CRC-Evans Pipeline Intern., Inc. v. Myers

• Decision Date: 18 July 1996
• Docket Number: No. 01-96-00234-CV,CRC-EVANS,01-96-00234-CV
• Citation: CRC-Evans Pipeline Intern., Inc. v. Myers, 927 S.W.2d 259 (Tex. App. 1996)
• Parties: 1996-2 Trade Cases P 71,524 PIPELINE INTERNATIONAL, INC., Appellant, v. Randolph P. MYERS, Jr., and Bobby Shell Sanford, Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 259

927 S.W.2d 259

1996-2 Trade Cases P 71,524

CRC-EVANS PIPELINE INTERNATIONAL, INC., Appellant, v. Randolph P. MYERS, Jr., and Bobby Shell Sanford, Appellees.

No. 01-96-00234-CV.

Court of Appeals of Texas Houston (1st Dist.).

July 18, 1996.

Charles L. Babcock, David T. Moran, Leslie G. Ashby, Houston, for Appellant.

Russell B. Starbird, Houston, for Appellees.

Before MIRABAL, COHEN and ANDELL, JJ.

OPINION

MIRABAL, Justice.

This is an interlocutory appeal ¹ from the denial of a request for a temporary injunction to enforce covenants not to compete, and to prohibit the disclosure of trade secrets. We affirm.

CRC-Evans Pipeline International, Inc. (CRC) manufactures, sells, and leases specialized tools used in the construction of pipelines worldwide. The automatic internal welder is a tool developed by CRC, and it considers the welder to be a trade secret. Appellees, Randolph P. Myers, Jr., and Bobby Shell Sanford, are former employees of CRC, and both have experience working with the automatic internal welder.

On December 29, 1995, CRC filed suit against appellees alleging that they had breached written covenants not to compete by working for businesses in direct competition with CRC, and that they had breached contractual and common law duties not to disclose trade secrets and confidential information obtained during their employment with CRC. CRC was granted a temporary restraining order on December 29, 1995. On January 12, 1996, the trial court held an evidentiary hearing, following which the trial court denied CRC's request for a temporary injunction.

The trial court made the following findings of fact and conclusions of law:

Findings of Fact

1. Myers executed an Employment and Confidential Information Agreement with CRC on December 1, 1989 ("Myers' Employment Contract").

2. In Myers' Employment Contract, Myers agreed not to engage in any business which was in direct competition with CRC for a period of two years following his termination of employment with CRC.

3. In Myers' Employment Agreement, Myers further acknowledged that he has received or will receive trade secrets and confidential information of CRC in order for him to perform his duties and agreed not to disclose to anyone outside of CRC such trade secrets or confidential information of CRC either during or after his employment with CRC.

4. Myers terminated his employment with CRC on March 1, 1995.

5. Myers was hired by Noreast Services and Pipelines Limited ("Noreast") in 1995.

6. Noreast is in direct competition with CRC.

7. Sanford executed an Employment & Proprietary Information Agreement with CRC on March 28, 1994 ("Sanford's Employment Contract").

8. In Sanford's Employment Contract, Sanford agreed not to engage in any business which was in direct competition with CRC for a period of two years following his termination of employment with CRC.

9. In Sanford's Employment Contract, Sanford further acknowledged that he has received or will receive trade secrets and confidential information of CRC in order for him to perform his duties and agreed not to disclose to anyone outside of CRC any proprietary information either during or after his employment with CRC.

10. Sanford terminated his employment with CRC on August 8, 1994.

11. Sanford subsequently became employed with O.J. Pipelines Corp. ("O.J. Pipelines").

12. O.J. Pipelines is in direct competition with CRC.

13. Any conclusion of law which should be construed as a finding of fact is hereby adopted as such.

Conclusions of Law

1. CRC is not entitled to a temporary injunction enforcing the covenant not to compete clause contained in Myers' Employment Contract because the covenant not to compete clause was not ancillary to or part of an otherwise enforceable agreement and was, therefore, not enforceable. TEX. BUS. & COM.CODE ANN. § 15.50.

2. CRC is not entitled to a temporary injunction enforcing the covenant not to compete clause contained in Sanford's Employment Contract because the covenant not to compete clause was not ancillary to or part of an otherwise enforceable agreement and was, therefore, not enforceable. TEX. BUS. & COM.CODE ANN. § 15.50.

3. CRC is not entitled to a temporary injunction enjoining Myers from disclosing CRC's trade secrets because the nondisclosure clause contained in Myers' Employment Contract was not enforceable.

4. CRC is not entitled to a temporary injunction enjoining Sanford from disclosing CRC's trade secrets because the nondisclosure clause contained in Sanford's Employment Contract was not enforceable.

5. Any finding of fact which should be construed as a conclusion of law is hereby adopted as such.

In its first point of error, CRC asserts the trial court abused its discretion by denying CRC's request for a temporary injunction to enforce the covenants not to compete in appellees' employment contracts with CRC.

The decision to grant or deny a temporary injunction lies in the sound discretion of the trial court, and the court's grant or denial is subject to reversal only for a clear abuse of that discretion. Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.1993). The appellate court is not to substitute its judgment for that of the trial court, but must only determine whether the court's action was so arbitrary as to exceed the bounds of reasonable discretion. Philipp Bros., Inc. v. Oil Country Specialists, Ltd., 709 S.W.2d 262, 265 (Tex.App.--Houston [1st Dist.] 1986, writ dism'd w.o.j.).

In reviewing an order granting or denying a temporary injunction, the appellate court draws all legitimate inferences from the evidence in a manner most favorable to the trial court's judgment. Valenzuela v. Aquino, 763 S.W.2d 43, 44 (Tex.App.--Corpus Christi 1988, no writ); Metropolitan Life Ins. Co. v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646, 648 (Tex.App.--San Antonio 1988, writ dism'd). Abuse of discretion does not exist if the trial court heard conflicting evidence, and evidence appears in the record that reasonably supports the trial court's decision. Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978); Recon Exploration, Inc. v. Hodges, 798 S.W.2d 848, 852 (Tex.App.--Dallas 1990, no writ).

When specific findings of fact and conclusions of law are filed and a statement of facts is before the appellate court, the findings will be sustained if there is evidence to support them, and the appellate court will review the legal conclusions drawn from the facts found to determine their correctness. Mercer v. Bludworth, 715 S.W.2d 693, 697 (Tex.App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.).

The Covenants Not to Compete Act, TEX. BUS. & COM.CODE ANN. §§ 15.50-.52 (Vernon Supp.1996), governs the enforceability of the involved covenants not to compete, as well as the procedures and remedies in an action such as this one. Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 644 (Tex.1994). The enforceability of a covenant not to compete is a question of law for the court. Id.

Section 15.50 reads in relevant part:

[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 (Vernon Supp.1996). In the present case, we are concerned only with the first of the two criteria for enforceability of a covenant not to compete, i.e., whether each covenant not to compete involved here was "ancillary to or part of an otherwise enforceable agreement at the time the agreement [was] made." ² Under section 15.50, the relevant point in time is the moment the agreement is made; the issue is whether, "at the time the agreement is made," there exists other mutually binding promises to which the covenant not to compete is ancillary or part and parcel. Light, 883 S.W.2d at 644-45.

Both Myers and Sanford were "at-will" employees of CRC. An "otherwise enforceable agreement" can emanate from at-will employment, but only so long as the consideration for a promise is not dependent on a period of continued employment. A promise dependent on a period of continued employment would be illusory because it fails to bind the promisor, who always retains the option of discontinuing employment in lieu of performance. Light, 883 S.W.2d at 644. ³

In the agreements between appellees and CRC, in addition to the covenants not to compete, appellees made the following non-illusory promises: 1) not to publish or disclose trade secrets or confidential technical or business information, data, or material of CRC during or after employment; 2) to leave at CRC, upon termination of employment, all documents, records, blueprints, notebooks, customer sales lists, or other repositories containing trade secrets, or confidential information, or other proprietary information; and 3) to disclose and convey to CRC all technological ideas, inventions, improvements, and discoveries related to any present or prospective business of CRC, and to assist in obtaining and maintaining patents and copyrights.

In return, CRC promised employment, and the payment of a salary and/or other remuneration. CRC also impliedly promised to give appellees trade secrets and proprietary information necessary to perform their duties.

The main issue in this case is whether CRC's return promises are "illusory." If they are "illusory," then they do not constitute valid consideration for appellees' promises made in addition to the covenants not to compete, meaning no "otherwise enforceable agreement" would have existed at the time each agreement was made.

Appellant and appellees each claim that the Light case supports their respective positions. In Light, the employer agreed to provide "initial specialized training" to the employee. 883 S.W.2d at 646. The...