Tmc Worldwide, L.P. v. Gray
| Decision Date | 26 May 2005 |
| Docket Number | No. 01-04-00624-CV.,01-04-00624-CV. |
| Citation | 178 S.W.3d 29 |
| Parties | TMC WORLDWIDE, L.P., Appellant, v. Richard GRAY, Appellee. |
| Court | Texas Supreme Court |
Bennett S. Bartlett and T. Brooke Farnsworth, Farnsworth & VonBerg, Houston, for Appellant.
Christine R. Thrash, Richard Joseph Tholstrup, Houston, for Appellee.
Panel consists of Justices NUCHIA, HANKS, and HIGLEY.
Appellant, TMC Worldwide, L.P., appeals from the denial of its application for a temporary injunction in its suit to enforce a non-competition covenant and misappropriation of trade secrets. See TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(4) (Vernon Supp.2004-2005). In two points of error, TMC argues that the trial court abused its discretion by not enjoining Richard Gray, appellee, (1) from continuing to use TMC's trade secrets in competition with TMC and (2) from continuing to compete against TMC in violation of Gray's covenant not to compete. We affirm.
Glenn Atkinson was the sole owner of Automatic Insect Control Enterprises, Inc. (AICE), a business that installed a nozzle placement system around homes that had a time-released emission of insecticides to eliminate mosquitos and other biting insects around the house. Atkinson explained that the business survived on referrals and the monthly maintenance of the systems.1
In June 2001, Richard Gray signed a confidentiality agreement and became an at-will marketing consultant for AICE. AICE operated under the business name Champions Mosquito Control ("Champions") in Houston. The confidentiality agreement contained a covenant not to compete and provided as follows:
Whereas, [Gray] would like to receive and review confidential information relating to the products and business of AICE, AICE agrees to provide such information with absolute performance of the following points:
1. [Gray] agrees to accept and maintain in confidence all trade secrets, formulas and other confidential business information which [Gray] receives during consultation with AICE and further agrees to protect the same against disclosures to unauthorized persons.
2. In addition, [Gray] agrees not to use, directly or indirectly, for [his] own benefit or for the benefit of any other person, firm, corporation, etc., any confidential business information, trade secrets or formulas disclosed to [Gray] during or as a result of consultation with AICE or review of AICE's confidential information. It is understood that such information may be disclosed by [Gray] to employees of [his] company when necessary in furtherance of the relationship which exists between [Gray] and AICE; however, all such employees who receive such information shall agree to the terms of the AGREEMENT.
3. These obligations shall not apply to any information which is in the public domain as evidenced by printed publication and shall terminate if such information shall become public in such manner, except for such publications caused by an act or omission on [Gray's] part in breach of the AGREEMENT. In addition, these obligations shall apply to any information which is presently in [Gray's] possession or which may be disclosed to third persons without [Gray's] solicitation.
4. Notwithstanding the termination of this Agreement, [Gray] agrees that for a period of three (3) years following any termination they [sic] will not directly or indirectly in any capacity either as owner, partner, shareholder, broker, dealer, agent, employee, consultant, or otherwise, engage in the business of providing any program, service, equipment or product similar or competitive with the operation of AICE.
5. AICE and [Gray] agree that the foregoing restrictions which pertain to the three (3) year period immediately following the termination of this agreement, are reasonable, but recognize that damages in the breach of these restrictions will be difficult to ascertain and, therefore, agree that in addition to and without limiting any other remedy or right AICE may have, AICE shall have the right to an injunction against [Gray] issued by a Court of competent jurisdiction enjoining any such breach.
Atkinson testified that, when he started working for AICE, Gray signed this confidentiality agreement containing a non-compete clause, and he was given a customer list.2 However, Gray testified that he was not given a customer list until June 2002, one year after he started working for AICE.3 In October 2002, Gray stopped coming to work. He never quit and was not fired.
John Fleming, who lived in Corpus Christi, contacted Atkinson because Fleming was interested in getting a system from Champions. Don Carlson, a Champions consultant, went to Fleming's home and told him about the system. In November 2002, Carlson returned to give Fleming an estimate, and, this time, Carlson was accompanied by Gray. Gray and Carlson informed Fleming that they were "branching off" of the company and starting their own business to compete with Atkinson. They gave Fleming an estimate from Champions, and then under-cut it with a bid from their new venture, Affordable Automatic Mosquito Control (AAMC). Fleming testified that Gray told him that Champions was "going under." Fleming bought a system from AAMC. Fleming testified that Gray inquired if Fleming would be interested in becoming a distributor for AAMC. Fleming testified that he declined.
In January 2003, Fleming started his own mosquito business, TMC Worldwide, L.P., to service south Texas residents. During the first quarter of 2003, Fleming became aware of the fact that Gray possessed Champions's customer list. Fleming asked to see the list, but Gray would not let him. In November 2003, Fleming bought Champions's assets, including its customer list that contained more than 3000 names from across the United States.
In February 2004, Fleming received a telephone call from Mrs. Orloff, one of Fleming's customers, who informed him that she had received a letter from Gray. Mrs. Orloff faxed a copy of the letter to Fleming. The letter was generically addressed to "Resident," stated the various services offered by Gray's company, and offered a price for insecticide refills that was less than TMC's price. Fleming kept Mrs. Orloff as his customer by offering her a discount on the price of her insecticide refills. Fleming also testified that he later learned of at least one former Champions client, Mrs. West, who was now using Gray's services.
TMC filed suit, in which it alleged that Gray had breached his confidentiality agreement by using trade secrets — TMC's customer list — and by actively soliciting TMC's customers in violation of the non-compete clause. TMC also alleged that Gray misappropriated trade secrets. In its petition, TMC sought a temporary restraining order, a temporary injunction, and a permanent injunction. Gray's confidentiality agreement with AICE and a solicitation letter from Gray on AAMC letterhead were attached as exhibits to the petition.
In his answer, Gray generally denied the allegations and specifically stated that the covenant not to compete was unenforceable because (1) there was no separate enforceable agreement as is required by Texas Business and Commerce Code section 15.50(a),4 (2) Gray was an at-will employee, and (3) there was no geographic restriction in the covenant not to compete and no reasonable limitation on the scope of the activities to be restrained. Gray further denied misappropriating any trade secrets.
Three months after denying the temporary injunction and two weeks after TMC filed its appellate brief, the trial court issued the following combined findings of fact and conclusions of law.
1. Richard Gray, ("Gray"), executed a Confidentiality Agreement (the "Agreement") with Automatic Insect Control Enterprises, Inc. ("AICE") on or about June 10, 2001.
2. Gray was first given confidential information in the form of the AICE customer list ("Customer List") in June 2002, an entire year after the execution of the Agreement.
3. The restrictions in the Agreement were not reasonably limited.
4. There is no geographic restriction in the Agreement.
5. The Customer List contains customers located in most states in the United States.
6. The restrictions in the Agreement are not a reasonable limitation on the scope of activity to be restrained and the Agreement's limitations did impose a greater restraint than was necessary to protect AICE's business interests.
7. There was no separate, enforceable agreement between AICE and Gray for the primary purpose of obligating the [sic] Gray to render personal services.
8. In the alternative, AICE and Gray had an at-will, verbal commissioned sales agreement for Gray to provide sales services to AICE.
9. AICE's former owner, Glen Atkinson ("Atkinson") provided the Customer List to all contract sales personnel and at least one installation personnel.
10. The Customer List was not marked "CONFIDENTIAL."
11. Out-of-Date issues of the Customer List were not collected and/or destroyed by Atkinson or any other officer or employee of AICE.
12. AICE nor Atkinson made any effort to collect the Customer List from personnel or contractors who left employment with AICE.
13. Atkinson knew that Gray was competing with AICE at least as early as April/May 2003.
14. It is not known whether the 16 customers common to the Customer List and Gray's customer list were solicited by Gray, or sought Gray out because of a prior relationship with Gray.
15. TMC Worldwide, L.P. ("TMC") purchased the assets of AICE.
16. TMC's General Partner is John Fleming ("Fleming").
17. Fleming was aware of the Customer List in Gray's possession before TMC acquired the assets of AICE.
18. Fleming requested a copy of the Customer List in Gray's possession, from Gray, before TMC acquired the assets of AICE.
19. Atkinson took no or insufficient action that would indicate a concern for protecting the distributed copies of the...
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