Opinion
No. CV06-4023011-S.
December 18, 2006.
MEMORANDUM OF DECISION ON APPLICATION FOR TEMPORARY INJUNCTION
The plaintiff, Express Courier Systems, Inc. (plaintiff) has brought this civil action against the defendants Seymour Brown, Chip Joseph, and Moses Stephenson (defendants), seeking injunctive relief to enforce certain non-compete agreements, compensatory and punitive damages, attorneys fees and costs, and such other relief as may be appropriate. Before the court at this time is the plaintiff's application for a temporary injunction enjoining each of the defendants from violating his non-compete agreement which is part of the agreements entered into between the defendants and Contractor Management Services, LLC (CMS). CMS is not a party to this litigation. This court conducted an evidentiary hearing on the application on December 4, 2006. All parties appeared, offered evidence with respect to the application, and have submitted appropriate memoranda. The three defendants are represented by the same attorney.
The court finds the following facts and reaches the following conclusions. The plaintiff provides courier services, primarily to large hospitals, laboratories, and others in the medical field, in New England, New York and New Jersey. The plaintiff determines the particular requirements of each job and provides the individual courier with a specific route for maximum efficiency. The plaintiff provides dispatch services for the couriers, and monitors their performance and customer satisfaction. The plaintiff utilizes the services of approximately one hundred and eighty couriers, including the defendants, to provide courier services to its customers, such as Stamford Hospital, who have contracts with the plaintiff to provide such courier services to the customers on a round the clock basis, three hundred and sixty-five days a year. The plaintiff has had a contract since 2000 with Stamford Hospital to provide courier services to the hospital. The defendants operate as independent contractors. They are not employees of the plaintiff. They are recruited by the plaintiff through commercial advertising and word of mouth. In approximately December 2005 the plaintiff contracted with CMS, an independent third-party human resources provider to, among other things, obtain the services of couriers to provide the courier services which the plaintiff was obligated to provide pursuant to the contracts it had with its customers, such as Stamford Hospital. The defendants were among the couriers provided to the plaintiff commencing in December 2005 and January 2006. All couriers were independent contractors who were members of CMS. They were obliged to become members of CMS in order to provide courier services to the plaintiff. As members of CMS the defendants were required to pay a weekly membership fee. CMS provided various services to the members including, but not limited to, the processing of invoices and payments, assistance in obtaining insurance coverage, assistance in complying with tax and business laws and regulations, and finding work opportunities with contractors such as the plaintiff. Prior to December 2005 the plaintiff has had a contract with another third-party human resources provider, SCI, which provided the same type of service as CMS, and the defendants had provided courier services, as independent contractors, to the plaintiff though SCI. The defendant Brown had been providing courier services to the plaintiff, as an independent contractor, since 1999, the defendant Stephenson since 2005, and the defendant Joseph since 2002.
Commencing in December 2005, the plaintiff required the defendants to become members of CMS if they wished to provide independent contractor courier services for the plaintiff's customers. In order to become members of CMS, each of the defendants were required to enter into a membership application and agreement, and a "confidentiality nondisclosure and non-back solicitation" agreement (confidentiality agreement) with CMS. The defendants decided to become members of CMS and signed the agreements. (Exhibits 1-6.) The three confidentiality agreements were identical, and each provided that the defendant, who is described as the independent contractor (IC), and CMS, acknowledge and agree that the fact that the plaintiff is permitting the defendant to provide services for or to the plaintiff is deemed adequate and valid consideration for the obligations imposed on the defendant by the agreement with CMS.
The confidentiality agreement also provides:
4. IC agrees not to, during the term of this Agreement or for a period of one (1) year after the expiration of this Agreement, within the Standard Metropolitan Statistical Areas of Eastern Seaboard, directly or indirectly in any capacity, including, but not limited to, as a proprietor, employee, partner, shareholder, agent, financier or co-investor, solicit, canvass, obtain employment or do business of a similar nature to that of Company with any person, firm, corporation or other entity who or which:
a. is a customer of Company at the time of termination of this Agreement or at any time during the six (6) months immediately preceding the termination of this Agreement; and,
b. for whom IC performed services during the term of this Agreement.
7. In the event IC should breach any provision of this Agreement, the parties acknowledge and agree that (a) normal damages allowed at law for the breach of the covenants, warranties and agreements set forth herein above would be difficult or impossible to ascertain, and (b) Company would suffer irreparable injury if said breach, the attempt to breach, or the threat of said breach, was not immediately prevented or stopped. Therefore, IC hereby agrees and consents to the granting of equitable relief by way of a restraining order and/or injunction, mandatory or prohibitory, in a court of competent jurisdiction, to prevent, stop or cease the breach, threaten breach or attempted breach of any covenant, warranty or agreement set forth in this Agreement.
The confidentiality agreement also provides that the parties agree that the plaintiff is a third-party beneficiary to the agreement and has the authority to commence legal action to enforce its provisions.
In September 2006, Stamford Hospital terminated the contract by which the plaintiff provided courier services to the hospital, except for the portion of the contract relating to courier services being provided for the hospital laboratory. Walter Humphrey, the Vice-President of Operations for the plaintiff, promptly met with the defendants and told them about the contract termination. He explained that the plaintiff was going to continue the courier services for the laboratory, that the plaintiff was going to continue to pay them the commissions they were making, and that they didn't have to worry about any financial repercussions arising out of the plaintiff losing part of the contract. Later that day each of the defendants told Humphrey that they had been offered jobs by Xerox Corporation to perform the same type of services that they had been performing for the plaintiff, that the offer was too good to refuse, and that they would no longer be providing services for the plaintiff. They indicated that they were not concerned about the non-compete agreements. Their last day of work for the plaintiff was at the end of September 2006.
Since October 1, 2006 the defendants have been employed by the Xerox Corporation performing some of the same courier services for Stamford Hospital which were previously provided by the plaintiff pursuant to its contract with Stamford Hospital. This conduct is in violation of the non-compete provision of the confidentiality agreement each defendant entered into with CMS in that they have obtained employment or do business of a similar nature to that which the plaintiff did with Stamford Hospital, which was a customer of the plaintiff during the six months immediately preceding the termination of the confidentiality agreement, and for which each defendant performed services during the term of the confidentiality agreement.
It is well established that the elements which must be proven in order to obtain a preliminary temporary injunction are (1) a reasonable degree of probability of success on the merits of the injunction; (2) irreparable harm with no adequate remedy at law; and (3) a favorable balancing of the equities involved. Griffin Hospital v. Commission on Hospitals and Health Care, 196 Conn. 451, 457-58 (1985). The court finds that the plaintiff has proven that it will probably succeed on the merits of the injunction.
"Irreparable injury and lack of an adequate remedy at law are considered to be established by the nature of the threatened conduct where a party seeks to enforce a covenant not to compete. Lampson Lumber Co. v. Caporale, 140 Conn. 679, 685, 102 A.2d 875 (1954). Restrictive covenants are recognized as valuable business assets that are entitled to protection. Torrington Creamery, Inc. v. Davenport, 126 Conn. 515, 521, 12 A.2d 780 (1940). Loss of the benefits of compliance with such agreements is recognized as an irreparable injury, Mattis v. Lally, 138 Conn. 51, 56, 82 A.2d 155 (1951); since a party's actual injury is not, because of its nature, susceptible to determination." Musto v. Opticare Eye Health Centers, Superior Court, Complex Litigation Docket at Waterbury, Docket No. CV99 00155663 (August 9, 2000, Hodgson, J.)
"A covenant that restricts the activities of an employee following the termination of his employment is valid and enforceable if the restraint is reasonable. Scott v. General Iron Welding Co., supra, 137. There are five criteria by which the reasonableness of a restrictive covenant must be evaluated: (1) the length of time the restriction is to be in effect; (2) the geographic area covered by the restriction; (3) the degree of protection afforded to the party in whose favor the covenant is made; (4) the restrictions on the employee's ability to pursue his occupation; and (5) the extent of interference with the public's interests. Id., 137-38. The five prong test of Scott is disjunctive, rather than conjunctive; a finding of unreasonableness in any one of the criteria is enough to render the covenant unenforceable." New Haven Tobacco Co. v. Perrelli, 18 Conn.App. 531, 534 (1989).
The defendants claim, by way of brief, that as a factual matter, the work presently being performed for Xerox at Stamford Hospital is not similar in nature to the work which was done previously for the plaintiff. The court disagrees. The courier services now being done at Stamford Hospital by the defendants as employees of Xerox are similar in nature to the courier services that were done previously for the plaintiff, while the transportation of individuals is not similar in nature.
The non-compete agreements are for one year following termination of the defendants from CMS, and the only area or place to which the application for a temporary injunction refers is Stamford Hospital. The agreements refer to the eastern seaboard as the area of restriction, but that area is reduced in scope by providing that the prohibition only applies to an entity who was a customer of the plaintiff during the six months preceding, or at the time of the termination of the agreement, and was an entity for whom the defendants performed services during the term of the agreement. The court finds that the length of time and area covered is reasonable.
The degree of protection that the agreements provide for the plaintiff is reasonable. It applies in this case to only to one customer of the plaintiff, and the plaintiff has a right to protect its interest in contacts and relationships with that customer.
The agreements do not impose an unreasonable restriction on any of the defendants. They are merely prevented from performing courier services for one entity,, Stamford Hospital. Reasonable restrictions on contacts by former employees with customers of their former employer have been upheld by Connecticut courts on many occasions.
The agreements do not interfere with the public's interests. They do not unreasonably deprive the public of essential goods and services, and there is no probability of a monopoly being created.
It appears that the primary claim by the defendants is that the non-compete agreements are unenforceable because of a lack of consideration. In support of this claim, the defendants refer the court to various decisions wherein, during the course of employment, the employer presented the employee with an non-compete agreement, and the choice of signing or be fired. Some cases support this type of claim while others do not. See Roessler v. Burwell, 119 Conn. 289, 293-94 (1934); Cost Management Incentives, Inc. v. Yollanda London-Osborne et al, No. CV02 0-463081 (Dec. 5, 2002, Munro, J.).
In this case the defendants were not employees of either CMS or the plaintiff. They were specifically and acceptably independent contractors. The plaintiff had decided to enter into a contract with CMS, an independent third-party human resources provider, to provide courier services to the plaintiff. The plaintiff required that the defendants become members of CMS if they wished to provide independent contractor courier services, and to also agree to the terms of the confidentiality agreements. The agreements specifically set forth the consequences of a breach of their agreements by the defendants. Despite their agreements, less than one year after voluntarily and knowingly entering into the agreements, the defendants terminated their relationship with CMS and with the plaintiff, and began working for a competitor of the plaintiff, doing business of a similar nature at the same location, because they received a better offer. Under all of the circumstances of this case the court finds that the defendants received sufficient consideration for their non-compete agreements, and the agreements are enforceable.
The court finds that the plaintiff has met the requirements for a temporary injunction and that the restrictions to be placed on the defendants are reasonable. The application for a temporary injunction is granted to the extent that each of the defendants is prohibited from providing courier services at Stamford Hospital, either as independent contractors, or as employees, for any entity that is engaged in providing such services to Stamford Hospital. If not modified sooner, this injunction will expire on September 20, 2007.