Tuesday, August 25, 2009

Appellate Panel Splits on Enforceability of Noncompete Agreement

Majority of two on three-member appellate panel reverses the trial court’s order on summary judgment, enters judgment that the non-compete covenant is enforceable, and remands the cause to the district court for further proceedings. Dissenting justice would hold that the summary judgment evidence does not establish that employer's "confidential information" is worthy of protection and that the non-compete agreement between the former employee and the company is necessary to protect a legitimate business interest of the company.

Gallagher Healthcare Ins. Service, Inc. v. Vogelsang (Tex.App.- Houston [1st Dist.] Aug. 21, 2009)(Keyes) (enforceability of covenant-not-to-compete provision in employment agreement; noncompete held enforceable)
Disposition on appeal: Reverse trial court judgment and render judgment
Author of Majority Opinion: Justice Evelyn Keyes
Panel composition: Before Justices Terry Jennings, Evelyn Keyes and Laura Carter Higley
Appellate cause number: 01-07-00478-CV
Full case style: Gallagher Healthcare Insurance Services, Inc. v. Page M. Vogelsang, Michelle Friede, Patti Philippone, Trisha Birdsong, and Lockton Companies, Inc.
Court appealed from: Appeal from 133rd District Court of Harris County
Trial Court Judge: Hon. Lamar McCorkle

Dissenting Opinion by Justice Jennings in Gallagher Healthcare Insurance Services, Inc. v. Vogelsang (would hold that former employer has not established that the agreement not to compete is reasonable and therefore enforceable. Tex. Bus. & Comm. Code Ann. § 15.50.)


Covenant Not To Compete

Whether a covenant not to compete is enforceable is a question of law for the court. Light v. Centel Cellular Co., 883 S.W.2d 642, 644 (Tex. 1994); TMC Worldwide, L.P. v. Gray, 178 S.W.3d 29, 36 (Tex. App.—Houston [1st Dist.] 2005, no pet.). A covenant not to compete is enforceable if it is (1) “ancillary to or part of an otherwise enforceable agreement at the time the agreement is made” and (2) reasonable, not imposing a greater restraint than is necessary to protect the goodwill or other business interest of the employer. TEX. BUS. & COM. CODE ANN. § 15.50(a) (Vernon 2002).

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