Rako, Gregory v. Tifco Industries Inc.

• Court: Court of Appeals of Texas
• Decided: July 18, 2002
• Docket: 14-02-00017-CV
• Status: Published

Opinion

Affirmed and Opinion filed July 18, 2002

Affirmed and Opinion filed July 18, 2002.

In The

Fourteenth Court of Appeals

____________

NO. 14-02-00017-CV

GREGORY RAKO, Appellant

V.

TIFCO INDUSTRIES, INC., Appellee

On Appeal from the 80th District Court

Harris County, Texas

Trial Court Cause No. 01-51299

O P I N I O N

Gregory Rako appeals from an interlocutory order granting a temporary injunction.  See Tex. Civ. Prac. & Rem. Code Ann. ' 51.014(a)(4) (Vernon Supp. 2002).  Rako claims the injunction is based on an unenforceable covenant not to compete and should be dissolved.  We affirm.

Rako was employed by Tifco Industries, Inc. as a sales agent.  In connection with his employment, Rako signed two separate agreementsCa ASales Agent=s Agreement@ and a AConfidentiality, Development and Non-Interference Agreement.@  After working for Tifco for over three years, Rako resigned and began working for a competitor.  Soon after, Tifco sued Rako and applied for injunctive relief.  Following an evidentiary hearing, the trial court signed an order granting a temporary injunction.  The court entered the following orders:

!         Rako may not transfer, use, or disclose any of Tifco=s proprietary or confidential information, as defined in the Confidentiality Agreement, that Rako obtained during the course of his employment;

!         Rako may not, in Houston, Texas, contact for the purpose of soliciting business, solicit for sale, or sell competitive products to customers Rako serviced while employed by Tifco;^[1] and

!         Rako must return to Tifco all confidential information as defined in the Confidentiality Agreement, as well as all documents and tangible things in Rako=s possession belonging to Tifco.

The trial court further ordered that, Aas to this lawsuit,@ the restrictive time period set forth in paragraph 6(b) of the Agent=s Agreement is reformed from twenty-four months to twelve months, and the activities restricted by paragraph 6(b) are limited to Houston, Texas.  Paragraph 6(b) of the Agent=s Agreement provides that Rako

will not, while at any time employed by TIFCO and for a period of twenty-four (24) months following the termination of such employment, whether as an individual, or in any capacity, directly or indirectly, in competition with TIFCO solicit or sell or participate in any way concerning a sale of products similar to TIFCO=s products to any Customer which [Rako] at any time solicited or sold for TIFCO.

On appeal, Rako urges us to dissolve the temporary injunction.  Whether to grant a temporary injunction is within the trial court=s sound discretion, and we should reverse such an order only if the trial court abused that discretion.  Butnaru v. Ford Motor Co., 45 Tex. Sup. Ct. J. 916, 919, 2001 WL 1898460 (June 27, 2002).  In his sole issue, Rako claims the trial court erred in Aenforcing the Covenant Not to Compete,@ which he defines as paragraph 6(b) from the Agent=s Agreement, set forth above.  However, the court=s temporary injunction does more than enforce a covenant not to compete.  Rako concedes in his reply brief that he does not complain about the portions of the court=s injunction prohibiting him from disclosing Tifco=s confidential information and ordering him to return such information in his possession.  Accordingly, we consider Rako=s appeal to be directed solely to the portion of the injunction ordering Rako not to Acontact for purposes of soliciting business, solicit for sale or sell products competitive with those sold by Tifco@ to the customers identified in the order as those whom Rako Aserviced while employed by Tifco.@

The criteria for enforceability of covenants not to compete are set forth in section 15.50 of the Texas Business and Commerce Code, which provides as follows:

[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) (Vernon Supp. 2002).  Rako=s sole complaint is that the covenant not to compete is invalid because it is not Aancillary to or part of an otherwise enforceable agreement.@^[2]  Id.  We disagree.

We must first determine whether there is an otherwise enforceable agreement.  We begin by noting that the Agent=s Agreement expressly incorporates by reference the Confidentiality Agreement.  Therefore, we will consider the two agreements jointly.  See Ikon Office Solutions, Inc. v. Eifert, 2 S.W.3d 688, 693 (Tex. App.CHouston [14th Dist.] 1999, no pet.) (concluding that separate agreements should be treated as one when both were signed at the same time and one expressly incorporates the other by reference).

Rako argues that the agreements are unenforceable because the only consideration for them is his continued employment.  Both parties agree that Rako was an at-will employee.  An Aotherwise enforceable agreement@ can emanate from at-will employment only if the consideration for any promise in the agreement is not illusory.  Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642, 645 (Tex. 1994).  If the only consideration for a promise by Rako is his continued employment, then any such promise is illusory, and the agreement is unenforceable.  Id. at 644-45.

The preamble to the Confidentiality Agreement provides that the agreement is A[i]n consideration of [Rako=s] employment or continued employment by TIFCO and any additional compensation or benefits that TIFCO may from time to time bestow upon [Rako]@ (emphasis added).  In the Agent=s Agreement, Tifco agreed to lend Rako the following property: Aa sales case, display catalog(s), price book(s), sales manual(s), Customer history book(s), training handbook and other printed sales materials.@  In addition, Tifco=s president testified that Tifco provided Rako specialized training and knowledge regarding Tifco=s products.  We conclude that Rako=s continued employment was not the sole consideration for the agreements.  Accordingly, the two agreements constitute an Aotherwise enforceable agreement@ under section 15.50.

Next, we must decide whether the covenant not to compete is ancillary to or part of the otherwise enforceable agreement.  Light, 883 S.W.2d at 646-47.^[3]  For a covenant not to compete to be ancillary to an otherwise enforceable agreement:

(1)       the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer=s interest in restraining the employee from competing; and

(2)       the covenant must be designed to enforce the employee=s consideration or return promise in the otherwise enforceable agreement.

Id. at 647. Here, the Agent=s Agreement expressly states that its restrictive covenants, including the covenant not to compete, arise from Tifco=s interest in protecting the confidential information and specialized training it provides to employees. The protection of confidential or proprietary information is undeniably an Ainterest worthy of protection@ by a covenant not to compete.  DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 682 (Tex. 1990).   We conclude the covenant not to compete is designed to enforce Rako=s return promises not to divulge any of Tifco=s confidential information.  Accordingly, the covenant not to compete is ancillary to an otherwise enforceable agreement.

We affirm the trial court=s order granting the temporary injunction.

/s/        Leslie Brock Yates

Justice

Judgment rendered and Opinion filed July 18, 2002.

Panel consists of Justices Yates, Seymore, and Guzman.

Do Not Publish C Tex. R. App. P. 47.3(b).

---

^[1]  The court=s order contains a list of 39 such customers.

^[2]  Rako raises no complaint regarding the covenant=s limitations, nor does he object to the trial court=s apparent reformation of these limitations.

^[3]  Rako concedes in his brief that the covenant is ancillary to the Confidentiality Agreement.  Regardless, we find that the covenant satisfies the standard set forth in Light for being ancillary to an otherwise enforceable agreement.  See 883 S.W.2d at 647.