Posts tagged with "violation"

Connecticut Non-Compete Invalidated on Grounds of Unnecessary Protection Afforded to Employer

Sanford Hall Agency, Inc. v. Dezanni, 2004 Conn. Super. LEXIS 3574
Case Background

Ms. Lynne Dezanni worked for Sanford Hall Agency, an Avon, Connecticut based insurance company, from 1990 to 2004 where she served as a personal lines (primarily automobile and homeowners insurance) salesperson for clients whose last name started with “A” through “F”.  In 1994, Ms. Dezanni signed an employment agreement that included a non-compete covenant prohibiting the solicitation or attempted solicitation of Sanford Hall’s clients or the disclosure of the company’s confidential information.

In May 2004, Ms. Dezanni was contacted by a recruiter at Sinclair Insurance Group, a direct competitor of Sanford Hall based in Wallingford, Connecticut.  In the following weeks, Sanford Hall announced to its employees that it was engaging in a transaction to sell its assets.  Fearing that she would no longer have a job if the company were sold, Ms. Dezanni accepted employment at Sinclair on June 11, 2004.

The company was in fact sold to a New Jersey insurance company on November 1, 2004.  Sanford Hall commenced legal action alleging that Ms. Dezanni breached the written employment agreement and the non-compete covenant by soliciting its clients and disclosing confidential client information to Sinclair.

Court Ruling

Ms. Dezanni however argued that she was not in breach of the non-compete agreement because it contained unreasonable provisions and was therefore unenforceable.  Additionally, she argued that the employment agreement reserved the right for her to compete in the event that Sanford Hall sold its business.

The court in this case found in favor of Ms. Dezanni and held that the non-compete agreement was in fact unreasonable and unenforceable.  The court based this decision on the fact that Ms. Dezanni was not in a position at Sinclair to threaten Sanford Hall’s interests in its customer relationships and contracts.

Her job at Sanford Hall pertained to the initial contact with clients but her contact usually ended there.  She was not charged with entertaining, socializing with, or schmoozing clients over the phone or in person.  She would not review the contracts when they were due to expire, as the insurer and not the agent handled this business activity.  The court concluded, “Dezanni’s contact with the customers was too infrequent and irregular to pose any threat to the plaintiff’s relationship with its customers”.

The court also held that the agreement excessively restricted Ms. Dezanni from pursuing her occupation and instituted unnecessary limitations because it pertained not only to past and present clients, but to also future ones as well.  Ms. Dezanni was able to prove that the non-compete clause of the employment agreement afforded more protection to Sanford Hall than was reasonably necessary and as a result severely disadvantaged her and ran contrary to the interests of the public.  For these enumerated reasons, the court refused to enforce the non-compete clause of the employment agreement.

Contact Us

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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Connecticut Law Governs Non-Compete for Employee Based in Company’s Brazil Office

MacDermid, Inc. v. Selle, 535 F.Supp.2d 308

Mr. Raymond Selle worked for MacDermid, Inc. for thirty years in various capacities at facilities in Connecticut, Maryland, and Sao Paulo, Brazil.  MacDermid is a specialty chemical company engaged in a range of development, manufacture, and sale of chemicals and their corresponding processes.  Mr. Selle resigned from the company in 2007 while stationed in Brazil and immediately began work at Enthone, a West Haven based company with a presence in Brazil, as its South American New Business Development Manager.  MacDermid brought suit against Mr. Selle to enforce employment agreements from 1996 and 2002, seeking to prevent his employment at Enthone and the disclosure of confidential information.

MacDermid’s basis for legal action was two restrictive covenants signed by Mr. Selle and the vast amount of confidential information he acquired while employed at MacDermid.

Employment Agreement

The first “Employee’s Agreement” was signed November 24, 1996 and included a one-year non-compete agreement prohibiting employment with an industry competitor and an indefinite confidentiality agreement.  Mr. Selle signed a second non-compete and non-disclosure agreement on June 25, 2022 when he began his position at MacDermid’s Sao Paulo office.

Additionally, the agreement stipulated that its provisions were to be “construed and enforced in accordance with the laws of the State of Connecticut, without regard to conflict of law principles”.  MacDermid sought to enforce both the one-year non-compete clause and the indefinite confidentiality clause.  The company claimed that Mr. Selle was privy to considerable confidential information while employed there, including business strategies, research & development projects, and customer contact information and transaction history.

The Court’s Decision

The federal court found in favor of MacDermid, enjoined Mr. Selle from employment with Enthone or any other of MacDermid’s industry competitor until September 10, 2008 (the duration of the one-year prohibition), and enjoined him from disclosing any confidential or proprietary knowledge acquired during his employment with MacDermid.  The court found that there was “no basis for doubting the validity and enforceability of his [Selle’s] 1996 and 2002 employment agreements with MacDermid”.  Mr. Selle’s tried to make the claim that the restrictive covenants were too broad and favored the employer but the court concluded that the covenant’s provisions were narrow and limited in scope so as not to dramatically disadvantage the employee.

The court also discussed and decided what jurisdiction’s law to apply.  Mr. Selle argued that Brazilian law should govern the agreement and legal proceedings since that was where he found new employment at Enthone.  Mr. Selle made this assertion because he felt that Brazilian law reflects a fundamental public policy against the enforcement of restrictive covenants in employment contracts.  The court however held that Connecticut law superseded Brazilian law in this case and would govern the restrictive covenant, as specified and agreed to in the 1996 and 2002 agreements.

Conclusion

This case shows that in certain restrictive covenants, Connecticut law (or any state’s law) can be governing even when employment takes the employee out of the country.  The choice of law provision establishes the controlling legal principles (in this case, those of Connecticut) of the restrictive covenant and is characterized by global application.

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.

Court Enforces Non-Compete Agreement for Niche Water Purification Company

KX Industries, L.P. v. Saaski, 1997 Conn. Super. LEXIS 2444
Case Background

Mr. Bruce Saaski worked for KX Industries, L.P., a manufacturer and distributor of solid carbon block water filters, from December 1993 to April 24, 1996, as the company’s Technical Support Manager.  His employment contract with KXI contained several restrictive covenants that prohibited him from using or disclosing confidential and proprietary information without the prior written consent of KXI, maintaining personal copies of the company’s confidential information, or working for an industry competitor.  The “industry competitor” restriction applied for one year after Mr. Saaski’s termination but the covenants pertaining to KXI’s confidential information were indefinite.

Mr. Saaski terminated his employment with KXI and began to work at Water Safety, a direct competitor, shortly thereafter.  Additionally, he failed to return copies of confidential information to KXI’s management upon his termination.  KXI sued Ms. Saaski for violation of the non-compete agreement he signed as part of his employment contract and sought a court injunction to enforce its provisions.  Ms. Saaski presented several arguments to the court as to why the agreement was not valid or enforceable.

The court rejected his assertions however and found in favor of KXI, granting their request for enforcement of the non-compete and confidentiality covenants. Mr. Saaski attacked the non-compete on the basis that its lacked consideration, arguing that there existed a prior employment agreement obligating KXI to employ him for a two-year period.

The Court’s Decision

The court held that Mr. Saaski did not present adequate evidence to prove the existence of a prior employment agreement and pointed to the language of the December 1993 agreement to show that Mr. Saaski gave consideration for the agreement when he agreed to the restrictive covenants contained therein. Furthermore, Mr. Saaski contended that the restrictions were unreasonable because they were overly broad in scope, specifically referring to the prohibition on working for a company “similar to” or in “competition with” KXI.

To determine if this language was in fact overly broad the court heard testimony from KXI’s Chief Executive Officer where he stated that there were only four competitors that the non-compete applied to: Honeywell, Culligan, Multipure, and Water Safety, Mr. Saaski’s new employer.  The court found this to be restricted in scope and not overly broad to disproportionately favor KXI’s interests.  The restriction applied only to a small section of the water purification industry and KXI’s CEO provided a plethora of companies that Mr. Saaski could work for without violating the non-compete agreement.

The court found the overall non-compete and confidentiality covenants to be reasonable and concluded that they did not place excessive restriction on Mr. Saaski’s ability to pursue his occupation and earn a living.  Accordingly, the court found in favor of KXI and enforced the provisions of the non-compete agreement.

 

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.

Two-Prong Test for Temporary Injunction for Breach of Non-Solicitation Agreement

Integrated Corporate Relations, Inc. v. Bidz, Inc., 2009 Conn. Super. LEXIS 2212
Case Background

Integrated Corporate Relations, Inc. was a Westport-based parties relations and public consulting firm that contracted with Bidz, Inc., a California corporation, to perform various investor relations services.  The agreement between the companies contained a non-solicitation clause that prohibited Bidz from soliciting, hiring, or otherwise engaging any of Integrated’s personnel during the agreement and for one year following its termination.  Integrated stated that this was their standard practice with clients in order to protect its legitimate business interests and the resources it had spent to develop its business model.  It also claimed that it incurs a hardship when an employee leaves because it must find a suitable replacement.

Integrated hired Mr. Andrew Greenebaum in 2003 as an at-will employee at the company’s Los Angeles office to work as a Senior Managing Director where he was the primary manager of Bidz’s account.  Mr. Greenebaum worked in this capacity until his resignation on February 27, 2009 at which point he founded his own company, Addo Communications, Inc. with another former Integrated employee.  Bidz terminated its business relationship with Integrated on March 30, 2009 and shortly thereafter contracted with Mr. Greenebaum and Addo for investor relations services.

Granting Temporary Injunction

Integrated sued Bidz when it learned of this new business relationship and claimed that Bidz had violated the non-solicitation agreement in their contract.  The company requested equitable relief and called for the enforcement of the restrictive covenant.  Integrated requested a temporary injunction while the case was being decided in order to prevent further violations of the agreement.  The court’s holding in this case pertains to the issue of whether to grant a temporary injunction.

The court outlined that the primary purpose of a temporary injunction is to “preserve the status quo until the rights of the parties can be finally determined after a hearing on the merits”.  Connecticut courts will generally grant temporary injunctions when the moving party: 1) demonstrates “it is likely to succeed on the merits of its case” and 2) that it will “suffer immediate and irreparable harm if the injunction is not granted”.  The court concluded that Integrated failed to meet either of these requirements and denied the company’s request for a temporary injunction.

The Court’s Decision

The court concluded that Integrated lacked a meritorious claim regarding a breach of the employment contract by Bidz contracting with one of its former employees.  The non-solicitation agreement in question is one between a consulting company and a client, not between a company and its employee(s).  Integrated failed to present any case from any jurisdiction in the United States where a court recognized this business arrangement as an interest that warranted legal protection.

This, according to this court, meant that Integrated lacked a legitimate business interest that a temporary injunction would be necessary to protect.  Additionally, Integrated failed to present evidence that Bidz had actually “solicited” Mr. Greenebaum and purposefully induced him to terminate his employment with Integrated.  The court used these two factors to hold that that Integrated would most likely not succeed on the merits of its case.

Conclusions

The facts of the case also led the court to conclude that Integrated would not experience imminent and irreparable harm if it failed to issue an injunction.  The court held that this was requisite for granting a temporary injunction and commented “Connecticut law supports a distinctly moderated level of proof required to establish the elements of irreparable harm”.  Even though Connecticut courts require only a “moderated level of proof”, the moving party must demonstrate some degree of imminent, irreparable harm.  The only loss that Integrated could demonstrate was that two employees terminated their employment and started their own company.  They were both at-will employees however and could have done so at any point in time, regardless of Bidz’s action.

In conclusion, the court held that Integrated failed to meet the requirements that would warrant a temporary injunction against Bidz to prevent it from transacting with Mr. Greenebaum and his company Addo.

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.

Ambiguous “General Release Agreement” and Global Restrictions Invalidate a CT Non-Compete

Connecticut Stone Supplies, Inc. v. Fresa, 2002 Conn. Super. LEXIS 4141
Case Background

This case concerns Connecticut Stone Supplies’ (CSS) legal dispute with two former employees regarding the enforcement of their non-compete agreements.  The company employed Ms. Amy Fresa from May 15, 2000, until April 4, 2002, as an Administrative Assistant.  She began to work at the company as a temporary employee in connection with Reitman Personnel and the company officially hired her as a full-time employee on August 14, 2000.  CSS had her sign an “Employee Confidentiality and Non-Competition Agreement” when it first hired her and then had her sign a “General Release and Settlement Agreement” when it terminated her employment.

The restrictive covenant prohibited her from working at a competing company for a period of two years and additionally stipulated that she could not solicit CCS’s current of potential clients within a three hundred mile radius.  She began to work for O&G, a company in direct competition with CSS, on August 2002.  Mr. Travis Simms worked for the company from March 29, 2000 until January 22, 2011 at which time he also began to work for O&G.  He signed a non-compete agreement in the same manner as Ms. Fresa but did not execute a General Release Agreement upon termination.  CSS sued both former employees in Connecticut state court and sought to enforce their respective non-compete agreements.

The Court’s Decision

Ms. Fresa and Mr. Simms argued that the non-compete agreements were not binding upon them because the covenants lacked consideration and their terms were unreasonable.  Ms. Fresa additionally contended that the General Release Agreement “extinguished any rights that might exist under it [the non-compete agreement]”.

The court found in favor of Ms. Fresa and Mr. Simms and held that their restrictive covenants with CSS were not enforceable.  The court analyzed the General Release Agreement and found that it contained ambiguous language that created an unintended benefit for CSS.  The company, according to the court, should not be allowed the benefit of enforcing the agreement merely because of an unintended, ambiguous clause in an employment agreement that it had drafted.  The court used this analysis to determine that Ms. Fresa’s non-compete was unenforceable.

How the Court Reached its Decision

The court relied on a different analysis to conclude that Mr. Simm’s non-compete agreement with CSS was unenforceable.  Here the court examined the restrictive provisions of the non-compete agreement to determine whether they were limited and reasonable in a manner that the agreement fairly balanced the interests of the parties involved.  While there was a geographical restriction associated with the non-solicitation clause (three hundred miles), the non-compete clause did not have a geographical limitation and as such “means [the employee] cannot compete anywhere in the world against the plaintiff for a period of two years from termination”.

The court found this to be completely unacceptable and held that the global prohibition on competitive employment was “patently and grossly unreasonable”.  CSS stated that is conducted business all throughout the state of Connecticut but failed to offer any evidence that it carried out global operations or that a worldwide prohibition on competing employment was necessary to protect its legitimate interests.  The court invalidated Mr. Simm’s non-compete agreement in light of the unreasonable and oppressive nature of the provisions contained in agreement that he executed with CSS.

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.

Court Upholds Non-Compete Agreement for Connecticut Tax Preparation Firm Employee

Hoffnagle v. Henderson, 2002 Conn. Super. LEXIS 901

Ms. Nancy Henderson worked for Mr. John Hoffnagle, as an accountant at the tax preparation business “Hoffnagle & Associates” in Bristol, CT from early 1995 to October 2001.  The parties executed an employment agreement on January 27, 1996, that dictated the rights and obligations of the parties and contained a non-compete clause that would become effective upon Ms. Henderson’s termination.

Mr. Hoffnagle gave Ms. Henderson a significant, but temporary raise as consideration for the provisions of the agreement.  The restrictive covenant prohibited Ms. Henderson from operating general bookkeeping, tax preparation, and tax filing business within five miles of the company’s office(s) for a period of five years.  Additionally, the agreement prohibited her from disclosing or using Hoffnagle’s client lists or other confidential information of past or present clients.

The Case

In 1997, Hoffnagle opened a second office in Terryville, CT and appointed Ms. Henderson to be the branch’s manager.  At this time, Mr. Hoffnagle began to prepare for retirement and officially separated the offices because they would be more lucrative to sell individually rather than as a two-office firm.  He transferred ownership of the Terryville office to ConnTax Corporation, a Chapter S corporation controlled by members of Mr. Hoffnagle’s family.

From January 2001 until her termination, Ms. Henderson was technically an employee of ConnTax and received all compensation and benefits from that company.  In October 2001, Mr. Hoffnagle sold the original Bristol office to an industry competitor.  Ms. Henderson and Mr. Hoffnagle discussed her purchasing the Terryville office but the deal ultimately fell through when they could not agree on a final price.  This prompted Ms. Henderson to terminate her employment and open her own business across the street from Hoffnagle’s Terryville location.

Mr. Hoffnagle sued Ms. Henderson and asked the court to enjoin her from continuing to operate her tax preparation business at its current location in clear violation of the non-compete agreement executed by the parties in 1997.  Ms. Henderson, however, contended that the agreement lacked consideration and was therefore not binding upon the parties.  She claimed that the temporary raise she received was not in connection with the restrictive covenant but was merely coincidental.

The Court’s Decision

The court rejected the assertion that the non-compete agreement and the raise were unrelated and concluded that the raise was indeed adequate consideration to make the agreement legally binding.  The court also concluded that the duration and geographical limitations were reasonable.  They were reasonable to protect Mr. Hoffnagle’s legitimate business interests and the limited scope of the geographical limitation did not unnecessarily restrict Ms. Henderson’s ability to make a living.  The court also noted that the consuming public would not be denied access to the services provided by the parties by enforcing the provisions of the non-compete agreement.

Ms. Henderson raised an interesting point, however, when she inquired about whether the court’s holding and enforcement of the non-compete agreement included “personal clients” to whom she provided tax preparation services outside of her role as an employee of Hoffnagle & Associates and later ConnTax.  The court concluded that she was not enjoined from continuing to service those “personal clients” because their inclusion on the list of prohibited clients would be unfair since those clients did not have an official relationship to any Hoffnagle business entity.

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 you 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.

Court Enforces Non-Compete for Breach Within the Courier Services Industry

Express Courier Systems, Inc. v. Brown, 2006 Conn. Super. LEXIS 3784

Express Courier Systems, Inc. was a company that provided courier services to large hospitals, laboratories, and other medical facilities throughout New England, New York, and New Jersey.  The company provided high-efficiency route planning, dispatch services, monitored courier performance, and analyzed customer feedback.  One of the company’s biggest accounts was with Stamford Hospital with whom it had a contract since 2000.  Express Courier generally recruited its couriers through Contractor Management Services, LLC (CMS), an independent third-party human resources firm. Express Courier employed Misters Seymour Brown, Chip Joseph, and Moses Stephenson as independent contractors from 1999, 2002, and 2005 respectively, as couriers in connection with its contract with Stamford Hospital.

Violating the Employment Agreements

In December 2005, the company required that these employees register and become members of CMS if they wished to continue to provide services as independent contractors.  As part of the registration process with CMS to continue their employment with Express Courier, the three employees signed non-compete agreements that prohibited them from working at a company providing the same or similar services within the “Standard Metropolitan Statistical Area of the Eastern Seaboard” to an entity that was a client in the preceding six months for a one-year period following termination.  Additionally, the agreements stated that Express Courier was entitled to injunctive relief in the event of a breach of the non-compete agreements.

Stamford Hospital informed Express Courier in September 2006 that it was terminating its services except for those associated with the hospital’s laboratory.  At the same time, Misters Seymour, Joseph, and Stephenson informed Express Courier that they had accepted positions with Xerox.  The employees said that the offers were “too good to refuse” and that their last days would be September 30, 2006.

All three men began to work for Xerox on October 1, 2006 where their positions were very similar to their previous ones at Express Couriers and they were paid to perform very similar services.  Express Courier saw these actions as clear violations of the non-compete agreements and sued its three former employees in Connecticut state court where it sought an injunction enforcing the provisions of the restrictive covenants.

The Court’s Ruling

All three defendants claimed that their work as Xerox employees was vastly different from the services they provided as Express Courier employees but the court rejected this argument and concluded that they were performing the same services as they had done while still employed by Express Couriers.  The court established that there was a clear breach of the agreements’ provisions but next had to determine if the provisions were in fact reasonable, a requirement for enforcement under Connecticut law.

The restrictive covenants, according to the court provided Express Courier with a reasonable degree of protection while simultaneously not preventing the former employees from securing future employment.  The Eastern Seaboard is a large geographical area but even this restriction was severely limited by only applying to Express Courier’s clients in the six months prior to an employee’s termination.

In light of a clear breach of the non-compete agreements and a finding that they contained reasonable restrictions, the court found in favor of Express Courier and granted the company’s request for injunctions enjoining the former employees from providing services to Stamford Hospital in connection with their new employment with Xerox.

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.

“Inevitable Disclosure Doctrine” Fails to Demonstrate Breach of Non-Disclosure and Non-Compete Agreements

EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299
EarthWeb, Inc. v. Schlack, 2000 U.S. App. LEXIS 11446

Mr. Mark Schlack worked for EarthWeb, Inc. from October 19, 1998 to September 22, 1999 as the company’s Vice President of Worldwide Content where he had overall editorial responsibilities for the company’s website.  EarthWeb was started in 2004 and had 230 employees nationwide that provided online products and services to business professionals in the information technology (IT) industry.  The company and Mr. Schlack signed an employment agreement on October 13, 1998 that contained non disclosure and non compete clauses.

The restrictions prohibited Mr. Schlack from being an employee of a business entity that directly competed with EarthWeb for a period of twelve months after his termination.  The agreement provided consideration in the form of Mr. Schlack’s salary, performance-based bonus, and stock options.  Mr. Schlack tendered his resignation in September 1999 and informed his superiors at EarthWeb that he had accepted a position with ITworld.com, a subsidiary of IDG, another business connected to the IT industry.

EarthWeb Takes Action

EarthWeb sued Mr. Schlack in federal court and asked it to grant a preliminary injunction to prevent him from working for ITworld.com.  EarthWeb sued in order to protect its confidential information and trade secrets related to several components of its business operations: 1) strategic content planning, 2) licensing agreements and acquisitions, 3) advertising, and 4) technical knowledge.

The company argued that an injunction and the enforcement of the non-compete agreement were necessary to prevent disclosure of its trade secrets and confidential business information.  The federal court denied EarthWeb’s request and the company appealed to the Second Circuit Court of Appeals (jurisdiction over Connecticut, New York, and Vermont).  At the appellate level, the court affirmed the district court’s decision and held that the denial of the injunction and enforcement was proper given the facts of the case.

How to Prove Irreparable Harm

The Second Circuit had previously held that a demonstration of irreparable harm is the “single most important prerequisite for the issuance of a preliminary injunction”.  Mamiya Co. v. Masel Supply Co., 719 F.2d 42, (1983).  Disclosure of trade secrets and confidential information has traditionally been sufficient to show irreparable harm so long as the harm is imminent.  The mere possibility of harm is insufficient and motions should be denied when the harm described in the complaint is remote and speculative.  This case did not involve actual theft or misappropriation of confidential information, only the possibility of future disclosure.

Mr. Schlack defended himself by asserting that the position awaiting him at ITworld.com was very different from his job at EarthWeb and that he would not have an occasion to divulge any of EarthWeb’s confidential information.  Additionally, he claimed that EarthWeb’s complaint overstated his responsibilities and he was nowhere close to being a senior executive with access to vast amounts of confidential information.

Shortcomings of EarthWeb’s Argument

EarthWeb had the burden to show that Mr. Schlack’s breach of the non-compete agreement would create irreparable harm.  The appellate court held that the company had failed to establish that an injunction was reasonably necessary to protect its business interests.  The company failed to produce any evidence that there was an imminent risk that Mr. Schlack would disclose EarthWeb’s confidential information while being employed at ITworld.com.

The court stated that EarthWeb had relied on the “Inevitable Disclosure Doctrine”; a theory the court rejected and commented should only be applied in the rarest of circumstances.  The doctrine heavily relies on speculation and “what ifs” to advance a request for injunctive relief for breach of a non-compete agreement.  This doctrine employed insufficient concrete evidence that there would be a disclosure of confidential information and both the district and appellate courts denied EarthWeb’s request for injunctive relief in the form of enforcing the restrictive covenant.

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.

Enforcing a Non-Compete Agreement in the Connecticut Insurance Industry

Grayling Associates, Inc. v. Villota, 2004 Conn. Super. LEXIS 1859
Case Background

Grayling Associates, Inc., an executive recruiting agency for large national insurance companies, employed Mr. Albert Villota from October 2002 to April 8, 2004.  The parties executed a non compete agreement at the start of Mr. Villota’s employment that prohibited him from working at a competing firm within a one hundred mile radius of Grayling’s Connecticut office for a period of two years after his termination.

He began to work at a direct competitor, Park Avenue Group, Inc. (PAG), after he voluntarily terminated his employment with Grayling.  The company sued Mr. Villota in Connecticut state court and sought the enforcement of the provisions contained in the non-compete agreement.

The Court’s Decision

The court found in favor of Grayling and granted the company’s request for injunctive relief.  It enjoined Ms. Villota from working at PAG or other companies in competition with Grayling until April 8, 2006, the end of the two-year period as stipulated in the non-compete agreement.  The court went on to confirm that the time and geographical restrictions in the agreement were reasonable so that they properly balanced the interests of the parties.

The major point of contention in the case focused on the one hundred mile radius restriction.  Grayling was based in Hartford, referred to by many in the business world as the “insurance capital of the world” and as such, the nature of its services was very dependent on its location and proximity to the city.

Many of the nation’s most prominent insurance firms have their headquarters in Hartford and Mr. Villota’s actions within the vicinity of the city could negatively affect Grayling’s business interests and operations.  Grayling noted that the non-compete agreement allowed for the application of the “blue pencil rule” that would allow the court to modify the terms of the geographical restriction.  The court held that the restriction was enforceable as stated in the agreement and enforced the one hundred mile radius provision to protect Grayling’s legitimate interests.

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.