Noncompete Agreements in Texas: In Non-Compete Cases, Suing Only Individual Defendant Can Be Risky Strategy
Company X’s employee (who is bound by a non-compete agreement) resigns and begins working for Company Y (a competitor of Company X). Company X sues its former employee for violating his non-compete. Months later, they reach a settlement, and a final judgment is entered.
Company X can then sue Company Y for tortiously interfering with the non-compete agreement between Company X and its former employee, right? Maybe not.
In KForce, Inc. v. Surrex Solutions Corp., 436 F.3d 981 (8th Cir. 2006), the federal Eighth Circuit Court of Appeals, applying Missouri law, held that filing a second suit (against the new employer) would result in the plaintiff being compensated twice for the same injury. Thus, the second suit was barred.
Time will tell whether Texas courts adopt the holding in KForce. However, just as in Missouri, it is the law in Texas that an injured party cannot be compensated twice for the same injury. Thus, it’s possible that the KForce rationale would apply here.
Lesson: Be careful about settling with your former employee before you add his new employer as a defendant (unless you have no intention of ever doing so). If you settle with the former employee, you may not be able to pursue the new employer. The safest course, if you are inclined to seek relief (including injunctive relief) from both parties, is to name the ex-employee and his new employer as defendants from the outset.