Opinion
No. HHD CV X04 04 4034621 A
February 16, 2010
MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT (#129)
The court heard oral argument concerning the defendant, Joseph M. Siech (Siech)'s motion for summary judgment (motion) on December 14, 2009. After considering the parties' submissions and arguments, the court issues this memorandum of decision. For the reasons stated below the motion is denied.
I Background
Significant portions of the background of this matter are stated in Hilb Rogal Hobbs Co. v. Siech, Superior Court, judicial district of Hartford at Hartford, Docket No. CV 04 4004817 (March 23, 2005, Beach, J.) ( 38 Conn.L.Rptr. 706), where the court summarized: "The plaintiff companies, Hilb Rogal Hobbs Company (`HRH') and the Hobbs Group, LLC (`Hobbs'), have brought this action seeking to enforce terms of an employment agreement signed by the defendant Siech . . . Siech signed an `Employment, Non-Solicitation and Confidentiality Agreement' on October 22, 1997, with Hobbs. At the time, Siech, a commercial insurance agent, was a shareholder of Hobbs. Hobbs had a book of business which included a substantial amount of Connecticut clients, and at the time it had a principal place of business in Connecticut. Siech himself, on the other hand, lived in the Atlanta, Georgia, area and had few, if any, personal clients in Connecticut. Hobbs, a Delaware corporation, moved its corporate headquarters from Connecticut to Atlanta in 1998, and on July 2, 2002, HRH acquired Hobbs, and Siech, as a substantial stakeholder in Hobbs, received several million dollars. Siech had developed a substantial book of business. HRH is a Virginia corporation. Hobbs is now apparently a shell entity.
`In 2004, two former principals in Hobbs, which had been combined into HRH, one Golub and one MacGinnitie . . . formed a commercial insurance brokerage called Beecher Carlson Risk Strategies, which is competing with HRH for business. During 2004 Siech apparently decided to cast his lot with Beecher Carlson as well: his business activity for HRH . . . dropped dramatically and he announced his intention to leave HRH to join Beecher Carlson. Following that conversation, HRH formally terminated Siech's employment on November 1, 2004, but not before instituting this action . . . Siech, in turn, filed an action in the United States District Court for the Northern District of Georgia against HRH on November 1, 2004 [Georgia action] . . .
`The pertinent terms of the employment agreement which is the subject of this litigation include very broad non-compete provisions, including a provision that forbids Siech from accepting even any unsolicited business from HRH customers. The non-compete provisions are limited as to time. A further paragraph contains a very broad non-disclosure provision which is not limited as to time." (Citation omitted; footnote omitted.)
Paragraph 18 of the employment agreement provides, in relevant part: " Governing Law. The validity, construction, and enforceability of this Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Connecticut without giving effect to the conflict of laws provisions thereof."
Submitted with Siech's memorandum of law in support of his motion are copies of decisions from the Georgia action. Based on collateral estoppel and res judicata, Siech argues that the United States Court of Appeals for the Eleventh Circuit's August 29, 2006 decision, Siech v. Hobbs Group, LLC, 198 Fed. Appx. 840, which affirmed that of the United States District Court for the Northern District of Georgia, dated November 8, 2005, mandates dismissal of HRH's and Hobbs' complaint in this court.
At oral argument, counsel for the parties agreed that Siech's forum non conveniens argument, which was raised by previous motion to dismiss, and denied without prejudice in Judge Beach's March 23, 2005 decision, cited above, is not now before the court for consideration.
The District Court found the restrictions in the employment agreement to be unenforceable under Georgia law. See Siech v. Hobbs Group, LLC, United States District Court, Civil Action No. 1:04-CV-3199-CC (N.D.Ga. November 8, 2005) (District Court decision), p. 26. In particular, the District Court did not construe Paragraph 18 of the employment agreement, quoted above. Rather, it stated, "[i]n this case, the Employment Agreement purports to apply Connecticut law. The Restrictions, however, are unenforceable under Georgia law, and therefore, violate Georgia public policy . . . Therefore, application of Connecticut law to the Restrictions violates the public policy of Georgia." (Citation omitted.) See District Court decision, p. 9. The District Court found that it was "required to apply Georgia law to the Restrictions." See District Court decision, p. 10.
In addition, that court stated, "[t]he Court does not attempt to limit the scope of this declaratory judgment to the confines of the State of Georgia." See District Court decision, pp. 26-27.
The Eleventh Circuit, per curiam, affirmed, finding that the District Court "concluded correctly that the restrictive covenants were ancillary to employment and were unenforceable under the strict scrutiny standard applied by Georgia courts." Siech v. Hobbs Group, LLC, supra, 198 Fed. Appx. 842.
In response to the motion, Hobbs and HRH (collectively, HRH), contend that this action is not duplicative of the Georgia action, and that the doctrines of collateral estoppel and res judicata do not apply. HRH asserts that the Georgia court did not examine the enforceability of the restrictive covenants in the employment agreement under Connecticut law, which the parties to the agreement expressly covenanted would govern, and that this case is the first in which the court is asked to decide whether the restrictive covenants are valid and enforceable under Connecticut law. In addition, HRH asserts that its claims, including that Siech violated the Connecticut Uniform Trade Secrets Act, General Statutes § 35-50 et seq. (CUTSA), were not before, and not decided by the Georgia court. In the alternative, HRH argues that equitable considerations require that preclusion not apply to bar this action.
Additional references to the facts are set forth below.
II Standard Of Review
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Internal quotation marks omitted.) Southwick At Milford Condominium Association, Inc. v. 523 Wheelers Farm Road, Milford, LLC, 294 Conn. 311, 318, 984 A.2d 676 (2009). "The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).
III Discussion
"Federal law dictates whether a federal judgment is to be given claim preclusive effect in a state court." Commission On Human Rights Opportunities v. Torrington, 96 Conn.App. 313, 318, 901 A.2d 46, cert. denied, 280 Conn. 929, 909 A.2d 957 (2006). Concerning the claim preclusive effect of federal diversity judgments, such as that in the Georgia action here, the United States Supreme Court has adopted, "as the federally prescribed rule of decision, the law that would be applied by state courts in the State in which the federal diversity court sits." Semtek International, Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508, 121 S.Ct. 1021, 149 L.Ed. 2d 32 (2001).
This reference to state law does not apply where the state law is incompatible with federal interests. See id., 509. There is no contention here that federal interests are relevant to the court's consideration.
A Collateral Estoppel
Siech cites Palmer Cay, Inc. v. Marsh McLennan Cos., Inc., 404 F.3d 1297, 1310 (11th Cir.), cert. denied, 546 U.S. 998, 126 S.Ct. 567, 163 L.E.2d 499 (2005), in support of his argument that the District Court and Eleventh Circuit decisions in the Georgia action preclude relitigation of the enforceability of the restrictive covenants in the employment agreement under the doctrine of collateral estoppel. "Georgia does not attempt to limit its declaratory judgments in cases involving non-competition agreements. See Hostetler v. Answerthink, 267 Ga.App. 325, 599 S.E.2d 271, 275 (2004) (noting that under Georgia law of claim and issue preclusion, a final declaratory judgment with respect to a non-competiton agreement precludes subsequent claims or issues from being relitigated in other states) . . . A federal district court sitting in Georgia and applying Georgia law should not do so either." (Citations omitted.) Palmer Cay, Inc. v. Marsh McLennan Cos., Inc. supra, 404 F.3d 1310. Georgia courts apply strict scrutiny and refuse to reform even reasonable employment covenants. See id., 1303-04.
As the Eleventh Circuit earlier explained, "the public policy of Georgia is hostile toward any limitations on competition, and it will apply its own law to any agreements against its public policy even if the parties contracted in another state with the understanding that the other state's law would apply. For example, Ohio employs the blue pencil doctrine; therefore if the [non-competition agreement] were overbroad under Ohio law, the court would be empowered to modify the agreement to enforce it and protect the interests of the parties involved. Georgia law does not offer that flexibility. Georgia of course is entitled to enforce its public policy interests within its boundaries and, in the circumstance that litigation over [a non-competition agreement] is initiated in Georgia, it may employ that public policy to override a contracted choice of law provision. However, Georgia cannot in effect apply its public policy decisions nationwide — the public policy of Georgia is not that everywhere." Keener v. Convergys Corp., 342 F.3d 1264, 1269 (11th Cir. 2003).
Palmer Cay, Inc. v. Marsh McLennan Cos., Inc., supra, does not govern what issues were resolved in the Georgia action. Under Georgia law, the "doctrine of collateral estoppel precludes the re-adjudication of an issue that has previously been litigated and adjudicated on the merits in another action between the same parties or their privies . . . [C]ollateral estoppel does not require identity of the claim — so long as the issue was determined in the previous action and there is identity of the parties, that issue may not be re-litigated, even as a part of a different claim. Furthermore, collateral estoppel only precludes those issues that actually were litigated and decided in the previous action, or that necessarily had to be decided in order for the previous judgment to have been rendered. Therefore, collateral estoppel does not necessarily bar an action merely because the judgment in the prior action was on the merits. Before collateral estoppel will bar consideration of an issue, that issue must actually have been decided." Karan, Inc. v. Auto-Owners Insurance Co., 280 Ga. 545, 546, 629 S.E.2d 260 (2006).
Connecticut law on collateral estoppel is to the same effect. "The common-law doctrine of collateral estoppel, or issue preclusion, embodies a judicial policy in favor of judicial economy, the stability of former judgments and finality . . . Collateral estoppel, or issue preclusion, is that aspect of res judicata which prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action between the same parties upon a different claim . . . For an issue to be subject to collateral estoppel, it must have been fully and fairly litigated in the first action. It also must have been actually decided and the decision must have been necessary to the judgment . . . An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined . . . An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered . . . If an issue has been determined, but the judgment is not dependent [on] the determination of the issue, the parties may relitigate the issue in a subsequent action. Findings on nonessential issues usually have the characteristics of dicta." (Citations omitted; emphasis in original; internal quotation marks omitted.) Lyon v. Jones, 291 Conn. 384, 406, 968 A.2d 416 (2009).
Review of Siech's complaint in the Georgia action shows that he sought to have the restrictive covenants declared unenforceable under Georgia law. See Siech's Exhibit C, Count One ¶¶ 17-19. Here, the District Court did not even set forth the choice of law provisions in paragraph 18 of the employment agreement, let alone construe them. Rather than do so, the District Court stated that it was required by Georgia public policy to apply Georgia law.
In an analogous context, the court in Rimkus Consulting Group, Inc. v. Cammarata, 257 F.R.D. 127 (S.D. Tex. 2009), concluded that a Louisiana judgment which found noncompetition and nonsolicitation covenants unenforceable under Louisiana law because they offended Louisiana public policy, even though the agreement specified that Texas law applied, was not entitled to preclusive effect in Texas. As in Gerogia and Connecticut, Louisiana law precludes subsequent litigation "with respect to any issue actually litigated and determined [by the court] if its determination was essential to that judgment." (Internal quotation marks omitted.) Id., 137.
The Rimkus court analyzed "whether the issues decided by the Louisiana court are the same as the issues before this court, such that the Louisiana judgment precludes further litigation of those issues in this court." Id. That court concluded that the issues were not the same. "The Louisiana court's determination that in Louisiana, the contractual forum-selection, choice-of-law, noncompetition, and nonsolicitation provisions are unenforceable under Louisiana law because they offend Louisiana public policy is entitled to preclusive effect in this court. But the Louisiana court's judgment does not preclude this court from considering the enforceablity of the noncompetition and nonsolicitation covenants under Texas law for Cammarata's competitive activities outside Louisiana that allegedly breached those covenants . . . The Louisiana court's ruling that Louisiana law applies despite the choice of Texas law in the Employment Agreement does not invalidate the choice-of-law, noncompetition and nonsolitation provisions in all states." (Citation omitted.) Id., 140.
In Rimkus, the employee "argue[d] that the Louisiana court did not expressly limit its decision to activities `in Louisiana,' and that the court's judgment . . . should apply with equal force in all states." Id. The court found that the preclusive effect of the Louisiana decision was "limited to Cammarata's competitive activities inside Louisiana." Id. 140-41. As noted above, here, the District court also did not attempt to limit the scope of its declaratory judgment to Georgia.
The court is unpersuaded by Siech's reference to the court's order of dismissal in Hilb Rogal Hobbs Co. v. Donovan, Civil Action No. 3:06-CV54 (AWT) (D.Conn. September 28, 2006) (Siech's Exhibit B). That order, at page 3, stated that the court agreed with the defendant's analyses of collateral estoppel and res judicata as set forth on particular pages of the defendant's brief in that case. The analyses which the Donovan court found persuasive are not before this court to consider. This court is not bound to adopt or follow the decision made in that matter. See Deming v. Nationwide Mutual Insurance Co., 279 Conn. 745, 763-64, 905 A.2d 623 (2006).
Here, this court is asked to consider whether provisions of the employment agreement are enforceable, under Connecticut law, in Connecticut. That issue was not actually decided in the previous action in the District Court. Accordingly, collateral estoppel does not bar its consideration here.
B Res Judicata
In Georgia, res judicata has been codified in OCGA § 9-12-40, which provides, "[a] judgment of a court of competent jurisdiction shall be conclusive between the same parties and their privies as to all matters put in issue or which under the rules of law might have been put in issue to the cause wherein the judgment was rendered until the judgment is reversed or set aside." "The doctrine of res judicata prevents the re-litigation of all claims which have already been adjudicated, or which could have been adjudicated, between identical parties or their privies in identical causes of action . . . Three prerequisites must be satisfied before res judicata applies — (1) identity of the cause of action, (2) identity of the parties or their privies, and (3) previous adjudication on the merits by a court of competent jurisdiction." Karan, Inc. v. Auto-Owners Insurance Co., supra, 280 Ga. 546. In addition, the court may consider "whether reasons of public policy militate against a strict application of the above statute in this case." Statham v. Diversified Development Co., 250 Ga.App. 846, 847, 550 S.E.2d 410 (2001), cert. denied, 2002 Ga. LEXIS 195 (2002).
"The fact that the subject matter of different lawsuits may be linked factually does not mean that they are the same `cause' within the meaning of OCGA § 9-12-40 . . . For [the res judicata] doctrine to act as a bar, the cause of action in each suit must be identical." (Citation omitted; internal quotation marks omitted.) Morrison v. Morrison, 284 Ga. 112, 115, 663 S.E.2d 714 (2008).
Similarly, in Connecticut, "[t]he doctrine of res judicata holds that an existing final judgment rendered upon the merits without fraud or collusion, by a court of competent jurisdiction, is conclusive of causes of action and of facts or issues thereby litigated as to the parties and their privies in all other actions in the same or any other judicial tribunal of concurrent jurisdiction . . . If the same cause of action is again sued on, the judgment is a bar with respect to any claims relating to the cause of action which were actually made or which might have been made." (Internal quotation marks omitted.) Powell v. Infinity Insurance Co., 282 Conn. 594, 600-01, 922 A.2d 1073 (2007). Res judicata "bars not only subsequent relitigation of a claim previously asserted, but subsequent relitigation of any claims relating to the same cause of action . . . which might have been made." (Internal quotation marks omitted.) Isaac v. Truck Service, Inc., 253 Conn. 416, 421, 752 A.2d 509 (2000).
As discussed above, here under Connecticut law, HRH brings claims of breach of contract and misappropriation of trade secret information, and seeks damages and injunctive relief. In the Georgia action, under Georgia law, Siech sought a declatory judgment and injunctive relief. In the Georgia action, the District Court did not consider HRH's claims under Connecticut law since it was bound to apply Georgia law, which disfavored restrictive covenants in employment agreements.
Rimkus Consulting Group, Inc. v. Cammarata, supra, 257 F.R.D. 138, considered similar issues. "A determination made by Louisiana court applying Louisiana choice-of-law standards that the contractual provision designating Texas law is invalid does not have res judicata effect on a claim that the contractual provision is valid under Texas choice-of-law standards." (Emphasis in original.) Id. Similarly, the District Court in the Georgia action here did not determine whether, under Connecticut law, the Connecticut choice-of-law provision in Siech's employment agreement, and the noncompetition and nonsolicitation provisions thereof, were valid. Siech has not shown that such claims could have been adjudicated in the District Court, or that HRH's CUTSA claim could have been adjudicated there.
Siech has not met his burden of showing that res judicata applies to the District Court's choice of law determination, which led to the judgment rendered there. The District Court's judgment does not preclude this court from deciding whether the Connecticut choice of law provision in the employment agreement is enforceable and that Connecticut law applies to the noncompetition and nonsolicitation provisions. See id., 257 F.R.D. 139.
This situation differs from that in Waggaman v. Franklin Life Insurance Company, 265 Ga. 565, 458 S.E.2d 826 (1995), cited by Siech, where a prior divorce judgment determined the ownership of an insurance policy. There, such ownership was adjudicated in the prior action. "[O]rdinary principles of res judicata cannot be applied automatically to declaratory judgments . . . [T]he supplemental nature of such relief requires that preclusive effect can only be given to relitigation of any issue actually litigated and necessary to the judgment rendered." (Emphasis in original; footnote omitted). Empire Fire and Marine Insurance Co. v. J. Transport, Inc., supra, 280 Ga. 546 (res judicata prevents the re-litigation of all claims which already have been adjudicated or could have been adjudicated).
While neither collateral estoppel nor res judicata bars the claims here, the court makes no determination as to whether the choice of Connecticut law provision in the employment agreement is enforceable here.
Similarly, in view of the above conclusions, the court need not address HRH's argument that equitable considerations compel a conclusion that preclusion does not apply to this case.
CONCLUSION
For the foregoing reasons, Siech's motion for summary judgment is denied. It is so ordered.