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What Does “Ancillary To An Otherwise Enforceable Agreement” Mean Under Texas Law? (Part VI)

September 27, 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.

Yesterday, we blogged about Marsh USA Inc. v. Cook, 354 S.W.3d 764, 774-76 (Tex. 2011). We wanted to note that the Texas Supreme Court’s ruling in Marsh was consistent with the Houston First Court of Appeals decision in Totino v. Alexander & Assocs., Inc., No. 01-97-01204-CV, 1998 WL 552818, (Tex. App.–Houston [1st Dist.] Aug. 20,1998, no pet.) (not designated for publication). In Totino, the Houston First Court of Appeals found that stock options involved an interest worthy of a competitive restraint. In that case, the evidence showed that the stock options awards were offered in recognition of the employee’s contributions to the employer’s business, were one part of a long-term employee incentive plan, and were meant to reaffirm management’s commitment to linking employee interests to those of the company’s shareholders. In other words, the options were offered to encourage the employee’s loyalty and continued employment. The Totino court held that this interest may be protectable through a competitive restraint, and upheld the noncompetition covenant as “ancillary to” the stock option agreement. See Totino, 1998 WL 552818, at *7.

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