DeLeo v. Equale & Cirone, LLP , 180 Conn. App. 744 ( 2018 )

***********************************************
The “officially released” date that appears near the be-
ginning of each opinion is the date the opinion will be pub-
lished in the Connecticut Law Journal or the date it was
released as a slip opinion. The operative date for the be-
ginning of all time periods for filing postopinion motions
and petitions for certification is the “officially released”
date appearing in the opinion.
All opinions are subject to modification and technical
correction prior to official publication in the Connecticut
Reports and Connecticut Appellate Reports. In the event of
discrepancies between the advance release version of an
opinion and the latest version appearing in the Connecticut
Law Journal and subsequently in the Connecticut Reports
or Connecticut Appellate Reports, the latest version is to
be considered authoritative.
The syllabus and procedural history accompanying the
opinion as it appears in the Connecticut Law Journal and
bound volumes of official reports are copyrighted by the
Secretary of the State, State of Connecticut, and may not
be reproduced and distributed without the express written
permission of the Commission on Official Legal Publica-
tions, Judicial Branch, State of Connecticut.
***********************************************
DEREK J. DELEO v. EQUALE AND
CIRONE, LLP, ET AL.
(AC 38527)
Lavine, Prescott and Bright, Js.
Syllabus
The plaintiff sought to recover damages from the defendants for, inter alia,
breach of fiduciary duty and conversion. The plaintiff, a certified public
accountant, was a partner at the defendant accounting firm, where the
defendant C was managing partner. In April 2013, C decided to terminate
his partnership with the plaintiff after it became known that the plaintiff
had engaged in a relationship with a staff accountant. The plaintiff
retained his 38 percent partnership interest through June 30, 2018, and,
after his departure, continued to provide accounting services in New
Milford. The plaintiff thereafter brought the present action, alleging,
inter alia, that he still held a 38 percent interest in the partnership, that
C had excluded him from the daily operations of the partnership, and
that C’s conduct frustrated the economic purpose of the partnership
such that it was no longer reasonable to continue the partnership’s
business in accordance with the partnership agreement. The plaintiff
sought, inter alia, a dissolution and winding up of the partnership and
restoration of his partnership rights. The defendants filed a counterclaim,
special defenses and a claim of setoff. Following a trial to the court,
the trial court rendered judgment in favor of the defendants on the
complaint and on their special defenses, finding, inter alia, that the
plaintiff voluntarily withdrew as partner of the partnership, that C did
not waive the partnership’s right to enforce a noncompete provision in
the partnership agreement, and that the plaintiff had agreed to terminate
his partnership interest as of June 30, 2013. On the plaintiff’s appeal to
this court, held:
1. The plaintiff could not prevail on his claim that the trial court committed
plain error by not ordering the dissolution of the partnership, which
was based on his claim that the partnership could not continue to exist
as a single partner partnership; the record was factually inadequate to
permit this court to find an error so obvious that reversal was required,
the plaintiff’s claim that the partnership was a single partner partnership
that could not exist pursuant to statute (§ 34-301 [12]) was not raised
at trial and to allow him to raise the claim for the first time on appeal
would permit trial by ambuscade, and even if the trial court committed
error, no manifest injustice resulted from this court’s refusal to entertain
the claim newly raised on appeal, which contradicted the plaintiff’s
position in the trial court.
2. The plaintiff’s claim that the trial court improperly estopped him from
contesting the enforceability of a noncompete provision in the partner-
ship agreement was unavailing; although that court stated that the plain-
tiff was estopped from asserting that the noncompete provision was
unenforceable, it did not apply the doctrine of estoppel to preclude the
plaintiff from asserting his claim, as the court set forth the legal princi-
ples that governed the plaintiff’s claim but did not set forth any legal
principles regarding estoppel, it addressed six reasons for its conclusion
that the noncompete provision was enforceable, if the court had applied
the doctrine of estoppel to bar the claim there would have been no need
for it to have addressed the merits of the claim, and it was reasonable
to interpret the court’s discussion of estoppel as a comment on the
plaintiff’s credibility rather than an application of the doctrine.
3. The trial court’s finding that C had not waived enforcement of the non-
compete provision in the partnership agreement was not clearly errone-
ous; the record supported the trial court’s findings that C, as managing
partner of the partnership, repeatedly asserted that the partnership
agreement controlled the plaintiff’s departure, despite statements that
expressed his desire to avoid hurting the plaintiff, all of C’s representa-
tions were consistent with the terms of the noncompete provision in
the partnership agreement, which did not prohibit a departing partner
from continuing to practice accounting or from servicing former clients
of the partnership but required that the former partner compensate the
partnership for any clients taken from the partnership.
4. The trial court incorrectly treated the noncompete provision as a liquidated
damages clause and improperly failed to consider the reasonableness
of the restraint imposed by the noncompete provision; because the
plaintiff’s actions did not constitute a breach of contract and the non-
compete provision did not require that the plaintiff breach the partner-
ship agreement before the partnership was entitled to compensation
for work that the plaintiff performed for the partnership’s former clients,
the noncompete provision could not be viewed as a liquidated damages
clause designed to fix compensation for a breach of contract, and given
that the noncompete provision did not differ meaningfully from a prohibi-
tive covenant not to compete, the enforceability of the noncompete
provision had to be judged by the same standard used for covenants
not to compete.
Argued December 11, 2017—officially released April 10, 2018
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
in favor of the defendants on the complaint and in part
on the counterclaim, from which the plaintiff appealed
to this court. Reversed in part; further proceedings.
Brendon P. Levesque, with whom were Karen L.
Dowd and, on the brief, Scott T. Garosshen, for the
plaintiff (appellant).
Daniel J. Krisch, with whom was Kevin J. Greene,
for the defendants (appellees).
Opinion
BRIGHT, J. The plaintiff, Derek J. DeLeo, appeals
from the judgment of the trial court rendered in favor
of the defendants, Equale & Cirone, LLP (partnership),
and Anthony W. Cirone, Jr., on the plaintiff’s complaint
and the defendants’ special defenses, claim of setoff,
and counterclaim. Specifically, the plaintiff claims that
the trial court (1) committed plain error when it failed to
order the dissolution of the partnership; (2) improperly
estopped him from challenging the noncompete provi-
sion in the partnership agreement; (3) improperly found
that the defendants did not waive the enforcement of
the noncompete provision; and (4) improperly con-
cluded that the noncompete clause in the partnership
agreement was enforceable. We agree with the plain-
tiff’s final claim, and we, therefore, affirm in part and
reverse in part the judgment of the trial court.
The following facts and procedural history, as found
by the trial court or as undisputed in the record, are
relevant to our review. The partnership, an accounting
firm, is a limited liability partnership located in Bethel.
Joseph A. Equale, Jr., and Cirone formed the partner-
ship in 1999. In 2005, the plaintiff, a certified public
accountant, joined the partnership as an equity partner.
The partnership operated under an oral partnership
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, Tyranksy, 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
[Cirone’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 alleged the following special
defenses: the plaintiff’s complaint failed to state a claim
upon which relief could be granted; the plaintiff’s claims
were barred by his own conduct and breach of fiduciary
duties; the plaintiff’s claims were barred by the doctrine
of unclean hands; and the plaintiff had waived any claim
against the defendants because he had terminated his
partnership interest voluntarily. In their claim for setoff,
the defendants alleged, inter alia, that the plaintiff was
liable to the partnership for damages as a result of: self-
dealing, violations of his fiduciary duties, and amounts
due pursuant to the noncompete provision in the part-
nership agreement.
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. 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 provision3 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.
This appeal followed.
I
The plaintiff does not challenge on appeal the court’s
finding that he voluntarily withdrew from the partner-
ship. Instead, he argues that the court committed plain
error by not ordering the dissolution of the partnership
because a single partner partnership cannot exist. At
oral argument, the plaintiff conceded that this claim
was not preserved pursuant to our rules of practice.
Nevertheless, he contends that reversal is appropriate
pursuant to the plain error doctrine. The defendants
argue that this court should not review the plaintiff’s
claim because it contradicts the plaintiff’s pleadings
and arguments in the trial court. We agree with the
defendants.
The following legal principles inform our review.
‘‘[T]he plain error doctrine . . . is not . . . a rule of
reviewability. It is a rule of reversibility. That is, it is a
doctrine that this court invokes in order to rectify a
trial court ruling that, although either not properly pre-
served or never raised at all in the trial court, nonethe-
less requires reversal of the trial court’s judgment, for
reasons of policy. . . . In addition, the plain error doc-
trine is reserved for truly extraordinary situations
where the existence of the error is so obvious that it
affects the fairness and integrity of and public confi-
dence in the judicial proceedings. . . .
‘‘[Our Supreme Court] recently clarified the [two-
pronged] framework under which we review claims of
plain error. [Under the] [f]irst [prong], we must deter-
mine whether the trial court in fact committed an error
and, if it did, whether that error was indeed plain in
the sense that it is patent [or] readily discernable on
the face of a factually adequate record, [and] also . . .
obvious in the sense of not debatable. . . . [T]his
inquiry entails a relatively high standard, under which
it is not enough for the defendant simply to demonstrate
that his position is correct. Rather, the party seeking
plain error review must demonstrate that the claimed
impropriety was so clear, obvious and indisputable as
to warrant the extraordinary remedy of reversal. . . .
‘‘[U]nder the second prong of the analysis we must
determine whether the consequences of the error are
so grievous as to be fundamentally unfair or manifestly
unjust. . . . Only if both prongs of the analysis are
satisfied can the appealing party obtain relief.’’ (Empha-
sis omitted; internal quotation marks omitted.) Healey
v. Haymond Law Firm, P.C., 174 Conn. App. 230, 245,
166 A.3d 10 (2017).
After filing the present appeal, the plaintiff filed a
motion for articulation on September 19, 2016,
requesting that the trial court state ‘‘the factual and legal
basis for [its] finding that [the partnership] continued
as a single partner partnership after the plaintiff’s’’ vol-
untary departure on June 30, 2013. The court denied
the motion for articulation, however, the court stated
that ‘‘[t]he evidence at trial showed (and the court
found) that [the partnership] (1) existed as a for profit
venture between Cirone, [the plaintiff] and Tyransk[y]
prior to [the plaintiff’s] departure from the firm; and
(2) continued after [the plaintiff’s] departure between
Cirone and Tyransk[y], with Cirone as an equity partner
and Tyransk[y] as a nonequity contract partner.’’
Relying on the court’s statement in its order denying
his motion for articulation, the plaintiff contends that
because the court found that Tyransky was not an equity
partner of the partnership after the plaintiff’s departure,
the partnership could not have continued to exist.
Therefore, according to the plaintiff, the court should
have ordered the dissolution of the partnership. The
plaintiff also argues that had the trial court properly
ordered the dissolution of the partnership, the non-
compete provision would have been inapplicable
because the plaintiff could not have been in competition
with a partnership that no longer existed. We cannot
conclude under the facts and circumstances of this case
that reversal for plain error is warranted.
First, there is not a factually adequate record.
Although the plaintiff claims that ‘‘the trial court
expressly found that the partnership continued . . .
with . . . Tyransk[y] as a nonequity contract partner’’
after he withdrew from the partnership, he also
acknowledges that ‘‘[t]he testimony at trial . . . con-
flicted as to when, if ever, Tyransky actually received
the [1] percent equity interest.’’ Indeed, the court’s order
denying the plaintiff’s motion for articulation does not
make any finding as to the duration of Tyransky’s status
as a ‘‘nonequity contract partner.’’ Accordingly, this
court cannot find an error so obvious that reversal is
required on the basis of this record.
Second, it is axiomatic that this court ‘‘should not
consider different theories or new questions if proof
might have been offered to refute or overcome them
had they been presented at trial. . . . Our rules of pro-
cedure do not allow a [party] to pursue one course of
action at trial and later, on appeal, argue that a path
he rejected should now be open to him. . . . To rule
otherwise would permit trial by ambuscade.’’ (Citation
omitted; internal quotation marks omitted.) Nweeia v.
Nweeia, 142 Conn. App. 613, 620, 64 A.3d 1251 (2013).
At trial, the plaintiff did not claim that the partnership
was a single partner partnership that could not exist
pursuant to General Statutes §§ 34-301 (12).4 In fact,
the plaintiff argued the opposite position, claiming that
he continued to hold a 38 percent interest in the partner-
ship. He further alleged that Cirone unlawfully con-
verted his 38 percent interest in the partnership and
transferred 1 percent of that interest to Tyransky. In
light of the plaintiff’s pleadings and arguments at trial,
the defendants had no reason to offer evidence regard-
ing when Tyransky became a partner. To allow the
plaintiff to raise this claim for the first time on appeal
would permit trial by ambuscade. See id.
Finally, even if we assume that the trial court commit-
ted error in the present case, ‘‘no manifest injustice
results from our refusal to entertain an argument fash-
ioned anew for appellate purposes, particularly where
the freshly minted argument contradicts the position
that the plaintiff advanced in the trial court.’’ Gladstein
v. Goldfield, 163 Conn. App. 579, 586-87, 137 A.3d 60
(2016), appeal dismissed, 325 Conn. 418, 159 A.3d 661
(2017). Accordingly, we decline to apply the extraordi-
nary remedy of plain error to rescue the plaintiff from
his failed trial strategy.
II
The plaintiff next claims that the court improperly
estopped him from contesting the enforceability of the
noncompete provision in the partnership agreement.
The plaintiff argues that his inclusion of a payment
pursuant to the noncompete provision as a line item in a
submission for his divorce mediation ‘‘do[es] not satisfy
the legal standard for any kind of estoppel.’’ Although
we agree with the plaintiff that estoppel does not apply
under these circumstances, we conclude that the court
did not apply any form of estoppel.
It is well established that ‘‘an opinion must be read
as a whole, without particular portions read in isolation,
to discern the parameters of its holding. . . . Further-
more, we read an ambiguous trial court record so as
to support, rather than contradict, its judgment.’’ In re
Nevaeh W., 317 Conn. 723, 733, 120 A.3d 1177 (2015).
‘‘Additionally, our appellate courts do not presume
error on the part of the trial court. . . . Rather, we
presume that the trial court, in rendering its judgment
. . . undertook the proper analysis of the law and the
facts.’’ (Citations omitted; internal quotation marks
omitted.) Rogan v. Rungee, 165 Conn. App. 209, 223,
140 A.3d 979 (2016).
The trial court addressed the plaintiff’s claim that the
noncompete provision was unenforceable because it
was a penalty. After setting forth the legal standard for
determining whether a particular provision in a contract
is for liquidated damages or is an unenforceable penalty,
the court then proceeded to evaluate the noncompete
provision, listing six reasons supporting its conclusion
that the amount due pursuant to the noncompete provi-
sion is for liquidated damages. In the final two sentences
of its analysis, the court stated that ‘‘[the plaintiff]
included the noncompete payment as a line item in his
calculation of the value of his partnership in his divorce
mediation submission. . . . He is, therefore, estopped
from asserting that the noncompete provision is unen-
forceable.’’ (Emphasis added.)
Although the court stated that the plaintiff is estopped
from asserting that the noncompete provision is unen-
forceable, our review of the court’s decision convinces
us that the court did not apply the doctrine of estoppel
to bar the plaintiff’s claim. First, the court correctly set
forth the legal principles governing the plaintiff’s claim,5
but did not set forth any legal principles regarding estop-
pel. Second, the court addressed six reasons for its
conclusion that the noncompete provision was enforce-
able, before stating that the plaintiff was ‘‘estopped’’
from challenging it. Thus, the plaintiff’s interpretation
of the court’s decision is in tension with the court’s
entire discussion of his claim. Indeed, if the court had
applied the doctrine of estoppel to bar the claim, there
would have been no need for it to have addressed the
merits of the plaintiff’s claim. See State v. Jones, 98
Conn. App. 695, 696, 911 A.2d 353 (2006) (‘‘[b]ecause
we conclude that the defendant’s claim is barred by the
doctrine of res judicata, we do not review the merits
of his claim’’), cert. denied, 281 Conn. 916, 917 A.2d
1000 (2007). Furthermore, in the context of the whole
opinion, it is reasonable to interpret the court’s discus-
sion of estoppel as a comment on the plaintiff’s credibil-
ity rather than an application of the judicial doctrine
of estoppel. In fact, the court acknowledged that it
considered the plaintiff’s conflicting position in his
divorce case when it assessed his credibility.6 Accord-
ingly, after reviewing the court’s memorandum of deci-
sion in its entirety, we conclude that the court did not
apply any form of estoppel to preclude the plaintiff
from asserting that the noncompete provision was
unenforceable. For that reason, we find no error.
III
The plaintiff also claims that the court improperly
found that Cirone had not waived enforcement of the
noncompete provision in the partnership agreement.
We disagree.
‘‘Waiver is the intentional relinquishment of a known
right. . . . Intention to relinquish [must] appear, but
acts and conduct inconsistent with intention [to assert
a right] are sufficient. . . . Thus, [w]aiver does not
have to be express, but may consist of acts or conduct
from which waiver may be implied. . . . In other
words, waiver may be inferred from the circumstances
if it is reasonable to do so. . . . Whether conduct con-
stitutes a waiver is a question of fact. . . . Our review
therefore is limited to whether the judgment is clearly
erroneous or contrary to law.’’ (Internal quotation
marks omitted.) R.S. Silver Enterprises, Inc. v. Pascar-
ella, 163 Conn. App. 1, 32, 134 A.3d 662, cert. denied,
320 Conn. 929, 133 A.3d 460 (2016). ‘‘A court’s determi-
nation is clearly erroneous only in cases in which the
record contains no evidence to support it, or in cases
in which there is evidence, but the reviewing court is
left with the definite and firm conviction that a mistake
has been made.’’ (Internal quotation marks omitted.)
Coppola Construction Co. v. Hoffman Enterprises Ltd.
Partnership, 157 Conn. App. 139, 181, 117 A.3d 876,
certs. denied, 318 Conn. 902, 122 A.3d 631, 123 A.3d
882 (2015).
The plaintiff has failed to establish that the court’s
factual finding was clearly erroneous. The plaintiff
directs this court to portions of the April 26, 2013 con-
versation that he believes support his position that Cir-
one waived the noncompete provision. The plaintiff
contends that Cirone expressed his desire not to hurt
him, and Cirone acknowledged that the clients would
decide to go with whomever they wanted. He further
contends that Cirone encouraged him to take his clients,
and that Cirone never expressed an intention to enforce
the noncompete provision until the plaintiff com-
menced this action. According to the plaintiff, Cirone’s
conduct and representations caused him to believe that
he ‘‘could rest assured that his book of business would
be permitted to leave with him, unassailed by [the part-
nership’s] enforcement of the noncompete [provision].’’
The court, however, found that Cirone, as managing
partner of the partnership, did not ‘‘waive the firm’s
rights to receive amounts due pursuant to the non-
compete provision.’’ Additionally, the court found that
‘‘[a]t no point during the April 26 meeting or later in
their e-mail correspondence did [the plaintiff] deny the
existence or enforceability of the partnership
agreement.’’ Our review of the record supports the
court’s findings. Specifically, during the recorded con-
versation on April 26, 2013, Cirone asked the plaintiff
if he had a copy of the partnership agreement. The
plaintiff replied: ‘‘I have it. I know it in and out.’’ Cirone
confirmed: ‘‘[T]hat’s what we’re gonna follow.’’ Then,
again, at the end of that conversation, Cirone stated:
‘‘[W]e are not gonna try to stop any client of the firm
from leaving with you. We’ve only gotta discuss how
it’s gonna work in [the] confines [of] the partnership
agreement.’’
Despite Cirone’s statements expressing his desire to
avoid hurting the plaintiff, Cirone repeatedly asserted
that the partnership agreement controlled the plaintiff’s
departure. Moreover, all of Cirone’s representations are
consistent with the terms of the noncompete provision
in the partnership agreement.7 The noncompete provi-
sion does not prohibit a departing partner from continu-
ing to practice accounting or from servicing former
clients of the partnership. The provision requires that
a former partner compensate the partnership for any
clients that he or she takes from the partnership. Thus,
the evidence adduced at trial supports the court’s find-
ing that Cirone did not waive the partnership’s rights
pursuant to the partnership agreement. Because there
is evidence in the record to support the court’s finding,
we conclude that the court’s finding was not clearly
erroneous.8
IV
The plaintiff’s final claim is that the trial court improp-
erly concluded that the noncompete provision was
enforceable. Specifically, he argues that the non-
compete provision is a restraint of trade and, accord-
ingly, the court improperly failed to evaluate the
reasonableness of the restraint. The defendants argue
that the noncompete provision is not a restraint of trade
and thus not subject to a reasonableness analysis.
Instead, the defendants claim that the noncompete pro-
vision is, in reality, an inaptly titled liquidated damages
clause. We agree with the plaintiff.9
Our review of the plaintiff’s claim requires us to con-
strue the contract. ‘‘[W]ith any issue of contract inter-
pretation, we begin with the language of the contract.
. . . Although ordinarily the question of contract inter-
pretation, being a question of the parties’ intent, is a
question of fact . . . [w]here there is definitive con-
tract language, the determination of what the parties
intended by their contractual commitments is a ques-
tion of law.’’ (Citation omitted; internal quotation marks
omitted.) Financial Freedom Acquisition, LLC v. Grif-
fin, 176 Conn. App. 314, 338–39, 170 A.3d 41, cert.
denied, 327 Conn. 931, 171 A.3d 454 (2017). The relevant
language in the partnership agreement is plain and
unambiguous and, therefore, our review is plenary.
The language of the noncompete provision cannot
be read as a liquidated damages clause. ‘‘A provision
for liquidated damages . . . is one the real purpose of
which is to fix fair compensation to the injured party
for a breach of contract.’’ (Internal quotation marks
omitted.) Tsiropoulos v. Radigan, 163 Conn. App. 122,
127-28, 133 A.3d 898 (2016). In the present case, the
noncompete provision does not require that the plaintiff
breach the partnership agreement before the partner-
ship is entitled to compensation for work that the plain-
tiff performs for the partnership’s former clients. In
fact, under the terms of the partnership agreement, the
plaintiff had every right to provide services to former
clients of the partnership; he just had to compensate
the partnership if he did so. Because the plaintiff’s
actions do not constitute a breach of contract, the non-
compete provision cannot be viewed as a liquidated
damages clause designed to fix compensation for a
breach of contract.
Instead, under controlling law, the noncompete provi-
sion is exactly that because it imposes a financial disin-
centive on the plaintiff to deter competition with the
partnership. In the present case, the noncompete provi-
sion10 in the partnership agreement requires a former
partner to forfeit his Deferred Income Amount11 if the
partner provides any accounting, auditing, tax or con-
sulting services for one of the partnership’s former cli-
ents during the first five years following his departure
from the partnership. Additionally, the former partner
is required to pay 150 percent of the average annual
fees that the partnership billed to the former client
during the previous two years prior to the partner’s
departure. The provision does not prohibit a former
partner from providing accounting services to former
clients of the partnership; rather, it requires that the
former partner compensate the partnership. Simply put,
a partner may leave the partnership and engage in the
business of accounting subject to certain economic dis-
incentives.
Our interpretation of the noncompete provision at
issue in this case is controlled by our Supreme Court’s
decision in Deming v. Nationwide Mutual Ins. Co., 279
Conn. 745, 761, 905 A.2d 623 (2006). In Deming, the
court considered whether a forfeiture provision in an
employment contract was, in effect, a covenant not to
compete. Id., 760–68. The provision provided that if
an employee engaged in certain competitive conduct,
following the cancellation of the contract, the employee
would forfeit any deferred compensation that had been
earned during the employee’s employment. Id., 750. The
court recognized that ‘‘the contract does not require
an employee’s express promise not to compete after
termination of employment; instead, it requires a forfei-
ture of the employee’s benefits if he or she engages in
competition after termination of employment.’’ Id., 761.
Nevertheless, the court concluded that the provision
needed to be analyzed under the reasonableness test
for covenants not to compete. Id., 767. The court rea-
soned that ‘‘[p]ermitting a forfeiture clause that is not
subject to a reasonableness assessment is essentially
no different than enforcing a covenant not to compete,
which, not properly circumscribed, is the classic exam-
ple of a direct restraint.’’ Id., 768.
The facts of this case are also remarkably similar to
those in Holloway v. Faw, Casson & Co., 319 Md. 324,
572 A.2d 510 (1990), which our Supreme Court cited
with approval in Deming. See Deming v. Nationwide
Mutual Ins. Co., supra, 279 Conn. 767. 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 pay-
ments and pay the partnership ‘‘100% of the prior year’s
fees for any clients’’ for whom the departing partner
continued to provide accounting services. Holloway v.
Faw Casson & Co., supra, 319 Md. 328. The Maryland
Supreme Court held that ‘‘[t]he covenants in [the part-
nership agreement] are sufficiently similar to covenants
not to compete to invoke, in general, the analysis
applied under the law bearing on covenants not to com-
pete.’’ Id., 333.
In the present case, the noncompete provision does
not differ meaningfully from a prohibitive covenant not
to compete. Just as in Deming and Holloway, the part-
nership agreement imposes financial disincentives,
including a forfeiture of the former partner’s deferred
income amount, instead of requiring a partner’s express
promise not to compete. The financial disincentives for
competition discourage a former partner from continu-
ing to provide accounting services to the partnership’s
clients. Thus, although the provision at issue is an indi-
rect restraint on competition, much like the forfeiture
provision at issue in Deming, it accomplishes the same
result as a covenant not to compete: a restraint of trade.
Deming v. Nationwide Mutual Ins. Co., supra, 279
Conn. 767. ‘‘[A] covenant not to compete and a forfeiture
upon competing are but alternative approaches to
accomplish the same practical result. . . . When
pruned to their quintessence, they tend to accomplish
the same results and should be treated accordingly.’’
(Internal quotation marks omitted.) Id., 768–69. Conse-
quently, the enforceability of the noncompete provision
must be judged by the same standard used for covenants
not to compete.
‘‘A covenant that restricts the activities of an
employee following the termination of his employment
is valid and enforceable if the restraint is reasonable.’’
New Haven Tobacco Co. v. Perrelli, 18 Conn. App. 531,
533, 559 A.2d 715, cert. denied, 212 Conn. 809, 564 A.2d
1071 (1989). Whether a restraint is reasonable ‘‘depends
upon the competing needs of the parties as well as
the needs of the public. These needs include: (1) the
employer’s need to protect legitimate business inter-
ests, such as trade secrets and customer lists; (2) the
employee’s need to earn a living; and (3) the public’s
need to secure the employee’s presence in the labor
pool.’’ Deming v. Nationwide Mutual Ins. Co., supra,
279 Conn. 761.
In his posttrial brief, the plaintiff argued that the
noncompete provision is unenforceable because it is
unreasonable as a matter of law. He claimed that
enforcement would ‘‘eliminate [his] ability to pursue
his occupation in an economically tenable way.’’ The
court, however, did not consider the reasonableness of
the restraint imposed by the noncompete provision.
Instead, the court concluded that the noncompete pro-
vision was enforceable as a liquidated damages provi-
sion. For the reasons set forth previously in this opinion,
we conclude that the court incorrectly treated the non-
compete provision as a liquidated damages clause and
improperly failed to consider the reasonableness of the
restraint imposed by the noncompete provision.
The judgment is reversed only as to the award of
damages pursuant to count two of the defendants’ coun-
terclaim and the case is remanded for further proceed-
ings limited to determining whether the noncompete
provision in the partnership agreement is reasonable
under applicable law; the judgment is affirmed in all
other respects.
In this opinion the other judges concurred.
1
The plaintiff secretly recorded this meeting on his cell phone and the
parties agreed to enter a transcript of the recording into evidence.
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.’’ (Emphasis
omitted.)
3
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 F3 of Section III
of this Agreement, the withdrawing partner is subject to the [noncompete
provision] of that section.’’ (Emphasis omitted.)
4
General Statutes § 34-301 (12) defines a partnership as ‘‘an association
of two or more persons to carry on as co-owners a business for profit . . . .’’
5
Although the court applied the correct test for determining whether a
contractual provision for payment of money arising out of a breach of
contract is a liquidated damages clause or an unenforceable penalty, for
the reasons set forth in part IV of this opinion, that was not the correct
legal test to apply to the noncompete provision at issue in the present case,
which cannot properly be considered either a liquidated damages clause or
an unenforceable penalty.
6
The court stated: ‘‘Although it is not necessary to the court’s final determi-
nation in this case, when evaluating [the plaintiff’s] credibility, the court
also takes into consideration [his] calculation of the value of his partnership
interest in the divorce case. The court finds it highly suspect that [he] would
value his partnership interest in the dissolution of marriage action in 2013
or 2014 as $354,000, and then attempt to value it at $1,300,000 in this case
less than a year later.’’
7
The noncompete provision is contained in Section III F 3 of the partner-
ship agreement. It provides in relevant part: ‘‘If during the (5) five year period
after any retirement/withdrawal/termination [of a partner] he provides any
accounting, auditing, tax or consulting services for a client that was repre-
sented 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% 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 36 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]. . . . Any [p]artner who
violates the noncompete provisions of this section is not entitled to any
[Deferred Income Amount] payments. . . .’’ (Emphasis omitted.)
8
The plaintiff also argues that Cirone’s ‘‘representation that the non-
compete [provision] would be waived induced substantial reliance by the
plaintiff that would result in severe detriment if the noncompete’s enforce-
ment is not estopped.’’ As noted previously, the trial court found that Cirone
made no such representation. Consequently, there was no representation
of waiver on which the plaintiff could rely. Accordingly, we reject the
plaintiff’s equitable estoppel argument.
9
Because we agree with the plaintiff that the trial court erred in failing
to evaluate the reasonableness of the noncompete provision, we do not
address his argument that the noncompete provision is an unenforceable
penalty.
10
See footnote 7 of this opinion for the relevant portion of the non-
compete provision.
11
Section III F 2 (b) of the partnership agreement provides that Deferred
Income Amount ‘‘will equal the Goodwill value for the most recently com-
pleted fiscal year computed by taking two (2) times the average of the
partner’s past three years’ total annual compensation (per IRS form K1).’’
(Emphasis omitted.)