Opinion
No. CV 03 0521129 S
January 6, 2006
MEMORANDUM OF DECISION RE MOTIONS FOR SUMMARY JUDGMENT #122 123
Facts:
On May 16, 2003, the plaintiff, Riverside Millwork Co., Inc. (RIVCO), a New Hampshire corporation, filed a seven-count complaint against one of its former employees, Edward Pahl, and Pahl's current employer, Viking Kitchen Cabinets, L.L.C. (Viking). This action arises out of injuries RIVCO allegedly sustained when Pahl left its employ and began working for Viking in violation of a noncompetition agreement.
According to the evidence, Pahl worked for RIVCO in Connecticut as a salesperson from February 2000, though December 20, 2002. In July 2001, RIVCO sent Pahl a letter outlining the new compensation package it was offering to him. According to the letter, the offer was contingent on Pahl's acceptance and "re-execution" of a noncompetition/nondisclosure agreement. RIVCO asserts that Pahl stated that he signed the noncompetition agreement, and Pahl does not dispute this assertion.
In July 2002, Robert Hunt, RIVCO's regional sales manager, sent Pahl a letter in which RIVCO offered several modifications to Pahl's compensation package. In a letter dated July 31, 2002, Hunt outlined the terms of the package, including that Pahl's new compensation would become effective on August 1, 2002, and that it was contingent on Pahl's "renewal, acceptance and execution of a Non-competition/Non-disclosure agreement with RIVCO, as attached." Neither side presented any evidence as to whether Pahl executed either document.
Pahl and Hunt met on November 18, 2002, to discuss, among other things, modifications to Pahl's compensation package. At that meeting, Hunt presented two documents to Pahl: A letter dated November 12, 2002, which outlined RIVCO's proposed modifications to Pahl's July 2002 compensation package, which was again made contingent on Pahl's acceptance and execution of the second document i.e., RIVCO's noncompetition and nondisclosure agreement (noncompetition agreement). Pahl signed both documents on that date.
In mid-December 2002, Pahl resigned from his employment at RIVCO.
On December 23, 2002, Viking hired Pahl as a salesperson.
In January 2003, RIVCO sent Viking and Pahl letters advising them that Pahl had executed the noncompetition agreement and that Pahl was engaging in conduct on behalf of Viking that was in violation thereof. Although David Trachten, Viking's President, initially instructed Pahl not to solicit customers that he had worked with while he was employed by RIVCO, Trachten later lifted this restriction, after he and Pahl determined that the agreement was not enforceable. Pahl's attorney then informed RIVCO that, in his opinion, the agreement was invalid and that he expected that Pahl would continue to sell products similar to those he sold while employed by RIVCO. RIVCO then initiated the present action.
In counts one and two, RIVCO alleges claims for breach of contract and tortious interference with its contractual relations with its customers, respectively, against Pahl. In count three, RIVCO alleges that Viking has tortiously interfered with its contractual relations with Pahl which has, in turn, interfered with its customer relationships.
Counts four, five and six allege claims for violations of the New Hampshire Trade Secret Act, the Connecticut Uniform Trade Secrets Act and the Connecticut Unfair Trade Practices Act, respectively, against both defendants.
In count seven RIVCO alleges, inter alia, that the amount of damage it is likely to continue to suffer as a result of the defendants' conduct is difficult to quantify, that it cannot be adequately compensated at law, and that it will suffer irreparable harm absent injunctive relief. It asks for temporary and permanent injunctive relief enjoining the defendants from further use of its trade secrets and further solicitation of its customers. RIVCO also asks for such relief in its prayer for relief.
Viking and Pahl both filed answers in which they deny the essential allegations of the complaint and assert, as a special defense as to counts one and three, that the claims therein fail due to lack of consideration.
On March 23, 2004, Viking moved for summary judgment as to counts three and seven. Regarding count thee, Viking asserts that RIVCO did not give Pahl any consideration for his promise not to compete and, absent consideration, the noncompetition contract between Pahl and RIVCO is not enforceable. Furthermore, according to Viking, if that contract is not enforceable, Viking could not have tortiously interfered with it.
As to count seven, Viking argues that "entitlement to injunctive relief" is not a cause of action and this count should therefore be "dismissed."
On March 26, 2004, Pahl moved for summary judgment as to counts one and seven on the same grounds. RIVCO filed a single memorandum in opposition to both motions, and Viking filed a reply thereto.
Discussion
"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 . . . In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Larobina v. McDonald, 274 Conn. 394, 399, 876 A.2d 522 (2005).
In reaching a decision on a motion for summary judgment, "[t]he 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 . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Martel v. Metropolitan District Commission, 275 Conn. 38, 46-47, 881 A.2d 194 (2005).
The defendants assert that they are entitled to summary judgment as to counts one and three because the noncompetition agreement is not enforceable in that RIVCO did not provide Pahl with any consideration in return for his promise not to compete. They argue that the compensation letter and noncompetition agreement constitute a "unified expression of the parties understanding." When the documents are read together, the defendants argue, they prove lack of consideration because according to the terms of the letter, RIVCO's promise to increase Pahl's compensation did not take effect until January 2003, at which time, he had already left RIVCO's employ, and, in the letter, RIVCO expressly reserved the right to terminate Pahl's employment at any time for any reason. They add that RIVCO's letter cannot be used as the basis for an enforceable covenant to employ Pahl under the terms thereof because under Connecticut law, such a claim cannot override RIVCO's express reservations of its right not to do so. Finally, they argue that the noncompetition agreement states that its terms are to be interpreted under New Hampshire law, which does not recognize implied limitations on at-will employment relationships.
RIVCO counters that the agreements should be read separately. It also contends that the noncompete agreement is supported by sufficient consideration regardless of Pahl's employment at will status, and is enforceable under both Connecticut and New Hampshire law. Specifically, RIVCO maintains that it provided Pahl with consideration for signing the agreement in that it gave him access to its confidential information and continued to employ him. In addition, RIVCO contends that its agreement to increase Pahl's compensation as of August 1, 2002, and its agreement to do so again as of January 1, 2003, also provided Pahl with consideration for his signing the noncompetition agreement. Pahl's decision to resign before January 1, 2003, should not, according to RIVCO, make its promise illusory. At the very least, RIVCO argues, the issue of Pahl and RIVCO's intentions regarding the documents at issue remains unresolved, thus precluding summary judgment as to counts one and three.
Viking replies that RIVCO's first argument is belied by its discovery responses, in which it stated that its allegation that Pahl received consideration for the noncompetition agreement is premised on the compensation package that was to become effective in January 2003.
The first issue is whether the noncompete agreement and the compensation agreement are two separate and distinct contracts or whether they should be consolidated, as both defendants argue, into a single contract. "Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) Goldberg v. Hartford Fire Ins. Co., 269 Conn. 550, 559-60, 849 A.2d 368 (2004).
The court is required to examine the contracts, and "construe the instrument[s] to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms . . ."
"A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous . . . By contrast, language is unambiguous when it has a definite and precise meaning . . . concerning which there is no reasonable basis for a difference of opinion." (Citations omitted; internal quotation marks omitted.) Id., 559.
As to the question of whether the documents should be read as one, "[g]enerally, incorporation by reference of existing documents produces a single contract which includes the contents of the incorporated papers . . . When parties execute a contract that clearly refers to another document, there is an intent to make the terms and conditions of the other document a part of their agreement, as long as both parties are aware of the terms and conditions of the second document." (Internal quotation marks omitted.) Lussier v. Spinnato, 69 Conn.App. 136, 141, 794 A.2d 1008, cert. denied, 261 Conn. 910, 806 A.2d 49 (2002).
In the case at bar, it is not clear from the plain language of the compensation agreement and the noncompetition agreement that they should be integrated to form a single contract. However, the compensation agreement provides that "[t]his offer is contingent upon your acceptance and execution of a Non-competition/Non-disclosure agreement with RIVCO, as attached," and it is undisputed that both RIVCO and Pahl were aware of the terms and conditions of the noncompetition agreement. Yet, neither document states that it is incorporating the terms and conditions of the other, and the noncompetition agreement itself provides that "[t]his agreement constitutes the entire agreement and understanding between the company and me concerning the subject matter hereof."
The defendants' contention that RIVCO's interrogatory responses in which it stated that the consideration Pahl received for the noncompetition agreement was RIVCO's agreement to raise Pahl's compensation as of January 2003 constitutes "a current stipulation by RIVCO that the two documents should be read together," presents two problems. First, the defendants did not file a certified copy of these responses, but merely copied a portion of the document into their memoranda. As our Appellate Court has recently explained, "Practice Book § [17-45] . . . contemplates that supporting documents to a motion for summary judgment be made under oath or be otherwise reliable . . . [The] rules would be meaningless if they could be circumvented by filing [unauthenticated documents] in support of or in opposition to summary judgment . . ."
"Therefore, before a document may be considered by the court in support of a motion for summary judgment, `there must be a preliminary showing of [the document's] genuineness, i.e., that the proffered item of evidence is what its proponent claims it to be. The requirement of authentication applies to all types of evidence, including writings . . .' Conn. Code Evid. § 9-1(a), commentary." (Citation omitted; internal quotation marks omitted.) New Haven v. Pantani, 89 Conn.App. 675, 678-79, CT Page 370 874 A.2d 849 (2005).
Secondly, although properly authenticated discovery responses are the types of "disclosures" that a court may consider as evidence in deciding a motion for summary judgment; see Practice Book § 17-45; the defendants misperceive the nature of their effect. According to our Supreme Court, "[a] judicial admission dispenses with the production of evidence by the opposing party as to the fact admitted, and is conclusive upon the party making it." (Internal quotation marks omitted.) Pederson v. Vahidy, 209 Conn. 510, 519-20, 552 A.2d 419 (1989). However, "a response to an interrogatory is not a judicial admission in the same sense as admissions in the pleadings or in open court. [This restriction] on the effect of an interrogatory [is] consistent with General Statutes § 52-200, which states that a disclosure on oath shall not be deemed conclusive but may be contradicted like any other testimony." Piantedosi v. Florida, 186 Conn. 275, 278, 440 A.2d 997 (1982). See also Jewett v. Jewett, 265 Conn. 669, 689, 830 A.2d 193 (2003).
General Statutes § 52-200 provides: "When either party in any action has obtained from the other party a disclosure on oath, respecting the matters alleged in any pleading, the disclosure shall not be deemed conclusive, but may be contradicted like any other testimony."
Accordingly, the issue of whether the parties intended that the compensation agreement and the noncompetition agreement should be considered as a single document remains unresolved.
The court must next determine whether the noncompetition agreement was supported by valid consideration. As discussed earlier herein, the noncompetition agreement contained a choice of law provision in which RIVCO and Pahl agreed that "[t]his agreement shall be construed and governed in accordance with State of New Hampshire law." Our Supreme Court has concluded, "in accordance with § 187 of the Restatement [(Second) of Conflicts of Law (1971)] that parties to a contract generally are allowed to select the law that will govern their contract, unless either: `(a) the chosen state has no substantial relationship to the parties of the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.'" Elgar v. Elgar, 238 Conn. 839, 850, 679 A.2d 937 (1996).
New Hampshire has a substantial relationship to this action because RIVCO is a New Hampshire corporation and its corporate offices and principal place of business are in that state. Although the defendants presented evidence that Pahl was based in Connecticut and served accounts in this state, this evidence, in and of itself, does not establish that Connecticut has a "materially greater interest" than New Hampshire in determining the issue. As such, the court should look to New Hampshire law to determine whether the noncompetition agreement is supported by adequate consideration. The defendants' primary argument is that it was not because RIVCO reserved the right to terminate Pahl's employment at any time, and Pahl resigned before RIVCO's promise to increase his compensation as of January 1, 2003, became effective. RIVCO counters that its increase in Pahl's compensation as of August 1, 2002, and its continued employment of Pahl after he signed the noncompetition agreement in November 2002, constitute valid consideration Again, the defendants maintain that RIVCO cannot rely on these agreements because it did not include them in responding to Viking's interrogatories. As discussed earlier, interrogatory responses are not judicial admissions and do not preclude the responding party from offering other evidence on the issue.
According to the evidence, in July 2002, and again in November 2002, RIVCO presented Pahl with new compensation agreements which were contingent on his signing the noncompetition agreement. This provides some evidence that the increased compensation was consideration for the noncompetition agreement.
In addition, however, in the noncompetition agreement, RIVCO also reserved its right to terminate its employment relationship with Pahl "at any time for any reason or no reason, or with or without cause. Nothing in this agreement shall be construed to alter such `at-will' status." Nevertheless, it is undisputed that Pahl continued to work for RIVCO until mid-December 2002, after the August 1, 2002 compensation package became effective, and after he signed the compensation and noncompetition agreements on November 18, 2002. Moreover, in his affidavit, Hunt attests that on November 18, 2002, RIVCO presented Pahl with the noncompete agreement "that he was required to sign as a condition of his continued employment with RIVCO." Indeed, in the document itself, Pahl agrees that " my employment and the compensation I receive for my employment are the benefits I receive in exchange for this agreement." (Emphasis added.) This provides some evidence that RIVCO's continued employment of Pahl was consideration for the non-competition agreement.
In Smith, Batchelder Rugg v. Foster, 119 N.H. 679, 406 A.2d 1310 (1979), New Hampshire Supreme Court considered the question of whether continued employment is adequate consideration for a noncompetition agreement in the context of ongoing employment relationships. A comprehensive analysis of the case is found in a Connecticut Superior Court case, Gonzalez v. University System of New Hampshire, Superior Court, judicial District of New Haven, Docket No. CV 01 0451217 (January 28, 2005, Levin, J.) ( 38 Conn. L. Rptr. 673). In Foster, the defendants had worked for the plaintiff accounting firm for three years as accountants pursuant to oral agreements of employment. Thereafter, the defendants signed written contracts that contained a covenant in which they agreed that they would not compete with the plaintiff upon the termination of their employment. The written contracts also provided that the defendants' employment was terminable by either party on thirty days' written notice and terminable by the plaintiff if, in its sole judgment, it was not satisfied with the defendants' services. `These restrictive covenants were not part of the prior oral agreements but defendants were confronted with the written covenants only after they had substantially changed their positions in reliance upon the prior oral agreements.' . . . The defendants voluntarily terminated their employment with the plaintiff and established their own accounting firm. The plaintiff brought an action to enforce the restrictive covenants.
"The New Hampshire Supreme Court held that the written notice requirement was sufficient consideration for the defendants' promise not to compete with the plaintiff upon the termination of their employment . . . However, the court also held that `[c]ontinued employment after signing an employment contract constitutes consideration for a covenant not to compete contained therein.'" Gonzalez v. University System of New Hampshire, supra, 38 Conn. L. Rptr. 681.
New Hampshire has apparently not determined whether the same analysis would apply in the context of employment at will. The issue has been discussed in other jurisdictions. "Although there is authority to the contrary, most jurisdictions which have considered the issue have found that continued employment is sufficient consideration to support a restrictive covenant executed after employment has commenced even where employment continues to be on an at-will basis." See generally Annot. 51 A.L.R. 3d 825 (1973).
"Those jurisdictions which have rejected `continued employment' as consideration have concluded that the promise of continued employment is illusory because even though the employee signs the covenants, the employer retains the right to discharge the employee at any time . . . "[In the majority of jurisdictions, the courts] have found continued employment in an at-will relationship sufficient consideration for a variety of reasons. In Hogan v. Bergen Brunswig, Corp., 153 N.J. Super. 37, 378 A.2d 1164 (1977), the court discussed the fact that in an at-will employment relationship, the employer could discharge an employee who refused to sign the agreement. Whether the consideration is viewed as `forbearance to discharge' or ' continued employment,' as a practical matter, the consideration is the same. The court concluded that a threat of discharge is not necessary to establish consideration by continued employment." (Citations omitted.) Mattison v. Johnston, 152 Ariz. 109, 111-12, 730 P.2d 286 (Ariz.Ct.App. 1986); see also Summits 7, Inc. v. Kelly, 2005 Vt. 97, 23 I.E.R. Cases (BNA) 617 (August 19, 2005). Although "[s]everal courts have stated that a `short' period of employment might not suffice as consideration for a restrictive covenant . . . these statements arose in the context of discussing the possibility of a bad faith action by an employer requiring an employee to sign a restrictive covenant and then discharging that employee within a short period of time . . . None of the cases distinguishing between short term periods of employment and employment for a `substantial time' for purposes of finding consideration address a situation such as the one here, where the employee elects to terminate employment shortly after signing the covenant not to compete." (Citations omitted.) Mattison v. Johnston, supra, 152 Ariz. 113.
In Mattison, the at-will employee resigned less than three months after she signed a noncompetition agreement. In response to the employee's contention that her continued employment for that time did not constitute adequate consideration, the court explained that "nothing in the record indicates that [the employer] did not intend to continue the employment relationship. Under these circumstances we find that the implied promise of employment and continued employment were sufficient consideration for the covenant. We therefore conclude that the trial court erred in granting summary judgment on grounds that there was no consideration supporting the restrictive covenant in question." Id.
The analysis used in Mattison and the majority of jurisdictions that have determined that continued employment constitutes adequate consideration to support a noncompetition agreement in the context of at-will employment appears to be consistent with New Hampshire law as presented in Smith, Batchelder Rugg v. Foster, supra 119 N.H. 679. Thus, Pahl's continued employment with RIVCO provides some evidence that RIVCO provided him with adequate consideration for the noncompetition agreement and therefore the motions for summary judgment must be denied as to this count.
As to count three, Viking also seeks summary judgment on RIVCO's tortious interference claim on the alternative ground that the evidence establishes that it did not act with malice. RIVCO counters that this issue, which pertains to Viking's intent, involves factual issues which should not be resolved in the context of a motion for summary judgment.
Under Connecticut law, "in order to recover for a claim of tortious interference with business expectancies, the claimant must plead and prove that; (1) a business relationship existed between the plaintiff and another party; (2) the defendant intentionally interfered with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffered actual loss." Hi-Ho Tower, Inc. v. Com-tronics, Inc., 255 Conn. 20, 32-33, 761 A.2d 1268 (2000).
As to the second element, "not every act that disturbs a contract or business expectancy is actionable . . . [F]or a plaintiff successfully to prosecute such an action it must prove that the defendant's conduct was in fact tortious. This element may be satisfied by proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously . . . [T]he plaintiff [is required] to plead and prove at least some improper motive or improper means . . . The plaintiff . . . must demonstrate malice on the part of the defendant, not in the sense of ill will, but intentional interference without justification . . . In other words, the [plaintiff] bears the burden of alleging and proving lack of justification on the part of the [defendant]." (Citations omitted; internal quotation marks omitted.) Daley v. Aetna Life Casualty Co., 249 Conn. 766, 805-06, 734 A.2d 112 (1999).
Viking's evidence that no issue of material fact exists as to the element of malice consists of the affidavit of its president, David Trachten, in which Trachten attests that he conducted an investigation and concluded that the noncompetition agreement was unenforceable This affidavit also provides evidence, however, that RIVCO made Viking aware of the noncompetition agreement and that although Trachten instructed Pahl not to contact RIVCO's customers, he later lifted this restriction. His motive in so doing involves a question of intent, which is "not properly resolved on a motion for summary judgment." Union Trust Co. v. Jackson, 42 Conn.App. 413, 419, 679 A.2d 421 (1996). Moreover, a party's affidavits containing "self-serving, unsubstantiated" statements "do not amount to competent evidence" 2830 Whitney Avenue Corp. v. Heritage Canal Development Associates, Inc., 33 Conn.App. 563, 568, 636 A.2d 1377 (1994). In light of the foregoing, this court concludes that the defendants have not met their burden of establishing that no genuine issues of material fact exist as to counts one and three and the motions for summary judgment are denied as to these counts.
Finally, Viking and Pahl move for summary judgment on count seven, in which RIVCO alleges that it is entitled to injunctive relief against both defendants, on the grounds that injunctive relief is a remedy and not a cause of action, and the allegations therein are "superfluous and redundant" in that RIVCO also asks for injunctive relief in its prayer for relief.
"The proper vehicle [for elimination of irrelevant, immaterial or otherwise improper allegations in a complaint] would be a request to revise." (Internal quotation marks omitted.) Kesling v. Waste Management of Connecticut, Inc., Superior Court, judicial district of Windham at Putnam, Docket No. CV 03 0071426 (July 16, 2004, Foley, J.). "[T]he proper way to cure any confusion [regarding the complaint] is to file a [request] to revise . . . If a request to revise had been granted and complied with, the defendants would then have been in a position to move to strike any count of the plaintiff's revised complaint . . ." (Citations omitted.) Rowe v. Godou, 209 Conn. 273, 279, 550 A.2d 1073 (1988).
Although the Connecticut Supreme Court has provided that "the use of a motion for summary judgment to challenge the legal sufficiency of a complaint is appropriate when the complaint fails to set forth a cause of action and the defendant can establish that the defect could not be cured by repleading;" Larobina v. McDonald, supra, 274 Conn. 401; it is not clear that such circumstances exist in the present case. Instead it appears that in count seven, RIVCO is alleging facts that would entitle it to injunctive relief. Although a claim for injunctive relief is not, strictly speaking, a separate cause of action; Stefan v. P.J. Kids, LLC, Superior Court, complex litigation docket at Waterbury, Docket No. X01 CV 04 0185513 (March 1, 2005, Sheedy, J.); nevertheless, "[a] party seeking injunctive relief has the burden of alleging and proving irreparable harm and lack of an adequate remedy at law." (Internal quotation marks omitted.) Pet v. Dept. of Health Services, 207 Conn. 346, 370, 542 A.2d 672 (1988).
For the foregoing reasons, the defendants' motions for summary judgment as to count seven are denied.
Conclusion
For all of the reasons stated herein, the motions for summary judgment are denied in full. So ordered.