Non-Compete Agreement Restrictions in Connecticut Funeral Services Industry
by
Joseph C. Maya on Mar. 06, 2024
Summary: Sagarino v. SCI State Funeral Services, Inc., 2000 Conn. Super. LEXIS 1384
Case Background
Mr. Robert Sagarino’s mother sold the entire amount of stock in Donald D. Sagarino Funeral Home, Inc. to SCI Connecticut Funeral Services, Inc. for $700,000 and an additional $375,000 for the real estate where the business was located. SCI purchased the company with the condition that Mr. Sagarino and other employees execute a five-year employment contract and a fifteen-year non-compete agreement. Mr. Sagarino signed his agreement on June 15, 1999, wherein he agreed not to operate or work for a funeral home service company for fifteen years within a thirty-mile radius of SCI’s newly acquired Donald D. Sagarino Funeral Home. As consideration for the restrictive covenant, SCI agreed to pay Mr. Sagarino a total of $65,000 in one hundred twenty installments of $541.67.
Mr. Sagarino was terminated however on July 29, 1999 when he admitted to consuming alcohol while on the job. In early 2000, Mr. Sagarino opened C.R. Sagarino Funeral Home approximately two miles from SCI’s funeral home. SCI alleged that he advertised and sought clients from the same community that Douglas D. Sagarino had traditionally served and sued him to prevent further violations of the non-compete agreement executed in connection with the acquisition of Douglas D. Sagarino Funeral Home.
The Defense
Mr. Sagarino however presented a defense that the non-compete agreement was unreasonable and its terms were therefore unenforceable. The party that challenges the enforceability of a contract ultimately bears the burden of proving to the court that it is unreasonable and unenforceable. The court found in favor of SCI however, concluding that Mr. Sagarino had indeed breached a valid restrictive covenant and that SCI had successfully shown it suffered irreparable harm from the contractual breach. A major component of the court’s decision was that the parties executed the agreement at the time of the sale of a business, creating a situation where it added great value to the business.
The Court’s Decision
The court held that the restrictions in the non-compete agreement were adequate to protect the good will purchased by SCI in its acquisition of Donald D. Sagarino Funeral Home and not unreasonable so as to severely disadvantage Mr. Sagarino upon his termination with the company. The fifteen-year duration was reasonable provided the nature of the funeral services industry. The customer return frequency in the industry is typically nine years, a timeframe that makes the fifteen-year duration a reasonable restriction for a non-compete between the parties. The court also held that the thirty-mile geographical restriction was reasonable in light of the funeral services industry and its business trends.
The necessity of a non-compete in this case emanates from the funeral home name having a strong reputation in the local Italian-American community to which it catered its services. Business in the funeral home industry is highly dependent upon personal relationships and the family name connected with the business operations. The vast majority of clients are return customers or referrals from previous clients. The thirty-mile restriction in the non-compete covers the area where Donald D. Sagarino Funeral Home’s clients have historically been located. The court once again referenced the nature and business trends of the funeral services industry to conclude that the thirty-mile restriction was both reasonable and enforceable.
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