It has long been believed by some Texas lawyers that attorneys’ fees are not recoverable under a claim for breach of a noncompete agreement. This assumption has been based upon the language of the Texas noncompete statute, which states that the remedies provided by the statute “are exclusive and preempt any other criteria for enforceability of the covenant not to compete or procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise.” At least two Texas appellate courts have held that this language precludes an award of attorneys’ fees for violation of the noncompete agreement.
But what if the noncompete agreement itself states that the prevailing party in any litigation concerning the agreement shall recover its fees? In that case, would a recovery of attorneys’ fees be allowed?
In 2009, the Texas Supreme Court issued an opinion stating that parties to a contract may agree that the prevailing party in a breach of contract suit shall recover its attorneys’ fees from the other party. Speaking about Section 38.001 of the Texas Civil Practice and Remedies Code, which provides that the prevailing party in a breach of contract case may recover its attorneys’ fees, the supreme court noted, “Parties you are free to contract for a fee-recovery standard either looser or stricter than Chapter 38 . . . “
In the case before the Texas Supreme Court, the issue was what constituted a “prevailing party.” The court held that parties are free to define what that term means, and they are allowed to give the term a meaning different from what the term means under the statute.
If parties are free to agree on a meaning of “prevailing party” different from the meaning given to it by Section 38.001, can they agree that the prevailing party in a lawsuit for breach of a noncompete contract may recover its attorneys’ fees? This question has not been decided by the Texas Supreme Court. However, based upon the supreme court’s 2009 ruling, it seems possible that these could be recoverable in the appropriate case.