Posts tagged with "legally binding"

Connecticut Court Uses Oral Agreement to Substantiate Consideration for Non-Compete Agreement

In Command Systems, Inc. v. Wilson, 1995 Conn. Super. LEXIS 406, Mr. Steven Wilson worked for Command Systems, Inc. where he received a promotion to the position of Vice President and Secretary of the company on June 26, 1990.  In September of that year, management informed Mr. Wilson that he would receive a bonus contingent on the company achieving certain sales goals.  The company did achieve the specified goals in December 1990 but the company informed Mr. Wilson that he needed to sign an agreement containing a contractual non-compete clause before he could receive the bonus.  The parties signed an agreement on December 21, 1990, that contained several restrictive covenants.  Mr. Wilson voluntarily terminated his employment with Command Systems a few years later and formed a new company, the Vertex Company.  The creation of the new company and Mr. Wilson’s actions are the basis of Command’s complaint regarding the breach of the December 1990 non-compete agreement.  Mr. Wilson requested summary judgment on the matter because the agreement lacked consideration and was therefore not legally binding on the parties.

The court had to answer the basic question of whether the 1990 agreement with the contractual restrictions was a valid and enforceable contract.  The court ultimately denied Mr. Wilson’s request for summary judgment and found that the agreement between the parties had adequate consideration and constituted an enforceable contract.  The agreement stated that the consideration for the agreement was “Wilson’s appointment as Secretary of Command”, but he had held this title for several months prior to the non-compete agreement.  The court recognized this but looked beyond this clause of the agreement to identify adequate consideration in relation to Mr. Wilson’s promotion.

The court looked to affidavits provided by Mr. Caputo, Command’s president, to find adequate consideration for the agreement.  The court did not find any factual holes in Mr. Caputo’s statements and had no reason to believe that they contained any misrepresentations, omissions, or lies.  The affidavits repeatedly referenced several conversations between Mr. Caputo and Mr. Wilson, especially an oral agreement wherein Mr. Wilson agreed to sign a non-competition restriction in exchange for being promoted to Secretary of the company.  Mr. Caputo stated, “The decision to make Wilson Secretary of the plaintiff corporation was based on his agreement to sign the contract of employment” in December 1990 that contained the restrictive covenants.  Command provided Mr. Wilson with the non-compete contract when he received the paperwork that officially named him Secretary, although the parties did not sign the agreement until several months later in December.  The contract contained language and clauses that highlighted that Mr. Wilson was being made Secretary of the company in exchange for the execution of an employment agreement restricting future employment activities.  The court used the information from Mr. Caputo’s affidavits to hold that there was an understanding between the parties at the time of Mr. Wilson’s promotion that it was contingent upon the execution of a non-compete agreement.  The court interpreted the oral agreement and the contract presented at the time of promotion as contemporaneous evidence that the non-compete agreement was in fact supported by adequate consideration.  Mr. Wilson failed to meet the requisite burden of proof in demonstrating that the agreement lacked consideration and the court denied his request for summary judgment.

If you have questions regarding non-compete agreements or any employment matter, contact Joseph Maya at 203-221-3100 or by email 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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Sufficient Consideration for At-Will Employees

Sufficient Consideration for At-Will Employees
Home Funding Group, LLC v. Kochmann, 2007 U.S. Dist. LEXIS 41376

Home Funding Group, LLC was a New York corporation with primary business operations in Connecticut that engaged in the residential mortgage brokerage business. The company employed Mr. Nicholas Kochmann and Mr. Patrick Dougherty in its New Jersey office. They worked for the company from January 2004 to May 1, 2006 and July 18, 2006 respectively. The company had both employees sign an Employment Agreement that contained non-compete and non-solicitation clauses to protect Home Funding’s business interests. The employees later signed an “Invention Assignment Agreement” stating that Home Funding was the sole owner of any invention connected to their employment and that it would maintain full intellectual property rights. The agreement stated that Connecticut law would govern any legal disputes and litigation in state and/or federal court. Both employees signed a new restrictive covenant in March 2006 that amended and superseded the 2004 Employment Agreement.
Misters Kochmann and Dougherty both voluntarily terminated their employment with Home Funding and Hamilton Financial, a direct competitor in the mortgage broker industry, hired them shortly thereafter. Home Funding sued its two former employees for breach of the non-compete agreements and requested they be enjoined from further employment with Hamilton Financial. Misters Kochmann and Dougherty asserted that the agreements were not legally binding on them because they lacked valid consideration, claiming that continued employment is inadequate consideration for a covenant executed after the start of employment. The federal court sitting in Bridgeport, Connecticut rejected this argument and held that the agreements were properly executed, contained adequate consideration, and were binding upon the parties.
The former employees argued that Connecticut law requires an employer to promise to something different from what it is already obligated to do when it wants to modify/amend a restrictive covenant with one or more of its employees. The court however applied Home Funding’s legal assertion that at-will employees may be terminated at any time at the employer’s discretion and thus continued employment amounted to adequate consideration to support a valid non-compete agreement. The court noted that in this case, Home Funding had the burden of proof at trial to demonstrate that the agreement was correctly executed and enforceable. Home Funding was able to provide such proof and the federal court held in its favor. Had Misters Kochmann and Dougherty not been at-will employees however, the court would have likely held that the agreement did not have the requisite consideration and could have invalidated the agreement in its entirety.
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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Court Enforces Non-Compete Agreements Connected to Franchise Agreements

Court Enforces Non-Compete Agreements Connected to Franchise Agreements
Carvel Corporation v. DePaola, 2001 Conn. Super. LEXIS 1190

Carvel Corporation sells retail manufacturing licenses and related goods/services to franchises that operate Carvel ice cream stores. Misters Leopold and David DePaola operated two such Carvel stores in Waterbury, Connecticut. The two men contracted with Carvel on November 1, 1990 to obtain a retail manufacturer’s license for Carvel franchise store # 1578 for a period of ten years. The parties entered into non-compete and trade secrets agreements on March 22, 1991. Later that year, on September 11, 1997, the DePaolas entered into an agreement for a license for Carvel franchise store # 2704. Several restrictive covenants accompanied this second franchise agreement. The DePaolas were prohibited from operating ice cream stores within two miles of their previous Carvel locations for a period of three years following the abandonment or expiration of each respective license agreement. Additionally, the covenants stated that legal disputes would be “interpreted, governed, and construed pursuant to New York law”.
On October 31, 2000 the first license agreement expired but Carvel alleged that the DePaolas continued to operate that location as an independent ice cream store. The company learned a few weeks later that the DePaolas had begun to operate the second location in the same manner, as an independent ice cream store not classified as a Carvel franchise. Carvel Corp. sued the DePaolas for breach of the restrictive covenants and specifically claimed that they would disclose valuable and proprietary trade secrets during their current and future business activities. Carvel requested that the court issue two injunctions: one to order the DePaolas to cease using and to return any and all Carvel property and a second to cease the operation of their independent ice cream stores in order to comply with the non-compete agreements. The DePaolas were compliant with returning Carvel property but took issue with the company’s request that they cease their operations of the two ice cream stores. The agreement had a choice of law provision designating New York law as controlling, but the Superior Court of Connecticut sitting in New Britain was able to adjudicate the case because of the similarities in New York and Connecticut laws’ treatment of non-compete and other employment agreements.
The court found in favor of Carvel Corporation and ordered that the DePaolas cease their operations of their two independent ice cream stores in Waterbury, CT in order to comply with the non-compete agreement. To reach its decision regarding the enforceability of the underlying employment contract between the parties, the court analyzed whether Carvel had a legitimate business interest that warranted protection, the degree to which the restrictions were reasonable, and to what extent the restrictions would make the DePaolas bear occupational hardships.
The court held that Carvel did have a legitimate business interest that was threatened by the DePaolas’ continued business activities. While the company did not exercise physical control or have a leasehold interest over the stores, the company had an interest in its goodwill and name recognition that was connected to the customers of the DePaolas’ ice cream stores. Next, the court held that the restrictions, both time and geographical, were reasonable in scope and enforceable by an injunction. The stated purpose of the restrictions was to “prevent dilution of the exclusivity of the valuable Carvel know-how and Carvel trade secrets”. The restrictions enumerated in the non-compete agreement were firm enough to protect Carvel’s legitimate interest but limited enough so as not to unnecessary restrict the DePaolas’ economic activities.
The DePaolas claimed that should an injunction be issued, they would “lose both their income and their investment” because the “hardships would be immediate, devastating, and irreparable”. The court rejected this argument however and held that the DePaolas had entered into the agreements on their own accord without coercion and as such were responsible to bear the risk of hardships that may be the product of the agreements’ terms.
In light of a legitimate business interest and reasonable restrictions, the court granted Carvel’s request for an injunction restraining the DePaolas’ actions in order to prevent further violations of the legally binding non-compete agreements.
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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Court Enforces Non-Compete Agreements Connected to Franchise Agreements

Court Enforces Non-Compete Agreements Connected to Franchise Agreements
Carvel Corporation v. DePaola, 2001 Conn. Super. LEXIS 1190

Carvel Corporation sells retail manufacturing licenses and related goods/services to franchises that operate Carvel ice cream stores. Misters Leopold and David DePaola operated two such Carvel stores in Waterbury, Connecticut. The two men contracted with Carvel on November 1, 1990 to obtain a retail manufacturer’s license for Carvel franchise store # 1578 for a period of ten years. The parties entered into non-compete and trade secrets agreements on March 22, 1991. Later that year, on September 11, 1997, the DePaolas entered into an agreement for a license for Carvel franchise store # 2704. Several restrictive covenants accompanied this second franchise agreement. The DePaolas were prohibited from operating ice cream stores within two miles of their previous Carvel locations for a period of three years following the abandonment or expiration of each respective license agreement. Additionally, the covenants stated that legal disputes would be “interpreted, governed, and construed pursuant to New York law”.
On October 31, 2000 the first license agreement expired but Carvel alleged that the DePaolas continued to operate that location as an independent ice cream store. The company learned a few weeks later that the DePaolas had begun to operate the second location in the same manner, as an independent ice cream store not classified as a Carvel franchise. Carvel Corp. sued the DePaolas for breach of the restrictive covenants and specifically claimed that they would disclose valuable and proprietary trade secrets during their current and future business activities. Carvel requested that the court issue two injunctions: one to order the DePaolas to cease using and to return any and all Carvel property and a second to cease the operation of their independent ice cream stores in order to comply with the non-compete agreements. The DePaolas were compliant with returning Carvel property but took issue with the company’s request that they cease their operations of the two ice cream stores. The agreement had a choice of law provision designating New York law as controlling, but the Superior Court of Connecticut sitting in New Britain was able to adjudicate the case because of the similarities in New York and Connecticut laws’ treatment of non-compete and other employment agreements.
The court found in favor of Carvel Corporation and ordered that the DePaolas cease their operations of their two independent ice cream stores in Waterbury, CT in order to comply with the non-compete agreement. To reach its decision regarding the enforceability of the underlying employment contract between the parties, the court analyzed whether Carvel had a legitimate business interest that warranted protection, the degree to which the restrictions were reasonable, and to what extent the restrictions would make the DePaolas bear occupational hardships.
The court held that Carvel did have a legitimate business interest that was threatened by the DePaolas’ continued business activities. While the company did not exercise physical control or have a leasehold interest over the stores, the company had an interest in its goodwill and name recognition that was connected to the customers of the DePaolas’ ice cream stores. Next, the court held that the restrictions, both time and geographical, were reasonable in scope and enforceable by an injunction. The stated purpose of the restrictions was to “prevent dilution of the exclusivity of the valuable Carvel know-how and Carvel trade secrets”. The restrictions enumerated in the non-compete agreement were firm enough to protect Carvel’s legitimate interest but limited enough so as not to unnecessary restrict the DePaolas’ economic activities.
The DePaolas claimed that should an injunction be issued, they would “lose both their income and their investment” because the “hardships would be immediate, devastating, and irreparable”. The court rejected this argument however and held that the DePaolas had entered into the agreements on their own accord without coercion and as such were responsible to bear the risk of hardships that may be the product of the agreements’ terms.
In light of a legitimate business interest and reasonable restrictions, the court granted Carvel’s request for an injunction restraining the DePaolas’ actions in order to prevent further violations of the legally binding non-compete agreements.
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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Applying Basic Contract Principles to the Enforcement of Non-Compete Agreements

Applying Basic Contract Principles to the Enforcement of Non-Compete Agreements

North American Outdoor Products, Inc. v. Dawson, 2004 Conn. Super. LEXIS 2677

North American Outdoor Products, Inc. (NAOP) was a company created to facilitate sales of outdoor goods to mass retail merchants. The company marketed products such as instant garages, sporting goods, shelters, and canopies. Mr. Curt Dawson worked for NAOP in its sales and marketing department from February 1999 to April 2, 2004. He worked as the National Sales Manager for a period of time in Florida but returned to work in Connecticut when NAOP agreed in a January 2003 meeting to an annual raise of $25,000.00 and related moving expenses.
In March 2003, management requested that Mr. Dawson sign an Employee Agreement that contained and explained several restrictive covenants that would become effective upon termination. The agreement prohibited him from competing with NAOP for twelve months following termination as well as soliciting any entity that NAOP had transacted with in the three-year period prior to termination. Mr. Dawson signed and returned the employment and non-compete agreement on March 26, 2003 but a representative for the company did not sign the document at that time. A representative for NAOP only signed the document on March 20, 2004 when the company learned of Mr. Dawson’s intent to voluntarily terminate his employment.
NAOP brought legal action against Mr. Dawson and sought an injunctive order from the court to enforce the provisions of the non-compete agreement. Mr. Dawson however presented multiple defenses as to why the restrictive covenants were unenforceable: 1) lack of consideration, 2) unreasonable time and geographical restrictions, 3) unclean hands on the part of NAOP, and 4) lack of necessary signatures. The court found in favor of Mr. Dawson, held that the non-compete agreement was unenforceable, and denied NAOP’s request for injunctive relief.
Under Connecticut law, a non-compete agreement must have sufficient consideration to make the document legally binding upon the parties. For enforcement of a restrictive covenant, the employee must receive something in exchange for his or her covenant. The agreement at hand did not bestow any new benefit upon Mr. Dawson and stated that his continued employment was the consideration for the agreement. Connecticut courts have concluded however that “continued employment is not [sufficient] consideration for a covenant not to compete entered into after the beginning of the employment”. NAOP claimed that the raise and moving expenses promised in January 2003 demonstrated adequate consideration but the court rejected this notion because those promises bore no substantial connection to the written agreement from March 2003.
Furthermore, the court concluded that the covenant not to complete was unenforceable because of inherent ambiguities in its language. Courts cannot create a binding contract in the absence of a meeting of the minds between the parties. The plaintiff, in this case NAOP, bears the burden of proof with respect to demonstrating a meeting of the minds in order to prove its version/interpretation of the alleged contract. The court looked to the plain language of the agreement to ascertain whether it articulated clear and concise provisions that led to a meeting of the minds between Mr. Dawson and NAOP. The court concluded that the agreement was unclear about material details, namely the effective date of the provisions and the identification of the specific parties. The agreement was a bilateral document that required signatures of both parties in order to be complete and become legally binding. The absence of NAOP’s signature at the same time as Mr. Dawson’s thus rendered the 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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Court Denies Enforcement Due to Inconsistencies & Absence of Valid Contract

Court Denies Enforcement Due to Inconsistencies & Absence of Valid Contract
Luongo Construction & Development, LLC v. Keim, 2008 Conn. Super. LEXIS 1182

Luongo Construction & Development was a limited liability corporation organized under Connecticut law with headquarters in Wallingford, CT that was engaged in the modular home industry. The company employed Mr. Melvin Keim at its office and allegedly executed a “Non-Compete Agreement” with him on March 15, 2006. The agreement prohibited Mr. Keim from competing with Luongo by engaging in the modular home industry within fifty miles of Wallingford, CT for a period of five years following his termination. Luongo brought an action against Mr. Keim to enforce the provisions of the non-compete agreement when he began to work for another company in the same industry.
The court rejected Luongo’s request for injunctive relief and enforcement of the agreement because it concluded that there was no valid or enforceable contract executed by the parties. Luongo submitted the non-compete agreement to the court in two forms: first as an attachment to its application for preliminary injunctive relief (hereafter referred to as “Attachment”) and then as “Exhibit A” for evidence during the hearings regarding its application for an injunction (hereafter referred to as “Exhibit”). The court noted that while the documents had similarities, there were many significant differences. Firstly, the court identified that the documents were both photocopies since the originals could not be located, they were generic agreements that did not specifically mention Mr. Keim’s name, were dated March 15, 2006, and bore the same three signatures (Mr. Michael Luongo, Mr. Keim, and Mr. Robert G. Wetmore, the witness and Commissioner of the Superior Court).
The court went on to identify the numerous differences between the two documents and concluded that they were material differences that substantially affected the nature of the agreement’s obligations and validity. The following differences were cited as damaging to the agreements’ integrity and enforceability: Attachment contained a different provision concerning working for a competing business, Attachment prohibited engagement in the “financial planning business” while Exhibit prohibited engagement in the “modular home business”, and the documents had significant drafting differences with respect to its provisions and formatting”. Furthermore, the court noted that the parties were never in each other’s presence to actually witness the other party sign the agreements.
After an in-depth analysis of the agreements and taking testimony from both side, the court held that there was not a valid and legally enforceable contract executed by the parties. The court specifically stated that “The inconsistency of these two agreement also militates toward the court’s finding that there is insufficient evidence to support a probable cause finding of a bona fide agreement signed by the parties”. In order for parties to create a valid contract, there has be an offer and acceptance between the parties based on a mutual understanding of the terms and obligations. Courts have long held that mutual assent or a meeting of minds is required for a valid and legally binding contract. In this case, the court concluded that there was not an enforceable employment contract between the parties and subsequently denied Luongo’s request for injunctive relief to enforce the provisions 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.

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Enforcing a Non-Compete Agreement in a Medical Partnership

Enforcing a Non-Compete Agreement in a Medical Partnership

Fairfield County Bariatrics and Surgical Associates, P.C. v. Ehrlich, 2010 Conn. Super. LEXIS 568

Doctors Neil and Craig Floch created Floch Surgical Associates in 1999 in Norwalk, Connecticut to provide medical and surgical services to patients. They decided to gear their practice towards bariatric surgery and hired Dr. Timothy Ehrlich, a board certified general surgeon and graduate of Louisiana State University School of Medicine, in 2002. He was granted surgical privileges at Norwalk Hospital and St. Vincent’s Hospital (in Bridgeport, CT) and operated as the only member of the medical group to perform bariatric surgeries exclusively. On January 1, 2006, the two Floch doctors and Dr. Ehrlich formed Fairfield Bariatrics and Surgical Associates, P.C. (FCB). Each doctor became a third shareholder in the professional corporation and signed identical employment agreements that outlined the compensation schedule, termination protocols, and included a non-compete agreement. The non-compete prohibited each doctor, for two years after termination, from practicing general medicine/surgery within fifteen miles of FCB’s main office in Norwalk and barred performing bariatric procedures at hospitals located in Stamford, Norwalk, Greenwich, Danbury, and Bridgeport.
Doctors Neil and Craig Floch voted to terminate Dr. Ehrlich in July 2009 and notified him of the decision in a letter dated July 30, 1999. They justified his termination by claiming that he repeatedly “misrepresented the group” and had lost his surgical privileges at Norwalk Hospital due to non-compliance with the hospital’s Trauma Service requirements. Dr. Ehrlich proceeded to form his own limited liability company, Ehrlich Bariatrics LLC, on October 22, 2009 and opened offices in Waterford and Trumbull. Both of these municipalities are located outside of the prohibited area created by the non-compete agreement but he also continued to perform operations at St. Vincent’s Hospital in Bridgeport, an activity expressly prohibited by the restrictive covenant.
FCB sued Dr. Ehrlich in Connecticut court and requested that the court enforce the provisions outlined in the non-compete agreement dated January 1, 2006. The court found in favor of FCB, determined that Dr. Ehrlich had violated a valid non-compete agreement, and enforced the provisions of the covenant not to compete. The court stated that the challenging party (Dr. Ehrlich for this case) bore the burden of proof to demonstrate that the agreement was unenforceable. He asserted that he had not been properly terminated and that the agreement itself was unreasonable, and therefore unenforceable. The court rejected both of these arguments and concluded that the agreement was valid and enforceable.
Dr. Ehrlich advanced the unconvincing argument that he was the victim of improper termination because the shareholders meeting at which the vote was taken to terminate his employment was not properly noticed pursuant to the corporation’s by-laws. He essentially contended that the “lack of notice renders his termination a nullity”. The court however disagreed with Dr. Ehrlich because a physician whose termination is being voted on is not entitled to cast a vote. The lack of voting power for this matter meant that his presence was not required and he was not entitled to notice of the special shareholders meeting where the vote was taken. The court ultimately concluded that Doctors Neil and Craig Floch had taken the proper and necessary steps in accordance with the corporation’s by-laws to terminate Dr. Ehrlich’s employment with FCB.
Next, Dr. Ehrlich unsuccessfully contended that the agreement contained unreasonable provisions and therefore the court was not obligated or permitted to order its enforcement. Discerning the reasonableness of a non-compete agreement required the court to balance the competing needs of the parties as well as the needs of the public. Furthermore, the challenging party must show that the provisions are unreasonable in scope. First, the court established that FCB did in fact have a legitimate business interest that necessitated protection. The company was entitled to protect potential new patients within a reasonably limited market area. FCB was only concerned with future patients and did not seek to prevent Dr. Ehrlich from providing follow-up services to current or past patients.
Next, the court addressed and cited a variety of case law that showed Connecticut courts’ history of enforcing non-compete agreements when they protect against “something other than mere competition”, including the use of customer lists, impaired of purchased good will, confidential data/trade secrets, use of information concerning potential clients in a limited area, or some other advantage the former employee acquired while working for the plaintiff company. The court found that Dr. Ehrlich had greatly benefitted from his association with FCB and that his continued actions would negatively affect the reputation and business operations of his former employer.
Lastly, the court took time to address the differences between non-compete agreements for an employer-employee relationship and those for partnerships. It held that since there was not unequal bargaining power or impaired ability to earn a living, the provisions were not unreasonable in scope. The court noted that Dr. Ehrlich’s offices in Trumbull and Waterford did not violate the agreement and there were numerous hospitals located outside the prohibited area where he could find employment as a board certified surgeon specializing in bariatrics. He had actually received encouragement from several doctors to apply for privileges at permissible hospitals, including the Hospital of St. Raphael in New Haven.
In light of Dr. Ehrlich violating a legally binding non-compete agreement that protected a legitimate business interest, the court ordered the enforcement of the restrictive covenant.
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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Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding

Both Parties Must Sign Non-Compete Agreement To Make It Legally Binding
Fairfaxx Corp. v. Nickelson, 2000 Conn. Super. LEXIS 2340

Fairfaxx Corporation, a company based in Norwalk, Connecticut, employed Ms. Sarah Nickelson from January 1997 until she voluntarily terminated her employment on November 23, 1998. Fairfaxx provided services for full and part-time employees to clients located in Fairfield and New Haven counties in Connecticut in addition to Putnam and Westchester counties in New York. Ms. Nickelson first worked as a part-time receptionist for Fairfaxx at Aviator in Stratford, then as a temporary employee of Fairfaxx itself, and then hired on a permanent basis as a Personnel Consultant in May 1997. He did not have an employment contract and as such, she was classified as an employee at will. Seven months later, in December 1997, Fairfaxx’s employees, including Ms. Nickelson, were presented with a “Confidentiality and Non Compete Agreement”. There was an understanding that the employees would be terminated should they refuse to sign the restrictive covenant. Ms. Nickelson signed and returned the non-compete agreement on December 9, 1997. The covenant not to compete prohibited Ms. Nickelson from recruiting candidates or soliciting clients in New Haven, Fairfield, Putnam, and Westchester counties for two years following her termination.
Ms. Nickelson moved in November 1998 and was promptly contacted by a recruiter concerning a job at Premier Staffing Solutions, a company in direct competition with Fairfaxx. She was offered a position with Premier and accepted due to the shorter commute and higher commission rate. She ended her employment with Fairfaxx on November 23, 1998 and immediately began to work for Premier. Fairfaxx sued Ms. Nickelson in Connecticut state court for breach of the covenant not to compete and requested that the court enforce the restrictions contained therein. Ms. Nickelson argued that the non-compete agreement was not a valid employment agreement and she was not obligated to abide by its restrictions. The court ultimately found in favor of Ms. Nickelson, invalidated the non-compete agreement, and denied Fairfaxx’s request for injunctive relief.
The court came to this decision because the agreement lacked adequate consideration and the requisite signatures. The non-compete agreement spoke of “mutual promises” but the court concluded that Ms. Nickelson received nothing in exchange for her covenants. She had the same job, same salary, and same benefits after she signed the agreement as before its execution. She was promoted to Manager of the Temporary Division at Fairfaxx in January 1998 but the court found that this was not in any way connected to the non-compete agreement and held that this could not be construed as consideration for the covenants that Ms. Nickelson gave to the company.
Furthermore, the court found that the non-compete agreement was not legally binding because it was only signed by Ms. Nickelson. Fairfaxx noted that it clearly intended to sign the agreement and have its provisions become legally binding but did not actually know if someone from the company’s management had signed the covenant not to compete. The agreement was designed to be a bilateral contract and would not become legally binding until both parties had signed. The agreement contained signature blocks for Ms. Nickelson and Fairfaxx and required both in order for the restrictions/provisions to become effective.
In light of a missing requisite signature and inadequate consideration, the court held that the non-compete agreement was unenforceable and denied Fairfaxx’s request for injunctive relief.
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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Role of Consideration in Connecticut Non-Compete Agreements

Role of Consideration in Connecticut Non-Compete Agreements
J. M. Layton & Co. v. Millar, 2004 Conn. Super LEXIS 2226

Mr. Reid Millar worked at J. M. Layton & Co., a Connecticut commercial insurance brokerage firm, for close to twenty years until he voluntarily terminated his employment on December 3, 2003. During his career at Layton, Mr. Millar developed and maintained client relationships and the company even sent him to seminars in Florida on how to engender customer loyalty. In January 1994, the company’s ownership transferred to an ‘Employee Stock Option Plan” scheme wherein Mr. Millar and the other employees became the new owners of the brokerage firm. Mr. Millar signed an employment agreement later that year in August in response to a memo from the company’s president stating, “The value of the stock in the company would increase when all employees/shareholders signed employment agreements”. The employment agreement contained non-compete and non-solicitation clauses prohibiting Mr. Millar from performing any service provided by Layton for a period of two years to any entity or person that was a client of Layton in the two years prior to termination.
Four years later, in 1998, the employee-owners sold the firm to SIG Acquisition Co. for $5.59 million. Mr. Millar terminated his employment on December 3, 2003 and began to work for a competitor, Shoff Darby, soon after this decision. Several clients made the switch with Mr. Millar and he provided them with services they previously received from Layton. Layton sued Mr. Millar to enforce the terms of the restrictive covenant to which Mr. Millar presented a defense that there was not adequate consideration for the agreement to be enforceable.
The court found in favor of Mr. Millar and held that the agreement between Layton and himself lacked the adequate consideration required to make the covenant legally binding on the signatory parties. The court rejected Layton’s contentions that continued employment and increased value of stock in the firm were adequate forms of consideration for the agreement. Consideration is a crucial contract law principle wherein each party must receive a benefit and/or a detriment from the agreement to make it legally valid and enforceable. In the absence of consideration, an executory promise is generally unenforceable. Courts have determined that continued employment alone is not adequate consideration for a restrictive covenant. Past decisions have permitted it to qualify as adequate consideration when it accompanied by another defined benefit such as a change in compensation.
Likewise, the court held that the “increase in stock value” argument was without merit and did not constitute adequate consideration. There was a timeline disconnect with the issuance of the stock, the employment agreement, and any increase in value that prevented adequate consideration in this form. Mr. Millar received the stock seven months prior to signing the employment agreement and the increase in its value (if any) occurred four years after the agreement’s execution. These components lacked a coherent connection that would unite them in a manner as to represent the adequate consideration needed to make the agreement enforceable. The court concluded that the possible increase in stock value was far too “imprecise, indefinite, and self-serving, to be adequate consideration” and it denied Layton’s request for enforcement of the non-compete agreement.

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