When contracting with another party, it is essential to understand which state law will govern your contract in the event you find yourself in a contractual dispute. What might seem to be a reasonable provision, agreed upon by all parties, can be interpreted radically different depending upon the state law that will govern your contract. In legalese, choosing a...
Continue ReadingAn employee of a small manufacturing company (“Acme Company”) leaves and starts his own competing company (“Best Company”). Acme Company sues the employee for doing so—because the employee signed a noncompete agreement stating that, if he left Acme Company, he would not start a competing business. In the lawsuit, the employee argues, “The existence of my new company, Best...
Continue ReadingOnce again, a Texas appellate court sides with a company suing to enforce a noncompete agreement. This time, the employer sued a former employee for violating a covenant prohibiting the employee for competing for three years following the termination of his employment. Significantly, the noncompete covenant contained no geographic restriction. It did not, for example, prohibit the employee from...
Continue ReadingOn the street, there are many misconceptions about noncompete agreements in Texas. One myth is that, for a noncompete to be enforceable, the employer must have given the employee a cash payment, or a promotion, or some other monetary benefit. But this is not the law in Texas. Usually, what the employer provides to the employee as consideration for...
Continue ReadingAre noncompete agreements enforceable in Texas? You bet they are—more than ever. You know it’s bad news for the employee who is being sued when a court opinion starts with: “Texas law presumes a party has read and knows the terms of the contract that he has signed.” Ever since the Marsh USA decision, Texas courts have increasingly had...
Continue ReadingSeveral Texas courts have held that a victorious employer in a noncompete case cannot recover its attorneys’ fees against the losing employee. This is based upon the fact that the Texas noncompete statute does not explicitly authorize an award of attorneys’ fees to a winning employer. However, a recent case out of the Houston Court of Appeals shows that...
Continue ReadingWhile an employer may draft an enforceable non-compete covenant, it does not automatically follow that courts will enforce it with injunctive relief. Such was the case in Welsco, Inc. v. Brace, 2012 WL 4087224 (E.D. Ark. 2012). There, although the employment agreement was considered reasonable in both scope and duration, the...
Continue ReadingA recent decision from the Sixth Circuit upholding a district court’s preliminary injunction in litigation involving a non-compete clause demonstrates why an employee should sometimes be wary of legal advice from a new employer. In Firstenergy Solutions Corp. v. Flerick, 2013 WL 1500452 (6th Cir. 2013), Paul Flerick (“Flerick”) was employed as a salesman in the electric energy and...
Continue ReadingA preliminary injunction granted by the United States District Court for the Southern District of New York enforcing restrictive covenants against a former executive illustrates how narrowly tailored employment agreements are effective because of the willingness of courts to find them reasonable. In DeWitt Stern Group, Inc. v. Eisenberg, 2013 WL 2420835 (S.D.N.Y...
Continue ReadingAn opinion by the Dallas Court of Appeals shows how the courts apply the Texas Noncompete statute to covenants involving physicians. In the opinion, a surgery center was registered as a limited partnership. The general partner was a corporation, and the limited partners were physicians. The partnership agreement prohibited the limited partners from owning an interest in a competing...
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