East Texas Copy Systems, Inc. v. Jason Player
06-16-00035-CV
| Tex. App. | Oct 7, 2016Background
- In July 2013 Jason Player sold his customer list to East Texas Copy Systems, Inc. (ETCS) and signed an Asset Purchase Agreement (APA), Employment Contract, and a Non-Compete Agreement. The agreements included noncompete and nonsolicitation covenants conditioned on employment duration.
- The APA and Non-Compete Agreement each stated: if Player’s employment is terminated prior to two years from the agreement date for any reason other than for-cause, the noncompete provision (and agreement language) "will no longer be binding."
- The Employment Contract allowed either party to terminate employment on 60 days’ written notice.
- Player voluntarily resigned by giving 60 days’ notice on April 29, 2015 and his employment ended June 30, 2015—before the two-year mark.
- ETCS demanded Player cease competing and later sued for breach; Player sought declaratory judgment that the noncompetes were no longer binding. The trial court granted Player’s summary judgment, denied ETCS’s cross-motion, and entered final judgment for Player. ETCS appealed.
Issues
| Issue | Plaintiff's Argument (Player) | Defendant's Argument (ETCS) | Held |
|---|---|---|---|
| Whether the noncompete covenants remain binding when employment ends by voluntary resignation before two years for reasons other than cause | The contractual language is plain: if Player’s employment is terminated prior to two years for any reason other than for-cause, the noncompete is no longer binding; termination includes voluntary resignation | The clause should be read to protect Player only from termination by ETCS (i.e., insertion of "by ETCS"), so a voluntary resignation still leaves the restriction enforceable; alternately the clause is ambiguous and requires trial | Court adopted Player’s reading: the agreements are unambiguous and termination (by either party) before two years for any reason other than for-cause releases the noncompetes |
| Whether the court may "harmonize" or rewrite the agreements to add limiting language (e.g., "by ETCS") | Harmonization is unnecessary because the agreements are consistent; courts must enforce plain, objective contract language and may not rewrite agreements | ETCS urged harmonization to alter the Disputed Clause so it would read as termination only by ETCS, arguing the parties’ overall purpose supports that reading | Court refused to rewrite or add terms; held harmonization does not permit adding the phrase and enforcing ETCS’s preferred construction |
| Whether the conditional noncompete renders Player’s promise illusory | The noncompete is supported by the APA and other mutual obligations; conditional covenants are valid and were bargained-for consideration | ETCS claimed the condition makes the promise illusory (waived below) | Court found conditional promise valid and not illusory because it is part of an underlying agreement with mutual obligations |
| Whether the use of passive voice or other grammatical arguments creates ambiguity | Player: passive voice does not change ordinary meaning; other contract terms show termination can be by either party | ETCS: passive phrasing implies termination by ETCS, supporting its narrower construction (argument raised on appeal, not below) | Court rejected late grammatical arguments and held the clause unambiguous when read in context of the agreements |
Key Cases Cited
- El Paso Field Servs. v. Mastec N.A., 389 S.W.3d 802 (Tex. 2012) (courts must give effect to parties' objective intent and may not rewrite unambiguous contracts)
- FPL Energy v. TXU Portfolio Mgt. Co., 426 S.W.3d 59 (Tex. 2014) (primary goal of contract construction is to ascertain objective intent as expressed in the instrument)
- Anglo-Dutch Petroleum v. Greenberg Peden, P.C., 352 S.W.3d 445 (Tex. 2011) (extrinsic evidence cannot vary the clear terms of an agreement)
- MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647 (Tex. 1999) (construction of an unambiguous written instrument is a question of law reviewed de novo)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (contract is ambiguous only if reasonably susceptible to more than one meaning)