New Haven Tobacco Co. v. Perrelli

559 A.2d 715, 18 Conn. App. 531, 1989 Conn. App. LEXIS 177
CourtConnecticut Appellate Court
DecidedJune 6, 1989
Docket6575
StatusPublished
Cited by42 cases

This text of 559 A.2d 715 (New Haven Tobacco Co. v. Perrelli) is published on Counsel Stack Legal Research, covering Connecticut Appellate Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New Haven Tobacco Co. v. Perrelli, 559 A.2d 715, 18 Conn. App. 531, 1989 Conn. App. LEXIS 177 (Colo. Ct. App. 1989).

Opinion

Dupont, C. J.

The plaintiff appeals from the judgment of the trial court invalidating as unreasonable a restrictive covenant contained in an employment contract signed by the plaintiff and the defendant. We find error.

The following facts are undisputed. In December, 1980, the plaintiff, a wholesale tobacco business, and the defendant entered into an employment contract that contained the following covenant: “Because of the importance and value of the information disclosed to the Employee, as part of the consideration for his employment, the Employee agrees that he will not directly or indirectly sell products similar to those of the Employer to any of the customers that he has dealt with or has discovered and become aware of while in the employ of the Employer for a period of twenty-four months from the termination of his employment.”

The defendant voluntarily terminated his employment relationship with the plaintiff in November, 1981. Shortly thereafter, the defendant opened his own wholesale tobacco business and sold “products similar to those of the Employer” to certain customers of the plaintiff within the twenty-four month period of the restrictive covenant.

The plaintiff subsequently brought an action against the defendant seeking money damages and injunctive relief.1 The trial court, Hadden, J., denied the plain[533]*533tiff’s application for a temporary injunction. The plaintiff appealed to the Supreme Court, which dismissed the appeal suo motu, on the ground that an appeal taken from the denial of a temporary injunction is not taken from a final judgment.

The Supreme Court remanded the case to the trial court and, after trial, the court, Reynolds, J., rendered judgment for the defendant on the ground that the covenant interfered with the public interest. The plaintiff appealed the decision to this court, claiming that the trial court erred as a matter of law in holding that the covenant was unenforceable. Because the trial court invalidated the covenant on the ground that it restricted the public interest, without determining whether the restriction was reasonable, we found error and remanded the case to the trial court for evaluation of the covenant under the criteria set forth in Scott v. General Iron & Welding Co., 171 Conn. 132, 368 A.2d 111 (1976). New Haven Tobacco Co. v. Perrelli, 11 Conn. App. 636, 528 A.2d 865 (1987).

On remand, the trial court again invalidated the covenant concluding that it was unreasonable because it lacked a geographic limitation and because it unduly interfered with the public interest. The plaintiff has again appealed, claiming that the trial court erred in invalidating the covenant.

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 [534]*534pursue 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, supra, 639 n.2.

In the present case, the trial court concluded that the restrictive covenant was unreasonable with respect to the second and fifth prongs of Scott, finding that the covenant lacked any geographic limitation and unduly interfered with the public’s interests. The trial court reasoned that because the covenant did not specify the geographic area covered by the restriction, the geographic scope of the covenant was unlimited and thus unreasonable. We disagree.

The application of a restrictive covenant must be confined to a geographic area that is reasonable in view of the particular situation. Scott v. General Iron & Welding Co., supra, 138. “A restrictive covenant which protects the employer in areas in which he does not do business or is unlikely to do business is unreasonable with respect to area.” Id.

The trial court’s conclusion that the lack of an explicit geographic limitation rendered the covenant unreasonable with respect to area misconstrues the nature and operation of the particular covenant at issue. The covenant is not an anticompetitive covenant that restricts an employee from engaging in the same business as the employer in a given geographical area and prohibits the employee from doing business with all consumers of the service located in that area. Instead, the covenant at issue imposes an antisales restriction that prevents the employee from transacting business with only a specified group of consumers, namely, the customers of the former employer.

[535]*535An antisales restriction, as opposed to an anticom-petitive restriction, is by its nature limited to a definite geographic area.2 See Robert S. Weiss & Associates, Inc. v. Wiederlight, 208 Conn. 525, 531, 546 A.2d 216 (1988). The geographic area affected by an antisales covenant is limited to that area in which the customers of the former employer are located, and the restriction, even within that area, applies only to those customers.

In Wiederlight, our Supreme Court specifically rejected the contention that the antisolicitation and antisales restriction at issue in that case was unreasonable as to geographic area because it lacked, as does the present covenant, an explicit geographic limitation. Id., 531-32. In that case, the employer was doing business throughout Fairfield county and in New York.

In the present case, the plaintiff’s market, and thus its protected customer list, are local and limited to the greater New Haven area. Thus, although the covenant does not contain an explicit geographic limitation, the covenant is in fact limited to a reasonable geographic area.

[536]*536The trial court also concluded that the restrictive covenant was invalid and unenforceable because the covenant unreasonably interfered with the interests of the public.

In our previous opinion in this case, we set out factors for evaluating whether a restrictive employment covenant unreasonably interferes with the interests of the public. New Haven Tobacco Co. v. Perrelli, supra, 640-42. In order for such interference to be reasonable, it first must be determined that the employer is seeking to protect a legally recognized interest, and then, that the means used to achieve this end do not unreasonably deprive the public of essential goods and services. Id., 642.

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Cite This Page — Counsel Stack

Bluebook (online)
559 A.2d 715, 18 Conn. App. 531, 1989 Conn. App. LEXIS 177, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-haven-tobacco-co-v-perrelli-connappct-1989.