PAS, INC. v. Engel

350 S.W.3d 602, 2011 Tex. App. LEXIS 4851, 2011 WL 2535733
CourtCourt of Appeals of Texas
DecidedJune 28, 2011
Docket14-10-00513-CV
StatusPublished
Cited by62 cases

This text of 350 S.W.3d 602 (PAS, INC. v. Engel) 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
PAS, INC. v. Engel, 350 S.W.3d 602, 2011 Tex. App. LEXIS 4851, 2011 WL 2535733 (Tex. Ct. App. 2011).

Opinion

OPINION

MARTHA HILL JAMISON, Justice.

In this employment dispute, appellant PAS, Inc. appeals the trial court’s order granting summary judgment in favor of appellees Cory Engel (Engel), April Engel (April), and Caputech, Inc. In ten issues, PAS contends that the trial court erred in disposing of its claims for breach of fiduciary duty, breach of contract, fraud, and civil conspiracy. We hold that the trial court improperly granted summary judgment on PAS’s claim for breach of fiduciary duty and, in part, on its fraud claims. We therefore affirm in part and reverse and remand in part the trial court’s summary judgment.

Background

PAS provides consulting services to process and power companies. The services are intended to help companies improve safety, reliability, and profitability at their plants. Engel worked at PAS as its vice president of sales, with overall management of sales activities in North and South America. Engel previously had worked for Canadian company Matrikon, Inc., a competitor of PAS.

1. The employment dispute

Before Engel’s employment began, En-gel and PAS executed an employment agreement on March 1, 2006, that contains a two-year non-compete clause and provisions addressing confidential and trade-secret information belonging to PAS (the 2006 Agreement). The 2006 Agreement expressly provides that, during the employment relationship and for two years following its termination, Engel would not, without prior written approval of PAS,

... as an officer, director, partner, associate, owner, employee, consultant or otherwise, be engaged by any person or entity that sells specific products or services in competition with [PAS] ... [This is intended] (1) to limit his engagement in companies with specific competitive products or services that are generally acknowledged as competitors to PAS; (2) to restrict [his] work from sales or management functions similar to those done at PAS; and (3) to restrict [him] from working in the markets that [he] shall be charged with responsibility for while working at PAS.

Matrikon was specifically named as one of the “generally acknowledged” competitors. *605 The 2006 Agreement expressly states that “it does not alter or change the ‘at will’ nature of the employment relationship.”

Engel began work at PAS on April 3, 2006. The parties agree that from April 2006 until fall 2007, Engel appeared to be satisfied with his employment at PAS. During that time, it is undisputed that PAS gave Engel trade-secret and highly confidential information related to PAS’s business. In September 2007, however, Engel became increasingly dissatisfied with PAS and openly expressed his frustrations to PAS’s CEO Eddie Habibi. Over the next several months, Engel and PAS attempted to resolve these frustrations. During the course of these discussions, Engel requested that PAS renegotiate his non-compete agreement. In an email to Habibi dated February 25, 2008, Engel states the following:

Eddie, sorry to make [the 2006 non-compete] an issue, but it does bother me as we discussed. I’m not looking to harm PAS or any shareholders and am not looking to resign, but do not want to feel trapped. I am sure I did not agree to this, but would be happy to work through an appropriate document that captures the spirit of our discussions.

During this time, Engel also told Habibi that he intended to remain with PAS.

According to Habibi, in February 2008, Engel communicated with an employee of Matrikon about creating a business entity that would be an exclusive reseller of Ma-trikon products. Engel also collaborated with the Matrikon employee in selecting the name Caputech for Engel’s new company. 1 Engel did not disclose to PAS any discussions with Matrikon or the creation of Caputech during the renegotiation process.

On March 11, 2008, PAS and Engel executed a new non-compete agreement (the 2008 Agreement). The 2008 Agreement shortened the term of the non-compete clause from two years to 18 months and also narrowed the scope of the covenant not to compete. Engel agreed that, without prior written approval of PAS, he would not

(1) start or become an employee, owner, consultant, or contractor with a start up company competing with PAS in the fields of alarm management only as it pertains to D & R services, alarm shelving, alarm flood suppression, and state based alarming products and services, and in the field of automation asset configuration management; or (2) become an employee, consultant, or contract employee with his former employer, Matri-kon, Inc., its parents, subsidiaries, affiliates, joint ventures, or successors....

Habibi stated that PAS would not have renegotiated the 2006 Agreement for the more narrow terms in the 2008 Agreement if PAS had known that Engel already had set up a new business and intended to resign.

On March 20, 2008, nine days after the execution of the 2008 Agreement, Engel submitted his resignation to PAS, effective April 25, 2008. Engel stated that “the primary reason for my decision is my belief that there is no compelling future with PAS.” Engel incorporated Caputech on March 24, 2008. The certificate of formation lists Engel and April as the directors of the company. Caputech then entered into an “Exclusive Reseller Partner Agreement” with Matrikon under which Capu- *606 tech agreed to sell Matrikon products and services. Engel maintains that he has not been an employee, consultant, or contract employee of Matrikon and that Caputech does not compete with PAS in the “fields of alarm management only as it pertains to D & R services, alarm shelving, alarm flood suppression, or state based alarming products and services or the field of automation asset configuration management.” Thus, Engel asserts that the 2008 Agreement allows him to operate Caputech.

2. The resulting litigation

PAS sued Engel, April, and Caputech on June 10, 2008, after learning of Caputech and the exclusive reseller agreement with Matrikon. PAS asserted claims for breach of the 2008 Agreement, intentional interference with Engel’s 2008 employment agreement, theft of trade secrets, fraud, and civil conspiracy. Over the course of the litigation, PAS amended its pleadings so that, at the time of summary judgment, it had asserted claims for (a) breach of the 2006 Agreement or, in the alternative, breach of the 2008 Agreement, (b) intentional interference with Engel’s employment agreement, (c) fraud, (d) civil conspiracy, and (e) breach of fiduciary duty. Engel, April, and Caputech filed a general denial, asserted the affirmative defense of failure of consideration, and asserted a counterclaim for wrongfully obtaining a temporary restraining order.

On October 26, 2009, Engel, April, and Caputech filed their Defendants’ First Amended Traditional and No Evidence Motion for Summary Judgment (the Summary Judgment Motion). The Summary Judgment Motion sought to defeat PAS’s claims of breach of the 2006 Agreement on grounds that the 2006 Agreement had been superseded by the 2008 Agreement and PAS was estopped from denying the validity of the 2008 Agreement.

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Cite This Page — Counsel Stack

Bluebook (online)
350 S.W.3d 602, 2011 Tex. App. LEXIS 4851, 2011 WL 2535733, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pas-inc-v-engel-texapp-2011.