Smooth Transitions : Rob Radcliff : Texas Non-Compete Lawyer & Attorney : Langley Weinstein LLP Law Firm : Dallas Employment & Employee Departures : Smooth Transitions Law Blog

A recent non-solicit case out of the Fifth District Court of Appeals in Dallas addressed the trial court’s denial of an injunction. 

The Facts

The Defendants were both employed by Jon Scott Salon as hairstylists. They signed Employment Agreements that contained several covenants addressing confidential information and the non-solicitation of clients after termination.

After resigning from Jon Scott, the Defendants opened a new salon ten miles down the road and there was evidence that they were soliciting  Jon Scott customers.

The Lawsuit

Jon Scott filed a lawsuit and obtained a temporary restraining order. The trial court denied the request for the injunction because the “non-solicitation clause in [appellant’s] employment agreement with [Defendants] was unenforceable as a matter of law because [the] employment agreement with [Defendants] were ‘at will.’  Jon Scott took the issue up on appeal.

The Appeal

The Fifth District Court of Appeals reversed and remanded, holding that the trial court was in error when it ruled that Jon Scott was not entitled to an injunction solely because the employment agreements at issue were “at will.” 

The basis for the trial court's ruling is unclear.  Texas courts have found non-solicitation agreements enforceable in the context of “at will” employment for many years. Unfortunately it doesn’t help Jon Scott Salon because they are still going to have to put on evidence and attempt to secure a temporary injunction from the trial court. The take away for the Defendants is not to specify in the Order denying the injunction why it is being denied. 

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Happy Holidays to you and your family.  Below are a few of my favorite deposition clips:

This back and forth is priceless:

 The masked man deposition:

My all time favorite with Texas legend Joe Jamail:

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Verizon and AT&T nonsuited lawsuits pending in New York and Atlanta today which largely stemmed over the companies' respective 3G phone service.  Verizon filed a declaratory judgment lawsuit in July requesting a New York court to find Verizon's claim that its 3G network was the most reliable was accurate.   AT&T filed a lawsuit in November claiming Verizon's "There's a A Map for That" ad campaign was misleading.  It also attempted to obtain a temporary restraining order shutting down the ad campaign but the Court denied the request. 

Verizon's campaign was a response to AT&T's iphone success  and the "There's an app for that" campaign.  It is unclear why the lawsuits were dismissed. The Judge's denial of AT&T's application for a temporary restraing order certainly did not bode well for future success in the Atlanta suit.

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While I don't often discuss cases on Texas procedure, In Re Weekly Homes, which was published on August 28, 2009 is worth comment.  Prior to Weekly Homes there had been no guidance from the Texas Supreme Court on electronic discovery and little discussion by Texas intermediate appellate courts.  The opinion addresses a request by a party to inspect the computer hard drives of another during discovery. 

After review of the facts in the case and federal precedent on electronic discovery the Texas Supreme Court ruled:

— the party seeking to discover electronic information must make a specific request for that information and specify the form of production. Tex. R. Civ. P. 196.4.

 — The responding party must then produce any electronic information that is “responsive to the request and . . . reasonably available to the responding party in its ordinary course of business.” Id.

 — If “the responding party cannot — through reasonable efforts — retrieve the data or information requested or produce it in the form requested,” the responding party must object on those grounds. Id.

 — The parties should make reasonable efforts to resolve the dispute without court intervention. Tex. R. Civ. P. 191.2.

 — If the parties are unable to resolve the dispute, either party may request a hearing on the objection, Tex. R. Civ. P. 193.4(a), at which the responding party must demonstrate that the requested information is not reasonably available because of undue burden or cost, Tex. R. Civ. P. 192.4(b).

 — If the trial court determines the requested information is not reasonably available, the court may nevertheless order production upon a showing by the requesting party that the benefits of production outweigh the burdens imposed, again subject to Rule 192.4’s discovery limitations.

 — If the benefits are shown to outweigh the burdens of production and the trial court orders production of information that is not reasonably available, sensitive information should be protected and the least intrusive means should be employed. Tex. R. Civ. P. 192.6(b). The requesting party must also pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information. Tex. R. Civ. P. 196.4.

 — Finally, when determining the means by which the sources should be searched and information produced, direct access to another party’s electronic storage devices is discouraged, and courts should be extremely cautious to guard against undue intrusion.

So requests should specify what should be produced and how it should be produced.  If the requested production is going to be expensive, the requesting party has to pay.  Finally, direct access to another party's electronic devices is discouraged.  Of course, neutral third parties can be used to mirror hard drives or computers.

In the context of non-compete cases where a defendant has started a competing venture,  the departing employee's hard-drive may hold important information.  The hard-drive may have business plans, incorporation documents, potential customer contacts.  All of these items and more will allow the former employer to determine the chronology of events and potentially develop evidence of theft of trade secrets.  There is more to electronic discovery than email.

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I'll let the constitutional law scholars breakdown the Supreme Court's ruling in Massey Coal from Monday, but here is a synopsis from the Wall Street Journal Law Blog:

In a nutshell, the court ruled Monday that a West Virginia justice shouldn’t have participated in state court decisions overturning a $50 million judgment against Massey Coal, whose chief executive had been a major financial supporter of the justice’s campaign for office. The decision effectively creates a new constitutional recusal standard for judges who take contributions to fund their election campaigns.

So what does that mean for recusal cases here in Texas?  There has been plenty of scrutiny in Texas of donations to justices of the Texas Supreme Court but no change to our current system of electing judges.  But, we also elect our civil and criminal district court judges, county court judges, justices of the peace, and intermediate appellate court justices to name a few.  Since 1995, donations to Judge's campaigns have been limited to $5000 per family and $300,000 from political action committees.  Meaning, a donation of $3 million dollars, as was the case in Massey Coal, is unlikely. 

As long as campaigns are publicly financed there will always be allegations that donations lead to favorable rulings from the Texas Supreme Court on down to the justice of the peace.  The question remains does anyone actually care?  The solutions usually suggested are publicly financed elections, non-partisan elections, or retention elections.  It seems unlikely that the Massey Coal opinion will lead to the critical mass necessary to provoke such a change.  So for now the best rule of thumb is to make sure your donations to the presiding judge are equal to what the other party or lawyer on the other side of the docket has made.

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