Morse Wholesale Paper Company v. Bill Talley

• Court: Court of Appeals of Texas
• Decided: April 18, 2006
• Docket: 14-05-01180-CV
• Status: Published

Opinion

Affirmed and Memorandum Opinion filed April 18, 2006

Affirmed and Memorandum Opinion filed April 18, 2006.

In The

Fourteenth Court of Appeals

____________

NO. 14-05-01180-CV

MORSE WHOLESALE PAPER COMPANY, Appellant

V.

BILL TALLEY, Appellee

On Appeal from the 234th District Court

Harris County, Texas

Trial Court Cause No. 05-63442

M E M O R A N D U M   O P I N I O N

Appellant, Morse Wholesale Paper Company, appeals from the denial of its application for temporary injunction in a suit to enforce a non-competition covenant.  In two issues, Morse argues the trial court erred in (1) finding the non-competition agreement was not ancillary to an otherwise enforceable agreement, and (2) refusing to grant a temporary injunction in light of undisputed evidence establishing breaches of the covenant not to compete.  We affirm.

Background

Appellee, Bill Talley, is a janitorial supplies salesperson.  He spent most of his career selling cleaning supplies and paper goods for AmSan/Bogel Sales.  Early in 2005, Talley left AmSan to work for Morse Wholesale Paper Company (Morse), which also sells janitorial supplies.  On January 3, 2005, Talley became an at-will employee of Morse and signed a trade secret and non-competition agreement.  The agreement contains the following preamble:

Whereas, Employee desires to be employed by and has requested employment with the Company, to perform work at the Company=s workplace in Houston, Texas;

Whereas, as a condition of hiring Employee and in consideration for Employer=s provision of its confidential, proprietary and trade secret information concurrently with the execution of the Agreement and Employee=s continued access to such information during his employment, the Company requires Employee to enter into this Agreement and Employee is willing to do so;

Whereas, Employee understands that the Company would not hire Employee if Employee were not willing to enter into this Agreement; and

Whereas, each Party understands that the other Party regards the above representations as material and that the other Party is relying on these representations in entering into this Agreement.

The agreement also contains the following promise by the employee:

Confidential Information.  I acknowledge that I have current access to confidential, proprietary, and/or trade secret information (the AConfidential Information@) belonging to the Company and will continue to have access to such Confidential Information for as long as I am employed by the Company. 

Talley testified that after he signed the non-competition agreement, he was given that day=s inventory by Morse.  He was also given the use of a laptop computer with which he could obtain inventory and pricing information when he updated the computer at the office.  Douglas Morse, an owner of Morse Paper, testified that at the same time the non-competition agreement was signed, Morse provided Talley with training and confidential proprietary information.  Talley testified he received no training or proprietary information from Morse.  Approximately nine months later, Talley left Morse and returned to his former employer, AmSan.  Morse filed suit against Talley for breach of the non-competition agreement.

At the same time Morse filed its original petition, it obtained a temporary restraining order prohibiting Talley from working for AmSan.  On November 2, 2005, the trial court dissolved the temporary restraining order and denied Morse=s application for temporary injunction.  In its order, the trial court denied the injunction because the non-competition agreement was not ancillary to or part of an otherwise enforceable agreement at the time the agreement was made.

Temporary Injunction

In its first issue, Morse argues the trial court abused its discretion by not enjoining Talley from continuing to compete against Morse in violation of the agreement.  The purpose of a temporary injunction is to preserve the status quo of the litigation=s subject matter pending trial on the merits.  Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002).  A temporary injunction is an extraordinary remedy and does not issue as a matter of right.  Id.  To obtain a temporary injunction, the applicant must plead and prove three specific elements:  (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim.  Id. 

Standard of Review

The decision to grant or deny a temporary injunction lies in the sound discretion of the trial court, and the court=s ruling is subject to reversal only for a clear abuse of discretion.  Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993).  In reviewing an order granting or denying a temporary injunction, we draw all legitimate inferences from the evidence in a manner most favorable to the trial court=s judgment.  TMC Worldwide, L.P. v. Gray, 178 S.W.3d 29, 36 (Tex. App.CHouston [1st Dist.] 2005, no pet.).

Non-competition Agreement

Covenants not to compete are restraints of trade and are disfavored in law.  Travel Masters, Inc. v. Star Tours, Inc., 827 S.W.2d 830, 832 (Tex. 1991).  The Covenants Not to Compete Act governs the enforceability of the non-competition agreement.  Tex. Bus. & Com. Code Ann. ' 15.50B15.52.  The enforceability of a covenant not to compete is a question of law for the court.  Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 644 (Tex. 1994).  Section 15.50 provides in relevant part:

Notwithstanding Section 15.05 of this code, and subject to any applicable provision of Subsection (b), 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.  

Tex. Bus. & Com. Code Ann. ' 15.50(a).

In this case, we must first determine whether the parties entered into an otherwise enforceable agreement  An at-will employment relationship cannot form an otherwise enforceable agreement to which a covenant not to compete can append.  Light, 883 S.W.2d at 644B45.  A promise dependent on a period of continued employment would be illusory because it fails to bind the promisor who always retains the option of discontinuing employment in lieu of performance.  Id.  There must be a contemporaneous exchange of consideration between the parties at the time the otherwise enforceable agreement is executed for the promise not to be illusory.  Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991).  Under section 15.50 of the Business and Commerce Code, the time relevant to this determination is the moment the agreement is made.  CRC-Evans Pipeline Int=l v. Myers, 927 S.W.2d 259, 263 (Tex. App.CHouston [1st Dist.] 1996, no writ).  An Aotherwise enforceable agreement@ can emanate from at‑will employment, but only so long as the consideration for a promise is not dependent on a period of continued employment.  Id.  A promise dependent on a period of continued employment would be illusory because it fails to bind the promisor, who always retains the option of discontinuing employment in lieu of performance.  Id.

In this case, Talley testified that he was employed with Morse for nine months and, during that time, received no confidential or proprietary information.  He received no training from Morse.  Douglas Morse testified Morse began giving Talley proprietary information on the day the agreement was signed.  When faced with conflicting evidence, we must draw all reasonable inferences in favor of the trial court=s judgment.  Gray, 178 S.W.3d at 36 (abuse of discretion does not exist if the trial court heard conflicting evidence and evidence appears in the record that reasonably supports the trial court=s decision).  Viewing the record in the light most favorable to the judgment, we conclude there was no contemporaneous exchange of consideration.  Morse=s promise was illusory and cannot be the basis of an otherwise enforceable contract ancillary to the covenant.  See Wright v. Sport Supply Group, Inc., 137 S.W.3d 289, 297 (Tex. App.CBeaumont 2004, no pet.).  Appellant=s first issue is overruled.

Appellant=s second issue is dependent on a favorable answer to its first issue.  Because we have overruled appellant=s first issue, we need not address the second issue.

The judgment of the trial court is affirmed.

/s/      Paul C. Murphy

Senior Chief Justice

Judgment rendered and Memorandum Opinion filed April 18, 2006.

Panel consists of Justices Yates, Guzman, and Senior Chief Justice Murphy^[1].

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^[1]  Senior Chief Justice Paul C. Murphy sitting by assignment