Rafael Ortega, Rosara Investments, LLC,. LMMM Houston 50 Ltd., and SOGA Investments, Ltd. v. Amin Abel, Mohamad Mustafa, Saeed Abdel Fatah, Ihab Aboushi, Hanna Hinnawi, Sameera Abel, Amy Latif, Joann Barghout, Super Bravo, Inc., Bravo Ranch, Inc., Abel, Inc., Houston Bravo, Inc. ( 2018 )

Opinion issued August 23, 2018
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-16-00415-CV
———————————
RAFAEL ORTEGA, ROSARA INVESTMENTS, LLC, LMMM HOUSTON
#50 LTD., AND SOGA INVESTMENTS, LTD., Appellants
V.
AMIN ABEL, MOHAMAD MUSTAFA, SAEED ABDEL FATAH, IHAB
ABOUSHI, HANNA HINNAWI, SAMEERA ABEL, AMY LATIF, JOANN
BARGHOUT, SUPER BRAVO, INC., BRAVO RANCH, INC., ABEL, INC.,
AND HOUSTON BRAVO, INC., Appellees
On Appeal from the 269th District Court
Harris County, Texas
Trial Court Case No. 2012-70156
DISSENTING OPINION
This case arose from the sale of a business, freely and voluntarily entered into
by all parties. The business sold groceries in a specific market, Hispanic themed
grocery stores. The sale was an arm’s length transaction for valuable consideration,
$7.5 million. The contract of sale contained a non-competition agreement. Not only
was this agreement also freely and voluntarily entered into, but the “Sellers [were]
represented by counsel throughout the negotiation of this agreement. . . .” Para. 6,
Non-Competition Agreement. The non-competition agreement was an important
part of the deal because the sellers were experienced and actively involved in the
niche market and their continued use of this knowledge and experience “would
seriously, adversely and irreparably affect the ability of the Buyers to derive the
benefit or value for which it bargained in the Asset Purchase Agreement.” Para. A,
Non-Competition Agreement. Therefore, the agreement was “a material inducement
to the Buyers to consummate the transactions contemplated by the Asset Purchase
Agreement, and the Buyer would be unwilling to consummate such transactions if
either Sellers did not enter into this Agreement.” Para. D., Non-Competition
Agreement. The non-competition agreement was material enough to the sale that the
buyers specifically paid $1.7 million for it. Para. 2, Asset Purchase Agreement.
The jury found that the sellers had breached the contract of sale and violated
the non-competition agreement. The jury awarded over $21 million in damages and
found that the sellers had acted in such bad faith and malice that they awarded
approximately $5.2 million in punitive damages. All damages were taken away by
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the trial court when it reformed the non-competition agreement by reducing its
scope.
This non-competition agreement satisfied the statutory requirement that it be
part of “an otherwise enforceable agreement.” TEX. BUS. & COM. CODE ANN.
§ 15.50(a) (West 2011). It is not seriously contested, and the majority opinion holds,
that the non-competition agreement is enforceable. However, the trial court and the
majority hold that the agreement is too broad in scope and must be narrowed before
it can be enforced. An enforceable non-competition agreement must have a scope
that is no broader than necessary “to protect the goodwill or other business interest
of the promisee.” Id. The trial court, in a decision sustained by the majority, did this
by interpreting the transaction to be the sale of 5 grocery stores and limiting the
scope of the non-compete to a 3-mile radius around the five stores. I respectfully
submit that this misconstrues the business deal that is our focus. It is true that the
business operated out of five stores at the time of the purchase. However, it is clear
from the record and the documents through which this purchase was affected, that
the purchase was not merely of five stores, standing alone, but it was the purchase
of a business that was competing with the buyers in the specialty market of Hispanic
themed grocery stores. The non-competition agreement was not to free the buyers
from competition with the former operators of Mi Rancho only in the neighborhood
of the five Mi Rancho stores, but to free the buyers from such competition in that
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part of its market area covered by the agreement. Courts applying Texas law have
upheld non-competition agreements ancillary to the sale of a business with far larger
geographical scope than the one we are reviewing. In specialty, or niche markets,
courts have particularly upheld statewide1 and, indeed, nationwide2 restrictions as
necessary to accomplish their lawful purpose. This lengthy and carefully worded
purchase agreement, and its ancillary non-competition agreement, negotiated
between sophisticated parties, with counsel available, for which money was paid,
appears to be narrowly tailored to accomplish just that.
The promisor bears the burden of establishing that the non-competition
agreement does not meet the criteria set out in section 15.50. See TEX. BUS. & COM.
CODE ANN. § 15.51(b) (West 2011). The sellers attempted to do that through the
testimony of a marketing expert who examined the five stores and opined as to the
geographical scope of the market share of the five stores. The analysis treated each
store as a stand-alone business, which completely misses the mark. The purpose of
the transaction was not merely the purchase of five stores, it was the purchase of the
Mi Rancho business and the elimination of the competition of the former operators
of that business from the areas covered by the non-competition agreement. The jury
1
Caraway v. Flagg, 277 S.W.2d 803, 806 (Tex. Civ. App.—Dallas 1955, writ ref’d
n.r.e.).
2
Vais Arms, Inc. v. Vais, 383 F.3d 287, 295 (5th Cir. 2004).
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heard this evidence and the defense used it in their argument on damages. We can
infer from the verdict that the jury was unmoved by this testimony. I agree with the
jury. The sellers are required to establish that the scope of the non-competition
agreement is unreasonable. I believe they failed to carry that burden. I would
reinstate the jury’s verdict in its entirety and respectfully dissent from the holding of
the majority. “The role of the courts is not to protect parties from their own
agreements, but to enforce contracts that parties enter into freely and voluntarily.”
El Paso Field Serv., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 810–11 (Tex.
2012). A deal is a deal.
Russell Lloyd
Justice
Panel consists of Justices Higley, Massengale, and Lloyd.
Lloyd, J., dissenting.
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