Posts tagged with "#MayaLawyers"

What is “FINRA” and What Does (Should) It Do?

Attorneys here at Maya Murphy frequently are called upon to represent individuals who are the subject of a FINRA inquiry, or a party to a  FINRA arbitration.  We routinely post to our website client alerts regarding FINRA-related decisions but it recently occurred to us that we should take a step back and issue a post about FINRA itself—what it is, what it does (or doesn’t do), and where it came from.  Knowledge is power and because FINRA so pervades the financial industry to be forewarned is to be forearmed.

What is FINRA?

“FINRA” is an acronym for the “Financial Industry Regulatory Authority,” a so-called “Self Regulating Organization.”  On July 30, 2007, the New York Stock Exchange and the National Association of Securities Dealers (“NASD”) combined to form FINRA.  To be sure, FINRA is cloaked in official garments of the purest silk.  It was established under § 15A of the Securities Exchange Act of 1934, 15 U.S.C. § 78o-3, Karsner v. Lothian, 532 F.3d 876, 879 n.1 (D.C. Cir. 2008). It is authorized to exercise comprehensive oversight over “all securities firms that do business with the public.”  Sacks v. SEC, 648 F.3d 945 (9th Cir. 2011) (quoting 72 Fed. Reg. 42170 (Aug. 1, 2007)).

With respect to the creation of FINRA, the NASD, itself, made it clear that the new entity was directed at “the regulation of the financial markets.”  Id. “By virtue of its statutory authority, NASD wears two institutional hats: it serves as a professional association, promoting the interests of its members; and it serves as a quasi-governmental agency, with express statutory authority to adjudicate actions against members who are accused of illegal securities practices and to sanction members found to have violated the Exchange Act or Securities and Exchange Commission  . . . regulations issued pursuant thereto.”  NASD v. SEC, 431 F.3d 803, 804 (D.C. Cir. 2005) (citations omitted).

FINRA is a private corporation and the largest “independent” regulator of securities firms in the United States, overseeing approximately 4,800 brokerage firms, 172,000 branch offices, and 646,000 registered securities representatives.  It (not necessarily by claimant choice or mere happenstance) benefits from up to 9000 arbitration filings every year.  FINRA has a staff of approximately 3,000 employees and in 2009, collected revenue of $775 Million.  Senior FINRA management enjoys seven-figure annual salaries.

Codes for Industry Disputes and Customer Disputes

FINRA maintains two separate but similar “Codes of Arbitration Procedure”: one for “customer disputes” and another for “industry disputes.” In drafting its Industry Code, FINRA has apparently chosen to “trim some of the fat” off of the controlling law.  For example, Rule 13209 (amended December 15, 2008) states: “During an arbitration, no party may bring any suit, legal action, or proceeding against any other party that concerns or that would resolve any of the matters raised in the arbitration.”

In Arnold Chase Family, LLC v. UBS AG, 2008 U.S. Dist. LEXIS 58697 (D. Conn. Aug. 4, 2008), Judge Kravitz (in analyzing the analogous FINRA “customer” Rule 12209) demonstrated remarkable restraint in reminding UBS that within the Second Circuit (which includes Connecticut and New York) since at least 1998, United States District Courts have had not only the right, but also the duty to entertain requests for preliminary injunctions during the pendency of arbitration.  See Am. Express Fin. Advisors, Inc. v. Thorley, 147 F.3d 229, 231 (2d Cir. 1998). But FINRA’s arbitral disdain for the twin plinths of fundamental fairness and the opportunity to confront one’s accusers does not stop there.

Code Requirements

The Code’s §§ 13400-13402 require that at least one “non-public arbitrator” (i.e., one who within the last five years was associated with, or registered through, a broker or a dealer) serve on every three-person arbitration panel.  Given the state of the economy, in general, and the sudden appearance, disappearance, and consolidation of Wall Street firms, in particular, it is not unreasonable for a “non-public arbitrator” to have past connections or future aspirations with respect to a corporate party to the arbitration.[1] 

This ethical tar pit is bottomless, as evinced by Rule 13410, which vests in the “Director of FINRA Arbitration” discretion to retain an arbitrator who fails to make a required disclosure, notwithstanding a timely notice of disqualification by one of the parties See, generally, Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119 (9th Cir. 2005).

Interfering with Productive Arbitration

FINRA also makes it clear that it will not permit its Code to let the discoverable truth get in the way of an otherwise productive arbitration.  Rule 13506(a) ostensibly permits pre-arbitration requests for documents or information, provided such requests do “not require narrative answers or fact finding,” thereby rendering such requests virtually useless.  Rule 13510 states outright that depositions are “strongly discouraged” and permitted “only under very limited circumstances.”  The absence of meaningful pre-arbitration discovery makes the proceeding something akin to “trial by ambush.”  Rule 13604(a) states: “The panel will decide what evidence to admit.  The panel is not required to follow state or federal rules of evidence.”

Finally, Rule 13904 permits rendition by the panel of a skeletal or elliptical award devoid of underlying factual findings or legal reasoning.  Even if the parties jointly request an “explained decision” (requiring an additional $400.00 “honorarium” to the FINRA chairperson), only “general reasons” for the award are required, and inclusion of legal authorities and damage calculations is specifically not required.  Under these circumstances, mere comprehension of the basis for the award, much less meaningful judicial review of the award even under the most stringent “manifest disregard” standard (assuming such standard of review still exists, see Stmicroelectronics, N.V. v. Credit Suisse Securities (USA) LLC 648 F.3d 68, 78 (2d Cir. 2011), is rendered impossible.

The take-away from this is that for financial industry professionals, FINRA rules, investigations, and arbitrations (however unsatisfying) are often the only game in town.  If you find yourself trying to negotiate the FINRA minefield and need help, contact us at the Maya Murphy, P.C. office located in Westport, Connecticut, at (203) 221-3100.

Should you have any questions relating to FINRA, arbitration or employment issues, please do not hesitate to contact Attorney Joseph C. Maya in the firm’s Westport office in Fairfield County, Connecticut at 203-221-3100 or at JMaya@Mayalaw.com.


[1] In Arnold Chase Family, LLC v. UBS AG, 2008 U.S. Dist. LEXIS 58697 (D. Conn. Aug. 4, 2008), Judge Kravitz made pointed reference to both the sudden demise of Bear Stearns and the fact that securities customers do not have much say in the writing of FINRA’s rules.  Id. at *8-9, *13-14.

A Summary of Sexual Harassment Workplace Policies in Connecticut

Unfortunately, many instances of sexual harassment in the workplace go unreported, due either to a fear of retaliation or uncertainty as to whether the conduct constituted sexual harassment.  Whatever the case, no employee should feel demeaned in any way while on the job.  The following provides an overview of the various laws and regulations concerning sexual harassment in Connecticut, and the various steps employers must take to ensure compliance with the law.

First and foremost, even before consulting an attorney, anyone with questions or concerns relating to human rights or discrimination issues in Connecticut should consult Connecticut’s Commission on Human Rights and Opportunities (CHRO), which states that its mission “is to eliminate discrimination through civil and human rights law enforcement and to establish equal opportunity and justice for all persons within the state through advocacy and education.”  The site provides valuable resources and links.  With regard to sexual harassment, the site contains a step-by-step guide on what to do if you feel you have been the victim of sexual harassment.

The Commission gets its authority from Connecticut General Statute § 46a-54, which grants the Commission the authority to “require an employer having three or more employees to post in a prominent and accessible location information concerning the illegality of sexual harassment and remedies available to victims of sexual harassment,” and second, “to require an employer having fifty or more employees to provide two hours of training and education to all supervisory employees [ . . . ].”  The statute further provides that the training and education “shall include information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims of sexual harassment.”

What is sexual harassment?

By way of reference, sexual harassment refers to “any unwelcome sexual advances or requests for sexual favors or any conduct of a sexual nature.”

Employers with 3+ Employees

The information that is required of an employer having three or more employees includes, but is not limited to:

  • The statutory definition of sexual harassment and examples of different types of sexual harassment;
  • Notice that sexual harassment is prohibited by the State of Connecticut’s Discriminatory Employment Practices Law and Title VII of the 1964 Civil Rights Act;
  • The remedies available to a victim of sexual harassment, which can include but are not limited to:
    • Cease and desist orders;
    • Back pay;
    • Compensatory damages; and
    • Hiring, promotion or reinstatement;
  • Notice that the harasser may be subject to civil and/or criminal penalties;
  • The contact information for the CHRO;
  • A statement that Connecticut law requires that a formal written complaint be filed with the Commission within 180 days of the date when the alleged harassment occurred;
  • A large bold-faced notice stating, “Sexual Harassment is Illegal.”
    Employers with 50+ Employees

    An employer with fifty or more employees, in addition to the aforementioned requirements, must provide two hours of specialized sexual harassment training, which “shall be conducted in a classroom-like setting, using clear and understandable language and in a format that allows participants to ask questions and receive answers.”  The statute provides a long list of the specific topics that an employer can and should include in the training.


    It is the hope that the above provides a concise, easy to understand summary of the policies that an employer must abide by when it comes to sexual harassment.  If you feel that you have been the victim of sexual harassment, or even if you are not sure, you should consult with an attorney experienced in employment law.  The attorneys at Maya Murphy, P.C. regularly represent employees throughout the Fairfield County and New York City regions, and are ready to advocate on your behalf.  If you have questions or want to schedule a consultation, please contact Joseph C. Maya, Esq. at 203-221-3100 or at JMaya@mayalaw.com.

    Court Awards Damages for Breach of Non-Compete Agreement

    Van Dyck Printing Co. v. DiNicola, 43 Conn. Supp. 191

    Mr. Anthony DiNicola worked for Van Dyck Printing Company as a sales representative from March 11, 1969, to April 1987.  Mr. Leonard Drabkin, Van Dyck’s president, who had known Mr. DiNicola from Columbia Printing Company where Mr. DiNicola had worked for thirteen years, hired him.  Mr. DiNicola received as wages a car allowance, $150.00 per week draw on his commissions pay, and commissions for sales such that he received at least 7% on the first $100,000 of sales and a higher percentage on sales beyond $100,000.  It was not until a month into working that Van Dyck presented Mr. DiNicola with an employment agreement that the parties both signed.

    The employment agreement contained the finalized commission rate schedule that would apply to Mr. DiNicola’s employment with Van Dyck.  The agreement also contained a covenant not to compete that prohibited him from providing services to Van Dyck’s customers while working for a company that provided services in “any way similar to the type of business conducted by Employer [Van Dyck] at the time of termination of this agreement” for a period of twelve months.  The restrictive covenant further stipulated that the agreement would become enforceable by injunction for an addition twelve months (extending the total duration to twenty-four months) if there was evidence of a breach.

    Breach of Non-Compete

    Mr. DiNicola voluntarily terminated his employment with Van Dyck in April 1987 and immediately began to work for Image Development, Inc., a new company he formed with a second former Van Dyck employee.  He owned 50% of the shares in the company until he sold them in 1989 to his partner.  Van Dyck sued Mr. DiNicola for breach of the non-compete agreement and sought damages since injunctive relief was moot due to the expiration of the time period for enforcement by injunction.

    Mr. DiNicola argued that the agreement was not enforceable and that Van Dyck was not entitled to any damages because the agreement lacked consideration.  He further argued that Van Dyck breached the employment contract during his employment by “unilaterally changing the terms to suit itself”.  The Superior Court in New Haven held that the non-compete agreement was enforceable and granted Van Dyck’s request for relief in the form of damages.

    Past Consideration vs. New Consideration

    As a general contract principle, past consideration cannot be used to legitimate an agreement between an employer and employee once the employee has already commenced employment.  Mr. DiNicola asserted that there was not any new form of consideration when he signed the non-compete agreement that would make its provisions binding on him.

    The court rejected this contention and found that there was indeed new consideration for the non-compete agreement in the form of the finalized commission rate schedule that had previously not existed.  When Mr. DiNicola began with employment with Van Dyck not all of the precise employment provisions were finalized between the parties.  It was the employment contract and non-compete agreement that contained the finalized employment details and resolved any existing questions or issues.

    The Court’s Decision

    The court likewise rejected Mr. DiNicola’s claim that Van Dyck had invalidated the non-compete agreement when it unilaterally changed its provisions to overwhelmingly favor its interests over those of him.  He argued that the company had repeatedly changed the method used to calculate his commission payments.  The employment agreement did not specify a method to be used to calculate Mr. DiNicola’s payments under the commission rate schedule and as such, any change in method would not constitute a breach of Van Dyck’s obligations under the agreement.

    The court recognized that the period allowing injunctive relief had expired but granted Van Dyck’s request for damages.  Damages, according to the court, were calculated and awarded to reflect the loss suffered by the enforcing party (Van Dyck) in relation to Mr. DiNicola’s breach of the non-compete agreement.  The court calculated that Van Dyck lost $169,000.69 in sales in direct connection to Mr. DiNicola’s breach and applied a 35% company profitability rate, a statistic presented during Mr. DiNicola’s testimony.  This meant a total damages award of $59,151.29 for Van Dyck Printing Company.

    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.

    Continued Employment is Inadequate Consideration in Absence of At-Will Employment

    Cost Management Incentives, Inc. v. London-Osborne, 2002 Conn. Super. LEXIS 3967

    Cost Management Incentives, Inc. was a company that specialized in the placement of employees in the pharmaceutical industry.  This case addressed covenants signed by the company and two former employees, Ms. Yolanda London-Osborne and Ms. Kristen Herman.  The company presented the two employees with non-compete agreements in May 1996 after several years of employment.  The restrictive covenant contained a one-year non-compete clause and a two-year non-solicitation clause.

    Neither woman was afforded the opportunity to consult with a lawyer to go over the agreement and both felt they were in jeopardy of termination should they refuse to sign.  The agreement did not offer anything in addition to their current salary and benefits.  Mr. David Hallen, the president and Chief Executive Officer of the company, gave them approximately five minutes to skim and sign the agreements, preventing the women from gaining a firm grasp on what their obligations were under the agreement.  The employees continued in their employment in same manner and with the same benefits until the company terminated them.

    Inadequate Consideration

    Cost Management sued the two former employees and asked the court to issue an order preventing any violations of the covenant.  Ms. London-Osborne and Ms. Herman both sought an order declaring that the agreement was unenforceable on the grounds of inadequate consideration and the inappropriate and egregious conduct of the company’s management.  Both former employees further contended that they did not breach the agreement and there was no indication that they were likely to do so.  The court found in favor of the former employees and held that the restrictive covenants were unenforceable because they lacked consideration and their provisions were so broad that they unnecessarily restricted their ability to procure future employment.

    The restrictions in the agreement prohibited employment with any business enterprise engaged in facilitating temporary and/or permanent placement in the pharmaceutical industry for one year after termination.  The court found this specific nation-wide restriction to be reasonable since the company maintained national operations.

    The court however found that the two-year non-solicitation clause was unreasonable and rendered the covenant unenforceable.  This was overly broad and restrictive since 70-75% of Cost Management’s business came from a mere six pharmaceutical companies.  The court commented that Cost Management should have tailored this clause to protect its legitimate business interests without placing such an extensive hardship on former employees.  Analysis of the covenants also led the court to hold that the provisions provided the employer with much more protection than was deemed necessary or permissible.

    The Court’s Decision

    While the finding of unreasonable provisions is sufficient to invalidate a restrictive covenant, the court went on to discuss the lack of consideration, a factor that also renders a non-compete agreement unenforceable.  Connecticut law indicates that continued employment is not adequate consideration for a non-compete agreement for employees that are not working on an at-will basis.  Continued employment is sufficient for employees working on an at-will basis but this was not the case with Ms. London-Osborne and Ms. Herman.

    For these reasons, the court denied Cost Management’s request for injunctive relief and declared that the agreements were unenforceable and void under Connecticut law.


    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.

    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 at-will 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.

    The Court’s Decision

    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.

    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.

    Discrimination Against Spanish-Speaking Worker

    A former saleswoman for the Baccarat store on Madison Avenue was awarded $500,000 by a Federal jury after she testified that the company president complained about her Puerto Rican accent, barred her from speaking Spanish to a co-worker, and finally dismissed her from her job selling crystal and china because of her ethnic origins. Although the saleswoman, Erma Rivera, now 59, had contended that Baccarat Inc. was seeking a more youthful workforce, the jury in Federal District Court in Manhattan did not find that age discrimination played a role in her dismissal in July 1995.

    Losing the job was devastating to Ms. Rivera, who joined Baccarat in October 1986, after selling Haviland porcelain for 15 years, said her lawyer, Joseph C. Maya. “She had spent 25 years of her life teaching newlyweds how to set a place setting and about fine china,” he said. “She loved the company.”

    Ms. Rivera, who lives in Queens and is now employed by a department store bridal registry on Long Island, a job she struggled to find after losing her position at Baccarat, according to Mr. Maya – was unwilling to be interviewed. Her current job pays her about $21,000 a year, much less than she received at Baccarat, where her salary was in the mid-$50,000 range, her lawyer said.

    Case Details

    Ms. Riviera’s troubles at Baccarat did not begin until Mr. Negre was installed, her lawyer said. She testified that Mr. Negre once called her into his office and told her that he did not like her accent, Mr. Maya said.  He said that testimony at the weeklong trial showed that Ms. Rivera, the mother of five children, had an exemplary record at the store and had never prompted a complaint from a customer in her nine years on the sales force.

    In a letter introduced into evidence, a former store manager, J.D. Watts, described her as “the top sales person during my three-year tenure at Baccarat.” “She is fluent in Spanish and is extremely effective when dealing with South American and other Spanish-speaking customers,” Mr. Watts wrote.

    Baccarat’s lawyer, Jeffrey H. Daichman, said that Ms. Rivera was one of five employees fired at roughly the same time because the company’s new president, Jean-Luc Negre, wanted to improve the store’s performance and introduce “a more positive dynamic and energetic attitude toward dealing with customers.” Mr. Negre also made the decision to make the store more inviting by moving it a half-block to a corner site at 59th Street and Madison Avenue, Mr. Daichman said.

    After being named president of the company in 1999, Mr. Negre made seven visits to the store and found the sales force sitting at desks and slow to greet customers, Mr. Daichman said. Ms. Rivera “was not singled out” and was not criticized for speaking with an accent, he said.

    National Origin Discrimination

    Mr. Daichman acknowledged that Ms. Rivera was ordered to refrain from speaking Spanish to a co-worker in the presence of customers. He said the policy was instituted after a customer complained. “It’s just a matter of common sense,” he said. “If the customer is not Spanish-speaking, don’t talk another language. That’s rude.”
    “There was no evidence other than her own testimony about national origin discrimination. “Baccarat has a diverse sales force that includes a Brazilian employee who speaks Spanish as well as Portuguese and three sales people 50 or older, he said.

    Mr. Daichman said the company would ask the Federal magistrate who presided over the case, James C. Francis, to set aside the verdict or order a new trial. The jury found that the company discriminated against Ms. Rivera and awarded her $125,000 in compensatory damages and $375,000 in punitive damages.


    The New York Times Metro Section
    By Terry Pristin – February 10, 1998

    Court Finds 50-Mile Radius Prohibition Valid in a Connecticut Non-Compete Agreement

    United Rentals, Inc. v. Frey, 2011 U.S. Dist. LEXIS 16375

    United Rentals, Inc. was a Delaware corporation headquartered in Connecticut that rented and sold merchandise to the commercial and general public throughout the country.  United employed Mr. Evan Frey at its Indianapolis office as an Outside Sales Representative from December 2007 to October 6, 2010.  As part of his employment contract signed October 4, 2007, Mr. Frey agreed to a non-compete covenant that would be in effect twelve months from the last day of employment with United and would extend to a 50-mile radius from any and all locations that Frey performed services for the company in the previous two years.

    Mr. Frey received all his training and sales from United and the company entrusted him with all of the Indianapolis office’s client relationships because he was the sole Outside Sales Representative at that location.  Mr. Frey accepted a position with MacAllister Machinery Company, Inc., a direct competitor, upon his resignation from United on October 6, 2010 and began contacting United’s customers and submitting bids on behalf of his new employer.

    United Rentals sued for injunctive relief for Mr. Frey’s breach of the non-compete covenant, improper competition with United, and the improper disclosure of trade secrets/confidential information.  Mr. Frey challenged the validity and enforceability of the covenant based on a claim of containing unreasonable provisions.

    The Court’s Findings

    The court found in favor of United Rentals and granted their request for an injunction that would be in effect for one year from the date of the ruling.  The injunction barred Mr. Frey’s further employment with MacAllister Machinery Company, Inc. or other competitors in accordance with the non-compete covenant.  The court rejected Mr. Frey’s argument that the provisions of the non-compete agreement were overly broad and unenforceable.  When a defendant makes this claim, he or she bears the burden of proving that the non-compete is in fact unenforceable.

    Mr. Frey failed to meet the burden according to the court and it held that the time and geographical limitations were both reasonable.  It cited a plethora of previous cases to legitimate the one-year time limitation.  Additionally, the geographical limitations were appropriate and reasonable given the company’s location(s), the performance of services for its clients, and any management responsibilities previously belonging to Mr. Frey.


    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.

    Technology Company’s Non-Compete Found Enforceable on Grounds of Protecting Employer’s Interest and Commercial Operations

    Xplore Techs. Corp. v. Killion, 2010 Conn. Super. LEXIS 2401

    Xplore Technologies Corporation was a company engaged in the engineering, developing, and marketing of rugged computer tablets.  Mr. Timothy Killion worked as a Senior Sales Representative with the company from December 8, 2003, to June 2010.  As part of his employment contract with Xplore, Mr. Killion signed a non-compete and non-disclosure agreement that stated, “By accepting this offer, you agree not to exercise or participate in any activity directly or indirectly competing with that of Xplore Technologies, Corp.” for a period of one year.

    In June 2010, Mr. Killion announced that he would be leaving Xplore to work for another company, later identified as DRS Technologies, Inc., a direct competitor.  In the years leading up to Mr. Killion’s resignation he was intimately involved in the development of a new product and a deal with AT&T valued at $20-23 million.  Xplore commenced a suit seeking an injunction to prevent DRS’s further employment of Mr. Killion and prevent the disclosure/utilization of any classified information regarding Xplore’s business operations.  Mr. Killion claimed that the non-compete agreement was unenforceable because it was too broad in scope.

    The Court’s Decision

    The Superior Court held in favor of Xplore Technologies, finding the non-compete to be valid and issued an injunction prohibiting DRS from employing Mr. Killion until a year after his resignation from Xplore.  The court found that the strongest factor that made the agreement enforceable was the employer’s interest to protect its commercial operations.  Non-compete agreements protect employers in the specific area in which they do business by restricting the disclosure of trade secrets, technical marketing, and financial information.  The court held that the non-compete agreement was a reasonable and binding way for Xplore to protect itself given the uniqueness of the industry, its products, and business activities.

    The court struck down Mr. Killion’s assertion that the agreement was too broad with regard to time and space.  It held that the one-year period was appropriate and reasonable provided the length of Mr. Killion’s employment with Xplore and the nature of the company.  The lack of geographical limitations does not invalidate the agreement in this case.  The nature of Xplore’s business is heavily internet-based and its employees’ work is not confined to a specific office within a specific geographical area.  Instead, the geographical limitations become Xplore’s three direct competitors that conduct business in the same manner and that are involved in the development of similar products.

    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.

    LegalZoom Will Held Invalid Due to Lack of Compliance with Statute of Wills

    In a Superior Court case, Litevich v. Probate Court, a LegalZoom was held invalid for failing to comply with the requirements of the Statute of Wills C.G.S.A section 45a-251. The plaintiff in the case, a proposed beneficiary under the LegalZoom attempted to have the will probated although it was not witnessed nor signed. The court held that the lack of those requirements was not simply a “harmless error” and therefore the will was invalid. Instead, the court held valid a will some 20 years older which gave nothing to the plaintiff.

    Case Details

    The facts of this case were simple. The decedent had no children, was not married, and met the plaintiff in 2000 while working at Yale. Around 2011, the decedent fell ill due to her habit of being a heavy smoker. When there were little signs of her health improving she sought to update her will but decided to use LegalZoom instead of contacting an attorney. Plaintiff maintained decedent chose this method to save money.

    After completing the will online the decedent had to provide personal information, give numerous confirmations to LegalZoom, and electronically sign that the wishes stated were indeed hers. Once completed, decedent paid LegalZoom and they mailed her the documents. Unfortunately, decedent was in the hospital when the documents arrived and plaintiff received them for her. Instead of getting the will signed, they attempted to have a notary present because they believed one was needed in order for the will to be valid. A notary is not required by statute in Connecticut.

    A notary was not available until decedent fell into such a state of health that she did not have the legal capacity necessary to sign a legally binding document. The will was left with plaintiff unsigned upon decedent’s death. Plaintiff contends that the LegalZoom will is binding and that her electronic signature and confirmation online should satisfy the Statute of Wills.

    The Court’s Analysis

    The court began its analysis by laying out Connecticut law which states as follows: § 45a–251, provides: “A will or codicil shall not be valid to pass any property unless it is in writing, subscribed by the decedent and attested by two witnesses, each of them subscribing in the testator’s presence; but any will executed according to the laws of the state or country where it was executed may be admitted to probate in this state and shall be effectual to pass any property of the decedent situated in this state.”

    “[O]ur [S]tatute [of Wills] amounts to a positive rule for the transmission of property, which must be complied with, as a complete act at the time of execution, or never, so far as the act of the testator is concerned.” (Emphasis added; internal quotation marks omitted.) Hatheway v. Smith, 79 Conn. 506, 511, 65A, 1058 (1907).

    The statute has, from its inception, been treated as an act that “permits a disposition of property by will upon compliance with the prescribed conditions.” (Emphasis added.) Id. Thus, to be valid, a will must strictly comply with the requirements of the statute. See Gardner v. Balboni, 218 Conn. 220, 225, 588 A.2d 634 (1991); see also Hatheway v. Smith, supra, 79 Conn. 511 (Statute of Wills “prohibitory and exhaustive”). The statute is designed to “effectuate the policies of safeguarding titles and frustrating fraudulent claims.” Starcez v. Kida, 183 Conn. 41, 45 n. 2, 438 A.2d 1157 (1981).

    The Court’s Decision

    The court followed the law strictly and succinctly stated, “the language of § 45a–251 plainly provides that for any testamentary instrument to be valid it must be subscribed by the decedent and attested by two witnesses in the decedent’s presence. Gardner v. Balboni, supra, 218 Conn. 225. In the present case, the will is not subscribed by the decedent or two witnesses. Accordingly, the court concludes that the Legalzoom will fail to satisfy the statute.”

    Although the court made this finding, the plaintiff still attempted to have the will probated by means of the harmless error doctrine. This doctrine “provides that a testamentary instrument is not invalid for failure to satisfy the execution formalities of a given jurisdiction if the proponent of the will can establish by clear and convincing evidence that the testator intended the document to be his or her will.

    See Uniform Probate Code, § 2–503, p. 141 (“Although a document … was not executed in compliance with [the formalities for execution of a will], the document or writing is treated as if it had been executed in compliance … if the proponent of the document or writing establishes by clear and convincing evidence that the decedent intended the document or writing to constitute … the decedent’s will …”); 1 Restatement (Third), supra, § 3.03, p. 217 (“A harmless error in executing a will may be excused if the proponent establishes by clear and convincing evidence that the decedent adopted the document as his or her will”).”

    The Harmless Error Rule

    No court in Connecticut has decided to adopt the harmless error rule and neither has the Connecticut Legislature in C.G.S.A. 45a-251. When speaking on the doctrine the court said even if it was to apply, “[i]n applying [the harmless error doctrine] to particular cases, a hierarchy of sorts has been found to emerge among the formalities.”

    For example, “[t]he requirement of a writing is so fundamental to the purpose of the execution formalities that it cannot be excused as harmless under the principle of [the] Restatement. Only a harmless error in executing a document can be excused …” (Emphasis in original.) Even then, “[a]mong those defects in execution that can be excused, the lack of a signature is the hardest to excuse. An unsigned will raises a serious but not insurmountable doubt about whether the testator adopted the document as his or her will.”

    Following the Harmless Error Doctrine

    Instead of clearing adopting or rejecting the doctrine, the court concluded the following: “were the court to agree with the plaintiff that Connecticut law allows for the harmless error doctrine, it would not apply to the facts of this case. As the defendant observes, and as confirmed by the commentary to 1 Restatement (Third), supra, § 3 .03, within the harmless error doctrine exists a “hierarchy” of defects. Failure to sign a will at all, as with the case presently before the court, is considered by those states that have used the doctrine to be one of the most difficult defects to overcome. Id.

    Therefore, even if Connecticut were to follow the doctrine, it would still be a stretch to apply it to facts such as those presently before the court, where the will was signed by neither the decedent nor any witnesses. The “electronic signature” claimed by the plaintiff is not sufficient because, even if electronic signing were allowed by § 45a–251, a question the court does not now decide, the signature does not appear on the face of the will. Accordingly, the court rejects the plaintiff’s arguments relating to the harmless error doctrine.”

    Conclusion

    As you can see, sometimes LegalZoom is not all it’s cracked up to be. Truly nothing can beat the experience and know-how of a lawyer who has dealt with Connecticut wills, trusts, and estates. Although at times expensive, the cost can be balanced against the goals it achieves. For example, this case. The sad story of the decedent who should have had her current last wishes carried out, not the wishes she made some two decades prior. Although LegalZoom may be a helpful resource in some instances, it does not in any way provide a substitute for an attorney. But don’t take our word for it, here is LegalZoom’s disclaimer from their own website in full:

    Disclaimers

    LegalZoom is not a law firm, and the employees of LegalZoom are not acting as your attorney. LegalZoom’s legal document service is not a substitute for the advice of an attorney.

    LegalZoom.com, Inc. (“LegalZoom”) is a registered and bonded legal document assistant, #0104, Los Angeles County (exp. 12/13) and is located at 101 N. Brand Blvd., 11th Floor, Glendale, CA 91203. LegalZoom cannot provide legal advice and can only provide self-help services at your specific direction.

    LegalZoom is not permitted to engage in the practice of law. LegalZoom is prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.

    This site is not intended to create an attorney-client relationship, and by using LegalZoom, no attorney-client relationship will be created with LegalZoom. Instead, you are representing yourself in any legal matter you undertake through LegalZoom’s legal document service. Accordingly, while communications between you and LegalZoom are protected by our Privacy Policy, they are not protected by the attorney-client privilege or work product doctrine.

    LegalZoom provides an online legal portal to give visitors a general understanding of the law, as well as to provide an automated software solution to individuals who choose to prepare their own legal documents. To that extent, the site publishes general information on legal issues commonly encountered.

    LegalZoom’s document service also includes a review of your answers for completeness, spelling and grammar, as well as internal consistency of names, addresses and the like. At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation. LegalZoom and its services are not a substitute for the advice of an attorney.

    Although LegalZoom takes every reasonable effort to ensure that the information on our website and documents are up-to-date and legally sufficient, the legal information on this site is not legal advice and is not guaranteed to be correct, complete or up-to-date. Because the law changes rapidly, is different from jurisdiction to jurisdiction, and is also subject to varying interpretations by different courts and certain government and administrative bodies, LegalZoom cannot guarantee that all the information on the site is completely current. The law is a personal matter, and no general information or legal tool like the kind LegalZoom provides can fit every circumstance.

    Therefore, if you need legal advice for your specific problem, or if your specific problem is too complex to be addressed by our tools, you should consult a licensed attorney in your area. Visitors to our site may obtain information regarding free or low cost representation through your state bar association or local legal aid office.

    This site and some of the articles on this site contain links to other resources and businesses on the Internet. Those links are provided as citations and aids to help you identify and locate other Internet resources that may be of interest, and are not intended to state or imply that LegalZoom sponsors, is affiliated or associated with, guarantees, or is legally authorized to use any trade name, registered trademark, logo, legal or official seal, or copyrighted symbol that may be reflected in the links.

    LegalZoom is not responsible for any loss, injury, claim, liability, or damage related to your use of this site or any site linked to this site, whether from errors or omissions in the content of our site or any other linked sites, from the site being down or from any other use of the site. In short, your use of the site is at your own risk.”


    Our estate planning firm in Westport Connecticut serves clients with will, trust, and estate law issues from all over the state including the towns of: Bethel, Bridgeport, Brookfield, Danbury, Darien, Easton, Fairfield, Greenwich, Monroe, New Canaan, New Fairfield, Newton, Norwalk, Redding, Ridgefield, Shelton, Sherman, Stamford, Stratford, Trumbull, Weston, Westport, and Wilton. We have the best probate attorneys in CT on staff that can help with your Connecticut or New York estate today.

    If you have any questions or would like to speak to a probate law attorney about a will, trust, or estate matter, please don’t hesitate to call our office at (203) 221-3100. We offer free consultation on all matters. Call today.

    Technology Company’s Non-Compete Found Enforceable on Grounds of Protecting Employer’s Interest and Commercial Operations

    Xplore Techs. Corp. v. Killion, 2010 Conn. Super. LEXIS 2401

    Xplore Technologies Corporation was a company engaged in the engineering, developing, and marketing of rugged computer tablets.  Mr. Timothy Killion worked as a Senior Sales Representative with the company from December 8, 2003, to June 2010.  As part of his employment contract with Xplore, Mr. Killion signed a non-compete and non-disclosure agreement that stated, “By accepting this offer, you agree not to exercise or participate in any activity directly or indirectly competing with that of Xplore Technologies, Corp.” for a period of one year.

    In June 2010, Mr. Killion announced that he would be leaving Xplore to work for another company, later identified as DRS Technologies, Inc., a direct competitor.  In the years leading up to Mr. Killion’s resignation he was intimately involved in the development of a new product and a deal with AT&T valued at $20-23 million.  Xplore commenced a suit seeking an injunction to prevent DRS’s further employment of Mr. Killion and prevent the disclosure/utilization of any classified information regarding Xplore’s business operations.  Mr. Killion claimed that the non-compete agreement was unenforceable because it was too broad in scope.

    The Court’s Decision

    The Superior Court held in favor of Xplore Technologies, finding the non-compete to be valid and issued an injunction prohibiting DRS from employing Mr. Killion until a year after his resignation from Xplore.  The court found that the strongest factor that made the agreement enforceable was the employer’s interest to protect its commercial operations.  Non-compete agreements protect employers in the specific area in which they do business by restricting the disclosure of trade secrets, technical marketing, and financial information.  The court held that the non-compete agreement was a reasonable and binding way for Xplore to protect itself given the uniqueness of the industry, its products, and business activities.

    The court struck down Mr. Killion’s assertion that the agreement was too broad with regard to time and space.  It held that the one-year period was appropriate and reasonable provided the length of Mr. Killion’s employment with Xplore and the nature of the company.  The lack of geographical limitations does not invalidate the agreement in this case.  The nature of Xplore’s business is heavily internet-based and its employees’ work is not confined to a specific office within a specific geographical area.  Instead, the geographical limitations become Xplore’s three direct competitors that conduct business in the same manner and that are involved in the development of similar products.


    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.