Opinion
No. CV 05-4003389
September 14, 2005
MEMORANDUM OF DECISION RE APPLICATION FOR A TEMPORARY INJUNCTION
Most of the facts relevant to this application for a temporary injunction are not in significant dispute. Access America, LLC is a licensed real estate broker doing business as Century 21 Access America. Century 21 Access America and the defendant, as real estate salesperson, entered into a contract which included a number of significant provisions, including a private office and a higher percentage of commissions for the defendant, as well as a non-compete agreement, whereby the defendant agreed that "during the two (2) year period commencing on the termination of affiliation of Salesperson, for any reason whatsoever, Salesperson shall not engage in or carry on directly or indirectly, a business similar to or competing with any business or products carried on by the [plaintiff] within a fifteen (15) mile radius of 136 Berlin Road, Cromwell, CT," the location of the defendant's office. The defendant terminated her association with the plaintiff on April 20, 2005 and shortly thereafter commenced employment with ERA Innovative Realty, at an office located well within a fifteen mile radius of 136 Berlin Road. While working for the plaintiff, the defendant was primarily engaged in the sale of single-family and multi-family residential real estate, the same services she performs with her current employer.
In July of 2005, the plaintiff brought this action seeking temporary and permanent injunctive relief with regard to the non-compete provisions of the contract as well as damages, costs and "such other relief to which the court may deem just proper and appropriate." A hearing was held before the undersigned on the application for a temporary injunction only on August 23 and 31, 2005.
"The principal purpose for 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." (Internal quotation marks omitted.) Clinton v. Middlesex Mutual Assurance Co., 37 Conn.App. 269, 270, 655 A.2d 814 (1995). The standard for the granting of a temporary injunction pending final determination of the matter, is "a proper showing by the movant that if the injunction is not granted he or she will suffer irreparable harm for which there is no adequate remedy at law . . . In exercising its discretion, the court, in a proper case, may consider and balance the injury complained of with that which will result from interference by injunction." (Citations omitted; internal quotation marks omitted.) Moore v. Ganim, 233 Conn. 557, 569, n. 25, 660 A.2d 742 (1995). There is normally a four-part test for the issuance of a temporary injunction: "(1) the plaintiff ha[s] no adequate legal remedy; (2) the plaintiff would suffer irreparable injury absent [the injunction]; (3) the plaintiff [is] likely to prevail . . .; and (4) the balance of the equities favor[s the issuance of the injunction]." Waterbury Teachers Assn. v. Freedom of Information Commission, 230 Conn. 441, 446, 645 A.2d 978 (1994).
The standard for granting a temporary injunction to enforce a covenant not to compete, however, is somewhat different in that the plaintiff does not need to prove irreparable harm. "While ordinarily proof of imminent harm is essential, in this type of case there is no such requirement. It has long been recognized in this state that a restrictive covenant is a valuable business asset which is entitled to protection . . . Irreparable harm would invariably result from a violation of the defendant's promises . . . The reason for this is that such a plaintiff's actual injury is not susceptible of determination to its entire extent but is estimable largely by conjecture and prediction." (Citations omitted; internal quotation marks omitted.) Sagarino v. SCI Connecticut Funeral Services, Inc., Superior Court, judicial district of New Britain, Docket No. 499737 (May 22, 2000, Aurigemma, J.) (27 Conn. L. Rptr 281), quoting Gartner Group, Inc. v. Mewes, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No, 118332 (January 3, 1992, Mottolese, J.) ( 5 Conn. L. Rptr. 411) ( 7 C.S.C.R. 275); see also Merryfield Animal Hospital v. Mackay, Superior Court, judicial district of New Haven Docket No. 464586 (July 31, 2002, Hadden, J.T.R.) ( 32 Conn. L. Rptr. 652); Musto v. Opticare Eye Health Centers, Superior Court, Complex Litigation Docket at Waterbury Docket No. 155663 (August 9, 2000, Hodgson, J.).
The standard is also different in that the plaintiff does not have to demonstrate that there is no adequate remedy at law. "[W]hile the plaintiff could maintain a claim for damages as to each violation that causes injury the difficulty of proof and the inefficiency of repetitive suits render inadequate the use of successive remedies at law, and injunctive relief is therefore warranted to protect the plaintiff from harm which the restrictive covenant was intended to prevent." (Citations omitted; internal quotation marks omitted.) Sagarino v. SCI Connecticut Funeral Services, Inc., Superior Court, judicial district of New Britain, Docket No. 499737 (May 22, 2000, Aurigemma, J.) ( 27 Conn. L. Rptr. 281), quoting Gartner Group, Inc. v. Mewes, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. 118332 (January 3, 1992, Mottolese, J.) ( 5 Conn. L. Rptr. 411) ( 7 C.S.C.R. 275); see also Merryfield Animal Hospital v. Mackay, Superior Court, judicial district of New Haven, Docket No. 464586 (July 31, 2002, Hadden, J.T.R.) ( 32 Conn. L. Rptr. 652); Musto v. Opticare Eye Health Centers, Superior Court, Complex Litigation Docket at Waterbury, Docket No. 155663 (August 9, 2000, Hodgson, J.). Thus, the present application only requires this court to determine that the plaintiff is likely to prevail and that the balance of the equities favors the issuance of the injunction.
With that standard in mind, the court concludes that the plaintiff is likely to prevail in its claim of the existence of a valid contract between the parties, including the non-compete provision previously referenced. Although the defendant provided some testimony to the effect that she signed the contract under duress, the court found this evidence unpersuasive, especially in light of the fact that the contract gave her other significant benefits albeit while requiring, for the first time in the course of her employment with the plaintiff, to agree not to compete should she terminate her employment with it. The court also finds that the plaintiff invested time, effort and money in training for the defendant. Although the defendant disparaged this training, the court feels that there is substantial evidence upon which to conclude that this training can be construed as conferring a benefit on the defendant, that it did or should have made her a more productive salesperson, and that such training, combined with introduction to the plaintiff's client base and its sales methods, created an interest which the plaintiff could legitimately seek to protect through a covenant not to compete. Additionally, in her termination letter, the defendant confirmed that she was well aware of her obligations under the contract: "I understand what I have signed and I know you must do what you have to."
The defendant makes somewhat more persuasive arguments with regard to her claim that the covenant was unreasonable and therefore invalid. "A covenant that restricts the activities of an employee following the termination of his employment is valid and enforceable if the restraint is reasonable." New Haven Tobacco Co. v. Perrelli, 18 Conn.App. 531, 533, 559 A.2d 715 cert. denied, 212 Conn. 809, 564 A.2d 1071 (1989). In determining whether a covenant is reasonable, "[t]he five factors to be considered . . . are: (1) the length of time the restriction operates; (2) the geographical area covered; (3) the fairness of the protection accorded to the employer; (4) the extent of the restraint on the employee's opportunity to pursue his occupation; and (5) the extent of interference with the public's interests." Robert S. Weiss Associates, Inc. v. Wiederlight, 208 Conn. 525, 529 n. 2, 546 A.2d 216 (1988). This test is "disjunctive, rather than conjunctive; a finding of unreasonableness in any one of the criteria is enough to render the covenant unenforceable." New Haven Tobacco Co. v. Perrelli, supra, 18 Conn.App. 534. A party challenging the validity of a covenant not to compete, however, bears the burden of proof on this issue. Scott v. General Iron Welding Co., 171 Conn. 132, 139, 368 A.2d 111 (1976); Milaneseo v. Calvanese, 171 Conn. 132, 137, 103 A. 841 (1918).
The defendant's principal contentions are that the non-compete clause is unreasonable as to its geographical limitations as well as its duration. She offered testimony from one Darell Kern who teaches real estate and is well-credentialed in the realty business. Although Kern testified that a fifteen mile radius was not reasonable, he also suggested that a limitation that restricted competition within the town in which the salesperson had worked as well as all of the contiguous towns might be reasonable. A quick look at a map of the State of Connecticut reveals that a limitation of the sort suggested by Kern could well be even more onerous than the one in the contract, as it would include all of the town of Cromwell plus Berlin, Rocky Hill, Glastonbury, Portland and Middletown. Neither this testimony nor any other evidence in the case gave this court reason to believe that the fifteen mile radius should be deemed unreasonable.
The defendant also contends that the two-year limitation on competition is also unreasonable. She points out that the permissible period of suspension of a real estate agent's license is only one year, suggesting that the two-year deprivation of livelihood posed by the contract is by its nature punitive and hence unreasonable as a restriction on competition. She ignores, however, the fact that a license suspension prohibits all professional real estate activity within the state of Connecticut, while the restriction in the contract covers only a fifteen mile radius from the plaintiff's office, a far less serious limitation on the defendant's right to practice her profession.
Both parties point to Century 21 Access America v. Nereida Lisboa, Superior Court, judicial district of Ansonia/Milford at Milford, Docket No. CV03-081901 (July 23, 2003, Ronan, J.) ( 35 Conn. L. Rptr. 272) in which that court, while upholding a contractual non-compete provision, nonetheless concluded that the two-year limitation was unreasonable under all the circumstances of that case and reduced it to one year. The contract in that case, however, included specific language to the effect that should the court conclude that the time period was too long, it would have the authority to enforce the agreement for "such lesser period of time as shall be deemed reasonable and not excessive by such court." On one hand, the defendant argues that absent similar language in this case, if the court finds two-years unreasonable, it must invalidate the entire non-compete agreement. In the alternative, she argues, as does the plaintiff, that if the court concludes the agreement is otherwise valid, it could reduce the duration of the restriction.
The defendant also argues that she was only associated with the plaintiff for one year prior to her decision to leave, suggesting that a two-year restriction on future employment is too restrictive. For the three years previous, however, she had been associated with the predecessor firm which was bought out by the plaintiff, suggesting a much longer period of association with the office and, hence, access to its client base, sales methods, etc. Additionally, in Lisboa, there had been testimony by both plaintiff and defendant that the plaintiff's average customer listing lasted only six months in that case and that there was little repeat business. Although this court has some concern that a two-year period may be stretch the bounds of reasonableness, there was no similar evidence in this case upon which the court could firmly draw such a conclusion. It may be that at the time of the trial on the merits of the permanent injunction, there will be more evidence to establish either the reasonableness or unreasonableness of the two-year time limit. At this point, however, the court concludes that the plaintiff is likely to prevail. Additionally, if the time restriction is ultimately deemed excessive, it is possible that, even absent the specific authorizing language in the contract in Lisboa, the court in this case would have authority to reduce the time limitation because of the "blue pencil rule" which states that under certain circumstances, a court may enforce parts of an agreement and not others. "Whether the promises in a contract will be treated as severable or not is primarily a matter of the intent of the parties, determined by a fair construction of all the provisions of the contract." Beit v. Beit, 135 Conn. 195, 205, 63 A.2d 161 (1948). Such a determination may only be made after a full hearing on the merits.
See Timenterial, Inc. v. Dagata, 21 Conn.Sup. 180, 184, 277 A.2d 512 (1971).
The court therefore grants the application for a temporary injunction as follows: the defendant is enjoined from working as an real estate salesperson with a competitor of the plaintiff and engaging in competitive activity within a fifteen mile radius of 136 Berlin Road, Cromwell, Connecticut until further order of this court. In recognition of the fact that a legitimate question remains as to the appropriate duration of the covenant not to compete, however, this restriction shall be in effect until further order of the court but no for no longer than one year from the date of this order unless, upon motion by the plaintiff, it is extended by further order of this court. The defendant is also enjoined from using confidential information concerning the policies and inner workings of the plaintiff to persuade plaintiff's customers to cease business with the plaintiff, to make any attempt to take plaintiff's customers away from it or in any way to interfere with the business relationships, contracts and expectations of the plaintiff with its customers.
Jonathan E. Silbert, Judge