Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding

289 S.W.3d 844, 52 Tex. Sup. Ct. J. 616, 28 I.E.R. Cas. (BNA) 1847, 2009 Tex. LEXIS 124, 2009 WL 1028051
CourtTexas Supreme Court
DecidedApril 17, 2009
Docket07-0490
StatusPublished
Cited by1,853 cases

This text of 289 S.W.3d 844 (Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 52 Tex. Sup. Ct. J. 616, 28 I.E.R. Cas. (BNA) 1847, 2009 Tex. LEXIS 124, 2009 WL 1028051 (Tex. 2009).

Opinions

Justice JOHNSON

delivered the opinion of the Court.

In this case we determine whether a eovenant not to compete in an at-will employment agreement is enforceable when the employee expressly promises not to disclose confidential information, but the employer makes no express return promise to provide confidential information. We hold that if the nature of the employment for which the employee is hired will reasonably require the employer to provide confidential information to the employee for the employee to accomplish [846]*846the contemplated job duties, then the employer impliedly promises to provide confidential information and the covenant is enforceable so long as the other requirements of the Covenant Not to Compete Act are satisfied.

I. Background

Mann Frankfort Stein & Lipp Advisors, Inc., MFSL GP, LLC., and MFSL Employee Investments, Ltd. (collectively "Mann Frankfort") is an accounting and consulting firm. It hired Brendan Fielding, a certified public accountant, on January 6, 1992. Fielding worked as a staff accountant in Mann Frankfort's Tax Department. He resigned in 1995 but was rehired later that year as a senior manager in the Tax Department. As a condition of Fielding's re-employment in 1995, Mann Frankfort required him to sign one of its standard at-will employment agreements. The agreement contained the following "client purchase provision":

10. If at any time within one (1) year after the termination or expiration hereof, Employee directly or indirectly performs accounting services for remuneration for any party who is a client of Employer during the term of this Agreement, Employee shall immediately purchase from Employer and Employer shall sell to employee that portion of Employer's business associated with each such client.

The agreement listed and defined the types of "business" Fielding would have to purchase from Mann Frankfort and set the purchase price. By executing the agreement, Fielding also promised he would "not disclose or use at any time ... any secret or confidential information or knowledge obtained by [Fielding] while employed...." In the course of his employment, Fielding also signed a limited partnership agreement that included a similar client purchase provision.

On January 19, 2004, Fielding again resigned from Mann Frankfort. Soon after he resigned, Fielding opened an accounting firm with David Hardy. Fielding1 then filed a declaratory judgment action seeking to have the client purchase provisions in his employment and limited partnership agreements declared unenforceable pursuant to Texas Business and Commerce Code section 15.50(a), which states in part:

[A] covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.

Mann Frankfort answered and filed a counterclaim, asserting, among other matters, a breach of contract claim. Fielding filed a motion for partial summary judgment on the grounds that the client purchase provisions in his employment and limited partnership agreements were unenforceable covenants not to compete. Mann Frankfort filed a motion for partial summary judgment on the grounds that Fielding had breached the agreements, the client purchase provisions were not restrictive covenants; and even if they were, the provisions were nevertheless enforceable. The trial court granted Fielding's motion and denied that of Mann Frankfort.

After prevailing in the declaratory judgment action, Fielding sought attor[847]*847ney's fees under both the Uniform Declaratory Judgments Act (UDJA), see Tax. Crv. Prac. & Rem.Cop® § 37.009, and under his employment agreement. His employment agreement provided that the "prevailing party" in a suit between Mann Frankfort and Fielding was entitled to attorney's fees. The trial court refused to award Fielding attorney's fees under the UDJA. Fielding and Mann Frankfort filed competing motions for partial summary judgment on Fielding's entitlement to attorney's fees under his employment agreement. The trial court granted Mann Frankfort's motion and denied Fielding's. The court determined that Fielding's claim for attorney's fees under his employment agreement was preempted by Business and Commerce Code section 15.52, which states:

The criteria for enforceability of a covenant not to compete provided by Section 15.50 of this code and the procedures and remedies in an action to enforce a covenant not to compete provided by Section 15.51 of this code are exclusive and preempt any other criteria for enforceability of a covenant not to compete or procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise.

Fielding appealed the trial court's denial of his motion for attorney's fees. 263 S.W.3d 232, 238-39. Mann Frankfort cross-appealed, arguing that the client purchase provisions were enforceable. Id. at 239. The court of appeals held the client purchase provisions were unenforceable covenants not to compete. Id. at 245-50. The appeals court held that the client purchase agreement was not ancillary to or part of an "otherwise enforceable agreement" as required by the Covenant Not to Compete Act (the Act). Id. at 247; Tux. Bus. & ComCopm § 15.50(a). The court held that Mann Frankfort failed to provide any consideration because it made no promise to give Fielding access to confidential information. 263 S.W.3d at 247 (citing Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex.2006), and Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642 (Tex.1994)). The court of appeals reasoned that because Fielding never acknowledged that he had received or would receive confidential information and the employment agreement contained no representations that Fielding was to receive any consideration for agreeing to the client purchase or non-disclosure provisions, there was no implied promise on the part of Mann Frankfort to disclose confidential information. Id.

As to Fielding's entitlement to attorney's fees, the court of appeals determined that the trial court did not abuse its discretion in denying attorney's fees under the UDJA and did not reach the issue of whether the Act preempts an award of attorney's fees under the UDJA. Id. at 255 n. 8. The court did, however, hold that Fielding was entitled to attorney's fees under his employment agreement. Id. at 259. It held (1) the Act did not preempt Fielding's claim because the Act's preemption provision limits only actions to enforce covenants not to compete, not actions seeking to prevent enforcement, and (2) the unenforceable client purchase provision was severable from the remainder of the agreement. Id. at 256, 259; see also Tex. Bus. & Com.Code § 15.52.

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Bluebook (online)
289 S.W.3d 844, 52 Tex. Sup. Ct. J. 616, 28 I.E.R. Cas. (BNA) 1847, 2009 Tex. LEXIS 124, 2009 WL 1028051, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mann-frankfort-stein-lipp-advisors-inc-v-fielding-tex-2009.