Opinion
No. CV08 401 00 66S
September 16, 2008
MEMORANDUM OF DECISION RE MOTION FOR TEMPORARY RESTRAINING ORDER #101
The plaintiffs, Money Mailer Franchise Corp. and Javier Ferrer, have instituted this action against Douglas Wheeler, a former Money Mailer Franchise Corp. franchisee, seeking a permanent injunction to enforce a covenant not to compete, as well as money damages, attorneys fees, and punitive damages. Presently before this court is the plaintiff's application for a temporary restraining order, filed on June 16, 2008. The application was addressed by way of an evidentiary hearing on July 21, 2008. Upon conclusion of the hearing, the parties were directed to submit simultaneous memorandums of law by August 20, 2008.
Based upon the credible evidence as presented at the hearing held on July 21, 2008, the court finds the following facts. Plaintiff Money Mailer is in the business of franchising a system providing direct mail advertising and related services to multiple business clients throughout multiple territories. The defendant, Douglas Wheeler, executed a franchise agreement with Money Mailer of Connecticut, Inc., on February 28, 2003. In conformity with the agreement the defendant was assigned a mailing territory of thirteen (13) zip codes in Fairfield County and New Haven County (the "Territory"). On October 6, 2006, Money Mailer of Connecticut, Inc., assigned this franchise agreement to plaintiff Money Mailer Franchise Corp.
The franchise agreement, in addition to other provisions, included a covenant not to compete, with terms as follows:
7.14 Non-Competition
a. During the Term, neither Franchisee (as defined in sub-paragraph c), nor any officer, director, family member or shareholder of Franchisee, shall engage in any Competitive Activities within the Territory or within the territory of any other "Money Mailer" franchise then in operation. For purposes of this Agreement, the term "Competitive Activities" shall mean and refer to any act or activity which, either directly or indirectly, aids, or assists the conduct of any business which is similar or related to the Direct Mail Advertising Business (including the Co-op Mailings, Segmented Mailings and Individual Mailings), whether as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, family member, independent contractor, advisor or consultant.
b. For a period of two (2) years immediately following the termination of this Agreement, the Franchisee shall not engage in any Competitive Activities (a) within the Franchisee's Territory or (b) within Fifty (50) miles of the Franchisee's Territory, or (c) within 50 miles of the territory of any other "Money Mailer of Connecticut, Inc.," "Money Mailer of Westchester, Inc.," and "Money Mailer of CenWest Massachusetts, Inc." franchisee, or (d) within 50 miles of the territory of any other Money Mailer Franchisee. If the Franchisee breaches any of the provisions of this section, the two (2) year non-competition period shall begin again and shall continue until the Franchisee has fully complied with the terms contained in this paragraph 7.13 for the period of time specified.
c. For purposes of this paragraph 7.13, "Franchisee" shall be deemed to include any officer, director, or shareholder of a corporate franchisee, partner of any franchisee which is a partnership, a member or unit holder of any limited liability company which is a franchisee or principal of any other type of entity now or hereafter created and any Guarantor thereof. The parties have attempted in this paragraph to limit the Franchisee's right to compete only to the extent necessary to protect Region from unfair competition and protect Money Mailer's goodwill, trade secrets and proprietary information. The parties hereby expressly agree that if the scope or enforceability of this paragraph is disputed at any time by Franchisee, the arbitrator may modify either or both of such provisions to the extent that he or she deems necessary to make such provision enforceable under applicable law. In addition, the Region reserves the right to reduce the scope of said provision without the Franchisee's consent, at any time, effective immediately upon notice to Franchisee.
d. Franchisee acknowledges and warrants that no such violation of the terms of this Section 7.13 exists as of the date of this agreement.
Section 12.4 of the franchise agreement specified the covenant not to compete survives the termination of the franchise agreement.
On or about October 31, 2007, defendant Wheeler sold his Money Mailer franchise to plaintiff Javier Ferrer. The purchase price was one hundred thirty thousand dollars ($130,000), which was paid in full at the closing on or about October 29, 2007.
At the closing, the seller (defendant Wheeler) and the purchaser (plaintiff Ferrer) were both represented by counsel. Defendant Wheeler agreed "to abide by all post-termination covenants [in Mr. Wheeler's franchise agreement] and inter alia all duties of confidentiality and covenants not to compete."
In addition to the original and surviving covenant not to compete, as set forth above, defendant Wheeler (as seller) executed a written covenant not to compete with Mr. Ferrer. This document, dated October 29, 2007, provided:
2. The Seller agrees that for a period of three (3) years from and after the date hereof, he will not establish, open, be engaged in, nor in any manner whatsoever become interested, directly or indirectly, as employee, owner, partner, agent, shareholder, director or officer, or otherwise, in any business, trade or occupation similar to the Money Mailer of Connecticut, Inc. franchise business assigned hereunder, within the franchise zones and territories of the Buyer.
CT Page 15012
3. The Seller and Buyer agree and stipulate that the provisions contained herein are fair and reasonable, however, they are aware that in certain circumstances courts have refused to enforce certain agreements not to compete. Therefore, in furtherance of and not in derogation of the preceding paragraphs, those paragraphs shall be deemed to be modified to restrict the ability of the Seller and Buyer to the maximum extent, in both time and geography, which a court of competent jurisdiction shall find enforceable; however, in no event shall the provisions of the proceeding paragraphs be deemed to be more restrictive upon them than those contained therein.
Thereafter, commencing on or before February 2008, defendant Wheeler became involved working as an independent contractor for Direct Advantage, which is a business entity engaged in the same business and is a direct competitor of Money Mailer, as well as plaintiff Ferrer. Defendant Wheeler, in his testimony, acknowledged becoming involved in the exact same business that was the subject of the franchise non-compete agreement.
Additionally, defendant Wheeler actively pursued at least several clients with whom he had previously done business as a Money Mailer franchisee. Those solicitations occurred within the protected territory and in clear violation of the covenants not to compete in any way or capacity with Money Mailer as well as with Mr. Ferrer.
DISCUSSION
Before reaching the substantive issues presented by this motion, the court pauses to set forth the relevant standard of review. "The principal purpose of a temporary injunction is to preserve the status quo until the rights of the parties can be finally determined after a hearing on the merits." (Internal quotation marks omitted.) Clinton v. Middlesex Mutual Assurance Co., 37 Conn.App. 269, 270, 655 A.2d 814 (1995). The standard for the granting of a temporary injunction in Connecticut is well settled. "In general, a court may, in its discretion, exercise its equitable power to order a temporary injunction pending final determination of the order, upon a proper showing by the movant that if the injunction is not granted he or she will suffer irreparable harm for which there is no adequate remedy at law . . . In exercising its discretion, the court, in a proper case, may consider and balance the injury complained of with that which will result from interference by injunction." (Citations omitted; internal quotation marks omitted.) Moore v. Ganim, 233 Conn. 557, 569, n. 25, 660 A.2d 742 (1995). There is a four-part test for the issuance of a temporary injunction: "(1) the plaintiff ha[s] no adequate legal remedy; (2) the plaintiff would suffer irreparable injury absent [the injunction]; (3) the plaintiff [is] likely to prevail . . .; and (4) the balance of the equities favor[s] the issuance of the injunction]." Waterbury Teachers Ass'n. v. Freedom of Information Commission, 230 Conn. 441, 446, 645 A.2d 978 (1994).
The standard for granting a temporary injunction to enforce a covenant not to compete, however, is somewhat different in that the plaintiff does not need to prove irreparable harm. "While ordinarily proof of imminent harm is essential, in this type of case there is no such requirement. It has long been recognized in this state that a restrictive covenant is a valuable business asset which is entitled to protection . . . Irreparable harm would invariably result from a violation of the defendant's promises . . . The reason for this is that such a plaintiff's actual injury is not susceptible of determination to its entire extent but is estimable largely by conjecture and prediction." (Citations omitted; internal quotation marks omitted.) Sagarino v. SCI Connecticut Funeral Services, Inc., Superior Court, judicial district of New Britain, Docket No. 499737 (May 22, 2000, Aurigemma, J.), 27 Conn. L. Rptr. 281, quoting Gartner Group, Inc. v. Mewes, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. 118332 (January 3, 1992, Mottolese, J.) (7 C.S.C.R. 275), 5 Conn. L. Rptr. 411; see also Merryfield Animal Hospital v. Mackay, Superior Court, judicial district of New Haven, Docket No. 464586 (July 31, 2002, Hadden, J.T.R.), 32 Conn. L. Rptr. 652; Musto v. Opticare Eye Health Centers, Superior Court, Complex Litigation Docket at Waterbury, Docket No. 155663 (August 9, 2000, Hodgson, J.).
The standard is also different in that the plaintiff does not have to demonstrate an inadequate remedy at law. "[W]hile the plaintiff could maintain a claim for damages as to each violation that causes injury the difficulty of proof and the inefficiency of repetitive suits render inadequate the use of successive remedies at law, and injunctive relief is therefore warranted to protect the plaintiff from harm which the restrictive covenant was intended to prevent." (Citations omitted; internal quotation marks omitted.) Sagarino v. SCI Connecticut Funeral Services, Inc., Superior Court, judicial district of New Britain, Docket No. 499737 (May 22, 2000, Aurigemnia, J.) [27 Conn. L. Rptr. 281], quoting Gartner Group, Inc. v. Mewes, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. 118332 (January 3, 1992, Mottolese, J.) (7 C.S.C.R. 275) [5 Conn. L. Rptr, 411]; see also Merryfield Animal Hospital v. Mackay, Superior Court, judicial district of New Haven, Docket No. 464586 (July 31, 2002, Hadden, J.T.R.) [32 Conn. L. Rptr. 652]; Musto v. Opticare Eye Health Centers, Superior Court, Complex Litigation Docket at Waterbury, Docket No. 155663 (August 9, 2000, Hodgson, J.). Thus, the present application only requires this court to determine that the plaintiff is likely to prevail and that the balance of the equities favors the issuance of the injunction.
With these standards in mind, the court first addresses whether the plaintiff is likely to prevail. During the hearing held on July 21, 2008, defendant Wheeler testified that he previously sold his Money Mailer franchise to Javier Ferrer in October of 2007, and that he was a party to the non-compete provisions referenced above. Moreover, the defendant testified that commencing on or before February 2008, he became involved working as an independent contractor for Direct Advantage, which is a business entity engaged in the same business as, and is a direct competitor of, Money Mailer and plaintiff Ferrer. Additionally, defendant Wheeler testified to actively pursuing several clients with whom he had previously done business as a Money Mailer franchisee. By way of example, defendant Wheeler testified that he solicited business on behalf of Direct Advantage from both Landmark Landscape and Personal Touch Car Wash, both of which he had done business with when he owned his Money Mailer franchise and both of which were within the geographic region protected by the non-compete clauses to which he is a party. Thus, those solicitations occurred in clear violation of the covenants not to compete in any way or capacity with Money Mailer and Mr. Ferrer, and strongly suggest that the plaintiff is likely to prevail in his suit to obtain a permanent injunction to enforce the two covenants not to compete.
This court is likewise persuaded that the equities in this case counsel in favor of ordering the temporary restraining order. In the first instance, it is noted that a temporary restraining order would have the effect of restoring the parties to the relative positions that they bargained for in their contracts with one another. In other words, ordering defendant Wheeler to abide by the non-compete agreements to which he is a party only forces him into a position he voluntarily chose for himself when he sold his franchise to the plaintiffs under the terms that he did. Moreover, the court observes that plaintiff Ferrer paid one hundred thirty thousand dollars ($130,000.) to defendant Wheeler for his Money Mailer franchise, which is less profitable because the defendant continues to solicit business for the plaintiffs' direct competition. This behavior frustrates the intended purpose of the non-compete agreements and has the potential to continue decreasing the amount of business the plaintiffs are able to generate. Accordingly, the equities in this case also support issuing the temporary restraining order.
For the reasons set forth above, the application for a temporary restraining order is granted and it is hereby ordered: that the defendant shall refrain from providing services in any capacity and carrying on, directly or indirectly, any business of the same or similar nature to Money Mailer's or plaintiff Ferrer's business within any of the franchise territories including Mr. Wheeler's former Money Mailer franchise territory; within fifty (50) miles of that territory; within fifty (50) miles of the territory of any Money Mailer of Connecticut, Inc., Money Mailer of Westchester, Inc. and Money Mailer of CenWest Massachusetts, Inc. franchisee, or within fifty (50) miles of the territory of any other Money Mailer franchisee.