Bertotti v. CE SHEPHERED CO., INC.

752 S.W.2d 648, 1988 Tex. App. LEXIS 1207, 1988 WL 52171
CourtCourt of Appeals of Texas
DecidedMay 26, 1988
DocketC14-87-000057-CV
StatusPublished
Cited by35 cases

This text of 752 S.W.2d 648 (Bertotti v. CE SHEPHERED CO., INC.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bertotti v. CE SHEPHERED CO., INC., 752 S.W.2d 648, 1988 Tex. App. LEXIS 1207, 1988 WL 52171 (Tex. Ct. App. 1988).

Opinions

[650]*650OPINION

SEARS, Justice.

This is an appeal from a temporary injunction ordering appellants not to compete with appellee in accordance with an employment agreement signed by appellant Bertotti. We find the injunction to be over-broad in its prohibition on sales of goods or materials of any kind to customers of C.E. Shepherd Co., Inc. We modify the injunction and affirm the injunction as modified.

Appellee C.E. Shepherd Co., Inc. (Shepherd) manufactures and sells wire and plastic products that are used in the poultry and commercial fishing industries and in cooling towers. These products are sold in all fifty states and in several foreign countries. In July 1984 Shepherd hired John 0. Bertotti as sales manager. Bertotti had a graduate degree in mechanical engineering and prior experience with chemical companies. He did not have any prior experience with the products marketed by Shepherd. As a condition of employment, Bertotti signed an employment agreement acknowledging the confidential nature of the company’s business and agreeing not to disclose trade secrets or confidential information. He also agreed not to compete with the company for a period of two years following termination of his employment.

In late 1985 Bertotti and Jerral Downs, a co-employee, explored the possibility of going into business for themselves. They first considered buying an existing business but later considered starting a new company to compete with Shepherd in the manufacture and sale of “film pack.” Film pack is a product used in cooling towers to provide a heat exchange medium. Downs decided that forming the new company would involve a breach of the employment contract with Shepherd and he chose not to pursue the venture. Downs told Bertotti he was not interested and he urged Bertotti to focus instead on the opportunities available at Shepherd.

In 1986 Charles E. Shepherd, president of C.E. Shepherd Co., Inc., became dissatisfied with Bertotti’s work record. He felt that Bertotti did not handle people well and had not initiated new markets as requested. Mr. Shepherd testified that he later became suspicious that Bertotti was setting up a competing company and he discussed his concerns and suspicions with Bertotti on May 8 or 9, 1986. Bertotti denied that he was starting a competing business and assured Mr. Shepherd that he wanted to remain with the company. Later that same day, Mr. Shepherd learned that Bertotti had been seen early in the morning copying company information and placing it in two briefcases, which he then put in his car. Mr. Shepherd called Bertotti back into his office, confronted him with this new information and asked to see the contents of the briefcases. Bertotti refused and Mr. Shepherd immediately terminated his employment.

The following month, Bertotti and several other investors incorporated Houston Engineered Products Corporation (HEPCO) for the primary purpose of manufacturing and marketing film pack. When the funding for HEPCO was delayed, Bertotti and the same investors formed Pact Wire, Inc. to be the exclusive sales and engineering representative for a line of wire products sold by Riverdale Mills, a competitor of Shepherd.

Shepherd then sued for breach of his employment agreement and sought injunc-tive relief from the use of its trade secrets. The trial court granted a temporary injunction, which reads in part:

ORDERED that JOHN 0. BERTOTTI, PACT WIRE, INC. and HOUSTON ENGINEERED PRODUCTS CORPORATION, Defendants, be commanded forthwith to desist and refrain from directly or indirectly, in any manner, selling or offering to sell goods or materials of any kind to customers of C.E. Shepherd Co., Inc. in any state of the United States or any foreign country in which C.E. Shepherd Co., Inc. does business until this Order can be replaced by a judgment entered in this cause.

The court then set the case for trial on April 26, 1987.

Prior to trial, Bertotti filed for bankruptcy and all three appellants filed motions to [651]*651stay the proceedings. The trial court granted the motions and removed the case from the trial docket. This appeal was taken from the granting of the temporary injunction.

The purpose of a temporary injunction is to preserve the status quo pending trial on the merits. Matlock v. Data Processing Security, Inc., 618 S.W.2d 327, 328 (Tex.1981). The applicant need only show a probable right and probable injury and is not required to establish that he will prevail in the final litigation. State v. Southwestern Bell Telephone Co., 526 S.W.2d 526, 528 (Tex.1975). Also, the temporary injunction hearing is not a hearing on the merits. Therefore, the only question before this court on appeal is whether the trial court abused its discretion in issuing the injunction. Electronic Data Systems Corp. v. Powell, 524 S.W.2d 393, 395 (Tex.Civ.App.—Dallas 1975, writ ref’d n.r. e.). The standard of review is to determine if the trial court misapplied the law to established facts, or if the evidence does not reasonably support the conclusion that the applicant has a probable right of recovery. State v. Southwestern Bell Telephone Co., 526 S.W.2d at 528. The appellate court must then draw all legitimate inferences from the evidence in the light most favorable to the trial court’s judgment. David v. Bache Halsey Stuart Shields, Inc., 630 S.W.2d 754, 757 (Tex.App.—Houston [1st Dist.] 1982, no writ). With these standards in mind, we review appellants’ points of error.

In point of error one, appellants argue the trial court erred in ordering the temporary injunction because the covenant not to compete is a restraint on trade, is unnecessary to protect the business and goodwill of the company and is not supported by the evidence. In point of error two, appellants contend that the covenant is unreasonable.

An agreement on the part of an employee not to compete with his employer after termination of employment is in restraint of trade and will not be enforced unless its terms are reasonable. A covenant is unreasonable if the restraint is greater than is required for the protection of the person for whose benefit it is imposed or imposes undue hardship upon the person restricted. Weatherford Oil Tool Co. v. Campbell, 161 Tex. 310, 340 S.W.2d 950, 951 (1960); see also Restatement (Second) of Contracts § 188 (1981).

To be found reasonable, the covenant must: (1) be necessary for the protection of the promisee; (2) must not be oppressive to the promisor; (3) must not be injurious to the public; and (4) should be enforced only if the promisee gives consideration for something of value. Hill v. Mobile Auto Trim, Inc., 725 S.W.2d 168, 170-71 (Tex.1987).

In deciding whether a covenant is necessary for the protection of the prom-isee, we must first determine if the prom-isee has a legitimate interest in protecting its business goodwill or trade secrets. Hill, 725 S.W.2d at 170-71.

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752 S.W.2d 648, 1988 Tex. App. LEXIS 1207, 1988 WL 52171, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bertotti-v-ce-shephered-co-inc-texapp-1988.