Texas courts are increasingly encountering efforts to challenge restrictive covenant agreements on free speech grounds, where the restricted activity includes business-related communications. A recent Texas appellate court decision indicates that this strategy has its limits.
Articles Discussing Restrictive Covenants In Texas.
Proof of damages in restrictive covenant matters can be complicated. In Rhymes v. Filter Resources, Inc., the Ninth Court of Appeals in Beaumont reminded parties that revenue and sales are not the same as lost profits, and expenses must be considered when developing a damage model.
The Texas Supreme Court ruled today that a party accused of stealing trade secrets does not have an absolute right to be present in the courtroom for the entirety of a preliminary injunction hearing when the trade secrets at issue are discussed. In December 2014, MI-SWACO, a subsidiary of oil and gas services company Schlumberger sought a writ of mandamus after a trial court allowed the party alleged to have received or benefitted from misappropriated trade secrets to be in the courtroom during evidentiary proceedings discussing the trade secrets at issue.
In a detailed, 26-page published decision in the matter of Cardoni v Prosperity Bank, No. 14-20682 (5th Cir. Oct. 29, 2015) the Fifth Circuit Court of Appeals took a deep look at choice of law provisions in restrictive covenants. The Appellate Court started out by noting that in addition to their well-known disagreements over boundaries and football, Texas and Oklahoma do not see eye to eye on the enforceability of non-compete agreements. Texas generally allows them, Oklahoma does not.
A U.S. District Judge in the Northern District of Texas has issued a preliminary injunction to enforce a non-compete agreement in Brink’s, Inc. v. Patrick, Case No. 3:14-cv-775-B (N.D. Tex., 6/26/14). The opinion adheres to well-established Texas law principles regarding the reasonableness of the limitations contained in non-compete agreements.
Texas has joined 47 other states and the District of Columbia in adopting the Uniform Trade Secrets Act. The new law, Texas Senate Bill 953, which will go into effect on September 1, 2014, provides a number of protections for trade secrets in Texas. New Jersey most recently enacted a law to protect trade secrets in 2012. (See New Jersey Adopts Trade Secret Law.) Now, only Massachusetts and New York have yet to pass some form of the Uniform Trade Secret Act, with Massachusetts providing statutory protection in a different form and New York recognizing common law protection of trade secrets.
Since being approved in 1979, the Uniform Trade Secrets Act has been adopted, in some form or fashion, by 47 states. At least one Texas lawmaker hopes to make Texas the 48th to do so. With S.B. 953, a Dallas lawmaker seeks to codify existing Texas common law relating to misappropriation of trade secrets and expand available remedies to a “claimant” seeking to stop and remedy a misappropriation. If enacted, the Texas Uniform Trade Secrets Act would go into effect on September 1, 2013.
The Texas Supreme Court has determined that, under the Texas Covenants Not to Compete Act, a covenant not to compete signed by a current employee in consideration for stock options is not unenforceable as a matter of law. The Court found the consideration is reasonably related to the companyâ€™s interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection.