447 S.W.3d 319
Tex. App.2014Background
- Steven Hebert, a pathologist, entered successive written employment agreements (1998, 2002, 2005, 2008) with a Dallas-area 5.01(a) nonprofit; the 2008 agreement named the employer as "AmeriPath DFW 5.01(a) Corporation" though the operating nonprofit was DFW 5.01(a) Corporation (a single-word name insertion went unnoticed until litigation).
- The 2008 Agreement contained a covenant not to compete and a physician "buyout" provision (arbitration option to fix a reasonable buyout price); an arbitrator later fixed the buyout at $2,580,175.
- Hebert signed a professional services agreement with a hospital (the Hospital PSA) on behalf of DFW, which included a key-man clause potentially waiving his noncompete as to that hospital; Hebert then resigned (2009) and went to work for a competitor, ProPath.
- Litigation ensued: Hebert sued to declare the noncompete unenforceable and for tortious interference; DFW/AmeriPath counterclaimed for contract breach, misappropriation, breach of fiduciary duty, tortious interference, conspiracy, and sought to confirm the arbitration award.
- The trial court granted Hebert summary judgment holding the 2008 contract invalid because the named corporate party (ADFW) did not exist, vacated the arbitration award, then granted Hebert summary judgment dismissing appellants’ counterclaims and awarded Hebert attorney’s fees; the court of appeals partially reversed and remanded.
Issues
| Issue | Hebert's Argument | AmeriPath/DFW's Argument | Held |
|---|---|---|---|
| 1) Confirmation of arbitration award fixing buyout price | Award should be denied because DFW/ADFW was not a party to the arbitration and award was procured by fraud/negligent misrepresentation (ADFW did not exist) | Arbitrator’s award should be confirmed; misnaming is a misnomer and does not void the award | Court of appeals: trial court erred in denying confirmation; Hebert’s undue-means claim (negligent misnaming) fails as a basis to vacate; remanded to confirm award (timeliness issues: some objections waived) |
| 2) Validity of employment contract (misnomer) | 2008 Agreement named a non-existent entity (ADFW) so no contract existed | Misnomer doctrine: parties intended and behaved as if contract was with DFW; identity of DFW was substantially apparent; extrinsic evidence supports intent and performance by DFW | Court: reversed trial court; misnomer applies — contract existed between Hebert and DFW; summary judgment for Hebert on this ground was erroneous |
| 3) Enforceability of the covenant not to compete (geographic scope and Hospital PSA release) | Covenant is unenforceable: overbroad geographically and Hospital PSA released him from restrictions regarding that hospital | Geographic restriction reasonable given Hebert’s managerial role; Hospital PSA does not give Hebert standing to enforce a release (he is not a party or an intended third‑party beneficiary) | Court: covenant’s geographic scope not shown unenforceable as matter of law; Hebert lacks standing to enforce Hospital PSA as a release; trial court erred in granting summary judgment that noncompete was unenforceable |
| 4) Summary judgment dismissal of DFW/AmeriPath counterclaims (contract and torts) | With no valid contract, counterclaims fail; summary judgment properly dismissed all counterclaims | Contract valid and noncompete enforceable; fact issues exist on breach, breach of fiduciary duty, and tortious interference | Court: reversed summary judgment as to breach of contract and breach of fiduciary duty (genuine fact issues); affirmed dismissal of misappropriation, harmful‑acts‑by‑computer, tortious interference damages (appellants failed to show recoverable damages), and civil conspiracy (cannot conspire with only Hebert) |
| 5) Award of Hebert’s attorney’s fees | Fees appropriate under Declaratory Judgment Act and Business & Commerce Code given the litigation over noncompete | Fees improper because underlying rulings (contract invalidity and noncompete unenforceability) were erroneous; timing/Rule 11 dispute | Court: award must be reconsidered — remanded because appellate rulings change the posture and may affect whether fees are equitable and just; any timing error was harmless |
Key Cases Cited
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (primary guide for ascertaining parties’ intent when construing written contracts)
- Greater Houston Orthopaedic Specialists, Inc. v. 295 S.W.3d 323 (Tex. 2009) (misnomer doctrine standard and correction where identity substantially appears)
- Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (enforceability of covenants not to compete is a question of law reviewed de novo)
- International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex. 1963) (corporate officers and directors owe fiduciary duties to the corporation)
- Houston Land & Loan Co. v. Danley, 131 S.W. 1143 (Tex. Civ. App. 1910) (departure from strict corporate name will not avoid a contract if identity substantially appears)
- Las Palmas Medical Center v. Moore, 349 S.W.3d 57 (Tex. App.—El Paso 2010) (reviewing court cannot set aside arbitration award for mere mistake of fact or law)