Opinion
FSTCV146021437
01-18-2017
Newton J. Friese, IV v. Fadner Media Enterprises, LLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION FOLLOWING BENCH TRIAL
Hon. Charles T. Lee, J.
Plaintiff Newton Friese (" Friese") commenced this action by service of a summons and complaint on defendants Fadner Media Enterprises, LLC (" Fadner Media" or the " company") and Kenneth Fadner (" Fadner") on or about March 3, 2014. The complaint contains two counts: the first alleging breach of contract against Fadner Media, and the second alleging tortious interference against Mr. Fadner. In the first count, the plaintiff alleges that Fadner Media failed to pay him his accrued benefit under the company's deferred compensation plan (the " Option Agreement") following the termination of his employment with the company on March 31, 2008. In the second count, the plaintiff alleges that Mr. Fadner tortiously interfered with the company's payment to the plaintiff of the deferred compensation benefits, seeking revenge against the plaintiff for divorcing Mr. Fadner's daughter, among other things.
On or about June 25, 2015, defendants filed a revised amended answer and counterclaims in which they asserted special defenses against the first count, claiming that Mr. Friese breached the employment agreement by failing to devote substantially all of his business time and effort to the company, and instead working on other ventures; and that Mr. Friese breached the Option Agreement by competing against Fadner Media, hiring its employees and misappropriating its assets and proprietary information. The defendants asserted the same special defenses against the second count, sounding in tortious interference. The defendants asserted five counterclaims, but later withdrew the third, fourth and fifth counterclaims. The remaining first counterclaim asserts that Mr. Friese breached duties of loyalty and care to Fadner Media and breached the Option Agreement by competing with the company while an employee and thereafter, hiring away company employees and misappropriating assets and proprietary information, including the company's customer (or " membership" list). The second counterclaim alleges unjust enrichment on behalf of the company by reason of Mr. Friese's failing to devote full time to his job duties and by reason of the conduct alleged in the first counterclaim.
The plaintiff filed a reply to defendants' special defenses, and revised special defenses to the counterclaims claiming, with respect to the first counterclaim, that the company's failure to pay the deferred compensation benefit excused the plaintiffs alleged improper conduct, which also would be considered a set-off, was barred by the six-year statute of limitations for breach of contract, General Statutes § 52-576, for failure of consideration and because the non-compete and non-solicitation clauses were unreasonably restrictive because they were not limited in geographical scope. With the respect to the second counterclaim, plaintiff alleged that defendants waived any such claims by encouraging the plaintiff to pursue other business ventures and receiving compensation therefrom, that the unpaid deferred compensation would constitute a setoff, and that the claim is barred by laches and unclean hands because the company failed to pay the benefit and profited from the plaintiff's other activities.
The matter came on for trial before the court on July 19, 2016, and continued on July 20 and July 21, 2016. The parties submitted post-trial briefs and replies. The court finds that plaintiff has not prevailed on his contract and tortious interference counts, nor have defendants prevailed on their counterclaims for breach of plaintiff's duty of loyalty and care and the non-compete clause or for unjust enrichment, for the reasons set forth below:
Findings of Fact
After review of the trial testimony and the admitted exhibits, the court finds the following:
The Parties
1. Defendant Kenneth Fadner founded defendant Fadner Media, LLC in 1996. It conducts business as MediaPost (hereinafter " the company, " " Fadner Media" or " MediaPost") and is a Connecticut limited liability company, which at all relevant times was owned by Fadner and his wife, with offices at 145 Pipers Hill Road in Wilton, Connecticut and 1140 Broadway, New York, New York. Fadner Media is a publisher and organizer of conferences for the digital advertising and marketing industry. It also provides information to media buyers, publishers and planners about their industry through newsletters, research, job listings and the aforementioned conferences.
2. Plaintiff Newton Friese married one of Mr. Fadner's daughters, Nicole, in 1996, and joined the company in 2000. From 2000 until March 31, 2008, Friese served as Vice-President of Marketing and Sales.
The Option Agreement
3. In 2005, Fadner Media created a deferred compensation plan entitled " The Fadner Media Enterprises, LLC 2005 Option Plan" (" Option Plan"), a deferred compensation arrangement by which certain employees accumulated nominal interests in Fadner Media called " options."
4. On or about July 11, 2005, Friese and Fadner Media entered into an Option Agreement (" Agreement"), drafted by Fadner, whereby Fadner Media granted Friese an option for phantom stock under the specific terms and conditions contained in the Agreement. At this time, Fadner and Friese discussed the provisions of the Option Plan and Agreement. Friese also read the Option Agreement at this time and was aware of its terms and conditions. While it does not appear Friese ever signed the Agreement, Fadner is not claiming that the options were not granted to Friese.
5. After the creation of the Membership Program, Fadner Media provided plaintiff with a confirmation that he held interests pursuant to the program and the value of the interests as of the end of each calendar year. The Agreement provided that plaintiff had been granted 150, 000 Options exercisable at a strike price of $1.00. 75, 000 of the options were " vested" on the effective date of the Option Agreement and 12.5% of the remaining options would vest on each anniversary of the Agreement.
6. Paragraph 3(d) of the Agreement provides that the Option is exercisable during the option period (ten years), provided that " the Employee is then engaged as an employee of the Company. If the Employee shall leave the employ of the Company, the Option shall lapse as of the last date of employment."
7. Paragraph 5 of the Agreement, entitled " Method of Exercising Options" provides, in pertinent part, as follows:
(a) Subject to the terms and conditions of this Option Agreement, the Option may be exercised by written notice to the Company at its then current place of business. Such notice shall state the election to exercise the Option and the vested portion as to which it is being exercised, and shall be signed by the person or persons so exercising this Option . . .
8. Paragraph 6 of the Agreement is entitled " Negative Covenant" and provides in pertinent part as follows:
a. In consideration for the grant of this Option, Employee agrees that, while engaged as an employee of the Company and for a period of 12 months thereafter, he or she will not:
(i) Directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected with, as partner, stockholder, director, officer, agent, employee, consultant, or in any other capacity, any business, firm or corporation which competes with the business of the Company or any of its subsidiaries and affiliates.
(ii) Directly or indirectly, disclose to any person or company or otherwise use any confidential information or trade secrets owned by the Company or any of its subsidiaries and affiliates . . . All trademarks, trade names, copyrights, information, and property relating to the Company or its subsidiaries and affiliates which the Employee shall prepare in connection with Company sponsored projects or use or come into contact with, shall be and remain the Employer's sole property and shall be used by the Employee only as required in the course of his or her employment with the Company.
(iii) Solicit, directly or indirectly, any employees of the company to leave the employ of the Company.
c. The parties acknowledge that the Company's business and the businesses of its affiliated entities involve trade secrets and are highly competitive and of specialized nature and unique character, and, accordingly, that it is appropriate and reasonable for the Employee to be bound by the negative covenants set forth in this Section 6.
9. Section 8 of the Agreement also provides that " No modifications of or additions to any of the provisions hereof shall be binding or effective unless set forth in a writing subscribed by both parties hereto."
Friese's Departure from the Company
10. In December 2007, Friese and Nicole were separated, and Nicole filed for divorce. Shortly thereafter, Friese and Fadner met and agreed that Friese's position with the company was untenable and that he would resign as of March 31, 2008. In that same meeting and subsequently, Friese indicated to Fadner that he intended to develop his " Guitar Jam Daily" blog dedicated to guitar topics, and if unsuccessful, get an industry job.
11. On December 21, 2007, Fadner sent Friese an email stating that he had " drafted this agreement to continue our employment relationship through March 31, settle the options and the loans and provide for the repayment of the loans I've made to the two of you." He also attached a first draft of an " Option Settlement Agreement, " which provided, inter alia, that its objectives were " the complete settlement of all claims under that OPTION AGREEMENT dated July 11, 2005 between Friese and MediaPost"; and to establish that the agreed value of the Option was $225,000, which is based upon a " value per share of $3.00 minus the $1.00 value on the date of the grant times 150, 000 shares times the vesting percentage of 75%."
12. Fadner and Friese discussed various other drafts of such an agreement, but no agreement was ever signed.
13. Friese resigned from the company on March 31, 2008.
Post-Termination Activities
14. The Guitar Jam project was not remunerative, and, on or about April 1, 2008, Friese formed a new company called DM2 Events, LLC, subsequently known as Digiday Media, LLC, for purposes including staging conferences. The first conference was for the benefit of a company called Zinio, which is a publishing technology company that assists clients in digitizing their magazines, among other things. The conference was called the Digital Publishing and Advertising Conference (" DPAC"). Friese had signed a contract with Zinio in February 2008 to stage the conference in 2008. Fadner concedes that Friese advised him of this and that Fadner had waived the application of the negative covenant, contending that it was a " one off" event. Subsequently, Fadner agreed that Friese could stage a second conference for Zinio in October 2008, referred to as " DPAC II." Friese purchased advertisements for DPAC on Fadner Media's websites.
15. Zinio was also a customer of MediaPost and it was a sponsor of a MediaPost conference called OMMA Publish in June 2008, which had been developed in the fall of 2007, while Friese was still employed by the company.
16. DM2 conducted two other half-day conferences on March 18, 2009, before the expiration of the non-compete period, i.e., March 31, 2009. These events were styled Digiday Mobile and Digiday Social.
17. MediaPost previously had run events directed to mobile and social media participants in 2007 and 2008. The marketing materials prepared in connection with Friese's events bore a strong resemblance to the company's materials for its own conferences. There was also considerable overlap of sponsors and of subject matter between the various events. Some of the same individuals attended the company's events and Friese's events. Digiday held three more conferences in 2009, after the expiration of the non-compete period, which probably were developed during the period.
18. During the non-compete period, Digiday also published a newsletter, which shared characteristics with several of MediaPost's newsletters. Digiday also established a website, which defendants claimed resembled their own, but no adequate proof was adduced of the latter contention.
19. Two individuals, Karen Ariel and Lou Rossi, left Fadner Media to work with DM2/Digiday during the non-compete period. However, Ms. Ariel was an independent contractor and not an employee. Mr. Rossi was an employee and left in late September, 2008; however, there was evidence presented that he may have left the company because of a conflict with a Media Post manager.
20. Defendants presented excerpts from Friese's tax returns for 2008 and 2009, which showed that his gross receipts in 2008 were $293,248 and $909,473 in 2009. The same returns showed net losses of $44,198 in 2008 and $7,090 in 2009.
21. Defendants presented no probative evidence of losses by Fadner Media caused by Mr. Friese's activities in the non-compete period.
22. The discussions relating to financial issues between Friese, Nicole, and her father, Fadner, continued after the conversations and draft agreements in December 2007. In later stages, they included proposals that Fadner would give financial support to Nicole and her children that would be considered as a pay-out against the company's deferred compensation obligations to Friese. Many permutations were considered. Fadner occasionally threatened to enforce the non-compete agreement, which coincided with Friese's retention of counsel. No agreement was signed and negotiations broke down in August 2008.
23. Fadner paid $103,000 to Nicole out of his personal account from April 2008 to October 2009. The company also made COBRA payment to Friese of $8,619.20. In July or August 2009, the company filed an IRS Form 1099 characterizing $111,619.20, including the $103,000 paid by Fadner to Nicole, as a payment to Friese from Fadner Media, thereby imposing a related tax liability on Mr. Friese (and presumably transforming the payments to Fadner's daughter into a corporate tax deduction for Fadner Media).
Conclusions of Law
A. Plaintiff's Claims
1. Breach of Contract
Friese claims that Fadner Media owes him at least $250,000 under the Agreement. Defendants claim, inter alia, that Friese failed to exercise the option as required by the Agreement and, in any event, his recovery is precluded because he breached the non-compete clause in the Agreement.
The elements of a cause of action sounding in breach of contract are well-established. " The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Keller v. Beckenstein, 117 Conn.App. 550, 558, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009).
Plaintiff has proven the existence of the Option Agreement, that he would be entitled to $225,000 under the Agreement and that he has not been paid the money. However, whether he has established the second element, performance, is a closer question. Friese conceded on the stand that he did not make a formal written demand for exercise of the Agreement while still employed by Fadner Media. However, the draft agreement sent to him on December 21, 2007 and written by Fadner states that one of its purposes in " the complete settlement of all claims under that OPTION AGREEMENT dated July 11, 2005." As a result, Fadner, the CEO of Fadner Media, necessarily acknowledged that a claim under the Option Agreement had been made by Friese. Further, Fadner Media filed the 2009 Form 1099 in which it claimed that it had paid $103,000 as compensation, which Mr. Fadner testified related to compensation to Friese under the Option Agreement. Accordingly, the court finds that defendants waived the requirement of written notice to trigger the obligation to pay the accrued benefit under the Option agreement. As a result, the court finds that Friese has proven that Fadner Media breached the Option Agreement.
Defendants' Special Defenses to the Contract Claim
Defendants assert two special defenses against the contract count: (1) that Friese breached the Agreement by failing to devote substantially all of his time to company business while employed by it, and (2) that he breached the non-compete covenant in the Agreement.
As to the first defense, while Friese agreed that he spent some time working on the Guitar Jam project before leaving the company, Fadner approved those efforts and cannot be heard to complain of them now. Further, there was no proof of the extent of the distraction from Friese's corporate duties. Accordingly, the first special defense to the breach of contract count is rejected.
The second special defense, that Mr. Friese violated the non-compete agreement, requires more discussion. Based on the facts adduced at trial, the court finds that Friese competed against Fadner Media in violation of the covenant not to compete. The business activities of DM2/DigiMedia plainly copied those of Fadner Media in their conference format, target audiences, sponsors, marketing material and subject matter. While Mr. Fadner admits that he permitted Friese to conduct the DPAC I and DPAC II conferences in 2008, there was no such permission granted for the Digiday Mobile and Digiday Social conferences in the first quarter of 2009. By their conduct, the parties acknowledged the fact of competition because, if Friese's conduct was not competitive, a waiver would have been unnecessary. This finding is sufficient to find a breach of the non-compete covenant and the court does not need to reach the claims of trade secret appropriation or solicitation of employees.
The discussion does not end here, however, because in reply to the second special defense, plaintiff asserts that the covenant is an invalid restraint of trade; specifically, because it is not limited in geographic scope. As the party contesting the effectiveness of the non-compete clause, Friese has the burden of proof on the issue. Scott v. General Iron & Welding Co., 171 Conn. 132, 139, 368 A.2d 111 (1976). The plaintiff contends that the clause does not satisfy the reasonableness analysis applied to non-compete clauses as mandated by our Supreme Court in Weiss v. Wiederlight, 208 Conn. 525, 546 A.2d 216 (1988) (" Weiss "). Defendants claim that the clause is a forfeiture provision not requiring a reasonableness analysis under the holding of Schoonmaker v. Cummings & Lockwood, 252 Conn. 416, 451, 747 A.2d 1017 (2000). A typical non-compete clause may be included in an employment contract or sale of business agreement, providing that the counter-party is barred from competing for a certain period of time in a specified area. A forfeiture provision causes a loss of some benefit if competition occurs.
As explained by the Supreme Court in Deming v. Nationwide Mut. Ins. Co., 279 Conn. 745, 767-68, 905 A.2d 623 (2006) when considering a non-compete clause in a deferred compensation agreement given to insurance agents:
We recognize that [the clause] " does not restrain [the plaintiffs] rights to future employment in the sense that it does not present the classic situation wherein the employee, by assuming a position in a competitive field exposes himself to a suit by the employer for breach of contract or by way of a bill for injunctive relief." Food Fair Stores, Inc. v. Greeley, supra, 264 Md. at 116, 285 A.2d 632. Here, the plaintiffs are free to engage in competition without restraint or interference by the defendants, but they are not free to do so and receive the deferred compensation benefits. Therefore, " whether the restraint on the employee is by way of an employment contract arming the employer with legal sanctions or by virtue of a pension plan, which holds over the employee the loss of benefits should he compete, in either instance, the employee is subject to an economic loss should he breach the restrictive covenant." Id.
Because the clause at issue in this case provides that breach of the non-compete clause relieves Fadner Media of its obligation to pay Mr. Friese the option payment, the court concludes that it is fairly characterized as a forfeiture clause. However, our Supreme Court held in Deming, supra, as a matter of first impression that the reasonableness analysis set forth in Weiss, supra, still must be applied, explaining, " [W]e agree with the plaintiffs that the provision in the present case, requiring that an agent forfeit his or her interest in the plan for competing with the defendants is, for all intents and purposes, a restraint against competition to which the reasonable standard applies." 279 Conn. at 768.
In Weiss, our Supreme Court set forth the factors to be considered in considering the reasonableness of non-compete as follows:
The five factors to be considered in evaluating the reasonableness of a restrictive covenant ancillary to an employment agreement are: (1) the length of time the restriction operates; (2) the geographical area covered; (3) the fairness of the protection accorded to the employer; (4) the extent of the restraint on the employee's opportunity to pursue his occupation; and (5) the extent of interference with the public's interests. Scott v. General Iron & Welding Co., 171 Conn. 132, 137, 368 A.2d 111(1976); New Haven Tobacco Co. v. Perrelli, 11 Conn.App. 636, 638-39, 528 A.2d 865 (1987).Robert S. Weiss & Assocs., Inc. v. Wiederlight, 208 Conn. 525, n.2, 546 A.2d 216 (1988). In this case, the plaintiff concedes that a non-compete period of one year following termination of employment is not an unreasonable period to protect the employer's interests. However, the plaintiff notes that Paragraph 6 of the Option Agreement bars the plaintiff from forming a connection with " any business, firm or corporation which competes with the business of the Company or any of its subsidiaries and affiliates, " and does not contain a geographic limitation or boundary. Plaintiff points to cases such as Weiss, which have upheld limitations of a limited radius from the employer's business, or county boundaries or other geographic specifications dictated by the area of the employer's business; see, e.g., Robert S. Weiss & Associates, Inc. v. Wiederlight, supra, 208 Conn. at 531 (ten-mile radius was found reasonable in context of insurance sales); Access America, LLC v. Mazzotta, Superior Court, judicial district of Middlesex, Docket No. CV-05-4003389-S (September 14, 2005, Silbert, J.) (40 Conn.L.Rptr. 12, 13, ) (fifteen-mile radius was found reasonable in context of real estate sales); Century 21 Access America v. Lisboa, Superior Court, judicial district of Ansonia-Milford, Docket No. CV-03-0081901-S (July 22, 2003, Ronan, J.) (35 Conn.L.Rptr. 272, 277-78, ) (same) . . . The courts that have upheld relatively narrow geographic limitations have generally been dealing with businesses not engaged in internet or global commerce, such as barber shops, beauty parlors, and insurance agents. On the other hand, the law has come to acknowledge the inapplicability of geographic bounds to companies that do business on a national or international basis such as Fadner Media. See LYS Global Technology, LLC v. Bonarrigo et al., Superior Court, judicial district of Hartford, Docket No. HHDCV156061764S *4-5, (May 13, 2016, Dubay, J.); Tyco Healthcare Group L.P. v. Ross, United States District Court, District of Connecticut, Civil Action No. 3:11-cv-373, (May 10, 2011, Droney, J.) (worldwide covenant enforceable because of nature of plaintiff's business); Branson Ultrasonics Corp. v. Stratman., 921 F.Supp. 909, 913-14 (D.Conn. 1996) (international scope of non-compete clause reasonable in light of plaintiff's marketing activities); Business Intelligence Servs., Inc. v. Hudson, 580 F.Supp. 1068, 1073 (S.D.N.Y. 1984) (worldwide non-compete reasonable, given international scope of plaintiff's business); Aetna Retirement Serv., Inc. et al v. Hug et al., Superior Court, judicial district of Hartford-New Britain at New Britain, Docket No. 47 99 74, (June 18, 1997, Holzberg, J.).
This trend is particularly applicable to a business operating on the internet. Simplexity, LLC v. Zeinfeld, Docket No. 8171-VCG, (Del. Ch. April 5, 2013) (noncompetition provision prohibiting competition in the United States and any country wherein the company " has conducted business, is conducting business or . . . [at the time of execution was] contemplating conducting business" is reasonable for a " cell-phone activation business [operated] largely over the internet, and thus not limited geographically"); West Publishing Corp. v. Stanley, United States District Court, Docket No. Civ. 03-5832 (JRT/FLN), (D.Minn. January 7, 2004) (noncompetition provision lacking geographic limitation was " reasonable in light of the national, and . . . international, nature of internet business").
A prohibition against competing from a location less than twenty-five miles away, for example, would provide no effective protection to a company engaged in internet commerce; and the plaintiff makes no convincing argument as to why a global prohibition against competing with Fadner Media's global internet business is unreasonable.
Friese also claims that Paragraph 6 is vague and unenforceable because it does not define what is meant by " the business of the Company." This argument is unpersuasive as applied to Friese, who was employed as the vice president of marketing and sales for the company for more than ten years. Certainly a senior officer such as Friese could be expected to understand the company's business sufficiently to avoid competing with it. It is also worth noting that the clause prohibits competition only with the company's actual business and does not prevent Friese from working in the field of internet marketing or sales.
Plaintiff makes no argument with respect to the final three factors specified by Weiss, and so concedes them. The court agrees that the clause (a) provides a fair level protection to Fadner Media given the global nature of its specialized business; (2) does not prevent the plaintiff from doing business in the field of internet commerce; and (3) does not deprive the public of a unique resource. Accordingly, the court finds that Paragraph 6 does not constitute an unreasonable restraint of trade. Having found that Friese competed with the business of Fadner Media during the year following his departure from the company, the court finds that Friese forfeited his right to receive payment under the Agreement and so the company did not breach the Agreement by failing to make payment to Friese under that agreement.
2. Tortious Interference
The second count of the complaint alleges that Mr. Fadner tortiously interfered with the company's payments to Friese by diverting the money to Nicole and for revenge against Friese for divorcing Nicole.
The elements the plaintiff must prove in support of this claim have recently been restated by our Supreme Court as follows:
A claim for tortious interference with contractual relations requires the plaintiff to establish (1) the existence of a contractual or beneficial relationship, (2) the defendants' knowledge of that relationship, (3) the defendants' intent to interfere with the relationship, (4) the interference was tortious, and (5) a loss suffered by the plaintiff that was caused by the defendants' tortious conduct. (Internal quotation marks omitted.) Appleton v. Board of Education, 254 Conn. 205, 212-13, 757 A.2d 1059 (2000).Landmark Inv. Grp., LLC v. CALCO Constr. & Dev. Co., 318 Conn. 847, 864, 124 A.3d 847 (2015). Thus, the first element plaintiff must prove is that he had a valid contract for payment of the option amounts that was interfered with by Mr. Fadner. However, the court has concluded that Friese breached the non-compete provision of the contract and forfeited any right to payment thereunder. Accordingly, the plaintiff has failed to prove tortious interference by Mr. Fadner with plaintiff's right to payment under the Agreement.
A subsidiary argument made by plaintiff is that the issuance of the IRS Form 1099 to him claiming that he had received a taxable payment of $103,000 also constituted tortious interference. Certainly, the assertions by the defendants at trial regarding the $103,000 payments were questionable. The defendants' position that (1) the $103,000 was an advance on the option payment is inconsistent with the position that (2) Friese's competition forfeited his right to payment. If the first contention is correct, then Fadner Media owes Friese the balance of the option payment. If the second contention is correct, then the $103,000 must be considered to be a gift to Nicole by her father. The court finds that the latter proposition is correct and that the $103,000 was wrongly attributed to Friese and not to Mr. Fadner's largesse. Friese claims the 1099 caused him to pay $47,000 in taxes unnecessarily. However, there was no proof adduced at trial of this amount, if Mr. Friese in fact paid the excess tax, and the calculated dollar amount only appeared in plaintiff's post-trial brief. Moreover, because the court has determined that a key element of the tort of tortious interference, i.e., a valid and enforceable contract is not present, Friese may not recover under this theory for any harm inflicted by the Form 1099. While the company's issuance of the Form 1099 may have been wrongful, the complaint does not contain a count under which relief can be granted, and the amount of damages has not been proven.
As a result, a claim for tortious interference will not lie against Mr. Fadner, and the court finds against plaintiff on the second count of the complaint.
B. Counterclaims of Defendant Fadner Media
1. Breach of Contract
In its first counterclaim, Fadner Media seeks damages against Friese based on (a) his alleged breach of the non-compete provision in Paragraph 6 of the Option Agreement, and (b) breaches of his duty of loyalty and care. This claim is deficient for several reasons.
First, a forfeiture clause does not support a claim for recovery of contract damages for breach, as explained in Deming, supra . Rather, it fixes damages as the company's relief from the obligation to pay anything under the Option Agreement, in this case $225,000. To allow contract damages in addition to the forfeiture would be to permit a duplicative recovery without justification.
Second, defendants have not presented evidence as to the proper measure of any damages they claim to have suffered from Friese's alleged wrongful acts. Evidence of Friese's substantial gross receipts in 2008 and 2009 are insufficient. As the Supreme Court stated in Weiss, supra, " The proper measure of damages for breach of a covenant not to compete is the " nonbreaching party's losses rather than the breaching party's gains." [Citations omitted.] 208 Conn. at 542. Here, defendants presented insufficient evidence at trial to show any losses suffered by Fadner Media. Accordingly, the court finds against the defendants on their first counterclaim.
2. Unjust Enrichment
The second counterclaim alleges unjust enrichment against Friese by reason of his failure to devote full time to the company's business while employed by it and, as alleged in its first counterclaim, by appropriating its intellectual property without payment.
In American Express Centurion Bank v. Head, 115 Conn.App. 10, 16, 971 A.2d 90 (2009), the Appellate Court prescribed the elements of the cause of action for unjust enrichment as follows: " Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment. Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006)." (Internal quotation marks omitted.)
The court has already rejected defendants' first special defense to plaintiff's contract count, claiming that Friese did not devote sufficient time to the affairs of the company while employed by it. Accordingly, it rejects this same contention asserted as part of the second counterclaim. Defendants have not adduced sufficient evidence to show the extent of Friese's distraction, or that it was not permitted or that it harmed the company in any appreciable way.
As to that part of the second counterclaim asserting unjust enrichment based on Mr. Friese's post-employment activities, Fadner Media is not entitled to the relief it seeks given the existence of an express contract between the parties, namely, the Option Agreement relating to those activities. The existence of an express agreement between the parties acts as a bar to recovery under an unjust enrichment theory. " [P]arties who have entered into controlling express contracts are bound by such contracts to the exclusion of inconsistent implied contract obligations." H.B. Toms Tree Surgery, Inc. v. Brant, 187 Conn. 343, 346-47, 446 A.2d 1 (1982). Thus, " [p]roof of a contract enforceable at law precludes the remedy of unjust enrichment." New Hartford v. Connecticut Resources Recovery Auth., 208 Conn. 525 (2009); Feng v. Dart Hill Realty Inc., 26 Conn.App. 380, 383, 601 A.2d 547, cert. denied, 223 Conn. 912, 612 A.2d 59 (1992). Finally, as discussed above, defendants have failed to adequately prove their damages or detriment arising from Mr. Friese's post-termination activities. Accordingly, the court holds against defendants as to their second counterclaim.
By reason of the court's holdings, the court does not need to evaluate plaintiff's special defenses with respect to defendants' counterclaims.
Conclusion
Having heard the parties' testimony at trial and reviewed the admitted exhibits, the court concludes that plaintiff has not established his right to any recovery against defendants under either count of his complaint; and that defendants have not established their right to any recovery against plaintiff under their counterclaims.