Posts tagged with "enforceability test"

Court Modifies Geographical Restriction in order to Enforce a Non-Compete Contract

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Eastcoast Guitar Center, Inc. v. Tedesco, 2000 Conn. Super. LEXIS 320

Eastcoast Guitar Center, Inc. was a company based in Danbury, CT and employed Mr. Richard Tedesco as a sales/customer service representative from 1997 to 1999.  The company had Mr. Tedesco sign a non-compete contract on January 27, 1997 that prohibited him for one year following his termination from competing directly or indirectly with Eastcoast Guitar within a one hundred mile radius of the store’s location at 25 Hayestown Road, Danbury, CT.

This provision created a protected/prohibited area that included the entire state of Connecticut and extended into portions of Massachusetts, New York, and Rhode Island.  Eastcoast Guitar terminated Mr. Tedesco’s employment on August 16, 1999 and he began to operate his own company known as Guitar Hangar, an internet-based guitar sales company.  Eastcoast Guitar sued Mr. Tedesco in Connecticut state court for violation of the non-compete contract and requested that the court issue an injunction to enforce the restrictions and prevent further violations of the covenant.

The Court’s Decision

The court found in favor of Eastcoast Guitar and enforced the non-compete contract on a modified basis.  In its analysis, the court applied the five-prong test to assess the enforceability of the non-compete contract as stated in Robert S. Weiss & Associates, Inc. Wiederlight, 208 Conn. 525 (1988).  Specifically, the court looked at: 1) the scope of the time restriction, 2) the scope of the geographical restriction, 3) the protection afforded to the employer, 4) the restraint of the employee’s ability to obtain future employment, and lastly 5) the extent the agreement interfered with the public’s interest.  All of these factors must be reasonable in order for a plaintiff to be entitled to injunctive relief in a legal dispute.

The court, after reviewing all the evidence and testimony, found that the agreement satisfied the factors with exception of the geographical restriction.  It recognized that the company had a valid business interest that deserved protection and as such changed the geographical restriction from one hundred miles to thirty miles and ordered that the agreement be enforced.  The one hundred mile radius was too broad and overreaching according to the court and it felt that its modification of the restriction to prohibit only Fairfield, Litchfield, and New Haven counties was reasonable and legally acceptable under Connecticut law.

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.

Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants

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Newinno, Inc. v. Peregrim Development, Inc., 2004 Conn. Super. LEXIS 1160

Mr. Russell Koch worked for Newinno, Inc., a consulting firm, where his employment was contingent upon several restrictive covenants contained in his employment contract.  The main agreement between the parties was a non-disclosure covenant designed to protect Newinno’s confidential information and business interests upon Mr. Koch’s termination.  The agreement had four main provisions such that Mr. Koch was: 1) prohibited from disclosing information about the company that “is not generally known in the industry which the company is or may become engaged”, 2) prohibited disclosing any information relating to actual or potential clients’ products, business plans, designs, or trade secrets, 3) prohibited disclosing information from the company’s “BrainBank”, and lastly 4) prohibited disclosing information relating to the company’s “lead/prospect and customer lists”.

The agreement did not articulate any time or geographical restrictions, which became the main issue in the case and how Mr. Koch asserted that the covenant was not binding or enforceable.  These provisions went into effect when Mr. Koch voluntarily terminated his employment at Newinno and began to work for one of its competitors, Peregrim Development, Inc..

The Court’s Decision

Newinno sought to enforce the provisions and requested an injunction from the court to prevent Mr. Koch’s further employment at its direct competitor in order to prevent any breaches of the covenant by him disclosing confidential information.  The court held in favor of Newinno and stated that the company had met the burden of proof to demonstrate that the facts of the case warranted injunctive relief.  In its decision, the court explained that the issue at the heart of the case was not “whether a reasonableness standard should govern the enforceability of the parties’ confidentiality agreements, but rather concerns [regarding] the exact manner in which the test should be defined or applied”.

Enforcing Confidentiality Agreements

Connecticut courts are divided on whether to apply the same criteria and test used to assess non-compete agreements’ enforceability or resort to a more relaxed version of the reasonableness test.  Non-disclosure/confidentiality agreements have traditionally enjoyed treatment that is more favorable under Connecticut laws in the courts than non-compete agreements.  There are not any Connecticut cases, state or federal, that have held that the enforceability of confidentiality agreements hinges on the same standards and test that governs the enforceability of non-compete agreements.

Overall, the courts have concluded that time and geographical restrictions are not necessary in order to enforce a non-disclosure agreement.  This is very divergent from how the courts address the enforceability of non-compete agreements where they generally insist that those provisions are in the text of the agreement.  This trend has led Connecticut courts to apply a modified version of the non-compete enforceability test where the legal analysis takes into account the “purpose of the confidentiality covenants and the specific information sought to be protected.

It is beneficial for an employee to know the difference in the enforcement trends and policies with regard to non-disclosure and non-compete agreements under Connecticut law.  This is especially true when an employment contract contains both covenants and ensuing legal disputes question the validity of each.  A party may succeed on the merits of the case with regard to the enforcement of one covenant and then fail on the merits for the other.

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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.