Vais Arms Inc v. Vais ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED SEPTEMBER 30, 2004
August 26, 2004
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
_____________________
No. 03-50287
_____________________
VAIS ARMS, INC.,
Plaintiff - Appellee,
versus
GEORGE VAIS
Defendant - Appellant.
---------------------
Appeal from the United States District Court for the Western
District of Texas, San Antonio Division
(SA-01-CA-0868-EP)
---------------------
BEFORE JOLLY, WIENER, and PICKERING Circuit Judges.
WIENER, Circuit Judge.
Defendant-Appellant George Vais appeals from the district
court’s grant of summary judgment and entry of permanent injunction
in favor of Plaintiff-Appellee Vais Arms, Inc. on claims for (1)
unfair competition under § 43(a) of the Lanham Act, (2) trademark
dilution and injury to business reputation under the Texas
commercial code, (3) trademark infringement and unfair competition
under Texas common law, and (4) breach of a covenant not to compete
(“non-compete agreement”) under the Texas commercial code. We
affirm.
I. FACTS AND PROCEEDINGS
From 1996 until May 15, 2000, Defendant-Appellant George Vais
(“George”) manufactured and sold firearm muzzle brakes1 through his
unincorporated proprietorship, “Vais Arms.” During that time,
George moved his business to various locations across the United
States, including Houston, Texas; Boise, Idaho; Prescott, Arizona;
and finally, Kerrville, Texas. He marketed his muzzle brakes
primarily through telephone and mail order catalogues, recognizing
sales throughout the United States, as well as in some foreign
countries.
During the early days of the operation of his business, George
developed a severe allergy to household and industrial chemicals
and solvents, including those he used in the manufacture of his
muzzle brakes. In summer 1999, George’s condition worsened
significantly, and he decided to leave the United States and return
to his native Greece in the hope that the change in environment
would improve his health. In preparing for his departure, George
asked Ronald Bartlett (“Bartlett”), a gunsmith at a nearby San
Antonio sporting goods outlet, whether he would be interested in
purchasing George’s muzzle brake business and continuing the
production and sale of Vais muzzle brakes. Bartlett ultimately
1
A muzzle brake is a device attached to the muzzle (exit end)
of a gun barrel to reduce perceived recoil and barrel “bounce” that
occurs when the gun is fired.
2
agreed to purchase George’s business and formed the plaintiff
corporation “Vais Arms, Inc.” for that purpose.
On December 30, 1999, George and Bartlett executed a Bill of
Sale in which “Vais Arms,” as seller, agreed to sell to “Vais Arms,
Inc.,” as buyer, all of Vais Arms’s assets and equipment, for a
lump sum payment of $40,000. The Bill of Sale specified that the
transfer would take place on May 15, 2000. It also referenced an
attached exhibit listing the assets and equipment to be sold. The
total cost of the items listed was $39,848.97, roughly $150 less
than the amount of the purchase price.
In addition, the parties executed an Attachment to the Bill of
Sale which reads as follows:
The following is agreed to by George Vais and Ronald Bartlett
1. George Vais agrees to the following:
A. To get a trade name patent for Vais Arms,
Inc. and include it in the sale of assets.
B. To help move the equipment to the new
location and make sure everything works. To
give instructions for the first two weeks
after the move.
C. If Ronald Bartlett dies before the transfer
of all assets, all payments on the note will
be refunded to Ronald’s estate.
2. Ronald Bartlett agrees to the following:
A. If George dies before all payments are made
on the note, Ronald will make remaining
payments on the note to a trust fund for
George’s children, This trust fund will be
established by George’s estate.
Finally, the parties executed a non-compete agreement which states,
in pertinent part:
Non-Compete Covenant. For a period of 10 years
after the effective date of this Agreement, George
3
Vais Arms will not directly or indirectly engage in
any business that competes with Vais Arms, Inc..
This covenant shall apply to the geographical area
that includes all U.S. states and countries which
are included in the current customer bases.
Vais Arms, Inc. immediately began operations on May 15, 2000.
For approximately two weeks thereafter, George worked alongside
Bartlett in Bartlett’s store, assisting him in the production of
the muzzle brakes. When Vais Arms, Inc. became fully operational,
George went home to Greece.
Vais Arms, Inc. soon began marketing its muzzle brakes
nationwide and, like its predecessor, Vais Arms, quickly recognized
sales throughout this country. Early in 2001, however, George
returned from Greece and began manufacturing and marketing muzzle
brakes under the VAIS mark.
In March 2001, after receiving a series of customer inquiries
prompted by George’s national advertising campaign, Bartlett
applied for federal registration of the VAIS trademark in
connection with “firearms components and accessories, namely muzzle
brakes.” George filed a notice of opposition. As of the time of
this appeal, Bartlett’s application was still pending.
In September 2001, Vais Arms, Inc. filed suit in the district
court alleging that George’s use of the VAIS mark infringed Vais
Arms, Inc.’s rights as senior user of the mark and that George’s
sales and marketing efforts violated the terms of the non-compete
agreement. Vais Arms, Inc. brought claims for (1) unfair
4
competition under § 43(a) of the Lanham Act,2 (2) trademark
dilution and injury to business reputation under § 16.29 of the
Texas Business and Commerce Code,3 (3) breach of the non-compete
agreement under § 15.50 of the Texas Business and Commerce Code,4
and (4) trademark infringement and unfair competition under Texas
common law. A year later, Vais Arms, Inc. filed a motion for
summary judgment on all its claims. It also filed a motion for a
preliminary injunction prohibiting George from using the VAIS mark
in connection with the sale of muzzle brakes and from
manufacturing, selling, and marketing firearm muzzle brakes in
contravention of the non-compete agreement.
In January 2003, the district court granted summary judgment
in favor of Vais Arms, Inc. on its claims for unfair competition,
trademark dilution and injury to business reputation, and trademark
infringement and unfair competition under Texas common law (“the
trademark claims”). The district court based its decision on a
determination that no genuine issue of material fact existed as to
whether George had abandoned the VAIS mark in selling his business
to Bartlett and leaving the country. The court declined to grant
summary judgment in Vais Arms, Inc.’s favor as to its claim for
2
See 15 U.S.C.A. § 1125(a)(Supp. 2004).
3
See TEX. BUS. & COMM. CODE ANN. § 16.29 (Vernon 2002 & Supp.
2004).
4
See TEX. BUS. & COMM. CODE ANN. § 15.50 (Vernon 2002 & Supp.
2004).
5
breach of the non-compete agreement, however, choosing instead to
hold the motion in abeyance pending further briefing on the
reasonableness of the agreement’s geographic and temporal
limitations. Accordingly, the district court entered a preliminary
injunction prohibiting George’s use of the VAIS mark but reserved
ruling on Vais Arms, Inc.’s request for an injunction enforcing the
terms of the non-compete agreement.
Following further briefing on the reasonableness of the
temporal and geographic limitations of the non-compete agreement,
the district court granted Vais Arms, Inc.’s motion for summary
judgment on its claim for breach of the non-compete agreement. The
court also permanently enjoined George from competing with Vais
Arms, Inc. in the manufacturing and marketing of firearm muzzle
brakes anywhere in the United States until May 15, 2010. After
judgment was entered in its favor, Vais Arms, Inc. filed a motion
to alter or amend the judgment to make permanent the court’s
earlier injunction prohibiting George’s use of the “VAIS” mark.
Before the district court could rule on that motion to alter
or amend, however, George filed a motion to reconsider the grant of
summary judgment on Vais Arms, Inc.’s trademark claims. George
advanced that Vais Arms, Inc. waived its abandonment argument by
failing to assert it in its complaint, and that he had not had
adequate time to respond to Vais Arms, Inc.’s abandonment argument
before the district court granted summary judgment. George noted
that the issue of abandonment was raised for the first time in Vais
6
Arms, Inc.’s reply brief. The district court rejected George’s
first ground for reconsideration but allowed the parties additional
time to submit supplemental briefs and evidence on abandonment.
After considering the supplemental briefing and evidence on
abandonment, the district court determined that no genuine issue of
material fact existed as to whether George had abandoned the mark.
Accordingly, the court denied George’s motion to reconsider its
prior grant of summary judgment on Vais Arms, Inc.’s trademark
claims. The court then granted Vais Arms, Inc.’s motion to alter
or amend the judgment and permanently enjoined George from using
the mark in connection with the manufacturing, marketing, or
selling of firearm muzzle brakes. The court denied George’s motion
to stay the injunction pending appeal.
George timely filed notices of appeal from the district
court’s rulings granting summary judgment, enjoining his use of the
VAIS mark, and enjoining his activities in contravention of the
non-compete agreement.
II. ANALYSIS
A. Standard of Review
We review de novo a district court’s grant of summary
judgment.5
B. Trademark Abandonment
5
See Markos v. City of Atlanta, 364 F.3d 567, 570 (5th Cir.
2004).
7
George asserts that genuine issues of material fact exist as
to whether he abandoned the VAIS mark when he sold his business to
Bartlett and moved back to Greece. He argues that, as a result,
the district court erred in holding that Vais Arms, Inc. was the
senior holder of the mark and granting summary judgment on Vais
Arms, Inc.’s trademark claims. Specifically, George contends that
(1) as a matter of law, a person cannot abandon his surname, and
(2) even assuming arguendo that a person can abandon his surname,
genuine issues of material fact exist as to whether he intended to
abandon the VAIS mark. Because he did not argue before the
district court that a person cannot abandon his surname, George has
waived this argument on appeal.6 We therefore consider only
6
See Ellison v. Software Spectrum, Inc., 85 F.3d 187, 191
(5th Cir. 1996). We observe, however, that had George preserved
this issue for appeal, we would rule against him. A surname is
classified as a descriptive word mark. See Perini Corp. v. Perini
Constr., Inc., 915 F.2d 121, 124 (4th Cir. 1990). As such, “one
who claims federal trademark rights in a [surname] must prove that
the name has acquired a secondary meaning.” Id. at 125; see also
Chevron Chem. Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d
695, 702 (5th Cir. 1981). “[A s]econdary meaning exists if in fact
a substantial number of present or prospective customers understand
the designation when used in connection with a business to refer to
a particular person or business enterprise.” Perini, 915 F.2d at
125 (quoting Food Fair Stores, Inc. v. Lakeland Grocery Corp., 301
F.2d 156, 160-61 (4th Cir. 1962)). Once it is established that a
surname has acquired a secondary meaning, however, it “becomes a
trade name or service mark subject to the rule of priority in order
to prevent deception of the public,” and accordingly is susceptible
of abandonment. John R. Thompson Co. v. Holloway, 366 F.2d 108,
113 (5th Cir. 1966)(“a man has no absolute right to use his own
name, even honestly, as the name of his merchandise or his
business”).
Further, George’s reliance on the Ninth Circuit’s decision in
Abdul-Jabbar v. Gen. Motors Corp. as support for his proposition
that a person cannot abandon his surname is misplaced. See 75 F.3d
8
whether a genuine issue of material fact exists as to George’s
intent to abandon.
As a threshold matter, George reasserts on appeal his argument
that in the district court Vais Arms, Inc. waived the issue of
abandonment by raising it for the first time in its reply to
George’s memorandum in opposition to Vais Arms, Inc.’s motion for
summary judgment. George cites the Sixth Circuit’s decision in
Atlas Supply Company v. Atlas Brake Shops, Inc. for the proposition
that abandonment is “an affirmative defense which must be pleaded;
otherwise it is deemed waived.”7 As the district court aptly noted,
however, Vais Arms, Inc. does not raise the issue of abandonment as
a defense but as a means to show a break in the chain of priority,
i.e., that it has become the senior holder of the mark and is
therefore entitled to bring claims for infringement and dilution.8
In that posture, Vais Arms, Inc. was not required to plead
abandonment in its complaint, and Atlas is inapposite.
1391 (9th Cir. 1996), superseded by 85 F.3d 407 (9th Cir. 1996).
Abdul-Jabbar is distinguishable. Unlike the VAIS mark, the surname
at issue in Abdul-Jabbar was not a trademark, as the plaintiff had
not used the name for commercial purposes for more than ten years
prior to filing suit. See id. at 411.
7
360 F.2d 16, 18 (6th Cir. 1966).
8
See J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION
§17:4 (4th ed. 2004)(“abandonment may become significant in a
number of possible legal situations [including the situation where]
“abandonment result[s] in a break in the chain of priority where
the parties each claim prior use”).
9
George’s procedural contention that he was denied an adequate
opportunity to respond to Vais Arms, Inc.’s abandonment argument is
equally unpersuasive. The record establishes that the district
court permitted him to file a supplemental memorandum on the issue
of abandonment along with any additional evidence in his favor.
Although we have not comprehensively identified all the
circumstances under which a district court may rely on arguments
and evidence presented for the first time in a reply brief, we have
stated that “Rule 56(c) merely requires the court to give the non-
movant an adequate opportunity to respond prior to a ruling.”9
Further, those circuits that have expressly addressed this issue
have held that a district court may rely on arguments and evidence
presented for the first time in a reply brief as long as the court
gives the nonmovant an adequate opportunity to respond.10 As the
9
Southwestern Bell Tel. Co. v. City of El Paso, 346 F.3d 541,
545 (5th Cir. 2003).
10
See, e.g., Seay v. Tenn. Valley Auth., 339 F.3d 454, 481-482
(6th Cir. 2003)(“the purposes of notice and opportunity to respond
extend Rule 56(c) to the situation where the moving party submits
in a reply brief new reasons and evidence in support of its motion
for summary judgment, and require a district court to allow the
nonmoving party an opportunity to respond”); Booking v. Gen. Star
Mgmt. Co., 254 F.3d 414, 418 (2d Cir. 2001)(“Rule 28 of the Federal
Rules of Appellate Procedure . . . has no analogue in the Federal
Rules of Civil Procedure, and in most cases trial judges can
provide parties with an adequate opportunity to respond to
particular arguments by ordering additional briefing.”); Beaird v.
Seagate Tech., Inc., 145 F.3d 1159, 1164 (10th Cir. 1998)(“when a
moving party advances in a reply new reasons and evidence in
support of its motion for summary judgment, the nonmoving party
should be granted an opportunity to respond”)(citing Cia. Petrolera
Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 410 (1st Cir.
1985)).
10
district court allowed George such an opportunity, he cannot now
complain that he was prejudiced by Vais Arms, Inc.’s failure to
raise the issue until its reply.11
As for the substance of George’s arguments, he contends that
genuine issues of material fact exist on whether he intended to
abandon the VAIS mark when he sold his business to Bartlett and
moved home to Greece. Under the Lanham Act, a mark is deemed
“abandoned”
[w]hen its use has been discontinued with intent
not to resume such use. Intent not to resume may be
inferred from circumstances. Nonuse for three
consecutive years shall be prima facie evidence of
abandonment. “Use” of a mark means the bona fide
use of that mark made in the ordinary course of
trade, and not made merely to reserve a right in a
mark.12
The party asserting abandonment must establish that the owner of
the mark both (1) discontinued use of the mark and (2) intended not
to resume its use. The burden of proof is on the party claiming
abandonment.13
11
The Seventh Circuit cases cited by George are
distinguishable. The district courts in those cases did not permit
the nonmovant an adequate opportunity to respond. See Aviles v.
Cornell Forge Co., 183 F.3d 598, 605 (7th Cir. 1999)(employee not
granted opportunity to respond to arguments raised in reply);
Edwards v. Honeywell, Inc., 960 F.2d 673, 674 (7th Cir.
1992)(district court improperly granted summary judgment in favor
of defendant on ground not raised by either party; plaintiff was
given no opportunity to respond).
12
See 15 U.S.C.A. § 1127 (Supp. 2004).
13
See id. at 99.
11
The parties do not dispute that George discontinued his use of
the mark when he sold his business to Bartlett and departed for
Greece. Rather, the sole point of contention is whether, in so
doing, George possessed the requisite intent to abandon his
proprietary right to the VAIS mark.14 To support its contention
that George intended to abandon the mark, Vais Arms, Inc. filed
numerous declarations and affidavits from George’s former customers
in which the declarants or affiants expressed their belief, and the
facts on which these beliefs were grounded, that when George sold
his business, he had no intention of reentering the muzzle brake
business in this country. In addition, Vais Arms, Inc. introduced
into evidence an October 2000 shooting magazine article about
George’s retirement from the muzzle brake business and the transfer
of his business to Bartlett. The article describes George’s long-
time struggle with his allergy to household and industrial
chemicals —— including those used in the manufacture of muzzle
brakes —— and his belief that by moving back to his native Greece
he could improve his condition. The article makes no mention
14
The distinction between an “intent to abandon” and an
“intent not to resume” becomes relevant only when there is an issue
of “hoarding” of a mark, i.e., when there is a claim that the owner
wanted to retain the mark only to prevent its use by others. See
Exxon Corp. v. Humble Exploration Co., 695 F.2d 96, 102 (5th Cir.
1983). As there is no allegation of “hoarding” in this appeal, and
as both parties appear to accept George’s framing of the issue as
whether he “intended to abandon” the VAIS mark, we adopt George’s
characterization of the element of intent.
12
whether George intended ever to return to the United States or ever
to resume his trade, either in the United States or abroad.
For his part, George produced nothing but his own self-serving
affidavit, in which he states that he had developed a condition
known as “multiple chemical sensitivity” and had left for Greece in
the hope that the “clean environment” there would improve his
health. He further states conclusionally that he did not “intend
to abandon [his] business name of Vais Arms” and that he had “hoped
to return after a stay in Greece to pursue []his craft [of
manufacturing muzzle brakes].” As objective evidence of his intent
not to abandon the mark, George stated that he asked Bartlett to
strike out provision 1(A) of the Attachment to the Bill of Sale
prior to signing. This provision reads: “George Vais agrees to the
following: A. To get a trade name patent [sic] for Vais Arms, Inc.
and include it in the sale of assets.” A review of the Attachment
confirms that the provision was, in fact, struck-out and initialed
by Bartlett. This strike-out is not dated.
Bartlett does not contest that he struck-out and initialed
provision 1(A). He insists, however, that he did not strike out
the provision prior to George’s signing the Bill of Sale in
December of 1999, as George avers, but did so early in March 2000
to reflect that he no longer held George responsible for
registering the VAIS mark. Thus, he asserts, this act cannot be
construed as evidence that George lacked the requisite intent to
13
abandon, only that Bartlett would assume responsibility for
registering the mark.
That intent is determined by an objective test is too well
settled to require citation. Viewing the summary judgment evidence
in the light most favorable to George as non-movant —— including an
assumption that the strike-out occurred, as he contends, at the
signing in December, 1999 —— we agree with the district court’s
determination that George failed to establish that a genuine issue
of material fact exists as to his intent to abandon the VAIS mark.
George’s vague, self-serving statements in his affidavit to the
effect that he “hoped” to regain his health in Greece and return
one day to his “craft of manufacturing muzzle brakes” is not
sufficient to raise a genuine issue of material fact as to the
element of intent, particularly when viewed in light of Vais Arms,
Inc.’s overwhelming evidence of abandonment. “[T]he owner of a
trademark cannot defeat an abandonment claim . . . by simply
asserting a vague, subjective intent to resume use of a mark at
some unspecified future date.”15 At most, George’s affidavit
establishes only his subjective, uncommunicated desire not to
abandon the mark, without any indication of when or how he intended
15
Emergency One, Inc. v. Am. FireEagle, Ltd., 228 F.3d 531,
537 (4th Cir. 2000); see also MCCARTHY ON TRADEMARKS § 17:13(“If all
a party had to do to avoid a holding of abandonment was to testify
that he never had any intent to abandon the mark, or never had any
intent not to resume use, then no mark would ever be held
abandoned.”)(citing Golenpaul v. Rosett, 18 N.Y.S.2d 889 (N.Y. Sup.
Ct. 1940)).
14
to resume its commercial use; it does not establish a genuine issue
as to his intent to abandon.
Neither does Bartlett’s striking out of provision 1(A) in the
Attachment raise a genuine issue of material fact as to the element
of intent to abandon the mark. That provision referred to George’s
duty to procure a “trade name patent” and to “include it in the sale
of assets”; it says nothing about the actual transfer of the trade
name itself. Neither does it make the transfer due at signing, only
at some unidentified time in the future. Thus, even assuming that
the provision was stricken at or prior to George’s signing the Bill
of Sale, Bartlett’s act of striking it out does not convey an
understanding on the part of either party that the VAIS mark was not
being transferred along with the sale of the business’s other
assets. Quite to the contrary, a reasonable reading of provision
1(A) in context of the whole transaction over the five months
between the signing of the Bill of Sale and the effective date of
the sale confirms that the provision was struck out by Bartlett
solely to relieve George of the procedural hassle of registering the
VAIS mark before he left the country for health reasons.
As George has failed to produce evidence that would establish
the existence of a genuine issue of material fact whether he
abandoned the VAIS mark, we affirm the district court’s grant of
summary judgment in favor of Vais Arms, Inc. on its trademark
claims.
C. Non-Compete Agreement
15
“The enforceability of a covenant not to compete is a question
of law for the court.”16 The Texas Covenants Not to Compete Act
provides two criteria for the enforceability of such a covenant.17
It must (1) be “ancillary to or part of an otherwise enforceable
agreement” and (2) contain “limitations as to time, geographical
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.”18
On appeal, George does not contest that the non-compete
agreement was ancillary to the Bill of Sale or that the time
limitation (10 years) was reasonable. He challenges only the
geographic extent of its restriction. That provision, confected by
an accountant, not a lawyer, reads:
This covenant shall apply to the geographical area
that includes all U.S. states and countries which
are included in the current customer bases.
The district court, on Vais Arms, Inc.’s request, reformed this
clause to include only “U.S. states”; Vais Arms, Inc. abandoned any
claim to coverage of foreign countries.19 Nevertheless, George
16
Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 792
(Tex. App. —— Houston [1st Dist.] 2001, no pet.).
17
TEX. BUS. & COM. COD. ANN. § 15.50(a)(Vernon 2002 & Supp.
2004).
18
Id.
19
Section 15.51(c) requires the trial court to reform a
covenant not to compete “to the extent necessary to cause . . . the
limitations to be reasonable and to impose a restraint that is not
greater than necessary . . . .” TEX. BUS. & COM. CODE ANN.
16
contends that the entire geographic limitation is unenforceable as
written because it does not define the term “current customer
bases,” or, alternatively, that the phrase “current customer bases”
is ambiguous and therefore a jury should determine its meaning. We
disagree.
Albeit the geographic limiter was inartfully drafted, a plain
reading confirms beyond quibble that the phrase “current customer
bases” modifies only the foreign “countries” aspect of the
geographic coverage —— not the “U.S. states” portion. Thus, the
covenant as drafted covered (1) “all United States” and (2) any
foreign countries in which George had a “current customer base,”
i.e. sales of muzzle brakes. By reforming the geographic limiter
to cover only “U.S. states” in conformity with Vais Arms, Inc.’s
voluntary abandonment of foreign coverage, the district court
eliminated any potential interpretive issue with the modifier
“current customer bases.”
Indeed, this reading of the geographic limitation is the only
one that sensibly comports with the national character of the
business that George sold. The record establishes that when George
conducted the business, he advertised his muzzle brakes via
nationally-distributed trade publications, mail order catalogues,
and, importantly, the Internet. In addition, George does not
contest that he marketed his products and enjoyed sales throughout
15.51(c)(Vernon 2002 & Supp. 2004).
17
the United States. Accordingly, to interpret this provision as
requiring the parties to restrict the geographic limits of the
covenant to just those states in which George had actually
consummated one or more sales, while disregarding the nationwide
scope of his marketing efforts, would be legally absurd. We are
convinced that the court’s interpretation of the geographic
limitation is correct and that extending the coverage of the
covenant to the fifty states of the Union is reasonable and comports
with the objectively determined intent of the parties. The district
court properly enjoined George from manufacturing and marketing his
muzzle brakes within that geographic area.20
III. CONCLUSION
No genuine issue of material fact exists as to whether George
abandoned his rights to the VAIS mark in selling his business to
Bartlett and relocating to Greece. We affirm the district court’s
grant of summary judgment and entry of permanent injunction in favor
of Vais Arms, Inc. on its trademark claims. Further, we also agree
that the geographic limitation imposed by the non-compete agreement
20
Texas courts have upheld nationwide geographic limitations
in non-compete agreements when it has been clearly established that
the business is national in character. See, e.g., Williams v.
Powell Elec. Mfg. Co., 508 S.W.2d 665, 668 (Tex. App. – Houston
[14th Dist.] 1974, no pet.)(enforcing five-year national
restriction in favor of manufacturer upon finding that
manufacturer’s business was “national in character”; “[A] national
injunction is reasonable, since it is necessary to protect the
national business sold from competition. In an era of national and
international corporations, a modern court of equity cannot feel
constrained by past precedents involving the sale of barber shops
and livery stables.”).
18
as reformed by the district court is reasonable and enforceable.
We affirm the district court’s grant of summary judgment on Vais
Arms, Inc.’s claim for breach of the non-compete agreement, as well
as the court’s entry of a permanent injunction enforcing that
agreement against Defendant-Appellant George Vais.
AFFIRMED.
19
CHARLES W. PICKERING, SR., Circuit Judge, concurring in part and dissenting in part.
I concur in all aspects of the majority opinion except the part dealing with the non-compete
clause. In Texas, “[c]ourts generally disfavor noncompete covenants because of the public policy
against restraints of trade and the hardships resulting from interference with a person’s means of
livelihood.” Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 658 (Tex. App.– Dallas 1992). I recognize
that it is possible to have a valid non-compete clause; however, I would conclude that there is an
ambiguity in this particular non-compete clause. A contract is ambiguous when its meaning is
reasonably susceptible to more than one interpretation. Heritage Res. Inc. v. NationsBank, 939
S.W.2d 118, 121 (Tex. 1996). In this case, the agreement states that “[t]his covenant shall apply to
the geographical area that includes all U.S. states and countries which are included in the current
customer base.” The phrase “which are included in the current customer base” could be read to apply
only to the word “countries”, or it could be read to apply to “all U.S. states and countries.” Because
the phrase is susceptible to more than one reasonable interpretation, the issue should be remanded to
the district court for an appropriate determination. See Exxon Corp. v. West Texas Gathering Co.,
868 S.W.2d 299, 302 (Tex. 1993) (explaining that cont ract ambiguities are fact questions to be
submitted to a jury).
For the foregoing reasons I respectfully dissent as to that part of the majority opinion dealing
with the non compete clause.
20