Opinion
No. CV05 4002444
July 20, 2005
MEMORANDUM OF DECISION ON APPLICATION FOR TEMPORARY INJUNCTION
The plaintiff, Kim's Hair Studio, LLC, has made application for a temporary injunction to prevent the defendant, Dorothy Rogers, from competing with it in violation of a covenant not to compete.
After a hearing the court finds the following facts. On August 23, 2004 the defendant, who owned and operated a hair salon in Higganum, Connecticut, known as Dotties Creative Cuts, entered into a Purchase and Sale Agreement whereby she agreed to sell to the plaintiff the "assets, goodwill and client lists" of Dotties Creative Cuts for the sum of $20,000. On the same date, the parties entered into a second contract, entitled "Confidentiality and Non-Competition Agreement for Kim's Hair Studio, LLC Employees." Under the terms of that contract the defendant agreed that in consideration of her continued employment with Kim's Hair Studio, LLC she would not compete with the plaintiff during the time of her employment with the plaintiff and for a one-year period after the termination of such employment. The defendant further agreed not to divulge or use client lists or solicit the clients of the plaintiff salon.
When the plaintiff purchased the hair salon from the defendant it had four hairdressers, including the defendant, who had the largest number of clients. The defendant continued to work at the salon for the plaintiff. However, things did not go well and the defendant left employment with the plaintiff on December 30, 2004.
The covenant not to compete contains the following language:
(a) I acknowledge that the purpose of this non-compete section is preserving the relationship between Clients and the Salon should my employment be terminated I agree not to compete directly or indirectly with the Salon business activity.
(b) For a period of one year following the date of termination, I shall not compete directly or indirectly with the salon business activity within the Salon market place. Market area is defined as the area within 10 miles of 323 Saybrook Road or the primary work location of Kim's Hair Studio, LLC.
The defendant was aware of the covenant, but in April 2005 she started working for a hair salon located one-half mile away from the plaintiff. She also removed a rolodex with a list of the plaintiff's clients on it and she contacted those clients. The defendant competed with the plaintiff in violation of the covenant because her husband had become ill and her family needed the income. Nevertheless, the defendant did violate the covenant.
The goodwill and client lists was a crucial asset for which the plaintiff paid and the plaintiff has lost clients to the defendant, a loss which the covenant was intended to prevent.
A party is entitled to a temporary injunction if the party establishes that: (i) there is a probability of success on the merits and there is no other adequate remedy at law, and (ii) substantial and irreparable injury is imminent. Connecticut Association of Clinical Laboratories v. Connecticut Blue Cross, 31 Conn.Sup. 110, 119 (1973). Irreparable injury and lack of an adequate remedy at law is considered to be automatically established where a party seeks to enforce a covenant not to compete. Lampson Lumber Co. v. Caporale, 140 Conn. 679, 685, 102 A.2d 875 (1954); Welles v. O'Connell, 23 Conn.Sup. 335, 337 (1962).
In Welles v. O'Connell, 23 Conn.Sup. 335, 337 (1962) the court stated that where a party has engaged in "a breach of a restrictive covenant there can be no question that the plaintiff is entitled to an injunction restraining the breach, irrespective of whether the damage he will suffer is great or small." (quoting Lampson Lumber Co. v. Caporale, 140 Conn. 679, 685, 102 A.2d 875 (1954). In Gartner Group, Inc. v. Mewes, 7 C.S.C.R. 275 (Jan. 3, 1992, Mottolese, J.) ( 5 Conn. L. Rptr. 411) this court considered the requirement of proving irreparable harm in an action to enjoin the breach of a covenant not to compete in an employment contract: 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. Torrington Creamery, Inc. v. Davenport, [ 126 Conn. 515], at 521. Irreparable harm would invariably result from a violation of the defendant's promises. Mattis v. Lally, 138 Conn. 51, 56; Welles v. O'Connell, 23 Conn.Sup. 335, 337. 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. Case v. Zeiff, 10 Conn. Sup. 530, 532 . . . [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. A party challenging the enforceability of a restrictive covenant has the burden of proving that the covenant is not enforceable, Mathis v. Lally, 138 Conn. 51, 55, 82 A.2d 155 (1955); Scott v. General Iron Welding Co., 171 Conn. 121, [ 171 Conn. 132], (1976). "[C]ourts have generally been more willing to uphold promises to refrain from competition made in connection with sales of goodwill than those made in connection with contracts of employment." Hilb, Rogal Ham Company of Hartford v. Pawlich, No. CV 94 0705183, 1995 WL 91431 (Conn.Super. March 31, 1995, Corradino, J.) See also, Nesko v. Fontaine, 19 Conn.Sup. 160, 110 A.2d 631 (1954). Restrictive stipulations given at the time of a sale of a business are more readily enforceable than in the case of employer-employee relationship. When a covenant not to compete is given in connection with a sale of business, "`a large scope for freedom of contract and a correspondingly large restraint of trade' is allowable." Samuel Stores, Inc. v. Abrams, 94 Conn. 248, 253, 108 A. 541 (1919). "[In] a restrictive covenant between an employer and an employee on the other hand, there is a `small scope for the restraint of the right to labor and trade and a correspondingly small freedom of contract.'" Id. This is because "restrictive covenants add to the value of the business leased or sold and add to the value of business leased or purchased." Hilb, supra. The value of good will purchased by a vendor of a business which has obtained a restrictive covenant as part of the purchase of a business was explained in as follows Mathis v. Lally, 138 Conn. 51, 54-55, 82 A.2d 155 (1951).
Good will in the sense here used means an established business at a given place with the patronage that attaches to the name and the location. It is the probability that old customers will resort to the old place . . . Having paid for "good will," the plaintiff was entitled to have reasonable limitations placed upon the activities of the defendant to protect his purchase. If the plaintiff could hold the patronage of the defendant's old customers and secure that of others who might be lacking for the services of a barber at the established location, he would be reasonably assured of carrying on the business profitably. If, however, the defendant could open up another shop in the immediate vicinity, it was to be expected that his old personal customers and others would seek his services. (Citations omitted.)
In upholding the restrictive covenant given by the seller of the business in Mathis, the Court wrote: "The plaintiff however, has purchased the business for a substantial consideration and in good faith, relying on the restrictive clause for protection . . . To excuse [the defendant] from the performance of his agreement would amount to returning to him a large part of what he has sold and would work a real hardship on the plaintiff." Id. at 55-56.
The court finds that the time and area restrictions in the covenant not to compete are reasonable and that the defendant's competition with the plaintiff, her use of customers lists and her contact with the clients of the plaintiff have caused the plaintiff to suffer irreparable harm.
Therefore, the court hereby orders that Dorothy Rogers is temporarily enjoined from:
a) conducting any salon-related business or working for any salon-related business within a ten-mile radius of 323 Saybrook Road, Higganum, Connecticut;
b) contacting any client or employee of the plaintiff, as defined in the "Confidentiality and Non-Competition Agreement" for the purpose of conducting salon-related business or for the purpose of dissuading customers or employees from conducting salon-related business with the plaintiff;
c) disclosing any confidential information as defined in the" Confidentiality and Non-Competition Agreement."
The foregoing injunction continues until December 30, 2005.
By the court,
Aurigemma, J.