Breach of Non-Compete in Connecticut Insurance Firm

Mr. Matthew Butler worked for CUNA Mutual Life Insurance Co. for approximately five years (August 2002 to March 2007) as an Executive Benefits Specialist servicing accounts in Maine, Vermont, Connecticut, Rhode Island, New Hampshire, Massachusetts, and part of New York.  CUNA sold insurance-related products to credit unions and Mr. Butler was responsible for marketing and constructing deferred executive compensation programs that involved life insurances, mutual funds, and annuities.  CUNA had Mr. Butler agree to and sign a non-compete agreement when it hired him and stipulated that he be prohibited from soliciting or providing services to CUNA clients for a period of two years following his termination from the company.

Mr. Butler also agreed to return “all company books, rate books, records, applications, materials, conditional receipts, [and] customer or client lists”.

On March 22, 2007, while still employed by CUNA, Mr. Butler created Elite Capital Management Group to do business as an affiliate of Cambridge Research Investment, with the intent to continue to market and sell insurance-related products.  On March 28, 2008, he sent an e-mail to seventy-five of his CUNA clients lauding the prestige, expertise, and quality of the newly formed Elite Capital.  He tendered his resignation from CUNA and immediately began to provide the same services at his new firm.  He told the court that several clients had contacted him for work because of his March 28 e-mail describing Elite Capital.  CUNA sued Mr. Butler in Connecticut state court requesting enforcement of the non-compete agreement.

The Court’s Decision

The court granted CUNA’s request to enforce the restrictive covenant and enjoined Mr. Butler from further soliciting and providing services to CUNA’s current or past clients.  This was a proper decision in order to provide the necessary protection for CUNA with regard to its investment in developing good will and positive customer relationships via its employment and occupational enrichment of Mr. Butler.  There was clearly a breach of the restrictive covenant in Mr. Butler’s active solicitation of CUNA’s clients during and immediately following his employment at the company.

Furthermore, the court held that the restrictions were reasonable in the sense that they “protected CUNA Mutual’s substantial investment in building good will with its clients while permitting Mr. Butler to market to a very large potential group of customers”.  The restrictions had a very limited scope (credit unions in the northeast that were customers of CUNA) and did not excessively restrict Mr. Butler’s ability to earn a living.  There was no evidence that the agreement would create unreasonable hardships for Mr. Butler since he was still able to market his skills and products to state and federal banks, corporations, non-profits, and other business that were not in the narrow definition of prohibited parties.

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