Posts tagged with "irreparable harm"

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.

Court Grants Combination of Equitable & Legal Relief for Breach of Non-Compete Agreement

In Party Time Deli, Inc. v. Neylan, 2001 Conn. Super. LEXIS 2411, Mr. Michael Neylan and Mr. Robert Goldkopf entered into an agreement on November 29, 1996, wherein Mr. Neylan agreed to purchase Party Time Deli, Inc. for $110,000.00 in addition to executing a promissory note on December 1, 1996, for the amount of $35,000.00 as consideration for Mr. Goldkopf consenting to a non-compete agreement.  The restrictive covenant identified Mr. Goldkopf as the party “primarily responsible for the day to day operation of the business known as Party Time Deli, Inc.” and prohibited him from directly or indirectly engaging in a delicatessen-type business within the City of Stamford for three (3) years following the date of closing for Mr. Neylan’s purchase of the company.  The $35,000.00 promissory note served as consideration for the covenant not to compete and was to be paid over a period of four (4) years.

Mr. Neylan failed to deliver the full amount of the promissory note to Mr. Goldkopf because he asserted that Mr. Goldkopf violated the terms of the non-compete agreement by operating the concession stand at the Stamford Yacht Club during the summer months of 1998.  Mr. Goldkopf contended that his actions did not violate the agreements between the parties because they did not specifically state whether the Stamford Yacht Club concession was covered by the covenant’s prohibitions.  He further argued that he was owed the balance of the promissory note, valued at $18,903.94 at the time of trial.  Mr. Goldkopf sued Mr. Neylan to recover the balance of the promissory note and Mr. Neyland submitted a counterclaim for lost profits associated with Mr. Goldkopf’s alleged breach of the non-compete agreement.

The court concluded that Mr. Goldkopf had indeed violated the terms of the covenant not to compete when he operated the Stamford Yacht Club concession stand during the summer of 1998 and that Mr. Neylan was entitled to the enforcement of the agreement’s terms.  While the court decided that Mr. Neylan was required to pay the balance of the promissory note that served as consideration for the non-compete agreement, that amount could be offset by the amount of profits from Mr. Goldkopf’s activities from the summer of 1998.  The court determined that Mr. Goldkopf’s unlawful activities resulted in a $25,000.00 lost profit suffered by Mr. Neylan, the amount that offset the balance of the promissory notes.  Based on the claim and counterclaim of the dispute, the court concluded that Mr. Goldkopf owed Mr. Neylan $6,096.06, an amount calculated by putting the $18,903.94 balance on the promissory note against the $25,000.00 lost profits associated with unlawful activities.

While the typical relief for a case involving an alleged breach of a non-compete agreement is an injunction (equitable relief), this case is an example where the court exercised its authority to grant both legal and equitable relief.  The court ordered the enforcement of the non-compete agreement’s provisions and also awarded damages due to moneys associated with the agreement’s consideration and profits generated from activities that violated the agreement’s terms.

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.

Court Invalidates Non-Compete agreements to Prevent Employment with Company’s Clients

Innovative Financial Services, LLC v. Urban, 2005 Conn. Super. LEXIS 775 marks a milestone in the law of non-compete agreements. Ms. Shelley Anne Urban worked as a full-time employee at Innovative Financial Services, LLC (IFS) from March 24, 2003, to January 17, 2004.  The company provided outsourced bookkeeping, accounting, and administrative services to approximately forty local businesses.  The parties executed a six-page Employment Agreement that stipulated she could not accept employment from a client of the company without the company’s prior written consent.  Ms. Urban had previously signed a “Confidentiality and Non-Competition Agreement” with IFS when she was only a part-time employee.  This prior agreement stated that she was prohibited from providing services to IFS’s past, current, or prospective clients in Hartford County (Connecticut) and Middlesex County (Massachusetts) for a period of one year after termination.  Both of the agreements stated that IFS would be “entitled to injunctive relief in the event of a breach”.

Ms. Urban began to work for the Law Office of William A. Snider two days after her voluntary termination from IFS where she proceeded to perform accounting and bookkeeping services for the business.  The law firm was a prior IFS client and Ms. Urban worked on the firm’s account as an IFS employee in the later part of 2003.  IFS sued Ms. Urban and requested that the Connecticut state court enforce the non-compete agreements and enjoin her from further employment at the Law Office of William A. Snider.  The court denied the company’s request and refused to enforce the agreements between IFS and Ms. Urban.

The court acquiesced that the provisions contained in the agreements were reasonable in scope and did not blatantly favor one party over the other.  The court did not deny the injunction based on unreasonable provisions, but on the basis that Ms. Urban’s actions did not constitute a breach that would disadvantage or harm IFS.  The court stated that injunctive relief is more appropriately applied to prevent a former employee from working for a competing company rather than a former client.  Ms. O’Neil, the owner and president of IFS, did not indicate that Ms. Urban’s actions caused irreparable harm to her company and even testified that she interpreted the non-compete agreements to prevent former employees from “starting up a business to compete against me”.  The court had no choice but to deny the request for injunctive relief in the absence of evidence demonstrating that Ms. Urban’s past or future actions would harm IFS’s business interests.

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.

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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What’s In a Separation Agreement?

With the economy where it is, the employment lawyers in the Westport, Connecticut office of Maya Murphy, P.C. are frequently asked to review and negotiate separation agreements for terminated employees.  These agreements often appear similar in form and content but must be carefully scrutinized, as they can contain hidden “trip wires” that can have a profound and long-lasting effect on the former employee’s job prospects.  Here are some of the things to look out for.

Most separation agreements contain restrictive covenants—confidentiality, non-solicitation, or non-competition clauses.  The first two—confidentiality and non-solicitation—are typically non-controversial, as they often confirm pre-existing obligations owed an employer by a former employee.  The last—non-competition—is usually a point of contention, as it impacts directly the employee’s ability to find a new position.  We have blogged extensively on non-competes, their interpretation and enforceability, etc. and readers are invited to review those prior posts.  But other terms and conditions of a separation agreement deserve your attention, as well.

First of all, do not be surprised by the length of a separation agreement.  A federal statute called the Older Worker’s Benefit and Protection Act requires the inclusion of extensive release language, and such things as a 21 day review and seven day revocation period.  Here are some of the other things you should be on the lookout for:

  • Consideration:  Make sure all of the severance benefits are correct and clearly stated.  This includes severance pay, COBRA coverage, etc.  Do not leave anything to inference or implication.
  • Confirmation that No Claims Exist/Covenant Not to Sue: Notwithstanding the comprehensive release language, some separation agreements will also require the employee to state that he/she is not aware of any factual basis to support any charge or complaint and that the employee will forego suit, even if such a claim exists.
  • Non-disparagement: Both sides often agree that neither will say anything to disparage the other.  Sometimes (particularly in the financial industry), a separation agreement will contain a “carve out” for employer reporting to FINRA or the SEC.  In such a case, it is important to have the agreement state that as of the employee’s separation date, the employer was not aware of any reportable event or information that would warrant comment or notation on a Form U-5.
  • Governing Law:  Employment law does not travel well across state lines.  For example, California law is much different than Connecticut’s.  Large companies will sometimes have their separation agreements governed by the law of the state where it has its headquarters, irrespective of the actual place of work of the departing employee.
  • Acknowledgement of Non-Revocation: An employee has seven days within which to revoke acceptance of a separation agreement.  Some companies adopt a “belt and suspenders” approach and require the employee to acknowledge in writing a negative—that they have not revoked such acceptance.

The employment law attorneys in the Westport, Connecticut office of Maya Murphy, P.C. have extensive experience in the negotiation and litigation of all sorts of employment-related disputes and assist clients from Greenwich, Stamford, New Canaan, Darien, Norwalk, Westport and Fairfield in resolving such issues.  203-221-3100.

 

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Court Enforces Non-Compete Agreement to Protect Employer’s Business Interests

Court Enforces Non-Compete Agreement to Protect Employer’s Business Interests
Webster Bank v. Ludwin, 2011 Conn. Super. LEXIS 127

Webster Bank is regional commercial bank with headquarters in Waterbury, Connecticut that provides financial services to customers in Connecticut, New York Rhode Island, and Massachusetts. The company employed Mr. Michael Ludwin as a dual employee with UVEST Financial Services from January 2007 until the company terminated his employment in June 2010. Mr. Ludwin signed a new employment agreement with Webster when he became a dual employee wherein the agreement contained a covenant not to compete. The agreement, executed on February 7, 2009, prohibited Mr. Ludwin, for a period of one year following termination, from engaging in competing business activities within twenty-five miles of Webster Bank’s “base of operation”. Additionally, he was obligated to refrain from soliciting Webster’s customers and to “treat as confidential the names and addresses of customers” (non-disclosure clause).
Webster terminated Mr. Ludwin in June 2010 and on July 9, 2010 he began to work for Harvest Capital, LLC, a Wethersfield, CT based financial consulting firm. Webster’s counsel sent Mr. Ludwin a letter reminding him of his obligations under the non-compete agreement contained in his employment contract and demanded that he observe the enumerated restrictions. The bank sued Mr. Ludwin in Connecticut state court for violation of the covenant not to compete when Mr. Ludwin failed to curtail his activities and requested that the court issue an injunction preventing any further breaches of the agreement. The court granted Webster’s request and ordered that Mr. Ludwin “cease and desist from competing with the plaintiffs within a twenty-five mile radius of Hamden and Milford, Connecticut for a period to end on June 30, 2011” and further ordered him to return any and all customer lists that he removed from Webster’s premises.
The court held that injunctive relief was necessary if it was to maintain the status quo between the parties. Webster presented sufficient evidence to demonstrate that it would experience irreparable harm from Mr. Ludwin’s actions in the absence of an injunction. Its customer lists and relationships are valuable business interests that are integral to the success of the company and as such the court identified that Webster had a legitimate business interest that was afforded protection under Connecticut law. Furthermore, the court concluded that the agreement had reasonable provisions that did not excessively favor one party over the other or unnecessarily stifle their future business activities.
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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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.

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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.

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Five Things that Make a Connecticut Non-Compete Enforceable

The Fairfield County employment lawyers here at Maya Murphy, P.C., have advised numerous residents of Greenwich, New Canaan, Stamford, Darien, and Westport about the enforceability of non-competition provisions contained in Employment Agreements or Separation Agreements. While every case, and the wording of every agreement, is different, there are five “constants” that Connecticut courts look to in deciding whether or not to enforce a non-competition clause. They are the starting point for any discussion or individual analysis of whether a particular non-compete may be enforceable as to you. Again, every case turns upon its own peculiar facts.

The key concepts are:
1. The reasonableness of the time restriction. As a general proposition, a time restriction of up to three years is generally found to be reasonable. That can vary, however, depending upon the industry involved. In the world of information technology, for example, a particular product’s “shelf life” may be measured in months, rather than years, and an IT employer may not need to put a former employee on the sidelines for a longer period of time (see #’s 3 and 4 below).
2. The reasonableness of the geographical restriction. An employer is entitled to no more non-competition protection than it requires. Stated differently, a company in Connecticut doing business only east of the Mississippi river should not be able to preclude a former employee from joining a competing company anywhere in the United States. The broader the geographical restriction the greater the judicial scrutiny.
3. The degree of protection afforded to the employer. An employer is generally entitled to protect its existing business and client or customer base, together with current and realistic plans for expansion. A hedge fund typically will not be able to prevent a former employee from working outside of the financial industry, and a start-up will not garner protection for grandiose or “pipe-dream” plans to capture an entire industry.
4. Does it unnecessarily restrict an employee’s ability to pursue his or her career? While non-competes are enforceable in Connecticut, Judges are reluctant to order an individual not to pursue his or her chosen profession or livelihood. In a severely depressed job market, the mere existence of a prior non-compete provision can sound the death knell of a job search and this enforceability aspect requires careful analysis by an experienced employment attorney. We at Maya Murphy can “compare and contrast” the language of a particular non-compete with the countless others we have seen before to advise you as to its likely enforceability, or whether an employer can be convinced to scale back its reach.
5. The degree to which it interferes with the interests of the public. Here, an extreme example best illustrates the point. We represented a pediatric cardiac surgeon in seeking to avoid a non-compete. Obviously, such skilled physicians are rare and society benefits greatly from the availability of their services. The public is best served by minimizing restrictions on their employment and maximizing the availability of their life-saving skill.

These five “constants” are viewed separately; a non-compete provision can (but need not) be rendered unenforceable if it violates even a single factor. The non-compete is viewed and evaluated in its entirety and courts may ascribe greater or lesser weight to a particular factor, but all enter into the final equation regarding enforceability.

The employment attorneys in Maya Murphy’s Westport, Connecticut office stand ready to assist you in determining whether, or to what extent, you may be subject to a non-compete contained in an Employment Agreement or Separation Agreement. No two cases are the same; there are always differentiating facts and circumstances. Thus, you should consult with an experienced practitioner to determine where you stand. For further information, call Robert Keepnews, Esq. at (203) 221-3100, or e-mail him at rkeepnews@mayalaw.com.

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Mere Inclusion of a Restrictive Covenant Does Not Invalidate Entire Contract

Mere Inclusion of a Restrictive Covenant Does Not Invalidate Entire Contract
Wes-Garde Components Group, Inc. v. Carling Technologies, Inc., 2012 Conn. Super. LEXIS 899
Wes-Garde Components Group, Inc. (“Wes-Garde”) and Carling Technologies, Inc. (“Carling”) executed an agreement on December 31, 1979 wherein Wes-Garde would receive “permanent favorable pricing” on certain electrical components manufactured by Carling, contingent upon maintaining annual threshold purchasing levels. The contract was amended on January 1, 1988 and it stayed in effect until 2008. The agreement between the two companies contained a covenant not to compete where Carling specifically agreed to refrain from entering the distribution market for certain electrical components.
Carling informed Wes-Garde on June 19, 2008 that is considered the agreement unenforceable and as such the company was under no contractual obligation to provide favorable pricing or abide by the non-compete provisions. December 1, 2008 marked the first date that Carling actually failed to provide favorable pricing, per the contract, while transacting with Wes-Garde. Wes-Garde ultimately sued Carling and requested that the court enforce the agreement. Carling moved for summary judgment on the grounds that the whole contract was unenforceable because it contained an “unreasonable restraint of trade” in the form of a mutual covenant not to compete. The Superior Court in the Judicial District of Hartford denied Carling’s motion for summary judgment and unequivocally rejected the argument that the mere inclusion of the mutual non-compete agreement necessitated the invalidation of an entire contract willingly executed by the parties. The details of a specific non-compete agreement may render that portion of the contract unenforceable but there is not a principle under Connecticut law espousing the idea that the mere presence of a restrictive covenant invalidates an entire agreement.
Wes-Garde opposed the motion for summary judgment on procedural grounds due to Carling’s failure to specify the ground on which it moved or make a specific reference to the covenant not to compete. Carling’s pleading did not establish specific facts or allegations regarding the non-compete agreement nor did they identify it as the grounds for moving for summary judgment. Carling failed to provide the court with the necessary information and the opportunity to evaluate the non-compete agreement based on its particular provisions. The court could have ruled on the enforceability of the non-compete agreement had Carling introduced specific facts or pleadings regarding those contractual provisions.
Carling’s defense, where a party alleges that the inclusion of a covenant not to compete invalidates a whole agreement, is universally rejected by courts in Connecticut and cannot be successfully argued as an avenue to render an entire agreement unenforceable.
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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