to consult the law of the state being selected, in this case, that of Connecticut.  Connecticut law however cannot be the “choice of law” state when there is another state with a “materially greater interest…in the determination of the particular issue”.  The court held that Louisiana did in fact have a greater interest in the dispute and thus Louisiana law was applicable and controlling for the case.

Although Louisiana law is less than favorable to United Rentals with regard to “choice of law” clauses, it still recognizes that parties are entitled to a remedy in connection with a violation of a confidentiality agreement “if the material sought to be protected is in fact confidential”.  Courts generally view the disclosure of confidential information as sufficient evidence for a company to establish that it would suffer irreparable harm if an injunction were not granted.  During her employment with the company, Ms. Myers was exposed to and had access to United Rentals’ trade secrets, contract details, customer data, financial information, and marketing plans/strategies.  The court held that this was clearly sensitive and confidential information, the content of which entitled United Rentals to protection in the form of a court-ordered injunction.

The court held for United Rentals despite applying Louisiana law in response to Ms. Myers’ justified assertion that this specific “choice of law” provision was not valid.  Although Louisiana law shuns “choice of law” provisions in non-compete agreements, it does support injunctions when it is necessary and proper for a company to protect its confidential business information.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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.

Continue Reading

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.

Continue Reading

Constructive Discharge Does Not Invalidate Connecticut Non-Compete Agreements

Constructive Discharge Does Not Invalidate Connecticut Non-Compete Agreements
Drummond American LLC v. Share Corporation, 2009 U.S. Dist. LEXIS 105965

Ms. Martha Mahoney worked for Drummond American LLC, a company that sold commercial grade chemicals and hardware to governmental and industrial customers, as its Connecticut Sales Agent until August 2008. She was in charge of facilitating contact between the company and its customers. Drummond had her sign a covenant not to compete as a condition of her employment with the company. The non-compete agreement prohibited Ms. Mahoney from soliciting orders from or selling competitive products to any customers she solicited or sold to on Drummond’s behalf in the twelve months prior to termination. The agreement detailed that the restrictions applied for two years following Ms. Mahoney’s termination. Ms. Mahoney began to work for Share Corporation in August 2008. The company was a direct competitor with Drummond and had Ms. Mahoney sign an agreement stating that she would honor her non-compete with Drummond during her employment with Share. She contacted her previous Drummond customers however and sold Share’s products to twelve such customers.
Drummond sued Ms. Mahoney for breach of the restrictive covenant and asked the court to enforce the non-compete clauses. Ms. Mahoney did not deny that she breached the non-compete agreement but argued that she should not be held liable for her breach because the agreement was invalid. Her main contentions were that the agreement was unenforceable under the five-prong test as stated by the Connecticut Supreme Court in Scott v. Gen. Iron & Welding Co., 171 Conn. 132 (1976), and that her constructive discharge invalidated the agreement. The court ultimately rejected these defenses, found in favor of Drummond, and ordered the non-compete agreement enforced.
In Scott, the court held that a non-compete agreement’s reasonableness is evaluated based on five factors: 1) duration of the restrictions, 2) geographic area of the restrictions, 3) degree of protection afforded to the employer, 4) restrictions on employee’s ability to pursue a career, and 5) any interference with the public’s interests. Here, the court held that the agreement between Drummond and Ms. Mahoney did not violate any of these factors. An employer possesses a proprietary right to its customers and is entitled to protect this right for a reasonable period. The court held that a two-year period was reasonable and enforceable. Furthermore, the court found that the provisions of the agreement were not overly broad and did not unnecessarily restrict her ability to earn a living. The covenant only prevents her from soliciting and transacting with twenty-six customers, meaning that there were still thousands of potential clients not excluded under the agreement’s provisions.
The court likewise rejected Ms. Mahoney’s argument that Drummond constructively discharged her and this action invalidated the non-compete agreement. A constructive discharge is when the employer creates an intolerable work atmosphere that forces the employee to quit involuntarily instead of the employer directly terminating the individual’s employment. The court held that the nature of an employee’s termination is irrelevant in this respect and does not affect the validity of the agreement and its legally binding nature upon the parties.
All of Ms. Mahoney’s defenses failed under the court’s scrutiny and analysis of the case, rending her liable for her 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.

Continue Reading

Enforceability of Non-Solicitation Agreement for Potential Clients of Former Employer

Webster Financial Corporation v. McDonald, 2009 Conn. Super. LEXIS 169

USI Insurance Services of Connecticut, Inc., formerly Webster Insurance, Inc., employed Mr. William McDonald as a senior vice president at its Westport, CT office. The company had Mr. McDonald sign an employment agreement dated February 11, 2003 that contained non-compete and non-solicitation clauses in the event of his termination. The agreement prohibited Mr. McDonald from soliciting any of USI’s contacts that had been clients or potential clients in the twelve months prior to his termination and established a geographical limit of twenty-five miles within USI’s Westport office. As for the time limitation, the covenant was applicable for the great period of two years following Mr. McDonald’s termination or as long as he received benefits from a deferred compensation plan. Mr. McDonald resigned on September 21, 2007 and began to work at Shoff Darby, Inc., an industry competitor well within the prohibited twenty-five radius of USI’s Westport office. At his new firm, Mr. McDonald proceeded to solicit and sell insurance products to USI’s former and current clients. Additionally, he contacted several USI employees and urged them to leave the company to seek employment with Shoff Darby.
USI sued Mr. McDonald and asked the court to enforce the provisions of the restrictive covenant. Mr. McDonald presented two defenses to the court, arguing that the agreement was overly broad and therefore unenforceable. He claimed that the prohibition of potential clients and the potential unlimited duration made the non-compete agreement unreasonable and unenforceable. USI asserted the validity of the agreement and emphasized to the court that it contained a “blue pencil” provision that authorized the court to amend the time and/or geographical limitation in order to comply with Connecticut law. Mr. McDonald countered this argument stating that this legal procedure would require the court to essentially rewrite the non-compete contract, an act forbidden under Connecticut law.
The court found in favor of USI with regard to the issue of the agreement’s enforceability with its holding stating, “taking the covenant as whole, nothing on the face of the contract renders the covenant unenforceable as a matter of law”. While deliberating about the claim that the prohibition on potential clients was unreasonable, the court stated that there is no direction or precedent from the Connecticut Appellate Courts and that the Superior Courts throughout the state were divided on the issue. This court took the approach used in Cuna Mutual Life Ins. Co. v. Butler (2007 Conn. Super. LEXIS 1623) that such limitations on potential clients are reasonable so long as they are “readily identifiable and narrowly defined”. The court concluded that the potentially unlimited applicable duration of the agreement was not “per se unreasonable” because the agreement as a whole contained several other definitive restrictions such as the twenty-five radius from the Westport office and the limited group of clients for the anti-solicitation clause.

Continue Reading

Covenants Not To Compete in Franchise Agreements

Covenants Not To Compete in Franchise Agreements
Pirtek USA, LLC v. Zaetz, 408 F.Supp.2d 81

Pirtek USA, LLC was a franchise company that operated as a business system “consisting of the sale, assembly and installation of industrial and hydraulic hoses, fixed tube assemblies and related components and services”. Pirtek entered into a Franchise Agreement with Mr. Irwin Zaetz in September 1999 to license him to operate a Pirtek business. The agreement contained a non-compete clause that prohibited Mr. Zaetz from operating or working for a competing business within a limited geographical area for a two-year period after the termination of the franchise agreement. Pirtek and Mr. Zaetz terminated their franchise agreement on April 22, 2005 and the parties went their separate ways. Pirtek was able to sell that particular franchise to another party, Ms. Ashely Geddes, while Mr. Zaetz and his son proceeded to operate their own business, Hose Medic. This new company provided many of the same services as Pirtek franchises and covered the same general geographical area. Additionally, the registered address for Hose Medic was the same one Mr. Zaetz used to register his franchise with Pirtek.
Pirtek alleged that Mr. Zaetz used his son’s company as a front to avoid the enforcement of the covenant not to compete. More specifically, the company alleged that Mr. Zaetz used Pirtek’s proprietary information to help his son base the new company on the Pirtek business model. Pirtek sued Mr. Zaetz in federal court and requested that the court issue a temporary injunction to prevent further contractual violations while the court tried the case. The court denied its request and refused to issue a temporary injunction.
Pirtek sued on three accounts, claiming that Mr. Zaetz breached the non-compete by 1) operating a competing hose installation and repair business, 2) infringing on its intellectual property rights, and 3) violating several post-termination provisions of the franchise agreement. The court found that Pirtek did not meet the burden of proof necessary to show that Mr. Zaetz was in breach of the non-compete. Pirtek asserted that their business interests were threatened by Mr. Zaetz’s use of the words “hose”, “assembly”, and a graphic of a cog when advertising and discussing the new company. This, according to this court, was an unfounded assertion because the words were too general to create confusion among consumers and negatively affect Pirtek’s business operations. Pirtek was not able to establish that it had suffered any hardship or was likely to do so in the future if an injunction was not issued. Imminent harm, according to the courts, is a requisite factor for granting a temporary injunction, and a court is not obligated to grant one if this crucial factor is missing.
The court pointed out however that the denial of the temporary injunction did not necessary mean that Pirtek would not be able to obtain a permanent injunction later. It counseled Pirtek that later stages of litigation could result in the enforcement of the covenant. It noted that Pirtek had some strong evidence to present and use in subsequent stages of the case but that its current request must be denied because it “failed to demonstrate irreparable harm”.
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.

Continue Reading

Covenants Not To Compete in Franchise Agreements

Covenants Not To Compete in Franchise Agreements
Pirtek USA, LLC v. Zaetz, 408 F.Supp.2d 81

Pirtek USA, LLC was a franchise company that operated as a business system “consisting of the sale, assembly and installation of industrial and hydraulic hoses, fixed tube assemblies and related components and services”. Pirtek entered into a Franchise Agreement with Mr. Irwin Zaetz in September 1999 to license him to operate a Pirtek business. The agreement contained a non-compete clause that prohibited Mr. Zaetz from operating or working for a competing business within a limited geographical area for a two-year period after the termination of the franchise agreement. Pirtek and Mr. Zaetz terminated their franchise agreement on April 22, 2005 and the parties went their separate ways. Pirtek was able to sell that particular franchise to another party, Ms. Ashely Geddes, while Mr. Zaetz and his son proceeded to operate their own business, Hose Medic. This new company provided many of the same services as Pirtek franchises and covered the same general geographical area. Additionally, the registered address for Hose Medic was the same one Mr. Zaetz used to register his franchise with Pirtek.
Pirtek alleged that Mr. Zaetz used his son’s company as a front to avoid the enforcement of the covenant not to compete. More specifically, the company alleged that Mr. Zaetz used Pirtek’s proprietary information to help his son base the new company on the Pirtek business model. Pirtek sued Mr. Zaetz in federal court and requested that the court issue a temporary injunction to prevent further contractual violations while the court tried the case. The court denied its request and refused to issue a temporary injunction.
Pirtek sued on three accounts, claiming that Mr. Zaetz breached the non-compete by 1) operating a competing hose installation and repair business, 2) infringing on its intellectual property rights, and 3) violating several post-termination provisions of the franchise agreement. The court found that Pirtek did not meet the burden of proof necessary to show that Mr. Zaetz was in breach of the non-compete. Pirtek asserted that their business interests were threatened by Mr. Zaetz’s use of the words “hose”, “assembly”, and a graphic of a cog when advertising and discussing the new company. This, according to this court, was an unfounded assertion because the words were too general to create confusion among consumers and negatively affect Pirtek’s business operations. Pirtek was not able to establish that it had suffered any hardship or was likely to do so in the future if an injunction was not issued. Imminent harm, according to the courts, is a requisite factor for granting a temporary injunction, and a court is not obligated to grant one if this crucial factor is missing.
The court pointed out however that the denial of the temporary injunction did not necessary mean that Pirtek would not be able to obtain a permanent injunction later. It counseled Pirtek that later stages of litigation could result in the enforcement of the covenant. It noted that Pirtek had some strong evidence to present and use in subsequent stages of the case but that its current request must be denied because it “failed to demonstrate irreparable harm”.
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.

Continue Reading

Enforcing Non-Competes Associated with Sale of Company and Goodwill

Enforcing Non-Competes Associated with Sale of Company and Goodwill
Kim’s Hair Studio, LLC v. Rogers, 2005 Conn. Super. LEXIS 1805

Ms. Dorothy Rogers owned a hair salon in Higganum, Connecticut called Dotties Creative Cuts and entered into an agreement to sell the company’s “assets, goodwill, and client lists” to Kim’s Hair Studio, LLC for the amount of $20,000. This transaction essentially made Ms. Rogers a new employee of Kim’s hair Studio and as such, she was required to sign a non-compete agreement that prohibited her from offering competing services for twelve months after her termination within ten miles of 323 Saybrook Road, the primary work location of Kim’s Hair Studio. The parties executed non-compete and confidentiality agreements on August 23, 2004. Ms. Rogers did not like how the salon was being run by the company’s management and voluntarily terminated her employment in order to work at a new hair salon that was located a mere one-half mile away. Ms. Rogers additionally removed a rolodex containing Kim’s Hair Studio’s client information and began to contact them to solicit their business. Kim’s Hair Studio sued Ms. Rogers and requested that the court enforce the non-compete and confidentiality agreements.
The court granted the request for an injunction and ordered the enforcement of the agreements’ provisions. It concluded that the restrictions were reasonable in scope and that Ms. Rogers’ action had amounted to a breach of the covenant between the two parties. Kim’s Hair Studio had legitimate interests in executing non-compete agreements with its employees because its goodwill and client clients were essential assets that Kim’s Hair Studio invested resources in to acquire and maintain. The restrictive covenants were designed to prevent the loss or infringement of these assets and ensure that Kim’s Hair Studio was not negatively affected due to an employee’s termination, whether voluntary or involuntary in nature.
The court reasoned that a party is entitled to an injunction restraining further breach of a restrictive covenant when it demonstrates that the other party has or is very likely to breach the agreement. Additionally, the court noted Connecticut courts’ willingness to enforce a non-compete agreement when it is made in connection with the sale of a company and its goodwill. These legal principles, in conjunction with reasonable and limited restrictions, allowed the court to conclude that the non-compete agreement between Ms. Rogers and Kim’s Hair Studio was valid and enforceable under Connecticut law.
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.

Continue Reading

Court Enforces Non-Compete and Rejects “Ambiguous Language” and “Unreasonable Restrictions” Defenses

Court Enforces Non-Compete and Rejects “Ambiguous Language” and “Unreasonable Restrictions” Defenses
Century 21 Access America v. Lisboa, 2003 Conn. Super. LEXIS 2085

Century 21 Access America was a residential real estate sales company based in Milford, Connecticut that employed Ms. Nereida Lisboa as a salesperson from April 2002 until April 2003. Her employment was contingent upon signing an Independent Contractor Agreement on April 24, 2002 wherein paragraph twelve constituted a non-compete clause. The restrictive covenant prohibited Ms. Lisboa for a period of two years from working at a competing company located within fifteen miles of Milford, Connecticut. Once Ms. Lisboa voluntarily terminated her employment with Century 21, she immediately began to work for William Raveis Real Estate, a direct competitor located directly across the street. Century 21 sued Ms. Lisboa for breach of the non-compete agreement and requested that the court enforce the provisions of the covenant.
Connecticut courts have the authority to exercise equitable power to order a temporary injunction pending final determination of the order, upon the moving party demonstrating that it will incur irreparable harm in the absence of such an injunctive order. The court found that an injunction was warranted and proper in this case and as such, granted Century 21’s request for an injunctive order to restrain Ms. Lisboa from further violations of the covenant not to compete. Ms. Lisboa offered several defenses to invalidate the agreement, including a claim that the language of the agreement was ambiguous and another claim that the provisions were unreasonable. The court ultimately rejected both of these assertions and held in favor of Century 21.
The challenging party bears the burden of proof to show that an agreement is invalid and should not be binding upon the signatory parties. The court found no merit in Ms. Lisboa’s claim that the agreement was ambiguous and that she was not obligated to refrain from any specific business activity. The court stated that “although the covenant is neither a model of clarity or precise craftsmanship, the defendant [Ms. Lisboa] fails to demonstrate how the covenant’s language, in and of itself, is ambiguous”.
The court further dissected Ms. Lisboa’s defenses and shot down her claim that the restrictions were unreasonable. It is well established in Connecticut law that a company has a proprietary right to its clients and is thus entitled to protection for that right. Century 21 had a legitimate business interest worthy of protection based on the fact that Ms. Lisboa could use information gained from Century 21’s client lists and the time she spent with the company to solicit business for herself and her new company to the detriment of Century 21. The company was well within its rights to employ reasonable restrictions to protect this legitimate business interest. Ms. Lisboa’s license to engage in the real estate industry is valid throughout the state of Connecticut and the covenant only restricted her business activities within a relatively small area with a fifteen-mile radius. This, in combination with a limited time restriction, made the court conclude that the geographical restriction was in fact reasonable and enforceable.
The court identified a legitimate business interest that required protection and concluded that the provisions of the covenant not to compete were reasonable, leading it the grant Century 21’s request for injunctive relief in the form of 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.

Continue Reading

Excessive Geographical Restriction Invalidates Connecticut Non-Compete Between Dance Studio and Instructor

Excessive Geographical Restriction Invalidates Connecticut Non-Compete Between Dance Studio and Instructor
RKR Dance Studios, Inc. v. Makowski, 2008 Conn. Super. LEXIS 2295

This case involved the legal analysis used to determine if a non-compete agreement between a dance studio and one of its instructors is enforceable in the State of Connecticut. Jessica Makowski worked as an at-will instructor for RKR Dance Studios from November 29, 2001 to September 28, 2007 at one of its franchised dance studios. Maximize Your Impact, LLC became the franchisor for RKR in January 2004 and thus became the employer of Ms. Makowski. She signed a non-compete agreement with Maximize on May 5, 2006 that contained provisions specifying a two year duration and geographical limitation of fifteen mile radius from Maximize’s dance studio and a ten mile radius from any Fred Astaire Dance Studio, whether they be corporate-owned, franchised, or otherwise established. Ms. Makowski voluntarily left Maximize on September 28, 2007 and shortly thereafter began employment with Steps in Time, a dance studio located within ten miles of another Fred Astaire Dance Studio. Maximize sued Ms. Makowski to enforce the provisions of the non-compete agreement. Ms. Makowski contended that she did not violate the agreement because there was inadequate consideration and unreasonable limitations, characteristics that would make the non-compete agreement unenforceable. The court, while finding that there was adequate consideration, ultimately found in favor of Ms. Makowski, held the non-compete covenant to be unreasonable, and denied Maximize’s request for the court to enforce the agreement.
The major issue with regard to consideration in this case revolved around the question “is continued employment adequate consideration for a non-compete agreement?”. The court cited previous cases, both state (Roessler v. Burwell (119 Conn. 289)) and federal (MacDermid, Inc. v. Selle (535 F. Supp.2d 308)), where the courts concluded that continued employment was adequate consideration for at-will employees for restrictive covenants with their employers. The court highlights the exchange between the parties, such that the employee receives wages and the employer receives his or her services and the protection created by the non-compete agreement. The payment and receipt of wages was adequate consideration to legitimize a non-compete agreement and render vague terms sufficient for enforcement. The court did discuss several dissenting cases but noted that the facts of those cases were critically different from the legal dispute between Ms. Makowski and Maximize. The court emphasized that the pivotal fact with regard to continued employment as adequate consideration is whether it involves at-will employment. If there is at-will employment, as was the case with Ms. Makowski, then continued employment is sufficient consideration to render the non-compete agreement enforceable.
The agreement was ultimately found to be unenforceable however due to containing unreasonable restrictions. The court highlighted the public policy of non-compete agreement enforcement and the balance that must be struck between: 1) the employer’s need to protect legitimate business interests, 2) the employee’s need to earn a living, and 3) the public’s need to secure the employee’s presence in the labor pool. Fair protection must be afforded to employer and employee alike, a principle that is absent in the agreement between Ms. Makowski and Maximize. The court specifically stated that the geographical limitation was extremely unreasonable and placed a great hardship on Ms. Makowski’s efforts to earn a living and pursue her career. Evidence pertaining to job prospects in Massachusetts, Rhode Island, Connecticut, and New York revealed that the closest permissible studio to employ Ms. Makowski was located in Natick, MA, a staggering one and a half hour drive from her house. The court felt that a three hour daily, roundtrip commute was an excessive burden for Ms. Makowski to bear and concluded that this provision was indeed unreasonable and invalidated the agreement as a whole.

Continue Reading