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Rimkus Consulting Grp., Inc. v. Cammarata - 255 F.R.D. 417 (S.D. Tex. 2008)

Rule:

A nonsolicitation covenant in an employment contract is a restraint on trade and competition and must meet the criteria of Tex. Bus. & Com. Code Ann. § 15.50 to be enforceable. Nonsolicitation covenants will be enforceable if they are ancillary to or part of an otherwise enforceable agreement at the time the agreement and contain reasonable limitations as to time, geographical area, and scope of activity to be restrained that do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee. Tex. Bus. & Com. Code Ann. § 15.50.

Facts:

A former employer sought preliminary injunctive relief in Texas against a former employee and his new firm, to enforce noncompetition and nonsolicitation covenants in their previous employment agreement and to enjoin the use or disclosure of trade secrets and confidential information. The employee argued a Louisiana state court previously found that Louisiana law applied to the agreement and that under Louisiana law, the covenants were invalid.

Issue:

Should the employer's request for a preliminary injunction be granted?

Answer:

No.

Conclusion:

The court held that the Louisiana ruling, that in Louisiana the contractual forum-selection (Texas), choice-of-law (Texas), and covenant provisions were unenforceable, was preclusive. The court did not resolve the issue of whether, under Full Faith and Credit, the Louisiana court's ruling that Louisiana law applies despite the choice of Texas law in the parties' Employment Agreement invalidates the choice-of-law, noncompetition, and nonsolicitation provisions in all states. Thus, whether or not the ruling was entitled to preclusive effect in Texas, injunctive relief was not proper. While the choice-of-law provision would be enforceable outside Louisiana, because the agreement covered many areas where the employee had not worked for the employer, under Texas law the noncompetition clause was geographically too broad under Tex. Bus. & Com. Code Ann. § 15.50. And, the delay in seeking an injunction weighed against any irreparable injury. Suit was not filed until a year after the employee left and the covenants' time periods expired while it was pending. An extension was not necessary since any secret information was outdated and could not provide an unfair advantage. The nonsolicitation covenant was unreasonable because it applied to all the employer's customers, and the employee had solicited few clients, and no other employees, outside Louisiana. There was no evidence defendants used any trade secrets or that the new firm's growth was due to such use instead of the growth of the industry.

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