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

In Texas a party seeking a temporary restraining order can do so ex parte - without the presence of the other side. In Dallas, most cases require that Plaintiff seeking the TRO provide the other side with the actual pleadings and a proposed Temporary Restraining Order two hours before any hearing.

When the notice for a TRO appears, do not ignore it. Call the company’s lawyer immediately, because once a TRO is entered, it sets the tone for the lawsuit and is difficult to undo. 

TROs are frequently used in non-compete cases. If the party ignores the notice of the TRO, it is essentially allowing the party seeking the TRO to have an unencumbered conversation with the Court where there is no defensive argument. Depending up on the Judge, there is a high likelihood by simply meeting the elements of the TRO, they will get the relief they are requesting. This could result in the shutdown of the business and end up costing the Defendant a substantial amount of money. The problem is, if the TRO is entered, the Defendant will either have to move to dissolve the TRO (which is costly) or appear for an injunction hearing in two weeks and have a mini-trial, also costly. 

More importantly, the Plaintiff has been permitted to set the tone for the lawsuit and can tell the Judge all the bad things the Defendant has done whether or not they are actually true. An application for a TRO must be treated seriously and addressed. It is very difficult to rewind the clock on the TRO process.

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#1: Employers can't enforce non-competes when they terminated the employee.

Wrong - Assuming the non-compete satisfies Texas law, it can survive termination or resignation.  Most agreements will spell this out in the agreement, some do not.  (Now of course this also assumes the firing was legal, i.e., not based on race, national origin, gender, etc.) 

This makes sense in most cases.  What if there is an employee who purposely gets fired so they can go out and compete - it happens.  Should the employer be penalized because they fired the employee - no.  Now, what about  a situation where the employer merely fires the employee to gain some tactical advantage in the marketplace and then enforces the non-compete?  A judge asked to enforce a non-compete on facts like that may have a different view on enforcing the non-compete in the context of a temporary restraining order and injunction.

The balance of non-compete cases are resolved early on, either through a TRO or injunction.  TROs and injunctions force the parties to: (1) spend significant fees early on in the process; (2) get in front of the judge; and (3) negotiate.  Parties looking to defend or enforce a non-compete should be considering what the optics will look like to the Court in the context of injunctive relief - usually a situation where the employer is attempting to keep the employee from working for a new employer. 

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It’s not every day that a Dallas district court spars with the High Court in London over the sale of the Liverpool Football Club.  But, that is exactly what happened last week.  For those who are not familiar with Tom Hicks, he is presently the owner of the NHL's Dallas Stars, formerly the owner of the Texas Rangers, and now former Liverpool co-owner.   

Last week, Hicks’ business entities instituted a law suit here in Dallas to essentially stop the sale of Liverpool FC.  (The petition and temporary restraining order are below for review.)   Liverpool was founded in 1892 and is worth approximately $822 million according to Forbes.  With significant debt owed to the Royal Bank of Scotland, Hicks made the decision to sell Liverpool.  The details and goings on of the proposed sale are set forth within the petition. 

Utimately, the board of directors of the company that owns Liverpool was set to approve the sale of the club to strangely enough, John Henry and the New England Sports Group - the owners of the Boston Red Sox.  

In response to the impending sale, Hicks filed the aforementioned lawsuit stating that “Plaintiffs bring this suit to save them from an epic swindle at the hands of rogue corporate directors and their co-conspirators.”  Hicks didn't think Henry was going to pay enough for the team.

On Wednesday of last week, Judge Jim Jordan of the 160^th Court here in Dallas entered a temporary restraining order that prevented the sale from going through.  In response, the following day, the British High Court entered an anti-suit injunction giving Hicks a deadline to end the Texas suit.  (Take a look at the Guardian newspaper's blog on the events for more detail.)   Ultimately, Hicks gave up on the TRO but has vowed to fight another day.  The sale to Henry went through.

 It is amazing that a Texas court would intervene in such a dispute.  It would be akin to a British court meddling with the sale of the Cowboys.  But, it highlights the nature of a temporary restraining order proceeding in Texas.  With verified affidavits, a Plaintiff can apply for a TRO without the other side being there - even when it comes to the sale of a British football club.  

Liverpool Petition & TRO

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I liked Jay Shepherds' remarks in Eight Ways to Lose a Non-Compete Case blog entry.    Here they are with my thoughts in italics:

• Putting too much faith in the belief that the court will enforce the language of the non-compete agreement as written.
• Trying to enforce a non-compete against employees who really don't possess any confidential information or customer relationships.   Does the employee really have trade secrets?
• Drafting the non-compete too broadly.
• Focusing only on geography, duration, and scope of the non-compete rather than on the existence of protectable interests. 
• Waiting too long to file.
• Asking for an injunction before you've developed enough evidence. Texas permits TROs and a party can secure limited discovery for the injunction hearing.
• Filing in the wrong jurisdiction. If you want to enforce a non-compete file in the jurisdiction where the former employee is based or working.
• Focusing on the law instead of on the story of the case.

I agree with most of the eight but here is what I would add:

1. Know the law from state to state, the enforceability of a non-compete in Texas is quite different from California;
2. Make sure the state law you want will control.  Along the same lines, if your non-compete specifies Texas law and the employee is in California, make sure the choice-of-law provision will stick;
3. Don't wait to file.  Sometimes you may have to file a lawsuit and seek an injunction before you have all the evidence - but filing early can protect your business and possibly make your former employee think twice about violating the non-compete.
4. Contact your clients.  Just because your company's contact person with the client has departed doesn't mean the business will go.  Call your clients and be up front with what has occurred and how valuable their business is to your company.
5. Marshall your evidence.  Odds are your departing employee began preparing to compete before they left your company.  See if they left a papertrail.  (email, phone calls, accessing company databases, and printing out company information)
6. Remember your targets.  Not only the employee who left, but the company they left for or formed.

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