Posts tagged with "non-compete agreement"

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.

Keywords: assets, assigned to purchaser, business assets, business interests, diary industry, sale of business, sold operations, enforcement, franchise, injunctive relief, obligations, prohibitions, valid, attempted solicitation, solicitation, refuse to enforce, reasonably necessary, former employer, previous employer, job responsibilities, binding, classified information, commercial operations, competing, compete, directly, employer’s interest, indirectly, internet-based, protect, reasonable, restricting disclosures, restricting disclosures, similar products, burden of proof, duress, direct competitor, disclosure of trade secrets, employment contract, enforceability, geographic limitations, headquarters, improper competition, injunction, management responsibilities, non-compete covenant, radius, sales representative, time limitations, unreasonable provisions, attorney, attorneys, employment attorneys, bonus, bonuses, companies, company, connecticut, customary practices, Darien, departing employees, directors, employee, employer, employment law, employment at-will, at-will, legal counsel, executives, New York, Fairfield, Fairfield County, Norwalk, Westport, Weston, Easton, Bridgeport, Stamford, Stratford, severance package, Greenwich, harassment, discrimination, hiring, human resources, job offers, lawyer, lawyers, leaving company, leverage, Maya Murphy, negotiated, negotiating severance packages, negotiation, New Canaan, non-compete, non-competition, non-disparagement, non-solicitation, offer, offer agreement, offer letter, P.C., payroll, position, represent, representation, salary, salaries,  senior management, manager, separation agreement, severance agreements, severance letters, severance package, termination, vacation, vesting, vesting of stock options, law firm, public interest, monopoly, start own business, voluntary, voluntarily left, mediation, burdensome, excessive, geographical, occupation, practice, territorial, violation, restrictive, proprietary knowledge, scope, narrow, broad, anti-compete, future clients, adequate consideration, competing businesses, confidentiality agreement,  conflict of interest, defense, fraud, consideration, oral representations, written approval, commercial, compensation, clients, contracts, duration, area, successor

Court Grants Combination of Equitable & Legal Relief for Breach of Non-Compete Agreement

In Party Time Deli, Inc. v. Neylan, 2001 Conn. Super. LEXIS 2411, Mr. Michael Neylan and Mr. Robert Goldkopf entered into an agreement on November 29, 1996, wherein Mr. Neylan agreed to purchase Party Time Deli, Inc. for $110,000.00 in addition to executing a promissory note on December 1, 1996, for the amount of $35,000.00 as consideration for Mr. Goldkopf consenting to a non-compete agreement.  The restrictive covenant identified Mr. Goldkopf as the party “primarily responsible for the day to day operation of the business known as Party Time Deli, Inc.” and prohibited him from directly or indirectly engaging in a delicatessen-type business within the City of Stamford for three (3) years following the date of closing for Mr. Neylan’s purchase of the company.  The $35,000.00 promissory note served as consideration for the covenant not to compete and was to be paid over a period of four (4) years.

Mr. Neylan failed to deliver the full amount of the promissory note to Mr. Goldkopf because he asserted that Mr. Goldkopf violated the terms of the non-compete agreement by operating the concession stand at the Stamford Yacht Club during the summer months of 1998.  Mr. Goldkopf contended that his actions did not violate the agreements between the parties because they did not specifically state whether the Stamford Yacht Club concession was covered by the covenant’s prohibitions.  He further argued that he was owed the balance of the promissory note, valued at $18,903.94 at the time of trial.  Mr. Goldkopf sued Mr. Neylan to recover the balance of the promissory note and Mr. Neyland submitted a counterclaim for lost profits associated with Mr. Goldkopf’s alleged breach of the non-compete agreement.

The court concluded that Mr. Goldkopf had indeed violated the terms of the covenant not to compete when he operated the Stamford Yacht Club concession stand during the summer of 1998 and that Mr. Neylan was entitled to the enforcement of the agreement’s terms.  While the court decided that Mr. Neylan was required to pay the balance of the promissory note that served as consideration for the non-compete agreement, that amount could be offset by the amount of profits from Mr. Goldkopf’s activities from the summer of 1998.  The court determined that Mr. Goldkopf’s unlawful activities resulted in a $25,000.00 lost profit suffered by Mr. Neylan, the amount that offset the balance of the promissory notes.  Based on the claim and counterclaim of the dispute, the court concluded that Mr. Goldkopf owed Mr. Neylan $6,096.06, an amount calculated by putting the $18,903.94 balance on the promissory note against the $25,000.00 lost profits associated with unlawful activities.

While the typical relief for a case involving an alleged breach of a non-compete agreement is an injunction (equitable relief), this case is an example where the court exercised its authority to grant both legal and equitable relief.  The court ordered the enforcement of the non-compete agreement’s provisions and also awarded damages due to moneys associated with the agreement’s consideration and profits generated from activities that violated the agreement’s terms.

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.

Termination Does Not Invalidate a Non-Compete Agreement

Termination Does Not Invalidate a Non-Compete Agreement

Built In America, Inc. v. Morris, 2001 Conn. Super. LEXIS 2953

Mr. Michael Morris was the owner of Built In America, Inc. until he sold his entire stock in the company to Mr. Marc Costa in October 2000. The parties executed a Purchase and Sale Agreement that legally transferred the stock and ownership of the company. The transaction included an employment contract for an initial period of two years and a non-compete clause that became effective upon Mr. Morris’s termination from the company. The company terminated Mr. Morris in April 2001 and he proceeded to work in direct competition with his former employer. Mr. Costa and Built In America sued Mr. Morris for violation of the non-compete agreement and asked the court to enforce the agreement’s provisions. Mr. Morris argued that the restrictive covenant was null and void because the company had breached the employment agreement when it unlawfully terminated his employment.
The court found in favor of Built In America, ordered the enforcement of the covenant not to compete, and issued an injunction. There was no dispute over the reasonableness of the covenant, only a dispute over whether it became void when the company allegedly improperly terminated Mr. Morris. Built In America cited previous Connecticut cases, most notably Robert S. Weiss & Associates, Inc. v. Wiederlight (208 Conn. 525 (1988)), where the court held that termination did not invalidate a non-compete agreement. Furthermore, the court concluded that the company was justified with respect to its decision to terminate Mr. Morris’s employment, stating that his “behavior was so outrageous that one is left to believe he was inviting his discharge”. The court ultimately concluded that the covenant was legally binding and ordered its enforcement.
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.

Continue Reading

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment
Connecticut Bathworks Corp. v. Palmer, 2003 Conn. Super. LEXIS 2193

Connecticut Bathworks Corporation was a company servicing New Haven, Fairfield, and Litchfield counties that remodeled bathrooms via the installation of prefabricated acrylic bathtub liners and wall systems. The company employed Mr. Palmer from approximately the beginning of April 2001 to February 28, 2003 at which point Mr. Palmer voluntarily terminated his employment. He began to work for Re-Bath of Connecticut, a company in direct competition with Bathworks, the next day. The issue in this case is that Mr. Palmer signed a “Company Confidentiality Agreement” when he began to work for Bathworks that contained a covenant not to compete that prohibited him from “being employed by any business in competition with the plaintiff [Bathworks] within any county in which the plaintiff is doing business for a period of three years from the termination of his employment with the plaintiff”. This created a three-year prohibition on working for a competitor with the tri-county area of New Haven, Fairfield, and Litchfield.
Bathworks sued Mr. Palmer in Connecticut state court and requested an injunction to enjoin him from further violations of the non-compete agreement. The court analyzed the facts of the case, held in favor of Mr. Palmer, and denied Bathworks’s request for injunctive relief. The court’s decision ultimately came down to the issue of whether Mr. Palmer’s employment with Re-Bath would negatively affect Bathworks’s interests and business operations. Bathworks carried the burden of establishing the probability of success on the merits of the case and the court held that it failed to present sufficient evidence to indicate it would be directly and immediately harmed due to breach of the restrictive covenant.
Bathworks argued that Mr. Palmer acquired valuable trade secrets and information during his employment with the company and that his continued employment with Re-Bath would harm its operations. The court however found that Mr. Palmer, as an installer, did not have access to Bathworks’s confidential information or any trade secrets that would put the company at a competitive disadvantage. The court further noted that while Mr. Palmer was a skilled laborer, he was not a high-level executive, nor did he provide “special, extraordinary, or unique” services. Bathworks also failed to present any evidence to show that Mr. Palmer knew of or took part in the company’s sales/marketing activities or the development of a business strategy.
The court stated that its role in deciding the case was to balance the parties’ interest to fairly protect Bathworks’s business while not unreasonably restricting Mr. Palmer’s right to seek employment elsewhere. This agreement however, according to court, unnecessarily restricted Mr. Palmer’s right to work at another company because there was nothing about that employment which would disadvantage Bathworks in the industry. The non-compete agreement went beyond what was reasonably necessary to protect the company’s interests and as such, the court denied Bathworks’s request for an injunction.
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.

Continue Reading

Non-Compete Enforceability: Must Protect Legitimate Interest & Not Be Punitive

Non-Compete Enforceability: Must Protect Legitimate & Not Be Punitive
Ranciato v. Nolan, 2002 Conn. Super. LEXIS 489

Historic Restoration and Appraisal, LLC (HRA) was engaged in the business of restoring primarily detached single-family homes that had suffered casualty damage from fire and/or water. The company employed Mr. Timothy Nolan to work as a project manager for jobs located throughout the state of Connecticut. Mr. Nolan’s employment began on November 18, 1996 and the company informed him shortly thereafter that his employment was contingent on the execution of a non-compete agreement. The parties signed the restrictive covenant on November 21, 1996 and it prohibited Mr. Nolan from performing the same services offered by HRA in the states of Connecticut, Massachusetts, and Rhode Island for a period of three years. The agreement did not affect Mr. Nolan’s ability to offer painting or home improvement services that were not in connection to fire and/or water damage. In exchange for this employment restriction, the agreement stipulated that Mr. Nolan’s annual salary would be $48,500. He felt that he would be fired if he failed to sign the agreement and signed it without consulting a legal professional.
HRA fired Mr. Nolan on January 24, 1997 after repeated incidents of discovering that he was receiving lewd and inappropriate materials via the company’s fax machine. He began to work for McGuire Associates shortly after HRA discharged him and performed marketing and business development services in the capacity of his new position. Unlike HRA, McGuire is a preferred builder and the court held that it did not compete with HRA. The company sued Mr. Nolan in Connecticut state court and asked the court to enforce the non-compete agreement that the parties had executed. The Superior Court of Connecticut in New Haven rejected HRA’s request and held that the company “suffered no financial loss as a result of the defendant’s employment by McGuire”.
According to the non-compete agreement, Mr. Nolan can be in breach only if he works at a company that is “in competition with” HRA. While the court acquiesced that HRA and McGuire were both in the construction industry, it held that they performed significantly different services and were not in competition with each other for clients or projects. The industry classified HRA as a “fire chaser” because it received most of its jobs by monitoring police reports and fire scanners to alert them of individuals that needed repairs for fire and/or water damage. McGuire however was a preferred builder and provided services for not only single-family homes, but also commercial and municipal buildings. The courts interpreted the significant differences between the two companies as adequate evidence that Mr. Nolan was not “in competition with” HRA because of his new employment with McGuire.
Furthermore, the court discussed the reasons why a court would enforce a non-compete covenant, specifically referencing the legal system’s desire to balance and protect the parties’ interests. Courts generally grant injunctions to enforce a non-compete agreement when the plaintiff employer can provide adequate evidence that the former employee’s breach will result in adverse financial consequences. The court noted that this policy did not apply to the case since HRA had not suffered any financial loss or hardship and Mr. Nolan did not have any access to confidential information that would be harmful to the company should it be disclosed.
Additionally, the court concluded that the time and geographical restrictions in the agreement were unreasonable given the facts of the case. HRA did not have anything to lose because of McGuire employing Mr. Nolan because of the differences in their business operations and the court held that the restrictions, if enforced, would only serve to prevent Mr. Nolan from employment at another company. The policy to enforce non-compete agreements focuses on protecting the interests of the employer and not to punish the employee and excessively restrict future employment opportunities. Specifically, the court cited that HRA could only “benefit from protection in the New Haven area” and that the “tri-state restriction imposed on the defendant was not necessary to protect any legitimate interests of the plaintiff and, therefore, [the agreement] was not ‘reasonably limited’”.
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.

Continue Reading

Non-Compete Enforceability: Must Protect Legitimate Interest & Not Be Punitive

Non-Compete Enforceability: Must Protect Legitimate & Not Be Punitive
Ranciato v. Nolan, 2002 Conn. Super. LEXIS 489

Historic Restoration and Appraisal, LLC (HRA) was engaged in the business of restoring primarily detached single-family homes that had suffered casualty damage from fire and/or water. The company employed Mr. Timothy Nolan to work as a project manager for jobs located throughout the state of Connecticut. Mr. Nolan’s employment began on November 18, 1996 and the company informed him shortly thereafter that his employment was contingent on the execution of a non-compete agreement. The parties signed the restrictive covenant on November 21, 1996 and it prohibited Mr. Nolan from performing the same services offered by HRA in the states of Connecticut, Massachusetts, and Rhode Island for a period of three years. The agreement did not affect Mr. Nolan’s ability to offer painting or home improvement services that were not in connection to fire and/or water damage. In exchange for this employment restriction, the agreement stipulated that Mr. Nolan’s annual salary would be $48,500. He felt that he would be fired if he failed to sign the agreement and signed it without consulting a legal professional.
HRA fired Mr. Nolan on January 24, 1997 after repeated incidents of discovering that he was receiving lewd and inappropriate materials via the company’s fax machine. He began to work for McGuire Associates shortly after HRA discharged him and performed marketing and business development services in the capacity of his new position. Unlike HRA, McGuire is a preferred builder and the court held that it did not compete with HRA. The company sued Mr. Nolan in Connecticut state court and asked the court to enforce the non-compete agreement that the parties had executed. The Superior Court of Connecticut in New Haven rejected HRA’s request and held that the company “suffered no financial loss as a result of the defendant’s employment by McGuire”.
According to the non-compete agreement, Mr. Nolan can be in breach only if he works at a company that is “in competition with” HRA. While the court acquiesced that HRA and McGuire were both in the construction industry, it held that they performed significantly different services and were not in competition with each other for clients or projects. The industry classified HRA as a “fire chaser” because it received most of its jobs by monitoring police reports and fire scanners to alert them of individuals that needed repairs for fire and/or water damage. McGuire however was a preferred builder and provided services for not only single-family homes, but also commercial and municipal buildings. The courts interpreted the significant differences between the two companies as adequate evidence that Mr. Nolan was not “in competition with” HRA because of his new employment with McGuire.
Furthermore, the court discussed the reasons why a court would enforce a non-compete covenant, specifically referencing the legal system’s desire to balance and protect the parties’ interests. Courts generally grant injunctions to enforce a non-compete agreement when the plaintiff employer can provide adequate evidence that the former employee’s breach will result in adverse financial consequences. The court noted that this policy did not apply to the case since HRA had not suffered any financial loss or hardship and Mr. Nolan did not have any access to confidential information that would be harmful to the company should it be disclosed.
Additionally, the court concluded that the time and geographical restrictions in the agreement were unreasonable given the facts of the case. HRA did not have anything to lose because of McGuire employing Mr. Nolan because of the differences in their business operations and the court held that the restrictions, if enforced, would only serve to prevent Mr. Nolan from employment at another company. The policy to enforce non-compete agreements focuses on protecting the interests of the employer and not to punish the employee and excessively restrict future employment opportunities. Specifically, the court cited that HRA could only “benefit from protection in the New Haven area” and that the “tri-state restriction imposed on the defendant was not necessary to protect any legitimate interests of the plaintiff and, therefore, [the agreement] was not ‘reasonably limited’”.
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.

Continue Reading

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.

Continue Reading

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.

Continue Reading

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

Tyco Healthcare Group v. Ross, 2011 U.S. Dist. LEXIS 49867
Difference in Job Responsibilities and Knowledge Prevents Breach of Non-Compete Agreement
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.
At this point, Covidien filed suit against Mr. Ross but stated that it was open to other solution 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 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.
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.

Continue Reading

Court Enforces Non-Compete Agreements Connected to Franchise Agreements

Court Enforces Non-Compete Agreements Connected to Franchise Agreements
Carvel Corporation v. DePaola, 2001 Conn. Super. LEXIS 1190

Carvel Corporation sells retail manufacturing licenses and related goods/services to franchises that operate Carvel ice cream stores. Misters Leopold and David DePaola operated two such Carvel stores in Waterbury, Connecticut. The two men contracted with Carvel on November 1, 1990 to obtain a retail manufacturer’s license for Carvel franchise store # 1578 for a period of ten years. The parties entered into non-compete and trade secrets agreements on March 22, 1991. Later that year, on September 11, 1997, the DePaolas entered into an agreement for a license for Carvel franchise store # 2704. Several restrictive covenants accompanied this second franchise agreement. The DePaolas were prohibited from operating ice cream stores within two miles of their previous Carvel locations for a period of three years following the abandonment or expiration of each respective license agreement. Additionally, the covenants stated that legal disputes would be “interpreted, governed, and construed pursuant to New York law”.
On October 31, 2000 the first license agreement expired but Carvel alleged that the DePaolas continued to operate that location as an independent ice cream store. The company learned a few weeks later that the DePaolas had begun to operate the second location in the same manner, as an independent ice cream store not classified as a Carvel franchise. Carvel Corp. sued the DePaolas for breach of the restrictive covenants and specifically claimed that they would disclose valuable and proprietary trade secrets during their current and future business activities. Carvel requested that the court issue two injunctions: one to order the DePaolas to cease using and to return any and all Carvel property and a second to cease the operation of their independent ice cream stores in order to comply with the non-compete agreements. The DePaolas were compliant with returning Carvel property but took issue with the company’s request that they cease their operations of the two ice cream stores. The agreement had a choice of law provision designating New York law as controlling, but the Superior Court of Connecticut sitting in New Britain was able to adjudicate the case because of the similarities in New York and Connecticut laws’ treatment of non-compete and other employment agreements.
The court found in favor of Carvel Corporation and ordered that the DePaolas cease their operations of their two independent ice cream stores in Waterbury, CT in order to comply with the non-compete agreement. To reach its decision regarding the enforceability of the underlying employment contract between the parties, the court analyzed whether Carvel had a legitimate business interest that warranted protection, the degree to which the restrictions were reasonable, and to what extent the restrictions would make the DePaolas bear occupational hardships.
The court held that Carvel did have a legitimate business interest that was threatened by the DePaolas’ continued business activities. While the company did not exercise physical control or have a leasehold interest over the stores, the company had an interest in its goodwill and name recognition that was connected to the customers of the DePaolas’ ice cream stores. Next, the court held that the restrictions, both time and geographical, were reasonable in scope and enforceable by an injunction. The stated purpose of the restrictions was to “prevent dilution of the exclusivity of the valuable Carvel know-how and Carvel trade secrets”. The restrictions enumerated in the non-compete agreement were firm enough to protect Carvel’s legitimate interest but limited enough so as not to unnecessary restrict the DePaolas’ economic activities.
The DePaolas claimed that should an injunction be issued, they would “lose both their income and their investment” because the “hardships would be immediate, devastating, and irreparable”. The court rejected this argument however and held that the DePaolas had entered into the agreements on their own accord without coercion and as such were responsible to bear the risk of hardships that may be the product of the agreements’ terms.
In light of a legitimate business interest and reasonable restrictions, the court granted Carvel’s request for an injunction restraining the DePaolas’ actions in order to prevent further violations of the legally binding non-compete agreements.
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.

Continue Reading