Posts tagged with "monopoly"

Court Grants Legal and Equitable Relief in Breach of Non-Compete Agreement

Leave a reply
National Truck Emergency Road Service, Inc. v. Peloquin, 2011 Conn. Super. LEXIS 2393

National Truck Emergency Road Service, Inc. (National Truck) was a Massachusetts corporation that engaged in interstate commerce by providing emergency road service to heavy and medium duty trucks and vans for local and national fleets.  The company hired Mr. Barry Peloquin on August 25, 2008, to work as a customer service representative.  The next day, the parties executed a non-compete agreement that prohibited Mr. Peloquin, for five years following termination, from working at a competing company within five hundred miles of the company’s headquarters located at 320 Main Street, Southbridge, MA.

The agreement also stated that Mr. Peloquin was obligated to return any company property upon termination and contained a non-disclosure provision.  Most importantly however, the covenant not to compete stipulated that in the event of a breach, National Truck would be entitled to “remedies allowed by law and equity”, therefore permitting National Truck to receive monetary damages and injunctive relief.

National Truck terminated Mr. Peloquin on October 20, 2009 and he soon found employment with a competing company in Connecticut and began servicing National Truck’s customer YRC.  The company sued Mr. Peloquin for illegally appropriating company lists and other protected intellectual property in conjunction with violating the non-compete agreement executed by the parties.

The company asked the court to enforce the provisions of the non-compete and to order Mr. Peloquin to return all proprietary documents he took home during his employment with National Truck.  The court found in favor of National Truck and granted both equitable and legal relief, although the injunction only addressed returning.

The Court’s Decision 

The court heard expert witness testimony and concluded that National Truck had $32,493.00 in damages directly attributable to illegal competition from Mr. Peloquin.  The company experienced an unusual and dramatic drop off in business from YRC commencing shortly after Mr. Peloquin’s termination.  Mr. Peloquin’s action created adverse financial consequences for National Truck, visible in the company’s lost profits and incurred expenses.

While damages are not generally awarded in cases involving breach of a non-compete agreement, the agreement itself specifically stipulated that the employer (National Truck) would be entitled to them should the employee (Mr. Peloquin) violate the covenant.  The court awarded National Truck the $32,493.00 in damages plus attorney’s fees and court costs.

The court was only willing to grant a portion of the injunctive relief sought by National Truck.  It ordered that Mr. Peloquin return all National Truck documents within thirty days and abide by the non-disclosure clause.  The court’s ruling however did not prevent his further employment with his current company because the court concluded that National Truck did not present adequate evidence to show that Mr. Peloquin violated the non-compete since litigation began or that he was likely to do so in the future.  Without demonstrating the imminent threat of irreparable harm, National Truck was not entitled to injunctive relief with this specific matter.

–

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.

Form U5 – Employment Termination in the Securities Industry

Leave a reply

Broker-dealers, investment advisors, and issuers of securities routinely use Form U5 to terminate the registration of an individual whose employment has ended and to notify the appropriate jurisdiction or self-regulatory organization.  Employees are still subject to the jurisdiction of regulators for at least two years after the registration has been terminated and may have to provide information about the association with their former employer.  The section of Form U5 that may be the most problematic concerns the reason for the termination that must be provided by the employer.

Reason for Termination

If the employer elects to describe a full termination as “permitted to resign,” “discharged,” or “other,”, then an explanation must be provided.  No such explanation is necessary if the full termination is deemed “voluntary.”  Disclosure of the employee’s involvement in investigations, internal reviews, regulatory actions, criminal matters and customer complaints must also be made by the employer.

In many cases, an employer and employee may disagree on what led to an employment termination and on the circumstances of the departure.  A disparaging remark, untrue statement or misleading explanation on Form U5 can jeopardize the ability of an individual to continue working in the securities industry.  A prospective employer may pass over a job candidate who has what has come to be known as a “Dirty U5” from a previous employer.

Dirty U5s

The Financial Industry Regulatory Authority (“FINRA”) does provide a forum for an employee to pursue arbitration against a former employer to contest a “Dirty U5.”  However, the best course of action is to avoid the problem from ever arising.  Registered employees in the securities industry are well advised to seek legal advice and counsel once it becomes apparent that their employment may be coming to an end.  In many cases, the disclosures made in the Form U5 by the employer may be mutually agreed upon before the employment termination ever occurs.

–

Should you have any questions relating to the Form U5, or employment issues generally, please feel free to contact Joseph Maya or the other experienced education attorneys at Maya Murphy, P.C. today at (203) 221-3100 or by email at JMaya@Mayalaw.com.

Difference in Job Responsibilities and Knowledge Prevents Breach of Non-Compete Agreement

Leave a reply
Tyco Healthcare Group v. Ross, 2011 U.S. Dist. LEXIS 49867

Tyco Healthcare, through its subsidiary Covidien (a medical device manufacturer and distributor), employed Mr. Adam Ross as a design engineer in the company’s research and development division from November 14, 2006, to March 18, 2011.  As part of his employment contract, Mr. Ross signed an “Employee Agreement regarding Confidential Information, Inventions, and Conflicting Employment” that specified that Mr. Ross could not divulge, in any capacity, any of Covidien’s confidential information that he was privy to during the time of his employment.  He additionally agreed to not seek for or engage in employment with an industry competitor for two years after the termination of his employment.

Mr. Ross began searching for a new job in 2010 and applied to Intuitive Surgical upon seeing a public advertisement.  Mr. Ross was up front with Intuitive about the non-compete agreement and went so far as to engage an outside attorney for questions he had in relation to the non-compete agreement.  Intuitive hired Mr. Ross as a design engineer in its Milford, CT office  and he began his new job on March 21, 2011, a mere three days after leaving the employ of Covidien.

Possession of Confidential Information

At this point, Covidien filed suit against Mr. Ross but stated that it was open to other solutions besides litigation.  Its main concern was the confidential industry information that Mr. Ross possessed because of his years at Covidien but it also wanted to enforce the two-year prohibition on employment with a competitor.  The company submitted several proposals to avoid litigation: 1) asked Intuitive to refrain from hiring Mr. Ross, 2) was willing to retain Mr. Ross as an employee, 3) compensate Mr. Ross in the event he was not able to find employment as an engineer at a non-competitor.

Mr. Ross and Intuitive ultimately turned down all of these offers, resulting in Covidien commencing further litigation activity.  Covidien asked the court to restrain Mr. Ross from being employed at Intuitive or divulging any trade secrets acquired at Covidien.

The Court’s Findings

The District Court of Connecticut found that the non-compete between Mr. Ross and Covidien was in fact enforceable on the grounds that it contained reasonable provisions and did not overly disadvantage one party.  In addition to a valid and enforceable non-compete agreement, Covidien must be able to show breach in order for its request to be granted, and as such, the court turned to the issue of whether or not there was a breach of this agreement.  In this matter, the court found that Mr. Ross did not breach the non-compete agreement despite gaining employment at a competitor of Covidien.

This legal discussion focused on the fine details and responsibilities of the jobs at Covidien and Intuitive, concluding with the court emphasizing the differences.  The projects, responsibilities, technology, and knowledge required/used/gained by the two jobs were so different that, according the court, there was not convincing evidence that Mr. Ross would be “performing ‘similar services’ at Intuitive, or that he will inevitably use and disclose confidential and proprietary information, in violation of his non-compete agreement”.

This decision demonstrates that upon close examination of very fine employment details, a court will not always find breach of a non-compete in light of gaining employment with a direct competitor of the previous employer and signatory to the non-compete agreement.

Timenterial, Inc. v. Dagata, 29 Conn. Supp. 180

Timenterial was a company that engaged in the sale and rental of mobile units and had previously employed Mr. James Dagata.  The employment contract contained a clause wherein Mr. Dagata agreed not to “engage in any business venture having to do with the sale or rental of mobile homes or mobile offices in a fifty miles radius from any existing Timenterial, Inc. sales lot” for one year following the termination of his employment.

Mr. Dagata terminated his employment on June 1, 1970 and Timenterial claimed that he had been active in business ventures involving mobile homes beginning June 12, 1970 at an office located a mere one-quarter mile from Timenterial’s Plainville, CT office.  Timenterial commenced a suit for violation of the non-compete agreement and sought to restrain Mr. Dagata from further mobile home business ventures in accordance with the agreement.

The Court’s Decision

The court found in favor of Mr. Dagata and held that the non-compete agreement was unenforceable because the geographical restriction in the agreement was unreasonable and excessive.  At the time of legal proceedings, Timenterial had seven facilities in Connecticut, four in Massachusetts, two in Vermont, and one in New Hampshire.  The court applied the fifty-mile radius as stipulated in the agreement and held that this territorial prohibition was unreasonable.

The application of the agreement would mean that Mr. Dagata could not be involved in the mobile homes business in all or substantial parts of Connecticut, New York, Massachusetts, Vermont, New Hampshire, and Rhode Island.  This placed excessive restrictions on Mr. Dagata and severely limited the opportunity for him to practice his occupation.  This excessive and burdensome characteristic of the non-compete rendered the agreement unenforceable and the court concluded that Mr. Dagata’s actions did not constitute a breach 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.

Assignability of Non-Compete Agreements Under Connecticut Law in the Event of a Merger

Leave a reply
Neopost USA, Inc. v. McCabe, 2011 U.S. Dist. LEXIS 105850

Neopost USA, Inc. and Pitney Bowes, Inc. are two companies that essentially hold a duopoly on the national “mailing equipment” market, an industry that includes postage meters, mailing machines, addressing machines, folders, inserters, and relevant software.  Neopost, Inc. employed Mr. John McCabe from 2002 to August 1, 2011 but did not have him sign a non-compete agreement until February 2005, at which time he received a pay raise in connection with a corporate reorganization.

The parties executed a subsequent restrictive covenant in March 2006.  The agreements prohibited Mr. McCabe from engaging in competitive business activities for one year following termination within fifty miles of any Neopost office where he had worked during his employment with the company.  Additionally, he could not solicit Neopost’s customers or employees during the specified one-year period.  Neopost, Inc. merged with Hasler, Inc. and the transaction became official in November 2009 with the creation of a new company, Neopost USA, that assumed title to Neopost, Inc.’s assets and liabilities.

The Dispute

Mr. McCabe’s last day with Neopost was August 1, 2011 and he began to work for Pitney Bowes, its direct and main competitor, only a few days later.  There was a dispute between the parties regarding whether Mr. McCabe voluntarily terminated (resigned) his employment with Neopost or the company fired him.

Neopost sued Mr. McCabe in federal court for violation of the non-compete agreement and requested that the court enforce the provisions of the covenant in order to prevent further breaches of the agreements executed by the parties.  Mr. McCabe argued that his non-compete agreement with Neopost, Inc. were not assignable to Neopost USA, Inc. after the merger with Hasler, Inc. and thus, he was not bound by the provisions contained therein.

The Court’s Decision

The court rejected Mr. McCabe’s defense and granted Neopost’s request for injunctive relief and the enforcement of the non-compete agreements.  The court did not bother deciding the question of fact regarding the classification of Mr. McCabe’s termination.  Provisions of a non-compete are automatically triggered upon termination, regardless of whether it is voluntary or involuntary in nature.  The issue at hand and the focus of the court was the validity and enforceability of the non-compete agreements between Neopost and Mr. McCabe.

The court held that the non-compete agreements were assignable to Neopost USA following the merger, citing Connecticut law that “all property owned by, and every contract right possessed by, each corporation or other entity that merges into the survivor is vested in the survivor without reversion or impairment”.  Conn. Gen. Stat. § 33-820(a)(4).  In the event of a corporate merger, the surviving company holds title to all contracts and employment agreements of the predecessor companies and their provisions are valid and enforceable 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.

Court Invalidates Non-Compete Agreement for Unreasonable Restrictions

Leave a reply
Trans-Clean Corp. v. Terrell, 1998 Conn. Super. LEXIS 717

Trans-Clean Corp. was a company engaged in the business of restoring exteriors and interiors of commercial buildings.  The company began to employ Mr. Alton Terrell as a salesman and manager in December 1990 in connection with the company’s acquisition of Travel Washer, Inc..  The parties executed an employment agreement that created a one-year term of employment, specified the compensation schedule, and contained a non-competition covenant.  The non-compete agreement stated that Mr. Terrell was prohibited for two years following the completion of his employment contract or any renewal thereof from competing with Trans-Clean within sixty miles of the company’s main office in Stratford, CT.

The parties negotiated a pay increase in 1993 and a new compensation schedule was created.  Trans-Clean considered this a renewal of the original employment contract and held the belief that the non-compete agreement was still valid and in effect.  Mr. Terrell however did not share the same view and did not treat the pay increase and new compensation schedule as a renewal of the original contract.  While the parties had different interpretations of the pay increase, there were no direct discussions to clarify its characteristics.

The Dispute

Mr. Terrell suddenly resigned from Trans-Clean in September 1997 and proceeded to create his own commercial restoration company and solicited business from individuals/businesses on Trans-Clean’s customer list.  Trans-Clean sued Mr. Terrell and asked the court to issue an injunction to enforce the non-compete agreement and prevent any further violations.  The court had to tackle two central issues to decide the dispute: 1) whether customer lists are protected trade secrets and 2) the nature and reasonableness of the employment contract and non-compete agreement.  It held that the lists were not trade secrets that entitled Trans-Clean to an injunction and further concluded that the non-compete agreement was unreasonable and unenforceable.

The court held that the customer lists were not trade secrets or confidential information that required protection.  There was never a company policy to designate the lists as confidential information or maintain a degree of secrecy of customers or contact persons.  Furthermore, each salesperson maintained his or her own personal contact lists and did not have any direct access to other sales representatives’ lists.  Each salesperson had the responsibility of developing his or her list, maintaining business relationships, and collecting accounts.  These lists did not amount to a business interest for which Trans-Clean was entitled to protection and injunctive relief.

Reasonableness of the Covenant

Next, the court assessed the reasonableness of the covenant not to compete and found that its provisions, specifically the geographical restriction, were unreasonable and unenforceable.  The sixty-mile radius restriction covered 75% of Connecticut, including the state’s six major metropolitan areas (Bridgeport, New Haven, Hartford, Waterbury, Stamford, and Danbury), and extended into parts of New York (including four out the five boroughs) and New Jersey.  The restriction, according to the court, was overreaching and unnecessarily infringed on Mr. Terrell’s ability to purse his occupation and obtain future employment.  He had twenty years of experience in the commercial restoration industry and it was the only field in which he had ever worked.

Renewal of the Original Agreement

Lastly, the court analyzed whether the pay increase and modification of the compensation schedule amounted to a renewal of the original agreement.  The court stated there was a “question of fact” that it needed to answer in order to decide the case.  It noted that the writing drawn up by the company regarding the pay increase did not make any reference to the original employment contract and there was no apparent connection between the two writings.

In the absence of any reference or connection, the court concluded that the pay increase was not a renewal or extension of the original employment contract.  The court noted however that Mr. Terrell “should be bound by the non-compete agreement if that agreement is found to be reasonable”.  The court’s earlier analysis revealed that the covenant was in fact unreasonable, thereby overriding Mr. Terrell’s obligation to abide by its provisions.

–

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.

Implied Duty to Not Disclose Accounts and Trade Secrets and Exceptions to the Rule

Leave a reply
Booth Waltz Enterprises v. Kimlingen, 2004 Conn. Super. LEXIS 2682

Booth Waltz Enterprises was an automotive and industrial lubricant distributor based in Hartford, Connecticut that transacted with auto dealers, fleet owners, and public entities.  Mr. Kevin Kimlingen worked for Booth Waltz as a sale representative from April 2000 to October 2003.  Booth Waltz’s management was impressed by Mr. Kimlingen’s practice of “rolling”, the art of convincing his customers to follow him to a new employer.  He “rolled” forty-five accounts to Booth Waltz within his first month at the company.

Booth Waltz took advantage of Mr. Kimlingen’s talents to acquire many new clients when the company hired him but it was very cognizant that it would have to take measures to protect its interests given his history of mobility and “rolling” within the industry.  In the summer of 2003, Booth Waltz prepared a non-solicitation agreement for its employees to better regulate the activities of its sales staff.  Mr. Kimlingen expressed great reluctance to sign the restrictive covenant when he received it in October 2003 and Booth Waltz assumed he resigned from its employ when he failed sign the agreement or attend a mandatory staff meeting.

Customer Solicitation 

Mr. Kimlingen began to work for U.S. Lubes, a direct industry competitor, and he began “rolling” his Booth Waltz accounts to his new employer.  Booth Waltz sued Mr. Kimlingen in Connecticut state court and sought injunctive relief to prevent any further solicitations of its customers.  Booth Waltz argued that although Mr. Kimlingen may not have breached an actual restrictive covenant, his actions violated the Connecticut Uniform Trade Secrets Act, which by default prohibited certain competitive activities.

The company argued that the customer lists Mr. Kimlingen took with him to his new employer was Booth Waltz’s sensitive and proprietary information.  Former employees may compete with a former employer in the absence of a non-compete agreement, but he or she is still bound by a duty to not disclose trade secrets or confidential information acquired during his or her employment to the detriment of the former employer.

The Court’s Decision

The court ultimately held that Mr. Kimlingen did not violate a covenant or implied duty by “rolling” clients from Booth Waltz to U.S. Lube.  A vast majority of these accounts had long-standing relationships with Mr. Kimlingen that pre-dated his employment with Booth Waltz.  The court concluded that these customer relationships were not property of Booth Waltz and the company had no authority or legal right to label the contact information as its proprietary information.

The court noted, “in the absence of a covenant not to compete, an employee who possessed the relevant customer information prior to the former employment is free to use the information in competition with the employer after termination of the employment relationship” (Restatement (Third), Unfair Competition § 42, comment f), and denied Booth Waltz’s request for an injunctive in light of no legally binding restrictive covenant or an implied duty.

–

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Court Grants Motion for Transfer to California District Court in Non-Compete Agreement Dispute

Leave a reply
United Rentals, Inc. v. Pruett, 296 F. Supp.2d 220

United Rentals, Inc. was a Delaware corporation with headquarters in Connecticut that employed Mr. Lawrence Pruett from May 2001 until August 2003 in its San Juan Capistrano, CA office.  He first worked as a salesperson and then the company promoted him to branch manager.  Mr. Pruett signed an Employment Agreement after verbally accepting the branch manager position wherein he agreed to restrictive covenants preventing employment with a competitor, soliciting the company’s customers, or from disclosing trade secrets.  The agreement contained a choice of law provision that stated Connecticut law would govern legal disputes arising from the agreement and that courts (federal or state) in Fairfield County had exclusive jurisdiction.

Mr. Pruett abruptly resigned in August 2003, began to work for one of United’s competitors, Brookstone Equipment Services, and allegedly solicited United’s customers.  United Rentals sued Mr. Pruett in federal court for violation of the non-compete agreement and requested that the United States District Court of Connecticut enforce the provisions of the agreement.  Mr. Pruett however submitted motions to dismiss and to transfer the case to a court in California, where he lived and worked.

Motion to Dismiss

The court denied Mr. Pruett’s motion to dismiss but granted his motion for transfer, handing the case over to the Central District of California.  The central issues of the case were the enforceability of the forum selection clause and the court’s ability to transfer the case to another district court.  Mr. Pruett argued that it was unenforceable because he “lacked notice of its existence, because the clause is unreasonable, and because it was the product of United’s overreaching”.

The court mentioned two United States Supreme Court cases, M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), and Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) to establish the federal judicial system’s attitude toward forum selection clauses and their enforceability.  In Bremen, the court held that the clauses are valid and enforceable so long as there is no showing that it would be unreasonable or unjust.  This case reversed American courts’ “long-standing hostility to forum selection clauses”.  In Carnival, the court held that a forum selection clause was enforceable only if both parties were aware of its existence.

In the current case, the court denied the motion to dismiss and found that the clause was reasonable and that the written contract had indeed provided Mr. Pruett with adequate notice of its existence.

Motion for Transfer

The court did however grant Mr. Pruett’s motion for transfer under 28 U.S.C. 1404(a) which authorizes district courts to transfer civil action to other districts “for the convenience of parties and witness, [and] in the interest of justice”.  In reaching this decision, the court analyzed the convenience of the parties, the existence of the forum selection clause, and factors of systemic integrity and fairness.

Mr. Pruett bore the burden of proof to show that the transfer was in the best interest of justice and the court concluded that he meant his burden.  All the witnesses for the case lived in California, the actions that led to the suit took place in California, and the vast majority of documentary evidence (sales records, advertising information, customer lists, etc.) was in California.  With regard to justice, United Rentals asserted that a transfer to a district court in California would deprive it of uniform treatment of its employment contracts.

The court recognized that Connecticut and California law greatly differ on their treatment of non-compete agreements but concluded that California had a materially greater interest in the case “because the impact of this litigation will be felt entirely in California”.  Furthermore, the court noted that California had a right to apply its own laws in order to protect its residents from anti-competitive measures by out-of-state employers that are contrary to California’s established public policy.

This case demonstrates that the convenience of the parties and the interests of justice can at times outweigh a contractual forum selection clause.  The court analyzed these factors and concluded that the facts surrounding the case favored a transfer of venues to a district court in California.

–

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Court Invalidates Non-Compete Agreement for Excessive Restraint of Trade

Leave a reply
CT Cellar Doors, LLC v. Palamar, 2010 Conn. Super. LEXIS 3247

CT Cellar Doors was a Connecticut company owned by Mr. Claude Raffin that designed and installed custom metal basement entry doors, windows, and other accessories.  Mr. Raffin hired Mr. Stephen Palamar in January 2006 as an installer and later promoted him to operations foreman on August 21, 2007.  The promotion involved a substantial pay raise conditioned on Mr. Palamar signing a “non-competition-non-disclosure agreement”.  The parties executed the restrictive covenant wherein Mr. Palamar agreed to not compete with CT Cellar Doors anywhere within the state of Connecticut for three years following his termination from the company.

Mr. Palamar voluntarily terminated his employment on May 24, 2010, registered himself as a home improvement contractor with the Connecticut Department of Consumer Affairs, and began doing business as Custom Cellar Doors.  His new company advertised and performed the same services he performed while in CT Cellar Door’s employ.

The Dispute 

CT Cellar Doors sued Mr. Palamar in Connecticut court for “irreparable harm to its goodwill, reputation, and name” and requested injunctive relief because there was no adequate remedy at law.  Both parties agreed that the central issue of the case was “whether the agreement was enforceable under Connecticut law”.  The court and parties likewise recognized that CT Cellar Doors had the burden to show that both parties signed the agreement and that Mr. Palamar had violated its provisions.  Once/if those were established, then Mr. Palamar bore the burden to show that the agreement was unenforceable.

The parties did not dispute, as a matter of fact, that the agreement was signed and that Mr. Palamar violated its terms.  The dispute is over whether, as a matter of law, the agreement is valid and enforceable.  The court ultimately found in favor of Mr. Palamar and held that the agreement executed by the parties was unreasonable and unenforceable.

The Defense’s Argument

Mr. Palamar presented two arguments to address whether the agreement was reasonable under Connecticut law: 1) the agreement had inadequate consideration and 2) it was an unreasonable restraint of trade.  The court rejected the first argument, noted the substantial pay raise Mr. Palamar received, and held that it constituted adequate consideration.

Although that defense failed, the court agreed with Mr. Palamar that the agreement was an excessive restraint of trade and the agreement was unreasonable because it denied him the right to earn a living in his chosen profession that he had had for twenty-five years.  The court also noted that CT Cellar Doors did not present adequate evidence to demonstrate that they had experienced or were likely to experience irreparable harm.  At the time that litigation began, CT Cellar Doors had fifty clients while Mr. Palamar only had two.  CT Cellar Doors was not able to articulate a claim and present evidence that Mr. Palamar’s actions had damaged its business operations.

While CT Cellar Doors had a legitimate business interest to protect, the provisions of the non-compete went too far and placed oppressive occupational restraints on Mr. Palamar and excessively restricted his ability to secure future employment in his chose profession.  This lack of balance between the interests of the parties ultimately led the court to find the restrictions unreasonable and for it to invalidate the non-compete agreement.

–

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

Court Denies Enforcement Due to Inconsistencies & Absence of Valid Contract

Leave a reply
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 Employment Agreement

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 their 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.

The Court’s Analysis and Decision

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.

–

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.

Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement

Leave a reply
Opticare, P.C. v. Zimmerman, 2008 Conn. Super. LEXIS 759

Opticare, P.C. was a company engaged in the business of offering optometry and ophthalmology services to patients.  A sister company, Opticare Eye Health Centers, Inc., was created in 1995 to provide management services to Opticare, operate an ambulatory surgical center, and own/operate retail eye-wear stores.  Opticare employed Dr. Neal Zimmerman as an ophthalmologist specializing in vitreoretinal surgery from April 1984 to November 10, 2006.  He signed several employment agreements with Opticare during his time as an employee with the company and each one contained a non-compete clause that would become effective upon Dr. Zimmerman’s termination.

The restrictive covenant stated that Dr. Zimmerman was prohibited for eighteen months after his termination from offering medical services at a competing company located with a restricted area that was a hexagon ranging from fifteen to thirty miles from where he practiced his profession.  The non-compete agreements also specified that Dr. Zimmerman was required to provide one year notice of voluntary termination if he intended to continue to practice medicine in the state of Connecticut.

On September 6, 2006, Dr. Zimmerman provided a sixty-day notice of voluntary termination to Opticare’s management and shortly thereafter, five other physicians tendered their resignation from the company.  He began providing ophthalmological services on January 2, 2007 at a new office located in Prospect, Connecticut, a mere four miles from Opticare’s office in Waterbury and clearly within the prohibited area according to the non-compete agreement.  He testified that approximately 50% of his current patients were former patients of Opticare, his former employer.  Opticare sued Dr. Zimmerman for breach of the non-compete agreement and asked the court to grant injunctive relief by enforcing the restrictions enumerated in the agreement.

The Court’s Decision

After weighing the evidence presented by the parties, the court held in favor of Dr. Zimmerman and concluded that the non-compete agreement was not enforceable.  Dr. Zimmerman admitted he violated the agreement based on the face value of its terms but raised questions regarding the legality of the covenant and argued that he was not obligated to refrain from further activities at his new practice.  The court weighed the evidence to evaluate whether Dr. Zimmerman’s breach of the agreement had any negative impact on Opticare’s business operations or that the company had incurred irreparable harm.

It ultimately found that Opticare failed to present sufficient evidence to prove that it experienced either of these detriments and the court noted that Opticare was “still in business and there was no showing that the business is close to ruination or has been permanently harmed in any way”.  Breach alone, according to the court, is insufficient to demonstrate that an injunction is necessary.  A moving party must demonstrate breach and incurred or imminent irreparable harm in order to be successful with a request for injunctive relief.

–

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.