Excessive Geographical Limitation in Connecticut Non-Compete Agreement Found Unenforceable
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Case Background
Timenterial was a company that engaged in the sale and rental of mobile units and had previously employed Mr. James Dagata. The employment contract contained a non-compete clause wherein Mr. Dagata agreed not to “engage in any business venture having to do with the sale or rental of mobile homes or mobile offices in a fifty miles radius from any existing Timenterial, Inc. sales lot” for one year following the termination of his employment.
Mr. Dagata terminated his employment on June 1, 1970, and Timenterial claimed that he had been active in business ventures involving mobile homes beginning June 12, 1970, at an office located a mere one-quarter mile from Timenterial’s Plainville, CT office. Timenterial commenced a suit for violation of the non-compete agreement and sought to restrain Mr. Dagata from further mobile home business ventures in accordance with the agreement.
The Court’s Decision
The court found in favor of Mr. Dagata and held that the non-compete agreement was unenforceable because the geographical restriction in the agreement was unreasonable and excessive. At the time of legal proceedings, Timenterial had seven facilities in Connecticut, four in Massachusetts, two in Vermont, and one in New Hampshire. The court applied the fifty-mile radius as stipulated in the agreement and held that this territorial prohibition was unreasonable.
The application of the agreement would mean that Mr. Dagata could not be involved in the mobile homes business in all or substantial parts of Connecticut, New York, Massachusetts, Vermont, New Hampshire, and Rhode Island. This placed excessive restrictions on Mr. Dagata and severely limited the opportunity for him to practice his occupation. This excessive and burdensome characteristic of the non-compete rendered the agreement unenforceable and the court concluded that Mr. Dagata’s actions did not constitute a breach of the restrictive covenant.
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