C.S.C.S., Inc. v. Carter

• Decision Date: 20 October 2003
• Docket Number: No. 05-03-00138-CV.,05-03-00138-CV.
• Parties: C.S.C.S., INC., Appellant, v. Linden Josh CARTER, Appellee.
• Court: Texas Court of Appeals

129 S.W.3d 584

C.S.C.S., INC., Appellant, v. Linden Josh CARTER, Appellee.

No. 05-03-00138-CV.

Court of Appeals of Texas, Dallas.

October 20, 2003.

Marilyn K. Lahr, Law Office of Marilyn K. Lahr, Dallas, for Appellant.

Kimberly Sumner Moore, Dallas, for Appellee.

Before Justices MOSELEY, RICHTER, and FRANCIS.

OPINION

Opinion By Justice MOSELEY.

C.S.C.S., Inc. (CSCS) appeals the denial of its application for a temporary injunction in its lawsuit seeking to enforce a covenant-not-to-compete against its former employee, appellee Linden Josh Carter. In five issues, CSCS argues the trial court erred in denying the application for temporary injunction and in ruling on the application before CSCS had presented all of its testimony. We affirm the trial court's order.

CSCS manufactures and sells cast stone building materials. On July 17, 1997, Carter signed a document entitled "Confidentiality and Non-Compete Agreement," which we will refer to as the "Non-Competition Agreement." The Non-Competition Agreement stated:

In the course of your forthcoming employment [CSCS] may reveal certain confidential information that is deemed proprietary. In the interest of avoiding any misunderstandings about the basis on which this information is disclosed to you, we ask that you agree to the following terms.

1. You agree not to disclose to others any information regarding the methods and procedures that [CSCS] uses in the course of its daily business.

2. You further agree not to work for a competitor of [CSCS] for two years after your last day of employment.

Underneath this language and above Carter's signature line is the following: "I have read and understand the above Confidentiality and Non-Compete Agreement."

Four days later, on July 21, 1997, Carter and CSCS signed an employment agreement that stated it was effective July 14, 1997. The agreement was for a term of twenty-four months; the first month would consist of a training period for which Carter would not be compensated, and the remaining months were a probationary period at a monthly salary. After twenty-four months, the agreement would be renegotiated or continue month-to-month until a new contract was negotiated. The employment agreement did not specify the bases for which the agreement could be terminated. The evidence is conflicting as to whether Carter began working on July 14 or July 21, 1997.

CSCS filed suit alleging that Carter left its employment in January 2003, and that he was competing against CSCS in violation of the Non-Competition Agreement. CSCS obtained a temporary restraining order prohibiting Carter from becoming employed by a competitor of CSCS. At the temporary injunction hearing, during direct examination of CSCS's general manager, the trial court suggested and the parties agreed it would be efficient to hear argument on the enforceability of the alleged agreements before continuing with evidence regarding confidential and proprietary information. After extended argument, the trial court dissolved the temporary restraining order prohibiting Carter from becoming employed by a competitor of CSCS and denied CSCS's temporary injunction application in that respect. (The parties agreed to a temporary injunction to protect certain "trade secret, proprietary, or confidential information," which the trial court later granted.) CSCS appeals the denial of its temporary injunction regarding the covenant-not-to-compete. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (Vernon Supp. 2003).

The purpose of a temporary injunction is to preserve the status quo until the case can be tried on the merits. Rugen v. Interactive Business Systems, Inc., 864 S.W.2d 548, 550 (Tex.App.-Dallas 1993, no writ). An applicant for a temporary injunction must plead and prove: (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.¹ Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Our review is strictly limited to determining whether the trial court clearly abused its discretion in granting or denying the temporary injunction. Strickland v. Medtronic, Inc., 97 S.W.3d 835, 837 (Tex.App.-Dallas 2003, pet. dism'd w.o.j.) (citing Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.1993)). We do not consider the merits of the case or the ultimate enforceability of the covenant-not-to-compete; we review only the trial court's exercise of discretion in denying the temporary injunction. See Tom James of Dallas, Inc. v. Cobb, 109 S.W.3d 877, 883 (Tex.App.-Dallas 2003, no pet.). We do not substitute our judgment for that of the trial court, but determine only whether the trial court's action was so arbitrary as to exceed the bounds of reasonable discretion. Id.

THE NON-COMPETITION AGREEMENT

In its first three issues, CSCS argues the trial court abused its discretion because CSCS showed the covenant-not-to-compete was ancillary to an otherwise enforceable agreement. See Tex. Bus. & Com. Code Ann. § 15.50(a) (Vernon 2002) (requirements for enforceable covenant-not-to-compete);² Light v. Centel Cellular Co., 883 S.W.2d 642, 644, 647 (Tex.1994). We must make two initial inquiries as to the formation of the covenant-not-to-compete: "(1) is there an otherwise enforceable agreement, to which (2) the covenant not to compete is ancillary to or a part of at the time the agreement is made." Light, 883 S.W.2d at 644.

Much of CSCS's argument appears to imply that for its Non-Competition Agreement to be enforceable, it need only show the existence of some other enforceable agreement between it and Carter. Light makes clear that not only must another otherwise enforceable agreement exist, but the Non-Competition Agreement must be "ancillary to or part of" that other agreement at the time it was made. Light, 883 S.W.2d at 643. For a covenant-not-to-compete to be "ancillary to or a part of" 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.

CSCS points to several other agreements between it and Carter that it claims were enforceable on July 17, 1997 (when the Non-Competition Agreement was signed) and to which the Non-Competition Agreement was ancillary or a part. We address these seriatim.

(1) The Employment Agreement

CSCS first argues the Non-Competition Agreement was ancillary to or a part of the written employment agreement, which it claims was not an "at-will" agreement (and was thus enforceable) because it was for a term of twenty-four months. However, the written employment agreement did not exist when the Non-Competition Agreement was signed—it was not signed until four days later.

CSCS argues the evidence was undisputed that the Non-Competition Agreement and the written employment agreement were part of the same transaction— the hiring of Carter—and thus that the documents should be read together and treated as one document, even when they were executed on different dates and did not reference one another. See Courage Co. v. Chemshare Corp., 93 S.W.3d 323, 333 (Tex.App.-Houston [14th Dist.] 2002, no pet.) (interpreting conflicting choice of forum provisions in separate documents executed at different times). This is a principle of document construction, however, and does not satisfy or override the clear requirement that a non-compete agreement be "ancillary to or part of an otherwise enforceable agreement at the time the agreement is made." Tex. Bus. & Com.Code Ann. § 15.50(a); Light, 883 S.W.2d at 644-45; CRC-Evans Pipeline Int'l, Inc. v. Myers, 927 S.W.2d 259, 263 (Tex.App.-Houston [1st Dist.] 1996, no writ) ("Under section 15.50, the relevant point in time is the moment the agreement is made...." (Emphasis original.)). At the time the written employment agreement was made, the Non-Competition Agreement had been in existence for four days; as a result, the Non-Competition Agreement could not be "ancillary to or a part of" the written employment agreement at the time the employment agreement was made.

In a post-submission brief, CSCS argues that everything in the employment agreement (signed July 21) was orally agreed to on July 17, when the Non-Competition Agreement was signed, and the written employment agreement was merely a convenient memorial of the prior oral agreement. CSCS also argues that the written employment agreement expressly states it was effective July 14, 2000, and was an otherwise enforceable agreement at the time the Non-Competition Agreement was signed on July 17, 2000. However, an oral agreement for employment for more than one year is within the statute of frauds and unenforceable. See Gilliam v. Kouchoucos, 161 Tex. 299, 340 S.W.2d 27, 28-29 (1960) (employment agreement for ten years required to be in writing); Young v. Ward, 917 S.W.2d 506, 511-512 (Tex.App.-Waco, 1996, no writ). Assuming it was made on July 17, CSCS's alleged oral agreement to employ Carter for two years was unenforceable at the time and would not support the Non-Competition Agreement. Even had the oral agreement been enforceable, an employment agreement for a term will not support a covenant-not-to-compete. See Light, 883 S.W.2d at 646 n. 10 ("[E]ven if [the notice of termination] provision created an employment contract for a term of two weeks, the covenant at issue would not be ancillary to such an agreement.").

Moreover, the requirement that a noncompete agreement be ancillary to or part of an otherwise enforceable agreement "at the time the agreement is made" recognizes that agreements are often amended or supplemented, and expresses a "legislative intent that such amendments or supplements cannot `tack on' a noncompete provision to a previously existing, enforceable...