Zep Mfg. Co. v. Harthcock

• Decision Date: 16 January 1992
• Docket Number: No. 05-90-01554-CV,05-90-01554-CV
• Citation: 824 S.W.2d 654
• Parties: ZEP MANUFACTURING COMPANY, Appellant, v. Gregory B. HARTHCOCK & Panther Industries, Inc., Appellees.
• Court: Texas Court of Appeals

Page 654

824 S.W.2d 654

ZEP MANUFACTURING COMPANY, Appellant, v. Gregory B. HARTHCOCK & Panther Industries, Inc., Appellees.

No. 05-90-01554-CV.

Court of Appeals of Texas,

Dallas.

Jan. 16, 1992.

Tori Smith Levine, Mark J. Zimmermann, Dallas, for appellant.

Celeste L. Frank, George C. Dunlap, Dallas, for appellees.

Before STEWART, OVARD, and CHAPMAN, JJ.

OPINION

STEWART, Justice.

Zep Manufacturing Company appeals from a summary judgment in favor of Gregory B. Harthcock and Panther Industries, Inc. ¹ on Zep's claims against Harthcock for breach of an employment contract and against Panther for tortious interference with contract. In seventeen points of error, Zep complains that the trial court erred in granting summary judgment. We affirm in part, reverse and render in part, and reverse and remand in part.

FACTUAL BACKGROUND

Zep and Panther compete in the manufacture and sale of industrial chemicals. Each company develops its own chemical formulas, which distinguish it in the chemical industry. These formulas generally are not patented because patents are expensive and require the disclosure of the company's formula. Zep seeks to protect its chemical formulas and other proprietary information by having its employees sign an employment agreement.

In April 1987, Zep hired Harthcock as a chemist. His duties included quality control of plant production and analyses of competitive products. Harthcock signed an employment agreement which contained, among other things, the noncompete and nondisclosure covenants at issue here. Zep trained Harthcock as an industrial chemist ² and gave him access to Zep's chemical formulas.

In May 1989, Daniel Stultz, chairman of the executive committee at Panther, contacted Harthcock concerning an employment opportunity at Panther. When Harthcock told Stultz about his employment agreement with Zep, Stultz said that Panther would handle any legal matters that arose from Harthcock's employment with Panther. On May 26, 1989, Harthcock resigned from Zep. He subsequently began to work as a chemist for Panther.

On August 15 and October 18, 1989, Zep sent Harthcock and Panther notice that it believed that Harthcock's employment violated the employment agreement and that it intended to enforce the employment agreement. Harthcock continued to work for Panther.

In December 1989, Zep filed this lawsuit against appellees, alleging Harthcock's breach of the noncompete, nondisclosure, and nonsolicitation covenants ³ contained in the employment agreement; Panther's tortious interference with contractual relations; and unfair competition. On December 13, 1989, the trial court granted Zep's request for a temporary restraining order. On December 22, 1989, the trial court entered an agreed temporary injunction restraining Harthcock from, among other things, knowingly or intentionally disclosing any of Zep's trade secrets or confidential information.

On July 27, 1990, appellees filed their motion for summary judgment, alleging the following grounds:

1. The noncompete covenant is unenforceable as a matter of law as not being ancillary to an otherwise enforceable agreement.

2. The noncompete covenant is an unreasonable restraint on trade and unenforceable on the grounds of public policy.

3. The nondisclosure covenant is unenforceable as a matter of law because it is part of and operates in conjunction with an otherwise unenforceable noncompete covenant and/or contains an unreasonable period of time and has no geographical limits to its enforceability.

4. Zep cannot base its action for damages for tortious interference against Panther on Harthcock's unenforceable noncompete covenant and nondisclosure agreement.

On November 2, 1990, the trial court rendered judgment granting appellees' motion for summary judgment on all of Zep's claims.

STANDARD OF REVIEW

In reviewing a summary judgment record, this Court applies the following standards:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). For the defendant as movant to prevail on a summary judgment, it must either (1) disprove at least one element of the plaintiff's theory of recovery or (2) plead and conclusively establish each essential element of an affirmative defense, thereby rebutting the plaintiff's cause of action. Traylor v. Unitedbank Orange, 675 S.W.2d 802, 804 (Tex.App.--Beaumont 1984, writ ref'd n.r.e.). A matter is conclusively established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence. Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex.1982). The question on appeal is whether the summary judgment proof establishes as a matter of law that there is no genuine issue of fact as to one or more of the essential elements of the cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970). When, as here, the trial court's judgment does not specify the grounds relied upon for its ruling, summary judgment will be affirmed if any of the grounds advanced in support of summary judgment is meritorious. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989).

ENFORCEABILITY OF THE NONCOMPETE COVENANT

Panther alleged as grounds for summary judgment that the noncompete covenant was unenforceable because it is not ancillary to an otherwise enforceable agreement and because it is an unreasonable restraint on trade and, thus, unenforceable on grounds of public policy.

Courts generally disfavor noncompete covenants because of the public policy against restraints of trade and the hardships resulting from interference with a person's means of livelihood. Martin v. Linen Sys. for Hosps., Inc., 671 S.W.2d 706, 709 (Tex.App.--Houston [1st Dist.] 1984, no writ). Section 15.50 of the Texas Business and Commerce Code provides that a noncompete covenant is enforceable if it:

(1) is ancillary to an otherwise enforceable agreement but, if the covenant not to compete is executed on a date other than the date on which the underlying agreement is executed, such covenant must be supported by independent valuable consideration; and

(2) contains reasonable limitations as to time, geographical area, and scope of activity to be restrained that 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(1)-(2) (Vernon Supp.1992).

A. Ancillary Requirement

In the first three points, Zep contends generally that the trial court erred in granting appellees' motion for summary judgment because the noncompete and nondisclosure covenants are ancillary to a valid and enforceable employment agreement. Zep contends that the employment agreement is a satisfaction, not an at-will, contract and is therefore "an otherwise enforceable agreement." Thus, it asserts, the noncompete covenant is ancillary to an enforceable contract. Appellees, on the other hand, argue that the employment agreement is ancillary to an unenforceable at-will employment contract. They specifically argue that the employment agreement is at-will because it does not contain a definite term of employment and because the president of Zep can terminate Harthcock in his " 'sole discretion' at any time."

Paragraph 6 of the employment agreement provides for termination by Zep as follows:

If the President of Zep, in his sole discretion, determines that Employee's performance of duties hereunder is unsatisfactory, Employee's employment hereunder may be terminated by written notice from the President of Zep or his designee, and Employee shall receive Employee's salary for the two (2) months (including the month in which notice is given as one full month) following the giving of such notice.

(Emphasis added.) Paragraph 6 further provides for voluntary termination as follows: "[Harthcock] may terminate [his] employment hereunder upon thirty (30) days prior written notice to Zep, and in such event, [Harthcock] shall only be entitled to [his] salary through the effective date of termination."

Appellees argue that Zep cannot contend on appeal that the employment agreement is a satisfaction contract because it failed to raise this argument in its response to appellees' motion for summary judgment. See TEX.R.CIV.P. 166a(c) (issues not expressly presented to the trial court by written motion, answer, or other response not considered on appeal as grounds for reversal). However, appellees, as summary judgment movants, had the burden to establish the unenforceability of the employment agreement as a matter of law. Thus, Zep was required to raise a fact question on this issue only if appellees first established as a matter of law that the employment agreement is at-will.

It is undisputed that the employment agreement does not provide a definite term of employment. ⁴ This alone, however, does not make the employment agreement an unenforceable employment-at-will contract. See Ramos v. Henry C. Beck Co., 711 S.W.2d 331, 336 (Tex.App.--Dallas 1986, no writ). An employment contract is at-will unless the parties limit the employer's right to terminate the employee at will. Benoit v. Polysar Gulf Coast, Inc., 728 S.W.2d 403, 406 (Tex.App.--Beaumont 1987, writ ref'd n.r.e.). An employment-at-will contract is not an otherwise enforceable agreement. Travel Masters, Inc. v. Star Tours, Inc., 35 Tex.Sup.Ct.J. 254, 255, 1991 WL 269039, (Dec. 18, 1991); see Martin v. Credit Protection Ass'n, 793 S.W.2d 667, 669-70 (Tex.1990).

The employment agreement allows Zep to terminate Harthcock's employment if, in the Zep...