Posts tagged with "remedy"

Connecticut Federal Court Applies Louisiana Law to Enforce Non-Compete to Protect Confidential Information

In United Rentals, Inc. v. Myers, 2003 U.S. Dist. LEXIS 25287, United Rental, Inc. was a Delaware corporation with principal business operations in Connecticut that employed Ms. Charlotte Myers in its Shreveport, Louisiana office from May 20, 2002, to March 7, 2003.  She signed an employment agreement with United Rentals on her first day of work that contained non-compete and confidentiality clauses that prohibited employment for a period of twelve months at any competing company located within one hundred miles of a United Rentals location where she worked.

The restrictive covenants further stated that the state and federal courts in Fairfield County, Connecticut would have jurisdiction in the event that legal proceedings ensued.  Upon her voluntary termination from United Rentals, Ms. Myers began to work at Head & Enquist Equipment, Inc., a competitor, at an office located approximately ten miles away from the United Rentals’ Shreveport office.  United Rentals contacted her to remind her of the restrictive covenants and her obligations under them but she continued her employment with Head & Enquist.

The Lawsuit

United Rentals sued Ms. Myers in Connecticut federal court for breach of the non-compete and confidentiality agreements and sought a court injunction to enforce their provisions.  The court found in favor of United Rentals and granted its request to enforce the non-compete agreement.

Ms. Myers presented various arguments to the court to persuade it to deny enforcement of the agreement, but the court ultimately found in favor of United Rentals.  She argued that Louisiana law should be controlling in the legal dispute, and further asserted that Louisiana law does not permit “choice of law” clauses in employment agreements.

The court investigated Ms. Myers’ contention and explained that the proper procedure to determine if a “choice of law” clause is permissible is to consult the law of the state being selected, in this case, that of Connecticut.  Connecticut law however cannot be the “choice of law” state when there is another state with a “materially greater interest…in the determination of the particular issue”.  The court held that Louisiana did in fact have a greater interest in the dispute and thus Louisiana law was applicable and controlling for the case.

The Court’s Decision

Although Louisiana law is less than favorable to United Rentals with regard to “choice of law” clauses, it still recognizes that parties are entitled to a remedy in connection with a violation of a confidentiality agreement “if the material sought to be protected is in fact confidential”.  Courts generally view the disclosure of confidential information as sufficient evidence for a company to establish that it would suffer irreparable harm if an injunction were not granted.

During her employment with the company, Ms. Myers was exposed to and had access to United Rentals’ trade secrets, contract details, customer data, financial information, and marketing plans/strategies.  The court held that this was clearly sensitive and confidential information, the content of which entitled United Rentals to protection in the form of a court-ordered injunction.

The court held for United Rentals despite applying Louisiana law in response to Ms. Myers’ justified assertion that this specific “choice of law” provision was not valid.  Although Louisiana law shuns “choice of law” provisions in non-compete agreements, it does support injunctions when it is necessary and proper for a company to protect its confidential business information.

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.

Courts Cannot Extend Expired Non-Compete Agreements Under Connecticut Law

Aladdin Capital Holdings, LLC v. Donoyan, 2011 U.S. Dist. LEXIS 61095

Ms. Harumi Aoto Donoyan worked as a Senior Managing Director for Japan Sales and Marketing at Aladdin Capital Holdings, LLC, a boutique investment bank in Stamford, Connecticut.  The firm promoted her to this position in 2008 contingent on executing a restrictive covenant wherein she promised not to complete with the firm following termination while she continued to receive compensation and other benefits from the firm.  Aladdin terminated Ms. Donoyan in April 2010 with the agreement that she would receive her full salary and benefits through May 5, 2011.  This arrangement made prohibitions in the non-compete effective until May 5, 2011 since the restrictions were applicable while she received benefits from the firm.

Aladdin alleged that Ms. Donoyan engaged in activities that amounted to competing with the firm while she was still receiving a salary and benefits.  It filed a suit in federal court on April 25, 2011 and served Ms. Donoyan on April 28, 2011, ten and seven days respectively before the expiration of the restrictive covenant.

The case reached the federal district court in June 2011, well after the non-compete agreement had expired.  Aladdin asked the court to declare that Ms. Donoyan had breached the agreement and issue an injunction prohibiting any further violations.  The court noted that the request for injunctive relief was moot since the time restriction had already expired.

The Court’s Analysis

The court did however analyze its authority as a court sitting in equity to extend the duration of a restrictive covenant as a remedy for a previous breach of a non-compete agreement.  Restrictive covenants can have built-in provisions that extend the time restriction upon a breach by the former employee.

This however, was not the case with the dispute before the court and the only way for the time restriction to be extended was for the court to unilaterally amend the agreement.  While some states’ highest courts have held that the lower courts have “broad equitable power to extend even an expired restrictive covenant as a remedy for breach”, the federal court here did not see any evidence that the Connecticut Supreme Court held this legal stance.

In light of this, the federal court held that it lacked the authority under Connecticut state law to extend an expired non-compete agreement.  The federal court’s holding with regard to this issue was that “a request for injunctive relief based on a restrictive covenant becomes moot upon the expiration of the period specified in the parties’ restrictive covenant, unless the restrictive covenant contains language that expressly permits extension of the restrictive covenant”.  Aladdin could have placed an automatic extension mechanism in its non-compete agreement but chose not to do so.

Even though the court acknowledged that Ms. Donoyan had in fact breached the non-compete agreement, it ultimately denied Aladdin’s request to extend and enforce the restrictive covenant based on the fact it lacked the authority to do so 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.

Connecticut Superior Court denies Prejudgment Remedy and declines to impose a Constructive Trust

Marinelli v. Estate of Marinelli, 2011 Conn. Super. LEXIS 1857 (2011)

The plaintiff, Michael Marinelli, brought an action against Joanne Marinelli, the executrix of the Estate of Anthony V. Marinelli, Jr. (the “Estate”) and the trustee of the Anthony V. Marinelli, Jr. Revocable Trust (the “Trust”).

The decedent, Anthony V. Marineeli, Jr., fraudulently induced the plaintiff, his brother, to believe that he would receive a 50% ownership interest in real property according to the plaintiff.  A family car repair business was operated on the real property in question and the plaintiff sought to impose a constructive trust.  The plaintiff filed an application for a prejudgment remedy against the Estate and the Trust pursuant to Conn. Gen. Stat. § 52-278d.

The Court held a hearing on the application and found there was an absence of probable cause to believe the plaintiff would prevail.   The plaintiff’s father clearly transferred title of the real property to the decedent who maintained the car repair business and assumed liability for all of its debts.

The evidence presented indicated that the plaintiff voluntarily relinquished his interest in the car repair business.  The apparent representations by his father and brother indicating that the plaintiff would be “taken care of” were imprecise assurances that did not persuade the Court.   There was no evidence of wrongdoing engaged in by the decedent.    As a result, the plaintiff’s application for a prejudgment remedy was denied.