On cross-motions for summary judgment, the district court entered judgment for the defendant Dun & Bradstreet Corp., and against its former employee, plaintiff Rodney Sheline. Sheline was employed by Dun & Bradstreet as a sales representative until he voluntarily resigned in 1989 pursuant to a written agreement which entitled him to severance pay in exchange for his covenant not to compete. Shortly after his resignation, Sheline accepted employment with TRW, a competitor of Dun & Bradstreet’s, and Dun & Bradstreet therefore discontinued the severance payments on account of Sheline’s breach of the covenant not to compete. Thirteen months later, Sheline filed this lawsuit.
The district court held that the covenant not to compete was unenforceable under Texas law because it was overly broad; it contained no geographical area limitations.
BACKGROUND
Dun & Bradstreet employed Sheline as a salesperson for thirteen years, over which time Sheline developed a successful client
Sheline was out of town on January 6, 1989 when the first severance check was due. He called his roommate, who informed him that the check had not arrived. Concluding, based on that alone, that Dun & Bradstreet was not intent on performing its part of the deal, Sheline accepted employment with TRW, a principal competitor of Dun & Bradstreet’s, that same day. In fact, Dun & Bradstreet had mailed the severance check on January 6, 1989, and it is undisputed that Sheline received and deposited two severance checks in January 1989,
When Dun & Bradstreet learned that Sheline had accepted employment with TRW, it terminated the severance payments, informing Sheline by letter that his employment with TRW constituted a breach of the severance agreement. She-line did not respond. Instead, he filed this lawsuit thirteen months later, in March 1990, three months after the covenant not to compete expired by its own terms.
On cross motions for summary judgment, the district court entered declaratory judgment in favor of Sheline on his claim that the covenant not to compete was unenforceable; entered judgment in favor of Dun & Bradstreet on Sheline’s claim of breach of contract; and found Dun & Bradstreet’s counterclaim for a declaration of its rights under the contract to be moot. The court later denied Sheline’s motion to reconsider.
DISCUSSION
As this case is on appeal from the entry of summary judgment, we must review the record
de novo. International Shortstop, Inc. v. Rally’s, Inc.,
A.
That the covenant not to compete is unenforceable as a matter of law is indubitable; both parties on appeal agree that the district court correctly held that the absence of a geographical area limitation rendered the covenant not to compete unenforceable.
See generally DeSantis v. Wackenhut Corp.,
Sheline takes issue with the district court’s conclusion, arguing that it would be unjust to allow Dun & Bradstreet to escape its obligation under the severance agreement on account of Dun & Bradstreet’s inclusion of an overly broad covenant not to compete. The authority which offers Sheline the greatest support for his position,
Frankiewicz v. National Comp Associates,
Following his departure from NCA, Frankiewicz accepted employment with another insurance agency. NCA then ceased paying Frankiewicz his renewal commissions due under the contract, on account of Frankiewicz’s alleged breach of the covenant not to compete. Frankiewicz sued for his renewal commissions. Even though Frankiewicz admitted that he was selling insurance for another insurance company in violation of the covenant not to compete, the court held in his favor. The court reasoned that because the covenant not to compete contained no territorial limitation, it was unenforceable, and therefore, “it [could] not provide the basis upon which NCA [could] suspend Frankiewicz’s commissions on renewal premiums any more than it could support a claim for damages on the part of NCA.” Id. at 507-08.
The district court in the instant case was not persuaded that
Frankiewicz
controlled. According to the district court,
Frankiew-icz
unconvincingly “assumed, without addressing the issue, that the invalidity of a covenant not to compete does not affect the rest of a contract.” District court op. at 7. The district court relied instead on the general principles of contract severability: “[S]everability is governed by the intent of the parties, ‘as evidenced by the language of the contract,’ and that the operative question is ‘whether or not the parties would have entered into the agreement absent the [unenforceable] parts.’ ”
Id.
(citing
McFarland v. Haby,
We are persuaded that the district court correctly distinguished
Frankiewicz.
The covenant not to compete and the severance compensation clause were mutually dependent promises, and as such, the unen-forceability of one necessarily rendered the other unenforceable.
See Alston Studios Inc. v. Lloyd V. Gress & Associates,
492
It is true that the severance agreement, by its terms, obligated Sheline to do more than merely refrain from competing. He promised to resign voluntarily and forego any claims against Dun & Bradstreet. Those promises, however, were of little (if any) value to Dun & Bradstreet: Sheline was an at-will employee and had no potential discrimination claims against Dun & Bradstreet.
Cf. Martin v. Credit Protection Ass’n, Inc.,
We conclude, therefore, that the covenant not to compete and the severance compensation clause were mutually dependent and that the unenforceability of the former rendered the latter unenforceable. Dun & Bradstreet’s reciprocal obligations under the contract were excused for lack of consideration. Cf. id. (covenant not to compete must be supported by independent valuable consideration).
B.
Recognizing the weakness of his position — having failed to abide by the terms of the covenant not to compete and then filing suit — Sheline contends that only the over-broad portion of the covenant not to compete was unenforceable: that is, the court should have construed the covenant not to compete as if it had a reasonable geographical limitation so as to render it, and the remainder of the severance agreement, enforceable. In this connection, he maintains that although TRW is in fact a direct competitor of Dun & Bradstreet’s, his employment with TRW would not have infringed upon a geographically limited covenant not to compete. He avers that his sales territory with TRW did not sufficiently overlap with his sales territory with Dun & Bradstreet. In essence, he asks this court to reform the contract by rewriting the covenant to include a reasonable geographical limitation, and find that his employment with TRW did not amount to a breach of that reformed covenant not to compete.
Sheline is correct that Texas law permits the reformation of an overly broad covenant not to compete in order to make it reasonable and hence enforceable.
See
Tex.Bus. & Com.Code Ann. §§ 15.50-15.51. Nevertheless, it is well settled that “[f]or purposes of an action for damages, the enforceability of the covenant not to compete will be determined as written and may not be modified to render it reasonable and enforceable.”
Juliette Fowler Homes,
Sheline argues in the final instance that we must be cognizant of the implications of a decision in favor of Dun & Bradstreet. He suggests that to hold in favor of Dun & Bradstreet would reward it for drafting a severance agreement with an unenforceable covenant not to compete. He prophesies that employers will include these unenforceable clauses so that they can later
A promisee waives its right to rescind on a contract if it “elects to treat a contract as continuing.”
Hanks,
The judgment of the district court is AFFIRMED.
Notes
. The district court also found against Sheline on his fraud claim, but he does not appeal that portion of the summary judgment order. She-line does challenge the district court's denial of attorney’s fees. We find no merit in this contention, especially in light of our disposition of the primary issue.
. At oral argument before this court, Sheline conceded that he had no potential claims against Dun & Bradstreet.