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holding that multiple breaches of a restrictive covenant were sufficient aggravating circumstances to support a CUTPA claim
Summary of this case from Medpricer.Com Inc. v. Becton, Dickinson & Co.Opinion
No. CV08-4016026S
January 28, 2009
MEMORANDUM OF DECISION MOTION #105
The issue before the court is the defendants' motion to strike counts one through nine of the plaintiffs' complaint. For the following reasons the court denies the defendants' motion as to counts one, three, six, eight and nine and grants the defendants' motion as to counts two, four, five, and seven.
FACTS
On April 29, 2008 the plaintiffs, Webster Financial Corporation (Webster) and USI Insurance Services of Connecticut, Inc. (USI), formerly known as Webster Insurance, Inc., commenced this action by service of process against the defendants, William McDonald (McDonald) and Shoff Darby, Inc. (Shoff Darby).
The plaintiff, USI Insurance Company formally changed its name from Webster Insurance, Inc. to USI Insurance Services of Connecticut, Inc. on February 29, 2008.
Then referring to both USI and Webster Financial we will use "the plaintiffs." Likewise when referring to both McDonald and Shoff Darby, then we will use "the defendants."
The plaintiffs filed a nine-count complaint in which they allege the following facts. On February 11, 2003, the defendant, McDonald, while employed as senior vice president at USI, entered into an employment agreement with USI. A copy of this agreement is attached to the plaintiffs' pleadings. The agreement contained a non-compete and a non-solicitation clause. The two clauses operate for the greater period of either: (1) two years following McDonald's termination; or (2) for as long as McDonald receives benefits under a prescribed deferred compensation plan or salary continuation policy. The non-compete clause, found at paragraph eight of the agreement, prohibits McDonald from soliciting and providing insurance services similar to those rendered by USI to anyone who was a client or potential client twelve months prior to McDonald's termination. The clause also forbids McDonald from accepting employment with any other insurance business within twenty-five miles of any insurance office of the defendants in the state of Connecticut.
Paragraphs 8(a) and nine provide that the agreement operates "[d]uring the term of Employee's employment with the Company and for the greater of: (I) a period of two years following the termination of Employee's employment f or any reason or (ii) for so long as the Employee shall be entitled to receive benefits under the Damman Associates, Inc. Deferred Compensation Plan or the Webster Bank Salary Continuation Policy . . ."
Paragraph 8(a) of the agreement provides that McDonald will not: "(1) attempt in any manner to solicit or accept from any Client business of the type performed by the Company or to persuade any Client of the Company to cease to do business or to reduce the amount of business any such Client has customarily done or contemplates doing with the Company, whether or not the relationship between the Company and such Client was originally established in whole or in part through Employee's efforts; (2) provide or render insurance services or products of the type provided or rendered by the Company to any Client of the Company; (3) be employed by (as an owner, employee, officer, director, independent contractor, agent, partner, or in any other capacity), represent, render consulting or advisory services to, or participate or be connected in the management, or control within 25 miles of any insurance office of the Company or the Parent in the state of Connecticut, of any business that is competitive with the Company or engaged in the business of providing insurance services; or (4) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any of its suppliers, distributors, clients, or employees, or take any action that adversely affects the Company's business."
The non-solicitation clause, found at paragraph nine in the contract, prohibits McDonald from soliciting past or current clients, accepting business from past or current clients, providing services to any past or current client and providing services to any organization that performs insurance services similar to the defendants. The clause also forbids McDonald from inducing other employees of the plaintiffs to terminate their employment with the plaintiffs.
Paragraph nine provides that McDonald shall not: "(a) solicit, induce, or attempt to induce, any past or current Client of the Company to cease doing insurance agency or brokerage business in whole or in part with the Company; (b) accept business from, do business with, or provide services to any past or current Client of the Company or other person, firm, partnership, corporation or other entity which performs insurance services materially similar to or competitive with those provided by the Company; or (c) either on his own account or for any person, firm, partnership, corporation or other entity, solicit, induce, attempt to induce, interfere with, or endeavor to cause any employee of the Company to terminate his or her employment with the Company." The agreement further defines Client, at paragraph 7(b) as: "any person, firm, or corporation that was a client or potential client at the time of Employee's termination or who was in such capacity at any time during the twelve months immediately preceding the Employee's termination."
The complaint further alleges that on September 21, 2007, McDonald resigned from USI and joined Shoff Darby, a competitor of USI, located within twenty-five miles of USI's office in Westport, Connecticut. After McDonald began his employment at Shoff Darby, he began to solicit and sell insurance products to USI's former clients. McDonald also contacted USI's current employees and attempted to induce them to terminate their positions with USI. In their complaint, the plaintiffs assert several causes of action based on the defendants' alleged violation of the agreement.
On June 20, 2008, the defendants moved to strike the complaint in its entirety. As required by Practice Book § 10-42, the defendants submitted a memorandum of law in support of the motion. The plaintiffs filed their memorandum of law in opposition to the motion to strike on July 23, 2008. On September 19, 2008, the defendants filed a reply memorandum of law in support of their motion to strike.
DISCUSSION A Motion to Strike Standard
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In ruling on a motion to strike, "[t]he role of the trial court [is] to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [plaintiff has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
"In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "Where the legal grounds for . . . a motion [to strike] are dependent upon underlying facts not alleged in the plaintiff's pleadings, the defendant must await the evidence which may be adduced at trial, and the motion should be denied." (Internal quotation marks omitted.) Commissioner of Labor v. C.J. M. Services, Inc., 268 Conn. 283, 293, 842 A.2d 1124 (2004).
B Count One: Breach of Covenant Not to Compete (Against McDonald)
In count one, the plaintiffs assert that McDonald breached his agreement with USI by accepting employment with Shoff Darby and providing services to USI's clients in violation of the restrictive covenants contained in the agreement. The defendants argue that the court should strike count one on the ground that the non-compete and non-solicitation clauses are overly broad and therefore unenforceable. Specifically, the defendants attack the covenant on two grounds: (1) the agreement is too broad because it limits McDonald from soliciting potential clients; and (2) the agreement is potentially unlimited in duration because the time limitation is conditioned upon McDonald's enrollment in USI's deferred compensation plan.
The plaintiffs argue that the covenants are reasonable. The plaintiffs further argue that even if the covenants are deemed unreasonable as currently written, the agreement contains a "blue pencil" provision which would allow the court to modify the time and geographical scope of the covenant in conformance with the law. In response, the defendants argue that the "blue pencil" provision is not helpful to the plaintiffs because in order to make the agreement reasonable under the law, the court would effectively have to rewrite the contract, an action that is forbidden under Connecticut law.
At the outset, it is important to note that the defendant is using a motion to strike to attack the illegality and enforceability of the agreement between McDonald and USI. On a motion to strike, the court is limited to facts alleged in the complaint, and therefore "[a]ny illegality which may arguably exist [must be] apparent upon a facial examination of either the challenged pleading or the copy of the contract that is attached to the challenged pleading." Russo Associates, Inc. v. Refined Sugars, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 93 0307744 (May 17, 1994, Rodriguez, J.) ( 9 C.S.C.R. 631). "[I]llegality not apparent on the face of the pleadings must be specially pleaded." Norwalk Door Closer Co., Inc. v. Eagle Lock Screw Co., 153 Conn. 681, 686, 220 A.2d 263 (1966). The court cannot "consider facts outside of the pleadings in order to rule on the legality or enforceability of the covenant not to compete." Russo Associates, Inc. v. Refined Sugars, Inc., supra, 9 C.S.C.R. 631. The Supreme Court has also noted that trade restraints, such as restrictive covenants, require a finding of reasonableness, which is commonly a question of fact and can only be struck down without the appropriate factual findings if it is "per se unreasonable." Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 759 n. 15, 905 A.2d 623 (2006); see also Elida, Inc. v. Harmour Realty Corp., 177 Conn. 218, 226-28, 231-32, 413 A.2d 1226 (1979). "Per se rules of illegality should only be applied to conduct which is shown to be manifestly anti-competitive . . ." Elida, Inc. v. Harmour Realty Corp., supra, 231.
This conclusion is in line with Practice Book § 10-50 requiring parties to plead "illegality not apparent on the face of pleadings" as a special defense.
A covenant not to compete 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). "The five factors to be considered in evaluating the reasonableness of a restrictive covenant ancillary to an employment agreement 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). "The five prong 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, 534.
The Appellate Court has not addressed the issue of whether a restrictive covenant prohibiting solicitation and service of potential clients renders a covenant per se unreasonable. At least one Superior Court has concluded that a blanket ban against soliciting future clients "who have no relationship with the plaintiff but are . . . in the plaintiff's range of business . . . [P]uts unnecessary restraints on ordinary competition . . ." Sanford Hall Agency, Inc. v. Dezzanni, Superior Court, judicial district of New Haven, Docket No. CV 04 4000576 (December 2, 2004, Meadow, J.T.R.) ( 38 Conn. L. Rptr. 420). Other Superior Courts have upheld covenants prohibiting the solicitation of potential clients that the employee may have had contact with or learned of during a specified time period during the employee's employment. For example, in Cuna Mutual Life Ins. Co. v. Butler, Superior Court, judicial district of Middlesex, Docket No. CV 07 5002153 (June 21, 2007, Aurigemma, J.), the court upheld a restrictive covenant prohibiting an employee from soliciting and selling to potential clients with whom the employee had contact within the last six months preceding her termination. The court reasoned that this restriction was reasonable and narrowly drawn because the employee was only prohibited from marketing to those clients with whom she dealt during her employment. See also Hilb, Rogal Ham Co. v. Pawlich, Superior Court, judicial district of Hartford, Docket No. CV 94 0705183 (March 31, 1995 Corradino, J.). In Robert J. Reby Co., Inc. v. Bryne, Superior Court, judicial district of Danbury, Docket No. CV 05 4004259 (July 13, 2006, Schuman, J.), the court upheld a restrictive covenant that prohibited an employee from soliciting potential customers that were identified to him through leads developed in the course of his employment. The court reasoned that this covenant was reasonable because the employee was only barred from soliciting those customers and not barred from actually selling the product to them.
Thus, in order for a covenant addressing potential clients to be reasonable, the potential clients must be readily identifiable and narrowly defined such that the former employee "can still market . . . products to multitude of potential customers . . ." Cuna Mutual Life Ins. Co. v. Butler, supra, Superior Court, Docket No. CV 07 5002153.
In fact, the purpose of the covenant is to protect employers where the "employment involves the imparting of . . . contacts and associations with clients or customers . . . [and] to restrain the use . . . of the knowledge and acquaintance so acquired, to injure or appropriate the business which the party was employed to maintain and enlarge." May v. Young, 125 Conn. 1, 7, 2 A.2d 385 (1938). "As to scope, the restraint may reasonably cover actual clients or customers of an employer whose business with them would be subject to injury through the activities contracted against." Id., 8. Indeed, "[t]he fact that an employer seeks to protect his interest in potential new customers in a reasonably limited market area as well as his existing customers at the time the employee leaves does not render the covenant unreasonable." (Emphasis added.) Robert S. Weiss Associates, Inc. v. Wiederlight, supra, 208 Conn. 533. Thus, courts have upheld geographic restrictions, restraining employees from doing business in a given area, a restraint which has the very effect of prohibiting contact with potential clients by virtue of their location to the employer. Id.
In the present case, the covenant prohibits McDonald from soliciting and servicing those entities that were current or potential clients in the last twelve months prior to his termination. This is patently different from the case in which employers barred contact with unknown future clients who the employee may never have come in contact with or acquired any special knowledge about in the course of their employment. The present case concerns potential clients or leads from a specified time period in which McDonald could have come in contact with and acquired information about. Even though McDonald may not have had direct contact with every potential client, he had an opportunity to gain the "knowledge and acquaintance so acquired, to injure or appropriate the business which [he] was employed to maintain and enlarge." May v. Young, supra, 125 Conn. 7. USI is entitled to protect the specialized knowledge he may have acquired. Moreover, the connection between USI and these clients is no more tenuous, than an employer's connection with potential clients in a given geographic area. Thus, it cannot be said that such a provision renders the covenant invalid upon its face.
To be sure, the defendants argue that in Webster Insurance, Inc. v. Levine, judicial district of New Haven, Docket No. CV 06 4020633 (December 12, 2006, Meadow, J.T.R.), the court struck down a similar covenant imposed by the defendants that forbade the employee from soliciting and doing business with both the employer's former and current clients. That case, however, concerned a motion for a prejudgment injunction, where findings of fact were made. Significantly, the court concluded that the limits placed upon the employee forbidding him from contacting former clients were unreasonable because the employer did not have the capacity to serve some of those former clients and therefore the clause was more about limiting competition and less about protecting its interests. That factual scenario is not present here and entertaining such an analysis would require the court to look at facts outside the pleadings.
The defendants' second argument is equally without merit. "In order to be valid and binding, a covenant which restricts the activities of an employee following the termination of his employment must be partial and restricted in its operation in respect to either time or place . . ." (Emphasis added; internal quotation marks omitted.) Scott v. General Iron Welding Co., 171 Conn. 132, 137, 368 A.2d 111 (1976). "[T]ime and geographic restrictions in a covenant not to compete are valid if they are reasonably limited and fairly protect the interests of both parties." Robert S. Weiss Associates, Inc. v. Wiederlight, supra, 208 Conn. 530. "[T]ime and geographical considerations are to be reviewed as intertwined when a determination is made on the reasonableness of the limitations of an employee's post-termination activities . . ." Van Dyck Printing Co. v. Dincola, 43 Conn.Sup. 191, 197, 648 A.2d 898, (1993), aff'd, 231 Conn. 272, 648 A.2d 877 (1994). "A restriction covering a large area might be reasonable if in effect for a brief time, while a restriction covering a small area might be reasonable for a longer time." Id. Although "the more recent cases have involved finite temporal restrictions" our courts have upheld permanent limitations on an individual's ability to practice his profession. Robert J. Reby Co., Inc. v. Bryne, supra, Superior Court, Docket No. CV 05 4004259; Styles v. Lyon, 87 Conn. 23, 86 A. 564 (1913). In Robert J. Reby Co., the court upheld a clause prohibiting the employee from soliciting current and potential clients of his current employer. Although the clause was not a pure non-compete, it contained no geographical or time restrictions. In an older case, Cook v. Johnson, 47 Conn. 175, 177-78 (1879), the Supreme Court upheld a permanent restriction on a dentist's ability to practice within a ten-mile radius of the person to whom he sold his business. One court, albeit in a different context, discussed treatment of covenants not to compete in our courts and determined that "Connecticut law does not require any such presumption of invalidity" as to lack of time or geographic restrictions. Newinno, Inc. v. Peregrim Development, Superior Court, judicial district of Fairfield, Docket No. CV 02390074 (June 3, 2003, Stevens, J.) [ 35 Conn. L. Rptr. 30]. "The mere fact that the duration of the restriction as to time is indefinite or perpetual will not of itself avoid the contract if it is limited as to place, and is reasonable and proper in all other respects." Cook v. Johnson, 47 Conn. 175, 178 (1879); see also Newinno, Inc. v. Peregrim Development, supra, Superior Court, Docket No. CV 02 390074; Robert J. Reby Co., Inc. v. Bryne, supra, Superior Court, Docket No. CV 05 4004259.
The present case concerns a covenant that operates for the greater of either two years or for so long as McDonald receives benefits under a deferred compensation plan. Under our case law, the mere fact that the covenant could be unlimited in duration does not make the covenant "per se unreasonable" on its face. Moreover, the covenant contains other limitations. The non-compete provision creates a geographic limitation, prohibiting McDonald from participating in the insurance business within a twenty-five mile radius from USI offices and the anti-solicitation is limited in that it is applicable only to former and present clients. Covenants that are applicable only to former and present customers are automatically limited in geography in that they are "limited to that area in which the customers are located." New Haven Tobacco Co. v. Perrelli, supra, 18 Conn.App. 537. While non-compete clauses containing radius restrictions have typically received greater scrutiny by the courts, radius restrictions have been upheld in several contexts. Robert S. Weiss Associates, Inc. v. Wiederlight, supra, 208 Conn. 531; Scott v. General Iron Welding Co., 171 Conn. 137-39 (upholding a statewide restriction). Finally, the covenant is not completely unlimited in duration, it is tied to a specific event that being the cessation of McDonald's participation in a deferred compensation plan.
The agreement is a little unclear in that paragraph nine specifically prohibits McDonald from soliciting current or past clients. Paragraph 7(b), however, defines client as: "any person, firm, or corporation that was a client or potential client at the time of Employee's termination or who was in such capacity at any time during the twelve months immediately preceding the Employee's termination."
In short, taking the covenant as a whole, nothing on the face of the contract renders the covenant unenforceable as a matter of law. Later proceedings may reveal that the covenant protects the employer in areas where they do not do business or that the prohibitions are not narrowly tailored to the business situation, but because on a motion to strike the court is limited only to the face of the pleadings, and nothing on its face renders the covenant per se unreasonable, the motion to strike is denied. Further, because the covenant on its face is not unreasonable, the court need not address the parties' arguments concerning the "blue pencil rule" at this time.
C Count Two Breach of Implied Covenant of Good Faith and Fair Dealing (Against McDonald) CT Page 2033
In count two, the plaintiffs assert that McDonald breached the implied covenant of good faith and fair dealing by (1) inducing USI's clients to cease doing business with USI; (2) accepting insurance business from and servicing USI's clients; and (3) interfering with USI's contractual relationships between USI and its employees. The defendants argue that because a breach of contract is required for the claim of the breach of the implied covenant of good faith and fair dealing and because a claim of breach of contract cannot lie where a restrictive covenant is unenforceable, the plaintiffs' claims under count two must fail. Alternatively, the defendants argue, that even if the plaintiffs' claims for breach of contract survive, the plaintiffs' claims under count two are insufficient because they fail to allege facts showing bad faith on the part of McDonald. Specifically, the defendants argue that the facts alleged in count two show only that McDonald breached his contract, and an express contractual breach is insufficient to support a showing of bad faith. The plaintiffs argue that because the covenant not to compete is reasonable and enforceable, the defendants have breached the of contract, and consequently, their claim for breach the implied covenant of good faith and fair dealing is not barred on that ground. Alternatively, the plaintiffs argue that a claim under the covenant of good faith and fair dealing could be brought on the theory that McDonald misappropriated confidential information that he gained during his employment in contravention of the contract.
Because the covenant is not per se unreasonable, the defendants' first argument is no longer viable and the only issue remaining is whether the plaintiffs have sufficiently alleged bad faith.
"[E]very contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term . . ." Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 16 n. 18, 938 A.2d 576 (2008). "Most courts decline to find a breach of the covenant apart from a breach of an express contract term . . . Stated otherwise, the claim [that the covenant has been breached] must be tied to an alleged breach of a specific contract term, often one that allows for discretion on the part of the party alleged to have violated the duty." (Citation omitted; internal marks quotations omitted.) Landry v. Spitz, 102 Conn.App. 34, 47, 925 A.2d 334 (2007).
"To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., supra, 285 Conn. 16-17 n. 18. "Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some sinister motive . . . Bad faith means more than mere negligence; it involves a dishonest purpose." (Internal quotation marks omitted.) Landry v. Spitz, supra, 102 Conn.App. 42-43. The Appellate Court has noted, however, that: "[a] complete catalogue of types of bad faith is impossible, but the following types are among those which have been recognized in judicial decisions: evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party's performance." (Internal quotation marks omitted.) Elm Street Builders, Inc. v. Enterprise Park Condominium Ass'n., Inc., 63 Conn.App. 657, 667, 778 A.2d 237 (2001). "Subterfuges and evasions violate the obligation of good faith in performance even though the actor believes them to be justified. But the obligation goes further: bad faith may be overt or may consist of inaction, and fair dealing may require more than honesty." Id.
A breach of contract, itself, however, is not a breach of the implied covenant of good faith dealing. On Site Gas Systems, Inc. v. Environics, Inc., Superior Court, complex litigation docket at Hartford, Docket No. X09 CV 04 4006239 (October 17, 2008, Shortall, J.). In On Site Gas Systems, Inc., the Superior Court determined that allegations that the defendant used confidential information in violation of a nondisclosure agreement "may amount to a breach of the non-disclosure agreement, but they do not even imply a sinister or dishonest purpose." The court stated that "[t]his is tantamount to saying that the breach of the contract, itself, is a breach of the covenant of good faith and fair dealing, and that is not the law." Id.; see also Fairfield Financial Mortgage Group, Inc. v. Salazar, Superior Court, judicial district of Danbury, Docket No. CV 00 0339752 (April 23, 2003, Moraghan, J.T.R.) ("Thus, in cases which have allowed claims of breach of implied covenant of good faith and fair dealing, there have been allegations beyond simple breach of contract that support a claim of the implied covenant").
In the present case, in count two, the plaintiffs have alleged that McDonald violated the covenant of good faith and fair dealing by soliciting and doing business with USI's clients and interfering with USI's employees' employment contracts in contravention of their agreement. The plaintiffs further allege in count two, by incorporation of paragraphs one through twenty-four, that McDonald, under the terms of his contract, agreed that he would refrain from both soliciting and servicing USI's clients and interfering with the employment relationships between USI and its current employees. While the plaintiffs' allegations in count two demonstrate that McDonald breached his contract with USI, similar to the allegations in On Site Gas Systems, Inc., they do not demonstrate that McDonald acted in bad faith. In count two, the plaintiffs do not allege any facts creating even an inference that McDonald's actions were the result of anything more than an honest mistake, that he had a dishonest purpose, or even that his breach was wilful. The plaintiffs' second argument that McDonald misappropriated confidential information is flawed for the same reasons. Again, while these facts might support a breach of contract claim, they do not support a claim of the implied covenant of good faith and fair dealing. See On Site Gas Systems, Inc. v. Environics, Inc., supra, Superior Court, Docket No. X09 CV 04 4006239 (determining that the plaintiff's allegations of misuse of confidential information amount only to a breach of the disclosure agreement and do not sink to the level of bad faith).
Accordingly, the court finds that the plaintiffs have not alleged enough facts to support allegations of bad faith on the part of McDonald, and therefore, the defendants' motion to strike count two is granted.
D Count Three Breach of Fiduciary Duty (Against McDonald)
In count three, the plaintiffs assert that McDonald breached his fiduciary duty to USI by (1) soliciting and servicing USI's former employees; and (2) interfering with USl's contractual relationships between USI, its employees, and clients. The defendant argues, however, that all of the transgressions forming the basis for the plaintiffs' claims occurred after McDonald terminated his employment relationship and that McDonald no longer owed a fiduciary duty to the plaintiffs at that time. The plaintiffs do not dispute that the transgressions alleged in their complaint occurred after McDonald terminated his employment with USI. Instead, the plaintiffs argue that McDonald owed a fiduciary duty to the plaintiffs by virtue of his restrictive covenant. Thus, the principle bone of contention between the two parties is the issue of when a fiduciary duty ends in an employment relationship containing a restrictive covenant.
An employee, as a fiduciary, "is obligated to exercise the utmost good faith, loyalty, and honesty toward his . . . employer." Town Country House Homes Service v. Evans, 150 Conn. 314, 317, 189 A.2d 390 (1963). "[An employee] during the term of the agency, is subject to a duty not to compete with the principal . . ." Id. "Generally speaking, in the absence of a restrictive covenant, a former employee may compete with his or her former employer upon the termination of employment." Elm City Cheese Co. v. Federico, 251 Conn. 59, 69, 752 A.2d 1037 (1999). "Thus, before the end of his employment, he can properly purchase a rival business and upon termination of the employment immediately compete. He is not, however, entitled to solicit customers for such rival business before the end of his employment . . . in direct competition with the agent's business." (Internal quotation marks omitted.) Town Country House Homes Service v. Evans, supra, 317. Nonetheless, "[e]ven after the employment has ceased, however, the employee remains subject to a duty not to use . . . confidential information, which he has acquired in the course of his employment, for his own benefit or that of a competitor to the detriment of his former employer." (Internal quotations marks omitted.) Elm City Co. v. Federico, supra, 69.
The plaintiffs argue that the phrase "absence of a restrictive covenant" implies that a fiduciary duty exists between a former employee and a former employer after the termination of an employment relationship. McDonald argues that the phrase refers only to a contractual obligation independent of any fiduciary duty owed by an employee, and accordingly, McDonald is only liable on the basis of contract law.
The Appellate Courts have not addressed this issue, however, at least one Superior Court determined that this clause "when read in its full context, refers to a breach of contract and not necessarily to a breach of fiduciary duty." Troxier Electronic Lab., Inc. v. Pallila, Superior Court, judicial district of Danbury, Docket No. 316518, (May 10, 1995, Stodolink, J.) ( 14 Conn. L. Rptr. 205). Nevertheless, the court in Troxler Electronic Lab, Inc. v. Pallila, supra, 14 Conn. L. Rptr. 205, concludes that in this context "a fiduciary's duty extends past the termination of agency." Courts in other jurisdictions have reached a similar conclusion finding that "[w]hile the termination of employment typically ends a fiduciary duty . . . this is not so where an employment contract contains a valid restrictive covenant." Labor Ready, Inc. v. Williams Staffing, LLC, 149 F.Sup.2d 398, 414 (N.D.Ill. 2001); see also Composite Marine Propellers v. Van Der Woude, 962 F.2d 1263 (7th Cir. 1992). "A fiduciary duty rests on the validity of an underlying contract." Id. A review of the Restatement (Third) of Agency supports this conclusion stating that, "[a]n agent has a duty to act in accordance with the express and implied terms of any contract between the agent and principal." Restatement (Third), Agency, Duty Created by Contract, § 8.07 p. 334 (2005).
In the present case, in their complaint, the plaintiffs allege that McDonald breached his fiduciary duty to USI by competing with USI and interfering with USI's contractual relations in contravention of the restrictive covenant, after he had terminated his relationship and joined Shoff Darby. Therefore, because an employee who enters into an agreement containing a restrictive covenant has a fiduciary duty, created by the contract, not to compete upon the termination of the agency relationship, the court finds the plaintiffs have alleged facts supporting a breach of a fiduciary duty. Accordingly, the defendants' motion to strike count three is denied.
E
Tortious Interference: Counts Four (Against McDonald), Five (Against Shoff Darby), Six (Against McDonald) and Seven (Against Shoff Darby) 1. Counts Four and Six (Against McDonald)In count four, the plaintiffs assert that McDonald tortiously interfered with the contractual relationships between USI and its employees by (1) trying to persuade USI's employees to terminate their employment with USI; (2) advising USI employees that their non-compete clause was unenforceable; and (3) offering to guide the employees through the termination process. The defendants first argue that the plaintiffs' complaint fails to state a cause of action because the plaintiffs do not allege facts showing either tortious conduct or an improper motive. The plaintiffs counter that they have in fact alleged tortious conduct or an improper motive. Specifically, the plaintiffs argue that the facts show that McDonald engaged in misrepresentation by informing USI's employees that the covenant not to compete was unenforceable and offering to guide them through their termination process.
"A claim for intentional interference with contractual [or business] relations requires the plaintiff to establish: (1) the existence of a contractual or beneficial relationship; (2) the defendant's knowledge of that relationship; (3) the defendant's intent to interfere with the relationship; (4) that the interference was tortious; and (5) a loss suffered by the plaintiff that was caused by the defendant's tortious conduct." Rioux v. Barry, 283 Conn. 338, 351, 927 A.2d. 304 (2007). The same basic proof requirements apply to a claim of tortious interference with business relations as tortious interference with contractual relations, except the former requires proof of a business relationship, whereas the latter requires proof of a contractual relationship. Robinson v. Robinson, 103 Conn.App. 69, 77, 927 A.2d 364 (2007). "[F]or a plaintiff successfully to prosecute . . . an action [of tortious interference with business relations] it must prove that the defendant's conduct was in fact tortious. This element may be satisfied by proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously . . . [An] action for intentional interference with business relations . . . requires the plaintiff to plead and prove at least some improper motive or improper means . . . [A] claim is made out [only] when interference resulting in injury to another is wrongful by some measure beyond the fact of the interference itself." (Internal quotation marks omitted.) Downes-Patterson Corp. v. First National Supermarkets, Inc., 64 Conn.App. 417, 429, 780 A.2d 967, cert. granted, 258 Conn. 917, 782 A.2d 1242 (2007). "Like the definition that emerges from our own cases, the Restatement (Second) of Torts defines intentional interference with business relations to cover a broad range of behavior." Blake v. Levy, 191 Conn. 257, 261, 464 A.2d 52 (1983). "Every act of interference is not, however, made tortious." Id.
A similar factual scenario was addressed in Desrosier of Greenwich v. Shumway Capital Partners, Superior Court, judicial district of Stamford, Docket No. CV 05 4004621 (May 30, 2006, Lewis, J.T.R.). In that case, on a motion to strike, the plaintiffs alleged that the defendants contracted with the plaintiffs to hire a consultant from the plaintiff's company, and in return, the defendants agreed that they would not solicit the consultant for employment at their company. Id. Subsequent to the agreement, the defendants encouraged the consultant to quit his employment with the plaintiffs and advised him that the non-compete clause in his own agreement was unenforceable. Id. The defendants eventually hired the consultant in contravention of their agreement with the plaintiff. Id. The court concluded that based on those allegations, the plaintiff had alleged both an improper motive and intentional interference by showing that the defendants "[terminated their] service contract with the plaintiff and subsequently [hired] away the plaintiff's [employee] to perform similar work." Id. The court noted that "[t]he purpose of the clause in the agreement forbidding the defendant from hiring any of the plaintiff's employees was more than likely included to prevent just such an occurrence." Id.
In the present case, the plaintiffs allege that McDonald solicited employees in contravention of his agreement, encouraged employees to quit their positions with USI and join Shoff Darby, and advised them that their covenants were not enforceable. Thus, the plaintiffs, similar to the plaintiffs in Desrosier of Greenwich v. Shumway Capital Partners, have sufficiently alleged improper motive on the part of McDonald.
The defendants next argue that the plaintiffs fail to allege facts showing an actual loss, which is a necessary component of a claim for tortious interference. The plaintiffs counter that they have alleged facts showing loss by pleading that they were harmed and entitled to damages.
"In order for the plaintiff to establish liability for interference with a contractual relationship, the plaintiff must show that the defendants' tortious conduct caused the [employees] to terminate [their] relationship with the plaintiff." Collum v. Chapin, 40 Conn.App. 449, 452, 671 A.2d 1329 (1996). "Unlike other torts in which liability gives rise to nominal damages even in the absence of proof of actual loss . . . it is an essential element of the tort of unlawful interference . . . that plaintiff suffers actual loss." Appleton v. Board of Education, 254 Conn. 205, 213, 757 A.2d 1059 (2000). "Thus, it must appear that, except for the tortious interference of the defendant, there was a reasonable probability that the plaintiff would have entered into a contract or made a profit . . . Such a determination is a question for the trier of fact, as is the question of whether the plaintiff has suffered an actual loss . . . If the question is whether the plaintiff would have succeeded in attaining a prospective business transaction in the absence of [the] defendant's interference, the court may, in determining whether the proof meets the requirement of reasonable certainty, give due weight to the fact that the question was made hypothetical by the very wrong of the defendant." (Citations omitted; internal quotation marks omitted.) American Diamond Exchange, Inc. v. Alpert, 101 Conn.App. 83, 97, 920 A.2d 357, cert. denied, 284 Conn. 901, 931 A.2d 261 (2007).
In Desrosier of Greenwich v. Shumway Capital Partners, supra, Superior Court, Docket No. CV 05 4004621, the court, applying the test delineated above, determined that "[a]lthough the plaintiff has not specified the damages it suffered, the allegations [that the employee left employment and the employer thereby incurred a loss were] sufficient to show that it is reasonably certain that the plaintiff suffered a monetary loss since it was deprived of the benefit it would have received from the services of [its employee]." Id.
In the present case, the plaintiffs allege that they suffered harm. However, unlike the plaintiffs in Desrosier of Greenwich, the plaintiffs have not alleged that any of the employees actually left USI as a result of McDonald's behavior. Id. To be sure, the plaintiffs have alleged that they have suffered harm, but, these allegations are conclusory. "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
2. Count Six
In count six, the plaintiffs assert that McDonald tortiously interfered with USI's business relationship between USI and its clients by soliciting and attempting to do business with their clients. The defendants argue that the plaintiffs' complaint fails to state a cause of action because the plaintiffs do not allege facts showing either (1) tortious conduct, (2) an improper motive, or (3) actual loss. Specifically, the plaintiffs argue that the facts show that McDonald engaged in misrepresentation by falsely informing USI's clients that one of USI's employees was leaving the company to have a child. The plaintiffs further argue that they have alleged facts showing actual loss by pleading that they were harmed and entitled to damages. Applying the principles articulated above in count four, the plaintiffs have sufficiently alleged both an improper means and actual loss. The plaintiffs allege that McDonald falsely informed a current USI client that one of its brokers was a stay at home mother. Reading the complaint in a light most favorable to the plaintiffs, the plaintiffs have alleged that McDonald used "at least some improper motive or means" to gain USI's client's business. Blake v. Levy, supra, 191 Conn. 262.
In the present case, the plaintiffs have pleaded, by incorporation of paragraph nineteen, that the defendants are now the brokers of record for the plaintiffs' former or potential clients. It can be inferred from those facts that the plaintiffs have actually lost current or prospective clients due to the misrepresentations of the client. Although, the plaintiffs do not specifically name the client that was lost as a result of McDonald's actions, on a motion to strike "[w]hat is necessarily implied [in an allegation] need not be expressly alleged." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). "Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Id. Moreover, in light of the more lenient standard for proving actual loss in tortious interference with business relations claims, articulated by the Appellate Court above, Superior Courts have not required such a level of specificity on motions to strike. See Tassmer v. McManus, Superior Court, judicial district of New Haven, Docket No. CV 08 5018061 (October 1, 2008, Bellis, J.) (concluding that plaintiffs alleged a claim for tortious interference despite their failure to name willing prospective buyers that were lost or an existing contract that was impaired); see also NEJ, Inc. v. Kentucky Apparel, LLP, Superior Court, judicial district of Waterbury, Docket No. CV 05 4006714 (February 10, 2006, Brunetti, J.) (finding that the plaintiff's allegations of damage to their business relationships and reputation in eyes of customers were sufficient to show actual loss even though plaintiffs did not plead loss of tangible specific customer). Thus construing the complaint broadly, the plaintiffs sufficiently plead the "actual loss" element of tortuous interference and accordingly, the defendants' motion to strike count six is denied.
3. Counts Five and Seven
In count five, the plaintiffs assert that Shoff Darby tortiously interfered with USI's contractual relationship with McDonald, and in count seven, the plaintiffs allege that Shoff Darby tortiously interfered with USI's business relationships with its clients. The defendants argue that the plaintiff's allegations in counts five and seven are insufficient because they fail to show that Shoff Darby acted maliciously or had an improper motive. The plaintiffs appear to argue that they have stated a claim of tortious interference by alleging: (1) Shoff Darby knew of the restrictive covenant; (2) acted tortiously and interfered with the relationship; and (3) obtained a financial benefit in doing so. They appear to be arguing that these allegations alone are enough to support their claim. They further argue that Shoff Darby participated in a scheme to divert customers away from USI and consequently, acted with an improper motive.
As stated above, to support a claim for tortious interference, "the plaintiff must plead and prove at least some improper motive or improper means." American Diamond Exchange v. Alpert, supra, 101 Conn.App. 90. "This element may be satisfied by proof that the defendant is guilty of fraud, misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously." (Internal quotations omitted.) Blake v. Levy, supra, 191 Conn. 261. The Supreme Court has determined in Robert S. Weiss Associates, Inc. v. Wiederlight, supra, 208 Conn. 536, a factually identical case, that allegations of mere knowledge of a restrictive covenant coupled with allegations that the defendant encouraged the restricted party to sell insurance in the restricted area do not "fairly imply that the [defendant] acted with . . . malice." Superior courts have also reached the same conclusion that mere knowledge of a restrictive covenant alone does not arise to a claim for tortious interference with either the employer's contractual relations with their employees or their business relations with their clients. Pediatric Occupational Therapy Services, Inc. v. Wilton, Superior Court, judicial district of Waterbury, Docket No. CV 02 0174833 (July 5, 2004, Alander, J.) ( 37 Conn. L. Rptr. 115); see also Sanford Hall Agency, Inc. v. Dezzanni, Superior Court, supra, 38 Conn. L. Rptr. 420. Nor does hiring an employee in violation of a restrictive covenant arise to a claim for tortious interference. Pediatric Occupational Therapy Services, Inc. v. Wilton, supra, 37 Conn. L. Rptr. 115. Indeed, an employer has an adequate, business-related justification to hire "a skilled professional . . . whose expertise would benefit [its] customers." Sanford Hall Agency, Inc. v. Dezzanni, supra, 38 Conn. L. Rptr. 420. "While hiring one of the plaintiff's employees may be viewed as interference with the plaintiff's business, it does not mean that it is tortious since not all interference is considered to be tortious." Id.
Similar to the plaintiff in Robert S. Weiss Associates, Inc., the most the complaint alleges is that Shoff Darby knew of the covenant's terms when it hired McDonald. This fact alone is not enough for a claim of tortious interference on either the basis that Shoff Darby interfered with USI's contractual relations with McDonald or its business relations with its clients.
It should be noted that this factual scenario is distinguishable from the scenario presented in Desrosier of Greenwich v. Shumway Capital Partners, supra, Superior Court, Docket No. CV 05 4004621, cited above in count four. That case concerned a company who hired a consultant from another company in contravention of their own agreement that they would not solicit that consultant for employment purposes. In the present case, Shoff Darby does not have such a contract with USI.
To be sure, plaintiffs alleged in their complaint that Shoff Darby obtained some financial betterment at the expense of USI, and they argue in their memorandum in opposition that Shoff Darby participated in a scheme or conspiracy to divert customers. Neither of these allegations are sufficient. First, the plaintiffs do not allege in count seven or count five of their complaint that Shoff Darby participated in a scheme to divert customers. "It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents . . ." Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n. 9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005). Second, mere allegations of encouragement on the part of a present employer or financial betterment are insufficient to arise to claims of tortious interference. Robert S. Weiss Associates, Inc. v. Wiederlight, supra, 208 Conn. 535-36. There is nothing in counts five or seven of the complaint indicating that Shoff Darby acted improperly such as requiring McDonald to "bring in the plaintiff's clients or misappropriate any company information as a condition of [his] employment." Sanford Hall Agency, Inc. v. Dezzanni, supra, 38 Conn. L. Rptr. 420. Therefore, the defendants' motion to strike counts five and seven are granted.
F CUTPA Violations: Counts Eight (Against McDonald) and Nine (Against Shoff Darby) 1. Count Eight
In count eight, the plaintiffs assert that all of McDonald's aforementioned transgressions violate CUTPA. The defendants first argue that the CUTPA claim against McDonald is invalid because it is based upon the premise that McDonald was acting in contravention of the non-compete agreement. The defendants contend that absent the non-compete agreement, McDonald's actions would not violate CUTPA, and it follows that because the non-compete is unenforceable, McDonald's actions do not violate CUTPA. At the outset, the court having concluded in count one that the covenant is not per se unreasonable, the defendants' first argument is no longer viable. The defendants next argue that, assuming the non-compete is enforceable, the plaintiffs' CUTPA allegations are nothing more than legal conclusions that are unsupported by factual allegations. Specifically, the defendants argue that the plaintiffs' allegations at best allege a breach of contract, and a mere breach of contract does not violate CUTPA. The plaintiffs contend that they have alleged more than a breach of contract claim. Specifically, the plaintiffs argue that they have alleged that McDonald has (1) solicited and serviced clients in contravention of the agreement; (2) spread false rumors about USI employees to USI clients; (3) solicited and attempted to persuade USI employees to terminate their relationships; (4) told USI's employees that their covenants were unenforceable; and (5) offered to guide those employees through the termination process. The defendant counters that McDonald's attempts to solicit USI's employees and the misrepresentation stemming from those attempts do not satisfy CUTPA because the plaintiffs have failed to show that they were injured as a result of McDonald's actions.
Connecticut Unfair Trade Practices Act, General Statutes § 42-110 et seq.
"CUTPA provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce . . . In order to enforce this prohibition, CUTPA provides a private cause of action to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice . . . Thus, in order to prevail in a CUTPA action, a plaintiff must establish both that the defendant has engaged in a prohibited act and that, as a result of this act, the plaintiff suffered an injury." (Citations omitted; emphasis in original; internal quotation marks omitted.) Stevenson Lumber Co.-Suffield, Inc., v. Chase Associates, Inc., 284 Conn. 205, 213-14, 932 A.2d 401 (2007).
"It is well settled that in determining whether a practice violates CUTPA [the Connecticut Supreme Court] has adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other business persons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to lesser extent it meets all three." (Internal quotation marks omitted.) Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 155, 881 A.2d 937 (2005), cert. denied, 547 U.S. 1111, 126 S.Ct. 1913, 164 L.Ed.2d 664 (2006).
"A claim under CUTPA must be pleaded with particularly to allow evaluation of the legal theory upon which the claim is based." (Internal quotation marks omitted.) S.M.S. Textile Mills, Inc. v. Brown, Jacobson, Tillinghast, Lahan King, P.C., 32 Conn.App. 786, 797, 631 A.2d 340, cert. denied, 228 Conn. 903, 634 A.2d 296 (1993). "[N]ot every contractual breach rises to the level of a CUTPA violation." Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571, 845 A.2d 417 (2004). Although "the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation;" Greene v. Orsini, 50 Conn.Sup. 312, 315, 926 A.2d 708 (2007); "[a] breach of contract claim can make out a legally sufficient CUTPA claim [only] as long as there are substantial aggravating circumstances." (Internal quotation marks omitted.) Alliance Food Management v. Gem Sensors, Superior Court, judicial district of Waterbury, Docket No. CV 06 5002996 (June 12, 2007, Gallagher, J.).
"Although there is a split of authority in the Superior Courts as to what is necessary to establish a CUTPA claim for a breach of contract, the vast majority of Superior Court decisions [conclude] that, absent allegations of sufficient aggravating circumstances, [a] simple breach of contract, even if intentional, does not amount to a violation of [CUTPA]." (Internal quotation marks omitted.) Centimark Corp. v. Village Manor Associates, Superior Court, judicial district of Windham, Docket No. CV 03 0070166 (June 21, 2007, Martin, J.). The Supreme Court appears to have adopted this standard in Lydall v. Ruschemeyer, 282 Conn. 209, 247, 919 A.2d 421 (2007), citing a federal district court standing for the same proposition.
"It has been held that a misrepresentation can constitute an aggravating circumstance that would allow a simple breach of contract claim to be treated as a CUTPA violation; it would in effect be a deceptive act . . . CUTPA liability should not be imposed, however, when a defendant merely has not delivered on a promise unless the defendant made a representation as to a future act coupled with a present intent not to fulfill the promise." (Internal quotation marks omitted.) Centimark Corp. v. Village Manor Associates, Superior Court, judicial district of Windham, Docket No. CV 03 0070166 (June 21, 2007, Martin, J.). Yet, "[even an] innocent misrepresentation can amount to a CUTPA violation." Friedlander Limited Partnership v. Cohen, Superior Court, judicial district of Bridgeport, Docket No. CV 04 0412547 (April 15, 2005, Skolnick, J.). "Where . . . a defendant made a representation during the course of the defendant's business practice, with or without the intent to deceive or fraud, and that misrepresentation led a plaintiff to lose money or property, that plaintiff has alleged a cause of action under CUTPA . . . Negligent misrepresentation suffices as a basis for a CUTPA claim and as an aggravating factor making a breach of contract action also the basis of a CUTPA claim." Id.
Breaches of contract that are considered "egregious and unconscionable" can also arise to CUTPA violations. Beebe v. Kasmun Builders, Inc., Superior Court, judicial district of Tolland, Docket No. CV 90 46122 (February 10, 1993, Klaczak, J.) For example, "[m]ultiple breaches of contract may also raise a breach of contract claim to the level of a CUTPA violation." Ameripride Services, Inc. v. U.S. Food Service, Inc., Superior Court, judicial district of Hartford, Docket No. CV 04 0835453 (June 7, 2006, Tanzer, J.). In Green v. Orsini, supra, 50 Conn.Sup. 316, the court found a CUTPA violation where the defendants violated their restrictive covenant on multiple occasions. After violating the covenant, the defendants promised they would refrain from further violations but continued to compete with the defendants in spite of their promises. Id. The court determined that both the misrepresentations and multiple violations of the covenant separately constituted aggravating factors. Id. Further, the Supreme Court, in Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 494, 656 A.2d 1009 (1995), intimated that an employee who accepts a position with a competing business and then, acting as a competitor, makes false representations that harm the former employer, may violate CUTPA. In the context of addressing a different issue, the Supreme court concluded that these allegations "may constitute a violation of CUTPA." Id. Indeed, a plaintiff can allege aggravating circumstances by alleging that "the defendants solicited and sold services to [a former employer's customers] in direct competition with [the employer] . . ." Sabatasso v. Bruno, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 03 0284486 (March 7, 2005, Tanzer, J.)
In the present case, the plaintiffs allege that McDonald spread false rumors to USI's customers concerning USI employees and violated the non-compete provisions of the contract several times. The actions allegedly taken by McDonald are similar to those taken by the defendants in Green v. Orsini and Realty Co. v. Larsen and constitute aggravating circumstances sufficient for CUTPA violation.
Further, because the plaintiff has alleged sufficient aggravating factors on the basis that McDonald repeatedly breached the covenant and by making false statements to USI's clients, the court need not reach the defendants' third argument that plaintiffs failed to show that USI was harmed by McDonald's actions aimed at USI's employees. The court finds that the plaintiffs have alleged sufficient facts to support a claim under CUTPA. The defendants' motion to strike count eight is denied.
2. Count Nine
As to count nine, the defendants argue that the plaintiffs base their alleged CUTPA violations on the presumption that Shoff Darby tortiously interfered with the plaintiffs' business. The defendants argue that because the plaintiffs fail to state a cause of action for tortious interference, the CUTPA violation must fail as well. Further, the defendants contend that there is no basis for the claim that Shoff Darby somehow violated CUTPA by hiring McDonald in violation of the non-compete clause. The plaintiffs argue that their claim amounts to more than a mere tortious interference claim. They contend that Shoff Darby engaged in unfair trade practices by (1) hiring McDonald in spite of their knowledge of the restrictive covenant; (2) soliciting, servicing and interfering with USI's relationship with its clients; and (3) assisting, advising, aiding and or allowing McDonald to spread false rumors about USI's employees.
"[T]he essential difference between a tort claim for interference with business expectancies and a claim under CUTPA is the standard by which the alleged acts are measured. While liability in tort is imposed only if the defendant maliciously or deliberately interfered with a competitor's business expectancy, CUTPA liability is premised on a finding that the defendant engaged in unfair competition and unfair deceptive trade practices." Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 755, 474 A.2d 780 (1994). "[I]mproper conduct that does not rise to the level of tortious interference may, nonetheless, constitute a CUTPA violation." Par Painting, Inc. v. Greenhorne O'Mara, Inc., 61 Conn.App. 317, 328, 763 A.2d 1078, cert. denied, 255 Conn. 951, 770 A.2d 31 (2001).
At least one Superior Court has determined that hiring an employee in spite of covenant not to compete does not necessarily constitute an "unscrupulous, unfair or deceptive" act. Sanford Hall Agency, Inc. v. Dezzanni, supra, 38 Conn. L. Rptr. 420. Further, one Superior Court has concluded that merely soliciting business in spite of having knowledge of an existing contract is "insufficient to support a CUTPA claim." Giordano Associates, Inc. v. Yagovane, Superior Court, judicial district of New Haven, Docket No. CV 06 5002958, (June 6, 2007, Cosgrove, J.). Moreover, naked "allegations of usurpation and diversion of business are insufficient to maintain a cause of action . . . [under] CUTPA . . ." Baer v. New England Home Delivery Services, LLC, Superior Court, judicial district of New Haven, Docket No. CV 06 4021976 (October 18, 2007, Lopez, J.).
In their complaint, the plaintiffs allege that Shoff Darby engaged in unfair practices by hiring McDonald and soliciting insurance business from USI's clients to be serviced by McDonald in contravention of the non-compete clause. These allegations alone merely restate their claims for tortious interference and do not violate CUTPA. The plaintiffs, however, further allege that Shoff Darby assisted or advised McDonald to spread false rumors about USI's employees. These allegations, if true, could support a claim under CUTPA. Therefore, the plaintiffs have alleged sufficient facts in support of their CUTPA claim against Shoff Darby, and accordingly, the defendants' motion to strike count nine is denied.
CONCLUSION
For the foregoing reasons, the court denies the defendants' motion to strike counts one, three, six, eight and nine and grant the defendants' motion to strike counts two, four, five, and seven.