Tuesday, May 26, 2009
Don't Mess With Texas (Courtroom Sciences v. Andrews)
In a relatively short amount of time, Texas went from a state where an employer virtually never was able to enforce a non-compete agreement against a departed at-will employee, to one where there seems to be a presumption that such a non-compete will be enforced. All this despite no legislative interference.
The case of Courtroom Sciences v. Andrews breaks no new legal ground, though it may be the first reported case to follow the predictable decision from the Texas Supreme Court in Mann Frankfort, about which I wrote some time ago. The beauty of this case is its non-sensical, sub-Three Stooges analysis - something all too familiar to lawyers who follow Texas non-compete cases.
Andrews, who worked in jury consultancy and trial services out of Chicago for CSI, signed an employment agreement with an array of restrictive covenants. They weren't terribly drafted, which meant she had no chance of winning. Essentially, they prohibited her from disclosing a range of confidential business information, soliciting CSI clients with whom she had a relationship, interfering with employee relationships, and working nationwide for a trial sciences consultancy firm. Other than the confidentiality restriction, the covenants lasted two years.
The court's analysis about the level of Andrews' violation of her agreement when she left abruptly to join DecisionQuest is predictably thin. It seemed to focus on her failure to return certain corporate information - not really defined at all - to CSI within 24 hours of her departure. It also seemed to suggest CSI lost business, though it's not clear Andrews solicited any clients to leave or if they just left CSI as a result of Andrews' resignation. The court didn't bother to give us that rather helpful bit of information.
Here's the richest part of this case, though. The court itself acknowledged that Texas law requires courts to modify covenants if they are unreasonable or overbroad in any respect. The court further discussed at length CSI's nationwide practice and how it would be unfair or illogical to put a geographic parameter on the non-compete. Then, despite enforcing the other activity covenants in the agreement, the court ignored the non-compete clause and did not restrain DecisionQuest from employing Andrews. Instead, it prohibited her from performing work for CSI clients through trial (in essence, what the non-solicitation clause barred), disclosing certain information unique to CSI, and soliciting employees of CSI (despite the absence of any evidence this actually took place).
So the end result of the non-compete clause was that it was not enforced despite the court's recognition that the law compelled enforcement.
Of all the inane and stupid commentary throughout the decision, however, the real head-scratcher comes in the "analysis" regarding Andrews' breach of her fiduciary duty as an employee of CSI. In citing the evidence supporting a finding in plaintiff's favor, the court actually had the temerity (or ignorance) to cite this fact: "[Andrews] obtained a 'fail-safe' contract insuring her income regardless of the result of this anticipated litigation."
Supposedly now, in Texas, it is a breach of fiduciary duty for an employee to negotiate a favorable contract with a new employer. I would argue this seems a bit ridiculous, but we've come to expect that from Texas courts.
Court: United States District Court for the Northern District of Texas
Opinion Date: 5/11/09
Cite: Courtoom Sciences, Inc. v. Andrews, 2009 U.S. Dist. LEXIS 39917 (N.D. Tex. May 11, 2009)