DeSantis v. Wackenhut Corp.

• Decision Date: 23 April 1987
• Docket Number: No. C14-85-804-CV,C14-85-804-CV
• Citation: 732 S.W.2d 29
• Parties: Edward DeSANTIS and Risk Deterrence, Inc., Appellants, v. The WACKENHUT CORPORATION, Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 29

732 S.W.2d 29

Edward DeSANTIS and Risk Deterrence, Inc., Appellants, v. The WACKENHUT CORPORATION, Appellee.

No. C14-85-804-CV.

Court of Appeals of Texas Houston (14th Dist.).

April 23, 1987.

Rehearing Denied May 28, 1987.

Jon Mercer, Theodore C. Flick, Houston, for appellants.

William H. Bruckner, Roxella T. Cavazos, Houston, for appellee.

Before DRAUGHN, JUNELL and ELLIS, JJ.

OPINION

JUNELL, Justice.

Edward DeSantis and Risk Deterrence, Inc. (appellants) appeal from a judgment granting a permanent injunction and attorney's fees to The Wackenhut Corporation (appellee) in a case involving the alleged breach of a non-compete agreement. We affirm the judgment of the trial court.

Appellants raise nineteen points of error on appeal. They argue that Wackenhut is not entitled to the injunction because it failed to prove irreparable injury and because the trial court erred in concluding that irreparable injury was presumed due to Florida "procedural" law. They allege that the non-compete agreement is an illegal and unenforceable restraint of trade under Texas law and that Wackenhut failed to prove the agreement was reasonably necessary to protect its business or that it was indeed breached. Appellants also challenge the denial of their counterclaims for damages, the grant of summary judgment on their tortious interference issue and the issuance of a directed verdict on their fraud and estoppel issues. Finally, appellants argue that the cumulative effect of the trial court's erroneous evidentiary rulings and trial administration was such as to deny appellants' right to due process and a fair trial by jury as provided by the Texas Constitution.

Edward DeSantis, who had both CIA and private industry security experience, was employed by The Wackenhut Corporation in August 1981 as area manager of the Houston office. As a condition of employment, DeSantis was required to sign a non-compete agreement. The agreement precluded him from engaging in any business or other activity that is competitive with the business conducted by Wackenhut within the geographical limits of the area office (a forty-county area including and surrounding Harris County) for a period of two years from his date of termination. The agreement also specified that DeSantis was not to disclose the list of Wackenhut's clients nor was he to divulge confidential or proprietary information. The parties further agreed "that any questions concerning interpretation or enforcement of this contract shall be governed by Florida law."

On March 15, 1984, DeSantis resigned from the company under threat of termination. He contends that he was forced out after disagreements with the head office about the profitability of the Houston office. Wackenhut contends that the resignation resulted from an unethical business solicitation by DeSantis. Following his resignation, DeSantis bought into a company which marketed security electronics, and he also formed Risk Deterrence, Inc. (RDI) to provide security consulting services and, ultimately, security guard services to a limited clientele.

In April 1984 DeSantis sent out letters announcing his new ventures to twenty or thirty companies, over one-half of which were Wackenhut clients. To the letters to Wackenhut clients he added a postscript disclaiming any intent to interfere with existing Wackenhut contracts. In October 1984 Marathon Oil Company notified Wackenhut that it was terminating its guard service contract with Wackenhut and then signed five-year security consulting and guard service contracts with RDI. At about the same time, another Wackenhut client, TRW-Mission Drilling Products, became unhappy with Wackenhut's service and requested that RDI submit a bid for the TRW security guard contract. When the temporary injunction was issued in this case, Marathon terminated its contracts, and DeSantis withdrew his TRW proposal from consideration.

Wackenhut sued for injunctive relief and monetary damages for breach of the non-compete agreement and tortious interference with contract and business relations. DeSantis and RDI counterclaimed. The trial court granted Wackenhut partial summary judgment on defendants' tortious interference counterclaim, and, later, a directed verdict on defendants' fraud and estoppel counterclaims. At trial Wackenhut withdrew its claim for damages based on tortious interference.

The trial court submitted five special issues to the jury. The jury found that DeSantis had breached the non-compete agreement by engaging in a competing business but had not breached the agreement by soliciting Wackenhut employees (Special Issue No. 1); that Wackenhut would not suffer irreparable harm were DeSantis not prevented from breaching the agreement (Special Issue No. 2); that Wackenhut had not treated DeSantis unfairly during his employment (Special Issue No. 3); that $18,000.00 would compensate RDI for the loss of the Marathon and TRW accounts (Special Issue No. 4); and that DeSantis had suffered no actual damages (Special Issue No. 5).

The trial court disregarded the jury's answers to Special Issues Nos. 2 and 4 and entered judgment for Wackenhut. DeSantis was permanently enjoined from competing with Wackenhut for two years; however, based on testimony in the temporary injunction hearing, the geographical area was reduced from forty counties to thirteen. He also was enjoined from disclosing client lists or divulging confidential information. RDI was permanently enjoined from divulging or using any confidential or proprietary information acquired through DeSantis by reason of his employment with Wackenhut. The company also was enjoined from employing DeSantis during a two-year period beginning March 29, 1984, in any capacity or for the performance of any activities that are competitive with the business conducted by Wackenhut in the designated thirteen counties. The permanent injunction expired on March 29, 1986.

In their first eight points of error appellants attack the granting of the permanent injunction. In point of error two they allege that the non-compete agreement is an illegal and unenforceable restraint of trade under both the common law and the Texas Free Enterprise and Antitrust Act of 1983, Tex.Bus. & Com.Code Ann. §§ 15.01-15.40 (Vernon Supp.1987). Underlying appellants' argument is their assertion that, contrary to the agreement that any questions concerning interpretation or enforcement of the contract were to be governed by Florida law, Texas law should apply.

The parties clearly agreed that Florida law would govern the terms of this agreement. An express agreement of the parties that the contract is to be governed by the laws of a particular state will be given effect if the contract bears a reasonable relation to the chosen state and no countervailing public policy of the forum demands otherwise. First Commerce Realty Investors v. K-F Land Co., 617 S.W.2d 806, 808-09 (Tex.Civ.App.--Houston [14th Dist.] 1981, writ ref'd n.r.e.); Woods-Tucker Leasing Corp. of Georgia v. Hutcheson--Ingram Development Co., 642 F.2d 744, 746, 750 (5th Cir.1981); Tex.Bus. & Com.Code Ann. § 1.105 (Vernon Supp.1987). The State of Florida has a reasonable relation to the non-compete agreement as Wackenhut's corporate headquarters are located in Coral Gables, Florida; DeSantis was interviewed and hired there; and the management of the Houston office seems to have been closely supervised from there. Furthermore, no overriding public policy of the State of Texas prohibits the application of Florida law. Non-compete agreements that do not impose upon the employee any greater restraint than is reasonably necessary to protect the business and good will of the employer have been enforced in this state. Weatherford Oil Tool Co. v. Campbell, 161 Tex. 310, 340 S.W.2d 950, 951 (1960). The recent Supreme Court decision in Hill v. Mobile Auto Trim, Inc., 725 S.W.2d 168 (1987), cited by appellants in a post-submission brief, does not vitiate such reasonable agreements. In that case the supreme court specified four criteria that a covenant not to compete must meet in order to be deemed reasonable and then found that the particular covenant at issue, which was contained in a franchise agreement, did not meet several of those criteria. Id. at 170-71.

Neither does the Texas Free Enterprise and Antitrust Act establish a public policy which prohibits the application of Florida law in this case. As will be discussed at greater length in our response to points of error thirteen through sixteen, contrary to appellants' assertion, that act does not render non-compete agreements unlawful in Texas.

Based on the foregoing discussion, the parties' agreement to be governed by Florida law should be given effect. Accordingly, Texas law is inapplicable (except to the extent discussed above), and point of error two is overruled.

In point of error three appellants declare the non-compete agreement to be overbroad and unreasonable. Although Florida law recognizes the common law prohibition against agreements in restraint of trade, it permits, by statute, the limited use of covenants not to compete. Fla.Stat. § 542.33 (1987); Silvers v. Dis-Com Securities, Inc., 403 So.2d 1133, 1135 (Fla. 4th DCA 1981). The statute provides that an agreement not to compete "within a reasonably limited time and area ... and so long as such employer continues to carry on a like business therein" is enforceable by injunction. Fla.Stat. § 542.33(2)(a) (1987). The only authority the court possesses over the terms of the agreement is to determine the reasonableness of its time and area limitations. More specifically, the court is not empowered to refuse to give effect to such a contract on the basis of a finding that enforcement of its terms would produce an unjust result in the form of an overly burdensome effect upon the employee. Twenty Four Collection, Inc. v. Keller, 389 So.2d 1062, 1063 (Fla. 3rd DCA 1980), pet. rev. dismissed, 419...