Posts tagged with "voluntarily terminated"

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.

Non-Compete Invalidated Due to Unnecessary Restrictions on Future Employment

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

Connecticut Bathworks Corporation was a company servicing New Haven, Fairfield, and Litchfield counties that remodeled bathrooms via the installation of prefabricated acrylic bathtub liners and wall systems. The company employed Mr. Palmer from approximately the beginning of April 2001 to February 28, 2003 at which point Mr. Palmer voluntarily terminated his employment. He began to work for Re-Bath of Connecticut, a company in direct competition with Bathworks, the next day. The issue in this case is that Mr. Palmer signed a “Company Confidentiality Agreement” when he began to work for Bathworks that contained a covenant not to compete that prohibited him from “being employed by any business in competition with the plaintiff [Bathworks] within any county in which the plaintiff is doing business for a period of three years from the termination of his employment with the plaintiff”. This created a three-year prohibition on working for a competitor with the tri-county area of New Haven, Fairfield, and Litchfield.
Bathworks sued Mr. Palmer in Connecticut state court and requested an injunction to enjoin him from further violations of the non-compete agreement. The court analyzed the facts of the case, held in favor of Mr. Palmer, and denied Bathworks’s request for injunctive relief. The court’s decision ultimately came down to the issue of whether Mr. Palmer’s employment with Re-Bath would negatively affect Bathworks’s interests and business operations. Bathworks carried the burden of establishing the probability of success on the merits of the case and the court held that it failed to present sufficient evidence to indicate it would be directly and immediately harmed due to breach of the restrictive covenant.
Bathworks argued that Mr. Palmer acquired valuable trade secrets and information during his employment with the company and that his continued employment with Re-Bath would harm its operations. The court however found that Mr. Palmer, as an installer, did not have access to Bathworks’s confidential information or any trade secrets that would put the company at a competitive disadvantage. The court further noted that while Mr. Palmer was a skilled laborer, he was not a high-level executive, nor did he provide “special, extraordinary, or unique” services. Bathworks also failed to present any evidence to show that Mr. Palmer knew of or took part in the company’s sales/marketing activities or the development of a business strategy.
The court stated that its role in deciding the case was to balance the parties’ interest to fairly protect Bathworks’s business while not unreasonably restricting Mr. Palmer’s right to seek employment elsewhere. This agreement however, according to court, unnecessarily restricted Mr. Palmer’s right to work at another company because there was nothing about that employment which would disadvantage Bathworks in the industry. The non-compete agreement went beyond what was reasonably necessary to protect the company’s interests and as such, the court denied Bathworks’s request for an injunction.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Court Awards Damages for Breach of Non-Compete Agreement

Court Awards Damages for Breach of Non-Compete Agreement
Van Dyck Printing Co. v. DiNicola, 43 Conn. Supp. 191

Mr. Anthony DiNicola worked for Van Dyck Printing Company as a sales representative from March 11, 1969 to April 1987. Mr. Leonard Drabkin, Van Dyck’s president, who had known Mr. DiNicola from Columbia Printing Company where Mr. DiNicola had worked for thirteen years, hired him. Mr. DiNicola received as wages a car allowance, $150.00 per week draw on his commissions pay, and commissions for sales such that he received at least 7% on the first $100,000 of sales and a higher percentage on sales beyond $100,000. It was not until a month into working that Van Dyck presented Mr. DiNicola with an employment agreement that the parties both signed. The employment agreement contained the finalized commission rate schedule that would apply to Mr. DiNicola’s employment with Van Dyck. The agreement also contained a covenant not to compete that prohibited him from providing services to Van Dyck’s customers while working for a company that provided services in “any way similar to the type of business conducted by Employer [Van Dyck] at the time of termination of this agreement” for a period of twelve months. The restrictive covenant further stipulated that the agreement would become enforceable by injunction for an addition twelve months (extending the total duration to twenty-four months) if there was evidence of a breach.
Mr. DiNicola voluntarily terminated his employment with Van Dyck in April 1987 and immediately began to work for Image Development, Inc., a new company he formed with a second former Van Dyck employee. He owned 50% of the shares in the company until he sold them in 1989 to his partner. Van Dyck sued Mr. DiNicola for breach of the non-compete agreement and sought damages since injunctive relief was moot due to the expiration of the time period for enforcement by injunction. Mr. DiNicola argued that the agreement was not enforceable and that Van Dyck was not entitled to any damages because the agreement lacked consideration. He further argued that Van Dyck breached the employment contract during his employment by “unilaterally changing the terms to suit itself”. The Superior Court in New Haven held that the non-compete agreement was enforceable and granted Van Dyck’s request for relief in the form of damages.
As a general contract principle, past consideration cannot be used to legitimate an agreement between an employer and employee once the employee has already commenced employment. Mr. DiNicola asserted that there was not any new form of consideration when he signed the non-compete agreement that would make its provisions binding on him. The court rejected this contention and found that there was indeed new consideration for the non-compete agreement in the form of the finalized commission rate schedule that had previously not existed. When Mr. DiNicola began with employment with Van Dyck not all of the precise employment provisions were finalized between the parties. It was the employment contract and non-compete agreement that contained the finalized employment details and resolved any existing questions or issues.
The court likewise rejected Mr. DiNicola’s claim that Van Dyck had invalidated the non-compete agreement when it unilaterally changed its provisions to overwhelmingly favor its interests over those of him. He argued that the company had repeatedly changed the method used to calculate his commission payments. The employment agreement did not specify a method to be used to calculate Mr. DiNicola’s payments under the commission rate schedule and as such, any change in method would not constitute a breach of Van Dyck’s obligations under the agreement.
The court recognized that the period allowing injunctive relief had expired but granted Van Dyck’s request for damages. Damages, according to the court, were calculated and awarded to reflect the loss suffered by the enforcing party (Van Dyck) in relation to Mr. DiNicola’s breach of the non-compete agreement. The court calculated that Van Dyck lost $169,000.69 in sales in direct connection to Mr. DiNicola’s breach and applied a 35% company profitability rate, a statistic presented during Mr. DiNicola’s testimony. This meant a total damages award of $59,151.29 for Van Dyck Printing Company.
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 Awards Damages for Breach of Non-Compete Agreement

Court Awards Damages for Breach of Non-Compete Agreement
Van Dyck Printing Co. v. DiNicola, 43 Conn. Supp. 191

Mr. Anthony DiNicola worked for Van Dyck Printing Company as a sales representative from March 11, 1969 to April 1987. Mr. Leonard Drabkin, Van Dyck’s president, who had known Mr. DiNicola from Columbia Printing Company where Mr. DiNicola had worked for thirteen years, hired him. Mr. DiNicola received as wages a car allowance, $150.00 per week draw on his commissions pay, and commissions for sales such that he received at least 7% on the first $100,000 of sales and a higher percentage on sales beyond $100,000. It was not until a month into working that Van Dyck presented Mr. DiNicola with an employment agreement that the parties both signed. The employment agreement contained the finalized commission rate schedule that would apply to Mr. DiNicola’s employment with Van Dyck. The agreement also contained a covenant not to compete that prohibited him from providing services to Van Dyck’s customers while working for a company that provided services in “any way similar to the type of business conducted by Employer [Van Dyck] at the time of termination of this agreement” for a period of twelve months. The restrictive covenant further stipulated that the agreement would become enforceable by injunction for an addition twelve months (extending the total duration to twenty-four months) if there was evidence of a breach.
Mr. DiNicola voluntarily terminated his employment with Van Dyck in April 1987 and immediately began to work for Image Development, Inc., a new company he formed with a second former Van Dyck employee. He owned 50% of the shares in the company until he sold them in 1989 to his partner. Van Dyck sued Mr. DiNicola for breach of the non-compete agreement and sought damages since injunctive relief was moot due to the expiration of the time period for enforcement by injunction. Mr. DiNicola argued that the agreement was not enforceable and that Van Dyck was not entitled to any damages because the agreement lacked consideration. He further argued that Van Dyck breached the employment contract during his employment by “unilaterally changing the terms to suit itself”. The Superior Court in New Haven held that the non-compete agreement was enforceable and granted Van Dyck’s request for relief in the form of damages.
As a general contract principle, past consideration cannot be used to legitimate an agreement between an employer and employee once the employee has already commenced employment. Mr. DiNicola asserted that there was not any new form of consideration when he signed the non-compete agreement that would make its provisions binding on him. The court rejected this contention and found that there was indeed new consideration for the non-compete agreement in the form of the finalized commission rate schedule that had previously not existed. When Mr. DiNicola began with employment with Van Dyck not all of the precise employment provisions were finalized between the parties. It was the employment contract and non-compete agreement that contained the finalized employment details and resolved any existing questions or issues.
The court likewise rejected Mr. DiNicola’s claim that Van Dyck had invalidated the non-compete agreement when it unilaterally changed its provisions to overwhelmingly favor its interests over those of him. He argued that the company had repeatedly changed the method used to calculate his commission payments. The employment agreement did not specify a method to be used to calculate Mr. DiNicola’s payments under the commission rate schedule and as such, any change in method would not constitute a breach of Van Dyck’s obligations under the agreement.
The court recognized that the period allowing injunctive relief had expired but granted Van Dyck’s request for damages. Damages, according to the court, were calculated and awarded to reflect the loss suffered by the enforcing party (Van Dyck) in relation to Mr. DiNicola’s breach of the non-compete agreement. The court calculated that Van Dyck lost $169,000.69 in sales in direct connection to Mr. DiNicola’s breach and applied a 35% company profitability rate, a statistic presented during Mr. DiNicola’s testimony. This meant a total damages award of $59,151.29 for Van Dyck Printing Company.
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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Sufficient Consideration for At-Will Employees

Sufficient Consideration for At-Will Employees
Home Funding Group, LLC v. Kochmann, 2007 U.S. Dist. LEXIS 41376

Home Funding Group, LLC was a New York corporation with primary business operations in Connecticut that engaged in the residential mortgage brokerage business. The company employed Mr. Nicholas Kochmann and Mr. Patrick Dougherty in its New Jersey office. They worked for the company from January 2004 to May 1, 2006 and July 18, 2006 respectively. The company had both employees sign an Employment Agreement that contained non-compete and non-solicitation clauses to protect Home Funding’s business interests. The employees later signed an “Invention Assignment Agreement” stating that Home Funding was the sole owner of any invention connected to their employment and that it would maintain full intellectual property rights. The agreement stated that Connecticut law would govern any legal disputes and litigation in state and/or federal court. Both employees signed a new restrictive covenant in March 2006 that amended and superseded the 2004 Employment Agreement.
Misters Kochmann and Dougherty both voluntarily terminated their employment with Home Funding and Hamilton Financial, a direct competitor in the mortgage broker industry, hired them shortly thereafter. Home Funding sued its two former employees for breach of the non-compete agreements and requested they be enjoined from further employment with Hamilton Financial. Misters Kochmann and Dougherty asserted that the agreements were not legally binding on them because they lacked valid consideration, claiming that continued employment is inadequate consideration for a covenant executed after the start of employment. The federal court sitting in Bridgeport, Connecticut rejected this argument and held that the agreements were properly executed, contained adequate consideration, and were binding upon the parties.
The former employees argued that Connecticut law requires an employer to promise to something different from what it is already obligated to do when it wants to modify/amend a restrictive covenant with one or more of its employees. The court however applied Home Funding’s legal assertion that at-will employees may be terminated at any time at the employer’s discretion and thus continued employment amounted to adequate consideration to support a valid non-compete agreement. The court noted that in this case, Home Funding had the burden of proof at trial to demonstrate that the agreement was correctly executed and enforceable. Home Funding was able to provide such proof and the federal court held in its favor. Had Misters Kochmann and Dougherty not been at-will employees however, the court would have likely held that the agreement did not have the requisite consideration and could have invalidated the agreement in its entirety.
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 Non-Competes Associated with Sale of Company and Goodwill

Enforcing Non-Competes Associated with Sale of Company and Goodwill
Kim’s Hair Studio, LLC v. Rogers, 2005 Conn. Super. LEXIS 1805

Ms. Dorothy Rogers owned a hair salon in Higganum, Connecticut called Dotties Creative Cuts and entered into an agreement to sell the company’s “assets, goodwill, and client lists” to Kim’s Hair Studio, LLC for the amount of $20,000. This transaction essentially made Ms. Rogers a new employee of Kim’s hair Studio and as such, she was required to sign a non-compete agreement that prohibited her from offering competing services for twelve months after her termination within ten miles of 323 Saybrook Road, the primary work location of Kim’s Hair Studio. The parties executed non-compete and confidentiality agreements on August 23, 2004. Ms. Rogers did not like how the salon was being run by the company’s management and voluntarily terminated her employment in order to work at a new hair salon that was located a mere one-half mile away. Ms. Rogers additionally removed a rolodex containing Kim’s Hair Studio’s client information and began to contact them to solicit their business. Kim’s Hair Studio sued Ms. Rogers and requested that the court enforce the non-compete and confidentiality agreements.
The court granted the request for an injunction and ordered the enforcement of the agreements’ provisions. It concluded that the restrictions were reasonable in scope and that Ms. Rogers’ action had amounted to a breach of the covenant between the two parties. Kim’s Hair Studio had legitimate interests in executing non-compete agreements with its employees because its goodwill and client clients were essential assets that Kim’s Hair Studio invested resources in to acquire and maintain. The restrictive covenants were designed to prevent the loss or infringement of these assets and ensure that Kim’s Hair Studio was not negatively affected due to an employee’s termination, whether voluntary or involuntary in nature.
The court reasoned that a party is entitled to an injunction restraining further breach of a restrictive covenant when it demonstrates that the other party has or is very likely to breach the agreement. Additionally, the court noted Connecticut courts’ willingness to enforce a non-compete agreement when it is made in connection with the sale of a company and its goodwill. These legal principles, in conjunction with reasonable and limited restrictions, allowed the court to conclude that the non-compete agreement between Ms. Rogers and Kim’s Hair Studio was valid and enforceable under Connecticut law.
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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Balancing Policy Concerns When Determining Enforceability of Non-Compete Agreement

Balancing Policy Concerns When Determining Enforceability of Non-Compete Agreement
Booth Waltz Enterprises, Inc. v. Pierson, 2009 Conn. Super. LEXIS 1912

Speedway Distributors, Inc. employed Mr. David Pierson as a sales representative beginning in 1998 and had him sign a non-compete agreement as a condition precedent to his employment. The agreement, executed on January 26, 1998, prohibited Mr. Pierson from soliciting Speedway customers or divulging their contact information to other parties for a period of one year following his termination. Speedway’s primary business operation was distributing aftermarket chemical products in Connecticut, Rhode Island, and western Massachusetts. On October 20, 1998 Booth Waltz Enterprises, Inc. acquired certain Speedway assets, most notably its customer lists/information and its sales representatives’ non-compete agreements. Booth Waltz offered Mr. Pierson a job under the new corporate management scheme and asked him to sign a new non-solicitation agreement but he voluntarily terminated his employment. Following his termination, Mr. Pierson started his own business, Hometown Distributors, which engaged in the same business operations and geographical area as his former employer. Booth Waltz alleged that Mr. Pierson was soliciting its customers in violation of the non-compete it acquired from Speedway and sued for the enforcement of the restrictive covenant.
The court found in favor of Booth Waltz, holding that the “defendant [Mr. Pierson] has engaged in conduct which is in breach of the restrictive covenant. This conduct would dictate that the plaintiff [Booth Waltz] is entitled to enforce the agreement”. Mr. Pierson contended that the provisions of the non-compete agreement were unreasonable, rending the agreement unenforceable, but the court rejected these assertions. In handing down its decision, the court had to balance the necessity to protect the employer’s business interests and the employee’s right to earn a living. The duration of one year was reasonable and was supported by the public policy principle that Booth Waltz had a right to protect the long-term relationships that Speedway maintained with its customers. Additionally, the court concluded that the geographical limitation (Connecticut, Rhode Island, and western Massachusetts) was reasonable because it only restricted specific customers appearing on Speedway’s customer list, and not the region as a whole. The court also addressed and stated that its holding did not interfere with public interest since it did not unreasonably deprive the public of a good/service for the sake of protecting a business’s recognized interest. This case is a good example of how a court must balance multiple interests and policy concerns when deciding a case disputing a non-compete agreement between an employer and one of its former employees.

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