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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.

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

Contract Principles in Connecticut Non-Compete Agreements: Consideration and the Parol Evidence Rule
United Rentals, Inc. v. Bastanzi, 2005 U.S. Dist. LEXIS 45268

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.
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.
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”.
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.
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.

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