Texas Non-Compete Law Blog : Texas Non-Compete Agreements Lawyer & Attorney : K&L Gates : Trade Secret Litigation : Serving Austin, Dallas, San Antonio

In July 2001, Sysco, a distributor of food service products, issued a Request for Proposal (“RFP”). Among the companies that received the RFP were Mark III and BI.

Mark III and BI had a business relationship that involved them sharing information and customers.  Unbeknownst to Sysco, their relationship was formalized in a written contract. 

Mark III and BI submitted a joint response to the Sysco RFP.  Sysco accepted their proposal, awarding Mark III one function and BI a different function.

Sometime later, a BI employee left BI and became a Sysco manager.  The new Sysco manager then terminated several Sysco employees and replaced them with BI employees.  The manager then informed Mark III that it would no longer perform the functions awarded it under the RFP (and that BI would perform them).  BI informed Mark III that it would perform work for Sysco without Mark III’s help.

Mark III filed suit against Sysco for breach of contract, tortious interference with contracts and relationships, and aiding and abetting BI’s breach of fiduciary duty.

In support of its contract claim, Mark III pointed to language in Sysco’s letter awarding the RFP stating that “if there were any issues with either company that could not be resolved to Sysco’s satisfaction, it would be grounds for both companies to lose Sysco’s business.”  However, the court held that this language imposed no legal obligation upon Sysco to keep Mark III as one of the companies performing the work.

With respect to Mark III’s tortious interference claim, the court found that Sysco was unaware of the contractual relationship between Mark III and BI.  Thus, an essential element of a tortious interference claim could not be met.

The court also declined to accept Mark III’s invitation to recognize a claim for Sysco’s alleged “participating and assisting” BI’s breach of fiduciary duty.

From Mark III’s perspective, this case illustrates the importance of proper documentation of a business deal so that, if the deal falls through, the damaged party enjoys necessary legal protections.  Here, Mark III needed a more definite written contract with Sysco, to prevent work from being taken from Mark III and its partner in responding to the RFP, BI.

Mark III Systems, Inc. v. Sysco Corp., 2007 WL 529960 (Tex. App.—Houston [1^st Dist.] 2007).

• Email This
• Print
• Trackbacks

In tortious interference with contract (or prospective business relations) cases, plaintiffs often contend that their contracts with customers—or employees—have been unlawfully interfered with. In many situations, the contract alleged to have been interfered with is an “at-will” contract (i.e., it is a contract that can be canceled by either party at any time, for any reason).

An at-will employment agreement was the subject of a similar claim in a case decided earlier this year. There, a consulting company (“Consultant”) provided services for a manufacturing company (“Client”). Consultant and Client entered into a “no-hire” agreement that read in part as follows:

Both parties agree to not, directly or indirectly, during the period that Consultant provides services for Client, and for a period of one year thereafter, solicit, employ or hire or induce to hire any person who is or has been an employee of either party unless otherwise consented to in writing.

Consultant provided one of its employees to do some consulting work for Client. Sometime later, the employee resigned from Consultant. Client then asked Consultant whether Consultant would object to Client hiring its former employee. Consultant did not consent to the hiring, but Client hired the employee anyway. Consultant then sued Client for breaching the no-hire agreement.

Consultant contended that it was entitled to recover damages in the amount of $341,000. This amount was derived from estimating what the Consultant would have earned based on the employee continuing to work for it for an additional year (minus expenses, including the employee’s salary). The district court granted the defendant Client’s motion for summary judgment, and the appellate court affirmed.

The court of appeals based its ruling on the fact that the employee was “at-will.” Thus, the court reasoned, Consultant’s damages could not be established with “reasonable certainty.” This language is from the court’s opinion:

The damages request relies on the assumption that [the employee] would continue working for [Consultant], earning consulting fees for the year in question. This type of contingency, created by his at-will status, is impermissible in Texas.

The employee could have resigned from Consultant at any time, for any reason. For example, even if Client had not hired the employee, another company (i.e., one that was not bound by an agreement not to hire) might have done so. Thus, Consultant had no guarantee that the employee would remain employed by it in any event, and the court could not know with “reasonable certainty” what Consultant’s damages [as a result of the Client hiring him] might me.


Things to consider:


1. This is a potentially significant decision because it calls into question whether a tortious interference claim can be based on interference with an at-will contract.

2. Perhaps significantly, this case was decided by the federal Fifth Circuit. Whether the Texas Supreme Court will adopt this holding is unknown at this time. It’s possible, based on its holding in Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex. 1989) (holding that one can tortiously interfere with an at-will contract), that the Texas Supreme Court will not do so.

Blasé Industries Corp. v. Anorad Corp., 442 F.3d 235 (5th Cir. 2006).

• Email This
• Print
• Trackbacks

In our free market economy, it’s a given that competition is a good thing, right? Theoretically, yes, but courts have made it clear that competition, to be lawful, must also be “fair.”  A Texas case shed some light on the difference between fair and unlawful competition.

Renew Data Corporation ("Renew") provided computer forensic services for corporations. Renew would search its clients’ computer networks to assist them in prosecution and defense of litigation, responding to subpoenas, etc.

Shawn Strickler worked for Renew as a Director of Corporate Sales. Strickler had access to Renew’s customer lists and potential “opportunities,” and was intimately familiar with the services offered and prices charged by Renew.

Renew fired Strickler in November 2003. Shortly thereafter, Strickler became employed by one of Renew’s competitors.

A few weeks later, Strickler sent a letter to a potential customer, Computer Associates (with which neither Strickler nor his new employer had ever done any business). Strickler offered to help Computer Associates in connection with some pending government investigations.  Computer Associates indicated that it was willing to consider using Strickler, but it stated that it would also consider having Renew handle the project.

Over the next few days, Strickler, in an attempt to secure business from Computer Associates, began “subtly pointing out” to Computer Associates things he could offer that Renew could not (and he relied upon his intimate knowledge of Renew to make these distinctions). Computer Associates ultimately retained Strickler, rather than Renew, to handle the project.

Renew sued Strickler for tortiously interfering with its “prospective business relations” with Computer Associates. In response, Strickler contended that Renew could not prove one of the essential elements of the claim—that Renew had enjoyed “a reasonable probability that [it] would have entered into a business relationship” with Computer Associates.  After examining all of the evidence—including Computer Associates’ testimony that (a) it had a previous relationship with Renew and (b) had never heard of Stickler or his new employer before Strickler’s initial contact, the Court concluded that Renew could meet this element.

But, Strickler asked on appeal (after a jury verdict against him), “What is wrong with me contacting a potential customer and telling them that we can do the job better?”  How is that wrongful?

Of course, not all competition is wrongful—only “unfair” competition is wrongful.  To prove a claim for tortious interference with “prospective” business relations, a plaintiff must prove that an independently tortious or wrongful act by the defendant prevented the relationship from occurring.   To meet the “independently tortious or wrongful” standard, the defendant need not have committed a criminal act; rather, his conduct must merely be actionable under a different recognized tort.

The court found that Strickler had committed the tort of breach of fiduciary duty, and that this satisfied the “independently tortious or wrongful” element necessary to also make a tortious interference claim.  Significantly, the court noted that Strickler’s post-termination conduct constituted a breach of his fiduciary duty to his former employer, Renew.  The evidence showed, for example, that Strickler had, after his termination by Renew, used and disclosed the latter’s confidential information (including its pricing information) in an attempt to obtain Computer Associates’ business.  The court held that Strickler’s post-termination breach of his fiduciary duty to Renew (which conduct was committed by Strickler to maximize his chance of getting Computer Associates’ business rather than Renew) satisfied the “independently tortious or wrongful” element of the tortious interference claim.

Lessons learned:

1.  As this case illustrates, former employees who are not bound by enforceable non-compete agreements must nevertheless compete fairly, and they can be liable in tort if they fail to do so.

2.  Strickler’s interference with a “prospective” (not actual) business relationship was actionable because, in the course of seeking to obtain the business (and thereby keep Renew from getting it), he committed an independent wrong (breach of his fiduciary duty to Renew).

3.  One’s fiduciary duty can last even beyond the termination of employment, as Strickler found out here.


Renew Data Corporation v. Strickler, No. 03-05-00273-CV, 2006 WL 504998 (Tex. App.—Austin Mar. 3, 2006, no pet.).

• Email This
• Print
• Trackbacks