DeSantis v. Wackenhut Corp.

Decision Date06 June 1990
Docket NumberNo. C-6617,C-6617
Parties, 1990-2 Trade Cases P 69,147, 5 IER Cases 739 Edward DeSANTIS, et al., Petitioners, v. WACKENHUT CORPORATION, Respondent.
CourtTexas Supreme Court

HECHT, Justice.

On motions for rehearing, our opinion and judgment of July 13, 1988, are withdrawn, and the following is now the opinion of the Court.

This case involving a noncompetition agreement between an employer and employee presents three principal issues: first, whether the law of the state chosen by the parties to govern their agreement should be applied; second, whether the noncompetition agreement is enforceable; third, if the agreement is not enforceable, whether damages for its attempted enforcement are recoverable under the Texas Free Enterprise and Antitrust Act of 1983 or for wrongful injunction, fraud, or tortious interference with contract.

The trial court applied the law of the state of Florida, chosen by the parties to govern the noncompetition agreement, to hold the agreement valid but overly broad as to the geographical territory in which competition was restricted. Based upon a jury finding that the employee breached the agreement, the trial court enjoined any further violation of the agreement within a smaller territory, and denied the employee's claims for damages. The court of appeals affirmed. 732 S.W.2d 29. We hold that Texas law, not Florida law, applies in this case, and that under Texas law, the noncompetition agreement is unenforceable. We further hold that the employee is not entitled to recover damages for his employer's wrongfully obtaining an injunction against him, and that the employee has failed to show fraud, tortious interference, or a violation of the Texas Free Enterprise and Antitrust Act entitling him to damages. We accordingly reverse the judgment of the court of appeals and render judgment in accordance with this opinion.

I
A

Edward DeSantis has been providing international and corporate security services, both in the CIA and the private sector for his entire career. In June 1981, while employed by R.J. Reynolds Industries in North Carolina, DeSantis interviewed for a position with Wackenhut Corporation. At that time, Wackenhut, which was chartered and headquartered in Florida, was the third largest company in the nation specializing in furnishing security guards for businesses throughout the country. DeSantis met with Wackenhut's president, founder, and majority stockholder, George Wackenhut, at the company's offices in Florida, and the two agreed that DeSantis would immediately assume the position of Wackenhut's Houston area manager. According to DeSantis, George Wackenhut promised him that the area manager's position was only temporary, and that he would soon be moved into a top executive position. George Wackenhut denies that he made any such promises to DeSantis, admitting only that he mentioned advancement to an executive position as a possible opportunity.

At Wackenhut's request, DeSantis signed a noncompetition agreement at the inception of his employment. The agreement recites that it was "made and entered into" on August 13, 1981, in Florida, although DeSantis signed it in Texas. It also recites consideration "including but not limited to the Employee's employment by the Employer". In the agreement DeSantis covenanted that as long as he was employed by Wackenhut and for two years thereafter, he would not compete in any way with Wackenhut in a forty-county area in south Texas. DeSantis expressly acknowledged that Wackenhut's client list "is a valuable, special and unique asset of [Wackenhut's] business" and agreed never to disclose it to anyone. DeSantis also agreed never to divulge any confidential or proprietary information acquired through his employment with Wackenhut. Finally, DeSantis and Wackenhut agreed "that any questions concerning interpretation or enforcement of this contract shall be governed by Florida law."

DeSantis remained manager of Wackenhut's Houston office for nearly three years, until March 1984, when he resigned under threat of termination. DeSantis contends that he was forced to quit because of disagreements with Wackehut's senior management over the profitability of the Houston office. Wackenhut contends that DeSantis was asked to resign because of his unethical solicitation of business.

Following his resignation, DeSantis invested in a company which marketed security electronics. He also formed a new company, Risk Deterrence, Inc. ("RDI"), to provide security consulting services and security guards to a limited clientele. The month following termination of his employment with Wackenhut, DeSantis sent out letters announcing his new ventures to twenty or thirty businesses, about half of which were Wackenhut clients. He added a postscript to letters to Wackenhut clients in which he disclaimed any intent to interfere with their existing contracts with Wackenhut. Within six months, however, one of Wackenhut's clients, Marathon Oil Company, had terminated its contract with Wackenhut and signed a five-year contract with RDI, and a second Wackenhut client, TRW-Mission Drilling Products, was considering doing the same. Wackenhut claims that DeSantis was acquiring its clients in violation of the noncompetition agreement. DeSantis claims that these clients began considering other security service providers only after the quality of Wackenhut's services declined, following DeSantis' departure.

B

Wackenhut sued DeSantis and RDI in October 1984 to enjoin them from violating the noncompetition agreement, and to recover damages for breach of the agreement and for tortious interference with business relations. Wackenhut alleged that DeSantis and RDI were soliciting its clients' business using confidential client and pricing information which DeSantis obtained through his employment with Wackenhut. The trial court issued an ex parte temporary restraining order against DeSantis and RDI, and fixed the amount of the requisite bond which Wackenhut filed at $5,000. Following a hearing, the trial court issued a temporary injunction upon a $75,000 bond, which Wackenhut also filed. DeSantis and RDI counterclaimed against Wackenhut, alleging that Wackenhut had fraudulently induced DeSantis to sign the noncompetition agreement, that the agreement violated state antitrust laws, and that enforcement of the agreement by temporary injunction was wrongful and tortiously interfered with DeSantis and RDI's contract and business relationships. RDI claimed damages for loss of the Marathon contract, which Marathon terminated after the injunction issued, for loss of the TRW business, and for injury to its reputation. DeSantis claimed damages for lost salary, impaired reputation, and mental anguish. DeSantis and RDI both sought statutory damages under the Texas Free Enterprise and Antitrust Act, Texas Business and Commerce Code Annotated sections 15.01-15.51 (Vernon 1987 and Supp.1990), and exemplary damages.

The trial court granted Wackenhut's motion for summary judgment on DeSantis and RDI's claim for tortious interference, and directed a verdict against them on their fraud claim. At trial, Wackenhut withdrew its tortious interference claim. A jury found that DeSantis breached the noncompetition agreement by competing with Wackenhut, but failed to find that Wackenhut would be irreparably harmed if DeSantis were not prohibited from further breaching the agreement. 1 The jury also failed to find that Wackenhut had ever been unfair, unjust, misleading or deceptive to DeSantis so as to cause him any injury. The jury found that Wackenhut's enforcement of the noncompetition agreement had caused DeSantis no damages, but had caused RDI to lose profits from Marathon's and TRW's business in the amount of $9,000 in the past and a like amount in the future.

The trial court concluded that irreparable harm to Wackenhut was either presumed from DeSantis' breach of the agreement under Florida law, or established as a matter of law because of the absence of an adequate legal remedy for breach of the agreement under Texas law. Accordingly, the trial court permanently enjoined DeSantis from competing with Wackenhut, and RDI from employing DeSantis to compete with Wackenhut, for two years from the date DeSantis left Wackenhut in an area reduced by the trial court from the forty counties stated in the agreement to the thirteen counties found by the trial court to be reasonably necessary to protect Wackenhut's interest. The trial court also permanently enjoined DeSantis from divulging Wackenhut's client list or proprietary information, and RDI from using any proprietary information of Wackenhut's acquired through DeSantis. The trial court denied all relief requested by DeSantis and RDI, based upon the jury's finding that DeSantis had breached his agreement with Wackenhut. The trial court awarded Wackenhut attorney's fees and costs.

The court of appeals affirmed the judgment of the trial court in all respects.

II

We first consider what law is to be applied in determining whether the noncompetition agreement in this case is enforceable. Wackenhut contends that Florida law applies, as expressly agreed by the parties. DeSantis argues that Texas law applies, despite the parties' agreement.

A

This Court has not previously addressed what effect should be given to contractual choice of law provisions. We begin with what Chief Justice Marshall referred to as a principle of "universal law ... that, in every forum, a contract is governed by the law with a view to which it was made." Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 48, 6 L.Ed. 253 (1825). This principle derives from the most basic policy of contract law, which is the protection of the justified expectations of the parties. See...

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