In a recent Texas case involving a restrictive covenant, the plaintiff contended that the duration of the non-compete covenant should be judicially extended beyond the agreement’s normal expiration date. In that case, the seller of a dance studio entered into an agreement in which she promised not to compete with the buyer. As is true in most states, non-compete covenants contained...
Continue ReadingWhat happens if an employer seeking to enforce a non-compete agreement is itself in breach of the agreement. Does the employer’s previous breach adversely affect its ability to enforce the non-compete? Maybe. It’s "hornbook" law in Texas that one party to a contract is precluded from enforcing a contract if that party itself is in “material” breach. In DeSantis v....
Continue ReadingNot infrequently, whenever an employer hires a competitor’s ex-employee, the competitor sues not only its ex-employee (for an alleged non-compete violation, breach of fiduciary duty, misappropriation of trade secrets, tortious interference, etc.), but also the new employer. The plaintiff contends, for example, that just as its ex-employee is liable for using and disclosing its trade secrets, the new employer...
Continue ReadingTexas courts routinely hold that at-will employment is "illusory" consideration. Because the employer is free to terminate the employee at any time, the courts reason, giving an at-will job to someone is, legally speaking, meaningless. Thus, non-compete agreements in Texas based upon that consideration are unenforceable. Not all states agree. While researching a noncompete matter in Illinois the other...
Continue ReadingIn July 2001, Sysco, a distributor of food service products, issued a Request for Proposal (“RFP”). Among the companies that received the RFP were Mark III and BI. Mark III and BI had a business relationship that involved them sharing information and customers. Unbeknownst to Sysco, their relationship was formalized in a written contract. Mark III and BI submitted a...
Continue ReadingTexas courts have long held that Texas law should determine whether non-compete agreements affecting Texas residents are enforceable. As a result, Texas courts generally will not enforce out-of-state choice of law provisions. However, as a recent Texas Supreme Court case illustrates, contractual forum selection provisions can alter that result. In Re AutoNation, Inc. involved a suit filed in Broward...
Continue ReadingNon-compete agreements routinely provide for the employer to get injunctive relief in the event the employee engages in post-employment competition. In a recent case, the agreement in question subjected the employee to potentially harsher penalties. The non-compete in question contained the following provisions: 14. Restrictive Covenant. In consideration of the benefits being provided to the Employee pursuant to this Agreement as...
Continue ReadingIn a recent case in Houston, the First District Court of Appeals upheld a trial court’s failure to reform an overly broad covenant not to compete. The covenant was overly broad in three respects: (a) there was no geographical limitation; (b) the covenant prohibited the employee from contacting all of his former employer’s customers, not merely the customers with whom the...
Continue ReadingInteresting piece on increasing pervasiveness of non-compete agreements throughout the United States: http://minnesota.publicradio.org/display/web/2007/04/24/noncompete/ www.mylawteam.com
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