Posts tagged with "new company"

Retention of Confidential Information is a Clear Breach of Non-Compete According to Connecticut Court

TyMetrix, Inc. v. Szymonik, 2006 Conn. Super. LEXIS 3865
Case Background

Mr. Peter Szymonik worked for TyMetrix, Inc. from July 2002 to March 10, 2005 as the Director of Client Services and then as Vice President of Technical Operations beginning in January 2004.  TyMetrix was a technology company that provided web-based systems for its clients in order to implement electronic invoicing, performance management metrics, matter & document management, budgeting, forecasting, and generating other business reports.  The company’s typical clients included the legal departments of Fortune 500 companies, law firms, and insurance companies.  The company operated within the United States but at the time had potential clients in the United Kingdom and Australia.  Mr. Szymonik signed an employment agreement in July 2002 and the document contained several post-employment restrictive covenants.

The non-compete agreement prohibited him from: 1) retaining, using, or disclosing any confidential information, 2) working for a competing enterprise for two years following termination, 3) soliciting TyMetrix’s clients (current or prospective) during those two years, and 4) soliciting or hiring any TyMetrix employee during those two years.

Breach of Employment Agreement

TyMetrix terminated Mr. Szymonik on March 10, 2005 and he proceeded to form a new company, SpectoWise, Inc., on July 5, 2005 where he served as its president.  In his capacity as the president of the new company, he solicited several TyMetrix clients and employees to join his firm and even hired at least one former TyMetrix employee.  TyMetrix also asserted that Mr. Szymonik retained copies of some of the company’s confidential information.

He claimed that he was only retaining the information to assist in litigation with TyMetrix and had not used its content in connection with the business operations of his new company or for any other personal gain.  TyMetrix sued Mr. Szymonik in Connecticut state court and asked the court to grant injunctive relief by enforcing the provisions of the July 2002 non-compete agreement.

The Court’s Decision

The court found in favor of TyMetrix, concluded that Mr. Szymonik had indeed breached a valid non-compete agreement, and ordered the covenant enforced.  Mr. Szymonik presented several defenses that the court ultimately rejected in its legal analysis.  He asserted that his new company, SpectoWise, offered very different services from TyMetrix and further argued that the non-compete was unenforceable because the company wrongfully terminated his employment.  As for the claim that the companies were vastly different, the court analyzed SpectoWise’s marketing material and discerned that it was abundantly clear the companies essentially offered the same services to their clients.

Furthermore, the court held that Mr. Szymonik’s termination was not in bad faith and did not go against public policy.  He failed to present any evidence to demonstrate that TyMetrix had violated any “expressed statutory or constitutional provision or judicially derived public policy” when it terminated his employment.  The court also held that Mr. Szymonik’s retention of TyMetrix documents was unlawful on its face and was a clear breach of the non-compete agreement.  It was irrelevant why Mr. Szymonik retained the documents because the mere fact that he still possessed the confidential information was a violation of the employment agreement.

The court’s legal analysis of the dispute indicated that there was in fact a breach of the non-compete agreement and that TyMetrix was likely to succeed on the merits of its claim.  These two factors led the court to find in favor of the employer (TyMetrix) and ordered the enforcement of the restrictive covenant that the parties had executed in July 2002.

 

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.

Legitimate Signature is Required for Enforcement of Non-Compete Agreement

In Stay Alert Safety Services, Inc. v. Fletcher, 2005 Conn. Super. LEXIS 1915, Mr. Christopher Fletcher began to work at United Rentals, Inc., a North Carolina company in the traffic safety and control industry, starting in February 2003.  He signed an employment agreement upon accepting the job offer wherein the agreement contained a non-compete provision.   According to the restrictive provisions, he was prohibited from working at a competing company located within two hundred miles for a period of two years after his termination.  The company felt it needed to protect its legitimate interests due to Mr. Fletcher’s access to its customer lists, cost information, and pricing schemes.  Mr. Fletcher’s employment was terminated on June 8, 2004, and he proceeded to start a new company, Traffic Control, with his wife.  He essentially performed the same services as he had previously in connection with his employment at United Rentals.

Stay Alert Safety Services, Inc., a company with headquarters in Greenwich, Connecticut, acquired United Rentals in January 2005 and its legal department concluded that Mr. Fletcher and other employees’ non-compete agreements were assignable and could be transferred to the possession of Stay Alert.  Stay Alert sued Mr. Fletcher in Connecticut state court for breach of the non-compete agreement and asked the court to enforce the restrictive covenant that he had signed with United Rentals.

The Superior Court sitting in Bridgeport found in favor of Stay Alert and ordered the enforcement of the non-compete agreement.  It held that the agreement’s provisions were reasonable given the circumstances of the case and that Stay Alert was entitled to injunctive relief because of the contractual breach.  Mr. Fletcher argued that he had not actually signed the non-compete agreement and therefore its restrictions were not applicable.  The court rejected this argument and noted that Mr. Fletcher’s signature appeared on page six of the employment agreement right above his typed name.  He claimed that it was not his signature so the court called in a handwriting expert to ascertain whether it was in fact his signature.  The expert, Dr. Marc Seiter, concluded that it was Mr. Fletcher’s signature and the court agreed with this finding.  A signed employment agreement coupled with reasonable provisions meant that the restrictive covenant was valid and enforceable.

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 questions regarding non-compete agreements or any employment matter, contact Joseph Maya at 203-221-3100 or by email at JMaya@MayaLaw.com.

Effects on Non-Competes When a Company Splits and Grants a License to the New Entity

Effects on Non-Competes When a Company Splits and Grants a License to the New Entity

Multicare Physicians & Rehabilitation Group, P.C. v. Wong, 2006 Conn. Super. LEXIS 1351

Multicare Physicians & Rehabilitation Group, P.C. was a Connecticut company that provided healthcare services and maintained offices in Milford, Ansonia, Wallingford, and Cheshire. Dr. Wong began to work for the company and executed an employment agreement on January 21, 2004, pursuant to the company’s employment regulations and standards. There was a restrictive covenant in paragraph nine of the agreement that prohibited Dr. Wong from practicing within fifteen miles of “the corporation’s offices” within the four towns previously mentioned for a period of two years following termination. The agreement stated that Physicians would be entitled to equitable and legal damages (a court ordered injunction and monetary relief respectively) in the event of a breach.
The company split up in the summer of 2004 into Physicians and a new company, Multicare Medical Center, P.C. (“Medical”), that practiced out of the Milford and Ansonia offices previously occupied by Physicians. Physicians licensed “the Name” to Medical in exchange for consideration for $10, and this license gave Medical the right to brand and advertise itself as Physicians. Medical officially became “independently owned company” on August 6, 2004. In August 2005, Dr. Wong gave Physicians notice that he would not be renewing his employment contract with them and then proceeded to accept a part-time position at Medical beginning in December 2005. Physicians learned of Dr. Wong’s new employment and interpreted this as in direct violation of the non-compete clause contained in the employment agreement. Physicians sued Dr. Wong in Connecticut state court and requested enforcement of the restrictive covenant.
The court had to decide whether Dr. Wong had violated the non-compete agreement by working as an employee of Medical, for which it concluded that he had not breached the employment contract with Physicians and denied the company’s request for an injunction restraining Dr. Wong’s further employment at Medical. The main factor that the court analyzed to reach this conclusion was the existence and terms of the license granted to Medical by Physicians on June 30, 2004. The court made it clear that since the company split in 2004, Physicians did not have any offices in Milford or Ansonia and as such, Dr. Wong was free to practice medicine in these towns without violating the non-compete clause. Medical was permitted to operate as Physicians by using its name pursuant to the license but the offices in Milford and Ansonia were not by any means components of Physicians’ business structure or operations. Those offices, while under the trade name of Physicians, were wholly owned and operated Medical business offices.
This decision highlights the special relationship between companies when they split and one party grants the other a license to continue to operate under the same trade name. The court emphasized that while the companies were the same with respect to their trade name, for all other intents and purposes they were completely separate companies with different business structures and operations.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Effects on Non-Competes When a Company Splits and Grants a License to the New Entity

Effects on Non-Competes When a Company Splits and Grants a License to the New Entity

Multicare Physicians & Rehabilitation Group, P.C. v. Wong, 2006 Conn. Super. LEXIS 1351

Multicare Physicians & Rehabilitation Group, P.C. was a Connecticut company that provided healthcare services and maintained offices in Milford, Ansonia, Wallingford, and Cheshire. Dr. Wong began to work for the company and executed an employment agreement on January 21, 2004, pursuant to the company’s employment regulations and standards. There was a restrictive covenant in paragraph nine of the agreement that prohibited Dr. Wong from practicing within fifteen miles of “the corporation’s offices” within the four towns previously mentioned for a period of two years following termination. The agreement stated that Physicians would be entitled to equitable and legal damages (a court ordered injunction and monetary relief respectively) in the event of a breach.
The company split up in the summer of 2004 into Physicians and a new company, Multicare Medical Center, P.C. (“Medical”), that practiced out of the Milford and Ansonia offices previously occupied by Physicians. Physicians licensed “the Name” to Medical in exchange for consideration for $10, and this license gave Medical the right to brand and advertise itself as Physicians. Medical officially became “independently owned company” on August 6, 2004. In August 2005, Dr. Wong gave Physicians notice that he would not be renewing his employment contract with them and then proceeded to accept a part-time position at Medical beginning in December 2005. Physicians learned of Dr. Wong’s new employment and interpreted this as in direct violation of the non-compete clause contained in the employment agreement. Physicians sued Dr. Wong in Connecticut state court and requested enforcement of the restrictive covenant.
The court had to decide whether Dr. Wong had violated the non-compete agreement by working as an employee of Medical, for which it concluded that he had not breached the employment contract with Physicians and denied the company’s request for an injunction restraining Dr. Wong’s further employment at Medical. The main factor that the court analyzed to reach this conclusion was the existence and terms of the license granted to Medical by Physicians on June 30, 2004. The court made it clear that since the company split in 2004, Physicians did not have any offices in Milford or Ansonia and as such, Dr. Wong was free to practice medicine in these towns without violating the non-compete clause. Medical was permitted to operate as Physicians by using its name pursuant to the license but the offices in Milford and Ansonia were not by any means components of Physicians’ business structure or operations. Those offices, while under the trade name of Physicians, were wholly owned and operated Medical business offices.
This decision highlights the special relationship between companies when they split and one party grants the other a license to continue to operate under the same trade name. The court emphasized that while the companies were the same with respect to their trade name, for all other intents and purposes they were completely separate companies with different business structures and operations.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Court Awards Damages for Breach of Non-Compete Agreement

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.
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.
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 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.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

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Court Awards Damages for Breach of Non-Compete Agreement

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.
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.
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 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.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

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