Robert S. Weiss and Associates, Inc. v. Wiederlight

• Decision Date: 09 August 1988
• Docket Number: No. 13201,13201
• Citation: 208 Conn. 525,546 A.2d 216
• Court: Connecticut Supreme Court
• Parties: ROBERT S. WEISS AND ASSOCIATES, INC. v. Michael E. WIEDERLIGHT et al.

Page 216

546 A.2d 216

208 Conn. 525

ROBERT S. WEISS AND ASSOCIATES, INC. v. Michael E. WIEDERLIGHT et al.

No. 13201.

Supreme Court of Connecticut.

Argued May 31, 1988.

Decided Aug. 9, 1988.

Jay H. Sandak, with whom, on the brief, was Catherine C. Ziehl, Stamford, for appellant-appellee (plaintiff).

David L. Fineberg, with whom were Wesley W. Horton, Hartford, and, on the brief, Paul J. Pacifico, Rowayton, for appellee-appellant (named defendant).

Thomas E. Minogue, Jr., with whom was Kimberly A. Grillo, Southport, for appellee-appellant (defendant Insurance Associates of Connecticut, Inc.).

Before PETERS, C.J., and ARTHUR H. HEALEY, CALLAHAN, GLASS and HULL, JJ.

GLASS, Associate Justice.

The plaintiff, Robert S. Weiss and Associates, Inc., instituted an action against Michael E. Wiederlight for breach of a restrictive covenant of employment and theft of trade secrets. In an amended complaint, the plaintiff added Insurance Associates of Connecticut, Inc. (IAC), as a defendant, alleging interference with a business enterprise and theft of trade secrets with Wiederlight acting as its agent. The trial court ruled in favor of the plaintiff on the issues of breach of the restrictive covenant and interference with a business enterprise and awarded damages, but found that the plaintiff had failed to sustain its burden of proof on the issue of theft of trade secrets. The plaintiff appealed to the Appellate Court and the appeal was transferred to this court pursuant to Practice Book § 4023.

On appeal, the plaintiff claims that the trial court erred: (1) in failing to conclude that the plaintiff's customer lists and related insurance information constituted trade secrets and that Wiederlight had committed a theft of trade secrets; (2) in failing to award damages beyond the 1983-1984 period for Wiederlight's solicitation of the plaintiff's accounts in breach of the covenant; and (3) in failing to award damages for other accounts written in the area restricted by the covenant after the court found that the covenant was valid and that Wiederlight had breached it. The defendants on cross appeal argue that the trial court erred in finding that the restrictive covenant was reasonable and valid and in finding that IAC tortiously interfered with the plaintiff's contract.

The facts may be summarized as follows. The plaintiff is an independent insurance agency in Stamford, that was doing business throughout Fairfield County and in New York at the time of the events underlying this case. In April, 1975, the plaintiff hired Wiederlight to sell commercial insurance under a four year contract of employment. Wiederlight previously had worked in sales with Liberty Mutual Insurance Company (Liberty) in New York for ten years. His written employment agreement at Liberty contained a restrictive covenant not to compete with Liberty for eighteen months after termination of employment.

Wiederlight's 1975 employment agreement with the plaintiff prohibited him from engaging in the commercial insurance business within Stamford and a fifteen mile radius for two years after his employment terminated. In April, 1979, the plaintiff's principal, Robert S. Weiss, and Wiederlight entered into a new four year employment agreement. Wiederlight expressed dissatisfaction with certain provisions of the 1979 contract, which reduced his status and commission rates and omitted a buy-in option that was set forth in the 1975 agreement. When the 1979 agreement was negotiated, Wiederlight's sole source of income was derived from his employment with Weiss. Wiederlight signed the agreement after he had read it and discussed it with his wife. He understood all the terms and conditions and voluntarily entered into the agreement.

The 1979 employment agreement contained three paragraphs pertinent to this case. Paragraph seven identified the agency's business records, including those produced by Wiederlight, as its exclusive property, and forbade Wiederlight from removing such records on termination of his employment. Paragraphs nine and ten barred Wiederlight, for two years from the date the agreement terminated, from soliciting accounts held by the plaintiff at the time the employment agreement terminated, and from working within Stamford and within ten miles from the outer borders of Stamford.

In March, 1983, Weiss told Wiederlight that his employment agreement would not be renewed upon expiration. Immediately thereafter, Wiederlight was hired by IAC, then located in Southport, and began to solicit and sell commercial insurance policies to customers he had dealt with while working for Weiss. Before hiring Wiederlight, the principals of IAC had reviewed his employment agreement with Weiss and were aware of the terms of the restrictive covenant.

During his employment at IAC from April, 1983 to March, 1985, Wiederlight sold insurance to a number of accounts that belonged to the plaintiff when Wiederlight's employment there ceased. Wiederlight also sold commercial insurance to other customers within the restricted Stamford area. The commissions generated by Wiederlight during his employment at IAC inured to the financial benefit of his employer. The principals of IAC encouraged and induced Wiederlight to sell insurance to customers of the plaintiff and others in the Stamford area despite their knowledge of the restrictive covenant in Wiederlight's 1979 employment agreement with Weiss.

I

We first consider the defendants' claim on cross appeal that the trial court erred in concluding that the restrictive covenant in Wiederlight's 1979 employment agreement was reasonable and therefore valid. ¹ We find no error in the trial court's conclusion.

The defendants' first claim is that the trial court's conclusion was erroneous because it applied the wrong criteria to evaluate the reasonableness of the restrictive covenant. We disagree. Scott v. General Iron & Welding Co., 171 Conn. 132, 368 A.2d 111 (1976), sets forth the criteria relevant to an evaluation of the reasonableness of a covenant not to compete ancillary to an employment agreement. ² Although the trial court stated that it relied upon Mattis v. Lally, 138 Conn. 51, 54, 82 A.2d 155 (1951), which involved a covenant ancillary to the sale of a business, this fact does not establish that it erred in finding that the restrictive covenant was reasonable. If the trial court's memorandum does not state a proper basis for its results, its judgment may be sustained if there are proper grounds to support it. Barra v. Ridgefield Card & Gift Gallery, Ltd., 194 Conn. 400, 404-405, 480 A.2d 552 (1984); Herman v. Division of Special Revenue, 193 Conn. 379, 387, 477 A.2d 119 (1984); Favorite v. Miller, 176 Conn. 310, 317, 407 A.2d 974 (1978).

The defendants next claim that the trial court erred in upholding the covenant because: (1) it contained time and geographic constraints that were unreasonable; (2) it unreasonably restrained Wiederlight from any employment in the commercial insurance business; (3) it unfairly protected the plaintiff's interests and interfered with the public's interest in open competition; and (4) it never became operative under the terms of the contract. ³ We are unpersuaded.

Paragraph nine of the employment agreement barred Wiederlight from selling, soliciting or otherwise engaging in commercial insurance for himself or any other firm in Stamford or within a ten mile radius, excluding Long Island, New York, and areas north of Stamford, for two years following termination of the agreement. Paragraph ten prohibited him from soliciting or selling commercial insurance to customers of the plaintiff, existing when Wiederlight's employment terminated, for two years following termination.

The trial court's conclusion that this restrictive covenant was reasonable is consistent with other cases where we have held that time and geographic restrictions in a covenant not to compete are valid if they are reasonably limited and fairly protect the interests of both parties. See Scott v. General Iron & Welding Co., supra, 171 Conn. at 138, 140, 368 A.2d 111 (upholding five year statewide covenant barring employee from working as manager in competing business); see also Torrington Creamery, Inc. v. Davenport, 126 Conn. 515, 520, 12 A.2d 780 (1940) (upholding two year restriction applicable to specific and limited geographic area); Roessler v. Burwell, 119 Conn. 289, 295, 176 A. 126 (1934) (covenant restricting delicatessen products salesman from soliciting employer's customers in specific locality upheld); cf. Samuel Stores, Inc. v. Abrams, 94 Conn. 248, 255, 108 A. 541 (1919) (invalidating covenant barring salesman for five years from selling clothes in any city where former employer operates).

In the present case, the two year limitation fairly protected the plaintiff's interests in the commercial insurance business in the Stamford area while ensuring that Wiederlight could return to commercial insurance in that area within a definite period of time. See Scott v. General Iron & Welding Co., supra, 171 Conn. at 140, 368 A.2d 111. In addition, the restricted geographical area was narrowly tailored to the plaintiff's business situation in the Stamford area. The provision of paragraph nine allowing Wiederlight to work in areas north of Stamford and in Long Island, New York, demonstrated the plaintiff's caution in avoiding an overly broad geographic restriction.

Further, we are not persuaded by the defendants' theory that paragraph ten is unreasonable because it lacks a geographic limitation. Paragraph ten barred Wiederlight from soliciting the plaintiff's accounts that existed when Wiederlight left. Upon the termination of the agreement, the clause fixed the geographical scope of the covenant to a definite and limited area. Cf. May v. Young, 125 Conn. 1, 8, 2 A.2d 385 (1938) (restraint may reasonably cover actual clients or customers of employer whose business with them is subject to injury by...