No. CV-06-4020633 S
December 12, 2006
MEMORANDUM OF DECISION
The plaintiff, Braman Chemical Enterprises, Inc. ("Braman"), a Massachusetts corporation with an office and principal place of business in Agawam, Massachusetts, provides pest control services to commercial and residential customers. It is authorized to, and does, conduct business in Connecticut. It has brought this action against a former employee, Valerie Barnes, seeking to enforce a non-compete clause in her employment agreement. Barnes opposes the plaintiff's efforts to enjoin her from competing with the plaintiff in Connecticut, primarily on the basis of her contention that the geographical restriction contained within the employment agreement . . . a radius of 50 miles from the Hartford City Hall . . . is unreasonable.
Most of the facts in this case are undisputed and were submitted to the court in the form of a written stipulation, summarized as follows: Braman has approximately 600 to 700 Connecticut commercial customers located in all of the State's cities and in many of its larger towns. Except for Fairfield County, in which it does little business, Braman services commercial and/or residential customers in at least 90 percent of Connecticut municipalities, although it does not have customers in all of the municipalities within the 50 mile radius from the Hartford City Hall. In 2005, Braman's total sales were approximately $4.6 million, of which commercial sales in Connecticut amounted to approximately $1.4 million. Its commercial sales in New Haven County amounted to approximately $125,000.
The defendant resides in Hamden, Connecticut. On November 5, 1990, Braman hired her to perform pest-control services for its commercial and residential customers in Connecticut. Before the start of her employment, and in consideration of her hire, Barnes executed a document dated October 24, 1990 and titled "Restriction Against Other Employment After Termination of Work With Braman Chemical Enterprises, Inc." This "non-compete" provides, in relevant part, as follows: CT Page 22816
Valerie Barnes agrees that he/she will not directly or indirectly, either as principal, or agent, or servant, for the period of 6 months after any termination of employment, enter or engage in any branch of the pest control business within 50 miles of the City Hall in the city of Hartford, Connecticut . . .
Prior to her employment with Braman, Barnes had no experience in the pest-control business, and Braman trained Barnes for her Operator's License. During the course of her employment with Braman, Barnes obtained her Supervisor's License on her own time and at her own expense. Braman paid license renewal fees on two or three occasions, allowing the defendant to retain her Supervisor's License.
Commencing in late 1990 and continuing until April 26, 2006, Barnes worked as an exterminator for Braman, driving a company truck from customer to customer and directly rendering extermination services. Many of the customers she serviced were restaurants and other businesses that received services on a prescribed schedule, such as once or twice per month. At the beginning of her employment, Barnes' territory stretched from Greenwich to New London, and included most of southwest and southeast Connecticut. Hartford was not part of her territory. Over the years, Braman hired more exterminators to work in Connecticut, and Barnes' territory contracted to cover the area including the Connecticut shoreline from New Haven to Guilford, and north from New Haven to Meriden.
Toward the end of her employment with Braman, Barnes serviced approximately 65 (roughly ten percent) of Braman's regular Connecticut customers. She had little responsibility for sales or solicitation calls. During most of her tenure at Braman, and continuing to this day, Braman has had two full-time sales representatives in Connecticut, one of whom works in the territory that Barnes serviced. Developing new commercial customers for Braman involves personal visits to each prospect's place of business, and it sometimes involves repeated visits to the same prospect. Although Barnes did some sales work for which she received commissions, a significant majority of the customers on Barnes' route at Braman were developed by Braman's sales representatives, not by Barnes or other exterminators. In 2002, Barnes was offered and accepted a sales position, but after several months, her replacement quit, and Barnes returned to being an exterminator.
On January 5, 2006, Barnes formed a Connecticut limited liability company called "Bug One, LLC," with an office address at her home, 58 Laura Road, Hamden, Connecticut. The office address is approximately 37 miles from City Hall in Hartford, and therefore within the geographic scope of the "non-compete area". Indeed, with the exception of part of Fairfield County, most of the cities and towns in Connecticut are within the non-compete area.
Effective April 26, 2006, Barnes left her employment at Braman. Within one week following her resignation date, she commenced operating "Bug One" from her Office Address. Within three weeks of her resignation date, twenty-four of the customers that Barnes had serviced as an employee of Braman had cancelled their service contracts with Braman and entered into service contracts with Bug One. Barnes, through Bug One, is now providing them with pest-control services that are substantially identical to those she had provided while an employee of Braman. For the one year period that began on April 1, 2005 and ended on March 31, 2006, she had billed these entities $29,393.62 for her services. It is undisputed that each of the twenty-four customers is located within New Haven County and within the non-compete area. Braman now has approximately 69 remaining commercial customers in New Haven County.
For the six-month period contemplated by this Non-Compete agreement, the defendant therefore billed approximately $14,700.
In 1996, roughly six years after Barnes had commenced her employment, the owner and general manager of Braman held a meeting with the employees during which the company gave the employees, including Barnes, a new non-compete agreement to sign. Barnes reviewed that agreement and decided not to sign it. Neither she nor Braman, however, made any effort to terminate her employment as a result of that decision.
Barnes was always paid as an hourly employee. During the beginning of her employment, she worked many overtime hours, some of which were mandatory. As Braman hired more exterminators in the territory in which Barnes worked, and as her territory contracted, she was given less opportunity to earn overtime pay because more people were sharing the available work. She did not receive a raise in 2005, even though she had received annual increases in her hourly pay prior to that year.
Braman filed the instant Application for Ex Parte Temporary Restraining Order, Temporary Injunction After Hearing, and Order to Show Cause on May 24, 2006. The Court, Pittman, J., denied the plaintiff's request for ex parte relief, but issued a show cause order for June 27, 2006. The parties agreed that the material facts were not in dispute, and they eventually selected a date on which to present the case to the court on the basis of the stipulation of facts outlined above, oral argument and written memoranda of law. The court heard argument on September 18, 2006, and the final brief was filed on October 31, 2006. The parties agree that under Connecticut law, a covenant not to compete is valid and enforceable "if the restraint is reasonable." New Haven Tobacco Co. v. Perrelli, 18 Conn.App. 531, 534 (1989). For a non-compete clause to be valid and binding, it must be "partial and restricted in its operation in respect either to time or 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 interests of the public. The interests of the employee himself must also be protected, and a restrictive covenant is unenforceable if by its terms the employee is precluded from pursuing his occupation and thus prevented from supporting himself and his family." Scott v. General Iron Welding Co., 171 Conn. 132, 137 (1976).
"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 (1988). "[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." Id., 208 Conn. at 530.
This five-prong test applies both to non-compete provisions, which bar an ex-employee from engaging in the same kind of business as the former employer, and to anti-sales provisions, which bar an ex-employee from transacting business with his former employer's customers. Robert S. Weiss Associates, Inc. v. Wiederlight, supra; New Haven Tobacco Co. v. Perrelli, supra, 18 Conn.App. at 535, n. 2. Our courts, however, have tended to apply greater scrutiny to non-competes that create general bars based on geographical considerations than to those which focus simply on doing business with the employer's customers.
"The general rule is that the application of a restrictive covenant will be confined to a geographical area which is reasonable in view of the particular situation." Scott v. General Iron, supra, 171 Conn. at 138. Geographic restrictions should be "narrowly tailored to the plaintiff's business situation." Robert S. Weiss Associates, Inc. v. Wiederlight, supra, 208 Conn. at 531 (although a 10-mile radius restriction was upheld, areas were carved out where the employee was free to practice his trade.) In that case, the court said that it was permissible for the employer to protect itself in a "reasonably limited market area." Id., at 533.
Although in Van Dyck Printing Co. v. DiNicola, 43 Conn.Sup. 191, 648 A.2d 898 (1993), the court stated that the reasonableness of time and geographic restrictions in a covenant not to compete are intertwined and that broad geographic restrictions may be reasonable if the duration of the covenant is short, and longer periods may be reasonable if the geographic area is small, our Appellate Court has instructed us that "the five pronged test is disjunctive; a finding of unreasonableness in any one of the criteria is enough to render the covenant unenforceable." New Haven Tobacco Co., Inv. v. Perrelli, 18 Conn.App. 531, 534, 559 A.2d 715, 717 (1989). This court concludes that the meaning of prior case law on this subject is that while the non-compete must be viewed in its entirety, a single unreasonable provision may be sufficient to invalidate the entire agreement.
Under our law, the party challenging the enforceability of a non-compete has the burden of proving that it is not enforceable, Scott v. General Iron Welding Co., 171 Conn. 132, 139 (1976). In addition, there is some case law to the effect that when a party seeks injunctive relief to enforce a non-compete against a person who has taken the party's customers and is rendering the same kind of services to them, the usual requirements of establishing irreparable harm and lack of an adequate remedy at law do not apply. Mattis v. Lally, 138 Conn. 51, 56 (1951). In such a case, "irreparable damage would inevitably result from a violation of the defendant's promises." Id. "[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." Kim's Hair Studio. LLC v. Rogers, 2005 WL 1971259 (Conn.Super.) The plaintiff here essentially argues that it wants to earn its money by exterminating vermin, "not to live on the income from a damages award." Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir. 1970). Thus, if plaintiff were to establish that the competition from the defendant was likely to shut down its business, the court would be likely to conclude that irreparable harm had been established. The plaintiff has not made such a showing. Moreover, in light of the court's conclusion, infra, that the unenforceability of the geographical restriction is fatal to the validity of the non-compete, irreparable harm turns out not to be a material factor in deciding whether the plaintiff is entitled to the issuance of a temporary injunction.
The defendant attacks the non-compete on several grounds. First, she has argued that the non-compete is unenforceable because of lack of consideration. This claim is without merit. Barnes has acknowledged in the written stipulation of facts that she executed the non-compete shortly before the start of her employment with Braman and in consideration of her hire. It is true that she was requested to sign another non-compete agreement in 1996 and refused to do so, but the defendant has offered no basis upon which the court could conclude that by offering a different non-compete that was rejected, the plaintiff in some way diminished the validity of the original agreement.
Barnes does not vigorously contest the plaintiff's claim that the six-month time frame contained in the non-compete is reasonable. As of her Resignation Date, she was servicing approximately 65 of Braman's 600 to 700 regular Connecticut customers. Braman has only two sales representatives in Connecticut, and it argues persuasively that six months is a reasonable time frame to allow its sales people to take on the additional task, above and beyond their regular duties, of securing those customers and the attendant goodwill following her departure from the company, as well as making arrangements to service those customers.
In fact, Connecticut courts have fairly frequently enforced non-compete periods of a year or more. See, e.g., Van Dyck Printing Company v. DiNicola, 43 Conn.Sup. 191 (1993), affirmed per curiam 231 Conn. 272 (1994) (one year); Robert S. Weiss Assoc. v. Wiederlight, 208 Conn. 525 (1988) (two years); Hart Nininger Campbell Assoc. v. Rogers, 16 Conn.App. 619 (1988) (two years); Scott v. General Iron Welding Co., 171 Conn. 132 (1976) (five years); Torrington Creamery, Inc. v. Davenport, 126 Conn. 515 (1940) (two years). An employer may pursue "the legitimate goal of allowing a period during which he could restaff his sales force to serve the customers formerly serviced by the defendant without losing the accounts to the appropriation by the defendant of the accumulated goodwill and familiarity built up by the plaintiff as his employer." Van Dyck, supra, 43 Conn.Sup. at 198.
The principal bone of contention in this case thus not the time restriction but rather the reasonableness of the non-compete's geographical restriction, a circle described by a fifty-mile radius drawn from the Hartford City Hall. Braman argues that the area is reasonably tailored to meet its legitimate business needs, pointing out that while the non-compete area covers most of Connecticut, it has customers in at least 90% of Connecticut's municipalities, and the non-compete area is substantially congruent with the area in which the company actually does business. "The fact that an employer seeks to protect his interests 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." Robert S. Weiss Assoc. v. Wiederlight, supra, 208 Conn. at 533.
To bolster its argument that the non-compete area is reasonable, Braman points out that it does not include all of Fairfield County, a part of the state in which the company does relatively little business. It suggests that because the agreement permits Barnes to pursue her livelihood during the non-compete period in a part of the state in which she previously had plied her trade, it is not unduly restrictive. In taking this position, however, it overlooks several important issues of fact and law.
First, the size of the geographical restriction makes it clear that Braman is focusing its attention not just on protecting its interest in those existing customers who were actually serviced by Barnes, or even those who might in some way have become acquainted with her professionally in the course of her tenure at Braman, but rather on excluding all competition from her within the very large entire territory in which it conducts much of its business. The defendant contends that because this is a geographic restriction that seeks far more than a "fair protection" of the plaintiff's interests, it is an unreasonable restraint of trade, regardless of its duration. She cites numerous cases in which large geographical restrictions were held to be invalid. See, e.g., Nesko Corp. v. Fontaine, 19 Conn.Sup. 160, 110 A.2d 631 (1954) (35-mile restriction, including a population of more than 1.5 million people, held invalid); Trans-Clean Corp. v. Terrell, 1998 Ct.Sup. 3765 (Conn.Super. 1998) (court noted that the 60-mile radius from the employer's home office in Stratford encompassed approximately 75% of the state); Timenterial, Inc. v. Dagata, 29 Conn.Sup. 180, 277 A.2d 512 (1971) (50-mile radius restriction held invalid).
The restriction sought by the plaintiff in this case is in fact a circle with a diameter of 100 miles. The total area covered is a whopping 7850 square miles (using A= r2). In contrast, the total area of the State of Connecticut, according to its official government website, is only 5018 squares miles, and while this non-compete does not quite cover all of the state, it does include portions of Massachusetts, New York and Rhode Island.
An examination of the cases which have upheld radius-based restrictions reveals that many of them involve non-competes in connection with the sale of business. Leo's Partners, LLC v. Ferrari, 2005 WL 3667346 (Conn.Super. 2005) (20-mile restriction in connection with the sale of a family restaurant); Kim's Hair Studio, LLC v. Rogers, 2005 WL 1971259 (Conn.Super. 2005) (10-mile restriction in connection with the sale of a beauty salon); and Sagarino v. SCI Connecticut Funeral Services, Inc., 2000 WL 765260 (Conn.Super. 2000) (30-mile restriction in connection with the sale of a family-owned funeral home). Indeed, the courts have less willing to uphold such restrictions against departing employees than they have in cases involving the sale of a business. See, Samuel Stores, Inv. v. Abrams, 94 Conn. 248, 108 A.2d 541 (1919). One case decided by the undersigned, which did concern a departing employee, involved only a 15-mile radius restriction. Access America, LLC v. Mazzotta, 2005 WL 2650093 (Conn.Super. 2005). In that case, the plaintiff real estate broker successfully argued that preventing the departing agent from selling real estate within the broker's limited market area was a fair protection of its business.
The 50-mile radius in this case is substantially more than is necessary to provide a "fair protection" of the plaintiff's business. Well over two million prospective Connecticut customers live within the 7850 square mile area covered by the non-compete. As the defendant points out, only around 700 of these are presently the plaintiff's customers, and it is likely that only a small percentage of these are even aware of the defendant's existence. There is nothing about her prior employment that has given Barnes any particular advantage over Braman in soliciting the more than two million potential customers spread out over those 7850 square miles.
A "fair protection" of Braman's interests might have been a six-month restriction on the defendant's soliciting any of the customers she serviced, or perhaps even any of Braman's existing customers. Non-competes limited to a plaintiff's existing customers have generally been upheld. E.g. May v. Young, 125 Conn. 1, 5, 2 A.2d 385 (1938) (restriction upheld because it involved only the clients of the plaintiff, "leaving open to the defendant all other opportunities for employment"); Roessler v. Burwell, 119 Conn. 289, 176 A 126 (1934) (non-compete held reasonable because defendant was "in no way restricted from entering into the same business anywhere he chose, nor in taking any proper means to build up such a business and secure customers, so long as he did not attempt to take away from the plaintiff his own customers"); Hilb, Rogal Ham Company of Hartford v. Pawlich, 1995 WL 91431 (Conn.Super. 1995), (limited to plaintiff's customers or "prospective customers"); New Haven Tobacco Co., Inc. v. Perrelli, 18 Conn.App. 531, 559 A.2d 715 (1989); Edge Technology Services, Inc. v. Worley, 2005 WL 1971109 (Conn.Super. 2005).
In Samuel Stores, supra, our Supreme Court held that a post-employment restriction must be no more than "reasonably necessary for the "fair protection" of the employer's business, and must not unreasonably restrict the rights of the employee. The non-compete in Samuel Stores, which prohibited a former salesman from competing with the plaintiff anywhere where the plaintiff had a branch store, was invalidated because its primary goal was to stifle competition and it was "not reasonably necessary for the fair protection of the plaintiff's business." Id., at 248. See also, Gartner Group, Inc., v. Mewes, 1992 WL 4766 (1992) (non-compete unreasonable because it prohibited solicitation of customers who were not "readily identifiable."); Trans-Clean Corp. v. Terell, supra; Timenterial, Inc. v. Dagata, supra; Beit v. Beit, 15 Conn.Sup. 191 (1947); Haims, Buzzeo Co. v. Wikstrom, Docket No. CV02-0120077 (Stamford/Norwalk Judicial District, 2003).
Other cases further suggest that the plaintiff has overreached in seeking enforcement of so vast a geographic restriction on the defendant's employment. For example, the restriction in Mattis v. Lally, 138 Conn. 51, 82 A.2d 155 (1951), was a one-mile radius from the plaintiff's business, and that non-compete was ancillary to the sale of a business. In Torrington Creamery v. Davenport, 126 Conn. 515, 12 A.2d 780 (Conn. 1984), the plaintiff sought and received enforcement of the non-compete in only two of ten towns where the employee had "special knowledge" of the employer's customers. In Scott v. General Iron Welding Co, Inc., 171 Conn. 132, 368 A.2d 111 (Conn. 1976), the wide area covered by the non-compete was upheld because of the employee's detailed knowledge of the company's customers and procedures, but the agreement did not prohibit the employee from working for competing companies; rather, it only prohibited his ownership and management of competing companies.
Braman also argues that it trained Barnes to work in this industry, and it was its sales staff, not Barnes, who recruited most of the customers in the non-compete area. It contends that it has thus made a considerable investment in both Barnes and the client base that it seeks to retain and grow, and that it is entitled to protect that investment. "Especially if the employment involves . . . [the employee's] contacts and associations with clients or customers it is appropriate to restrain the use, when the service is ended, of the knowledge and acquaintance so acquired to injure or appropriate the business which the party was employed to maintain and enlarge." Robert S. Weiss Assoc. v. Wiederlight, supra, 208 Conn. at 533. (Citation and internal quotation marks omitted).
That argument makes sense as far as it goes, and if the plaintiff had been seeking only to protect the customer base it had nurtured though its investment in Barnes, this case would be quite different. Braman, however, seeks not a fair return on that investment, but rather something closer to a windfall by keeping the defendant out of all parts of the state where the plaintiff does business and where the defendant would have any interest in doing business.
Moreover, the "investment" made in Barnes is quite different from, for example, the "considerable investment" cited in Edge Technology Services, Inc. v. Worley, 2005 WL 1971109 (Conn.Super.). The employee in that case earned a $100,000 salary, had the opportunity for quarterly $20,000 bonuses, a $30,000 expense account, a car allowance and reimbursement for his cell phone. Barnes, in contrast, was an hourly wage employee in whom some training and licensing fees were the company's only real investment.
Barnes also contends that the non-compete in this case does nothing to protect the public interest. When evaluating the "public interest" aspect of a non-compete, the court should consider "(1) the scope and severity of the covenant's effect on the public interest, (2) the probability of the restriction creating or maintaining an unfair monopoly in the area of trade, and (3) the interest sought to be protected by the employer." New Haven Tobacco Co. v. Perrelli, 11 Conn.App. 636, 640, 641 (1987). In the absence of specific facts showing the way in which enforcement of a non-compete would interfere with the public's interest in open competition, there is no basis for a court to conclude that enforcing the non-compete would impair that interest. Wiederlight, supra, 208 Conn. at 533, 534. On the other hand, there has been no evidence that this agreement advances the public interest, and thus, in this case, there is nothing in the stipulated facts to suggest that enforcement of the non-compete could possibly have any discernible effect on the public interest.
As previously discussed, however, it is the fact that the geographical restriction as written is designed less to protect the plaintiff's legitimate interests and more to preserve an enormous area free of competition that seals the fate of this non-compete. The court concludes that because of the geographical restriction, the non-compete may not be enforced against this defendant.
The plaintiff has suggested that should the court rule that any of the restrictions contained in the non-compete are excessive, it should enforce the agreement in a manner that would be fair, reducing, if necessary, the scope and/or nature of the offending restriction. The court concludes that it is not the court's task to reform the non-compete so that its application is rendered more fair. The plaintiff chose to require its employees to sign an agreement, which it drafted, in an effort to protect its interests. In light of the case law already discussed, it could have easily done so in a way that in all likelihood would have passed judicial muster. For example, it could have sought simply to prevent a departing employee from soliciting business from those customers served by that employee for a six-month period, or even, perhaps, limited the restriction to the specific towns and cities in which those customers were located. Either of these approaches would have prevented the defendant from doing what she has done. It could also, as the plaintiff had done in Gartner Group, Inc., v. Mewes Group, supra, have included a clause in a broader non-compete that specifically permitted such "blue-penciling" by the court. The agreement in that case included the following provision:
If any provision or clause of this Agreement, or portion thereof, shall be held by any court or other tribunal of competent jurisdiction to be illegal, valid (sic), or unenforceable in such jurisdiction, the remainder of such provision shall not be thereby affected and shall be given full effect, without regard to the invalid portion. It is the intention of the parties that, if any court construes any provision or clause of the Agreement, or any portion thereof, to be illegal, void, or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and in its reduced form, such provision shall then be enforceable and shall be enforced.
See, also, 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).
This agreement contained no such provision. Instead, the plaintiff chose to overreach by expanding the restriction to a geographical area so large that it effectively eliminates competition altogether and prevents the plaintiff from practicing her profession unless she relocates to an area outside the restricted portion of the state, or outside of the state entirely, actions which are not necessary for the fair protection of the plaintiff's legitimate business interests. To accept the suggestion that the court should enforce a narrowed version of the non-compete, with the nature and scope of the narrowing to be undertaken by the court, would be to encourage employers to cast their nets as widely as possible, secure in the knowledge that while some employees might effectively be deterred from competing by such an agreement, the burden would be on those who chose to compete to convince the court to reform the contractual agreement. The plaintiff has provided the court with no persuasive authority suggesting that, other than under the circumstances in Gartner Group, Inc., this a task which courts should undertake. There is no such provision in this agreement, however, and the court concludes that the approach it should take is that this non-compete is either enforceable on its own terms, or it is not.
Because the court has concluded that the geographical restriction contained in the non-compete is not enforceable as a matter of law, it also concludes that the plaintiff is unlikely to prevail on the merits of its action. For that reason, the court need not address the defendant's argument on the irreparable harm issue in order to reach a determination that the plaintiff is not entitled to the issuance of a temporary injunction.
For all of the above reasons, the Application for a Temporary Injunction is denied.