Posts tagged with "prohibited area"

Application of FINRA Rules & Regulations for Bank’s Non-Compete Agreement

Application of FINRA Rules & Regulations for Bank’s Non-Compete Agreement
Webster Bank, N.A. v. Cahill, 2009 Conn. Super. LEXIS 1672

Webster Bank is a regional commercial bank with business operations in lower New England that employed Mr. Daniel Cahill from April 11, 2995 to February 12, 2009. He was hired as a teller in the bank’s Bristol, CT office and was promoted to a financial consultant in 2001 to work for Webster Investment Services, the securities division of Webster Bank. The bank entered into a corporate arrangement with UVEST in 2007 and Mr. Cahill (and similar employees) had to sign a dual employment agreement. The contract detailed the terms of his employment and contained multiple restrictive covenants. Mr. Cahill was prohibited from engaging in competing business activities within twenty-five miles of his base of operations for one year following his termination and was subject to an indefinite non-disclosure clause for Webster and UVEST’s confidential and proprietary information.

Mr. Cahill faxed in a letter of resignation to Webster on February 12, 2009 and the next day began working for RBC Bank in its Hartford, CT office where he essentially performed the same duties as he done during his employment with Webster. Webster sued Mr. Cahill in Connecticut state court for the enforcement of the restrictive covenants contained in the dual employment agreement. Mr. Cahill admitted that RBC was a direct competitor of Webster, that his new office is within the twenty-five mile radius prohibited area, that he had taken with him a list of 2,900-3,000 Webster customers, and had send solicitation letter on RBC’s stationary to all of those customers. Of these solicitations, 350-400 accounts transferred their assets to RBC, amounting to a loss of approximately $5 million in assets under management for Webster.

Mr. Cahill admitted that he violated the terms of the dual employment contract but argued that the court should not enforce the non-compete agreement because he was a “licensed and registered securities dealer and a financial representative”, and therefore the rules and regulations of Financial Industry Regulatory Authority (FINRA) governed and he had done nothing wrong. He contended that under FINRA regulations, in an agreement referred to as the “Protocol”, he was permitted to take a copy of the customer list when he moved from Webster to RBC. These regulations permit taking a copy of names, addresses, phone numbers, and email addresses but not account numbers. The court found the assertion that it lacked jurisdiction unpersuasive and noted that FINRA was not controlling since neither Webster Bank nor UVEST were signatory members of the “Protocol”.

The court concluded that it did have jurisdiction over the case and next looked to whether the non-compete agreement was valid and enforceable under Connecticut law. Webster had a legitimate business interest that the court held warranted protection in the form of an injunction to restrict Mr. Cahill’s activities. An injunction, according to the court, was necessary to maintain the status quo and protect the interests of the parties involved in the legal dispute. The court held that the restrictions were reasonable in scope and did not overtly favor one party over the other. After establishing a need for an injunction and the reasonableness of the restrictions, the court ordered the enforcement of 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.

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Court Enforces Non-Compete Clause Against Real Estate Agent

Court Enforces Non-Compete Clause Against Real Estate Agent
Century 21 Access America v. McGregor-Mclean, 2004 Conn. Super. LEXIS 3239

Century 21 Access America is a national real estate company that employed Ms. Tori McGregor-Mclean as a real estate agent in it Bridgeport, CT office from July 2003 to June 16, 2004. Her employment contract, dated July 7, 2003, contained a non-compete clause that prohibited her for a two-year period following termination from engaging in competing business activities within a fifteen-mile radius of 3850 Main Street, Bridgeport, CT. Ms. McGregor-Mclean voluntarily terminated her employment on June 16, 2004 and began to work for Buyer’s Capitol Real Estate, a company located outside of the fifteen-mile radius in Stamford, CT. Century 21 did not have a problem with her new employment because the office was located outside of the prohibited area but issues arose when Ms. McGregor-Mclean began accepting listings within the fifteen-mile radius. Century 21 sued Ms. McGregor-Mclean in Connecticut state court for violation of the non-compete clause and requested that the court issue an injunction to enforce the agreement.
The court found that Ms. McGregor-Mclean’s activities with her new real estate agency were in fact violations of the non-compete agreement and it ordered that the provisions be enforced. The plain language of the non-compete clause stipulated that Ms. McGregor-Mclean was prohibited from carrying out any direct or indirect competing business activities within the defined fifteen-mile radius. She was in breach of the agreement because she accepted five listings within the prohibited area- it is inconsequential as a matter of law that her office was located outside of the fifteen-mile radius. Under the agreement, she was prohibited from having a physical business presence and transacting individual deals within the defined area. The court identified the unlawful breaches of the non-compete clause, concluded that the agreement was valid and reasonable, and issued an injunction to enjoin Ms. McGregor-Mclean from further violations of the covenant not to compete.
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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Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement

Breach and Irreparable Harm Required for Enforcement of Non-Compete Agreement
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 practice 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.
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.
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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Enforcing a Non-Compete Agreement in a Medical Partnership

Enforcing a Non-Compete Agreement in a Medical Partnership

Fairfield County Bariatrics and Surgical Associates, P.C. v. Ehrlich, 2010 Conn. Super. LEXIS 568

Doctors Neil and Craig Floch created Floch Surgical Associates in 1999 in Norwalk, Connecticut to provide medical and surgical services to patients. They decided to gear their practice towards bariatric surgery and hired Dr. Timothy Ehrlich, a board certified general surgeon and graduate of Louisiana State University School of Medicine, in 2002. He was granted surgical privileges at Norwalk Hospital and St. Vincent’s Hospital (in Bridgeport, CT) and operated as the only member of the medical group to perform bariatric surgeries exclusively. On January 1, 2006, the two Floch doctors and Dr. Ehrlich formed Fairfield Bariatrics and Surgical Associates, P.C. (FCB). Each doctor became a third shareholder in the professional corporation and signed identical employment agreements that outlined the compensation schedule, termination protocols, and included a non-compete agreement. The non-compete prohibited each doctor, for two years after termination, from practicing general medicine/surgery within fifteen miles of FCB’s main office in Norwalk and barred performing bariatric procedures at hospitals located in Stamford, Norwalk, Greenwich, Danbury, and Bridgeport.
Doctors Neil and Craig Floch voted to terminate Dr. Ehrlich in July 2009 and notified him of the decision in a letter dated July 30, 1999. They justified his termination by claiming that he repeatedly “misrepresented the group” and had lost his surgical privileges at Norwalk Hospital due to non-compliance with the hospital’s Trauma Service requirements. Dr. Ehrlich proceeded to form his own limited liability company, Ehrlich Bariatrics LLC, on October 22, 2009 and opened offices in Waterford and Trumbull. Both of these municipalities are located outside of the prohibited area created by the non-compete agreement but he also continued to perform operations at St. Vincent’s Hospital in Bridgeport, an activity expressly prohibited by the restrictive covenant.
FCB sued Dr. Ehrlich in Connecticut court and requested that the court enforce the provisions outlined in the non-compete agreement dated January 1, 2006. The court found in favor of FCB, determined that Dr. Ehrlich had violated a valid non-compete agreement, and enforced the provisions of the covenant not to compete. The court stated that the challenging party (Dr. Ehrlich for this case) bore the burden of proof to demonstrate that the agreement was unenforceable. He asserted that he had not been properly terminated and that the agreement itself was unreasonable, and therefore unenforceable. The court rejected both of these arguments and concluded that the agreement was valid and enforceable.
Dr. Ehrlich advanced the unconvincing argument that he was the victim of improper termination because the shareholders meeting at which the vote was taken to terminate his employment was not properly noticed pursuant to the corporation’s by-laws. He essentially contended that the “lack of notice renders his termination a nullity”. The court however disagreed with Dr. Ehrlich because a physician whose termination is being voted on is not entitled to cast a vote. The lack of voting power for this matter meant that his presence was not required and he was not entitled to notice of the special shareholders meeting where the vote was taken. The court ultimately concluded that Doctors Neil and Craig Floch had taken the proper and necessary steps in accordance with the corporation’s by-laws to terminate Dr. Ehrlich’s employment with FCB.
Next, Dr. Ehrlich unsuccessfully contended that the agreement contained unreasonable provisions and therefore the court was not obligated or permitted to order its enforcement. Discerning the reasonableness of a non-compete agreement required the court to balance the competing needs of the parties as well as the needs of the public. Furthermore, the challenging party must show that the provisions are unreasonable in scope. First, the court established that FCB did in fact have a legitimate business interest that necessitated protection. The company was entitled to protect potential new patients within a reasonably limited market area. FCB was only concerned with future patients and did not seek to prevent Dr. Ehrlich from providing follow-up services to current or past patients.
Next, the court addressed and cited a variety of case law that showed Connecticut courts’ history of enforcing non-compete agreements when they protect against “something other than mere competition”, including the use of customer lists, impaired of purchased good will, confidential data/trade secrets, use of information concerning potential clients in a limited area, or some other advantage the former employee acquired while working for the plaintiff company. The court found that Dr. Ehrlich had greatly benefitted from his association with FCB and that his continued actions would negatively affect the reputation and business operations of his former employer.
Lastly, the court took time to address the differences between non-compete agreements for an employer-employee relationship and those for partnerships. It held that since there was not unequal bargaining power or impaired ability to earn a living, the provisions were not unreasonable in scope. The court noted that Dr. Ehrlich’s offices in Trumbull and Waterford did not violate the agreement and there were numerous hospitals located outside the prohibited area where he could find employment as a board certified surgeon specializing in bariatrics. He had actually received encouragement from several doctors to apply for privileges at permissible hospitals, including the Hospital of St. Raphael in New Haven.
In light of Dr. Ehrlich violating a legally binding non-compete agreement that protected a legitimate business interest, the court ordered the enforcement 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.

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