STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
CA 06-1003
A & B BOLT & SUPPLY, INC.
VERSUS
DAVID S. DAWES, ET AL.
**********
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. 20033999 HONORABLE KRISTIAN DENNIS EARLES, DISTRICT JUDGE
JOHN D. SAUNDERS JUDGE
Court composed of Ulysses Gene Thibodeaux, Chief Judge, John D. Saunders, and Billy Howard Ezell, Judges.
REVERSED.
H. Mark Adams Jennifer Lynn Anderson Alia S. Zohur Jones, Walker 201 St. Charles Ave., 47th Fl. New Orleans, LA 70170 (504) 582-8000 Counsel for Defendants/Appellees: David S. Dawes Whitco Supply, L.L.C. Alan K. Breaud Timothy Wayne Basden Breaud & Lemoine P. O. Drawer 3448 Lafayette, LA 70502 (337) 266-2200 Counsel for Plaintiff/Appellant: A & B Bolt & Supply, Inc.
Jeffrey M. Baudier Attorney at Law 500 Dover Blvd, Ste 120 Lafayette, LA 70503 (337) 406-5610 Counsel for Defendants/Appellees: David S. Dawes Whitco Supply, L.L.C. SAUNDERS, Judge.
Employer, A & B Bolt & Supply, Inc. (A&B), filed a petition for temporary
restraining order (TRO), preliminary and permanent injunction, and damages against
former employee, David S. Dawes (Dawes), and his business, Whitco Supply, L.L.C.
(Whitco), for allegedly violating a covenant not to compete, which was granted. After
the TRO was subsequently dissolved, employee and his business filed a motion for
judgment on the pleadings.
The trial court granted the motion and dismissed the action with prejudice
basing its ruling on reasoning that the covenant not to compete was never effected
because the agreement between the parties expired by its own terms before employee
resigned.
The Third Circuit reversed this ruling by reasoning that the trial court did not
consider the effect of other provisions of the agreement indicating that the parties
intended the covenant not to compete to be effective regardless of whether employee's
employment was terminated under the terms of the agreement or whether the
agreement simply expired under its own terms.
On remand the employee filed a motion for summary judgment. The motion
was granted by the trial court and employer’s case was again dismissed with
prejudice. The trial court reasoned that the covenant not to compete had expired
because the agreement between the parties expired by its own terms before employee
Employer appealed. We reverse.
FACTS AND PROCEDURAL HISTORY
David S. Dawes and other family members were once the owners of A&B.
After successfully developing the business, the Dawes family sold their interest in A&B to Industrial Holdings, Inc., which sold it to T-3 Energy Services, Inc. (T-3),
the present owner. Dawes signed an Employment Agreement (Agreement) with T-3
that became effective May 7, 2001. The Agreement had an initial term of two years
and provided for two renewable terms of one year each. The Agreement also had a
Covenant Not to Compete that prevented Dawes from competing with A&B for one
year after his cessation of employment with A&B. The Agreement expired on May
7, 2003, but Dawes remained with T-3 as an “at will” employee until July 1, 2003,
when he resigned. At that time, he formed his own company, Whitco, which conducts
the same type of business that A&B conducts.
On July 23, 2003, A&B filed a Petition for Temporary Restraining Order,
Preliminary and Permanent Injunction and Damages, which was granted by the trial
court. The TRO was dissolved after a hearing on a motion filed by Dawes and
Whitco. A&B filed a writ application with this court seeking to reverse the action of
the trial court. The application was denied in an unpublished opinion. See A&B Bolt
& Supply, Inc. v. Dawes, 03-1073 (La.App. 3 Cir. 8/15/03). A&B's writ application
to the supreme court was also denied. See A&B Bolt & Supply, Inc. v. Dawes, 03-2411
(La. 9/5/03), 852 So.2d 1034.
Dawes and Whitco then filed a motion for judgment on the pleadings or,
alternatively, to clarify and/or correct judgment. After a hearing, the trial court
granted the motion and dismissed the action with prejudice.
A&B appealed the trial court's grant of a motion for judgment on the pleadings
and the trial court was reversed. See A&B Bolt & Supply, Inc. v. Dawes, 04-0699
(La.App. 3 Cir. 11/10/04), 888 So.2d 1023, writ denied, 05-265 (La. 4/1/05), 897 So.
2d 609.
2 On remand, Dawes and Whitco filed a motion for summary judgment. The trial
court granted this motion reasoning that the covenant not to compete had expired
because the agreement between the parties expired by its own terms before Dawes
resigned. A&B appealed this ruling. We reverse.
ASSIGNMENT OF ERROR:
1. Did the trial court err in granting summary judgment in favor of Dawes and Whitco on the basis that all obligations under the Agreement, including the covenant not to compete, ended at the expiration of the two year term of employment?
ASSIGNMENT OF ERROR #1:
A&B contends that the trial court erred in granting summary judgment
dismissing its claims against the defendants on the basis that all obligations under the
agreement, including the covenant not to compete, ended at the expiration of the two
year term of employment. We agree.
Appellate courts conduct a de novo review of rulings on motions for summary
judgment. “It is well established that a summary judgment shall be rendered if the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to material fact, and
that the mover is entitled to judgment as a matter of law.” Alfred Palma, Inc., v.
Crane Servs. Inc., 03-0614, p.3 (La.App. 3 Cir. 11/5/03), 858 So.2d 772, 774 (quoting
Shelton v. 700/Associates, 01-0587, p.5 (La. 10/16/01), 798 So.2d 60, 65); La.Code
Civ.P. art. 966.
“If the words of a contact are clear, explicit, and lead to no absurd results, it
must be interpreted by reference to the ‘four corners’ of the document and no further
interpretation can occur in search of the parties’ intent.” Hebert v. Insurance Center,
3 Inc., 97-298, p.5 (La.App. 3 Cir. 1/7/98), 706 So.2d 1007, writ denied 98-353 (La.
3/27/98), 716 So.2d 888, La.Civ.Code art. 2046.
The Covenant Not to Compete is found in Section 3.3 of the Agreement and
is as follows: (emphasis supplied)
Employee hereby agrees that:
3.3.1 Business of Company. The business of the Company is to distribute fastener related products, pipes, valves, fittings and other supplies to companies in the oil and gas and industrial fabrication industries (the “Business”).
3.3.2 During the Term of Employment and for one (1) year following the termination or resignation of Employee’s employment under this Agreement (the “Non-Compete Period”), he will not in association with or as an officer principal, member, advisor, agent, partner, director, stockholder, employee or consultant of any corporation (or sub-unit, in the case of a diversified business) or other enterprise, entity or association that competes with the Business of the Employer in the Territory (as defined in Section 3.3.4 below), work on acquisition or development of any line of business, property or project in with the Employer is then involved or has worked with or evaluated in the last year; and (Emphasis added)
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STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
CA 06-1003
A & B BOLT & SUPPLY, INC.
VERSUS
DAVID S. DAWES, ET AL.
**********
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. 20033999 HONORABLE KRISTIAN DENNIS EARLES, DISTRICT JUDGE
JOHN D. SAUNDERS JUDGE
Court composed of Ulysses Gene Thibodeaux, Chief Judge, John D. Saunders, and Billy Howard Ezell, Judges.
REVERSED.
H. Mark Adams Jennifer Lynn Anderson Alia S. Zohur Jones, Walker 201 St. Charles Ave., 47th Fl. New Orleans, LA 70170 (504) 582-8000 Counsel for Defendants/Appellees: David S. Dawes Whitco Supply, L.L.C. Alan K. Breaud Timothy Wayne Basden Breaud & Lemoine P. O. Drawer 3448 Lafayette, LA 70502 (337) 266-2200 Counsel for Plaintiff/Appellant: A & B Bolt & Supply, Inc.
Jeffrey M. Baudier Attorney at Law 500 Dover Blvd, Ste 120 Lafayette, LA 70503 (337) 406-5610 Counsel for Defendants/Appellees: David S. Dawes Whitco Supply, L.L.C. SAUNDERS, Judge.
Employer, A & B Bolt & Supply, Inc. (A&B), filed a petition for temporary
restraining order (TRO), preliminary and permanent injunction, and damages against
former employee, David S. Dawes (Dawes), and his business, Whitco Supply, L.L.C.
(Whitco), for allegedly violating a covenant not to compete, which was granted. After
the TRO was subsequently dissolved, employee and his business filed a motion for
judgment on the pleadings.
The trial court granted the motion and dismissed the action with prejudice
basing its ruling on reasoning that the covenant not to compete was never effected
because the agreement between the parties expired by its own terms before employee
resigned.
The Third Circuit reversed this ruling by reasoning that the trial court did not
consider the effect of other provisions of the agreement indicating that the parties
intended the covenant not to compete to be effective regardless of whether employee's
employment was terminated under the terms of the agreement or whether the
agreement simply expired under its own terms.
On remand the employee filed a motion for summary judgment. The motion
was granted by the trial court and employer’s case was again dismissed with
prejudice. The trial court reasoned that the covenant not to compete had expired
because the agreement between the parties expired by its own terms before employee
Employer appealed. We reverse.
FACTS AND PROCEDURAL HISTORY
David S. Dawes and other family members were once the owners of A&B.
After successfully developing the business, the Dawes family sold their interest in A&B to Industrial Holdings, Inc., which sold it to T-3 Energy Services, Inc. (T-3),
the present owner. Dawes signed an Employment Agreement (Agreement) with T-3
that became effective May 7, 2001. The Agreement had an initial term of two years
and provided for two renewable terms of one year each. The Agreement also had a
Covenant Not to Compete that prevented Dawes from competing with A&B for one
year after his cessation of employment with A&B. The Agreement expired on May
7, 2003, but Dawes remained with T-3 as an “at will” employee until July 1, 2003,
when he resigned. At that time, he formed his own company, Whitco, which conducts
the same type of business that A&B conducts.
On July 23, 2003, A&B filed a Petition for Temporary Restraining Order,
Preliminary and Permanent Injunction and Damages, which was granted by the trial
court. The TRO was dissolved after a hearing on a motion filed by Dawes and
Whitco. A&B filed a writ application with this court seeking to reverse the action of
the trial court. The application was denied in an unpublished opinion. See A&B Bolt
& Supply, Inc. v. Dawes, 03-1073 (La.App. 3 Cir. 8/15/03). A&B's writ application
to the supreme court was also denied. See A&B Bolt & Supply, Inc. v. Dawes, 03-2411
(La. 9/5/03), 852 So.2d 1034.
Dawes and Whitco then filed a motion for judgment on the pleadings or,
alternatively, to clarify and/or correct judgment. After a hearing, the trial court
granted the motion and dismissed the action with prejudice.
A&B appealed the trial court's grant of a motion for judgment on the pleadings
and the trial court was reversed. See A&B Bolt & Supply, Inc. v. Dawes, 04-0699
(La.App. 3 Cir. 11/10/04), 888 So.2d 1023, writ denied, 05-265 (La. 4/1/05), 897 So.
2d 609.
2 On remand, Dawes and Whitco filed a motion for summary judgment. The trial
court granted this motion reasoning that the covenant not to compete had expired
because the agreement between the parties expired by its own terms before Dawes
resigned. A&B appealed this ruling. We reverse.
ASSIGNMENT OF ERROR:
1. Did the trial court err in granting summary judgment in favor of Dawes and Whitco on the basis that all obligations under the Agreement, including the covenant not to compete, ended at the expiration of the two year term of employment?
ASSIGNMENT OF ERROR #1:
A&B contends that the trial court erred in granting summary judgment
dismissing its claims against the defendants on the basis that all obligations under the
agreement, including the covenant not to compete, ended at the expiration of the two
year term of employment. We agree.
Appellate courts conduct a de novo review of rulings on motions for summary
judgment. “It is well established that a summary judgment shall be rendered if the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to material fact, and
that the mover is entitled to judgment as a matter of law.” Alfred Palma, Inc., v.
Crane Servs. Inc., 03-0614, p.3 (La.App. 3 Cir. 11/5/03), 858 So.2d 772, 774 (quoting
Shelton v. 700/Associates, 01-0587, p.5 (La. 10/16/01), 798 So.2d 60, 65); La.Code
Civ.P. art. 966.
“If the words of a contact are clear, explicit, and lead to no absurd results, it
must be interpreted by reference to the ‘four corners’ of the document and no further
interpretation can occur in search of the parties’ intent.” Hebert v. Insurance Center,
3 Inc., 97-298, p.5 (La.App. 3 Cir. 1/7/98), 706 So.2d 1007, writ denied 98-353 (La.
3/27/98), 716 So.2d 888, La.Civ.Code art. 2046.
The Covenant Not to Compete is found in Section 3.3 of the Agreement and
is as follows: (emphasis supplied)
Employee hereby agrees that:
3.3.1 Business of Company. The business of the Company is to distribute fastener related products, pipes, valves, fittings and other supplies to companies in the oil and gas and industrial fabrication industries (the “Business”).
3.3.2 During the Term of Employment and for one (1) year following the termination or resignation of Employee’s employment under this Agreement (the “Non-Compete Period”), he will not in association with or as an officer principal, member, advisor, agent, partner, director, stockholder, employee or consultant of any corporation (or sub-unit, in the case of a diversified business) or other enterprise, entity or association that competes with the Business of the Employer in the Territory (as defined in Section 3.3.4 below), work on acquisition or development of any line of business, property or project in with the Employer is then involved or has worked with or evaluated in the last year; and (Emphasis added)
3.3.3 During the Term of Employment and during the Non- Compete Period, he will not solicit or induce any person who is or was employed by the Employer at any time during such term or period (A) to interfere with the activities or Business of the Employer, or employ any such person in a business or enterprise which competes with the Business of the Employer in the Territory. In addition, during the Term of Employment and during the Non-Compete Period, he will not (C) request any present or future customer or supplier of the Employer to curtail or cancel its business with Employer in the Territory, or (D) unless otherwise required by law, disclose to any person, firm or corporation any details or organization or business affairs of the Employer, any names of past or present customers of the Employer or any other non-public information concerning the Employer.
The pertinent part of Section 9.2 of the agreement is as follows:
Any termination of Employee’s employment and any expiration of the Term of Employment under this Agreement shall not affect the continuing operation and effect of Section 3 hereof or this Section 9, which shall continue in full force and effect with respect to employer
4 and Employee and their respective heirs, executors, personal representatives, successors or permitted assigns.
The trial court found that when the term of the contract ended both parties were
free to do whatever they wished. The court reasoned that if A&B did not have to
continue honoring their part of the contract, then Dawes no longer had to honor any
part of the contact he signed. The trial court reached this conclusion even in light of
Section 9.2 above. The court made this conclusion because it reasoned that Section
9.2 would only have effect if the contract was still in effect. We disagree.
Section 3.3.2 provides that Dawes may not compete with A&B “During the
Term of Employment and for one (1) year following the termination or resignation
of Employee’s employment under this Agreement.” His employment with A&B
“under this Agreement” ended May 7, 2003, when the contract expired and Dawes
became an “at will” employee. Accordingly, under section 3.3.2, Dawes was not
allowed to compete until May 7, 2004, one year from the day that his employment
“under this Agreement” was concluded. The fact that Dawes continued to work as an
“at will” employee does not change the terms of the agreement he signed and
certainly does not relieve Dawes from his contractual obligation to refrain from
competing with A&B for a period of one year after his employment ended “under this
Agreement.”.
The trial court reasoned that Dawes’ July 1, 2003, resignation did not trigger
the non-compete obligation as the resignation was from Dawes’ status as an “at will”
employee. It is true that Dawes’ July resignation did not trigger the non-compete
obligation, but it is equally true that the non-compete obligation was triggered by the
expiration of the Agreement on May 7, 2003.
5 This court found in A&B Bolt and Supply, Inc, 888 So.2d at 1026 that “This
language [Section 9.2] indicates that the parties intended the Covenant Not to
Compete to be effective regardless of whether Dawes' employment was terminated
under the terms of the Agreement or whether the Agreement simply expired under its
own terms.” We see nothing in the record to change how this court has already ruled.
As such, the ruling of the trial court granting Dawes’ and Whitco’s motion for
summary judgment is reversed and this case is remanded for further proceedings not
inconsistent with this ruling.
CONCLUSION
The judgment of the trial court is reversed, and the case is remanded to the trial
court for further proceedings. The costs of this appeal are assessed to David S. Dawes
and Whitco Supply, L.L.C.