The Waco Court of Appeals recently upheld a damages award and permanent injunction regarding the breach of a non-compete agreement in favor of Chris Christensen Systems, Inc. (CCS), a dog product manufacturer and distributor against its former employee, Eric Salas.
The Court of Appeals upheld the default judgment and all damages and held that the non-compete agreement with a five year duration and a broadly defined industry exclusion, as opposed to a geographic exclusion, was enforceable.
Salas had been hired as a VP of Sales and Education Director for CCS and signed a non-compete and confidentiality agreement (the "Agreement") upon commencing his employment. He was then provided with extensive confidential and trade secret information by his employer. After leaving his employment in September 2009, Salas almost immediately began competing against CCS, in violation of the Agreement.
In January 2010, CCS filed suit against Salas seeking a temporary injunction and seeking actual and exemplary damages. The trial court granted the temporary injunction in favor of CCS. Interestingly, Salas filed an answer and appeared at the temporary injunction hearing via telephone with an individual who purported to be an attorney licensed in Florida, but it was later found to not be a licensed attorney in any state. The temporary injunction was granted, and the matter was set for trial.
Salas was subsequently held in contempt on three separate occasions for violations of the temporary injunction and failing to abide by the court’s orders. Due to Salas’ unwillingness to abide by the trial court’s orders, his answer was eventually struck, and this matter proceeded to trial. The court found in favor of CCS, and awarded actual damages of $ 172,465.42, exemplary damages of $ 175,000, and granted the permanent injunction.
Salas filed a restricted appeal raising approximately thirteen points of error– including complaints about service of process on Salas, lack of notice of the trial setting, insufficient evidence of actual and exemplary damages, improper issuance of writ of capias (arrest warrant) against Salas, and an overly broad and unreasonable non-compete agreement.
The Court of Appeals held Salas had been properly served with the suit, and had even appeared at a hearing before the trial court, despite his allegations otherwise. Regarding the scope of the non-compete agreement that did not contain a geographic limitation, the Court stated as follows:
However, limiting the applicability of the covenant to particular client bases is an acceptable substitute for a geographic limitation in a non-compete agreement. See Gallagher Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654-655 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). Here, the Agreement is limited to a particular client base—entities which are or intend to be “engaged in providing and manufacturing pet supplies and related products manufactured and distributed by Company [Christensen]”—which we find to be an acceptable substitute for a geographic limitation. See id.
Ultimately, the Waco Court of Appeals found in favor of CCS on all issues, with one slight modification, shortening the expiration of the non-compete agreement’s five year term from September 3, 2014 to August 1, 2014. The Court of Appeals also affirmed the full amount of damages awarded.