Posts tagged with "future client"

Contract Principles in Connecticut Non-Compete Agreements: Consideration and the Parol Evidence Rule

United Rentals, Inc. v. Bastanzi, 2005 U.S. Dist. LEXIS 45268
Case Background

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.

Breach of the Employment 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.

Adequate Consideration

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”.

Burden of Proof

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.

Parol Evidence Rule

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.

 

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.

Duration of Connecticut Non-Compete Agreement Reduced by the Court

Access America, LLC v. Mazzotta, 2005 Conn. Super. LEXIS 2597
Case Background

Ms. Vassilia Mazzotta worked at Access America, LLC, a franchised office affiliated with Century 21 Real Estate, as a licensed real estate broker.  She sold single and multi-family residential real estate in conjunction with her job at Access America until she terminated her employment on April 20, 2005.  There was an employment contract between Ms. Mazzotta and Access America that contained a non-compete clause wherein it stipulated that Ms. Mazzotta could not “engage in or carry on directly or indirectly, a business similar to or competing with any business or products carried on by [Access America] within a fifteen (15) mile radius of 136 Berlin Road, Cromwell, CT (Access America’s office)”.

Shortly after her termination with Access America, Ms. Mazzotta began to work at ERA Innovative Realty, a competing real estate broker well within the fifteen-mile radius as defined in the non-compete covenant of the employment agreement.  Access America brought suit against Ms. Mazzotta and sought injunctive relief in the form of enforcement of the non-compete covenant.  Ms. Mazzotta conversely argued that she signed the restrictive covenant under duress and that its provisions were unreasonable, therefore making it unenforceable.

The Court’s Decision

The court found in favor of Access America, holding that the non-compete agreement was valid and enforceable but did amend its provisions in a way that lessened the occupational hardship placed on Ms. Mazzotta.  The court justified its holding by first discussing the public policy of the issue.  It stated, “It has long been recognized in this state [Connecticut] that a restrictive covenant is a valuable business asset which is entitled to protection”.  Access America, according to the court, had legitimate reasons for using a non-compete agreement to protect its business interest in the form of the money, time, and effort it spent to train Ms. Mazzotta.

The court found Ms. Mazzotta’s defense of signing the agreement under duress to be unpersuasive because the same agreement that contained the restrictive covenant also contained clauses that conferred considerable benefits on her in the form of a private office and a higher commission rate on real estate sales.  In addition, the court cited Ms. Mazzotta’s termination letter wherein she reaffirmed her obligations and prohibitions under the employment agreement.

Reducing the Duration of the Non-Compete Agreement

The one portion of the decision that Ms. Mazzotta found favorable was the reduction in applicable duration for the non-compete agreement.  The court reduced the two-year prohibition down to only one year.  During the legal proceedings, both parties were open to the possibility that the court could reduce the duration of the restriction if in the end it found the non-compete to be valid and enforceable.

Both parties referenced an earlier case, Century 21 Access America v. Nereida Lisboa (35 Conn. L. Rptr. 272 (Conn. Super. Ct. 2003)) where a court had reduced the duration based on the specific language of the employment agreement and specifically the non-compete clause.  This portion of the decision is very valuable as it shows that certain non-compete agreements, depending on the specific language used, are enforceable but the court has the authority to amend the provisions to lessen the restrictions placed on the employee.

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 Invalidated on Grounds of Unnecessary Protection Afforded to Employer

Sanford Hall Agency, Inc. v. Dezanni, 2004 Conn. Super. LEXIS 3574
Case Background

Ms. Lynne Dezanni worked for Sanford Hall Agency, an Avon, Connecticut based insurance company, from 1990 to 2004 where she served as a personal lines (primarily automobile and homeowners insurance) salesperson for clients whose last name started with “A” through “F”.  In 1994, Ms. Dezanni signed an employment agreement that included a non-compete covenant prohibiting the solicitation or attempted solicitation of Sanford Hall’s clients or the disclosure of the company’s confidential information.

In May 2004, Ms. Dezanni was contacted by a recruiter at Sinclair Insurance Group, a direct competitor of Sanford Hall based in Wallingford, Connecticut.  In the following weeks, Sanford Hall announced to its employees that it was engaging in a transaction to sell its assets.  Fearing that she would no longer have a job if the company were sold, Ms. Dezanni accepted employment at Sinclair on June 11, 2004.

The company was in fact sold to a New Jersey insurance company on November 1, 2004.  Sanford Hall commenced legal action alleging that Ms. Dezanni breached the written employment agreement and the non-compete covenant by soliciting its clients and disclosing confidential client information to Sinclair.

Court Ruling

Ms. Dezanni however argued that she was not in breach of the non-compete agreement because it contained unreasonable provisions and was therefore unenforceable.  Additionally, she argued that the employment agreement reserved the right for her to compete in the event that Sanford Hall sold its business.

The court in this case found in favor of Ms. Dezanni and held that the non-compete agreement was in fact unreasonable and unenforceable.  The court based this decision on the fact that Ms. Dezanni was not in a position at Sinclair to threaten Sanford Hall’s interests in its customer relationships and contracts.

Her job at Sanford Hall pertained to the initial contact with clients but her contact usually ended there.  She was not charged with entertaining, socializing with, or schmoozing clients over the phone or in person.  She would not review the contracts when they were due to expire, as the insurer and not the agent handled this business activity.  The court concluded, “Dezanni’s contact with the customers was too infrequent and irregular to pose any threat to the plaintiff’s relationship with its customers”.

The court also held that the agreement excessively restricted Ms. Dezanni from pursuing her occupation and instituted unnecessary limitations because it pertained not only to past and present clients, but to also future ones as well.  Ms. Dezanni was able to prove that the non-compete clause of the employment agreement afforded more protection to Sanford Hall than was reasonably necessary and as a result severely disadvantaged her and ran contrary to the interests of the public.  For these enumerated reasons, the court refused to enforce the non-compete clause of the employment agreement.

Contact Us

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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