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Policy of Enforcing Connecticut Non-Compete Agreements to Protect Employer’s Interests

Torrington Creamery, Inc. v. Davenport, 126 Conn. 515 pertains to a dispute regarding a non-compete agreement between an employer and employee in the dairy products industry in 1940.  While this case is by no means recent, it is a seminal case that lays the groundwork for the policy of enforcing non-compete agreements in Connecticut on the grounds of protecting the employer’s interest.  Specifically, this is one of the first Connecticut cases to address the enforceability of a company’s non-compete agreements when another company acquires it.

The High Brook Corporation employed Mr. Preston Davenport as a farm manager and superintendent beginning in 1932 at its Torrington, Connecticut location.  The company produced and distributed dairy products in the towns of Torrington, Litchfield, Winsted, Thomaston, New Milford, New Preston, and Greenwich, all towns in western or southwestern Connecticut.  High Brook changed its name to The Sunny Valley Corporation in March 1938 and on April 15, 1938, had Mr. Davenport sign an employment contract.  The contract specified that Mr. Davenport would receive a fixed compensation with no set duration and that he would be subject to several restrictive covenants.  A non-solicitation clause prohibited Mr. Davenport from soliciting, either directly or indirectly, Sunny Valley or its successor’s customers for a period of two years.  Meanwhile, a non-compete clause prohibited Mr. Davenport from engaging in the dairy production and distribution industry in the towns where Sunny Valley operated.  Another clause in the employment agreement stipulated that a court’s invalidation of a portion of the agreement would not affect the legally binding nature of the other provisions.  Sunny Valley sold its operations and assets to Torrington Creamery, Inc. in October 1938 and the company discharged Mr. Davenport from employment on October 18, 1938.  He proceeded to start his own dairy production and distribution business in February 1939 in the towns of Torrington and Litchfield.

Torrington Creamery sued Mr. Davenport to enforce the duration and geographical limitations of the restrictive covenant he had signed with Sunny Valley Corporation.  The Superior Court in Litchfield County found in favor of Torrington Creamery, Mr. Davenport appealed the decision, and the case went on to the Connecticut Supreme Court where it affirmed the lower court’s decision.  The Supreme Court found the terms of the non-compete agreement to be reasonable and necessary for the protection of Torrington Creamery’s business interests.  The notion of “protecting an employer’s business interests” is a driving force and major policy concern when deciding whether to enforce a non-compete agreement under Connecticut law.  Restrictive covenants become valuable assets of the employer and courts generally hold that the employer is entitled to the right to safeguard these assets.  Equally as important, the court held that the employer benefits contained in a restrictive covenant can be assigned to a purchaser in the event of the sale of the business and its assets.  Thus, when a company acquires another company, it gains the legal authority to enforce the acquired company’s valid non-compete agreements.  Courts view restrictive covenants as valuable business assets that provide for the necessary protection of the employer and any successor 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 to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Court Enforces Non-Compete Against Connecticut Opthalmologist

Musto v. OptiCare Eye Health Centers, 2000 Conn. Super. LEXIS 2298

Dr. Anthony Musto owned an eye care services professional corporation with two other doctors from 1973 to 1996. He worked as a private practice ophthalmologist in the greater Bridgeport area until the three doctors sold the practice to OptiCare Eye Health Centers, Inc. on July 31, 1996. Dr. Musto owned one third of the shares of the business, sold them to OptiCare for a profit of $590,000, and signed an employment agreement with OptiCare to work as an ophthalmologist on their payroll. He worked as an OptiCare employee from August 1, 1996 to August 4, 2000, providing management with a one-year written notice of voluntary termination on August 1, 1999. Following his termination, Dr. Musto proceeded to open a private practice office in Fairfield and perform surgeries at Bridgeport Hospital, including three extremely rare procedures: dactocystorhinostomy, blethoroplasty, and removal of eyelid tumors.
Dr. Musto signed a non-compete agreement with OptiCare as part of his employment contract and initialed each page to demonstrate he understood the agreement’s obligations and restrictions. The restrictive covenant stipulated that Dr. Musto be prohibited from engaging in the practice of ophthalmology or ophthalmic surgery for a period of eighteen months following termination with fifteen miles of OptiCare’s Stratford or Bridgeport offices. OptiCare sued to prevent further violations of the non-compete agreement because of Dr. Musto’s new practice in Fairfield, a location clearly within fifteen miles of the identified OptiCare offices. The company sought to enjoin him from performing general ophthalmic surgeries at Bridgeport Hospital, also located within the geographical restrictions, but did not ask the court to prevent him from performing the three rare surgeries since he was the only doctor on staff at the hospital with the requisite expertise and knowledge to perform them. Dr. Musto however argued before the court that the restrictions contained in the agreement were unreasonable and the court should deny OptiCare’s request for their enforcement.
The court held that the non-compete agreement was in fact reasonable and granted OptiCare’s request for its enforcement. The court granted the request, stating, “Where the context of the covenant not to compete is the sale of the good will of an established business, the courts recognize that enforcement of the covenant is necessary to prevent the seller from depriving the buyer of the value of the transaction”. When OptiCare acquired Dr. Musto’s professional corporation, it purchased the asset of continued patronage from people who had been patients of that practice, and the court concluded that OptiCare was entitled to protection of this valuable asset. When determining whether a restrictive covenant is reasonable, the court must determine if it affords more than fair and just protection to the party in whose favor it operates without unduly interfering with public interest. The eighteen-month duration was deemed reasonable because it was short enough not to cause any unwarranted or extreme hardships on Dr. Musto’s ability to start another practice. Additionally the court concluded that the fifteen-mile restriction was reasonable because it was not a distance greater than what was necessary to protect the good will asset that OptiCare acquired from Mr. Musto and his partners.

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