Opinion by Justice MOSELEY.
Hiring Partners, Inc. (HPI) and Lazer Spot, Inc. (Lazer Spot) filed competing motions for summary judgment in a suit brought by HPI. HPI's suit alleged that Lazer Spot had tortiously interfered with contracts between HPI and some of its employees. The trial court awarded summary judgment to HPI. Because we find no basis for the summary judgment granted in favor of HPI and because Lazer Spot was entitled to summary judgment as a matter of law, we reverse the judgment of the trial court and render judgment in favor of Lazer Spot.
HPI is in the business of recruiting workers for its clients for the performance of services required by those clients. HPI requires each of its employees to execute written employment contracts with HPI. While the form of these contracts vary somewhat, they each specifically state that the employees are at-will employees. In addition, each employment contract contains a ninety-day clause, which prohibits the employee from seeking "employment on a temporary, contract or permanent basis at any company where introduced by HPI for a period of ninety (90) days."
This case involves three at-will employees of HPI: Mitch Templeton, Shanda McCalib, and Michelle Thoms (the employees), who were each hired to work as gate clerks/dock hands
Unbeknownst to HPI, Lazer Spot received a request from Campbell's Soup in approximately July 2010 to submit a proposal to provide truck spotting services at its Paris facility. While Lazer Spot was aware that Arnold had been providing these services up to that point, Lazer Spot was unaware that Arnold was utilizing temporary employees supplied by HPI to perform yard work (or truck spotting services). On October 7, 2010, Campbell's Soup awarded the contract for those services to Lazer Spot.
On October 19, after the employees interviewed with Lazer Spot and were offered employment by it, Dana Hill, the operations manager for HPI, telephoned Jerry Edwards, the vice president of operations for Lazer Spot. Hill advised Edwards that the employees were subject to employment contracts with HPI. Although Edwards indicated that he then requested that Hill send him a copy of the contracts, Hill did not do so. According to Hill, Edwards did not ask to see a copy of the contracts, even after she indicated her belief that the employees would breach their contracts and that Lazer Spot would be assisting in that breach if it hired the employees.
On October 23, Lazer Spot received a letter (dated October 21) from HPI's counsel, Larry Lesh, demanding that Lazer Spot cease its interference with the employment contracts between HPI and its employees. The letter neither described the contractual obligations owed HPI by the employees, nor included a copy of the referenced contracts. Because counsel for Lazer Spot was hospitalized shortly after the letter was received, no immediate response was made.
On November 2, Lazer Spot commenced its operations at the Campbell's Soup plant and the employees began work for Lazer Spot "around this time."
On November 18 (after having been served with the lawsuit) Rhonda McCurtain, vice president of human resources and general counsel for Lazer Spot, called Lesh. According to McCurtain, she unconditionally offered to terminate the employment relationships of the employees so that HPI could rehire them.
On January 23, Lazer Spot filed a motion for summary judgment wherein it alleged
HPI filed a competing motion for summary judgment, contending Lazer Spot tortiously interfered with the employment contracts between HPI and its employees, entitling HPI to damages and declaratory relief, citing authority it maintains supports the proposition that a contract for at-will employment is subject to interference. It contended that Lazer Spot interfered with the employment contracts with full knowledge of their existence and that such interference was willful and intentional, causing HPI damages in the aggregate amount of $47,684.83 as of December 31, 2011, with damages continuing to accrue thereafter for so long as employees were employed by Lazer Spot.
On March 12, the trial court entered its final summary judgment denying Lazer Spot's motion for summary judgment and granting HPI's motion for summary judgment. The judgment awarded HPI damages it requested in the amount of $47,684.83, representing damages caused by Lazer Spot through December 31, 2011, and further declared that the liability of Lazer Spot to HPI "shall continue from and after December 31, 2011 for so long as Mitchell Templeton, Shanda McCalib and Michelle Thoms remain employees of Defendant Lazer Spot." This appeal ensued.
"When both sides move for summary judgment, as they did here, and the trial court grants one motion and denies the other, reviewing courts consider both sides' summary-judgment evidence, determine all questions presented, and render the judgment the trial court should have rendered." Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 124 (Tex.2010) (citing Embrey v. Royal Ins. Co. of Am., 22 S.W.3d 414, 415-16 (Tex.2000)).
Lazer Spot's primary appellate point is based on the premise that its motion for summary judgment should have been granted because the noncompetition covenants were not enforceable as a matter of law. In support of this contention, Lazer Spot argues that HPI did not provide consideration to the employees in exchange for their purported agreement to be bound by the covenants not to compete, and the noncompetition covenants are unlawfully broad with regard to the scope of activity they purport to restrain. Because we find the noncompetition covenants are not supported by consideration, we need not address the argument regarding their scope or breadth.
Lazer Spot further contends (apart from any issue relating to the noncompetition agreements) that the trial court erred in denying its motion for summary judgment
Lazer Spot initially maintains that the trial court erred in failing to grant its motion for summary judgment — and in granting HPI's motion — because the noncompetition agreements between HPI and its employees are unenforceable as a matter of law. Because "covenants not to compete which are unreasonable restraints of trade and unenforceable on grounds of public policy cannot form the basis of an action for tortious interference," Lazer Spot contends there is no tortious interference. Juliette Fowler Homes, Inc. v. Welch Assocs., 793 S.W.2d 660, 665 (Tex. 1990).
The Covenants Not to Compete Act governs the enforceability of noncompetition agreements. TEX. BUS. & COM. CODE ANN. §§ 15.50-.52 (West 2011). The enforceability of a covenant not to compete is a question of law. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.2009). We review the trial court's determinations of questions of law on a de novo basis. Barber v. CO Indep. Sch. Dist., 901 S.W.2d 447, 450 (Tex.1995).
Section 15.50 provides in relevant part:
TEX. BUS. & COM. CODE ANN. § 15.50(a).
Lazer Spot contends the noncompetition agreements are unenforceable because they are not "ancillary to or part of" an otherwise enforceable agreement as required under Section 15.50. The requirement of an "otherwise enforceable agreement" is satisfied when the covenant is part of an agreement which contains mutual, nonillusory promises. Marsh USA, Inc. v. Cook, 354 S.W.3d 764, 773 (Tex. 2011). An "otherwise enforceable" agreement "can emanate from at-will employment so long as the consideration for any promise is not illusory." Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 648 (Tex.2006). A noncompetition agreement must be supported by consideration to be enforceable. Id. at 651; DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 681 n. 6 (Tex.1990). "Consideration for a noncompet[ition] that is reasonably related to an interest worthy of protection, such as trade secrets, confidential information or goodwill, satisfies the statutory nexus." Marsh, 354 S.W.3d at 775. Here, Lazer Spot contends there was no consideration given to enforce the noncompetition agreements.
The covenant in question provides:
All contracts specify that employment is "employment at will," meaning that either HPI or the employee "can terminate the employment relationship at any time, with or without cause, with or without notice."
There is no recitation of consideration in the contracts. The contracts identify neither confidential, proprietary, or trade secret information to be divulged, nor any goodwill or specialized training to be provided the employees in consideration for signing the contracts. The only implied consideration
Likewise, the record fails to disclose the existence of any such consideration. Hill was asked whether there is "any confidential information that you can identify for the judge or jury that Hiring Partners provided to these employees as a part of their employment with Hiring Partners?" Her response was "No." In addition, Hill testified that because she could not identify any confidential or proprietary information given to the employees, she could not
HPI responds that "[c]onsideration for a noncompetition that is reasonably related to an interest worthy of protection, such as trade secrets, confidential information or goodwill, satisfies the statutory nexus" because "the purpose of the Act ... was to expand rather than restrict the enforceability of such covenants" and "[t]he Act provides that `goodwill' is a protectable interest." Marsh, 354 S.W.3d at 775-77.
HPI relies on Hill's testimony that the noncompetition agreements were designed to protect HPI's goodwill:
While Marsh does find that goodwill is a protectable interest, goodwill does not encompass guidelines that prevent the business from ceasing to exist (although some goodwill is generally necessary for that aim).
In Marsh, the employer's managing director, Cook, was granted the option to purchase shares of stock in the Marsh entity pursuant to an incentive plan. When the option was nearing expiration, Cook exercised his right to purchase company stock. In conjunction with the purchase, Cook agreed that in the circumstance he left Marsh within three years, he would neither compete with Marsh nor solicit its employees. Cook also agreed that he would maintain the confidentiality of Marsh's confidential information and trade secrets. Id. at 767. After leaving Marsh, Cook was sued for violating the covenant not to compete.
The Texas Supreme Court concluded that the noncompetition provision satisfied the requirements of the Act. Id. at 780. In doing so, it recognized that the award of stock options "linked the interests of a key employee with the company's long-term business interests." Id. at 777. In addition, "[o]wners' interests are furthered by fostering the goodwill between the employer and its clients" and "stock options are reasonably related to the protection of this business goodwill." Id.
Marsh does not support HPI's claim that the covenants against employment by others in controversy here were necessary to protect its goodwill; Marsh involved a managing director who was successful in achieving and attracting business for the company, these long-term relationships being vitally important in the insurance brokerage
Because the restrictive covenants here were not supported by consideration independent of the simple act of hiring under an at-will agreement, they are not "ancillary to or part of" an otherwise enforceable agreement under Section 15.50. TEX. BUS. & COM. CODE ANN. § 15.50(a). Those "covenants not to compete which are unreasonable restraints of trade and unenforceable on grounds of public policy cannot form the basis of an action for tortious interference." Juliette Fowler Homes, 793 S.W.2d at 665. Thus, unenforceability of a noncompetition covenant is a valid defense to a claim of tortious interference. Id.;
HPI relies on Sterner v. Marathon Oil Co., 767 S.W.2d 686, 689 (Tex.1989), to claim that even though the employment contracts were terminable-at-will, they are nevertheless subject to a cause of action for tortious interference. See also Crouch v. Trinque, 262 S.W.3d 417, 425-26 (Tex. App.-Eastland 2008, no pet.) (cause of action exists "for tortious interference with a contract of employment terminable at will").
Lazer Spot's response to this argument is two-fold.
The first part of Lazer Spot's argument zeroes in on the fact that Jones (HPI's president) testified that the only portions of the contracts HPI alleges were violated are the noncompetition covenants. When asked what part of the agreement the employees violated, Jones pointed to the following language, "I may not accept an assignment through another agency for a period of 90 days, at a firm/company that applicant has been introduced to by Hiring Partners." Jones further explained, "[T]he contractual obligation is ... that the employee cannot go to a company where we have introduced them. So that is what is in violation. They are certainly at-will employee[s] and can go to anybody else but some place where we've introduced them to, because that's our business." Lazer Spot seeks to hold HPI to this testimony and restrict the tortious interference issue to the noncompetition clause.
In its second point, Lazer Spot contends that when stripped of any protection the subject noncompetition agreements might otherwise provide, the remaining contract is nothing more than the written memorialization of a common law at-will employment relationship. Proceeding from that premise, Lazer Spot says that the mere hiring of an at-will worker who is currently employed by another, does not constitute actionable interference.
In Sterner, an employee of Marathon (Sterner) prevailed in a suit against Marathon following an accident. Sterner, 767 S.W.2d at 688. Sterner then took a job with a different company at a drilling site. Sterner's new employer was under contract with Marathon. When a Marathon supervisor noticed Sterner on the job site, he instructed Sterner's new employer to fire Sterner. Id. The high court held that it was tortious interference for Marathon to induce Sterner's employer to terminate its at-will contract with Sterner. Id. at 691.
While Sterner appears to be at odds with ACS Investors, it has been postulated that an explanation for this apparent inconsistency is the fact that
Sean Farrell, Applying Tortious Interference Claims to at-Will Contracts, 39 TEX. J. BUS. L. 527, 532 (Winter 2004) (footnotes omitted) (citations omitted). If one accepts this distinction, it does not follow that ACS Investors is necessarily at odds with Sterner.
Additional authority cited by HPI does not support its position that an at-will employee cannot be induced to do what he otherwise has a right to do (i.e., terminate employment at any time). For example, in Crouch, the tortious interference claim was based on allegedly defamatory comments that led to termination of the plaintiff's at-will employment. Summary judgment on the tortious interference claim was upheld because the affirmative
Graham v. Mary Kay Inc., 25 S.W.3d 749 (Tex.App.-Houston [14th Dist.] 2000, pet. denied), highlights the distinction between inducing someone to terminate at-will employment and interfering with at-will employment contracts. In that case, Graham appealed an injunction preventing her from selling Mary Kay cosmetics at her retail location. The Mary Kay consultants were required to sign an agreement with Mary Kay to only sell directly to the
Outside of the realm of allegedly defamatory statements made by third parties that result in termination of at-will employment (where inducement is apparently tortious because it is accomplished via defamation), other actionable interference appears to hinge on violation of a contractual provision, other than the at-will provision. See Sterner, 767 S.W.2d at 691 (Marathon not justified to interfere because directive to fire Sterner exceeded terms of Marathon-employer agreement); Graham, 25 S.W.3d at 754 (breach of direct sales clause in employees' agreements with Mary Kay).
Because a claim of tortious interference cannot be premised merely on the hiring of an at-will employee, without more, summary judgment was improperly granted on the claim of tortious interference with contractual relations; the employees were within their rights to terminate employment with HPI at any time.
Because the noncompetition covenants in this circumstance are unenforceable, and because there is otherwise no tortious interference with the contracts between HPI and the employees, we reverse the judgment of the trial court. Further, because Lazer Spot was entitled to summary judgment as a matter of law, we render judgment in favor of Lazer Spot. Lazer Spot is not, however, entitled to recover attorney's fees and court costs.
Marsh, 354 S.W.3d at 777-78.
The jury found that Butler breached the noncompetition clause of the Butler-Welch contract by accepting the position with NBA. The court found that the noncompetition clause was unenforceable and that Welch could therefore not recover for Butler's breach of the Butler-Welch contract (the clause contained no limitations concerning geographical area or scope of activity).
The jury found that Fowler tortiously interfered with Welch's contractual relationship with Butler. Fowler argued that the noncompetition clause in the Butler-Welch contract was an unreasonable restraint of trade and unenforceable on the grounds of public policy. Fowler therefore claimed that its actions "inducing" Butler to accept the position with NBA cannot support a judgment for tortious interference. The Texas Supreme Court indicated that "this argument presents the narrow issue of whether the unenforceability of the noncompetition clause in the Butler-Welch contract is a defense to Welch's action against Fowler for tortious interference with contractual relations." Id. at 664. After determining that the unenforceability of the noncompetition clause was a defense to Welch's tortious interference claim, the court held "that covenants not to compete which are unreasonable restraints of trade and unenforceable on grounds of public policy cannot form the basis of an action for tortious interference." Id. at 665.
To support its claim of "willful and intentional" interference, HPI contends that despite Lazer Spot's claimed lack of knowledge of the ninety-day clause (there is no evidence Lazer Spot knew about the ninety-day clause when it hired the employees on October 19), Lazer Spot was fully aware that employees were employed by HPI at the time it hired them because: (1) the employment applications listed HPI as the current employer, giving Lazer Spot actual notice of the status of those applicants as employees of HPI; and (2) on October 19, the date the employees were interviewed and offered employment, Hill advised Edwards that the employees were "under contract" with HPI and that Lazer Spot "would be assisting them in breaching the contract if" Lazer Spot hired them. Hill admits the telephone conversation with Edwards took place after Lazer Spot interviewed the employees and offered them employment. Further, Lazer Spot contends there is no evidence it was aware of any of the employees' contractual obligations when it hired them, and HPI provided no evidence to prove otherwise. We agree. Even if Lazer Spot was aware of the contractual provisions between HPI and its employees, nothing in those contracts prevented Lazer Spot from hiring the employees.
TEX. BUS. & COM. CODE ANN. § 15.51(c). The foregoing provision permits the "promisor" to recover costs and reasonable attorney's fees, in certain circumstances. Because the express language of the statute does not apply here, Lazer Spot is not entitled to attorney's fees under Section 15.51(c). TEX. BUS. & COM. CODE ANN. § 15.51(c); see Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 645 (Tex. App.-Houston [1st Dist.] 2010, pet. denied) (Covenants Not to Compete Act does not permit employers to recover their attorney's fees in suits to enforce their rights under the Act). We find no authority to support the proposition that a third party, such as Lazer Spot, is entitled to attorney's fees pursuant to this section of the statute.
