Texas’ Pro-Enforcement Trend Continues
The Marsh USA case was perhaps the most important non-compete case coming out of the Texas Supreme Court since the Light case in 1994. And that’s saying a lot, given the Sheshunoff (2006) and Mann Frankfort (2009) opinions which made non-competes more enforceable in Texas.
After Marsh USA, Texas restrictive covenant attorneys will have to monitor decisions coming from the Texas Court of Appeals to see whether the pro-enforcement trend continues. A recent case from the Waco Court of Appeals suggests that Texas courts will continue to look with favor upon covenants not to compete.
In the case out of Waco, the court upheld a customer solicitation provision prohibiting the employee from “directly or indirectly interfer[ing] with, or endeavor[ing] to entice away from the Company any clients or account with whom the Employee had direct contact at any time during his or her employment at Company, or for or with any other person, firm, corporation, partnership, joint venture, association, or other entity whatsoever, which is or intends to be engaged in providing or manufacturing pet supplies and related products manufactured and distributed by Company.” In upholding this provision, the court noted that, “Courts have upheld similar provisions prohibiting a former employee from soliciting the employer’s customers or disclosing the employer’s confidential information.”
The court also addressed the employee’s contention that the noncompete agreement contained no geographic limitation. The court noted the Texas rule that “limiting the applicability of the covenant to particular client bases is an acceptable substitute for a geographic limitation in a noncompete agreement.”
Finally, the court held that a five-year restraint was not unreasonable. The court noted that Texas courts have held that restraints of two to five years can be reasonable.
Yet again, a Texas court has come down squarely in favor of enforcing covenants not to compete. This appears to be the first reported case handed down since the Marsh USA decision. Texas courts seem to be accepting that we live in a legal environment that is much friendlier to non-competes than the one in which we lived just a few years ago. Employees who are bound by non-compete agreements in Texas must be wary of this trend.