Opinion
CV136019015
12-23-2015
Property Owners Consulting, LLC v. Crystal Cafiero et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
James J. Devine, J.
The plaintiff, Property Owners Consulting, LLC, commenced this action by writ, summons and complaint dated November 5, 2013, against the defendant, Crystal Cafiero. The plaintiff filed a multiple count complaint for (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) conversion; (4) civil theft pursuant to General Statutes § 52-564; (5) tortious interference of a business expectancy; and (6) unjust enrichment seeking injunctive relief, monetary and/or punitive damages. The suit arises out of a business relationship where the defendant was hired as a receptionist/record keeper for the plaintiff LLC which solicited record sellers of real estate located within an enterprise zone who were due real estate conveyance tax refunds from the State of Connecticut. The plaintiff executed a confidentiality agreement contemporaneous with her employment as an at-will employee.
The plaintiff moved to add an additional party defendant, The State Benefit Program, LLC (hereinafter " State Benefit"), with said motion granted by court order dated July 9, 2014. (See Order #112.01.) State Benefit failed to appear and was defaulted for failure to appear by order dated November 24, 2015 (See Order #145.01.)
The issues were joined and the matter was tried by the court on October 15, 2015. The parties were ordered to file briefs post-trial with the plaintiff's reply brief filed on November 19, 2015.
BACKGROUND AND FACTS
After review of the trial testimony and the exhibits, the court hereby finds that the plaintiff was a sole member LLC managed by its founder, Andrew Zeeman. The business of the plaintiff is assisting taxpayers in obtaining refunds of conveyance taxes paid for properties located in State of Connecticut municipalities which are exempt from state conveyance taxes. Mr. Zeeman has been involved in this type of business since 2005. He operated previously under the company name POCRS, which he founded in 2005. After establishing the business with several successful solicitations and rebates received, he sold a percentage to Elizabeth Sunshine, with POCRS presently dissolved. The plaintiff LLC competes with Elizabeth Sunshine and Marvin Katz, who operate two separate businesses who perform the same services for sellers entitled to conveyance tax rebates.
The plaintiff also admitted that Connecticut real estate attorneys and lay people who sell properties entitled to real estate conveyance rebates who are aware of the state laws and filing procedures can file for their clients or themselves.
The plaintiff was in need of a receptionist/record keeper when its sole employee was leaving her job. The plaintiff advertised on Craigslist. After a vetting process involving interviews with Andrew Zeeman and his wife, the defendant was hired on April 12, 2013 as an at-will employee (oral contract) with an agreed upon hourly rate. Contemporaneous with her hiring, she reviewed and signed a confidentiality agreement containing a covenant not to compete with the plaintiff's business. (Plaintiff Exhibit 15.) Her duties consisted of reception work, form filings and entries on the plaintiff's quickbooks computer software program.
The defendant worked for the plaintiff until October 4, 2013, her last day of employment. While she was employed by the plaintiff, she solicited business in competition with her employer, set up a corporation, State Benefit, later transferring her interest to a relative, that also competed with the plaintiff, utilized maiden name on amended forms sent to city clerks, and even forged the signature of the Norwich city assessor on an OP236 form. The defendant utilized a similar solicitation letter devised by the plaintiff with modifications, including the estimate of the amount of rebate available to the seller. The plaintiff's solicitation letter did not advise the amount of the rebate. The defendant also sent repeated letters to the prospective clients until a response was received comparable to the plaintiff's business plan. The defendant while in competition with the plaintiff received $9,300 in compensation, none of which was given to the plaintiff. The defendant also utilized the plaintiff's existing files and business equipment in seeking fees in competition with the plaintiff. All of the above was done while employed by the plaintiff, without its consent or knowledge and its sole member, managing partner Andrew Zeeman.
ANALYSIS
The plaintiff, as recited above, has alleged various legal causes of action, injunctive and monetary relief against the defendant. The defendant was hired on the basis of an oral agreement as an at-will employee of the plaintiff. She could leave or be terminated at any time. The plaintiff, however, required the defendant to sign a confidentiality agreement, including a covenant not to compete with the plaintiff's business. Said agreement was executed contemporaneously with her hiring as an employee of the plaintiff.
In the first count of its complaint, the plaintiff contends that the defendant breached the confidentiality agreement by (1) the use and disclosure of proprietary information and trade secrets of the plaintiff and/or (2) competing with the plaintiff's business by soliciting plaintiff's prospective customers in violation of the covenant not to compete. This court must first address whether there is an existing trade secret of the plaintiff that has been used and/or disclosed by the defendant or her assigns.
Trade secrets are defined as " information, including a formula, pattern, compilation, program, device, method, technique process, drawing, cost data or customer list that: (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (See General Statutes § 35-51(d) Elm City Cheese Co. v. Federico, 251 Conn. 59, 70, 752 A.2d 1037 (1999).) The Supreme Court has long held that " [m]atters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret." Town & Country House & Homes Service, Inc. v. Evans, 150 Conn. 314, 318, 189 A.2d 390 (1963). Further, " [a]n employee has a right to grow with his experience, and he can carry away for general use his skill and everything that he has learned at his place of employment, except trade secrets. Elm City, supra, 105.
The plaintiff in its business operation compiles a list of sellers in an enterprise zone through public records available from tax assessors, town clerks, town websites and/or the Department of Economic and Community Development. Those sellers entitled to a conveyance tax refund are sent a solicitation letter from the plaintiff to have their refund filed for them, which also includes a contract for them to sign to pay a " filer fee" in an agreed upon percentage of the refund received by the seller, who in turn sends a check to the plaintiff. The plaintiff maintains paper files for the prospective clients and resends solicitation letters on a periodic basis until contact is made or file close out. Once the contract is received, the plaintiff obtains a copy of the original conveyance record and deed and files an amended DRS tax form OP-236, with said forms available from the town clerk's offices.
As argued by the defendant, the plaintiff's business process, determination of eligibility for conveyance tax rebates, and paperwork documentation are public records available online or at town halls where enterprise zones are located. No aspect of the business of the plaintiff uses personal or confidential information. While it is true that the plaintiff has formulated its own solicitation letter, developed a master file, and procedure wherein repeat solicitation letters are sent and files purged, the plaintiff does not have any unique proprietary databases or programs. As admitted by the plaintiff, two competitor companies and real estate closing attorneys, etc., file the same amendments as the plaintiff for rebates of conveyance taxes in enterprise zones.
The court, based upon the facts found above concludes that the plaintiff has failed in its burden to prove a violation of any confidential information and/or trade secrets as claimed in count one of its complaint.
The court must now review the confidentiality agreement to determine whether there has been a violation of legally enforceable covenant not to compete. Regarding noncompetition by an employee, the contract at issue states:
8 COVENANT NOT TO SOLICIT OR COMPETE
8.1 RESTRICTIVE COVENANTS
(a) I agree that during the period of my employment by the Company I will not, without the Company's prior written consent, engage in any employment or business activity other than for the Company. I further agree that during the term of employment with the Company and for a period of one year thereafter, I shall not solicit, or arrange to have any other person or entity solicit any person or entity engaged by the Company as an employee, customer, supplier, or consultant or advisor to the Company to terminate such party's relationship with the Company . . .
Based upon the evidence submitted at trial, both testamentary and by exhibits, the defendant and her company (the defaulted defendant, State Benefit) competed with the plaintiff's business during and prior to her termination of employment. The defendant utilized the computer, paper files and master list in soliciting the plaintiff's prospective customers with a modified solicitation letter without any consent of the plaintiff and its sole member Andrew Zeeman. The defendant's business is found to have been in direct competition with the plaintiff's business while an employee, in violation of the of the first sentence of subparagraph (a) of 8.1 stated above. As a measure of damages, the court has reviewed the evidence submitted by the plaintiff. Its claims of monetary damages as a result of this contract breach is speculative at best. The plaintiff failed to submit any business records or tax returns sufficient to justify the amounts claimed by Mr. Zeeman in his testimony.
In addition, the plaintiff's claim for liquidated damages (set out in paragraph 1.2 " Remedies") of $50,000 is unforceable in that the court has concluded that no " proprietary trade secret information" applies to this case.
The court concludes that the amount obtained by the plaintiff, while in competition with her employer ($9,300) is the appropriate sum for breach of the contract by the defendant and defaulted defendant, State Benefit.
The court has considered the plaintiff's other claims for monetary damages. The second count of breach of a covenant of good faith and fair dealing involves an implied covenant. The parties entered into an oral contract which was breached by the defendant. As to the third count, conversion, the plaintiff has failed to prove that the defendant utilized the plaintiff's personal property to the exclusion of plaintiff. As to count four, civil theft, under General Statutes § 52-564, the plaintiff has failed to prove that the defendant stole any trade secrets of the plaintiff or denied the plaintiff any ownership rights in its personal property. As to count five, tortious interference with a business expectancy, the plaintiff must plead and prove that: (1) a business relationship existed between the plaintiff and another party; (2) the defendant intentionally interfered with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffered actual loss. Robinson v. Robinson, 103 Conn.App. 69, 77, 927 A.2d 364 (2007). The plaintiff has failed to prove that the actions of the defendant denied the plaintiff an ongoing relationship of any existing or future business clients, in addition to those that the defendant established a contractual relationship. As to the sixth count, unjust enrichment, the plaintiff must prove no remedy is available by an action on a contract. The court in the present controversy found an enforceable oral contract breached by the defendant.
The court must now determine whether the covenant not to compete is enforceable posttermination against the defendant, State Benefit, and any heirs or assigns, by way of injunctive relief.
" The five factors to be considered in evaluating the reasonableness of a restrictive covenant ancillary to an employment agreement [applicable after termination of employment] 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 public interests." Robert S. Weiss & Associates, Inc. v. Wiederlight, 208 Conn. 525, 529 n.2, 546 A.2d 216 (1988). Time restrictions in a restrictive covenant are only valued if they are reasonable in the interest of both parties. Id., 530. Furthermore, geographic restrictions must be narrowly tailored to the plaintiff's business situation. Id., 531.
The covenant in the present controversy contains both a covenant not to solicit and a covenant not to compete. It is basic that to restrict the employee from engaging in a competing enterprise is one of restraint of trade and, therefore, is against public policy if the restraint is unreasonable. It is not valid unless it is ancillary to a contract of employment or to an existing employment. Restatement, 2 Contracts 515(e) Domurat v. Mazzaccoli, 138 Conn. 327, 84 A.2d 271 (1951). Restatement (Second) Contracts § 187 (1981). In order to be valid and binding, a covenant restricting the activities of any employee following the termination of his employment must be partial and restricted in its operation in respect to time and place and must be reasonable--that is it should afford only a fair protection to the interest of the party in whose favor it is made and must not be so large in its operation as to interfere with the interest of the public (citations omitted). Cost Management Incentives, Inc. v. London-Osborne, et al., 2002 WL 31886860.
The court finds that, while the length of time (i.e., one year) may be considered reasonable as to time in that the defendant utilized the plaintiff's master file, forms, computer and maps, the court concludes that the geographic area of application is unlimited in scope as to the covenants not to solicit and/or compete. The court concludes the plaintiff, based upon the analysis stated above, is not entitled to injunctive relief based upon the unenforceable covenants not to solicit and/or compete set out in the subject confidentiality agreement.
Order
Judgment is entered against the defendant, Crystal Cafiero, and the defaulted defendant, State Benefit Program, LLC, in the amount of $9,300 together with taxable costs.