Court Uses Connecticut Law to Supersede Massachusetts Law in Application of Non-Compete Agreement

The Employment Agreements

The agreements established that he could not solicit or accept claims within a fifty-mile radius of Allied’s Orange office for a period of two years following his termination.  The agreements further specified that the names and contact information of Allied’s clients were the company’s confidential property.  The choice of law provision stated that Massachusetts law would be controlling (Allied had its headquarters in Massachusetts).  On September 1, 1997, Allied sold its business and all its assets, including its non-compete agreements, to Custard Insurance Adjusters.

Mr. Nardi became increasingly worried about future employment at Custard when the company restructured its compensation format, allegedly decreasing his annual income by 25%.  At this point, Mr. Nardi began to inquire about employment at other companies and in particular contacted Mr. John Markle, the president of Mark Adjustment, with whom he had a previous professional history.  He also arranged meetings between Mr. Markle and four other current Custard employees to discuss switching companies.  While the companies are competitors in the insurance industry, Mark’s business was restricted to the New England region while Custard operated nationally.  Custard terminated Mr. Nardi and asked the court to enforce the non-compete agreement.

Determining the Choice of Law Provision

The court first sought to tackle the issue of the choice of law provision since it designated Massachusetts law as controlling but this lawsuit was brought in Connecticut state court.  The court asserted its authority over the issue and case because it could not ascertain any “difference between the courts of Connecticut and Massachusetts in their interpretation of the common law tort breach of fiduciary obligation brought against a former officer of a corporation”.

The court emphasized that above all else, the legal issue at hand was that of contractual obligations and a company’s business operations.  It asserted its authority in this respect by stating it believed “that the Massachusetts courts interpret the tort of tortious interference with contractual and business relationships the same way our [Connecticut’s] courts do”.  Additionally, the court cited that the application of Massachusetts law would undermine Connecticut’s policy to afford legal effect to the Connecticut Unfair Trade Practices Act (CUTPA) and Connecticut Uniform Trade Secrets Act (CUTSA), two-state statutes used by Custard to sue Mr. Nardi.

Determining the Enforceability of the Non-Compete Agreement

Next, the court addressed the enforceability of the non-compete agreement signed by Mr. Nardi and Allied.  Mr. Nardi contended that the provisions of the agreement were only binding upon the signatory parties (himself and Allied) and that Custard lacked the authority to enforce its provisions.  He asked the court to deny Custard’s request to enforce the non-compete because it was “based on trust and confidence” between the signatory parties and “was thus not assignable”.  The court rejected this train of thought because the non-compete explicitly contained an assignability clause and it held that the non-compete covenant was properly and legally transferred to Custard under Massachusetts law.

Mr. Nardi based a substantial portion of his defense on the claim that Custard violated, and therefore invalidated, the agreement when it modified his compensation format.  He alleged that he was the victim of unjustified reductions in his professional responsibilities and compensation following Custard’s acquisition of Allied in 1997.  Mr. Nardi, however, was still an executive at the new company despite a reduction in rank and he himself had expressed excitement about becoming an executive at a national, instead of a regional, company.

The Court’s Findings

The court ultimately found the non-compete to be valid and enforceable, therefore granting Custard’s request for injunctive relief.  It assessed the facts of the case and Mr. Nardi’s current position to amend the time restriction of the agreement, however.  Taking into account that he was starting a family and had a young child in conjunction with estimates that the full restrictions could amount to a 60-70% loss of business for Mr. Nardi, the court reduced the time limitation from two years to six months.  The court concluded that while the provisions were reasonable at face value, they could have unforeseen consequences that would have severely impaired Mr. Nardi’s ability to make a living in order to provide for his family.

Maya Murphy P.C. has proudly been included in the 2024 Edition of Best Law Firms®, ranked among the top firms in the nation. In addition, Managing Partner Joseph C. Maya has been selected to The Best Lawyers in America® 2024 for his work in Employment Law and Education Law in Connecticut. Recognition in Best Lawyers® is awarded to firms and attorneys who demonstrate excellence in the industry, and is widely regarded by both clients and legal professionals as a significant honor.

Our firm in Westport, Connecticut serves clients with legal assistance all over the state, including the towns of: Ansonia, Beacon Falls, Bethany, Bethel, Branford, Bridgeport, Brookfield, Cheshire, Danbury, Darien, Derby, East Haven, Easton, Fairfield, Greenwich, Guilford, Hamden, Madison, Meriden, Middlebury, Milford, Monroe, Naugatuck, New Canaan, New Fairfield, New Haven, Newton, North Branford, North Haven, Norwalk, Orange, Oxford, Prospect, Redding, Ridgefield, Seymour, Shelton, Sherman, Southbury, Stamford, Stratford, Trumbull, Wallingford, Waterbury, West Haven, Weston, Westport, Wilton, and Woodbridge. In addition to assisting clients in Connecticut, our firm handles education law and employment law matters in New York as well. 

If you have any questions about employment law or education law in Connecticut, or would like to speak to an attorney about a legal matter, please contact Joseph C. Maya and the other experienced attorneys at Maya Murphy, P.C. at (203) 221-3100 or JMaya@Mayalaw.com to schedule a free initial consultation today.