Exxon Mobil Corporation v. William T. Drennen, Iii
452 S.W.3d 319
| Tex. | 2014Background
- Drennen worked as a geologist for Exxon Mobil in Houston for 31 years, culminating as Exploration VP of the Americas.
- Incentive Programs granted stock options and bonuses, with restricted stock vesting over three or seven years.
- The programs include New York choice-of-law provisions, despite ExxonMobil being Texas-based and incorporated elsewhere.
- Drennen’s 2007 resignation to Hess, a direct competitor, led ExxonMobil to cancel/forfeit 57,200 restricted ExxonMobil shares.
- Drennen sued for declaratory relief and asserted the forfeitures were unenforceable covenants not to compete under Texas law; the court of appeals reversed, holding Texas law applied and the forfeitures were unenforceable covenants.
- The Supreme Court held the New York choice-of-law provisions are enforceable and the detrimental-activity provisions are enforceable under New York law, thus reversing the court of appeals and rendering judgment for ExxonMobil.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the NY choice-of-law provisions enforceable under the Restatement framework? | Drennen argues Texas law should govern as the more significant policy. | ExxonMobil argues NY law should govern due to the chosen-state, relationship, and uniformity. | NY law enforceable; choice-of-law provisions valid. |
| Do the detrimental-activity provisions constitute covenants not to compete under Texas law? | Drennen contends these provisions are unenforceable covenants not to compete. | ExxonMobil argues they are forfeiture provisions, not covenants not to compete. | Under Texas law, these are not covenants not to compete; NY law applies for enforcement. |
| Should New York law be applied to determine enforceability of the forfeiture/detrimental provisions? | Texas policy should prevent enforcing such provisions. | Uniformity and predictability favor NY law; Texas policy not fundamental here. | Application of NY law does not contravene Texas public policy; NY law governs. |
Key Cases Cited
- DeSantis v. Wackenhut Corp., 793 S.W.2d 670 (Tex. 1990) (adopts Restatement § 187 framework for choice-of-law; upholds strong Texas interests when enforceability of restraints implicates employer-employee relations)
- Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011) (defines covenants not to compete and discusses ancillary/non-ancillary issues in employee restraints)
- Haass, 818 S.W.2d 381 (Tex. 1991) (illustrates restraint of trade analysis in non-compete/related agreements; distinguishes forfeiture contexts)
- Morris v. Schroder Capital Management International, 859 N.E.2d 503 (N.Y. 2006) (New York employee-choice doctrine; forfeiture upon competition if employee leaves for rival)