Posts tagged with "Restrictive Covenants"

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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Connecticut Court Uses Oral Agreement to Substantiate Consideration for Non-Compete Agreement

In Command Systems, Inc. v. Wilson, 1995 Conn. Super. LEXIS 406, Mr. Steven Wilson worked for Command Systems, Inc. where he received a promotion to the position of Vice President and Secretary of the company on June 26, 1990.  In September of that year, management informed Mr. Wilson that he would receive a bonus contingent on the company achieving certain sales goals.  The company did achieve the specified goals in December 1990 but the company informed Mr. Wilson that he needed to sign an agreement containing a contractual non-compete clause before he could receive the bonus.  The parties signed an agreement on December 21, 1990, that contained several restrictive covenants.  Mr. Wilson voluntarily terminated his employment with Command Systems a few years later and formed a new company, the Vertex Company.  The creation of the new company and Mr. Wilson’s actions are the basis of Command’s complaint regarding the breach of the December 1990 non-compete agreement.  Mr. Wilson requested summary judgment on the matter because the agreement lacked consideration and was therefore not legally binding on the parties.

The court had to answer the basic question of whether the 1990 agreement with the contractual restrictions was a valid and enforceable contract.  The court ultimately denied Mr. Wilson’s request for summary judgment and found that the agreement between the parties had adequate consideration and constituted an enforceable contract.  The agreement stated that the consideration for the agreement was “Wilson’s appointment as Secretary of Command”, but he had held this title for several months prior to the non-compete agreement.  The court recognized this but looked beyond this clause of the agreement to identify adequate consideration in relation to Mr. Wilson’s promotion.

The court looked to affidavits provided by Mr. Caputo, Command’s president, to find adequate consideration for the agreement.  The court did not find any factual holes in Mr. Caputo’s statements and had no reason to believe that they contained any misrepresentations, omissions, or lies.  The affidavits repeatedly referenced several conversations between Mr. Caputo and Mr. Wilson, especially an oral agreement wherein Mr. Wilson agreed to sign a non-competition restriction in exchange for being promoted to Secretary of the company.  Mr. Caputo stated, “The decision to make Wilson Secretary of the plaintiff corporation was based on his agreement to sign the contract of employment” in December 1990 that contained the restrictive covenants.  Command provided Mr. Wilson with the non-compete contract when he received the paperwork that officially named him Secretary, although the parties did not sign the agreement until several months later in December.  The contract contained language and clauses that highlighted that Mr. Wilson was being made Secretary of the company in exchange for the execution of an employment agreement restricting future employment activities.  The court used the information from Mr. Caputo’s affidavits to hold that there was an understanding between the parties at the time of Mr. Wilson’s promotion that it was contingent upon the execution of a non-compete agreement.  The court interpreted the oral agreement and the contract presented at the time of promotion as contemporaneous evidence that the non-compete agreement was in fact supported by adequate consideration.  Mr. Wilson failed to meet the requisite burden of proof in demonstrating that the agreement lacked consideration and the court denied his request for summary judgment.

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.

What’s In a Separation Agreement?

With the economy where it is, the employment lawyers in the Westport, Connecticut office of Maya Murphy, P.C. are frequently asked to review and negotiate separation agreements for terminated employees.  These agreements often appear similar in form and content but must be carefully scrutinized, as they can contain hidden “trip wires” that can have a profound and long-lasting effect on the former employee’s job prospects.  Here are some of the things to look out for.

Most separation agreements contain restrictive covenants—confidentiality, non-solicitation, or non-competition clauses.  The first two—confidentiality and non-solicitation—are typically non-controversial, as they often confirm pre-existing obligations owed an employer by a former employee.  The last—non-competition—is usually a point of contention, as it impacts directly the employee’s ability to find a new position.  We have blogged extensively on non-competes, their interpretation and enforceability, etc. and readers are invited to review those prior posts.  But other terms and conditions of a separation agreement deserve your attention, as well.

First of all, do not be surprised by the length of a separation agreement.  A federal statute called the Older Worker’s Benefit and Protection Act requires the inclusion of extensive release language, and such things as a 21 day review and seven day revocation period.  Here are some of the other things you should be on the lookout for:

  • Consideration:  Make sure all of the severance benefits are correct and clearly stated.  This includes severance pay, COBRA coverage, etc.  Do not leave anything to inference or implication.
  • Confirmation that No Claims Exist/Covenant Not to Sue: Notwithstanding the comprehensive release language, some separation agreements will also require the employee to state that he/she is not aware of any factual basis to support any charge or complaint and that the employee will forego suit, even if such a claim exists.
  • Non-disparagement: Both sides often agree that neither will say anything to disparage the other.  Sometimes (particularly in the financial industry), a separation agreement will contain a “carve out” for employer reporting to FINRA or the SEC.  In such a case, it is important to have the agreement state that as of the employee’s separation date, the employer was not aware of any reportable event or information that would warrant comment or notation on a Form U-5.
  • Governing Law:  Employment law does not travel well across state lines.  For example, California law is much different than Connecticut’s.  Large companies will sometimes have their separation agreements governed by the law of the state where it has its headquarters, irrespective of the actual place of work of the departing employee.
  • Acknowledgement of Non-Revocation: An employee has seven days within which to revoke acceptance of a separation agreement.  Some companies adopt a “belt and suspenders” approach and require the employee to acknowledge in writing a negative—that they have not revoked such acceptance.

The employment law attorneys in the Westport, Connecticut office of Maya Murphy, P.C. have extensive experience in the negotiation and litigation of all sorts of employment-related disputes and assist clients from Greenwich, Stamford, New Canaan, Darien, Norwalk, Westport and Fairfield in resolving such issues.  203-221-3100.

 

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Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants

Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants
Newinno, Inc. v. Peregrim Development, Inc., 2004 Conn. Super. LEXIS 1160

Mr. Russell Koch worked for Newinno, Inc., a consulting firm, where his employment was contingent upon several restrictive covenants contained in his employment contract. The main agreement between the parties was a non-disclosure covenant designed to protect Newinno’s confidential information and business interests upon Mr. Koch’s termination. The agreement had four main provisions such that Mr. Koch was: 1) prohibited from disclosing information about the company that “is not generally known in the industry which the company is or may become engaged”, 2) prohibited disclosing any information relating to actual or potential clients’ products, business plans, designs, or trade secrets, 3) prohibited disclosing information from the company’s “BrainBank”, and lastly 4) prohibited disclosing information relating to the company’s “lead/prospect and customer lists”. The agreement did not articulate any time or geographical restrictions, which became the main issue in the case and how Mr. Koch asserted that the covenant was not binding or enforceable. These provisions went into effect when Mr. Koch voluntarily terminated his employment at Newinno and began to work for one of its competitors, Peregrim Development, Inc..
Newinno sought to enforce the provisions and requested an injunction from the court to prevent Mr. Koch’s further employment at its direct competitor in order to prevent any breaches of the covenant by him disclosing confidential information. The court held in favor of Newinno and stated that the company had met the burden of proof to demonstrate that the facts of the case warranted injunctive relief. In its decision, the court explained that the issue at the heart of the case was not “whether a reasonableness standard should govern the enforceability of the parties’ confidentiality agreements, but rather concerns [regarding] the exact manner in which the test should be defined or applied”.
Connecticut courts are divided on whether to apply the same criteria and test used to assess non-compete agreements’ enforceability or resort to a more relaxed version of the reasonableness test. Non-disclosure/confidentiality agreements have traditionally enjoyed treatment that is more favorable under Connecticut laws in the courts than non-compete agreements. There are not any Connecticut cases, state or federal, that have held that the enforceability of confidentiality agreements hinges on the same standards and test that governs the enforceability of non-compete agreements. Overall, the courts have concluded that time and geographical restrictions are not necessary in order to enforce a non-disclosure agreement. This is very divergent from how the courts address the enforceability of non-compete agreements where they generally insist that those provisions are in the text of the agreement. This trend has led Connecticut courts to apply a modified version of the non-compete enforceability test where the legal analysis takes into account the “purpose of the confidentiality covenants and the specific information sought to be protected.
It is beneficial for an employee to know the difference in the enforcement trends and policies with regard to non-disclosure and non-compete agreements under Connecticut law. This is especially true when an employment contract contains both covenants and ensuing legal disputes question the validity of each. A party may succeed on the merits of the case with regard to the enforcement of one covenant and then fail on the merits for the other.
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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Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants

Differences in the Enforcement of Non-Disclosure and Non-Compete Covenants
Newinno, Inc. v. Peregrim Development, Inc., 2004 Conn. Super. LEXIS 1160

Mr. Russell Koch worked for Newinno, Inc., a consulting firm, where his employment was contingent upon several restrictive covenants contained in his employment contract. The main agreement between the parties was a non-disclosure covenant designed to protect Newinno’s confidential information and business interests upon Mr. Koch’s termination. The agreement had four main provisions such that Mr. Koch was: 1) prohibited from disclosing information about the company that “is not generally known in the industry which the company is or may become engaged”, 2) prohibited disclosing any information relating to actual or potential clients’ products, business plans, designs, or trade secrets, 3) prohibited disclosing information from the company’s “BrainBank”, and lastly 4) prohibited disclosing information relating to the company’s “lead/prospect and customer lists”. The agreement did not articulate any time or geographical restrictions, which became the main issue in the case and how Mr. Koch asserted that the covenant was not binding or enforceable. These provisions went into effect when Mr. Koch voluntarily terminated his employment at Newinno and began to work for one of its competitors, Peregrim Development, Inc..
Newinno sought to enforce the provisions and requested an injunction from the court to prevent Mr. Koch’s further employment at its direct competitor in order to prevent any breaches of the covenant by him disclosing confidential information. The court held in favor of Newinno and stated that the company had met the burden of proof to demonstrate that the facts of the case warranted injunctive relief. In its decision, the court explained that the issue at the heart of the case was not “whether a reasonableness standard should govern the enforceability of the parties’ confidentiality agreements, but rather concerns [regarding] the exact manner in which the test should be defined or applied”.
Connecticut courts are divided on whether to apply the same criteria and test used to assess non-compete agreements’ enforceability or resort to a more relaxed version of the reasonableness test. Non-disclosure/confidentiality agreements have traditionally enjoyed treatment that is more favorable under Connecticut laws in the courts than non-compete agreements. There are not any Connecticut cases, state or federal, that have held that the enforceability of confidentiality agreements hinges on the same standards and test that governs the enforceability of non-compete agreements. Overall, the courts have concluded that time and geographical restrictions are not necessary in order to enforce a non-disclosure agreement. This is very divergent from how the courts address the enforceability of non-compete agreements where they generally insist that those provisions are in the text of the agreement. This trend has led Connecticut courts to apply a modified version of the non-compete enforceability test where the legal analysis takes into account the “purpose of the confidentiality covenants and the specific information sought to be protected.
It is beneficial for an employee to know the difference in the enforcement trends and policies with regard to non-disclosure and non-compete agreements under Connecticut law. This is especially true when an employment contract contains both covenants and ensuing legal disputes question the validity of each. A party may succeed on the merits of the case with regard to the enforcement of one covenant and then fail on the merits for the other.
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 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.

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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.

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

Retention of Confidential Information is a Clear Breach of Non-Compete According to Connecticut Court
TyMetrix, Inc. v. Szymonik, 2006 Conn. Super. LEXIS 3865

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.
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 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.
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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Requisite Proof to Demonstrate Irreparable Harm in Connection to Breach of Non-Compete

Requisite Proof to Demonstrate Irreparable Harm in Connection to Breach of Non-Compete
VBrick Systems, Inc. v. Stephens, 2009 U.S. Dist. LEXIS 45835

VBrick Systems, Inc. was a Delaware corporation with primary business operations based in Wallingford, Connecticut that provided networked streaming video products and services. The company employed Mr. Robert Stephens as its Army Federal Territory Manager from July 2005 until April 1, 2008 when he tendered his resignation from the company and began to work at Optibase, Inc as its Director of Federal Sales. Optibase is a direct competitor that also sells networked video products and services to government, military, and private sector customers.
Mr. Stephens traveled to Connecticut after he was hired by VBrick to attend a training session at the company’s headquarters and signed an employment agreement that contained non-compete and non-disclosure clauses. In the agreement, he agreed to refrain from working at a competing company during an eighteen-month period after his termination from VBrick. The non-disclosure covenant stipulated that Mr. Stephens be legally obligated to maintain the confidential nature of VBrick’s business operations and information that he had access to during his employment with the company. The employment agreement stated that Connecticut law would govern any legal disputes but failed to enumerate any geographical limitations for the restrictive covenants.
VBrick alleged that Mr. Stephens breached the covenants by accepting a position with a competitor within eighteen months of his termination and by using VBrick’s proprietary information in his role as an Optibase employee. VBrick sued in federal court and requested that the court enforce the provisions contained in the restrictive covenants. The court ultimately found in favor of Mr. Stephens and denied VBrick’s request for injunctive relief. The court found that VBrick did not meet the burden of proof to demonstrate that it would suffer irreparable harm if the court did not issue an injunction.
The court held that VBrick failed to present adequate and convincing evidence that Mr. Stephens actually possessed or had access to any of its trade secrets or confidential information. He had familiarized himself with the products he was marketing and selling by using the company’s training programs and corporate website, both of which are accessible by the public. Additionally, VBrick did not convince the court that Mr. Stephens’ action as an Optibase employee had “affected or will significantly affect VBrick’s sales or revenues”. This meant that VBrick was unable to show that it had been adversely affected by Mr. Stephens’ actions or that it was likely to be in the future. VBrick’s testimony offered evidence to the contrary when it stated before the court that its sales and revenues remained strong despite Mr. Stephens’ termination and the national economic downturn. In light of inadequate evidence to show that Mr. Stephens’ action at Optibase created an imminent danger for VBrick’s business operations, the court had no option but to deny VBrick’s 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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