Schimenti Constr. Co. v. Schimenti
| Decision Date | 17 January 2023 |
| Docket Number | AC 44274 |
| Citation | 217 Conn.App. 224,288 A.3d 1038 |
| Parties | SCHIMENTI CONSTRUCTION COMPANY, LLC v. Joseph SCHIMENTI |
| Court | Connecticut Court of Appeals |
Robert M. Barrack, Glastonbury, with whom, on the brief, was Peter E. Strniste, Jr., for the appellant (plaintiff).
Lori B. Alexander, New Haven, with whom, on the brief, was Stephen P. Rosenberg, New Haven, for the appellee (defendant).
The plaintiff, Schimenti Construction Company, LLC, appeals from the summary judgment rendered by the trial court in favor of the defendant, Joseph Schimenti, on counts one and two of its complaint alleging breach of an employment contract and breach of the covenant of good faith and fair dealing. On appeal, the plaintiff claims that the court erred in determining that continued employment of an at-will employee1 does not constitute consideration for a restrictive covenant.2 We agree with plaintiff's claim and, therefore, reverse the summary judgment rendered in favor of the defendant and remand the case for further proceedings.
The following facts and procedural history, viewed in the light most favorable to the plaintiff, as the nonmoving party, are relevant to our resolution of this appeal. See, e.g., DAB Three, LLC v. Fitzpatrick , 215 Conn. App. 835, 837, 283 A.3d 1048 (2022). The plaintiff, a construction management firm organized and existing under the laws of the state of New York, with its headquarters located in Ridgefield, Connecticut, employs more than 200 employees. The president and sole owner of the plaintiff is Matthew Schimenti (Matthew), the cousin of the defendant.3 The plaintiff employed the defendant beginning in 1998. On various dates in 2013, the defendant informed Matthew that he "wanted more responsibility and to be involved in the strategic growth of [the plaintiff] and the overall management" and indicated that his ultimate goal included obtaining an ownership interest in the plaintiff. Matthew responded that he would consider creating a new position that included additional responsibilities and increased compensation for the defendant but noted that providing him with an ownership interest "was not possible at that time ...." At the beginning of 2014, the defendant held the title of project executive4 and received a salary of $165,000 per year. At some point in January or February, 2014, the defendant was promoted to managing director.5
On February 25, 2014, Matthew presented the defendant with two documents, a promotion letter and a nondisclosure agreement.6 The promotion letter, dated February 25, 2014, confirmed the defendant's promotion to managing director, effective February 1, 2014. This promotion letter described, inter alia, the responsibilities, compensation, and benefits of the new position. It stated that the defendant's initial base salary as managing director would start at $165,000 per year and that, effective August 1, 2014, it would increase to $185,000 per year, provided that he achieved performance objectives and was actively employed with the plaintiff. The promotion letter further stated that the defendant's salary was subject to an annual review, benchmarked on relevant industry data, and was subject to adjustment based on an appraisal of the defendant's work performance and the finances of the plaintiff. It also detailed additional benefits that the defendant would be eligible for, including fringe benefit plans and an incentive program.
The promotion letter further provided in relevant part: (Emphasis added.) The promotion letter specifically stated: "As a condition of your continued employment by the [plaintiff], you must execute a Non-Disclosure, Assignment of Developments & Non-Solicitation Agreement ([nondisclosure agreement])," which the promotion letter indicated was attached to it. The nondisclosure agreement provided in relevant part: "In consideration and as a condition of my employment by [the plaintiff] ... the [defendant] hereby agrees with the [plaintiff] as follows ...." Section one of the nondisclosure agreement was titled "Confidentiality of Information; Developments," section two was titled "Covenant Not to Compete/Solicit," and section three was titled "Miscellaneous." Section two prohibited the defendant from competing with the plaintiff's business for the duration of his employment and for two years after the termination of his employment.7 In section three, the nondisclosure agreement provided in relevant part that "[t]he [defendant] acknowledges and agrees that [he] is an ‘employee-at-will’ and this [a]greement does not create any obligation on the [plaintiff] or any other person or entity to continue the [defendant's] employment or to exploit any [d]evelopments."
The promotion letter directed the defendant to sign and date both the promotion letter and the nondisclosure agreement. It also stated these two documents contained "the entire understanding" of the defendant's employment by the plaintiff. The defendant signed the nondisclosure agreement on February 28, 2014, and the promotion letter on March 17, 2014.
Approximately four years later, in March, 2018, the defendant resigned from his employment with the plaintiff and accepted a position at JRM Construction Management, a construction company in New York City. The plaintiff commenced this action on June 25, 2018, claiming that the defendant had breached the nondisclosure agreement. The plaintiff sought both monetary damages and injunctive relief. Thereafter, the plaintiff filed an amended complaint (operative complaint) that contained seven counts.8 Only counts one and two of the operative complaint, in which the plaintiff alleged claims of breach of contract and breach of the covenant of good faith and fair dealing, respectively, are relevant to this appeal. On March 12, 2019, the defendant filed a revised answer and special defenses, including that (1) the covenant not to compete in the nondisclosure agreement was unreasonable and, thus, unenforceable, (2) the covenant not to compete was unenforceable due to the lack of consideration, (3) the covenant not to compete was unenforceable due to the plaintiff's anticipatory breach, and (4) the plaintiff failed to mitigate its alleged damages and harm.
On September 20, 2019, the defendant filed a motion for summary judgment as to counts one and two of the plaintiff's operative complaint. The defendant claimed, inter alia, that the restrictive covenants set forth in the nondisclosure agreement were unenforceable because the nondisclosure agreement lacked consideration.9
Specifically, he claimed that "the only item of value that [the defendant] arguably received for his [signing of the nondisclosure agreement] was his continued employment by [the plaintiff]" and that, "[b]ecause in this case there was no consideration for the [nondisclosure agreement] beyond [the defendant's] continued employment, the [nondisclosure agreement] is unenforceable as a matter of law."
On October 25, 2019, the plaintiff filed a memorandum of law in opposition to the defendant's motion for summary judgment. In addressing the defendant's claim of lack of consideration, the plaintiff argued that the promotion letter provided that the defendant's elevation to managing director became "effective February 1, 2014, that as part of that promotion he would be entitled to a raise to $185,000 per year (a $20,000 raise) effective August 1, 2014, and that as a condition of his continued employment in his new position he would sign the [nondisclosure agreement]." The plaintiff identified the promotion, additional employment responsibilities, and the promise of the $20,000 raise as consideration for the nondisclosure agreement. Finally, the plaintiff noted that Matthew " ‘would have never promoted [the defendant] to managing director and provided him with increased compensation unless he signed [the nondisclosure agreement].’ "
On December 11, 2019, the court issued its memorandum of decision granting the defendant's motion for summary judgment with respect to counts one and two of the operative complaint. At the outset, the court determined that both the promotion letter and the nondisclosure agreement were unenforceable due to a lack of consideration. It then stated that, pursuant to its interpretation of this court's decision in Thoma v. Oxford Performance Materials, Inc. , 153 Conn. App. 50, 100 A.3d 917 (2014), "a party giving nothing more than the status quo of continuing employment—neither offering a benefit nor accepting a harm—offers no consideration to exchange for his promise and the promise is, therefore, unenforceable." In the court's view, the restrictions placed on the defendant in the nondisclosure agreement were exchanged for the defendant's continued employment, which it concluded did not constitute consideration as a matter of law.
The court further explained that the language of the promotion letter specifically stated that it did not create an employment contract and that the defendant remained an at-will employee. Additionally, in the court's view, the promotion letter provided only the possibility of future raises, bonuses, and salary reviews based on industry benchmarks. The court reasoned that the nondisclosure agreement also granted the defendant nothing in exchange for his...
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