Ricky D. Parker and James Myers v. Schlumberger Technology Corporation ( 2015 )

ACCEPTED
01-14-01018-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
1/28/2015 6:06:44 PM
CHRISTOPHER PRINE
CLERK
NO. 01-14-01018-CV
FILED IN
IN THE COURT OF APPEALS 1st COURT OF APPEALS
FOR THE FIRST DISTRICT OF TEXAS HOUSTON, TEXAS
HOUSTON, TEXAS 1/28/2015 6:06:44 PM
CHRISTOPHER A. PRINE
Clerk
RICKY D. PARKER AND JAMES MYERS
Appellants
v.
SCHLUMBERGER TECHNOLOGY CORPORATION
Appellee
Interlocutory Appeal
from the 268th Judicial District Court of Fort Bend County, Texas
Cause No. 14-DCV-218252
APPELLANTS RICKY D. PARKER AND JAMES MYERS’
BRIEF ON THE MERITS
Levon G. Hovnatanian
State Bar No. 10059825
hovnatanian@mdjwlaw.com
Robert T. Owen
State Bar No. 24060370
owen@mdjwlaw.com
Kevin G. Cain
State Bar No. 24012371
cain@mdjwlaw.com
MARTIN, DISIERE, JEFFERSON &
WISDOM, L.L.P.
808 Travis, 20TH Floor
Houston, Texas 77002
(713) 632-1700 – Telephone
(713) 222-0101 – Facsimile
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
APPELLANTS/DEFENDANTS
Ricky D. Parker and James Myers
In this appeal, Mr. Parker and Mr. Myers are represented by the following
attorneys:
Levon G. Hovnatanian
State Bar No. 10059825
hovnatanian@mdjwlaw.com
Kevin G. Cain
State Bar No. 24012371
cain@mdjwlaw.com
Robert T. Owen
State Bar No. 24060370
owen@mdjwlaw.com
MARTIN, DISIERE, JEFFERSON, & WISDOM, L.L.P.
808 Travis, 20th Floor
Houston, Texas 77002
Telephone: (713) 632-1700
Facsimile: (713) 222-0101
In the trial court, AGCS was represented by the following attorneys:
W. Jackson Wisdom
State Bar No. 21804025
wisdom@mdjwlaw.com
James M. Cleary
State Bar No. 00783838
cleary@mdjwlaw.com
MARTIN, DISIERE, JEFFERSON, & WISDOM, L.L.P.
808 Travis, 20th Floor
Houston, Texas 77002
Telephone: (713) 632-1700
Facsimile: (713) 222-0101
i
APPELLEE/PLAINTIFF
Schlumberger Technology Corporation
In the trial court and in this appeal, Schlumberger was and is represented by the
following attorneys:
Jeff Barnes
State Bar No.: 24045452
barnesj@jacksonlewis.com
JACKSON LEWIS P.C.
1415 Louisiana, Suite 3325
Houston, Texas 77002
Telephone: 713-650-0404
Facsimile: 713-650-0405
William L. Davis
State Bar No. 05563800
davisw@jacksonlewis.com
JACKSON LEWIS P.C.
500 N. Akard, Suite 2500
Dallas, Texas 75201
Telephone: (214) 520-2400
Facsimile: (214) 520-2008
ii
TABLE OF CONTENTS
PAGE
IDENTITY OF PARTIES AND COUNSEL ............................................................i
TABLE OF CONTENTS ........................................................................................ iii
TABLE OF AUTHORITIES ....................................................................................v
STATEMENT OF THE CASE .................................................................................x
STATEMENT REGARDING ORAL ARGUMENT .............................................xi
ISSUES PRESENTED........................................................................................... xii
STATEMENT OF FACTS .......................................................................................1
SUMMARY OF THE ARGUMENT .......................................................................8
ARGUMENT ..........................................................................................................10
I. THE DISTRICT COURT IMPROPERLY DENIED PARKER AND
MYERS’ MOTION TO COMPEL ARBITRATION. .................................10
A. Standard Of Review ...........................................................................10
B. The APA Requires Schlumberger’s Claims To Be Presented To
An Arbitrator. .....................................................................................10
1. The arbitrability of the claims against Parker and Myers
should be determined by the arbitrator, not a state court
judge. ........................................................................................10
2. The APA’s arbitration provision requires each of
Schlumberger’s claims to be arbitrated. ..................................14
a. There is a valid agreement to arbitrate. .........................14
b. The claims asserted are encompassed by the
arbitration agreement. ....................................................15
c. Schlumberger is equitably estopped from avoiding
arbitration. ......................................................................23
iii
II. THE DISTRICT COURT IMPROPERLY GRANTED
SCHLUMBERGER A TEMPORARY INJUNCTION
PROHIBITING PARKER AND MYERS FROM WORKING IN
THE WIRELINE, SLICK-LINE, AND BRAIDED LINE
INDUSTRY. .................................................................................................25
A. The Temporary Injunction Should Be Reversed To Allow The
Arbitrator To Adjudicate The Dispute. ..............................................25
B. Oklahoma Law Applies To The Non-Compete Agreements. ............26
C. The Non-Competition Provisions In The ICN Agreement And
Retention Bonus Contract Are Void Under Oklahoma Law. ............33
D. Even Under Texas Law, The Non-Competition Agreements,
And The District Court’s Temporary Injunction, Are
Unenforceable Restraints On Trade. ..................................................36
E. There Is No Evidence Of Irreparable Harm As Required To
Support Injunctive Relief. ..................................................................54
CONCLUSION AND PRAYER ............................................................................56
CERTIFICATE OF COMPLIANCE ......................................................................58
CERTIFICATE OF SERVICE ...............................................................................58
APPENDICES
iv
TABLE OF AUTHORITIES
PAGE
Cases
Abetter Trucking Co. v. Arizpe,
113 S.W.3d 503 (Tex. App.—Houston [1st Dist.] 2003, no pet.) ......................55
Allan J. Richardson & Assocs., Inc. v. Andrews,
718 S.W.2d 833 (Tex. App.—Houston [14th Dist.] 1986, no writ) ...................46
Am. Emp’r Ins. Co. v. Aiken,
942 S.W.2d 156 (Tex. App.—Fort Worth 1997, no writ) ..................................14
Andrews v. Diamond, Rash, Leslie & Smith,
959 S.W.2d 646 (Tex. App.—El Paso 1997, writ denied)..................................13
Bayly, Martin & Fay, Inc. v. Pickard,
780 P.2d 1168 (Okla. 1989) ................................................................................35
Borders v. KRLB, Inc.,
727 S.W.2d 357 (Tex. App.—Amarillo 1987, writ ref’d n.r.e.) .........................55
Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty Trust,
249 S.W.3d 34 (Tex. App.—Houston [1st Dist.] 2007, pet. denied)..................11
Butler v. Arrow Mirror & Glass, Inc.,
51 S.W.3d 787 (Tex. App.—Houston [1st Dist.] 2001, no pet.) ............46, 47, 48
Butnaru v. Ford Motor Co.,
84 S.W.3d 198 (Tex. 2002) .................................................................................56
Cardinal Health Staffing Network, Inc. v. Bowen,
106 S.W.3d 230 (Tex. App.—Houston [1st Dist.] 2003, no pet.) ................56, 57
Cardoni v. Prosperity Bank.
2014 WL 4982600 (S.D. Tex. Oct. 6, 2014) .......................................................33
Coinmach Corp. v. Aspenwood Apartment Corp.,
417 S.W.3d 909 (Tex. 2013) ...............................................................................37
Cotton Commercial USA, Inc. v. Clear Creek Indep. Sch. Dist.,
387 S.W.3d 99 (Tex. App.—Houston [14th Dist.] 2012, no pet.) ......................16
v
Desantis v. Wackenhut Corp.,
793 S.W.2d 670 (Tex. 1990) ....................................................................... passim
Ellis v. Schlimmer,
337 S.W.3d 860 (Tex. 2011) ...............................................................................16
Exxon Mobil Corp. v. Drennen,
--- S.W.3d ----, 2014 WL 4782974 (Tex. 2014) .................................................31
Forest Oil Corp. v. McAllen,
268 S.W.3d 51 (Tex. 2008) .................................................................................10
Gallahger Healthcare Ins. Servs. v. Vogelsang,
312 S.W.3d 640 (Tex. App.—Houston [1st Dist.] 2009, pet. denied)........ passim
Glassell Producing Co., Inc. v. Jared Res., Ltd.,
422 S.W.3d 68 (Tex. App.—Texarkana 2014, no pet.) ................................16, 22
Grigson v. Creative Artists Agency, L.L.C.,
210 F.3d 524 (5th Cir. 2000) .........................................................................23, 24
GTE Sw., Inc. v. Bruce,
998 S.W.2d 605 (Tex. 1999) ...............................................................................52
Hall v. GE Plastic Pac. PTE Ltd.,
327 F.3d 391 (5th Cir. 2003) ...............................................................................13
Hammerly Oaks, Inc. v. Edwards,
958 S.W.2d 387 (Tex. 1997) ...............................................................................52
Howard v. Nitro-Lift Technologies, L.L.C.,
2011 OK 98, 28 P.3d 20,
cert. granted, judgment vacated on other grounds,
133 S. Ct. 500, 184 L. Ed. 2d 328 (2012) ...........................................................32
In re Credit Suisse First Boston Mortg. Capital, L.L.C.,
273 S.W.3d 843 (Tex. App.—Houston [14th Dist.] 2008, no pet.) ....................52
In re FirstMerit Bank, N.A.,
52 S.W.3d 749 (Tex. 2001) .................................................................................16
In re Kellogg Brown & Root, Inc.,
166 S.W.3d 732 (Tex. 2005) .........................................................................24, 25
vi
In re Weekley Homes, L.P.,
180 S.W.3d 127 (Tex. 2005) .........................................................................10, 24
Investors Diversified Servs. v. McElroy,
645 S.W.2d 338 (Tex. App.—Corpus Christi 1982, no writ))................47, 51, 52
J.J. Gregory Gourmet Servs., Inc. v. Antone’s Imp. Co.,
927 S.W.2d 31 (Tex. App.—Houston [1st Dist.] 1995, no writ) ........................26
John R. Ray & Sons, Inc. v. Stroman,
923 S.W.2d 80 (Tex. App.—Houston [14th Dist.] 1996,
writ denied)........................................................................................39, 41, 42, 44
Juliette Fowler Homes, Inc., v. Welce Assocs., Inc.,
793 S.W.2d 660 (Tex. 1990) ...............................................................................37
Marsh USA Inc. v. Cook,
354 S.W.3d 764 (Tex. 2011) ....................................................................... passim
Martin v. Linen Sys. for Hospitals, Inc.,
671 S.W.2d 706 (Tex. App.—Houston [1st Dist.] 1984, no writ) ................37, 39
Maxxim Med., Inc. v. Michelson,
51 F. Supp. 2d 773 (S.D. Tex. 1999) ..................................................................31
McNeilus Companies, Inc. v. Sams,
971 S.W.2d 507 (Tex. App.—Dallas 1997, no writ) ....................................44, 46
Meyer v. WMCO-GP, LLC,
211 S.W.3d 302 (Tex. 2006) ...............................................................................23
Minnesota Min. & Mfg. Co. v. Nishika Ltd.,
953 S.W.2d 733 (Tex. 1997) ...............................................................................29
My Cafe-CCC, Ltd. v. Lunchstop, Inc.,
107 S.W.3d 860 (Tex. App.—Dallas 2003, no pet.) ...........................................16
Nationwide of Bryan, Inc. v. Dyer,
969 S.W.2d 518 (Tex. App.—Austin 1998, no pet.) ....................................14, 22
Neatherlin Homes, Inc. v. Love,
2007 WL 700996 (Tex. App.—Corpus Christi Mar. 8, 2007, no pet.) ........23, 24
vii
Okorafor v. Uncle Sam & Assocs., Inc.,
295 S.W.3d 27 (Tex. App.—Houston [1st Dist.] 2009, pet. denied)..................10
Peat Marwick Main & Co. v. Haass,
818 S.W.2d 381 (Tex. 1991) .........................................................................38, 39
Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd.,
139 F.3d 1061 (5th Cir. 1998) ...........................................................17, 18, 21, 22
Pleasant Glade Assembly of God v. Schubert,
264 S.W.3d 1 (Tex. 2008) ...................................................................................12
Rachal v. Reitz,
403 S.W.3d 840 (Tex. 2013) ...............................................................................16
Recon Exploration, Inc. v. Hodges,
798 S.W.2d 848 (Tex. App.—Dallas 1990, no writ) .........................................44
Revere Oil Co. v. Bank of Chillicothe,
255 S.W. 219 (Tex. Civ. App.—Amarillo 1923, no writ) ..................................52
S. Distrib. Co. v. Carraway,
127 S.E. 427 (N.C. 1925) ....................................................................................52
Schlumberger Tech. Corp. v. Baker Hughes Inc.,
355 S.W.3d 791 (Tex. App.—Houston [1st Dist.] 2011, no pet.) .............. passim
Stocks v. Banner Am. Corp.,
599 S.W.2d 665 (Tex. Civ. App.—Texarkana 1980, no writ)............................47
Thompson v. Cont’l Airlines,
18 S.W.3d 701 (Tex. App.—San Antonio 2000, no pet.) ...................................13
Totino v. Alexander & Assocs.,
1998 WL 552818 (Tex. App.—Houston [1st Dist.] Aug. 20, 1998, no pet.) .....47
Wright v. Sport Supply Group, Inc.,
137 S.W.3d 289 (Tex. App.—Beaumont 2004, no pet.) ........................41, 42, 43
viii
Statutes
OKLA. STAT. tit. 15
§ 217 (2001) ..................................................................................................33, 36
OKLA. STAT. tit. 15
§ 219A (2001) ...................................................................................31, 33, 34, 36
TEX. BUS. & COMM. CODE
§ 15.51 .................................................................................................................31
TEX. BUS. & COMM. CODE
§ 15.50 ......................................................................................................... passim
TEX. CIV. PRAC. & REM. CODE
§ 171.001 .............................................................................................................15
Other Authorities
RESTATEMENT (SECOND) OF CONFLICT OF LAWS
§ 187 (1971) ........................................................................................................27
W. Wendall Hall et al., Hall's Standards of Review in Texas, 42 ST. MARY’S
L.J. 1, (2010) ......................................................................................................10
ix
STATEMENT OF THE CASE
Nature of the This is an interlocutory appeal of three orders: an order denying
Case: Parker and Myers’ Motion To Compel Arbitration (C.R. 284); an
order denying Parker and Myers’ Motion For Reconsideration of
that order (C.R. 285); and an order granting temporary injunction
enjoining Parker and Myers (C.R. 296-305).
Trial court: The Honorable Brady G. Elliot, 268th Judicial District Court of
Fort Bend County, Texas.
Course of trial Schlumberger sued Ricky Parker and James Myers, alleging that
court they breached various contracts and committed other torts. C.R.
proceedings: 7-21. Schlumberger also alleges that the district court should
permanently enjoin Parker and Myers from competing with it.
C.R. 17-20.
Parker and Myers moved the district court to compel
Schlumberger to arbitrate the dispute, which motion the trial
court denied. C.R. 160-68, 284. Parker and Myers also moved
the district court to reconsider its denial of the motion to compel,
which motion the district court also denied. C.R. 277-80, 285.
Schlumberger moved the trial court to sign a temporary
injunction barring Parker and Myers from competing with
Schlumberger, which injunction the trial court signed following
an evidentiary hearing. C.R. 17-20, 296-305
Parker and Myers timely appealed the district court’s orders
denying their motion to compel and motion for reconsideration
of same as well as the district court’s order granting
Schlumberger’s temporary injunction pursuant to sections
51.014(a)(4); 61.016; and 171.098 of the Texas Civil Practice
and Remedies Code. C.R. 306-07.
x
STATEMENT REGARDING ORAL ARGUMENT
Parker and Myers respectfully suggest that the Court should grant oral
argument. This case concerns whether an Asset Purchase Agreement requires the
parties to arbitrate a dispute where a party sues a signatory and non-signatory to
the Agreement for breach of contracts signed in connection with the agreement and
torts connected with the Agreement. This case also concerns whether the district
court properly applied Texas law in signing a temporary injunction barring
Oklahoma and Arkansas residents from competing with Schlumberger in
Oklahoma, and whether the district court’s limitations on its temporary injunction
are reasonable. Parker and Myers believe that hearing from the parties in person
would provide the Court helpful elaboration on the issues, which, as the Court will
see, are detailed and particular.
xi
ISSUES PRESENTED
(1) Whether the district court erroneously concluded that an Asset
Purchase Agreement, which provides that all disputes “arising under
or in connection with” the Agreement must be resolved via
arbitration, did not require the parties to submit disputes arising in
connection with the Agreement to an arbitrator?
(2) Whether the district court properly enjoined Parker and Myers from
competing with Schlumberger where Parker and Myers work
primarily in Oklahoma and Schlumberger’s covenant-not-to-compete
is void and unenforceable under Oklahoma law?
(3) Whether the district court’s injunction is reasonably limited in
geography, scope, and time where it bars Parker and Myers from
competing with Schlumberger in the entire wireline industry, applies
to 142 counties in eight states, and contains no temporal limitation?
(4) Whether the district court may properly grant Schlumberger injunctive
relief where it admits that it has a legal remedy for its claims?
xii
STATEMENT OF FACTS
On September 9, 2011, Parker Energy Services Company (now known as
Parker Close Out Company) entered into an “Asset Purchase Agreement” (“APA”)
with Production Wireline and Cased Hole Services Group, LLC, to sell the assets
of Parker Energy, an oilfield company offering wireline, slick-line, and braided
line services,1 to Production Wireline. See 5 R.R. Defs.’ Ex. 1. 2 Schlumberger
Technology Corporation is the successor-in-interest, by merger, of Production
Wireline. See 3 R.R. 81. Appellants Ricky D. Parker and James Myers were
employees of Parker Energy, and Parker, in his individual capacity, is a party to the
APA. See 5 R.R. Defs.’ Ex. 1 at 38, 48.
In addition to requiring Parker Energy to transfer its assets to Production
Wireline, the APA required that certain employees of Parker Energy, including
1
“Wireline,” “slick-line,” and “braided line” operations are specialized operations attendant to
oil and gas field work. “Wireline” generally refers to a cabling technology used by operators of
oil and gas wells to lower equipment or measurement devices into the well for the purposes of
well intervention, reservoir evaluation, and pipe recovery. “Slick-line” refers to a single strand
wire which is used to run tools into wellbore, and is generally used to lower downhole tools into
an oil or gas well to perform maintenance downhole. “Braided line” generally refers to an inner
core of insulated wires that provide power to equipment located at the end of the cable and
provides a pathway for electrical telemetry for communication between the surface and
equipment at the end of the cable. See Wikipedia: Wireline (Cabling),
http://en.wikipedia.org/wiki/Wireline_(cabling) (last visited January 27, 2015); See also 2 R.R.
17-18; 2 R.R. 47.
2
Volume 5 of the reporter’s record, which includes the exhibits presented during the temporary
injunction hearing and the hearing on Parker and Myers’ motion to reconsider the district court’s
denial of their motion to compel arbitration, is not paginated. Accordingly, Parker and Myers
will refer to the various exhibits contained therein by the exhibit number noted by the district
court.
1
Parker and Myers, agree to Production Wireline’s “standard employment forms,”
which included an “Intellectual Property, Confidential Information, and Non-
Compete” Agreement (“ICN Agreement”). 5 R.R. Defs.’ Ex. 1 at 38 ¶ 9.1(j); 4
R.R. 12-13. The APA also required that Myers agree to a “Retention Bonus
Contract,” a form which was attached as an exhibit to the APA. 5 R.R. Defs.’ Ex.
1 at 38 ¶ 9.1(j), (n). Parker and Myers signed the required forms. See 5 R.R. Pl.’s
Ex. 1-3.
The APA includes an arbitration clause requiring that:
Any controversy, dispute or claim arising under or in connection with
this Agreement (including, without limitation, the existence, validity,
interpretation or breach hereof and any claim based on contract, tort
[or] statute) shall be resolved by a binding arbitration, to be held in
Houston, Texas pursuant to the Federal Arbitration Act and in
accordance with the then-prevailing Commercial Arbitration Rules of
the American Arbitration Association (the AAA”).
5 R.R. Defs.’ Ex. 1 at 44-45 ¶ 12.3(b).
Parker worked for Schlumberger from September 2011 until October 2,
2013. 2 R.R. 15-16. Myers worked for Schlumberger from September 2011 until
September 16, 2014. 2 R.R 33-34. Both Parker and Myers worked for
Schlumberger in its Pocola, Oklahoma office with their work primarily focused in
Oklahoma, although they did supervise work crews operating in some other states.
3 R.R. 23-24.
2
In the underlying lawsuit, Schlumberger complains that, after leaving its
employ in October 2013, Parker purchased trucks and other equipment which
could be used to perform wireline, slick-line, and braided line work. C.R. 11-12.
It also complains that, on September 17, 2014, eleven and a half months after
resigning from Schlumberger, Parker hired Myers and other Schlumberger workers
to work for Professional Wireline Services, LLC (“PWL”), a company that would
compete with Schlumberger for wireline, slick-line, and braided line work. C.R.
12. PWL performed its first job on September 29, 2014, nearly one year after
Parker resigned from Schlumberger. 3 R.R. 69.
Schlumberger contends that such actions violate a covenant not to compete
included in the ICN Agreements Parker signed in connection with the APA, which
provided:
Employee agrees for a period of one (1) year following the date of
termination of his/her employment with Company, Employee will not
directly or indirectly work for or assist (whether as an owner,
employee, consultant, contractor or otherwise) any business or
commercial operation whose business is – even in part – in direct or
indirect competition with any area of the Company’s business in
which Employee was employed by Company.
...
Employee agrees that in order to protect Company Confidential
Information, business interests and goodwill, the foregoing restriction
on Employee’s subsequent employment shall extend to any county,
parish, borough, or foreign equivalent: (1) in which Employee had a
customer or service assignment for Company in the one-year period
preceding Employee’s termination; (2) in which Company has
3
customers or service assignments about which Employee obtained
Company Intellectual Property during his/her employment with
Company; (3) in which Company has a manufacturing site,
development site, work site, job site, or offices; and/or (4) in which
any business or commercial operation whose business (a) is – even in
part – in direct or indirect competition with any area of the
Company’s business in which Employee was employed by Company
or (b) has a manufacturing site, development site, work site, job site,
or offices.
C.R. 15-16, 25; 5 R.R. Pl.’s Ex. 1-2 at ¶ 5.
Schlumberger also contends that Myers, who signed an identical agreement,
violated the non-compete provision above by (1) communicating with Parker
regarding the acquisition of wireline equipment before retiring from Schlumberger
(C.R. 11-12); (2) meeting with Schlumberger employees on September 16, 2014
after his resignation to discuss employment opportunities with PWL (C.R. 12); and
(3) going to work for PWL on September 17, 2014, the day after he retired from
Schlumberger. (See C.R. 12-13). Schlumberger also contends that Myers failed to
return certain tools to it following his retirement from Schlumberger. See C.R. 13.
Schlumberger contends such acts also violate a non-compete provision in the
Retention Bonus Contract Myers signed, which provides:
As further condition of eligibility for the Bonus Award, and as
additional protection for the Company’s Confidential Information,
Employee agrees that:
(a) During Employee’s employment with the Company and for a
period of one year following the end of that employment, Employee
will not solicit, contact or accept work, which is the same or
substantially similar to work and/or services performed by Employee
4
for Company, from clients of Company with whom Employee had
business dealings during Employee’s employment with the Company;
(b) During Employee’s employment by the Company and for a period
of one year following the end of that employment, Employee will not
provide services (including consulting services), which are the same
or substantially similar to services and/or work performed by
Employee for Company, to clients of Company with whom Employee
had business dealings during Employee’s employment with Company;
(c) During Employee’s employment with the Company and for a
period of one year following the end of that employment, Employee
will not solicit, recruit, encourage, hire or assist any other person or
entity to solicit, recruit, encourage or hire for employment any other
employee or independent contractor to work for a competitor of the
Company;
(d) During Employee’s employment with the Company and for a
period of one year following the end of that employment, Employee
will not directly or indirectly own, manage, operate, control, be
employed by, be a consultant for, or perform any job functions for,
any business that is in competition with Company that is located or
performs services within the geographic territory serviced by the
Company’s offices where Employee has been employed during the
one year immediately before the end of Employee’s employment with
Company or any Affiliate. A “business that is in competition with
Company” is defined as a business that provides or offers the same or
similar services, goods or material to those offered by Company or
any Affiliate for which Employee works or performs services during
the term of Employee’s employment.
C.R. 15-16; 5 R.R. Pl.’s Ex. 3 at ¶ 5.
On October 29, 2014, Schlumberger sent a demand letter to Parker Close
Out Company and Parker alleging that Parker Close Out Company, Parker, and
Myers had breached the APA. C.R. 180-81. Schlumberger contended that (1)
Parker was continuing to utilize e-mail addresses that had been transferred under
5
the APA; (2) that certain tools had not been transferred as required by the APA;
and (3) Parker’s hiring of various Schlumberger employees, including Myers,
violates the APA. C.R. 180-81. Schlumberger also asserted that “failure to take
the steps set forth above will be a breach of . . . the APA . . . [i]f you fail to cure the
breaches of the Agreement, the likely next step will be to proceed to arbitration
under section 12.3 of the Agreement.” C.R. 181. In response to the demand letter,
Parker Close Out Company, Parker, in his individual capacity, and Myers, in his
individual capacity, filed and served a demand for arbitration with the AAA on
November 26, 2014; which arbitration remains pending. C.R. 170-77.
However, despite asserting that Parker’s acts constitute breaches of the
APA, on October 8, 2014, Schlumberger sued Parker and Myers, in their
individual capacities, in the state district court of Fort Bend County, Texas. C.R.
7-21. Schlumberger contends that (1) Parker tortiously interfered with the
Retention Bonus Contract and ICN Agreement between Schlumberger and Myers
(C.R. 14); (2) Parker and Myers tortiously interfered with Schlumberger’s
prospective business relations (C.R. 15); (3) Myers breached a fiduciary duty owed
to Schlumberger and that Parker aided and abetted that breach of fiduciary duty
(C.R. 16-17); and (4) Parker and Myers breached the Retention Bonus Contract
and ICN Agreements signed in connection with the APA (C.R. 15-16).
Schlumberger also asserts that it is entitled to permanently enjoin Parker and
6
Myers from “soliciting, contacting, or accepting work, which was the same or
substantially similar to the work and/or services performed by them for the
Company, from clients of the Company with whom they had business dealings
during their employment with the Company.” C.R. 19.
Parker and Myers moved the district court to compel arbitration as required
by the APA. C.R. 160-68. The district court denied the motion on December 10,
2011 ruling:
The Court finds . . . that Plaintiff in this action is not bringing claims
against the Defendants under the APA. The Court also finds that any
claims brought under the following agreements are not arbitrable: (1)
the Intellectual Property, Confidential Information and Non-Compete
Agreement between Plaintiff and Parker dated September 10, 2011,
(b) the Intellectual Property, Confidential Information and Non-
Compete Agreement between Plaintiff and James Myers (“Myers”)
dated September 10, 2011, and (c) the Retention Bonus Contract
between [Production Wireline] and Myers dated September 15, 2011.
C.R. 284. On December 18, 2014, the district court also granted Schlumberger a
temporary injunction providing, in part:
6. Enjoined Parties shall not directly or indirectly work for, or
assist (whether as an owner, employee, consultant, contractor or
otherwise) any business or commercial operations of wireline, slick
line and braided line operations in the counties set forth in Plaintiff’s
Exhibit 74 which is attached.
7. Enjoined Parties shall not solicit, contact, or accept wireline,
slick line or braided line work and/or service, from the Established
Customers of Schlumberger in the states of Oklahoma, Texas,
Arkansas, Kansas, Pennsylvania, and Louisiana.
8. Enjoined Parties shall not provide, or supervise, advise,
manage, or serve as a consultant for businesses who are performing,
7
wireline, slick line or braided line work for the Established Customers
of Schlumberger in the states of Oklahoma, Texas, Arkansas, Kansas,
Pennsylvania and Louisiana.
C.R. 304. Parker and Myers timely filed this interlocutory appeal of the order
denying their motion to compel arbitration as well as the district court’s temporary
injunction on December 22, 2014. C.R. 306-07.
SUMMARY OF THE ARGUMENT
The district court committed reversible error by failing to stay the
proceedings in the underlying lawsuit and compel Schlumberger’s claims to
arbitration. Parker and Schlumberger’s predecessor-in-interest agreed to arbitrate
disputes arising under or in connection with the APA. Schlumberger’s claims for
breach of contracts signed in connection with the APA are encompassed within
that arbitration agreement. Further, Schlumberger’s tort claims for interference
with relationships created by the APA also fall within the arbitration agreement
and must be presented to the arbitrator. Moreover, Schlumberger is equitably
estopped from avoiding arbitration due to the presence of Myers, a non-signatory
defendant, because Schlumberger seeks direct benefits of the APA from Myers and
its claims against Myers are substantively intertwined and rest on the same facts as
its claims against Parker, a signatory to the arbitration agreement.
The district court also erred by signing an order enjoining Parker and Myers
from working in the wireline industry. The evidence in the record establishes that
8
Schlumberger’s covenants not-to-compete should have been evaluated under
Oklahoma law, which state’s public policy renders such covenants void. Further,
even assuming the district court properly applied Texas law, which it did not, the
district court erred by imposing unreasonable restrictions as to geography, scope,
and time in violation of section 15.50 of the Texas Business and Commerce Code.
The district court also erred by awarding Schlumberger injunctive relief when the
record establishes it has an adequate remedy at law.
9
ARGUMENT
I. THE DISTRICT COURT IMPROPERLY DENIED PARKER AND
MYERS’ MOTION TO COMPEL ARBITRATION.
A. Standard Of Review
Generally, this Court reviews a trial court's denial of a motion to compel
arbitration for abuse of discretion. Schlumberger Tech. Corp. v. Baker Hughes
Inc., 355 S.W.3d 791, 800 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (citing
Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 38 (Tex. App.—Houston
[1st Dist.] 2009, pet. denied); W. Wendall Hall et al.,
Hall's Standards of Review in Texas, 42 ST. MARY’S L.J. 1, 78 (2010)). However,
when an appeal from a denial of a motion to compel arbitration turns on a legal
determination, the court applies a de novo standard. Forest Oil Corp. v. McAllen,
268 S.W.3d 51, 55 n. 9 (Tex. 2008).
B. The APA Requires Schlumberger’s Claims To Be Presented To
An Arbitrator.
1. The arbitrability of the claims against Parker and Myers
should be determined by the arbitrator, not a state court
judge.
At the outset, the district court erred by refusing to stay the proceedings and
submitting the jurisdictional question to the arbitrator. See Schlumberger Tech.
Corp., 355 S.W.3d at 802. While the general rule under Texas law is that
questions of arbitrability are to be resolved by a court, see In re Weekley Homes,
L.P., 180 S.W.3d 127, 130 (Tex. 2005), this Court recognizes that “the express
10
incorporation of rules that empower the arbitrator to determine arbitrability—such
as the [American Arbitration Association] Commercial Arbitration Rules—has
been held to be clear and unmistakable evidence of the parties’ intent to allow the
arbitrator to decide such issues.” Schlumberger Tech. Corp., 355 S.W.3d at 802
(citing Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty Trust, 249
S.W.3d 34, 39-41 (Tex. App.—Houston [1st Dist.] 2007, pet. denied)) (emphasis
added).
As in Schlumberger v. Baker Hughes, the APA incorporates the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”). 5 R.R. Defs.’
Ex. 1 at 45 ¶ 12.3(b) (“Any controversy, dispute or claim arising under or in
connection with this Agreement . . . shall be resolved by a binding
arbitration . . . in accordance with the then prevailing Commercial Arbitration
Rules of the American Arbitration Association.”) (emphasis added). The AAA
Commercial Arbitration Rules provide:
The arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the existence,
scope, or validity of the arbitration agreement or to the arbitrability of
any claim or counterclaim.
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION,
Rule 7(a) (2014). This Court recognizes that, where an arbitration agreement
incorporates the AAA rules, and no provision negates an arbitrator’s power under
AAA Rule 7(a) to determine the scope of the arbitration, the arbitrator must be
11
allowed to determine arbitrability. Schlumberger Tech. Corp., 355 S.W.3d at 803.
There are no provisions in the APA that negate an arbitrator’s power under AAA
Rule 7(a) to determine the scope of the arbitration. Accordingly, the arbitrator, not
the district court, had the exclusive authority to decide whether Schlumberger’s
claims were arbitrable. See id. The district court erred by failing to stay its
proceedings to allow the arbitrator to decide the proper scope of the arbitration,
usurping the arbitator’s agreed upon authority to make such a decision. Id.
Indeed, that the arbitrator had such authority should have been readily
apparent to Schlumberger as it has, in the past, argued to this Court that an
arbitrator, not a state court judge, has the exclusive right to resolve questions of
arbitrability where the arbitration agreement provides the arbitrator with such
authority. Schlumberger Tech. Corp., 355 S.W.3d at 802-03. Schlumberger’s
prior position before this Court, with which this Court properly agreed, precludes it
from taking a contrary position in this matter pursuant to the doctrine of judicial
estoppel.
Judicial estoppel “precludes a party from adopting a position inconsistent
with one that it maintained successfully in an earlier proceeding.” Pleasant Glade
Assembly of God v. Schubert, 264 S.W.3d 1, 6 (Tex. 2008). Its essential function
“is to prevent the use of intentional self-contradiction as a means of obtaining
unfair advantage.” See Andrews v. Diamond, Rash, Leslie & Smith, 959 S.W.2d
12
646, 650 (Tex. App.—El Paso 1997, writ denied); Hall v. GE Plastic Pac. PTE
Ltd., 327 F.3d 391, 396 (5th Cir. 2003) (noting basis for judicial estoppel is the
assertion of a position clearly inconsistent with a previous position accepted by the
court). “The policies underlying the doctrine include preventing internal
inconsistency, precluding litigants from playing fast and loose with the courts, and
prohibiting parties from deliberately changing positions according to the
exigencies of the moment.” Thompson v. Cont’l Airlines, 18 S.W.3d 701, 703
(Tex. App.—San Antonio 2000, no pet.).
In its prior case before this Court, Schlumberger asserted that an arbitrator
has the exclusive right to determine the jurisdiction of the arbitration where the
arbitration agreement incorporates the AAA commercial arbitration rules, as the
APA does in this case. See Schlumberger Tech. Corp., 355 S.W.3d at 803. This
Court agreed with Schlumberger, holding that “the trial court should have
granted . . . Schlumberger’s motion [to compel arbitration] so that the dispute
could be resolved by the AAA panel.” Id. Accordingly, having previously
asserted a (correct) position with which this Court agreed, Schlumberger is
judicially estopped from asserting that a state court judge, rather than the arbitrator,
is the proper person to determine the jurisdictional scope of the arbitration. See
Thompson, 18 S.W.3d at 703.
13
As the APA provides the arbitrator with exclusive authority to determine
arbitrability, and Schlumberger is judicially estopped to contest this issue, the
Court should reverse the district court’s denial of Parker and Myers’ motion to
compel arbitration, stay the proceedings in the underlying litigation, and allow the
arbitrator the opportunity to rule regarding the scope of its jurisdiction. See
Schlumberger Tech. Corp., 355 S.W.3d at 802-03.
2. The APA’s arbitration provision requires each of
Schlumberger’s claims to be arbitrated.
Even assuming for the sake of argument that the district court could properly
preclude the arbitrator from adjudicating the scope of the arbitration, which it
cannot, the APA requires each of Schlumberger’s claims to be arbitrated. District
courts are required to grant motions to compel arbitration where (1) there is a valid
arbitration and (2) the agreement encompasses the claims presented. Nationwide
of Bryan, Inc. v. Dyer, 969 S.W.2d 518, 520 (Tex. App.—Austin 1998, no pet.).
“In Texas, every reasonable presumption must be decided in favor of arbitration.”
Id. “Once a party to a suit comes forward with a presumptively valid arbitration
agreement, the court must order the parties to arbitrate.” Id.
a. There is a valid agreement to arbitrate.
Whether a valid arbitration agreement exists is a question of law. Am.
Emp’r Ins. Co. v. Aiken, 942 S.W.2d 156, 159 (Tex. App.—Fort Worth 1997, no
writ). “A written agreement to arbitrate is valid and enforceable if the agreement is
14
to arbitrate a controversy that: (1) exists at the time of the agreement; or (2) arises
between the parties after the date of the agreement.” TEX. CIV. PRAC. & REM.
CODE § 171.001.
Production Wireline (Schlumberger’s predecessor-in-interest), Parker
Energy, and Parker each entered into the APA, a written contract including an
agreement to arbitrate all disputes “arising under or in connection with” the APA.
5 R.R. Defs.’ Ex. 1 at 45 ¶ 12.3(b). The written arbitration agreement meets the
enforceability requirements under Texas law and constitutes a valid agreement to
arbitrate. See Tex. Civ. Prac. & Rem. Code § 171.001.
b. The claims asserted are encompassed by the
arbitration agreement.
Despite the agreement to arbitrate, the district court denied the motion to
compel arbitration because it concluded that Schlumberger’s claims under the
Retention Bonus Contracts and ICN Agreements signed in connection with the
APA, were “separable” from the APA, concluding: “Plaintiff in this action is not
bringing any claims against the Defendants under the APA.” C.R. 284; 3 R.R. 7.
Such analysis, however, fails to apply the proper legal standards relative to a
motion to compel arbitration.
The supreme court instructs that, when determining whether a claim falls
within the scope of an arbitration agreement, a court must look to the factual
allegations asserted, not the legal claims. Rachal v. Reitz, 403 S.W.3d 840, 850
15
(Tex. 2013); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 754 (Tex. 2001) (“To
determine whether a party’s claims fall within an arbitration agreement’s scope, we
focus on the complaint’s factual allegations rather than the legal causes of action
asserted.”). A claim is not subject to arbitration “only if the facts alleged in
support of the claim are completely independent of the contract and the claim
could be maintained without reference to the contract.” Glassell Producing Co.,
Inc. v. Jared Res., Ltd., 422 S.W.3d 68, 77 (Tex. App.—Texarkana 2014, no pet.)
(emphasis added) (citing Cotton Commercial USA, Inc. v. Clear Creek Indep. Sch.
Dist., 387 S.W.3d 99, 108 (Tex. App.—Houston [14th Dist.] 2012, no pet.)).
Courts should resolve doubts as to the agreement’s scope in favor of arbitration.
Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011).
The APA requires that “[a]ny controversy, dispute or claim arising under or
in connection with this Agreement (including, without limitation, the existence,
validity, interpretation or breach hereof and any claim based on contract, tort [or]
statute) shall be resolved by a binding arbitration.” 5 R.R. Defs.’ Ex. 1 at 44-45 ¶
12.3(b) (emphasis added). Texas courts recognize that the term “arising under or
in connection with” is broad in scope and must be given a broad construction. See
My Cafe-CCC, Ltd. v. Lunchstop, Inc., 107 S.W.3d 860, 866 (Tex. App.—Dallas
2003, no pet.) (construing term “any dispute arising under or in connection with”
broadly as encompassing any dispute connected to or relating to the agreement);
16
Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067–68
(5th Cir. 1998) (noting, in context of arbitration clauses, “in connection with”
language is broad and dispute need only “touch” matters covered by the contract to
fall within scope of arbitration agreement). Looking to the facts alleged, each of
Schlumberger’s asserted claims “arises under” or “in connection with” the APA.
Schlumberger asserts six claims against Parker and Myers alleging (1)
Parker breached the ICN Agreement and Myers breached the Retention Bonus
Contract and ICN Agreement (C.R. 16); (2) Parker tortiously the Retention Bonus
Contract and ICN Agreement between Production Wireline and Myers (C.R. 14);
(3) Parker and Myers tortiously interfered with Schlumberger’s prospective
business relationships with third parties (C.R. 15); (4) Myers breached his
fiduciary duty to Schlumberger by working for a competing business; and (5) that
Parker, “as a result of his knowledge of the terms of the APA,” knowingly “aided
and abetted” Myers’ breaches of fiduciary duty (C.R. 16-17).
The facts supporting each of these claims arise under or in connection with
the APA; any dispute regarding them must be resolved by arbitration.
The APA required, as conditions precedent to closing:
(j) [E]ach of the Transferred Employees shall have executed and delivered
Purchaser’s standard employment documentation for new hires;
***
17
(n) . . . James O. Myers . . . shall have executed and delivered to Purchaser a
retention bonus contract substantially in the form of Exhibit C hereto (the
“Retention Bonus Contract”).
5 R.R. Defs.’ Ex. 1 at 38, ¶ 9.1 (emphasis in original). Parker and Myers qualify as
“Transferred Employees” under the APA, and the evidence in the record shows
that the ICN Agreements they signed are part of Schlumberger’s “standard
employment documentation” referenced by the APA. See 4 R.R. 13. Myers’
execution of the retention bonus agreement was also an express condition to the
APA, and a form retention bonus contract was included as an exhibit to the APA.
5 R.R. Defs.’ Ex. 1 at 38, ¶ 9.1. As the Retention Bonus Contract and ICN
Agreements are ancillary to the APA, and Parker and Myers agreement to those
contracts were, in fact, required by the APA, any dispute regarding the Retention
Bonus Contract or ICN Agreements necessarily “arises under or in connection
with” the APA. Schlumberger’s claims for breach of the Retention Bonus Contract
and ICN Agreements, therefore, are encompassed within the APA’s arbitration
provision and those claims must be compelled to arbitration pursuant to Texas law.
See Pennzoil Exploration & Prod. Co., 139 F.3d at 1068 (compelling claims to
arbitration where claim is based upon a subsequent letter agreement ancillary to the
agreement containing the arbitration clause).
Indeed, the fact that Schlumberger’s claims are not “completely
independent” of the APA as required to avoid arbitration is confirmed by
18
Schlumberger’s conduct before and after it filed the underlying lawsuit. This is
clear from a comparison of Schlumberger’s pre-suit demand letter to Parker
alleging that he had breached the APA and its petition in this case, under which the
factual allegations supporting the alleged violation of the APA asserted in the
demand letter are the same facts that Schlumberger now says support its tort and
contract claims in the underlying lawsuit:
Demand Letter Petition
With respect to Purchased Intellectual The business name used by [Parker and
Property . . . We have learned that your Myers], ‘PW’ and ‘Professional
new business is using a deceptively Wireline’ is similar to the name used by
similar name to the trade name you sold Schlumberger – Production Wireline.
in the Asset Purchase Agreement. C.R. C.R. 13.
180
With respect to the tool boxes in the Schlumberger also found that
truck used by Mr. Myers, those were Schlumberger property was missing and
Purchased Assets . . . of the Agreement made a demand for the return of the
and must be returned along with all of property. Some of the property has
the tools contained in the boxes.” C.R. been returned, but other property is still
181 under investigation. C.R. 13.
A large portion of the purchase price Ricky Parker knew that James Myers
was allocated to goodwill. Demand is entered into the Retention Bonus
hereby made that you cease all activities Agreement and the ICN Agreement. He
which interfere with Schlumberger willfully and intentionally interfered
receiving the full value of the goodwill with these agreements. C.R. 14
purchased from you. This would
include making sure that James Myers As a result of his knowledge of the
[and others] comply with their terms of the APA, Ricky Parker knew
obligations under their agreements they that James Myers had a fiduciary
signed which were referenced in the duty . . . to Schlumberger following the
APA. C.R. 181 acquisition . . . Ricky Parker aided and
abetted James Myers in breaching James
19
Myers’ duty of loyalty and his fiduciary
duties as set forth in more detail above.
C.R. 16-17
The fact that Schlumberger’s claims are not completely independent from
the APA is also readily apparent from its repeated reference to the APA in its
petition. See C.R. 8 (“Having signed the APA, Ricky Parker was put on notice of
paragraph 9.1(n) which required that employees James O. Myers . . . execute
Retention Bonus Contracts.”); C.R. 8 (“The APA further put Ricky Parker on
notice that he . . . would have to agree to Schlumberger’s policies and
agreements.”); C.R. 10 (“As contemplated by the APA, on September 15, 2011,
James Myers signed a Retention Bonus Contract.”); C.R. 13 (“Schlumberger also
found that Schlumberger property was missing and made a demand for the return
of the property.”); C.R. 16 (“[A]s a result of his knowledge of the terms of the
APA, Ricky Parker knew that James Myers had a fiduciary duty and duties of
loyalty to Schlumberger following the acquisition.”).
Moreover, Schlumberger has repeatedly acknowledged in its filings in the
district court and this Court that the Retention Bonus Contract and ICN
Agreements were signed “in connection with” the APA and are “ancillary” to the
APA. See C.R. 18 (Application For Injunction) (“[Parker and Myers] were paid
substantial sums of money in connection with the sale of the business [the APA]
and ancillary Retention Bonus Agreement . . . .”); Appellee’s Response To
20
Appellant’s Emergency Motion To Stay Trial Court Order at p. 2 (“In connection
with the sale, Parker and Myers . . . signed separate Intellectual Property,
Confidential Information, and Non-Compete Agreements . . . Additionally Myers
signed a Retention Bonus Agreement wherein he was paid a substantial amount of
money in connection with the sale of the business and his agreement to remain
employed for a period of two years after he signed the agreement.”). Accordingly,
as even Schlumberger admits that the ICN Agreement and Retention Bonus
Contract were signed “in connection with” the APA (See Appellee’s Response To
Appellant’s Emergency Motion To Stay Trial Court Order at p. 2), any dispute for
breach of those agreements necessarily touches upon the APA and must be
compelled to arbitration. See Pennzoil Exploration & Prod. Co., 139 F.3d at 1068.
The torts asserted by Schlumberger also “arise under or in connection with”
the APA and must be compelled to arbitration. Each of the alleged torts concerns
relationships created by the APA and those agreements ancillary to it. See C.R. 7-
17. For example, the alleged claims for tortious interference with the Bonus
Retention Contract and ICN Agreement and breach of fiduciary duty claim arise
out of the employment relationship between Schlumberger and Myers. See C.R.
16. This relationship was expressly created by the APA because Myers is a
“Transferred Employee,” i.e., an employee transferred between Parker Energy and
Schlumberger pursuant to the APA. 5 R.R. Defs.’ Ex. 1 at 35-36 ¶ 8.1, 37 ¶
21
9.1(n). Such claims, indisputably, “touch upon” the APA and are connected with
that agreement. Pennzoil Exploration & Prod. Co., 139 F.3d 1068; Glassell
Producing Co., Inc., 422 S.W.3d at 77.
Likewise, Schlumberger’s claims for tortious interference with its
prospective business relationships also concern the relationships created by the
APA. Schlumberger contends that, by hiring other former Parker Energy
employees, Parker and Myers tortiously interfered with Schlumberger’s
prospective business relationships because “staffing projects being performed for
customers with key personnel is essential for Schlumberger to maintain its
relationships.” C.R. 15. Such relationships, both between Schlumberger and the
former Parker Energy employees, as well as between Schlumberger and Parker
Energy’s customers, however, were created by the APA. See C.R. 15, 5 R.R.
Defs.’ Ex. 1 at 8 ¶ 2.1. Therefore, the alleged interference with prospective
business relationships tort also touches upon the APA and should be compelled to
arbitration. Pennzoil Exploration & Prod. Co., 139 F.3d 1068. As the APA’s
arbitration agreement encompasses each of Schlumberger’s claims, the dispute, in
its entirety, should be compelled to binding arbitration and the proceedings in the
district court stayed. See Nationwide of Bryan, Inc., 969 S.W.2d at 520.
22
c. Schlumberger is equitably estopped from avoiding
arbitration.
Pursuant to the doctrine of equitable estoppel, “a defendant-signatory to an
arbitration agreement [can] compel arbitration with a plaintiff-signatory.” Grigson
v. Creative Artists Agency, L.L.C., 210 F.3d 524, 526 (5th Cir. 2000); see also
Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 307 (Tex. 2006) (applying equitable
estoppel to compel arbitration against signatory-plaintiff); see also Neatherlin
Homes, Inc. v. Love, 2007 WL 700996, at *4 (Tex. App.—Corpus Christi Mar. 8,
2007, no pet.) (applying equitable estoppel to compel arbitration where “[signatory
to arbitration agreement] brought the same causes of action against [signatory and
non-signatory to agreement] and alleged concerted, coordinated acts by these
parties, and all of [signatory-plaintiff’s] causes of action arise from the same
operative facts concerning the allegedly defective construction of her home.”)
Equitable estoppel allows a nonsignatory to compel arbitration in two
different circumstances: “[f]irst, equitable estoppel applies when the signatory to a
written agreement containing an arbitration clause must rely on the terms of the
written agreement in asserting its claims against the nonsignatory . . . [s]econd,
application of equitable estoppel is warranted when the signatory to the contract
containing an arbitration clause raises allegations of substantially interdependent
and concerted misconduct by both the nonsignatory and one or more of the
signatories to the contract.” Grigson, 210 F.3d at 527. In other words, equitable
23
estoppel to compel arbitration is proper where the claims against a signatory to an
arbitration agreement and the claims against a non-signatory are intertwined,
otherwise the arbitration provision between the two signatories would be rendered
meaningless and the public policy in favor of arbitration would be subverted. See
id.
Here, for the reasons noted above, it is indisputable that Schlumberger’s
claims against Parker arise under and are connected with the APA. Likewise, as
the facts supporting Schlumberger’s claims against Myers are the same facts
supporting its claims against Parker (see C.R. 7-17), the claims against Parker and
Myers are substantively intertwined such that Schlumberger is equitably estopped
from avoiding its agreement to arbitrate the dispute by suing Myers, a non-
signatory to the agreement. See Neatherlin Homes, 2007 WL 700996, at *4.
In the district court, Schlumberger contended that the supreme court had
overruled the equitable estoppel doctrine with respect to non-signatories. It has
not. The supreme court has noted that an estoppel theory remains applicable where
there are intertwined facts and a signatory-plaintiff seeks a direct benefit from a
contract containing an arbitration agreement from a non-signatory defendant. See
In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191 (Tex. 2007); see also In
re Weekley Homes, L.P., 180 S.W.3d at 131–32; In re Kellogg Brown & Root, Inc.,
166 S.W.3d 732, 741 (Tex. 2005). As noted above, Schlumberger seeks numerous
24
direct benefits from the Myers including damages for loss of goodwill allegedly
caused by various torts connected with the APA and injunctive relief pursuant to
contracts signed in connection with the APA. See C.R. 14-20; see also 4 R.R 93-
99.
Accordingly, the district court erred by declining to compel arbitration of the
related, intertwined claims asserted in Schlumberger’s petition, which all arise
under or are connected with the APA. The district court’s order denying Parker
and Myer’s motion to compel arbitration should be reversed and the state court
proceedings stayed to allow the claims to be presented to binding arbitration in
compliance with the APA’s arbitration provision. Id.
II. THE DISTRICT COURT IMPROPERLY GRANTED
SCHLUMBERGER A TEMPORARY INJUNCTION PROHIBITING
PARKER AND MYERS FROM WORKING IN THE WIRELINE,
SLICK-LINE, AND BRAIDED LINE INDUSTRY.
A. The Temporary Injunction Should Be Reversed To Allow The
Arbitrator To Adjudicate The Dispute.
For the reasons noted above, each of Schlumberger’s claims “arise under or
in connection with” the APA such that the claims should be compelled to
arbitration. Moreover, as Schlumberger’s claims for injunctive relief rely upon the
same facts as its claims for damages (see C.R. 18), and there is no provision in the
APA prohibiting the arbitrator from granting injunctive relief, the arbitrator, as
opposed to the district court, should have been afforded the opportunity to address
25
those claims as well. See J.J. Gregory Gourmet Services, Inc. v. Antone’s Imp.
Co., 927 S.W.2d 31, 36 (Tex. App.—Houston [1st Dist.] 1995, no writ) (holding
that arbitrators have authority to grant injunctive relief in the absence of any
language specifically prohibiting the arbiters from same). Accordingly, this Court
should reverse the district court’s injunction to allow the arbitrator to adjudicate
the dispute as required by the APA. See id.
B. Oklahoma Law Applies To The Non-Compete Agreements.
Even assuming for the sake of argument the district court could properly
adjudicate Schlumberger’s application for temporary injunction, which it cannot,
the district court committed numerous reversible errors in granting Schlumberger’s
application. First and foremost, the district court erred in applying Texas rather
than Oklahoma law to the covenants not to compete.
The APA, as well as the ancillary Retention Bonus Contract and ICN
Agreements, contain choice of law provisions designating Texas law to apply to
any dispute. See 5 R.R. Pl.’s Ex. 1 at ¶ 17; 5 R.R. Pl.’s Ex. 2 at ¶ 17; 5 R.R. Pl.’s
Ex. 3 at ¶ 11; 5 R.R. Defs.’ Ex. 1 at 46 ¶ 12.5. However, the Texas Supreme Court
has imposed limits to a contracting party’s ability to choose the jurisdictional law
applying to contracts, noting that parties “cannot by agreement thwart or offend the
public policy of the state the law of which ought otherwise to apply.” Desantis v.
Wackenhut Corp., 793 S.W.2d 670, 677 (Tex. 1990) (emphasis added). In
26
effectuating this policy, the supreme court adopted section 187 of the Restatement
of the Conflict of Laws, which provides:
(2) The law of the state chosen by the parties to govern their
contractual rights and duties will be applied, even if the particular
issue is one which the parties could not have resolved by an explicit
provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or
the transaction and there is no other reasonable basis for the
parties' choice, or
(b) application of the law of the chosen state would be contrary to
a fundamental policy of a state which has a materially greater
interest than the chosen state in the determination of the particular
issue and which, under the rule of § 188, would be the state of the
applicable law in the absence of an effective choice of law by the
parties.
Desantis, 793 S.W.2d at 677-78 (citing RESTATEMENT (SECOND) OF CONFLICT OF
LAWS § 187 (1971)).
Parker and Myers have not asserted that Texas has no substantial
relationship to the parties, and do not so assert in this appeal. Accordingly, the
choice of law issue turns on whether the application of Texas law would be
contrary to the fundamental policy of a state that has a materially greater interest.
Id. Distilling the rules set forth in the restatement, the supreme court instructs that
the following three-prong test applies to such an issue:
(1) whether a state has a more significant relationship with the parties and
their transaction than the state they chose;
(2) whether that state has a materially greater interest than the chosen
state in deciding whether the agreement should be enforced; and
27
(3) whether that state’s fundamental policy would be contravened by the
application of the law of the chosen state.
Desantis, 793 S.W.2d at 678. Applying the supreme court’s three prong test,
Oklahoma, not Texas, law should apply to the non-compete agreements.
Oklahoma has a more significant relationship to the non-compete
agreements and enjoined parties than Texas.
To determine what state has the “more significant relationship” to a
contractual agreement, the Court should consider the following factors:
(a) the place of contracting;
(b) the place of negotiation;
(c) the place of performance;
(d) the location of the contract’s subject matter; and
(e) the parties’ domicile, residence, nationality, place of incorporation,
and place of business.
Desantis, 793 S.W.2d at 678, n. 2; Minnesota Min. & Mfg. Co. v. Nishika Ltd., 953
S.W.2d 733, 735-36 (Tex. 1997). Considering the factors set forth above shows
that Oklahoma, not Texas, has the more significant relationship to the non-compete
agreements Schlumberger seeks to enforce and the enjoined parties.
Parker negotiated the sale of Parker Energy and the ancillary agreements
necessary to complete the sale primarily in Oklahoma. See 3 R.R. 55. After
execution of the APA, both Parker and Myers then went to work for Schlumberger
28
in its Pocola, Oklahoma office and worked for it primarily in Oklahoma. See 3
R.R. 25.
Moreover, by seeking to enjoin Parker and Myers from working for P.W.L.,
an Oklahoma business entity, the non-compete provisions will be fully performed
in Oklahoma. P.W.L. is located in Oklahoma, and Oklahoma is the only state
where P.W.L. has performed any wireline operations. See 3 R.R. 56-58. Myers is
also a resident of Oklahoma, while Parker is a resident of Arkansas who lives
seven to eight miles from P.W.L.’s offices in Oklahoma. 3 R.R. 23, 56-58. While
Parker and Myers acknowledge that the APA was signed in Texas (3 R.R. 55), that
Schlumberger has offices in Texas (3 R.R. 23), and that Parker and Myers, while
working for Schlumberger, supervised some Schlumberger workers working in
Texas (see, e.g., 3 R.R. 52-53), the record reflects that Oklahoma has a more
significant relationship to the non-compete provisions and the enjoined parties than
Texas. See Desantis, 793 S.W.2d at 678. Indeed, the substantive effect of the
district court’s injunction has been to stop an Oklahoma company’s employees
(one of which is an Oklahoma resident) from working for it in Oklahoma; in such
instances the Texas Supreme Court has held that the state where the work is
enjoined has the more substantive relationship to the non-compete and parties. See
id. (holding that where employee lived and worked in Texas, Texas had a more
29
significant relationship to employee and non-complete provision than the foreign
state whose law the employer had chosen to apply to the non-compete provision)
Oklahoma has a materially greater interest than Texas in deciding whether
the non-compete agreement should be enforced.
Where an employer seeks to enforce a non-compete agreement against a former
employee in another state, the state where the employee works has a materially
greater interest in deciding whether the non-compete agreement should be enforced
over the contractually chosen jurisdiction. See Desantis, 793 S.W.2d at 679; see
also Exxon Mobil Corp. v. Drennen, --- S.W.3d ----, 2014 WL 4782974 at *6 (Tex.
2014). For example, in Desantis, the supreme court held that where the issue was
“whether a Texas resident can leave one Texas job to start a competing Texas
business,” Texas had a materially greater interest than a foreign national employer
that had chosen Florida as the law to govern a non-compete agreement. Desantis,
793 S.W.2d at 679; see also Maxxim Med., Inc. v. Michelson, 51 F. Supp. 2d 773,
781 (S.D. Tex. 1999), rev’d on other grounds, 182 F.3d 915 (5th Cir. 1999)
(holding that when an employee involved is from a certain state and that state has a
strong public policy against non-competition agreements, that state has a materially
greater interest in the enforceability of the non-compete agreement). Schlumberger
seeks to enforce a non-competition agreement against two employees that worked
for it in its Pocola, Oklahoma office, and indisputably, worked and work primarily
in Oklahoma. See 3 R.R. 56-58. Further, it seeks to enjoin those employees from
30
working for their new Oklahoma employer in Oklahoma. See 3 R.R. 56-58. The
evidence establishes that Oklahoma has a materially greater interest than Texas in
the enforceability of the non-compete agreements. See Desantis, 793 S.W.2d at
679.
Application of Texas law would contravene the public policy of Oklahoma.
Under Oklahoma law, an employee has the affirmative right to “engage in
the same business as that conducted by the former employer or in a similar
business as that conducted by the former employer” and any non-compete that
purports to restrict that right “shall be void and unenforceable.” OKLA. STAT. tit.
15 § 219A (2001). Schlumberger, however, is using its non-competes to prohibit
Parker and Myers, its former employees, from competing with it in a similar
business, which violates the public policy of Oklahoma. See id.
Application of Texas law would contravene this public policy. Under Texas
law, courts have the authority to reform non-competition clauses to make them
enforceable. Tex. Bus. & Comm. Code § 15.51. Indeed, Schlumberger
specifically requested that the district court reform its exceedingly broad non-
compete agreements to make them enforceable. See C.R. 19. The district court
did so by crafting some, albeit unreasonably broad, limitations to its temporary
injunction that are not included in Schlumberger’s non-competes. Compare C.R.
304 with 5 R.R. Pl.’s Ex. 1-3. Oklahoma, however, does not permit such
31
reformation; under Oklahoma law, if a non-compete clause contains restrictions
prohibited by Oklahoma public policy, the non-compete agreement is simply void.
OKLA. STAT. tit. 15 § 219A(A), (B) (2001). Courts are prohibited from reforming
unenforceable agreements. See Howard v. Nitro-Lift Technologies, L.L.C., 2011
OK 98, ¶ 28, 273 P.3d 20, 30, cert. granted, judgment vacated on other grounds,
133 S. Ct. 500, 184 L. Ed. 2d 328 (2012) (holding that Oklahoma courts may not
reform non-compete agreements that violate section 219A). Accordingly, the
application of Texas law, which permits reformation of covenants not to compete
containing unenforceable limitations on a person’s constitutional right to work,
would contravene the Oklahoma public policy prohibiting such reformation, and
Oklahoma law should apply. See Desantis, 793 S.W.2d at 679.
Such analysis comports with Judge Gray Miller’s recent analysis of identical
issues in Cardoni v. Prosperity Bank. 2014 WL 4982600 (S.D. Tex. Oct. 6, 2014).
In Cardoni, an employer sought to enforce a non-competition provision in which
the parties had contractually agreed was governed by Texas law. Id. at *2. After
applying the conflicts of laws principals set forth above, Judge Miller concluded
that, despite the choice of law provision, the court was required to apply Oklahoma
law to the non-competition agreement. Id. at * 12-13. Judge Miller reasoned that
the provisions in the agreement exceeded the bounds of Oklahoma law and
unreasonably restrained fair competition. Id. at *13. Judge Miller concluded that,
32
where the agreement prohibited the employee from “engaging in any business
similar to that of [the former employer] or any business in which [the former
employer] may prospectively become engaged,” the non-competition agreement
violated the mandatory language of section 219A and required the application of
Oklahoma law. Id. This Court should apply the same analysis as Judge Miller and
look to Oklahoma law to judge the enforceability of Schlumberger’s non-compete
covenants. See id. at *13.
C. The Non-Competition Provisions In The ICN Agreement And
Retention Bonus Contract Are Void Under Oklahoma Law.
Oklahoma law provides that non-competition agreements are void and
unenforceable, except in very limited circumstances. OKLA. STAT. tit. 15 § 219A
(2001) (declaring “void and unenforceable” any contract between employer and
employee that restricts an employee from conducting the “same” or “similar”
business as employer); see also OKLA. STAT. tit. 15 § 217 (2001) (declaring void,
except in limited circumstances, every contract by which anyone is restrained from
carrying on a lawful profession or business). The non-competition provision of the
ICN Agreements and Retention Bonus Contract violate the public policy of
Oklahoma as set forth in these statutes.
The ICN Agreements state that the employee will not “directly or indirectly
work for or assist (whether as owner, employee, consultant, contractor, or
otherwise) any business or commercial operation whose business is – even in part
33
– in direct competition with any area of the Company’s business in which
Employee was employed by Company.” 5 R.R. Pl.’s Ex. 1-2 at ¶ 5. The Retention
Bonus Contract similarly provides that the employee will not “directly or indirectly
own, manage, operate, control, be employed by, be a consultant for, or perform any
job functions for, any business that is in competition with Company.” 5 R.R. Pl.’s
Ex. 3 at ¶ 5. A “business that is in competition with Company” is defined as “a
business that provides or offers the same or similar services, goods or material to
those offered by Company.” Id. The non-competition provisions of these
contracts violate Oklahoma law because they do not allow Parker and Myers to
“engage in the same business as that conducted by the former employer or in a
similar business as that conducted by the former employer.” OKLA. STAT. tit. 15
§ 219A (2001). Therefore, as required by section 219A, the Court should conclude
that the non-competition provisions Schlumberger seeks to enforce against Parker
and Myers are void and unenforceable. Howard, 2011 OK 98, ¶ 19 (noting that
where a covenant not to compete “prevent[s] the employees from taking jobs in
any capacity from a competing business” it violates Oklahoma public policy and is
void).
Furthermore, the district court’s temporary injunction modifying and
restricting the scope of the non-competition provisions violates Oklahoma public
policy prohibiting reformation of non-competition provisions when such
34
reformation requires the court to materially alter the provisions at issue. Bayly,
Martin & Fay, Inc. v. Pickard, 780 P.2d 1168, 1175 (Okla. 1989) (forbidding
courts from modifying non-competition provisions to bring them within the rule of
reason if the provisions require “material judicial alteration” of essential terms).
Under Oklahoma law, judicial modification of non-competes is not appropriate if
“the contractual provisions would have to be substantially rewritten to cure
multiple defects.” Howard, 2011 OK 98, ¶ 3. The non-competition provisions in
the ICN Agreements cannot be properly reformed under Oklahoma law as the
contracts prevent Parker and Myers from directly or indirectly working for or
assisting “(whether as owner, employee, consultant, contractor, or otherwise) any
business or commercial operation whose business is – even in part – in direct
competition with any area of the Company’s business in which Employee was
employed by Company.” 5 R.R. Pl.’s Ex. 1-2 at ¶ 5. The Retention Bonus
Contract also requires substantial reformation because, it prevents Myers from
directly or indirectly working, managing, operating, controlling, being employed
by, being a consultant for, or performing any job functions for “any business that is
in competition with Company.” 5 R.R. Pl.’s Ex. 3 at ¶ 5. Because it is against
Oklahoma public policy to prohibit workers in Oklahoma from “exercising a
lawful profession,” except in limited circumstances not applicable here, the non-
35
competition agreements at issue violate Oklahoma public policy and are void and
unenforceable. OKLA. STAT. tit. 15 §§ 217, 219A (2001).
The district court erred in refusing to apply Oklahoma law rendering
Schlumberger’s non-competition covenants void. The temporary injunction should
be reversed for this reason.
D. Even Under Texas Law, The Non-Competition Agreements, And
The District Court’s Temporary Injunction, Are Unenforceable
Restraints On Trade.
Even though the Court should apply Oklahoma law in evaluating the
enforceability of the non-competition agreements, even under Texas law the
agreements, and the district court’s injunction, constitute unreasonable restraints on
trade. Covenants not to compete are restraints on trade and unenforceable as a
matter of public policy unless they are reasonable restraints. See Juliette Fowler
Homes, Inc., v. Welce Assocs., Inc., 793 S.W.2d 660, 662 (Tex. 1990)
superseded on other grounds by statute as stated in Coinmach Corp. v.
Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013); see also TEX.
BUS. & COMM. CODE § 15.50(a). Indeed, as this Court recognizes, “[c]ovenants
against competition are generally not favored by our courts because of the public
policy against restraints of trade and the hardships resulting from interference with
a person’s means of livelihood.” Martin v. Linen Sys. for Hospitals, Inc., 671
S.W.2d 706, 709 (Tex. App.—Houston [1st Dist.] 1984, no writ). “Noncompetes
36
tailored to protectable business interests have their lawful place, but they should be
used sparingly and drafted narrowly. And employers must demonstrate special
facts that legitimize the noncompete agreement. Squelching competition for its
own sake is an interest unworthy of protection. Competition by a former employee
may well rile an employer, but companies do not have free rein to, by contract,
indenture an employee or dampen everyday competition that benefits Texas and
Texans.” Marsh USA Inc. v. Cook, 354 S.W.3d 764, 788 (Tex. 2011) (Willet, J.,
concurring).
The Business and Commerce Code provides that a covenant not to compete
is enforceable only if:
(1) it is ancillary to or part of an otherwise enforceable
agreement at the time the agreement is made and;
(2) it contains 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.
TEX. BUS. & COMM. CODE § 15.50(a). A restraint on trade is unnecessary if it is
broader than necessary to protect the legitimate interests of the employer.
Gallahger Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654 (Tex. App.—
Houston [1st Dist.] 2009, pet. denied). A restrictive covenant is “overbroad and
unreasonable when it extends to clients with whom the employee had no dealings
during his employment.” Id.; see also Peat Marwick Main & Co. v. Haass, 818
37
S.W.2d 381, 386–88 (Tex. 1991). The Texas Supreme Court instructs that an
agreement is overbroad and unreasonable if:
(1) it inhibits a departing employee from servicing clients
who were acquired after the employee left; or
(2) it inhibits departing employees from servicing clients
whom the employee had no contact while associated with
his former employer.
Id. Moreover, this Court recognizes that an industry-wide exclusion is
unreasonable. Vogelsang, 312 S.W.3d at 654; see also John R. Ray & Sons, Inc. v.
Stroman, 923 S.W.2d 80, 85 (Tex. App.—Houston [14th Dist.] 1996, writ denied)
(holding covenant not to compete prohibiting insurance agent from selling
insurance policies within a county and all adjacent counties constitutes an
unreasonable industry-wide restraint).
Standard of Review
Whether a covenant not to compete is reasonable is a legal question for the
court. Haass, 818 S.W.2d at 386. The burden of proving the necessity for and the
reasonableness of the non-competition covenant falls upon the employer. Martin,
671 S.W.2d at 709. Moreover, a court of appeals cannot uphold a noncompete
absent a record that demonstrates the limitations are reasonable and as
nonburdensome as possible. Marsh USA Inc., 354 S.W.3d at 785. As Justice
Willet recognized, “Every company has customer relationships and attendant
goodwill it wants to cultivate by incentivizing employees to stay, but merely
38
asserting goodwill is not enough . . . The evidentiary record must demonstrate
special circumstances beyond the bruises of ordinary competition such that, absent
the covenant, [the former employee] would possess a grossly unfair competitive
advantage. And even then the restrictions imposed must be as light as possible and
not restrict [the former employee’s] mobility to an extent greater than [the
employer’s] legitimate need.” Id. at 784-85 (emphasis in original).
The non-competition agreements, and the district court’s temporary
injunction, are unreasonable restraints that prohibit Parker and Myers from
working in an entire industry.
Texas courts have repeatedly recognized that a covenant not to compete is
unreasonable if it seeks to prohibit a former employee from working in an entire
industry. Vogelsang, 312 S.W.3d at 654; Stroman, 923 S.W.2d at 85; Wright v.
Sport Supply Group, Inc., 137 S.W.3d 289, 298 (Tex. App.—Beaumont 2004, no
pet.). Schlumberger sought to enjoin Parker and Myers from working in the entire
wireline, slick-line, and braided line industry (see 3 R.R. 19). The district court’s
order does so, providing:
6. Enjoined Parties shall not directly or indirectly work for, or assist
(whether as an owner, employee, consultant, contractor or otherwise)
any business or commercial operations of wireline, slick-line and
braided line operations in the counties set forth in Plaintiff’s Exhibit
74 which is attached.
39
C.R. 304. 3 The sole limitation to that order is a broad geographic one limiting the
order to “the counties set forth in Plaintiff’s Exhibit 74.” Id. Plaintiff’s Exhibit 74
is a list of 142 counties in Oklahoma, Arkansas, Texas, Louisiana, Pennsylvania,
Ohio, West Virginia, and New York that purportedly constitutes the complete list
of every county a work crew reporting to Myers ever worked during his three-year
tenure with Schlumberger. See 4 R.R. 69-70.
Such a restriction, however, is not reasonable under the business and
commerce code and constitutes an unreasonable industry-wide restraint under
Texas law. See Vogelsang, 312 S.W.3d at 654; Stroman, 923 S.W.2d at 85; Wright
v. Sport Supply Group, Inc., 137 S.W.3d 289, 298 (Tex. App.—Beaumont 2004,
no pet.). For example, in Stroman, the Fourteenth Court of Appeals held that a
non-competition agreement that provided “[the employee] would not engage in or
have an interest in any business that sold insurance policies or engaged in the
insurance agency business within Harris County and all adjacent counties for a
period of five years from the date of the Agreement” constituted an unreasonable
industry-wide restraint on trade. Stroman, 923 S.W.2d at 83, 85. The court
reasoned that the restraint could not be enforced because it completely prohibited
3
Plaintiff’s Exhibit 74 is not attached to the temporary injunction as the order states. See C.R.
299 - 306. However, there is a Plaintiff’s Exhibit 74 in the record, which was admitted without
objection and which identifies 142 counties in Oklahoma, Arkansas, Texas, Louisiana,
Pennsylvania, Ohio, West Virginia, and New York in which Parker and Myers are prohibited
from working. See 5 R.R. Pl.’s Ex. 74.
40
the employee’s “ability to work in the insurance business in and around Harris
County.” Id. at 85. As in Stroman, the district court’s injunction prohibits Parker
and Myers from working in the entire wireline, slick-line, and braided line industry
in the 142 counties in Oklahoma, Arkansas, Texas, Louisiana, Pennsylvania, Ohio,
West Virginia, and New York listed in Plaintiff’s Exhibit 74. See C.R. 304; 5 R.R.
Pl.’s Ex. 74. Such restrictions constitute unreasonable industry-wide prohibitions,
which are improper under Texas law. See Stroman, 923 S.W.2d at 83, 85; see also
Wright, 137 S.W.3d at 298 (holding that agreement prohibiting employee “from,
either directly or indirectly, conducting any sales related activities for a business
related to the promotion, marketing, distribution, manufacturing, sourcing,
importing and/or sale of sports related equipment and/or supplies to institutional
customers in certain counties” constitutes an unreasonable restriction on trade).
In contrast, this Court has held that where an employer’s non-competition
agreement merely prohibits the employee from working in a specific industry for
specific former clients of the employee, such a restriction does not constitute an
industry-wide restraint because it “does not limit [the employee] from working in
the insurance business, and she can practice her livelihood anywhere in the
world . . . [h]owever, she cannot work with her [former] clients” for a limited
period. Vogelsang, 312 S.W.3d at 655. This Court concluded that such a restraint
was a reasonable because the restraint was narrowly tailored to individual clients
41
and did not prohibit the employee from working in the industry as a whole and
earning a living. Id. Here, the district court’s injunction prohibits Parker and
Myers from earning a living in the wireline, slick-line, or braided line work in 142
counties in eight states. C.R. 304. Unlike the restriction in Vogelsang, the district
court’s injunction is not narrowly tailored merely to Parker and Myers’ former
clients with Schlumberger. See id. Accordingly, it is axiomatic that the industry-
wide restriction covering 142 counties in eight states is not “as light [a restriction]
as possible” as required to constitute a reasonable limitation on Parker and Myers’
right to work. Marsh USA Inc., 354 S.W.3d at 785. Instead, the injunction
prohibits Parker and Myers from earning a living in the wireline industry, which is
improper under Texas law. See Stroman, 923 S.W.2d at 85. The injunction should
be reversed for this reason.
The non-competition agreements, and the district court’s temporary
injunction, are unreasonable in scope.
Even setting aside the fact that the district court’s injunction constitutes an
improper industry-wide prohibition, the scope of the district court’s injunction is
overly broad and unreasonable. Where a covenant not to compete prohibits the
employee from working “in any capacity” for a competitor of the former employer,
the covenant is overbroad in scope as a matter of law. McNeilus Companies, Inc.
v. Sams, 971 S.W.2d 507, 511 (Tex. App.—Dallas 1997, no writ).; see also Recon
Exploration, Inc. v. Hodges, 798 S.W.2d 848, 853 (Tex. App.—Dallas 1990, no
42
writ) (non-competition covenant prohibiting employment in any business of type
and character engaged in and competitive with former employer presented question
of reasonableness).
While Schlumberger’s employees repeatedly testified that it sought only to
limit Parker and Myers in their ability to compete with Schlumberger in the
wireline business (see, e.g., 3 R.R. 19), the temporary injunction is not so limited.
The injunction states:
6. Enjoined Parties shall not directly or indirectly work for, or
assist (whether as an owner, employee, consultant, contractor or
otherwise) any business or commercial operation of wireline, slick
line and braided line operations in the counties set forth in Plaintiff’s
Exhibit 74 which is attached.
***
8. Enjoined Parties shall not provide, or supervise, advise, manage
or serve as a consultant for businesses who are performing wireline,
slick line or braided line work for the Established Customers of
Schlumberger in the states of Oklahoma, Texas, Arkansas, Kansas,
Pennsylvania and Louisiana.
C.R. 304. Despite Schlumberger’s stated intent, the injunction does not prohibit
Parker and Myers merely from engaging in wireline, slick-line, and braided line
work. The phrases “wireline, slick line and braided line operations” and “wireline,
slick line or braided line work” identify the type of business that Parker and Myers
cannot work for, but those phrases do not limit the type of work that Parker and
Myers are prohibited from engaging in. See C.R. 304. Under the district court’s
injunction, Parker and Myers cannot do any kind of work for any business that
43
engages in wireline-type work, regardless if that business was ever a client of
Schlumberger. C.R. 304. For example, the injunction would prevent Parker and
Myers from working as custodians or caterers for a business that has never done
business with Schlumberger that happens to perform wireline, slick-line, or braided
line work in one of the 142 counties listed on Plaintiff’s Exhibit 74. See C.R. 304.
Likewise, Parker and Myers could not even perform custodial work for
Schlumberger’s “Established Customers.” See id. As the injunction prohibits
Parker and Myers from working in any capacity for any business that performs
wireline-type work, the injunction is simply not narrowly tailored to protect
Schlumberger’s goodwill as required by the business and commerce code. See
TEX. BUS. & COMM. CODE § 15.50. Accordingly, the district court’s injunction
should be reversed as it fails to comply with the statutory requirements imposed by
the Texas Legislature. See McNeilus Companies, Inc., 971 S.W.2d at 511.
The non-competition agreements, and the district court’s temporary
injunction, do not include reasonable restraints on the geographic area in
which Parker and Myers are enjoined from working.
Moreover, the evidence in the record demonstrates that the geographic area
in which Parker and Myers have been enjoined from working is also unreasonable.
The breadth of enforcement of territorial restraints in covenants not to compete
depends upon the nature and extent of the employer’s business and the degree of
the employee’s involvement. Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d
44
787, 793 (Tex. App.—Houston [1st Dist.] 2001, no pet.); Allan J. Richardson &
Assocs., Inc. v. Andrews, 718 S.W.2d 833, 835 (Tex. App.—Houston [14th Dist.]
1986, no writ). The covenant must bear some relationship to the activities of the
employee. Butler, 51 S.W.3d at 793-94. Non-compete covenants with broad
geographical scopes are unenforceable, particularly when no evidence establishes
that the employee “actually worked” in all areas covered by the covenant. Id.
(emphasis added). Courts have also concluded that limitations to clients the
employee dealt with constitutes a reasonable alternative to a geographical
limitation. See Vogelsang, 312 S.W.3d at 654 (citing Stocks v. Banner Am. Corp.,
599 S.W.2d 665, 666–68 (Tex. Civ. App.—Texarkana 1980, no writ); Totino v.
Alexander & Assocs., 1998 WL 552818, at *4 (Tex. App.—Houston [1st Dist.]
Aug. 20, 1998, no pet.); Investors Diversified Servs. v. McElroy, 645 S.W.2d 338,
339 (Tex. App.—Corpus Christi 1982, no writ)).
Paragraph 6 of the district court’s injunction attempts to set a geographic
limitation by prohibiting Parker and Myers from performing “wireline, slick line
and braided line operations in the counties set forth in Plaintiff’s Exhibit 74 which
is attached.” C.R. 304 at ¶ 6. As noted above, Plaintiff’s Exhibit 74 identifies 142
counties in Oklahoma, Arkansas, Texas, Louisiana, Pennsylvania, Ohio, West
Virginia, and New York. 5 R.R. Pl.’s Ex. 74. This does not, however, constitute a
reasonable geographic limitation under Texas law, which requires that such an
45
order be limited to locations in which the enjoined party “actually worked.” See
Butler, 51 S.W.3d at 793. It is Schlumberger’s burden to produce evidence in the
temporary injunction hearing that Parker and Myers actually worked in the areas it
seeks to enjoin them from working. Marsh USA Inc., 354 S.W.3d at 785.
At the temporary injunction hearing, Schlumberger’s Production Manager
for North America, who managed Schlumberger’s entire wireline and slick-line
operations in North America, admitted that Parker and Myers worked from
Schlumberger’s Pocola, Oklahoma office. See 3 R.R. 24-25. The Schlumberger
Production Manager also admitted that Parker and Myers’ work was focused
primarily within the state of Oklahoma. 3 R.R. 25. Indeed, relative to the list of
142 counties in eight states in which Parker and Myers are now prohibited from
working, Schlumberger’s evidence is simply that a work crew under Myers worked
in each of those counties at one time or another. See 4 R.R. 69-70.
There is no evidence that Parker or Myers traveled to any of these counties,
actually supervised the work, had any contact with the clients Schlumberger was
servicing in the counties, or otherwise were connected with the listed counties
outside Oklahoma in any way, with the sole exception that, Schlumberger says,
Myers was responsible for “making sure that the charges were right on the ticket.”
4 R.R. 69-70. Evidence that Myers ensured that charges were correct, however, in
no way satisfies Schlumberger’s burden to prove that Myers and Parker “actually
46
worked” in the 142 counties listed in Plaintiff’s Exhibit 74. See, e.g., Butler, 51
S.W.3d at 793 (requiring evidence that employee “actually worked” in location to
prohibit him from subsequently working there based upon a covenant not to
compete). Indeed, there can be no reasoned basis for enjoining Parker and Myers
from working in the 142 counties in eight states listed in Plaintiff’s Exhibit 74 as
the purpose of such injunctions is to prohibit former employees from possessing a
“grossly unfair competitive advantage” over their former employer, and one can
gain no such advantage by merely approving bills to be sent to the employer’s
customers. See Marsh USA Inc., 354 S.W.3d at 785. As the record provides no
evidence establishing that Parker and Myers actually worked in the 142 counties in
eight states listed in Plaintiff’s Exhibit 74, the district court’s order granting
temporary injunction does not include a reasonable geographic restriction and
should be reversed. Id.
Moreover, the order does not meet the alternative requirement of substituting
geographic restrictions for a limitation to clients Parker and Myers dealt with. See
Vogelsang, 312 S.W.3d at 654. Paragraphs 7 and 8 of the injunction prohibit
Parker and Myers from soliciting “wireline, slick line or braided line work and/or
service, from the Established Customers of Schlumberger in the states of
Oklahoma, Texas, Arkansas, Kansas, Pennsylvania, and Louisiana,” and from
performing “wireline, slick line or braided line work for the Established Customers
47
of Schlumberger in the states of Oklahoma, Texas, Arkansas, Kansas,
Pennsylvania and Louisiana.” C.R. 304. The “Established Customers” of
Schlumberger are set forth in Plaintiff’s Exhibit 13, which is a list of 62 various
business entities. C.R. 293-94.
However, it is, again, Schlumberger’s burden, as an employer seeking to
enjoin Parker and Myers, to produce competent evidence that Parker and Myers
dealt with each of those customers while working for Schlumberger. See Marsh
USA Inc., 354 S.W.3d at 785. It attempted to do so by offering Plaintiff’s Exhibit
13, which purports to be a list of “Parker Energy Services” customer base, into
evidence. See 4 R.R. 114. That list, however, is a hearsay statement the district
court improperly admitted into evidence over Parker and Myers’ objection, and is
not competent evidence of the customers Parker and Myers dealt with while
employed by Schlumberger. See TEX. R. EVID. 801-03.
“Hearsay” is a statement, other than one made by the declarant while
testifying at the trial or hearing, offered in evidence to prove the truth of the matter
asserted. TEX. R. EVID. 801. The list of customers set forth in Plaintiff’s Exhibit
13 is an out-of-court statement offered for the truth of the matter asserted. See 4
R.R. 114; 5 R.R. Pl.’s Ex. 13. Despite Parker and Myers objection to the exhibit,
Schlumberger offered no evidence that Plaintiff’s Exhibit 13 meets any exception
to the hearsay rule or otherwise does not qualify as hearsay. Compare 3 R.R. 114
48
with TEX. R. EVID. 801-03. Moreover, other than the document itself, which is not
competent evidence, Schlumberger offered no evidence demonstrating that each of
the entities listed on the exhibit were customers of Parker or Myers during their
respective tenures with Schlumberger or that Parker and Myers otherwise had any
dealings with those customers while employed by Schlumberger. Accordingly, as
the document is hearsay that the district court should have been excluded from
evidence, there is simply no competent evidence demonstrating that Parker and
Myers dealt with each of the 62 entities listed on Plaintiffs’ Exhibit 13 as required
to support the trial court’s restriction of Parker and Myers’ right to perform
wireline, slick-line, or braided line work for those entities. See TEX. R. EVID. 801-
03; Marsh USA Inc., 354 S.W.3d at 785.4
Moreover, even if Plaintiff’s Exhibit 13 constituted competent evidence,
which it does not, it is not evidence that Parker or Myers, in their individual
capacities, had a relationship with any of the listed entities. See 3 R.R. 114. It is
simply a list of entities “Parker Energy Services” worked for at some point in time.
Id. While Parker and Myers were managers of Parker Energy, there is no evidence
Parker or Myers had a personal relationship with, or otherwise dealt with, each of
4
Out of the 62 entities listed in Plaintiff’s Exhibit 13, there is evidence in the record that Parker
or Myers dealt with only five during their tenure with Schlumberger: B.P., Chevron, Unit
Petroleum, X.T.O.Energy, and Jones Energy. See 3 R.R. 33-34, 69, 87.
49
the listed entities. See Vogelsang, 312 S.W.3d at 654; Investors Diversified Servs.,
645 S.W.2d at 339 (concluding that noncompetition covenant restricted “to 150
current customers of the [employer], with whom the [employee] had contacted or
dealt with” was reasonable).
It is “well-settled that corporations can act only through its agents and
employees.” In re Credit Suisse First Boston Mortg. Capital, L.L.C., 273 S.W.3d
843, 849 (Tex. App.—Houston [14th Dist.] 2008, no pet.) (citing GTE Sw., Inc. v.
Bruce, 998 S.W.2d 605, 618 (Tex. 1999); Hammerly Oaks, Inc. v. Edwards, 958
S.W.2d 387, 391 (Tex. 1997)). When a party sues a person in their individual
capacity, as Schlumberger sued Parker and Myers, it must prove that the individual
performed the act complained of. See, e.g., Revere Oil Co. v. Bank of Chillicothe,
255 S.W. 219, 220 (Tex. Civ. App.—Amarillo 1923, no writ). “‘Individually’
means separately and personally, as distinguished from jointly or officially, and as
opposed to collective or associate action or common interests.” S. Distrib. Co. v.
Carraway, 127 S.E. 427, 428 (N.C. 1925) (citing Revere Oil, 255 S.W. at 220).
Accordingly, a document showing that “Parker Energy Services” had a relationship
with another business entity is no evidence that Parker or Myers, in their individual
capacities, dealt with those other entities. See id. As Texas public policy prohibits
injunctions simply to stifle competition, without evidence that Parker or Myers
specifically dealt with the 62 entities listed on Plaintiff’s Exhibit 13, the district
50
court’s injunction is unreasonable. See Vogelsang, 312 S.W.3d at 654; Investors
Diversified Servs., 645 S.W.2d at 339.
The non-competition agreements and the district court’s temporary
injunction are not reasonably limited in time.
In addition to being reasonably limited in scope and geography, the Business
and Commerce Code requires that covenants not to compete be reasonably limited
in time. See TEX. BUS. & COMM. CODE § 15.50(a). Although the district court
recognized that the ICN Agreements and the Bonus Retention Contract each
provided Schlumberger with only a one year period during which the non-compete
provisions would apply, 5 the district court indefinitely enjoined Parker and Myers
from performing wireline work. See C.R. 296-305. Such an open-ended
injunction is not reasonable and does not comply with the requirements of the
Business and Commerce Code. See TEX. BUS. & COMM. CODE § 15.50(a).
Moreover, as to Parker, the district court’s injunction is not reasonably
restricted in time as he resigned his position with Schlumberger on October 2,
2013 (2 R.R. 15-16), and there is no proper basis to continue to enjoin him from
working in the wireline industry months after his covenant not to compete expired
by its own terms. 5 R.R. Pl.’s Ex. 1 at ¶¶ 5, 7.
5
See C.R. 298 (“The ICN Agreements also contained one year restrictions on certain competitive
activities after their employment ended.”); Id. (“Paragraph 5 of the Retention Bonus Contract
provides that during his employment with the Company and for a period of one year following
the end of his employment, he would not [compete with Schlumberger]”).
51
By its own terms, Parker’s non-competition covenant expired on October 2,
2014, one year after he resigned his position with Schlumberger. See 3 R.R. 31; 5
R.R. Pl.’s Ex. 1 at ¶ 5 (“Employee agrees that for a period of one (1) year
following the date of termination of his/her employment with Company, Employee
will not directly or indirectly work for or assist . . . [any competing business]”).
Parker, however, has been restrained and enjoined from performing wireline work
since October 9, 2014, when the district court signed a temporary restraining order
prohibiting him from working. C.R. 304. Accordingly, Parker has been prohibited
from working for months after his covenant not to compete expired by its own
terms.
The district court, however, ruled that the evidence showed that the non-
compete agreement should be tolled and extended, specifically referencing
Parker’s purchase of equipment in preparation to compete with Schlumberger in
early 2014. See C.R. 300, 4 R.R. 124. 6 However, as this Court recognizes: “[T]o
resign from one’s employment and go into business in competition with one’s
6
A tolling provision in the ICN Agreement provides: “If Employee is found to have breached
any promise made in Paragraph 5 of this Agreement, the one-year period specified in Paragraph
5 shall be extended by the period of time for which Employee was in breach.” 5 R.R. Pl.’s Ex. 1
at ¶ 7. Relative to the tolling provision, the evidence in the record shows that Parker (1)
purchased wireline trucks in January 2014 (3 R.R. 46); (2) purchased additional tools in April
2014 (3 R.R. 46); (3) purchased miscellaneous pick-up trucks for P.W.L. in August or September
2014 (3 R.R. 48); (4) hired Myers to work for P.W.L. on September 17, 2014 (see 3 R.R. 58);
and (5) performed the first job for P.W.L. on September 29, 2014 (3 R.R. 68).
52
former employer is, under ordinary circumstances, a constitutional right. There is
nothing legally wrong in engaging in such competition or in preparing to compete
before the employment terminates.” See Abetter Trucking Co. v. Arizpe, 113
S.W.3d 503, 510 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (emphasis added)
(citations omitted). It is only where a covenant not to compete specifically
prohibits preparing to compete that one may be prohibited from engaging in such
preparations. See id.
The I.C.N. Agreement does not preclude Parker from “preparing” to
compete, it provides that, for a period of one year, he may not “work for or
assist . . . any business . . . whose business is . . . in direct or indirect competition
with [Schlumberger].” 5 R.R. Pl. Ex. 1 at ¶ 5 (emphasis added). Such language is
written in the present tense, and, therefore, precludes Parker from working for
businesses in present competition with Schlumberger. See id. To conclude, as the
district court did, that the non-compete provision precludes preparing to compete
in the future, improperly adds restrictions to the agreement. Borders v. KRLB, Inc.,
727 S.W.2d 357, 359 (Tex. App.—Amarillo 1987, writ ref’d n.r.e.) (“The ultimate
restraint is that a court cannot, through the construction process, make a new
contract for the parties, one they did not make.”). Indeed, the district court’s
injunction, which penalizes Parker for preparing to compete, violates the public
policy of the state set forth by this Court that persons may properly “prepare[] to
53
compete” with their former employers absent an express agreement to the contrary.
Abetter Trucking Co., 113 S.W.3d at 510.
At the earliest, Parker’s non-compete agreement was tolled on September
17, 2014, when he hired Myers to work for P.W.L. See 3 R.R. 58. Even tolling
the non-compete agreement for that 15 day period (the time period between
September 17, 2014 and October 2, 2014), that the injunction against Parker should
have expired on October 24, 2014 (15 days after the district court’s initial entry of
a temporary restraining order prohibiting Parker from working). The district
court’s continued indefinite injunction prohibiting Parker from working is
unreasonable as he has now been restrained and enjoined from working for months
after his non-compete agreement should have expired. The district court’s
injunction should be reversed for this additional reason as it is not reasonably
limited in time as required by the Business and Commerce Code. TEX. BUS. &
COMM. CODE § 15.50.
E. There Is No Evidence Of Irreparable Harm As Required To
Support Injunctive Relief.
To be entitled to a temporary injunction, a party must establish that it has an
inadequate remedy at law. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 210 (Tex.
2002). In other words, the party must establish that it will suffer irreparable harm
if the injunction is not granted. See id; see also Cardinal Health Staffing Network,
Inc. v. Bowen, 106 S.W.3d 230, 240 (Tex. App.—Houston [1st Dist.] 2003, no
54
pet.) (holding that party must prove irreparable injury to be entitled to injunctive
relief stemming from breach of non-competition agreement). On appeal, the
standard of review for determining whether the record demonstrates an irreparable
harm is abuse of discretion. Cardinal Health Staffing Network, 106 S.W.3d at 234.
Review of the record demonstrates that there is no evidence that
Schlumberger will suffer irreparable harm in the absence of an injunction.
Schlumberger’s corporate representative repeatedly admitted that Schlumberger
had an adequate legal remedy for each of its claims against Parker and Myers -
damages. See 4 R.R. 93 (“Q: The loss of tools a harm Schlumberger can’t fix? Or
can Schlumberger buy more tools? A: We can buy more tools.); 4 R.R. 93 (Q: The
loss of employees is not a harm that Schlumberger can’t fix; you can hire and train
more people, correct? A: We can hire and train more people over a period of
time”); 4 R.R. 98-99 (Q: So you can calculate monetary damages for lost business,
can’t you? A: We can calculate? Q: Monetary damages for lost business. A: An
estimated amount. Q Okay. And then you can be paid for the lost business caused
by any wrongdoing of Mr. Parker and Mr. Myers, correct? A: We can be paid for
damages.”).
Such admissions show that Schlumberger has an adequate remedy at law -
damages for lost business. Indeed, Schlumberger is seeking to recover such
damages in the underlying lawsuit. See C.R. 14-16. As Schlumberger admits it
55
has an adequate remedy at law, the district court abused its discretion in signing a
temporary injunction prohibiting Parker and Myers from working, and the
temporary injunction should be reversed for this independent reason. Cardinal
Health Staffing Network, Inc., 106 S.W.3d at 243 (affirming trial court’s order
denying the temporary injunction where record showed applicant had an adequate
legal remedy to enforce non-competition agreement).
CONCLUSION AND PRAYER
For the reasons noted above, Appellants Ricky Parker and James Myers
respectfully request that the Court reverse the district court’s interlocutory orders
denying their motion to compel arbitration and denying the motion for
reconsideration of their motion to compel arbitration. Parker and Myers further
request that the Court reverse the district court’s order granting Schlumberger’s
application for temporary injunction and permit Parker and Myers to resume work
for their Oklahoma employer Professional Wireline LLC.
56
Respectfully submitted,
MARTIN, DISIERE, JEFFERSON & WISDOM, L.L.P.
By: /s/ Robert T. Owen
Levon G. Hovnatanian
State Bar No. 10059825
hovnatanian@mdjwlaw.com
Kevin G. Cain
State Bar No. 24012371
cain@mdjwlaw.com
Robert T. Owen
owen@mdjwlaw.com
State Bar No. 24060370
808 Travis, Suite 20th Floor
Houston, Texas 77002
(713) 632-1700 – Telephone
(713) 222-0101 – Facsimile
ATTORNEYS FOR APPELLANTS
RICKY D. PARKER AND JAMES MYERS
Of Counsel:
W. Jackson Wisdom
State Bar No. 21804025
wisdom@mdjwlaw.com
James M. Cleary
State Bar No. 00783838
cleary@mdjwlaw.com
808 Travis, Suite 20th Floor
Houston, Texas 77002
(713) 632-1700 – Telephone
(713) 222-0101 – Facsimile
57
CERTIFICATE OF COMPLIANCE
This is to certify that this computer-generated Appellant’s Brief contains
13,516 words.
/s/ Robert T. Owen
Robert T. Owen
Dated: January 28, 2015
CERTIFICATE OF SERVICE
I hereby certify that on this 28th day of January, 2015, a true and correct
copy of the foregoing appellants’ brief on the merits was sent by the method(s)
indicated to the following individuals:
Mr. Jeff Barnes via e-file and e-mail: barnesj@jacksonlewis.com
JACKSON LEWIS, P.C.
1415 Louisiana, Suite 3325
Houston, Texas 77002
Mr. William L. Davis via e-file and e-mail: davisw@jacksonlewis.com
JACKSON LEWIS, P.C.
500 N. Akard, Suite 2500
Dallas, Texas 75201
/s/ Robert T. Owen
Robert T. Owen
58
APPENDICES
INDEX
Order Denying Defendants’ Motion to Compel Arbitration ............................ 1
Order Denying Defendants’ Motion for Reconsideration of
Its Motion to Compel Arbitration ..................................................................... 2
Temporary Injunction ....................................................................................... 3
Asset Purchase Agreement dated September 9, 2011 ...................................... 4
Intellectual Property, Confidential Information and
Non Compete Agreement (Ricky Parker)......................................................... 5
Intellectual Property, Confidential Information and
Non Compete Agreement (James Myers) ......................................................... 6
Retention Bonus Contract ................................................................................. 7
Oklahoma Statute tit. 15 § 217 ......................................................................... 8
Oklahoma Statute tit. 15 § 219A....................................................................... 9
Texas Business & Commerce Code § 15.50..................................................... 10
Texas Business & Commerce Code § 15.51..................................................... 11
1
2
3
4
7
8