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...
Continue ReadingThe Houston Court of Appeals recently decided a case in which a former employee lost his company stock because he competed with his former employer. In the case, the employee had been awarded several thousand shares of restricted stock. The stock award document stated that the company could recover the stock if the employee engaged in "detrimental activity," which...
Continue ReadingFrequently in cases involving noncompete agreements, the issue arises as to whether an overly broad covenant not to compete will be held to be completely unenforceable, or whether it will be modified to make it enforceable. In some states, if a noncompetition agreement is overly broad, the entire agreement will be unenforceable. In other states, in response to an...
Continue ReadingIn his excellent concurrence in the Marsh USA case, Texas Supreme Court Justice Don Willett observed something that practitioners and trial court judges often forget or gloss over, namely, the adverse effect that unfair noncompete agreements can have on society at large. Justice Willett noted: “Restrictive covenants are not costless, and even a mutually acceptable noncompete can impose...
Continue ReadingJustice Don Willett’s concurrence in the Marsh USA contains a lot of economic theory and literary allusions that one typically does not see in a court opinion. For example, Justice Willett has this advice for trial court judges who handle disputes involving restrictive covenants in Texas: “Restrictions on employee mobility that exist only to squelch competition are per se...
Continue ReadingI re-read (again) the Marsh USA case this morning, including the concurring and dissenting opinions. The concurring opinion by Justice Willett is one of the most articulate and thoughtful opinions I have read in a long time. He tries to strike a balance between the pro-enforcement majority opinion and the dissenting opinion which fears that the majority has gone...
Continue ReadingTexas cases dealing with the enforceability of noncompete agreements have long held that “industry-wide” restrictions are overly broad. In a recent case from the Waco Court of Appeals, the court applied that rule to a concrete situation. The covenant not to compete applied to the “pet supply manufacturing and distribution industry.” The employee contended that this restriction was so...
Continue ReadingThe 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...
Continue ReadingOften in litigation involving noncompete agreeents, an employee bound by a noncompete agreement will contend that the scope of the restrictions contained in the agreement are overly broad. The employee may, for example, argue that an agreement prohibiting customer solicitation is too broad. Or, an employee may argue that a covenant not to compete is too restrictive; e.g., the...
Continue ReadingThe Marsh USA decision, which was handed down by the Texas Supreme Court earlier this month, sent shock waves through the community of lawyers who handle matters involving noncompete agreements. The decision creates danger for employees bound by noncompete agreements here. Hopefully, the word about this and other pro-enforcement decisions will get out, so that laypeople can stop referring...
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