Posts tagged with "executive"

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

The Employment Agreements

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.

Determining the Choice of Law Provision

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.

Determining the Enforceability of the Non-Compete Agreement

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’s Findings

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.

Connecticut Non-Compete Prohibits Client Solicitation in Investment Services Industry

The Court’s Decision

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.

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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.

Court Denies Injunction Against Former IBM Executive

Case Background

On January 24, 2011, the Court issued a temporary restraining order, and scheduled the case for a preliminary injunction hearing. Within five days of providing IBM with notice of his departure, Mr. Visentin was effectively without a job, precluded- at least temporarily- from engaging in his newly secured position. This case demonstrates not only the force, speed and agility of a large corporation’s legal team, but perhaps more importantly, illustrates the effectiveness of a quickly orchestrated and well-executed legal defense.

Prior to his resignation, Mr. Visentin worked for IBM in various capacities for twenty-six years. In 2006, he became a Global Vice President in the company’s Integrated Technology Services Group (ITS). Then, in September, 2007, he became General Manager of the ITS business. Responsible for providing its clients with various technology services, including services to improve data storage and recovery capabilities, protect networks from viruses, and implement data security systems, this segment generates approximately five thousand to nine thousand deals per quarter, and total revenue of $2.5 billion annually.

In December, 2008, Mr. Visentin was appointed to IBM’s Integration and Value Team, a leadership group that develops IBM’s corporate strategy. Although there were technical aspects of Mr. Visentin’s various positions, after hearing four days of testimony, the Court found that he was a business manager, not a technical expert.

Non-Compete Agreements

As part of his employment with IBM, Mr. Visentin signed two noncompetition agreements, the first on July 16, 2008 and the second on July 29, 2009. The July 29^th agreement essentially provided that during his employment with IBM, and for 12 months thereafter, he would not directly or indirectly engage in or associate with any competitors of the company. Mr. Visentin also agreed to a restrictive covenant precluding him from soliciting IBM clients for a period of one year, and IBM employees for a period of two years.

IBM’s first argument was that if Mr. Visentin were allowed to work for HP, IBM would be irreparably harmed because Mr. Visentin’s new position posed the risk that he would inevitably disclose confidential IBM information. IBM argued that Mr. Visentin possessed a plethora of confidential information including strategic business and marketing plans, “strategic initiative,” new service offerings, acquisition plans, the operational finances of the ITS business, IBM’s competitive business and pricing strategies, the identity of new client targets, the identify of troubled clients, and IBM’s competitive strategies to attack HP.

Court Denies Injunction

In denying IBM’s application for an injunction, the Court first noted that a preliminary injunction is “an extraordinary and drastic remedy which should not be routinely granted.” Med. Soc’y of State of N.Y. v. Toia, 560 F.2d 535, 538 (2^nd Cir. 1977). Indeed, to obtain a preliminary injunction, the moving party must demonstrate, first, that it will be irreparably harmed if an injunction is not granted, and, second, either a likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation, as well as a balance of the hardships tipping decidedly in its favor. Lusk v. Vill. Of Cold Spring, 475 F.3d 480, 485 (2^nd Cir. 2007).

To show that it will be irreparably harmed, a movant bears the burden of demonstrating that absent an injunction, it will suffer an injury that is neither remote nor speculative, but rather actual and imminent, and one that cannot be redressed through a monetary award. Payment Alliance Int’l, Inc. v. Ferreira, 530 F. Supp. 2d 477, 480 (S.D.N.Y. 2007).

Next, the Court explained that in New York, properly scoped noncompetition agreements are enforceable to protect an employer’s legitimate interests so long as they pose no undue hardship on the employee and do not militate against public policy. BDO Seidman v. Hirshber, 712 N.E. 2d 1220, 1223 (N.Y. 1999).

The Court further explained that trade secrets and confidential information are considered legitimate interests; however, only that confidential information or those trade secrets that the employee misappropriates or will inevitably disclose are protectable. Reed, Roberts Assocs., Inc. v. Strauman, 353 N.E. 2d 590, 593 (N.Y. 1976).

Court’s Ruling

In ruling in Mr. Visentin’s favor, the Court noted that his primary job at IBM was to be a general manager, explaining, “[a]lthough trade secrets may have lurked somewhere on the periphery, the real thrust of his position was to manage his teams to make them as efficient as possible.” The Court relied on Mr. Visentin’s testimony that he had never taken a computer science course and considered himself a generalist. Mr. Visentin testified, “I am not technical, I don’t know the details of offerings, I’m more of a general manager and I run a business.”

The Court also relied on the testimony of Mr. Visentin’s new manager at HP, who confirmed that Mr. Visentin’s generalist qualities were the driving factor behind his hiring. Mr. Visentin’s future manager testified that he hired Mr. Visentin because, “he had good general IT services knowledge [and] broad experience,” and that Mr. Visentin struck him, “as a process-oriented thinker, a guy who could sort of connect the dots, if you will, of the overall responsibilities of the job.” He also testified that Mr. Visentin’s job would not include involvement in technical services, but rather would be to “manage people.”

Court Does Not Find

Although IBM identified numerous types of information potentially in Mr. Visentin’s possession which it argued should be afforded protection, the court noted that much of the information is either applicable to all large corporations, in the public domain, or outdated, and, thus, does not constitute “trade secrets.”

The court also explained that simply showing Mr. Visentin had access to some confidential information does not sufficiently demonstrate irreparable harm. IBM failed to provide specific examples of confidential or trade secret information that could actually be used to its detriment if Mr. Visentin were allowed to assume his new position at HP. The Court further held that IBM failed to demonstrate Mr. Visentin’s position at HP would require him to disclose any confidential IBM information he might remember.

By: Joseph Maya, Esq.

Contact Us

Attorney Joseph Maya is a Managing Partner of Maya Murphy, P.C. Litigation Department. He can be reached by telephone in the Firm’s Westport office at (203) 221-3100 or by e-mail at JMaya@Mayalaw.com .