Deleo v. Equale & Cirone, LLP ( 2021 )

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DEREK J. DELEO v. EQUALE &
CIRONE, LLP, ET AL.
(AC 42383)
Alvord, Bright and Norcott, Js.*
Syllabus
The plaintiff, a certified public accountant, was a partner at the defendant
accounting firm, where the defendant C was a managing partner. After
the plaintiff left the partnership, he brought an action against the defen-
dants, claiming, inter alia, a breach of fiduciary duty. The defendants
filed a counterclaim, alleging, inter alia, damages under a noncompete
provision in the partnership agreement. Following the trial court’s judg-
ment in favor of the defendants on the complaint and on the counter-
claim, the plaintiff appealed to this court, which reversed the judgment
of damages pursuant to the noncompete provision and directed the trial
court to determine whether the noncompete provision constituted a
reasonable restraint of trade. The trial court thereafter concluded that
the noncompete provision constituted an unreasonable restraint of trade
and was therefore unenforceable and rendered judgment for the plaintiff,
and the defendants appealed to this court. Held that the trial court
properly determined that, under the specific facts found, which were
not clearly erroneous, the noncompete provision unreasonably
restrained trade and was unenforceable: although the parties had equal
bargaining power and entered into the partnership agreement volunta-
rily, that was not determinative of whether the noncompete provision
was a reasonable restraint of trade, the court’s conclusion was legally
correct based on the factual circumstances in this case, weighed in
totality and balancing the factors the Supreme Court determined in Scott
v. General Iron & Welding Co. (171 Conn. 132), as the noncompete
provision was not reasonably necessary to protect the defendants’ busi-
ness interests, as the court found that the noncompete provision imposed
a significant financial hardship on the plaintiff that was so disproportion-
ate to what was necessary to protect the defendants’ business interests
that it instead constituted a windfall to the defendants and would prevent
the plaintiff from practicing his profession, the plaintiff did not obtain
specialized knowledge or trade secrets from his work with the partner-
ship that would have given him a competitive advantage with clients,
and the noncompete provision imposed the same financial burden on
the plaintiff regardless of how or when the client was developed and
how much work was performed for the client; moreover, complete
enforcement of the provision would have effectively restrained the pub-
lic’s rights to the plaintiff’s services, barring clients’ ability to hire the
plaintiff and leaving them without the ability to engage the accountant
of their choice; furthermore, the duration of the noncompete provision
was unreasonable, as five years was longer than necessary to protect
the defendants’ interests and was longer than the period the plaintiff had
been subjected to the partnership agreement, and any of the plaintiff’s
business with a former partnership client would trigger the penalty,
regardless of the circumstances.
Argued March 10, 2020—officially released February 23, 2021
Procedural History
Action to recover damages for, inter alia, alleged
breach of fiduciary duty, and for other relief, brought
to the Superior Court in the judicial district of Danbury,
where the defendants filed a counterclaim; thereafter,
the matter was tried to the court, Truglia, J.; judgment
for the defendants on the complaint and in part on the
counterclaim, from which the plaintiff appealed to this
court, Lavine, Prescott and Bright, Js., which reversed
in part the trial court’s judgment and remanded the
case for further proceedings; subsequently, the court,
Krumeich, J., rendered judgment for the plaintiff on
the counterclaim, and the defendants appealed to this
court. Affirmed.
Daniel J. Krisch, with whom, on the brief, was Kevin
J. Green, for the appellants (defendants).
Michael S. Taylor, with whom was Brendon P. Lev-
esque, for the appellee (plaintiff).
Opinion
BRIGHT, J. The defendants, Equale & Cirone, LLP
(partnership), and Anthony W. Cirone, Jr., appeal from
the judgment of the trial court rendered in favor of the
plaintiff, Derek J. DeLeo, on the defendants’ counter-
claim for damages under the noncompete provision of
the parties’ partnership agreement (noncompete provi-
sion). The defendants claim that the trial court erred
in concluding that the noncompete provision consti-
tutes an unreasonable restraint of trade and, therefore,
is unenforceable. We affirm the judgment of the trial
court.
This case returns to us after our decision in DeLeo
v. Equale & Cirone, LLP, 180 Conn. App. 744, 184 A.3d
1264 (2018) (DeLeo I). In DeLeo I, this court reversed
the judgment of the trial court, which had awarded
damages in the amount of $740,783 to the defendants
on the basis of the defendants’ counterclaim under the
parties’ noncompete provision, and remanded the case
with direction that the trial court determine whether
the noncompete provision constitutes a reasonable
restraint of trade under existing law. Id., 751, 765. Fol-
lowing our remand, the court, in its memorandum of
decision dated November 28, 2018, determined that the
noncompete provision is unreasonable and, therefore,
unenforceable. This appeal challenges the court’s deter-
mination.
Our opinion in DeLeo I sets forth the following rele-
vant facts and procedural history. ‘‘The partnership, an
accounting firm, is a limited liability partnership located
in Bethel. Joseph A. Equale, Jr., and Cirone formed the
partnership in 1999. In 2005, the plaintiff, a certified
public accountant, joined the partnership as an equity
partner. The partnership operated under an oral part-
nership agreement until January, 2009, when Equale,
Cirone, and the plaintiff executed a written partnership
agreement (partnership agreement). Pursuant to the
partnership agreement, Cirone held a 40 percent inter-
est, Equale held a 35 percent interest, and the plaintiff
held a 25 percent interest. The partnership agreement
was intended to govern all aspects of the partnership.
‘‘In January, 2012, the partnership purchased the
assets of Allen & Tyransky, an accounting firm located
in Danbury. As a result of the acquisition, Jack Tyransky
became a nonequity ‘contract’ partner of the partner-
ship. Shortly after the acquisition of Allen & Tyransky,
several of the partnership’s employees began to suspect
that the plaintiff was involved in a romantic relationship
with a female staff accountant at the partnership. In
October, 2012, Cirone learned about the suspicions
regarding the plaintiff’s relationship with the staff
accountant. Thereafter, Cirone confronted the plaintiff
about the alleged relationship, but the plaintiff denied
any such relationship. Later, Cirone approached Equale,
who was preparing to retire from the partnership at the
end of 2012, to discuss the plaintiff’s alleged relation-
ship. Both Equale and Cirone decided to believe the
plaintiff’s denial, and they did not take any further
action at that time.
‘‘Equale retired, effective January 1, 2013, but he con-
tinued to work for the partnership through the end
of the 2013 tax season. Pursuant to the partnership
agreement, Equale’s shares were acquired by the part-
nership upon his retirement. Cirone and the plaintiff
agreed that following Equale’s retirement Cirone would
own 62 percent of the partnership and the plaintiff
would own the remaining 38 percent.
‘‘On April 26, 2013, after the completion of the 2013
tax season, Cirone, Tyransky, and the plaintiff met at
a diner to discuss the future of the partnership in light
of the plaintiff’s suspected relationship with the staff
accountant. At this meeting,1 Cirone told the plaintiff
that they needed to fire the staff accountant and termi-
nate their partnership. The court credited Cirone’s testi-
mony regarding this meeting, finding that ‘given [Cir-
one’s] position as managing partner of the firm and also
given the risks that [the plaintiff’s] actions posed to
the firm, [Cirone] had no choice but to separate [the
plaintiff] from the partnership.’ The plaintiff and Cirone
agreed that their business relationship had to end, and
they acknowledged that any plan for the plaintiff’s
departure would begin with the partnership agreement.
‘‘Following their meeting, Cirone and the plaintiff
exchanged several e-mails during May and June, 2013,
regarding the plaintiff’s departure from the partnership.
In these e-mails, the plaintiff did not deny that he was
leaving the partnership, and there was no indication that
he believed that the partnership was being dissolved.
Following these exchanges, Cirone sent an e-mail to
the partnership’s employees informing them that the
plaintiff would be ‘transitioning out of the firm’ begin-
ning on June 17, 2013. The plaintiff retained his 38
percent partnership interest through June 30, 2013, and,
after leaving the partnership, he continued to provide
accounting services in New Milford. Following the
plaintiff’s departure, Cirone first transferred the plain-
tiff’s interest in the partnership to himself, and then he
transferred a 1 percent interest to Tyransky.
‘‘In September, 2013, approximately two months after
leaving the partnership, the plaintiff commenced the
present action against the defendants. The operative
amended complaint was filed on September 29, 2014,
and contained seven counts alleging, inter alia, that the
plaintiff held a 38 percent interest in the partnership,
and that Cirone had excluded him from the daily opera-
tions of the partnership. He further alleged that Cirone’s
conduct had frustrated the economic purpose of the
partnership such that it was no longer reasonably practi-
cable to continue the partnership’s business in accor-
dance with the partnership agreement. Additionally, the
plaintiff alleged claims of breach of fiduciary duty and
conversion. The plaintiff sought, inter alia, a dissolution
and winding up of the partnership pursuant to General
Statutes §§ 34-339 (b) (2) (C) and 34-372 (5); restoration
of his partnership rights pursuant to § 34-339 (b) (1);
an accounting and access to the partnership’s books
and records pursuant to General Statutes §§ 34-337 and
34-338; appointment of a receiver pursuant to General
Statutes § 52-509; and money damages.
‘‘On January 6, 2015, the defendants filed an answer
denying the plaintiff’s allegations or leaving him to his
proof, asserted various special defenses and a claim
for setoff. . . .
‘‘The defendants also filed a four count counterclaim
against the plaintiff, claiming that the partnership had
terminated the plaintiff’s partnership interest for cause,
or, in the alternative, that the plaintiff had terminated
his partnership interest voluntarily. In both counts the
defendants claimed that the value of the plaintiff’s part-
nership interest was limited to the accrual basis capital
value,2 as defined in the partnership agreement. Addi-
tionally, the defendants claimed that the plaintiff is sub-
ject to the noncompete provision in the partnership
agreement, requiring him to compensate the partner-
ship for any former clients of the partnership for whom
the plaintiff had provided accounting services following
his departure.3 In counts three and four, the defendants
alleged that the plaintiff breached his fiduciary duty
pursuant to the partnership agreement and/or pursuant
to §§ 34-338 and 34-339.
‘‘The plaintiff denied all the allegations as set forth
in the defendants’ special defenses and claim for setoff.
He also denied the allegations in the defendants’ coun-
terclaim and, by way of special defense, asserted that
the defendants had waived the enforcement of the non-
compete provision.
‘‘The case was tried to the court over the course of
six days in September, 2015. In its memorandum of
decision dated October 22, 2015, the court rendered
judgment in favor of the defendants on the plaintiff’s
complaint and the defendants’ special defenses. The
court did not credit the plaintiff’s testimony, finding
that the plaintiff, ‘through his words and actions, start-
ing with the April 26 meeting through July of 2013,
voluntarily withdrew as a partner of [the partnership].’
The court credited Cirone’s testimony, finding that Cir-
one did not waive the partnership’s right to enforce the
noncompete provision in the partnership agreement,
and that the plaintiff had agreed to terminate his part-
nership interest as of June 30, 2013. The court further
found that the voluntary termination provision4 in the
partnership agreement determined the amount due to
the plaintiff. Accordingly, the court rendered judgment
in favor of the defendants on their counterclaim and
on the plaintiff’s special defense. The court awarded
the defendants $740,783. The court credited the testi-
mony of the defendants’ expert witness with respect
to the calculation of the plaintiff’s accrual basis capital
as of June 30, 2013, and the amount owed by the plaintiff
to the partnership, pursuant to the noncompete provi-
sion in the partnership agreement. The court found that
the plaintiff was overdrawn in his partnership income
account by $143,496 as of June 30, 2013, and that his
accrual basis capital as of June 30, 2013, was $165,079.
The court also found that the plaintiff owed $762,366 to
the partnership pursuant to the noncompete provision.’’
(Footnotes in original; footnote added.) Id., 747–52.
The plaintiff appealed from the judgment of the trial
court rendered in favor of the defendants on the plain-
tiff’s complaint and the defendants’ special defenses,
claim of setoff, and counterclaim, claiming that the
court ‘‘(1) committed plain error when it failed to order
the dissolution of the partnership; (2) improperly
estopped [the plaintiff] from challenging the non-
compete provision in the partnership agreement; (3)
improperly found that the defendants did not waive
the enforcement of the noncompete provision; and (4)
improperly concluded that the noncompete clause in
the partnership agreement was enforceable.’’ Id., 747.
This court affirmed in part and reversed in part the
judgment of the trial court; we rejected all of the plain-
tiff’s claims except his fourth claim—which concerned
count two of the defendants’ counterclaim—regarding
the enforceability of the noncompete provision in the
partnership agreement. Id. Specifically, this court deter-
mined that the court improperly treated the non-
compete provision as a liquidated damages clause and,
instead, should have considered the reasonableness of
the noncompete provision under the same standard
used for covenants not to compete. Id., 761–65. Accord-
ingly, we remanded the case to the trial court with
direction to consider the reasonableness of the non-
compete provision. Id., 765.
Following our remand, the trial court, in its memoran-
dum of decision dated November 28, 2018, determined
that the restrictions imposed by the noncompete provi-
sion in the parties’ partnership agreement constitute
an unreasonable restraint of trade and, therefore, are
unenforceable. In reaching its conclusion, the trial court
made the following subordinate factual findings: (1) the
requirements of the noncompete provision, and particu-
larly the five year restriction, exceed what would be
necessary to protect the defendants’ business interests;
(2) the noncompete provision interferes with the plain-
tiff’s ability to pursue his occupation as a certified pub-
lic accountant; and (3) enforcement of the noncompete
provision would affect adversely the public’s ability to
retain the accounting services of its choice. This appeal
followed. Additional facts will be set forth as necessary.
The defendants claim that the trial court erred by
concluding that the noncompete provision is unenforce-
able. Specifically, the defendants argue that (1) the par-
ties, as partners, had equal bargaining power and the
plaintiff entered into the partnership agreement volun-
tarily, (2) the partnership has a legitimate interest in
restricting the plaintiff from servicing former and
existing clients, (3) the noncompete provision has a
reasonable duration, and (4) the noncompete provision
does not harm the public interest. For these reasons,
the defendants argue that the noncompete provision is
a reasonable restraint of trade and is enforceable. We
are not persuaded.
I
As a preliminary matter, we address first the applica-
ble standard of review. The defendants maintain that
the court’s findings as to the reasonableness and
enforceability of the noncompete provision must be
evaluated under the plenary standard of review. Specifi-
cally, the defendants state at the outset of their principal
appellate brief that this appeal challenges ‘‘the propriety
of the trial court’s ‘application of the legal standards
to [its] historical fact determinations, [which] are not
facts in this sense.’ ’’5 Conversely, the plaintiff argues
that this court should apply the clearly erroneous stan-
dard of review because a determination as to the reason-
ableness of a covenant not to compete is a fact
driven inquiry.
‘‘The scope of our appellate review depends upon
the proper characterization of the rulings made by the
trial court. To the extent that the trial court has made
findings of fact, our review is limited to deciding
whether such findings were clearly erroneous. When,
however, the trial court draws conclusions of law, our
review is plenary and we must decide whether its con-
clusions are legally and logically correct and find sup-
port in the facts as they appear in the record. . . .
‘‘[W]hen the resolution of a question of law . . .
depends on underlying facts that are in dispute, that
question becomes, in essence, a mixed question of fact
and law. Thus, we review the subsidiary findings of
historical fact, which constitute a recital of external
events and the credibility of their narrators, for clear
error, and engage in plenary review of the trial court’s
application of . . . legal standards . . . to the under-
lying historical facts.’’ (Citation omitted; internal quota-
tion marks omitted.) Saggese v. Beazley Co. Realtors,
155 Conn. App. 734, 751–52, 109 A.3d 1043 (2015).
We agree with the defendants that the court’s ultimate
conclusion as to the enforceability of the noncompete
provision presents a question of law that requires our
plenary review. However, the court reached that conclu-
sion only after it heard the parties’ evidence on the
effects that enforcement of the noncompete provision
would have on them and third parties. The court’s fac-
tual findings on the basis of that evidence are what led
it to conclude that the noncompete provision consti-
tutes an unreasonable restraint of trade. To that end,
our plenary review is constrained by the court’s factual
findings, and we are bound to accept those findings
‘‘absent a showing that they are clearly erroneous in
light of the evidence.’’ Prestige Management, LLC v.
Auger, 92 Conn. App. 521, 525, 886 A.2d 458 (2005). As
this court recently stated in National Waste Associates,
LLC v. Scharf, 183 Conn. App. 734, 745, 194 A.3d 1(2018), ‘‘[a]nalysis of the validity and enforceability of
such covenants entails a fact-specific inquiry.’’
(Emphasis added.) This is not to say that a question as to
the enforceability of a noncompete provision presents
only an issue of fact but, rather, that the ultimate legal
conclusion as to a covenant’s enforceability is predi-
cated on specific facts that, if challenged, must be
reviewed for clear error. 6 Consequently, we first must
evaluate the court’s subordinate factual findings chal-
lenged by the defendants in order to determine whether
they were clearly erroneous.
II
The court made factual findings in its November 28,
2018 memorandum of decision that can be grouped
in the following manner: (1) the requirements of the
noncompete provision, and particularly the five year
restriction, exceed what would be necessary to protect
the defendants’ business interests; (2) the noncompete
provision interferes with the plaintiff’s ability to pursue
his occupation as a certified public accountant; and
(3) enforcement of the noncompete provision would
adversely affect the public’s ability to retain the
accounting services of its choice.7
‘‘It is well established that [i]n a case tried before a
court, the trial judge is the sole arbiter of the credibility
of the witnesses and the weight to be given specific
testimony. . . . On appeal, we do not retry the facts
or pass on the credibility of witnesses. . . . We afford
great weight to the trial court’s findings because of its
function to weigh the evidence and determine credibil-
ity. . . . Thus, those findings are binding upon this
court unless they are clearly erroneous in light of the
evidence and the pleadings in the record as a whole.
. . . A finding of fact is clearly erroneous when there
is no evidence in the record to support it . . . or when
although there is evidence to support it, the reviewing
court on the entire evidence is left with the definite and
firm conviction that a mistake has been committed.’’
(Internal quotation marks omitted.) Abrams v. PH
Architects, LLC, 183 Conn. App. 777, 787–88, 193 A.3d
1230, cert. denied, 330 Conn. 925, 194 A.3d 290 (2018).
After a careful review of the record, we conclude
that the court’s factual findings were not clearly errone-
ous. We begin with the court’s finding that the restraints
of the noncompete provision exceed what would be
necessary to protect the defendants’ business interests,
both in terms of the length of the restriction and of the
clients covered. As to the duration of the restriction,
the court explained that ‘‘[t]he five year term is consid-
erably longer than the one to two year terms usually
considered reasonable if needed to protect an estab-
lished business interest. . . . The length of the restric-
tion exceeds the duration of the period when [the plain-
tiff] was subject to the agreement. Moreover, the
lengthy time period means that any business for a for-
mer or present [partnership] client during the five year
period would trigger the penalty even if that client had
not been [a partnership] client during most of the
restricted period, or had left [the partnership] for rea-
sons unrelated to [the plaintiff], or had stayed with [the
partnership] but used [the plaintiff] for only part of the
work during the period or had only come to [the plain-
tiff] years after the client left [the partnership] for other
reasons without any solicitation by [the plaintiff].’’
(Citations omitted.)
The court further explained specifically that the part-
nership agreement and, in particular, the noncompete
provision, ‘‘does not distinguish between clients
brought into the firm by [the plaintiff] and those he
serviced while at [the partnership] who were integrated
firm clients or clients developed and/or referred to [the
plaintiff] by others at the firm.’’ This fact was of particu-
lar significance to the court’s reasoning because the
plaintiff, upon joining the partnership in 2005, brought
with him approximately 250 to 300 clients, which repre-
sented approximately 25 to 30 percent of the partner-
ship’s total client base at the time.
The court also found credible the plaintiff’s testimony
that 60 percent of his clients at the partnership were
clients that he had brought to the partnership from his
previous practice, while 40 percent were developed by
him at the partnership through networking. Conse-
quently, the court concluded that ‘‘[t]his also was not
a case where a long-standing relationship made it diffi-
cult to disentangle client relationships and to allocate
goodwill between the withdrawing partner and the
[partnership]. . . . [The partnership] was formed in
1999 when two sole proprietorships merged. In 2005
[the plaintiff] joined the [partnership] as an equity part-
ner when his sole proprietorship merged with [the part-
nership]. His existing clients became clients of [the
partnership] and represented roughly 25 [to] 30 [per-
cent] of [the partnership’s] client base at the time he
joined the firm. There is no evidence that [the partner-
ship] purchased his practice and paid [the plaintiff] for
his client base or that after the merger, his practice
became fully integrated into [the partnership] so that
his clients ceased to be his primary client relationship
and they became [partnership] clients. Nor is there evi-
dence that [the partnership] was the source of [the
plaintiff’s] acquaintance with the customers so that his
employment was the primary source of client relation-
ships and he was in an unfair position to compete with
[the partnership] after termination of his partnership
[interest]. Rather it appears even after the merger, [the
plaintiff’s] former sole proprietorship clients and those
he developed by his efforts at [the partnership], and
not through referrals from other partners, remained
identified with him and the client relationship was pri-
marily with him, not [with the partnership]. When he
left nearly 100 percent of his clients at [the partnership]
followed him to his new firm. This is compelling evi-
dence the clients did not consider themselves [partner-
ship] clients.’’ (Citation omitted; footnotes omitted.)
The court also addressed whether the plaintiff had
access to proprietary information of the partnership
when he started his competing business. The court
found: ‘‘Any customer list would be a list of [the plain-
tiff’s] own clients. There is no evidence of any special-
ized knowledge or trade secrets [the plaintiff] acquired
from [the partnership]. His familiarity with the clients
and their needs would not alone suffice as specialized
knowledge of [the partnership] to uphold the restric-
tions as that information could easily have been
obtained from the clients themselves when they
engaged [the plaintiff’s] services.’’ On the basis of this
evidence, the court found that the plaintiff’s employ-
ment with the partnership did not provide him with an
unfair advantage in competing for clients after leaving
the partnership.
In light of the fact that the plaintiff had not obtained
any specialized knowledge or trade secrets through his
employment with the defendants, the court found that
the benefits the defendants would receive from the
noncompete provision ‘‘far [exceed] any contributions
[the partnership] may have provided to generate good-
will in [the plaintiff’s] clients.’’ In reaching that determi-
nation, the court noted: ‘‘There is no evidence that [the
partnership] did anything special to generate goodwill
in [the plaintiff’s] client base other than to pay the
ordinary overhead attributable to providing accounting
services (i.e., staff, technology, fixed costs, etc.), and
that was funded by fees generated by the services pro-
vided to these clients, which according to Cirone gener-
ated profits to [the partnership] of 25 [to] 35 percent
so 65 [to] 75 percent of revenues covered overhead.
The partnership agreement in Section F 3 characterizes
the payment required for competing with [the partner-
ship] measured by 150 [percent] of [the plaintiff’s] bill-
ings ‘as compensation for the goodwill and know-how
of [the partnership] relating to such client,’ yet it
appears that [the plaintiff] was the one who primarily
provided such ‘know-how’ . . . and it was [the plain-
tiff] who maintained and developed the client relation-
ships.’’ On the basis of this evidence, the court reasoned
that the disproportionate effect that enforcement of
the noncompete provision would have on the plaintiff
exceeds what would be necessary to protect the defen-
dants’ business interests.
The court further found that the restriction exceeds
what would be necessary to protect the defendants’
business interests by such a degree that it would result
in a ‘‘windfall’’8 to the defendants that is ‘‘disproportion-
ate to the goodwill of the former [partnership’s] clients
who followed [the plaintiff] to his new practice.’’ The
court found that if the plaintiff violated the noncompete
provision as written, he would be required to pay
$762,366 to the defendants, which is based on a fee of
150 percent of his share of goodwill. Because the fee
is not dependent on how much the plaintiff earned from
a former client or what services he performed for a
client during the five year period, the court found that
‘‘[i]f [the plaintiff] performed any services for a former
[partnership] client during the five year period, it would
trigger a fee of 150 [percent] of that client’s revenues
received by [the partnership] for the most recent two
years thereby paying [the partnership] a premium above
any firm contribution to goodwill.’’
The court relied on, and cited to, evidence in the
record that supports the finding that the noncompete
provision exceeds what is necessary to protect the
defendants’ interests. This evidence is sufficient to sup-
port the court’s factual findings. The plaintiff testified
that he brought an established base of 250 to 300 clients
to the partnership, this was 25 to 30 percent of the
partnership’s client base, he maintained control over
this client pool, he brought new clients into the partner-
ship on his own, and when he left the partnership nearly
all of his clients followed him. Additionally, we agree
with the court that there is no evidence that the plaintiff
received specialized knowledge or trade secrets from
the defendants, and there is no evidence that the part-
nership did anything to generate goodwill in the plain-
tiff’s client base.
The defendants contend that the court’s findings are
contradictory to the extent that the court recognized
that the ‘‘obvious aim’’ of the noncompete provision
was to ‘‘dissuade [the plaintiff] from servicing existing
clients after he left [the partnership] by imposing finan-
cial burdens that would make competition unfeasible
and expensive,’’ but, nevertheless, concluded that the
partnership’s clients’ ‘‘future goodwill clearly was not
expected to remain with [the partnership]’’ because the
plaintiff could provide former clients with his account-
ing services in his new practice. (Internal quotation
marks omitted.) Consequently, the defendants maintain
that the noncompete provision, in fact, does protect the
partnership’s legitimate business interest in retaining
its clients’ goodwill, and the evidence in the record
supports such a conclusion.9 We are not persuaded.
The court did not find that the noncompete provision
did not protect the defendants’ business. To the con-
trary, the court found that the noncompete provision
provides greater protection than the defendants legiti-
mately need. It is obvious that the more onerous a
noncompete provision is to a former partner, the greater
the benefit to the partnership he is leaving. Finding
that a noncompete provision benefits the partnership is,
therefore, very different than finding that the covenant’s
restrictions are needed to protect the partnership’s busi-
ness interests. Thus, the defendants’ argument does not
address the actual finding of the court that the covenant
is more restrictive than necessary to protect the defen-
dants’ business interests. Because there is evidence in
the record that supports the court’s factual findings
as to the necessity of the reach of the noncompete
provision, we cannot conclude that its findings were
clearly erroneous. See Gorelick v. Montanaro, 119
Conn. App. 785, 808, 990 A.2d 371 (2010).
We next consider the court’s factual finding that the
noncompete provision interferes with the plaintiff’s
ability to pursue his occupation as a certified public
accountant. In support of their contention that ‘‘the
facts belie [the court’s] conclusion,’’ the defendants
argue: ‘‘The . . . court’s legal conclusion is wrong,
even if its finding that the plaintiff’s only option was
to work for former [partnership] clients is correct. How-
ever, the record does not support the finding, either.
The plaintiff did not so testify. He claimed only that he
‘wouldn’t be able to operate as an accountant, as a
professional,’ if he had ‘to make the compensation pay-
ment . . . required by the noncompete provision.’
. . . Though ‘[n]early 100 percent’ of the clients that
the plaintiff took to his new company were former
[partnership] clients . . . his own testimony belies the
inference that he had no choice except to service those
clients. The plaintiff found 100 [to] 120 new clients in
his seven plus years at [the partnership]. . . . The
court credited the plaintiff for having generated good-
will through those ‘efforts,’ but ignored his acumen in
terms of his post [partnership] options.’’ (Citations
omitted.)
In its November 28, 2018 memorandum of decision,
the court discussed at length the ‘‘easily quantifiable’’
effects that the noncompete provision would have on
the plaintiff. The court stated: ‘‘If these provisions are
enforceable, [the plaintiff] would owe $762,366 under
the noncompete provision in Section III F 3 of the part-
nership agreement and would lose $144,826 in [deferred
income amount] payment that would have been paid if
he had not continued to practice public accounting in
Connecticut.10 Moreover, [the plaintiff] would have been
entitled to receive accrual based capital of $21,583 that
was netted out to calculate the $740,783 damages
awarded. If the $762,366 attributable to the noncompete
provision [were] paid out over the thirty-six month
period called for in the agreement, [the plaintiff] would
have had to pay $21,177 per month.11 According to the
balance sheet of [the plaintiff’s new firm] for year-end
December 31, 2017, the company had revenues of
$1,278,087 and expenses of $1,239,197, which resulted
in a net profit of only $32,803. Even if you add the
profits to the $200,000 salary paid to [the plaintiff] for
pretax profits of $232,803, his monthly pretax income
of $19,400.25 would be insufficient to make the monthly
payments to [the partnership], with a shortfall each
month of $1777. Not only would [the plaintiff] be work-
ing for free but he would have to come up with another
$21,324 each year for three years (using 2017 results
as a baseline) and pay taxes on his income.’’ (Footnotes
in original.)
On the basis of the evidence regarding the financial
implications that enforcement of the noncompete provi-
sion would have on the plaintiff, the court found credi-
ble the plaintiff’s testimony that he would be unable to
continue his accounting practice if he were required to
pay the fees called for under the noncompete provision.
The court also rejected the defendants’ argument that
the plaintiff would have ‘‘sufficient cash flow with
$41,175.75 in monthly revenue from former [partner-
ship] clients to pay [the partnership] $20,500 per month
for thirty-six months, leaving him $20,675 in additional
revenue from former [partnership] clients to meet his
other obligations,’’ because there was no evidence that
the plaintiff’s profit margin was consistent with what
the defendants’ expert witness testified to as the indus-
try average.12 The court, instead, relied on the plaintiff’s
testimony that his profit margin was 18 percent, finding
that it was not reasonable ‘‘to expect [the plaintiff] each
month to pay an amount equal to one half of revenues
from [the partnership’s] former clients under the cir-
cumstances here.’’ Ultimately, on the basis of these
subordinate findings, the court found that ‘‘[the plain-
tiff’s] livelihood and welfare would be jeopardized if he
had no access to the client base he developed . . . .’’
In making these findings, the court relied on, and
cited to, evidence in the record that supports the factual
findings that the noncompete provision would jeopar-
dize the plaintiff’s livelihood and welfare. Specifically,
the court’s finding is supported by the evidence regard-
ing the plaintiff’s pretax income since leaving the part-
nership, his firm’s profit margin and the resulting
monthly shortfall he would face for three years were
he to pay the noncompete provision’s fee. Further, we
cannot disturb the court’s credibility determination
regarding the plaintiff’s testimony that he could not
afford to practice if required to pay the competition fee
under the agreement. See Abrams v. PH Architects,
supra, 183 Conn. App. 787–88. Consequently, the court’s
finding that the noncompete provision ‘‘would interfere
with [the plaintiff’s] ability to pursue his profession’’
was not clearly erroneous.
Finally, the court found that the noncompete provi-
sion’s restrictions adversely affect the public’s interest
in freely engaging with the certified public accountant
of its choice. The court stated: ‘‘[The plaintiff’s] relation-
ship of trust and knowledge of the clients’ affairs and
businesses would be difficult to recreate elsewhere if
[the plaintiff] [were] not available to continue to service
their needs. . . . The public’s interest, including the
clients’ interests, in having [the plaintiff’s] professional
services would not be served by denying him access to
his existing client base without forfeiture of significant
income. As a practical matter, if he wanted to continue
to practice public accounting, [the plaintiff] would be
required to purchase the right to service his own clients
from [the partnership] by paying the competition fee
and forfeiting his [deferred income amount] payment
where the [partnership] deserves little credit for client
recruitment and development and the fee is dispropor-
tionate to any [partnership] contribution toward devel-
opment of those clients.’’ (Footnote omitted.)There is
support in the record for this conclusion. The plaintiff
testified that he would be forced to stop practicing
accounting and file for bankruptcy if he were required
to pay the entire amount of the forfeiture. Further,
Antonio Capanna, a client of the plaintiff for more than
fifteen years, testified that the plaintiff knew his busi-
ness so well that it would have a significant impact on
his business if the plaintiff could not practice anymore,
and, due to the size and complexity of his business, it
would take a new accountant years to learn the business
and gain Capanna’s trust. On the basis of the record
before us, we cannot conclude that it was clear error
for the court to conclude that the clients’ interest in
freely engaging the certified public accountant of their
choice would be impeded by enforcement of the non-
compete provision. See Gorelick v. Montanaro, supra,119 Conn. App. 808.
III
Having found no clear error in the court’s subordinate
findings of fact, we turn next to its legal conclusion that
the noncompete provision amounts to an unreasonable
restraint of trade and, therefore, is unenforceable. The
defendants argue that the noncompete provision is valid
and enforceable because (1) the parties, as partners,
had equal bargaining power and the plaintiff entered
into the partnership agreement voluntarily, (2) the part-
nership has a legitimate interest in restricting the plain-
tiff from servicing former and existing clients, (3) the
noncompete provision has a reasonable duration, and
(4) the noncompete provision does not harm the public
interest. In light of the court’s factual findings, we dis-
agree with each of the defendants’ arguments and, for
the reasons that follow, conclude that the court did
not err by concluding that the noncompete provision
amounts to an unreasonable restraint of trade and,
therefore, is unenforceable.
As stated previously in this opinion, we apply our
plenary standard of review to the court’s ultimate con-
clusion that the noncompete provision amounts to an
unreasonable restraint of trade and, therefore, is unen-
forceable. See Pandolphe’s Auto Parts, Inc. v. Manches-
ter, 181 Conn. 217, 221, 435 A.2d 24 (1980) (‘‘where the
legal conclusions of the court are challenged, we must
determine whether they are legally and logically correct
and whether they find support in the facts set out in
the memorandum of decision’’).
The following legal principles are relevant to our
resolution of the defendants’ claim. ‘‘In order to be valid
and binding, a covenant which restricts the activities
of an employee following the termination of his employ-
ment must be partial and restricted in its operation
in respect either to time or place . . . and must be
reasonable—that is, it should afford only a fair protec-
tion to the interest of the party in whose favor it is
made and must not be so large in its operation as to
interfere with the interests of the public. . . . The
interests of the employee himself must also be pro-
tected, and a restrictive covenant is unenforceable if
by its terms the employee is precluded from pursuing
his occupation and thus prevented from supporting him-
self and his family.’’ (Citations omitted; internal quota-
tion marks omitted.) Scott v. General Iron & Welding
Co., 171 Conn. 132, 137, 368 A.2d 111 (1976).
‘‘A covenant that restricts the activities of an
employee following the termination of his employment
is valid and enforceable if the restraint is reasonable.
. . . There are five criteria by which the reasonableness
of a restrictive covenant must be evaluated: (1) the
length of time the restriction is to be in effect; (2)
the geographic area covered by the restriction; (3) the
degree of protection afforded to the party in whose
favor the covenant is made; (4) the restrictions on the
employee’s ability to pursue his occupation; and (5) the
extent of interference with the public’s interests. . . .
The five prong test of Scott is disjunctive, rather than
conjunctive; a finding of unreasonableness in any one
of the criteria is enough to render the covenant unen-
forceable.’’ (Citations omitted.) New Haven Tobacco
Co. v. Perrelli, 18 Conn. App. 531, 533–34, 559 A.2d 715,
cert. denied, 212 Conn. 809, 564 A.2d 1071 (1989).
A
The defendants first argue that the court should not
have invalidated the noncompete provision because the
parties had equal bargaining power and entered into
the partnership agreement voluntarily. Conversely, the
plaintiff argues that, although voluntary agreements
between partners with equal bargaining power may be
more readily enforced than involuntary agreements
between an employer and an employee, that legal princi-
ple is irrelevant to our analysis of whether the non-
compete provision is an unreasonable and unenforce-
able restraint of trade. We agree with the plaintiff.
The defendants place significant weight on the cir-
cumstances under which the parties entered into the
partnership agreement, arguing that the parties’ equal
bargaining power and sophisticated knowledge of the
industry are compelling reasons to uphold the enforce-
ment of the noncompete provision. We are not per-
suaded. The trial court correctly concluded that the
defendants’ argument that the parties entered into the
partnership agreement voluntarily ‘‘does not resolve the
question of whether the restraint [the plaintiff] agreed
to [is] reasonable and enforceable under all [of] the
circumstances.’’ The defendants maintain, however,
that the freedom to contract should not be impaired,
particularly in this instance, when ‘‘[t]he very nature
of professional partnerships weighs heavily in favor
of enforcement.’’
We recognize the strong public policy favoring free-
dom of contract and the principle that the court should
not rescue sophisticated commercial parties from the
terms of their bargain. See Schwartz v. Family Dental
Group, P.C., 106 Conn. App. 765, 772–73, 943 A.2d 1122,
cert. denied, 288 Conn. 911, 954 A.2d 184 (2008); Yellow
Page Consultants, Inc. v. Omni Home Health Services,
Inc., 59 Conn. App. 194, 199, 756 A.2d 309 (2000). Never-
theless, our Supreme Court has long recognized that a
court’s deference to the rights of parties to enter into
contracts as they see fit does not extend to contracts
that violate public policy. For example, the Supreme
Court, in evaluating a covenant not to compete, stated
more than 100 years ago: ‘‘The public [has] an interest
in every person’s carrying on his trade freely; so has
the individual. All interference with individual liberty
of action in trading and all restraints of trade of them-
selves, if there is nothing more, are contrary to public
policy, and therefore void. That is the general rule. But
there are exceptions: restraints of trade and interfer-
ence with individual liberty of action may be justified
by the special circumstances of a particular case. It
is a sufficient justification, and, indeed, it is the only
justification, if the restriction is reasonable—reason-
able, that is, in reference to the interests of the parties
concerned, and reasonable in reference to the interests
of the public, so framed and so guarded as to afford
adequate protection to the party in whose favor it is
imposed, while at the same time it is in no way injurious
to the public.’’ (Internal quotation marks omitted.) Sam-
uel Stores, Inc. v. Abrams, 94 Conn. 248, 252, 108 A.
541 (1919); see also Beit v. Beit, 135 Conn. 195, 198–99,
63 A.2d 161 (1948). These principles were delineated
further by our Supreme Court in Scott, which sets forth
the test that guides our analysis of whether the non-
compete provision is enforceable irrespective of the
parties’ equal bargaining power and sophistication.
Scott v. General Iron & Welding Co., supra, 171
Conn. 137.
Accordingly, we reject the defendants’ contention
that the circumstances under which the parties entered
into the partnership agreement is determinative of
whether the noncompete provision in the agreement
is reasonable.13
B
Before turning to the defendants’ remaining three
arguments, we discuss briefly our analytical framework
in determining the reasonableness and enforceability
of the noncompete provision. In their principal brief
before this court, the defendants address separately
each of the factors established in Scott, analogizing the
factual circumstances of the present case to those in
purportedly similar cases in furtherance of their claim
that the court erred in reaching its findings as to the
reasonableness of the noncompete provision. The fatal
flaw in the defendants’ analysis, however, is that it
ignores the fact intensive nature of the reasonableness
inquiry.14 We reiterate that a balancing of the Scott fac-
tors is what informs the court’s legal conclusion as to
the noncompete provision’s enforceability, and, there-
fore, the court must weigh these factors in their totality
on the basis of the factual circumstances before it. See
Mattis v. Lally, 138 Conn. 51, 56, 82 A.2d 155 (1951)
(‘‘[e]quity under some circumstances will hold invalid
contracts which are so broad in their application that
they prevent a party from carrying on his usual vocation
and earning a livelihood, thus working undue hard-
ship’’). Thus, we address the defendants’ remaining
arguments together, in the context of the court’s factual
findings in the present case, to determine if the court’s
conclusion was legally and logically correct.
The following legal principles are relevant to our
resolution of the defendants’ claim. ‘‘In order for such
interference to be reasonable, it first must be deter-
mined that the employer is seeking to protect a legally
recognized interest, and then, that the means used to
achieve this end do not unreasonably deprive the public
of essential goods and services. . . .
‘‘In determining whether a restrictive covenant unrea-
sonably deprives the public of essential goods and ser-
vices, the reasonableness of the scope and severity of
the covenant’s effect on the public and the probability
of the restriction’s creating a monopoly in the area
of trade must be examined.’’ (Citation omitted.) New
Haven Tobacco Co. v. Perrelli, supra, 18 Conn. App. 536.
‘‘[W]hen the character of the business and the nature
of the employment are such that the employer requires
protection for his established business against competi-
tive activities by one who has become familiar with it
through employment therein, restrictions are valid
when they appear to be reasonably necessary for the fair
protection of the employer’s business or rights . . . .
Especially if the employment involves . . . [the
employee’s] contacts and associations with clients or
customers it is appropriate to restrain the use, when the
service is ended, of the knowledge and acquaintance,
so acquired, to injure or appropriate the business which
the party was employed to maintain and enlarge.’’
(Internal quotation marks omitted.) Robert S. Weiss &
Associates, Inc. v. Wiederlight, 208 Conn. 525, 533, 546
A.2d 216 (1988).
In their remaining three arguments, the defendants
contend that (1) the partnership has a legitimate interest
in protecting its goodwill in its former clients, and
restricting the plaintiff from servicing the partnership’s
client base reasonably achieves that interest, (2) the
noncompete provision has a reasonable duration, and
(3) the noncompete provision does not harm the public
interest. We are not persuaded.
Although it is true that an employer has a legally
recognized right to protect its business interest in
retaining former and potential future clients; see id.;
the defendants’ analysis fails to consider whether the
means used to achieve that end are reasonably neces-
sary and whether they unreasonably deprive the plain-
tiff of his right to make a living and the public’s right
to access the free market.
The court’s factual findings as to the disproportionate
effect that enforcement of the noncompete provision
would have on both the plaintiff and the public under-
mine the defendants’ contention that the noncompete
provision ‘‘does nothing more than protect [the partner-
ship’s] goodwill against piracy by a mutinous partner.’’
(Internal quotation marks omitted.) To the contrary,
the court found that the covenant imposes a significant
financial hardship on the plaintiff that is so dispropor-
tionate to what is needed to protect the defendants
from the plaintiff’s so-called ‘‘piracy’’ that the court
concluded that enforcement of the noncompete provi-
sion would result in a windfall to the defendants. The
court further found that enforcement of the covenant
essentially would prevent the plaintiff from practicing
his profession. As set forth in part II of this opinion,
the court’s findings were not clearly erroneous. Thus,
the court did not err in concluding that the scope of the
noncompete provision goes beyond what is reasonably
necessary to protect the defendants’ interests and that
enforcement of the noncompete provision would
impose a significant financial hardship on the plaintiff
by unreasonably impeding his ability to practice his pro-
fession.15
In addition, the absence of any specialized knowledge
or trade secrets obtained by the plaintiff through his
employment with the defendants is compelling evi-
dence that the noncompete provision is not reasonably
necessary to protect the defendants’ interest in
retaining the goodwill of the former clients brought to
the partnership by the plaintiff. See Robert S. Weiss &
Associates, Inc. v. Wiederlight, supra, 208 Conn. 533(‘‘restrictions are valid when they appear to be reason-
ably necessary for the fair protection of the employer’s
business or rights’’ (internal quotation marks omitted)).
The plaintiff, on his termination from the partnership,
did not take with him any sensitive information that
would give him an advantage in competing with the
partnership and retaining the services of his former
clients. The only advantage that the plaintiff had in
retaining his former clients was his preexisting relation-
ships with them, which, as the trial court found, did
not derive from his employment with the partnership.
In an effort to protect the goodwill of those clients,
however, the defendants now seek to impose onerous
financial consequences on the plaintiff’s ability to prac-
tice his profession, which, given the factual findings of
the court, constitute an unreasonable restraint of trade.
Notably, the defendants still have the opportunity to
retain the clients at issue without the noncompete provi-
sion. Moreover, the defendants still have access to
approximately 70 percent of their clients, as the plain-
tiff’s clients comprised only 30 percent of the partner-
ship’s entire client base.
Furthermore, the court’s factual finding that virtually
all of the plaintiff’s client base was comprised of clients
he personally developed, the majority of whom fol-
lowed him to the partnership from his sole proprietor-
ship, coupled with the fact that the noncompete provi-
sion imposes the same financial burden on the plaintiff
on a client by client basis regardless of how or when
the client was developed and regardless of how much
work the plaintiff is currently performing for the client,
supports the conclusion that the covenant is not reason-
ably necessary to protect the defendants’ interests and
is, therefore, an unreasonable restraint of trade. See
Domurat v. Mazzaccoli, 138 Conn. 327, 330, 84 A.2d
271 (1951) (‘‘[a covenant not to compete] made in con-
nection with the sale of the [goodwill] of a business
. . . is valid only when the restraint imposed is no
greater than is necessary for the fair and just protection
of the business and does not impose unnecessary hard-
ship on the covenantor’’ (emphasis added)).
As to the noncompete provision’s effect on the public,
the defendants argue that the public interest is not
adversely affected because the plaintiff ‘‘is not the only
competent [certified public accountant] in the Danbury
area—nor is [the partnership] the only other available
firm. The plaintiff’s clients would have had little diffi-
culty finding an alternative to him.’’ The court’s factual
findings, in which we find no error, belie the defendants’
contention. The court acknowledged that ‘‘accounting
and auditing services are otherwise available to [the
plaintiff’s] clients’’ but, stressing the importance of their
right to choose an accountant, specifically found that
complete enforcement would effectively bar their abil-
ity to hire the plaintiff: ‘‘[T]he clients’ interest in freely
engaging the accountant of [their] choice and the cli-
ents’ ability to obtain timely and efficient service will
be affected if [the plaintiff] were to refrain from repre-
senting former [partnership] clients for fear of eco-
nomic forfeiture and diversion of revenues. . . . That
the [noncompete] provision does not bar outright [the
plaintiff] servicing former [partnership] clients does not
detract from the severe penalty he would incur if the
forfeiture of benefits and payment provision were
enforceable and the powerful disincentive to service
those clients if the restriction were enforced.’’ The fact
that there are other accounting services available to
the public is relevant to the reasonableness of the non-
compete provision. Certainly, the restriction does not
create a monopoly for the defendants. Nevertheless,
the plaintiff’s former clients would be left without the
services of the accountant who they had trusted and
worked with for several years prior to the plaintiff’s
departure from the partnership. There being other
accountants available in the Danbury area does not
detract from Capanna’s testimony that it would take
him years to feel confident that a new accountant knew
his business and to establish a relationship of trust. The
adverse effect on the public is reinforced by the fact
that the plaintiff’s client base followed him to the part-
nership at the time of the merger and continued to seek
his services after his departure therefrom. Although
such a negative impact on competition might be reason-
able in another case, we conclude, on the basis of the
facts as found by the court in this case, particularly
that the restraint is greater than is necessary to protect
the defendants’ interests, that the noncompete provi-
sion constitutes an unreasonable restraint of the pub-
lic’s rights to the plaintiff’s services.
Finally, we agree with the trial court that, on the facts
of this case, the duration of the noncompete provision
is unreasonable. The court found that ‘‘[t]he length of
the restriction exceeds the duration of the period when
[the plaintiff] was subject to the [partnership] agree-
ment. Moreover, the lengthy time period means that
any business for a former or present [partnership] client
during the five year period would trigger the penalty
even if that client had not been [a partnership] client
during most of the restricted period, or had left [the
partnership] for reasons unrelated to [the plaintiff], or
had stayed with [the partnership] but used [the plaintiff]
for only part of the work during the period, or had only
come to [the plaintiff] years after the client left [the
partnership] for other reasons without any solicitation
by [the plaintiff].’’ The defendants point to cases in
which five year restrictions were upheld, but we agree
with the plaintiff that Scott calls for a fact specific
inquiry and it cannot be said that there is a default
number of years that is uniformly reasonable. See
Robert S. Weiss & Associates, Inc. v. Wiederlight, supra,
208 Conn. 530 (holding that time restrictions in restric-
tive covenant are valid ‘‘if they are reasonably limited
and fairly protect the interests of both parties’’); see
also footnote 15 of this opinion.16 Having found no error
in the court’s factual findings regarding the effect of
the five year restriction, particularly that five years is
longer than necessary to protect the defendants’ inter-
ests, we similarly find no error in the court’s subsequent
conclusion that five years is an unreasonable duration.
Accordingly, we conclude that the court properly
determined that, under the specific facts found, the
noncompete provision unreasonably restrains trade
and, therefore, is unenforceable.
The judgment is affirmed.
In this opinion the other judges concurred.
* The listing of judges reflects their seniority status on this court as of
the date of oral argument.
1
‘‘The plaintiff secretly recorded this meeting on his cell phone and the
parties agreed to enter a transcript of the recording into evidence.’’ DeLeo
I, supra, 180 Conn. App. 748 n.1.
2
‘‘Section II E of the partnership agreement defines accrual basis capital
value as ‘the cash basis financial statement prepared by the [partnership]
on a monthly basis modified for inclusion of accounts receivable as defined
in [Item F] and work in process in [Item G] with the appropriate adjustments
for liabilities and expense accruals including but not limited to payroll
accruals, malpractice accruals, and other operating expenses.’ ’’ DeLeo I,
supra, 180 Conn. App. 750 n.2.
3
Section III F 3 of the partnership agreement, which contains the non-
compete provision, provides: ‘‘If during the five (5) year period after any
retirement/withdrawal/termination [the plaintiff] provides any accounting,
auditing, tax or consulting services for a client that was represented by [the
partnership] during the two (2) year period prior to his termination, he will
pay to [the partnership] as compensation for the goodwill and know-how
of [the partnership] relating to such client an amount equal to [150 percent]
of the total average annual fees billed to such client or to any related persons
or entities by [the partnership] during the two (2) year period prior to
such termination. Such amount shall be payable to the partnership in equal
monthly installments over the [thirty-six] month period commencing with
the date of termination. At the option of [the partnership], such installments
may be recovered by [the partnership] by set-off against any payments
that may be due to such [p]artner by [the partnership]. A [p]artner, after
termination, may serve as a director of a past or present client of [the
partnership] without being obligated to make any payment to [the partner-
ship], provided that the [p]artner does not provide accounting, auditing,
tax or consulting services to such client. Any [p]artner who violates the
noncompete provisions of this section is not entitled to any [deferred income
amount] payments. All remaining [deferred income amount] payments will
cease and he will be required to return any payments he has received.’’
(Emphasis omitted.)
4
‘‘Section III D 1 of the partnership agreement provides in relevant part:
‘Any Partner may terminate his interest in the [partnership] at any time
provided that the Partner gives the partnership at least one hundred eighty
(180) days prior notice in writing of his intention to terminate his interest.
. . . The only amounts that will be due to such Partner will be his [accrual
basis capital], unless, at the discretion of the remaining Partners, they choose
to provide any additional payments. . . . As noted in part F 3 of Section
III of this Agreement, the withdrawing partner is subject to the [noncompete
provision] of that section.’ ’’ DeLeo I, supra, 180 Conn. App. 751 n.3.
5
Notwithstanding their contention that our appellate review should be
plenary, the defendants maintain that, even under the clearly erroneous
standard of review, this court should reach the same result because ‘‘[t]he
invalidation of a contract made by sophisticated commercial parties with
equal bargaining power because one of them regrets the consequences
should leave the [c]ourt ‘with the definite and firm conviction that a mistake
has been made.’ ’’
6
The plaintiff relies on National Waste Associates, LLC, to argue that
the ultimate conclusion of whether a noncompete provision is enforceable
is a question of fact to be resolved pursuant to the clearly erroneous standard
of review. It is true that this court stated in that case: ‘‘The parties submit,
and we agree, that the clearly erroneous standard of review governs the
finding of the trial court as to the enforceability of a restrictive covenant
in an employment agreement.’’ National Waste Associates, LLC v. Scharf,
supra, 183 Conn. App. 746. A thorough reading of the opinion though makes
clear that the issue the court was reviewing was not whether the noncompete
provision was reasonable as a matter of law but, rather, whether the plaintiff
had proved a breach of the provision as to specific prospective customers.
‘‘Contrary to the plaintiff’s contention, the record demonstrates that the
court did not apply a blanket rule in its May 9, 2016 decision that the
provision was unenforceable as to prospects. Rather, in its decision, the
court examined whether the plaintiff proved causation and damages with
respect to any improper solicitation of the plaintiff’s prospects and con-
cluded that it had not.’’ Id., 748–49. Although the court concluded that ‘‘the
court’s finding that the nonsolicitation provision in the plaintiff’s employ-
ment agreements with [the former employee defendants] was unenforceable
as to prospects was not clearly erroneous’’; id., 750; we read the opinion
as concluding merely that the trial court’s findings that the plaintiff had
failed to prove its claims as to certain prospective customers were not
clearly erroneous. We also find it significant that the parties in National
Waste Associates, LLC, agreed that the clearly erroneous standard of review
governed their dispute, further confirming the fact specific nature of the
issues raised on appeal in that case. See id., 746.
7
The court also determined that the geographic area covered by the
noncompete provision—the second criterion for determining the reasonable-
ness of such a provision under Scott v. General Iron & Welding Co., 171
Conn. 132, 138, 368 A.2d 111 (1976)—was irrelevant to its reasonableness
analysis because ‘‘the reasonable geographic limitation implied in the agree-
ment is wherever the former [partnership] client is located. That the work
may concern matters in other parts of the state or out of state is irrelevant
to the restricted competition for [the partnership’s] clients.’’ Because neither
party challenges this finding and, moreover, because the geographic area
covered by the noncompete provision did not affect the court’s analysis as
to the reasonableness or enforceability of the noncompete provision, we
do not consider it on appeal.
8
Black’s Law Dictionary defines a windfall as: ‘‘An unanticipated benefit,
[usually] in the form of a profit and not caused by the recipient.’’ Black’s
Law Dictionary (11th ed. 2019) p. 1917. Because a windfall is an unexpected
benefit, irrespective of fairness or reasonableness, we conclude that this
finding is also a subordinate factual finding and not a conclusion of law.
9
Both parties agree that the ‘‘goodwill’’ protected by the noncompete
provision concerns the value of the partnership’s interest in retaining its
former clients’ patronage.
10
‘‘[The plaintiff’s] share of goodwill would have amounted to $579,305
upon retirement; when he withdrew he was entitled to 25 [percent] of
his [deferred income amount] or $144,826 if he had not practiced public
accountancy in Connecticut. The forfeiture of [deferred income amount] is
part of the anticompetitive consequences of the noncompete provisions in
the partnership agreement.’’
11
‘‘Because the net award was $740,000, the parties calculated the actual
payout to be $20,500 per month for thirty-six months.’’
12
The defendants’ expert witness testified that the industry profit margin
was somewhere between 50 and 60 percent. Cirone testified that the partner-
ship’s profit margin was between 25 and 35 percent.
13
The defendants, for the first time on appeal, also argue that, notwith-
standing the established precedent that the reasonableness factors under
Scott are disjunctive—i.e., a finding of unreasonableness as to any one factor
renders the noncompete provision unenforceable—this court should apply
the conjunctive analysis purportedly applied by our Supreme Court in Styles
v. Lyon, 87 Conn. 23, 86 A. 564 (1913), and Cook v. Johnson, 47 Conn. 175(1879). The defendants’ argument is untenable.
Neither case the defendants rely on applies the approach they ask this
court to consider. The courts in both Styles and Cook stated that a restriction
that is indefinite as to its duration does not, on its own, necessarily invalidate
a noncompete provision if the restrictions therein are limited as to geo-
graphic scope and are reasonable in all other respects. Styles v. Lyon, supra,87 Conn. 26–27; Cook v. Johnson, supra, 47 Conn. 178. Consequently, Styles
and Cook simply hold that an indefinite duration in a noncompete provision
is not necessarily unreasonable. We fail to see how such a conclusion is
inconsistent with the disjunctive approach set forth in Scott. See New Haven
Tobacco Co. v. Perrelli, supra, 18 Conn. App. 534.
14
Most notably, the defendants rely on the five year covenant not to
compete that our Supreme Court upheld in Mattis v. Lally, 138 Conn. 51,
56, 82 A.2d 155 (1951), for the proposition that a restriction of that duration
is not violative of public policy. Additionally, the defendants rely on Mattis
to assert that, contrary to the court’s determination that the partnership did
not do ‘‘anything special’’ to generate goodwill in the plaintiff’s clients, the
‘‘beneficiary of goodwill does not have to be the creator of it.’’ The facts in
Mattis differ greatly from those in the present case.
In Mattis, the defendant owned and operated a barbershop, which he
sold to the plaintiff ‘‘together with all goodwill’’ for $1500. (Internal quotation
marks omitted.) Mattis v. Lally, supra, 138 Conn. 53. The bill of sale con-
tained a restrictive covenant, which stated that the seller would not ‘‘engage
in the barbering business for a period of five years’’ in Rockville. (Internal
quotation marks omitted.) Id. At the time of the sale, both parties were
aware of the fact that the defendant was fifty-eight years old, was in poor
health, and was unfamiliar with other lines of work. Id. Because of his
limited work experience in other fields, the defendant continued to work
as a barber in the plaintiff’s shop for nine months before he elected to
operate a one chair barbershop out of his own home. Id. The defendant’s
home business was within 300 yards of the shop he had sold to the plaintiff,
thereby constituting a breach of the restrictive covenant. Id.On appeal, the court was faced with the question of whether the restrictive
covenant at issue constituted an unenforceable restraint of trade. Id., 54.
The court reasoned that ‘‘[h]aving paid for goodwill, the plaintiff was entitled
to have reasonable limitations placed upon the activities of the defendant
to protect his purchase,’’ and the durational and geographical limitations
under the covenant, having been ‘‘fairly and justly calculated to protect the
business’’ were not unreasonable. Id., 54–55. After considering the factual
findings of the trial court, namely, the fact that the defendant was not an
invalid and could work as a barber outside of Rockville, and that he and
his wife would face only minor financial strain if the covenant were enforced,
concluded that the covenant was not unreasonable under the circumstances.
Id., 56–57.
The distinguishable factual circumstances in Mattis illustrate why the
defendants’ reliance on them is unpersuasive. Unlike in Mattis, the defen-
dants in the present case did not purchase the goodwill of the plaintiff’s
clients at the time of the merger. The trial court found that the noncompete
provision’s failure to distinguish between the plaintiff’s clients that followed
him to the partnership and the integrated partnership clients was compelling
evidence of an unreasonable restraint, particularly in light of the fact that
the plaintiff generated those clients’ goodwill through his own individual
efforts and business acumen. Moreover, the trial court found, and the evi-
dence supports its finding, that the plaintiff would face significant financial
hardship were he to continue servicing the clients that comprised approxi-
mately 100 percent of his client base. Although the defendants are correct
that the court in Mattis upheld the enforceability of a five year covenant
not to compete; see id., 56; it reached that conclusion on the basis of the
trial court’s factual findings that the covenant’s geographic restrictions were
narrowly tailored such that the defendant was not precluded from earning
a livelihood. Id. In light of the trial court’s factual findings, the court correctly
weighed the impact that enforcement of the covenant would have on the
defendant and the public, and determined that, under the circumstances, it
would be reasonable to afford the plaintiff’s new business some degree of
protection because the plaintiff ‘‘had purchased the business for a substantial
consideration’’ in reliance on the protections called for under the restrictive
covenant. Id., 55.
The fact specific analysis employed by the court in Mattis is the approach
we apply in the present case.
15
The defendants also attempt to analogize the factual circumstances in
the present case to those in Scott in furtherance of their position that the
noncompete provision did not deprive the plaintiff of an opportunity to
earn a livelihood through his continued practice of public accounting. The
defendants’ argument is unpersuasive because, like Mattis, the facts in Scott
are distinguishable from the facts in the present case.
In Scott, the plaintiff worked for the defendant as a welder until he
ultimately became the chief engineer of the defendant corporation. Scott v.
General Iron & Welding Co., supra, 171 Conn. 134. As chief engineer, the
plaintiff had access to the company’s entire customer list and was tasked
with soliciting business for the defendant. Id., 135. After a salary dispute,
however, the plaintiff gave up his management position and eventually left
the company voluntarily. Id. The agreement between the parties contained
a covenant not to compete, which prohibited the plaintiff from ‘‘disclosing
confidential information not generally known in the industry and acquired by
him concerning the defendant’s products, processes and services, research,
inventions, manufacturing, purchasing, accounting, engineering, marketing,
merchandising and selling; and from disclosing the list of the defendant’s
customers to any person or other entity.’’ Id., 135–36. The covenant also
contained durational and geographical restrictions, which provided that the
plaintiff ‘‘for a period of five years after the termination of his employment,’’
would not ‘‘within the [s]tate of Connecticut, directly or indirectly, own,
manage, operate, control, act as agent for, participate in or be connected
in any manner with the ownership, management, operation, or control of
any business similar to the type of business conducted by the [defendant]
at the time of the termination of his employment.’’ (Internal quotation marks
omitted.) Id., 136. Our Supreme Court was faced with the question of whether
the covenant constituted an unreasonable restraint of trade. Id.
The court weighed the competing interests of the plaintiff, the defendant,
and the public, and determined, inter alia, that the plaintiff’s interests prop-
erly were protected under the terms of the agreement. Id., 140. Specifically,
the court concluded that the covenant was reasonable because the agree-
ment precluded the plaintiff from participating in the metals business only
as a manager, not as an employee. Id. The court stated: ‘‘At the time of trial,
the plaintiff was employed as a welder and was earning $200 per week.
Thus, the plaintiff is not being deprived of the opportunity to earn a livelihood
for himself and his family or of employment at his trade.’’ Id.
Unlike in Scott, the court found that the noncompete provision in the
present case does not afford the plaintiff with the same opportunity to
make a living practicing his profession. In the present case, the plaintiff
is precluded from servicing former partnership clients, which, effectively,
forecloses his access to his entire client base. The defendants’ argument
that the plaintiff could have worked for another firm or pursued other
clients ignores the court’s factual findings, fully supported by the plaintiff’s
testimony, to the contrary. The defendants point to no evidence, nor are
we aware of any, that suggests that the plaintiff actually would have been
able to make a living by servicing a significantly limited client pool or
that he had other actual employment opportunities. Although on cross-
examination the plaintiff testified that he technically could still practice
accounting, and he could find new clients or could work at another account-
ing firm, the defendants presented no evidence of the likelihood that the
plaintiff could find alternative employment or make a living doing so. Fur-
thermore, the defendants’ assertion that the plaintiff could have found new
clients ignores the harm that would befall his former clients, virtually all
of whom preferred the plaintiff’s services to other accountants, as evidenced
by the fact that all but three of the plaintiff’s clients followed him from
the partnership.
16
In DeLeo I, we cited Holloway v. Faw, Casson & Co., 319 Md. 324, 572
A.2d 510 (1990), explaining that ‘‘[t]he facts of this case are also remarkably
similar to those in [Holloway], which our Supreme Court cited with approval
in Deming [v. Nationwide Mutual Ins. Co., 279 Conn. 745, 767, 905 A.2d
623 (2006)]. In Holloway, the plaintiff, a former partner of an accounting
firm, challenged provisions in the partnership agreement that required him
to forfeit certain deferred income payments and pay the partnership ‘100
[percent] of the prior year’s fees for any clients’ for whom the departing
partner continued to provide accounting services.’’ DeLeo I, supra, 180 Conn.
App. 763. The Court of Appeals of Maryland, applying a similar inquiry based
on ‘‘the facts of a particular case and the interest of the employer sought
to be protected,’’ agreed with the trial court that the five year restriction
was longer than needed to protect the firm’s relationship with its clients.
Holloway v. Faw, Casson & Co., supra, 319 Md. 348–50. In this case, the
noncompete provision is even more onerous because, in addition to the five
year restriction, it requires the payment of ‘‘[150 percent] of the total average
annual fees billed to such client or to any related persons or entities by
[the partnership] during the two (2) year period prior to such termination.’’
(Emphasis added.) See footnote 3 of this opinion.