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Obtaining Injunctive Relief Based On A Texas Non-compete Agreement (Part II)

October 22, 2013

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

To obtain injunctive relief based on a non-compete agreement, most courts have held that the employer must still prove that it will suffer irreparable injury if an injunction is not granted. Specifically, the general rule stated is that a covenant not to compete “will not be enforced by an injunction where the party seeking the injunction has failed to show that without injunctive relief he will suffer irreparable injury for which he has no adequate legal remedy.” Reach Group, L.L.C., 173 S.W.3d at 837-38; see also Cardinal Health Staffing Network, Inc., 106 S.W.3d at 241. That is not always an easy burden to carry, and provides a basis for a court to deny injunctive relief if it wants to do so without attacking the validity of the noncompetition agreement. See Primary Health Physicians, P.A. v. Sarver, 390 S.W.3d 662, 665-66 (Tex. App.-Dallas 2012, no pet.) (affirming district court’s denial of a temporary injunction in a noncompetition case because the employer failed to prove irreparable harm); Cardinal Health Staffing Network, Inc., 106 S.W.3d at 241 (holding that since employer could calculate its damages, it failed to prove irreparable harm even though its non-compete agreement was valid and enforceable); Criterion Brock, Inc. v. Aguirre, Civil Action No. H–11–1877, 2011 WL 2517319, at *4 (S.D. Tex. June 23, 2011) (reaching same conclusion); Shoreline Gas, Inc. v. McGaughey, No. 13-07-364-CV, 2008 WL 1747624, at *12 (Tex. App.–Corpus Christi April 17, 2008, no pet.) (not designated for publication) (although non-compete agreement was enforceable, employer was not entitled to a temporary injunction because it failed to prove probability of irreparable injury); W.R. Grace & Co. – Conn v. Taylor, No. 14-06-01056-CV, 2007 WL 1438544 (Tex. App.–Houston [14th Dist.] May 17, 2007, no pet.) (same). However, there are two relevant notes here. First, it is worth noting that Texas law provides that “proof that a highly trained employee is continuing to breach a non-competition covenant gives rise to a rebuttable presumption that the applicant is suffering irreparable injury.” In Electro-Motor, Inc. v. Industrial Apparatus Services, Inc., 390 B.R. 859, 867 (Bankr. E.D. Tex. 2008) (quoting Cardinal Health Staffing Network, Inc., 106 S.W.3d at 236). Second, some Texas state courts have done away with the irreparable injury requirement altogether. As one court stated in 2012 in an unpublished decision:

Under the common law, a party seeking an injunction must show that without injunctive relief he will suffer irreparable injury for which he has no adequate legal remedy. Tom James Co. v. Mendrop, 819 S.W.2d 251, 252 (Tex. App. – Fort Worth 1991, no writ). However, in its motion for rehearing, Heritage notes that if a party relies on a statute that defines the requirements for injunctive relief, then the express statutory language supersedes common law requirements. Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 795 (Tex. App. – Houston [1st Dist.] 2001, no pet.). The Covenants Not to Compete Act provides for “damages, injunctive relief, or both” for a breach of a non-compete by the promisor. TEX. BUS. & COM. CODE § 15.51(a). Thus, a party seeking injunctive relief under the Covenants Not to Compete act does not have to show irreparable injury for which he has no adequate legal remedy as a prerequisite to injunctive relief. See Letkeman v. Reyes, 299 S.W.3d 482, 486 (Tex. App. – Amarillo 2009, no pet.) (“It is enough simply to prove a distinct or substantial breach.”); see also TEX. BUS. & COM. CODE § 15.52 (stating that “the procedures and remedies … provided by Section 15.51 … are exclusive and preempt any other criteria for enforceability of a covenant not to compete or procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise”).

Heritage Operating, L.P. v. Rhine Brothers, LLC, NO. 02-10-00474-CV, 2012 WL 2344864, at *6 (Tex. App. – Fort Worth June 21, 2012) (unpublished). But see Sarver, 390 S.W.3d at 665 (holding that the Covenants Not to Compete Act does not preempt the requirements for obtaining temporary injunctive relief and citing multiple cases in support of its holding).

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