Summary
highlighting testimony from the plaintiff-employer's representative that the non-competition provision's "prohibition is probably greater than necessary to protect [the plaintiff's] goodwill or business interests"
Summary of this case from Reilly v. Premier Polymers, L.L.COpinion
NO. 14-17-00708-CV
07-28-2020
FORUM US, INC., Appellant v. JEFFREY MUSSELWHITE, AUDIE ROMERO, ANTELOPE OIL TOOL & MFG. CO., LLC, INTERVALE CAPITAL, LLC, HKM CONSULTING, LLC, AND WEARSOX, L.P., Appellees
On Appeal from the 295th District Court Harris County, Texas
Trial Court Cause No. 2013-60075
MEMORANDUM OPINION
Appellant Forum US, Inc. (Forum) sued appellee Jeffrey Musselwhite for, among other claims, violations of the restrictive covenants contained in his employment agreement. Forum also sued the remaining appellees asserting various causes of action including tortious interference and misappropriation of trade secrets. The trial court granted a partial summary judgment declaring the restrictive covenants in Musselwhite's employment agreement unenforceable. Forum's remaining claims against Musselwhite and the other appellees went to trial before a jury, which rejected each of Forum's claims. The trial court subsequently signed a take-nothing final judgment on Forum's claims. Finding no error, we affirm the trial court's final judgment.
BACKGROUND
Davis-Lynch, Inc. was a family-owned business that sold, among other products, centralizers for deepwater wells in the Gulf of Mexico. Musselwhite worked for Davis-Lynch for more than thirty years. Musselwhite rose to become the Western Division Sales Manager. Musselwhite was not on the Davis-Lynch board of directors and was not an officer of the company. According to Musselwhite, Davis-Lynch had an excellent reputation for superior customer service and product delivery times.
A centralizer is attached to a casing pipe to ensure that the pipe moves smoothly down a well hole and then stays in place.
Appellee WearSox, L.P. had developed and patented a "thermal spray" process that involved spraying metal alloy directly onto a pipe. The thermal-spray process involved spraying layer after layer of a metal onto a pipe. Using this thermal-spray process, Wearsox could build up any shape it wanted on a pipe.
One of Davis-Lynch's deepwater products was the "CentraLaser." The CentraLaser was a centralizer cut from a single tube of steel using a laser. Musselwhite recognized that WearSox's thermal spray technology could be a superior method for securing the CentraLaser to a casing pipe. Eventually, Davis-Lynch and WearSox collaborated through a handshake deal to offer customers a combo product that used WearSox's technology to attach a CentraLaser to the customer's casing pipe. Davis-Lynch would pay WearSox for its thermal spray services, then mark up the price of the CentraLaser combo product before selling it to customers.
Forum Energy Technologies, Inc. (Forum Energy) is a global oilfield products company that serves all segments of the oil and natural gas industry. Forum is a wholly-owned subsidiary of Forum Energy. Forum Energy is a very large company employing thousands of people. It was divided into two large divisions each with multiple subparts serving different aspects of the oil and natural gas industry. Forum Energy bought Davis-Lynch in 2011. Forum Energy required that certain Davis-Lynch employees, including Musselwhite, sign new employment agreements containing restrictive covenants. After signing the employment agreement, Musselwhite retained his title of Western Division Sales Manager and he was responsible for sales in Houston, Dallas, Denver, and California. Musselwhite directly supervised a single salesman, appellee Audie Romero.
To facilitate the sale of the business, Davis-Lynch, Inc. became a wholly-owned subsidiary of Davis-Lynch Holding Company, Inc. Davis-Lynch, Inc. was then converted into Davis-Lynch, LLC. Forum Energy purchased the equity in Davis-Lynch, LLC and contributed the stock of Davis-Lynch, LLC to Forum. Davis-Lynch, LLC was subsequently merged into Forum in November 2012. Musselwhite was initially an employee of Davis-Lynch, Inc. He then became an employee of Davis-Lynch, LLC and finally, he became an employee of Forum once the merger mentioned above was completed.
Musselwhite's employment agreement created a three-year term of employment. The agreement provided for Musselwhite's salary, bonuses, stock options, and other benefits. It also included a recital that Davis-Lynch, LLC was "in the business of designing, producing and selling oil field downhole cementing and related equipment (the "Business")." The restrictive covenants are found in section 6 of the employment agreement. They include a covenant not to compete, a non-solicitation of employees provision, and a non-solicitation of customers provision.
After the acquisition, Forum installed new management and made numerous changes to Davis-Lynch's business operations. Among other things, Forum implemented new inventory management software and downsized the number of employees working in the warehouse and manufacturing. According to Musselwhite, Forum management took over Davis-Lynch with an attitude that Davis-Lynch's long-time employees did not know what they were doing. One of Forum's vice presidents told Musselwhite that "Davis-Lynch is a very good company, but we're going to show you how to make it better."
Forum did make changes to Davis-Lynch's operations. It was not a smooth transition as Forum's changes created problems in invoicing and inventory control. The problems were so severe that they negatively impacted Davis-Lynch's sales. The warehouse under Forum management struggled to satisfy normal levels of demand and delivery times increased dramatically. In addition, the quality of Forum's product noticeably declined. Forum lost customers as a result of the problems. Forum's management acknowledged that the changes had caused manufacturing and delivery problems. While the situation did eventually begin to improve, it was a very slow process and manufacturing did not return to its pre-acquisition level until sometime in 2014, three years after the acquisition.
Forum continued the relationship with WearSox. Because it was a handshake-only relationship, WearSox was free to partner with Forum's competitors if it so chose. Indeed, Wearsox had worked with Forum's competitors to offer other centralizers using its thermal spray technology. Sales of the Davis-Lynch/Forum CentraLaser combo product totaled approximately twenty-five percent of WearSox's total sales. For Forum, WearSox's freedom to leave the relationship was problematic because of the importance of WearSox's thermal spray technology to the success of the CentraLaser combo product. WearSox's technology, by contrast, could be applied to many other centralizers in the market. As a result, Musselwhite made numerous suggestions to Forum management that they should purchase WearSox. While Forum did try to buy WearSox, WearSox thought the offer was too low and it declined to continue the discussions.
Soon thereafter, WearSox noticed that its relationship with Forum began to change. The biggest change was a pattern of slow or no payment for WearSox's thermal spray services used in sales of the CentraLaser combo product. Eventually, the amount Forum owed WearSox exceeded $740,000. Faced with this, WearSox decided to flip the relationship with Forum. Instead of WearSox selling its thermal spray services to Forum, which would then sell the CentraLaser combo product under Forum's invoice, WearSox would buy CentraLasers from Forum, and sell the combo product under WearSox's invoice. WearSox officially flipped the relationship in late 2012.
Musselwhite tried to help Forum after the acquisition. He introduced the new Forum management to Davis-Lynch's customers. Musselwhite responded to customers and tried to diffuse their complaints. Musselwhite also warned his superiors about the danger of losing WearSox and urged them to maintain the relationship. Eventually, Musselwhite began experiencing severe headaches and believed his headaches were caused by the stress arising out of dealing with the problems created by Forum's changes and management's inability to correct the problems. So, Musselwhite resigned from Forum in early 2013 to take a job with Allied Oil & Gas Services, Inc. (Allied), a cement-pumping business in the oilfield services market. Allied was not in a business that competed with Forum.
Since he worked for a non-competitor, Musselwhite did what he could to help Forum after he left the company. Examples include referring millions of dollars in sales to Forum instead of Forum's competitors. Musselwhite also responded to calls from Forum's customers and tried to make certain that Forum met the customer's needs. Forum even let Musselwhite keep his company phone so that he could help his former customers. Musselwhite also kept some customer and sales files for the same reason. Musselwhite testified that he never gave this information to anyone else or used it for any purpose other than helping Forum.
WearSox continued to sell the combo product using CentraLasers it purchased from Forum. Tyler Swain, an owner and founder of WearSox, thought it was fair, and industry practice, to pay a commission from these sales to anyone who helped sell WearSox's products. The people receiving these commissions included Musselwhite and Romero, both of whom sold Forum's CentraLasers to WearSox. In Swain's view, WearSox's commission plan did not harm Forum because WearSox continued purchasing Forum's CentraLaser. Swain also did not believe the plan competed with Forum because WearSox's technology was a complimentary product to Forum's CentraLaser. Musselwhite and Romero did not believe the commission arrangement harmed Forum. They instead believed that the arrangement helped Forum because it maintained Forum's access to WearSox's thermal-spray technology and enabled Forum to continue selling CentraLasers. Without Musselwhite and Romero's involvement, because of Forum's prior payment problems, there was a distinct possibility that WearSox would stop dealing with Forum altogether. Forum later took issue with this arrangement and sued an entity, HKM Consulting, LLC, which had received the commissions paid by WearSox on the sales that Musselwhite and Romero helped to make.
As Musselwhite testified during the trial, without WearSox's thermal-spray technology, Forum's product was "just so much junk sitting on a shelf."
Intervale Capital, LLC (Intervale) is a private equity fund that invests in oil field services and equipment companies. Allied, Musselwhite's new employer, was an Intervale company. Intervale purchased Antelope Oil and Manufacturing Co., LLC (Antelope) because it wanted to invest in a casing hardware company and turn the company into a major competitor in the market. Intervale then hired Iain Levie to be Antelope's executive vice-president of sales. Levie knew about WearSox's technology and thought WearSox was a "ridiculously underperforming company with an equally ridiculous potential." Levie recommended that Intervale acquire WearSox's technology and combine it with Antelope. Musselwhite was not involved in introducing WearSox to Antelope and was not involved in the discussions about Antelope acquiring WearSox's technology.
Antelope bought WearSox's assets, including the thermal-spray technology, for $25 million. Antelope grew at an unprecedented rate after the acquisition. Simultaneously, Forum's sales declined dramatically. Soon, Forum was out of the Gulf of Mexico business.
Forum sued Musselwhite, Romero, Intervale, WearSox, Antelope, and others. Forum asserted many causes of action, including breach of contract and breach of fiduciary duty against Musselwhite, misappropriation of trade secrets and conversion against all defendants, and tortious interference with Musselwhite's employment agreement against Intervale, Antelope, and WearSox. Forum sought injunctive relief but later dropped that requested relief in favor of seeking damages.
Musselwhite moved for partial summary judgment on the enforceability of the restrictive covenants in his employment agreement. Musselwhite argued that the covenants were unenforceable because they lacked reasonable limitations and were broader than necessary to protect Forum's legitimate interests. Intervale, Antelope, and WearSox joined the motion. The trial court granted Musselwhite's motion and ruled that the non-compete and non-solicitation provisions were "unenforceable as written because they contain limitations that are unreasonable and impose a greater restraint than is necessary to protect any goodwill or other business interest of Plaintiff."
Forum's claims for breach of the confidentiality provision, breach of fiduciary duty, and misappropriation of trade secrets were tried to a jury in a lengthy trial. Forum alleged the defendants entered into a conspiracy to steal Forum's trade secrets and confidential information and then used that information to help Antelope succeed at Forum's expense. The jury rejected each of Forum's claims. The jury found that Musselwhite did not breach the confidentiality provision in his employment agreement. It also determined that Forum did not possess any trade secrets. The jury rejected Forum's contention that a fiduciary relationship existed between Forum and Musselwhite and Romero. Finally, the jury found that Forum knew the restrictions in Musselwhite's employment agreement were unreasonable at the time the contract was signed and that Forum sought to enforce the restrictive covenants to "a greater extent than was necessary to protect the goodwill or other legitimate business interest of Forum." This final answer served as the necessary predicate finding for the trial court to award Musselwhite his attorneys' fees.
After the jury reached its verdict, Musselwhite filed an application for his attorneys' fees pursuant to section 15.51(c) of the Texas Business and Commerce Code. See Tex. Bus. & Com. Code § 15.51(c) (providing that if "the promisor establishes that the promisee knew at the time of the execution of the agreement that the covenant did not contain limitations as to time, geographical area, and scope of activity to be restrained that were reasonable and the limitations imposed a greater restraint than necessary to protect the goodwill or other business interest of the promisee, and the promisee sought to enforce the covenant to a greater extent than was necessary to protect the goodwill or other business interest of the promisee, the court may award the promisor the costs, including reasonable attorneys' fees, actually and reasonably incurred by the promisor in defending the action to enforce the covenant."). Appellees filed a motion for judgment, which also included a request for Musselwhite's attorneys' fees, the same day.
The trial court signed a final judgment that rendered a take-nothing judgment on Forum's claims and awarded Musselwhite his attorneys' fees. The final judgment was signed by a visiting judge. Forum then filed post-judgment motions, including a motion for judgment notwithstanding the verdict and a motion for new trial. In both motions, Forum requested a change in the judgment on Musselwhite's counterclaim for attorneys' fees either by granting a new trial on the issue or by denying Musselwhite's claim for fees altogether. The regular trial court judge returned to the bench and signed orders denying both of Forum's post-judgment motions. The regular trial judge also signed an "Order Denying Defendant Jeffrey Musselwhite's Application for Attorney's Fees." Forum filed its notice of appeal. Forum subsequently filed its opening brief in this appeal, which did not include an issue addressing Musselwhite's attorneys' fees.
ANALYSIS
Forum raises four issues in this appeal. Because we reject Forum's arguments contained in its first two issues and affirm the trial court's summary judgment, we need not address Forum's third and fourth issues which are contingent on a reversal of the trial court's summary judgment order.
I. The trial court did not err when it granted Musselwhite's motion for summary judgment based on a determination that the restrictive covenants found in Musselwhite's employment agreement were unreasonable.
Forum argues in its first two issues that the trial court erred when it granted Musselwhite's motion for summary judgment in which he argued that the restrictive covenants in his employment agreement were unreasonable and therefore unenforceable. We address these issues together.
A. Standard of review and applicable law
To prevail on a traditional motion for summary judgment, the movant must establish that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). We review a trial court's order granting a traditional summary judgment de novo. Mid-Century Ins. Co. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). When a defendant moves for summary judgment, it must disprove at least one essential element of the plaintiff's cause of action in order to prevail. Doggett v. Robinson, 345 S.W.3d 94, 98 (Tex. App.—Houston [14th Dist.] 2011, no pet.).
In construing a written contract, an appellate court's primary goal is to ascertain the true intentions of the parties as expressed in the instrument. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). When construing a contract, we give contract terms their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). We construe contracts from a utilitarian standpoint, bearing in mind the particular business activity sought to be served, and we avoid, when possible and proper, a construction that is unreasonable, inequitable, or oppressive. Frost Nat'l Bank v. L & F Distrib., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). Courts are not authorized to rewrite agreements to insert provisions parties could have included or to imply terms for which they have not bargained. Tenneco, Inc. v. Enterprise Prod. Co., 925 S.W.2d 640, 646 (Tex. 1996). In other words, courts cannot make, or remake, contracts for the parties. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 888 (Tex. 1998).
Whether a contract is ambiguous is a question of law for the court to decide by examining the agreement as a whole in light of the circumstances present when the contract was entered. Lane-Valente Indus. (Nat'l), Inc. v. J.P. Morgan Chase Bank, N.A., 468 S.W.3d 200, 205 (Tex. App.—Houston [14th Dist.] 2015, no pet.). A contract is unambiguous if it can be given one certain or definite legal interpretation. Id. The fact that the parties disagree about a contract's meaning does not necessarily show that it is ambiguous. Id. In addition, parol evidence is not admissible for the purpose of creating an ambiguity. Material Partnerships, Inc. v. Ventura, 102 S.W.3d 252, 258 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). If a contract is not ambiguous, the court will construe it as a matter of law. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003); see Owens v. Ousey, 241 S.W.3d 124, 129 (Tex. App.—Austin 2007, pet. denied) ("Like other questions of law, we review a trial court's construction of restrictive covenants de novo.").
The enforceability of a covenant not to compete is a question of law. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 682 (Tex. 1990); Curtis v. Ziff Energy Group, Ltd., 12 S.W.3d 114, 118 (Tex. App.—Houston [14th Dist.] 1999, no pet.). We review a trial court's resolution of questions of law de novo. See Hicks v. Hicks, 348 S.W.3d 281, 284 (Tex. App.—Houston [14th Dist.] 2011, no pet.). Under de novo review, the reviewing court exercises its own judgment and re-determines each legal issue. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998).
In the Free Enterprise and Antitrust Act, the Texas Legislature declared that "'[e]very contract, combination, or conspiracy in restraint of trade or commerce is unlawful.'" Marsh USA, Inc. v. Cook, 354 S.W.3d 764, 770 (Tex. 2011) (quoting Tex. Bus. & Com. Code § 15.05(a)). The Supreme Court of Texas has concluded that covenants limiting employees' professional mobility are unlawful restraints of trade under this statute unless they fall within the exception created by the Covenants Not to Compete Act. Id. at 768, 770; see also id. at 782 (Willett, J., concurring in judgment). As the court explained, "[u]nreasonable limitations on employees' abilities to change employers . . . could hinder legitimate competition between businesses and the mobility of skilled employees." Id. at 769. The Covenants Not to Compete Act provides that a covenant is enforceable only if (among other things not at issue in this case) "it contains limitations as to time, geographic area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee." Tex. Bus. & Com. Code § 15.50(a); see Tex. Bus. & Com. Code § 15.51(c); see also Marsh, 354 S.W.3d at 777 ("The hallmark of enforcement is whether or not the covenant is reasonable."); DeSantis, 793 S.W.2d at 681 (explaining similar standards of reasonableness that had to be met to enforce covenants not to compete at common law).
B. All three restrictive covenants, the covenant not to compete, the non-solicitation of employees provision, and non-solicitation of customers provision, are governed by the Covenants Not to Compete Act.
We turn first to the argument raised in Forum's second issue asserting that the non-solicitation provisions found in sections 6(e) and 6(f) of Musselwhite's employment agreement are not governed by the requirements set forth in the Covenants Not to Compete Act. See Tex. Bus. & Com. Code §§ 15.50-52. The Supreme Court of Texas has determined that covenants placing limits on former employees' professional mobility or restricting their solicitation of the former employers' customers and employees are restraints on trade and are governed by the Covenants Not to Compete Act. Marsh, 354 S.W.3d at 768; see Peat Marwick Main & Co. v. Haass, 818 S.W.2d 381, 388 (Tex. 1991) (holding that "provisions clearly intended to restrict the right to render personal services are in restraint of trade and must be analyzed for the same standards of reasonableness as covenants not to compete to be enforceable"); Rieves v. Buc-ee's, Ltd., 532 S.W.3d 845, 851 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (applying reasonableness standards to penalty provisions contained in employment agreement that had effect of restricting employee's mobility). Because the Supreme Court of Texas has determined that non-solicitation provisions such as those found in Musselwhite's employment agreement are governed by the Covenants Not to Compete Act, we must follow that precedent and therefore reject Forum's contention that the non-solicitation provisions are not subject to the requirements of the Covenants Not to Compete Act. See also Cooper Valves, LLC v. ValvTechnologies, Inc., 531 S.W.3d 254, 263, 265 (Tex. App.—Houston [14th Dist.] 2017, no pet.) ("We address these contentions together because both noncompetition covenants and nonsolicitation covenants like those in the 1997 Agreement are governed by the Covenants Not to Compete Act.").
C. The restrictions found in the non-competition provision in Musselwhite's employment agreement, section 6(d), are unreasonable and therefore unenforceable.
Forum argues in its first issue that the trial court erred when it declared section 6(d), the covenant not to compete, unreasonable and unenforceable. Forum asserts the covenant not to compete is reasonable because it did not impose an industry-wide exclusion on Musselwhite. Appellees respond that section 6(d) is unenforceable even if it does not impose an industry-wide exclusion because it fails to impose reasonable limits on the scope of activity restrained. We agree with appellees.
While it is true that an industry-wide exclusion is almost always going to be unreasonable because it restrains more activity than necessary to protect the business interest of a former employer, the inverse of that statement will not always be true. See Tex. Dep't of Pub. Safety v. Caruana, 363 S.W.3d 558, 561 (Tex. 2012) (addressing admissibility of sworn and unsworn reports under State Office of Administrative Hearings Rule 159.23). Forum cites numerous cases in support of its industry-wide exclusion argument. We conclude that none stand for this proposition. Most of the cases examined whether the covenant not to compete at issue contained reasonable limitations as to time, geographic area, and scope of activity. See e.g. M-I LLC v. Stelly, 733 F.Supp.2d 759, 797 (S.D. Tex. 2010) (court rejected employee's argument that covenant not to compete was an overbroad industry-wide exclusion because the covenant restricted the employee's "competition to a reasonably narrow business area that correlate[d] to his work with [employer]."); Gallagher Healthcare Ins. Services v. Vogelsang, 312 S.W.3d 640, 654-55 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (rejecting employee's argument that covenant not to compete was unenforceable because the covenant contained reasonable limitations on time, scope of activity, and a reasonable alternative to geographical area); Curtis v. Ziff Energy Group, Ltd., 12 S.W.3d 114, 118 (Tex. App.—Houston [14th Dist.] 1999, no pet.) ("[W]e now look to see whether the covenant contains limitations as to time, geographical area, and scope of activity that are reasonable and do not impose a greater restraint than is necessary.").
The case that comes closest to such a proposition is Republic Services, Inc. v. Rodriguez. No. 14-12-01054-CV, 2014 WL 2936172, at *8 (Tex. App.—Houston [14th Dist.] June 26, 2014, no pet.) (mem. op.). In Rodriguez, the trial court granted the employee's motion for summary judgment, which made a single argument: the covenant not to compete was overbroad because it established an industry-wide exclusion. Id. A prior panel of this court reversed the summary judgment because the employee failed to establish as a matter of law that the covenant imposed an unreasonable industry-wide exclusion. Id. The panel did not, however, hold that a covenant not to compete was automatically reasonable and enforceable if it did not establish an industry-wide exclusion. Id. Because Forum has not cited any authority supporting its argument that section 6(d) is automatically reasonable and enforceable because it did not establish an industry-wide exclusion, we reject it. We turn now to whether section 6(d) of Musselwhite's employment agreement restrains more activity than necessary to protect the goodwill or other business interest of Forum. See Tex. Bus. & Com. Code §15.50(a).
Covenants not to compete must bear some reasonable relationship to the activities of the employee. Haass, 818 S.W.2d at 387. For example, when a covenant not to compete extends to clients or customers with whom a former sales employee had no contact, it is overbroad and unenforceable. See id. (holding that "[i]nhibiting departing partners from engaging accounting services for clients who were acquired after the partner left, or with whom the accountant had no contact while associated with the firm, does not further and is not reasonably necessary to protect that interest" and renders covenant not to compete overbroad and unreasonable); John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d 80, 85 (Tex. App.—Houston [14th Dist.] 1996, writ denied) ("Section 1.2 is similarly unenforceable because it is unlimited as to time and extends to customers with whom Stroman had no association while he was working for Ray & Sons.").
Section 6(d) of Musselwhite's employment agreement provides:
(d) Non-Compete. Having made the acknowledgments contained in section 6(a) above, and in order to protect Davis-Lynch's legitimate business interests, [Musselwhite] covenants and agrees with [Davis-Lynch] that he will not directly or indirectly, while he is in [Davis-Lynch's] employ and through the period ending twelve (12) months after the Date of Termination (regardless of the reason for termination), within the Territory, carry on or engage in the Business on behalf of any entity other than Davis-Lynch. [Musselwhite] acknowledges that the following would effectively constitute engaging in or carrying on in the Business in violation of this Section 6(d): providing services to, or otherwise being affiliated with, any person or entity which is at the time, or which is planning to be, directly or indirectly, in competition with the Business of Davis-Lynch, whether as an officer, director, shareholder, member, partner, proprietor, executive, agent, employee, consultant, independent contractor, or otherwise and whether or not compensated.
This section prohibits Musselwhite from "providing services" to an existing, or possible future, competitor. Because "services" is undefined in the employment agreement, we apply its ordinary meaning. Epps v. Fowler, 351 S.W.3d 862, 866 (Tex. 2011). In ordinary usage the term "services" has a broad and general meaning. Damuth v. Trinity Valley Cmty. Coll., 450 S.W.3d 903, 904 (Tex. 2014) (per curiam). "It includes generally any act performed for the benefit of another under some arrangement or agreement whereby such act was to have been performed." Id. (construing undefined term "services" in statute). The dictionary defines "service" as "the act, fact, or means of serving" which is defined as "helping." "Service" & "Serving" Merriam-Webster Dictionary New Edition 658 (2004). The term is "broad enough to encompass a wide array of activities." Damuth, 450 S.W.3d at 904.
As written, Section 6(d) broadly prohibits Musselwhite from providing a "wide array of activities" to Forum competitors regardless of whether they relate in any way to Musselwhite's activities while a Forum employee. Jim McCulloch, Forum's general counsel and corporate representative, conceded during his deposition that section 6(d) "doesn't say anything about competitive services." McCulloch also recognized during his deposition that such a broad prohibition is probably greater than necessary to protect Forum's goodwill or business interests. As revealed by McCulloch's deposition testimony, Forum could have tailored section 6(d) so that the type of prohibited services directly aligned with Musselwhite's activities while a Forum employee, but it instead opted to impose a very broad restriction on Musselwhite's ability to change jobs.
Forum did not stop there, however. Section 6(d) also bars Musselwhite from "otherwise being affiliated with" a competitor in any capacity—including as a "shareholder" and "whether or not compensated." Musselwhite's employment agreement does not define the term "affiliated," so the term is given its ordinary meaning. Epps, 351 S.W.3d at 866. As with the term "services," the common meaning of "affiliated" is broad. See, e.g. Wharton Physician Servs., P.A. v. Signature Gulf Coast Hosp., L.P., No. 13-14-00437-CV, 2016 WL 192069, at *5 (Tex. App.—Corpus Christi Jan. 14, 2016, no pet.) (mem. op.) ("'Affiliated' is defined more broadly as 'closely associated with another typically in a dependent or subordinate position.'"). Indeed, McCulloch confirmed the broad scope of Section 6(d) during his deposition. McCulloch testified that he understood "affiliated with" to be equivalent to the terms "connected with" or "associated with." Cf. Maracich v. Spears, 570 U.S. 48, 59-60 (2013) (phrase "in connection with" is "essentially indeterminate because connections, like relations, stop nowhere.").
Given the ordinary meaning of "affiliated," Section 6(d) restricts Musselwhite from owning even a single share of stock in a competitor. McCulloch confirmed that Section 6(d) "actually prohibits Mr. Musselwhite from being a shareholder of an entity in competition with the business of Davis-Lynch." McCulloch also testified that he thought "it would be a stretch to say that [restricting Musselwhite from owning less than one percent of a competing company] would be a legitimate interest of a . . . non-compete agreement." Similarly, because the covenant restricts Musselwhite from affiliating with or providing services to a competitor "whether or not compensated," it effectively prohibits Musselwhite from volunteering at a competitor's annual charity golf tournament. McCulloch conceded that such restrictions are greater than necessary to protect Forum's legitimate interests.
Indeed, McCulloch testified that enforcing the non-competition covenant as written would lead to an "absurd result." McCulloch also testified that prohibiting affiliation with a person in competition with Forum is "not necessary" to protect a legitimate interest of Forum. We conclude that the provision restraining Musselwhite from being "affiliated" with a Forum competitor in any way is overbroad and therefore restricts Musselwhite in a manner greater than necessary to protect Forum's legitimate interests.
Finally, Section 6(d) prohibits Musselwhite from "engaging in the Business of Davis-Lynch." Forum argued in its summary judgment response that Section 3 of the agreement defines "Davis-Lynch" to include all of Davis-Lynch's "subsidiaries and affiliates," and therefore encompasses Forum Energy Technologies (the parent company), Forum US, and forty other "affiliates" in the Forum corporate family. As interpreted by Forum, the reference to "Davis-Lynch" greatly expands the class of persons or entities the covenant forbids Musselwhite from "providing services" to or "being affiliated with." By extending the scope of the covenant not to compete to persons or entities in competition with any of the entities in Forum's corporate family, Section 6(d) prohibits Musselwhite from providing services to or affiliating with entities who never competed with Davis-Lynch and with whom Musselwhite never interacted. This restriction is overbroad and unreasonable. See U.S. Risk Ins. Grp., Inc. v. Woods, 399 S.W.3d 295, 301 (Tex. App.—Dallas 2013, no pet.) (covenant prohibiting former employee "from being associated with or employed by any business that competes in the business currently engaged in by USRIG or any of its subsidiaries" overbroad because the "business currently engaged in by the Company" was not limited to business that former employee performed).
Forum attempted to limit the reach of this provision by asserting in its summary judgment response that the covenant not to compete "only prevents Musselwhite from working in the 'Business,' which is defined as 'designing, producing and selling oil field downhole cementing and related equipment.'" Far from limiting the expanse of the covenant, we conclude the use of the undefined phrase "related equipment" in the definition of "Business" vastly expands the reach of the non-compete. The use of the adjective "related," which means associated or connected, in this phrase could reasonably mean that Musselwhite was barred from working for any entity involved with equipment that is associated with, or connected to, the drilling of oil wells. Cf. Continental Airlines v. Kiefer, 920 S.W.2d 274, 281 (Tex. 1996) ("We begin with the question whether a personal-injury negligence action, like the Kiefers' and the Shupes', is 'related to' an airline's prices or services within the meaning of Section 41713(b)(1). We think the answer is rather clearly yes, given the broad definition of 'related to' prescribed by Morales and the Supreme Court's comparison to the expansiveness to ERISA preemption."); Patel v. Patel, No. 14-18-00771-CV, 2020 WL 2120313, at *7 (Tex. App.—Houston [14th Dist.] May 5, 2020, no pet.) (mem. op.) (recognizing broad scope of TCPA when it concluded that TCPA applied to party's counterclaim because the counterclaim "relates to the exercise of the right to free speech, as broadly defined by the TCPA and interpreted by the supreme court"); Burks v. XL Specialty Ins. Co., 534 S.W.3d 458, 464 (Tex. App.—Houston [14th Dist.] 2015, no pet.) ("As quoted above, the definition of 'interrelated wrongful acts' is incredibly broad as it includes any wrongful act that in any way involves any of the same or related . . . facts, circumstances, situations, transactions, or events.") (internal quotation marks omitted). Section 6(d) therefore prohibits Musselwhite from engaging in activities for another entity that potentially had no connection with his activities while an employee of Davis-Lynch or Forum. It is therefore overbroad. See U.S. Risk Ins. Grp., Inc., 399 S.W.3d at 301.
Each of the above renders section 6(d) overbroad because it does not impose reasonable limits on the scope of activity restrained in violation of the Covenants Not to Compete Act. We therefore conclude that the trial court did not err when it declared section 6(d) unenforceable as written.
Forum's remaining arguments in support section 6(d) do not change this result. First, Forum asserts that "Musselwhite's only argument for summary judgment was the non-compete was overbroad and unreasonable on its face." Far from a weakness, Musselwhite's summary judgment argument correctly states the law as it applies to covenants not to compete when damages are at issue. In making this initial argument, Forum does not contend that the employment agreement is ambiguous and even if Forum did make that argument, we conclude that the agreement is not ambiguous. See Lane-Valente Indus., 468 S.W.3d at 205 ("A contract is unambiguous if it can be given one certain or definite legal interpretation."). In that situation, we construe the contract as a matter of law. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999). In addition, because Forum seeks damages and not injunctive relief for Musselwhite's alleged breach of the employment agreement, we are limited to construing the language of the contract as written. See Tex. Bus. & Com. Code § 15.51(c); Weatherford Oil Tool Co. v. Campbell, 340 S.W.2d 950, 953 (Tex. 1960) ("We hold that an action for damages resulting from competition occurring before a reasonable territory and period have been prescribed by a court of competent jurisdiction must stand or fall on the contract as written."); Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 796 (Tex. App.—Houston [1st Dist.] 2001, no pet.) (stating that an award of damages must be based on the language of a non-competition agreement as written).
Next, Forum argues Musselwhite cannot rely on hypotheticals to demonstrate the overbroad nature of section 6(d) and, then, even if Musselwhite could rely on hypotheticals, his hypotheticals were unreasonable. Forum asserts the hypotheticals are unreasonable because Forum would never enforce section 6(d) to the extent allowed by its plain language because doing so would be unreasonable. In essence, Forum asks this court to rewrite section 6(d) of the agreement in the guise of construing it to make the limitations in section 6(d) reasonable. This we cannot do. See Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 239 (Tex. 2016) (stating that it is "fundamental that we may neither rewrite the parties' contract nor add to its language.") (internal quotation marks omitted); Best v. Falcon Rock Community Association, Inc., No. 14-17-00052-CV, 2018 WL 4139092, at *2 (Tex. App.—Houston [14th Dist.] Aug. 30, 2018, no pet.) ("Courts are not authorized to rewrite agreements to insert provisions parties could have included or imply terms for which they have not bargained."); Wilson v. Fleming, 566 S.W.3d 410, 420 (Tex. App.—Houston [14th Dist.] 2018, pet. filed) ("The parties' intent is governed by the language they chose, not by what one side contends they intended but failed to say."). Further, as pointed out above, since Forum sought damages for Musselwhite's alleged breach of the covenant not to compete, we are limited to construing the language of the contract as written. See Butler, 51 S.W.3d at 796. We conclude that Musselwhite's use of hypotheticals was an appropriate method to demonstrate the full extent of activities prohibited by the plain language of section 6(d). See Rieves, 532 S.W.3d at 851 (citing hypothetical possibilities to demonstrate unreasonable nature of repayment obligation in employment agreement).
Forum also argues that the trial court procedurally erred when it granted Musselwhite's motion for summary judgment because Musselwhite failed to respond to the evidence it submitted allegedly demonstrating that section 6(d) did not create an industry-wide exclusion. We have already rejected Forum's industry-wide exclusion argument. In addition, a court construes an unambiguous contract as a matter of law, even if that construction favors the movant for summary judgment. See Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157-62 (Tex. 2003) (granting insurer's motion for summary after construing policy language); Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 593 (Tex. 1996) (rendering judgment for defendant when the contract was unambiguous and the parties' intent should not have been submitted to the jury). Finally, the relevant facts in this case, such as Musselwhite's actions and the interests Forum sought to protect, are undisputed. In this situation, the court resolves all issues as a matter of law. See Meek v. Bishop Peterson & Sharp, P.C., 919 S.W.2d 805, 808 (Tex. App.—Houston [14th Dist.] 1996, writ denied) (stating that a court construes a contract as a matter of law to determine what the contract requires of the parties and if the "facts are undisputed or conclusively established, there is no need to submit issues thereon to the jury"). As a result, there was nothing procedurally wrong with the trial court's handling of Musselwhite's motion for summary judgment.
Finally, Forum points out that Musselwhite acknowledged in the employment agreement that the restrictions were reasonable. While this may be considered in our analysis, it is not determinative. See Poole v. U.S. Money Reserve, Inc., No. 09-08-00137-CV, 2008 WL 4735602, at *8 (Tex. App.—Beaumont Oct. 30, 2008, no pet.) (mem. op.) (holding covenant unenforceable despite employee's acknowledgement of reasonableness in agreement). If the rule was otherwise, every employer could require employees to sign an acknowledgement of reasonableness as a condition of employment and courts would be powerless to hold unreasonable covenants not to compete unenforceable as a violation of Texas public policy. Marsh, 354 S.W.3d at 782, 787 (Willett, J., concurring) (observing that the Covenants Not to Compete Act expressly vests the duty to decide whether restrictions in a covenant not to compete are reasonable on courts and that, while a restriction may be agreeable to both parties, it may still violate public policy because it harms competition).
Having addressed and rejected Forum's arguments made in its first issue, we overrule that issue.
D. The non-solicitation provisions in sections 6(e) and 6(f) are also unenforceable.
Forum argues in its second issue that the trial court erred when it granted Musselwhite's motion for summary judgment and declared sections 6(e) and 6(f) unenforceable because they contained reasonable restrictions. Appellees respond that the trial court did not err because neither section meets the requirements of the Covenants Not to Compete Act. We once again agree with appellees.
The two non-solicitation provisions in section 6 of Musselwhite's employment agreement provide:
(e) Non-Solicitation of Employees and Others. Having made the acknowledgements contained in Section 6(a) above and in order to protect Davis-Lynch's legitimate business interests, [Musselwhite] covenants and agrees with the Company that he will not, directly or indirectly or by assisting others, while he is in the Company's employ and through the period ending twelve (12) months after the Date of Termination (regardless of the reason for termination) solicit, recruit, engage or hire, or attempt to solicit, recruit, engage or hire, to or for any competing person or entity, any director, officer, employee or consultant of Davis-Lynch, any person who was a director, officer, employee or consultant of Davis-Lynch and who provided services to Davis-Lynch within twelve months of the solicitation, recruitment, or hiring, or any person who is, or was within twelve months of the solicitation, recruitment, or hiring, an employee of MacQueen Staffing, LLC assigned to work at Davis-Lynch.
(f) Non-Solicitation of Customers. Having made the acknowledgements contained in paragraph (a) above and in order to protect Davis-Lynch's legitimate business interests, [Musselwhite] covenants and agrees with the Company that he will not, directly or indirectly, while he is in the Company's employ and through the period ending twelve (12) months after the Date of Termination (regardless of the reason for termination), (A) solicit, divert, or appropriate to any person in competition with, or planning to be in competition with, the Business of Davis-Lynch, on his own behalf or in the service of or on behalf of any such competing person or entity, or planning to be in competition with, the Business of Davis-Lynch; or (B) solicit, encourage, facilitate, or induce any such customer of Davis-Lynch to breach any agreement or contract with, or discontinue or curtail his, her, or its business relationships with Davis-Lynch.
As addressed above, both non-solicitation provisions must comply with the same requirements covenants not to compete must meet. Neither meets these requirements. First, the non-solicitation of employees provision is broader than necessary because it prohibits Musselwhite from soliciting "any" director, officer, employee, or consultant of Davis-Lynch who provided services to Davis-Lynch without any limitation as to the employee's type of position or whether they had any interaction with Musselwhite. This renders section 6(e) unreasonably overbroad and therefore unenforceable. See Marsh, 354 S.W.3d at 771; Ally Financial, Inc. v. Gutierrez, No. 02-13-00108-CV, 2014 WL 261038, at *8 (Tex. App.—Fort Worth Jan. 23, 2014, no pet.) (mem. op.) (holding overbroad non-solicitation of employee covenant unenforceable because it "goes beyond what was necessary to protect Ally's goodwill or other business interest of Ally").
Section 6(f), the customer non-solicitation provision, suffers the same fate. Section 6(f) lacks reasonable limitations on the scope of the customer's activity, geography, and the time-period during which the customer did business with Davis-Lynch. In addition, section 6(f) prohibits solicitation of any "prospective customer," and it defines "prospective customer" to include "any person or entity to whom Davis-Lynch has sent a written sales proposal, including without limitation a bid sheet or price list, or contract, in connection with the Business during the period that Employee is employed hereunder." This expansive prohibition is sufficient to render section 6(f) overbroad and unreasonable. See Stroman, 923 S.W.2d at 85 (stating that restrictions on "client solicitation [are] overbroad and unreasonable when it extends to clients with whom the [former] employee had no dealings during his employment.").
Having determined that both section 6(e) and section 6(f) are unreasonably overbroad and unenforceable, we conclude the trial court did not err when it granted Musselwhite's motion for summary judgment on Forum's claims seeking damages for Musselwhite's alleged violations of both provisions. We therefore overrule Forum's second issue.
II. We need not address Forum's third and fourth issues because they are contingent on a reversal of the trial court's summary judgment in favor
of Musselwhite.
Forum's third issue states: "The trial court's error in granting summary judgment prohibited Forum from presenting its entire case at trial and substantially prejudiced Forum to such an extent that a new trial is warranted on all of Forum's claims." Because we have affirmed the trial court's summary judgment order, we need not address this issue. See Tex. R. App. P. 47.1; West Tex. LTC Partners, Inc. v. Collier, 595 S.W.3d 308, 313 (Tex. App.—Houston [14th Dist.] 2020, pet. denied) ("Because Cedar Manor's third issue addressing recovery of its attorneys' fees was contingent on this court sustaining its first two issues, we need not address it.").
Forum's fourth issue asserts that "the trial court's discovery order errors must be corrected on remand." Because we have affirmed the trial court's summary judgment order and there will be no remand, we need not address this issue. See Tex. R. App. P. 47.1; West Tex. LTC Partners, Inc., 595 S.W.3d at 313.
III. The judgment at issue in this appeal awards attorneys' fees to Musselwhite.
Because we are affirming the trial court's final judgment, we must determine whether the judgment being affirmed includes an award of attorneys' fees to Musselwhite. This question is significant because the parties disagree whether the judgment being appealed includes an award of attorneys' fees. Despite that disagreement, Forum did not include in its opening brief an issue, conditional or otherwise, challenging an award of attorneys' fees to Musselwhite. Conversely, Musselwhite asked this court to affirm the judgment containing a fee award.
On July 27, 2017, a visiting judge signed the final judgment at issue in this appeal and it included an award of attorneys' fees to Musselwhite. The regular trial judge returned to the bench and signed an "Order Denying Defendant Jeffrey Musselwhite's Application for Attorneys' Fees" on October 3, 2017, which was within the trial court's plenary power. This order states: "On this date, this Court considered Came on to the heard [handwritten] Defendant Jeffrey Musselwhite's Application for Attorneys' Fees and, after hearing arguments of counsel, Plaintiff's response, the evidence on file, arguments of counsel, if any, Upon consideration, [handwritten] this Court hereby DENIES the Application in its entirety pursuant to Tex. Bus. & Com. Code § 15.51(c)." It does not reference the Final Judgment in any manner. Forum, citing Quanaim v. Frasco Restaurant & Catering, argues in its reply brief that we must presume the October 3 order implicitly modified the final judgment because it was signed within the trial court's plenary power unless the record indicates otherwise. 17 S.W.3d 30, 38 (Tex. App.—Houston [14th Dist.] 2000, pet. denied). We must, therefore, determine what effect, if any, this order had on the previously signed final judgment.
We conclude that any presumption that the October 3 order modified the final judgment is rebutted on this record for several reasons. We initially point out that there can be only one final judgment. Tex. R. Civ. P. 301. The July 27 final judgment clearly disposes of all parties and claims before the trial court and it contains all the attributes and decretal language commonly associated with final judgments. See In re Vaishangi, Inc., 442 S.W.3d 256, 260 (Tex. 2014) (per curiam) ("In fact, we note that the Rule 11 agreement contains no decretal language typically seen in a judgment (i.e., 'ordered, adjudged, and decreed') . . . .). The October 3 order does not. It also does not purport to be a judgment. All it does is deny Musselwhite's application for attorneys' fees. See Kheir v. Progressive Cty. Mut. Ins. Co., No. 14-04-00694-CV, 2006 WL 1594031 at *4 (Tex. App.—Houston [14th Dist.] June 13, 2006, pet. denied) (mem. op.) ("The dismissal order appears to be a precautionary measure, a belt-and-suspenders action to ensure without any question that the case was finished. This one act, taken without explanation by the trial court, is insufficient to overcome the presumption [that a judgment rendered after a conventional trial on the merits is presumed to dispose of all issues and parties].") The trial court also signed orders denying Forum's motion for new trial and motion for judgment notwithstanding the verdict, both of which requested that Musselwhite's attorneys' fee award be deleted from the final judgment. These actions indicate that the trial court denied these apparently pending motions to ensure that there would be no question that the case was finished. See id. As a result, we conclude that the order denying Musselwhite's application for attorneys' fees did not modify the July 27 final judgment and that the final judgment, which we affirm today, includes an award of Musslewhite's attorneys' fees. See id. (stating that "it takes a significant act by the judge and the parties to overcome" the presumption that a judgment rendered after a conventional trial on the merits is presumed to dispose of all issues and parties).
CONCLUSION
Having overruled all of Forum's issues necessary to resolve this appeal, we affirm the trial court's final judgment.
/s/ Jerry Zimmerer
Justice Panel consists of Justices Jewell, Bourliot, and Zimmerer.