Evan's World Travel, Inc. v. Adams

• Decision Date: 01 September 1998
• Docket Number: No. 06-97-00057-CV,06-97-00057-CV
• Citation: 978 S.W.2d 225
• Parties: EVAN'S WORLD TRAVEL, INC., Appellant, v. Paula ADAMS and Marshall Pro-Travel, Appellees.
• Court: Texas Court of Appeals

Page 225

978 S.W.2d 225

EVAN'S WORLD TRAVEL, INC., Appellant, v. Paula ADAMS and Marshall Pro-Travel, Appellees.

No. 06-97-00057-CV.

Court of Appeals of Texas Texarkana.

Argued May 21, 1998.

Decided Aug. 13, 1998.

Rehearing Overruled Sept. 1, 1998.

Gregory P. Grajczyk, Harbour, Smith, Harris, Longview, for appellant.

Bailey c. Moseley, Moseley and Davis, Associates, Marshall, for Marshall Pro-Travel.

Sam R. Moseley, Marshall, for Paula Adams.

Before CORNELIUS, C.J., and GRANT and ROSS, JJ.

OPINION

ROSS, Justice.

Evan's World Travel (Evan's Travel) brought suit against a former employee, Paula Adams (Adams), to enforce a covenant not to compete. The trial court found that the covenant was not enforceable. In addition, the trial court awarded attorney's fees to Adams and Adams' subsequent employer, Marshall Pro-Travel (Pro-Travel), an intervenor in the suit.

Evan's Travel brings fourteen points of error. Issues presented include whether the trial court erred in determining that the covenant not to compete was unenforceable and in finding that: (1) the employment contract was terminable at will; (2) the covenant not to compete was not ancillary to an otherwise enforceable agreement; (3) Evan's Travel sought to enforce the agreement to a greater extent than necessary; (4) Evan's Travel knew that the geographical area restrictions were not reasonable; and (5) the primary purpose of the covenant was to restrain trade. Remaining points challenge the legal and factual sufficiency to support various findings by the trial court. Finally, Evan's Travel asserts that the trial court erred in allowing Pro-Travel to intervene and in awarding attorney's fees to both Adams and Pro-Travel for purposes of appeal.

I. FACTS

In September 1993, Paula Adams, a travel agent with ten years of experience, met with Evan Shelan, the owner of Evan's World Travel, to discuss employment as a travel agent with his company. At the time of Adams' interview, Shelan operated offices in Longview, Marshall, and Kilgore, Texas. At this initial meeting, Shelan explained to Adams that a noncompetition agreement would be necessary between the two as an express condition of her employment. Adams agreed to this condition. She began working for Evan's Travel in October 1993 and, shortly after beginning work, signed the employment agreement which contained the noncompete clause.

The agreement purported to set a term of employment for three years. The agreement also stated that Evan's Travel would share confidential information with Adams. In return, Adams agreed not to disclose such confidential information or take any of Evan's Travel's documents upon termination of the term of employment. Adams also agreed not to engage or participate in any business that would be in competition with Evan's Travel for a period of three years after she left Evan's Travel. This agreement encompassed the geographical region of Harrison and Gregg counties, the state of Texas, or any state in which Evan's Travel conducted business during the term of employment. Further, Adams agreed not to call on, solicit, or take away Evan's Travel's customers for the same three-year period.

Adams was placed at the Marshall, Texas, office in Harrison County and performed well for Evan's Travel. She was typically one of the top producers at the travel agency. Her responsibilities included servicing existing Evan's Travel customers and developing new ones. She had access to customer files and information and was trained by Evan's Travel in its own business protocols and office procedures. At the time she left Evan's Travel, Adams was the manager of the Marshall office.

On October 3, 1996, Adams resigned from Evan's Travel and went to work for Marshall Pro-Travel, a new competing travel agency in Marshall. Evan's Travel experienced a significant drop in business after Adams' departure. Evan's Travel sent a letter to Adams insisting that she honor the noncompetition clause of the employment agreement. Adams refused. Evan's Travel then filed this lawsuit seeking a declaration that the noncompetition agreement and related restricted covenants were valid and enforceable. Evan's Travel also sought an order preventing Adams from competing with it for the three-year period contained in the employment agreement.

A bench trial on the merits was held on February 10, 1997. The trial court held for Adams and awarded attorney's fees to both Adams and Pro-Travel. Evan's Travel appealed.

II. ANALYSIS

A. Standard of Review

When a party makes challenges to the legal sufficiency of the evidence following a bench trial, where findings of fact and a complete clerk's record are available, the trial court's findings of fact are reviewable for legal and factual sufficiency of the evidence to support them by the same standards as are applied in reviewing the legal or factual sufficiency of the evidence supporting a jury finding. Okon v. Levy, 612 S.W.2d 938, 941 (Tex.Civ.App.-Dallas 1981, writ ref'd n.r.e.). A party having the burden of proof, in attempting to overcome an adverse fact finding as a matter of law, must surmount two hurdles. First, the record must be examined for evidence that supports the finding, while ignoring all evidence to the contrary. Second, if there is no evidence to support the finding, then the entire record must be examined to see if the contrary proposition is established as a matter of law. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). When reviewing the trial court's findings to determine the factual sufficiency of the evidence, this Court must consider and weigh all the evidence, and should set aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). We may also review the conclusions of law drawn from the trial court's findings 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).

B. Covenant Not to Compete

The legislature enacted the Covenants Not to Compete Act in 1989, which largely supplanted the common-law development of this area of law up to that time. TEX. BUS. & COM.CODE ANN. §§ 15.50, et seq. (Vernon Supp.1998). A covenant not to compete is a restraint of trade and will not be enforced unless it is reasonable. Travel Masters, Inc. v. Star Tours, Inc., 827 S.W.2d 830, 832 (Tex.1991). A covenant not to compete is enforceable if (1) it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made, and (2) the limitations of time, geographical area, and scope of activity 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. The burden of proof lies with the promisee-the employer-to demonstrate that the covenant meets the statutory criteria. TEX. BUS. & COM.CODE ANN. § 15.51; John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d 80, 85 (Tex.App.-Houston [14th Dist.] 1996, writ denied).

In the case at bar, the trial court found that the agreement was not ancillary to an otherwise enforceable agreement. Evan's Travel challenges this conclusion and the findings which support it. In order to analyze this issue, we must make two initial inquiries: (1) Is there an otherwise enforceable agreement? and (2) Is the covenant not to compete ancillary to or part of that agreement at the time the agreement was made? Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 644 (Tex.1994); see TEX. BUS. & COM.CODE ANN. § 15.50.

1. Is this an otherwise enforceable agreement?

The first step in this analysis is to determine whether an otherwise enforceable agreement existed between Adams and Evan's Travel. An employment at will relationship is not an otherwise enforceable agreement. Light, 883 S.W.2d at 644; Travel Masters, Inc., 827 S.W.2d at 832. The trial court found that Adams was an at-will employee because the trial court determined that the employment contract between Adams and Evan's Travel was terminable at will by either party.

Texas has long followed the employment at will doctrine which allows either the employer or employee to terminate the employment relationship at any time for any reason. Federal Express Corp. v. Dutschmann, 846 S.W.2d 282, 283 (Tex.1993); East Line & R.R.R. Co. v. Scott, 72 Tex. 70, 10 S.W. 99, 102 (1888). In order to alter the employment at will presumption, a writing which attempts to alter the presumption must, "in a meaningful and special way," limit the employer's right to terminate the employment at will. Lee-Wright, Inc. v. Hall, 840 S.W.2d 572, 577 (Tex.App.-Houston [1st Dist.] 1992, no writ) (citing Benoit v. Polysar Gulf Coast, Inc., 728 S.W.2d 403, 406 (Tex.App.-Beaumont 1987, writ ref'd n.r.e.)). In such an employment contract, the employer must unequivocally indicate a definite intent to be bound not to terminate the employee except under clearly specified circumstances. Montgomery County Hosp. Dist. v. Brown, 965 S.W.2d 501, 502-03 (Tex.1998).

The pertinent part of the employment agreement between Adams and Evan's Travel reads as follows:

5. Term. The "Term of Employment," as used herein, shall mean a period commencing Nov. 2, 1993 and ending on the third anniversary of such date (the "Ending Date"); provided however that the occurrence of any of the following prior to the Ending Date shall result in the immediate termination of the Term of Employment, but shall not result in the termination of this Agreement:

(i) the termination by the Employer of the Term of Employment for any reason, including, but not limited to, the commission by the Employee of any act constituting a dishonest or other act of material or a fraudulent act or a felony under the laws of any state or of the United States to which the Employer or Employee is subject, (and act results or is intended to result...