Noncompete Clause Unenforceable

Connecticut Superior Court, 2004; Century 21 Access America v. Garcia

July 1, 2005

A Connecticut court has ruled that a noncompete clause in a brokerage’s contract wasn’t enforceable because the salesperson’s move to another company didn’t unfairly harm the brokerage. The salesperson, Mayra Garcia, affiliated herself with a brokerage as an independent contractor. After five months, she moved to another brokerage less than 15 miles away. The first brokerage sued, arguing that Garcia had violated a noncompete clause in the affiliation contract.

Although the court agreed with the argument that the noncompete clause was enforceable even though Garcia was an independent contractor, it ruled that the facts in the case didn’t show that Garcia’s move to a competitor had harmed the company. First the court noted that Garcia had gained no information that would amount to trade secrets. Nor did she take away any unique skills that would benefit the competing brokerage. Finally, she had closed only one transaction during her time with the company.

Legal note: It’s important to note that the same noncompete clause in the company’s independent contractor agreement ruled unenforceable in this case was upheld by courts in two other cases involving the company. In one, Century 21 Access America v. McGregor-McLean (Conn. Superior Court, 2004), the court found the noncompete clause prohibited a salesperson, who’d been with the company for 11 months and had closed 14 transactions during that time, from working on any listings within 15 miles of the brokerage’s offices. The clause covered not only the salesperson’s office location but the trade area, said the court.

Bank site governed by real estate license law

New Hampshire Assoc. of REALTORS® v. Hildreth New Hampshire Superior Court, 2005

New Hampshire’s Superior Court has ruled that the state’s Real Estate Commission, not its Banking Department, has jurisdiction over a bank-operated Web site that allows sellers to post homes for sale for a fee. The dispute began when the New Hampshire Association of REALTORS® filed a complaint with the New Hampshire Real Estate Commission. The complaint alleged that, a division of East/West Mortgage Inc., was acting as an unlicensed real estate broker.

In response, East/West filed a petition with the Banking Department and received a ruling that the company was subject only to that department’s regulation. The association then filed a lawsuit seeking a judgment that the Banking Department didn’t have jurisdiction to determine whether a company had violated the state’s real estate license law.

The state’s attorney general, who had previously told the Real Estate Commission to proceed with its review of the complaint, agreed with the association. The Superior Court then found that the Real Estate Commission had the exclusive jurisdiction to consider violations of real estate license law. As a result, the commission will review the allegations.

Editor’s note: The NATIONAL ASSOCIATION OF REALTORS® contributed financial support to NHAR’s efforts in this suit.

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