David Flake v. EGL Eagle Global Logistics, L.P. F/K/A Eagle USA Airfreights Inc.

Affirmed and Opinion filed September 5, 2002

Affirmed and Opinion filed September 5, 2002.

In The

Fourteenth Court of Appeals

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NO. 14-01-01069-CV

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DAVID FLAKE, Appellant

V.

EGL EAGLE GLOBAL LOGISTICS, L.P. f/k/a

EAGLE USA AIRFREIGHT, INC., Appellee

On Appeal from the 127th District Court

Harris County, Texas

Trial Court Cause No. 2001-51486

O P I N I O N

Pursuant to section 51.014(a)(1) of the Texas Civil Practice and Remedies Code, appellant, David Flake (“Flake”), appeals the grant of a temporary injunction, in favor of appellee, Eagle Global Logistics (“Eagle”).  We affirm.

I.  FACTUAL AND PROCEDURAL BACKGROUND

Flake began working as a salesman for Eagle, a freight forwarding company, in February 1997.  On or about May 17, 1999, Flake signed an at-will employment agreement with the company.  The agreement contains a covenant not to compete which prohibits Flake from:  (1) working for a competing business in the same geographic area as Eagle for a period of one year after employment termination; and (2) calling on or soliciting business from customers with whom he had dealt during the last two years of employment at Eagle.  The agreement also prohibits Flake from using or disclosing confidential information or  trade secrets to which he had access while working for Eagle, unless the disclosure was for the exclusive benefit of the company.  In exchange for his agreement to these restrictions and promises, Eagle would provide Flake with access to trade secrets and confidential information for use in his sales position. 

Flake gave Eagle notice of his intent to leave the company, and terminated his employment on October 1, 2001.  Flake immediately thereafter became part owner of Expedited Logistics and Freight Services, Limited (“ELFS”), a freight shipping company.  Flake called upon and solicited business from the same accounts he had serviced while employed by Eagle.

On October 8, 2001, Eagle filed an original petition for damages and immediate injunctive relief alleging Flake was violating the non-disclosure and non-competition provisions of the employment contract, and seeking court intervention.  In its petition, Eagle alleged that Flake was breaching the agreement by: (1) soliciting his former customers in direct violation of the covenant not to compete; and (2) utilizing confidential pricing structures, customer lists and trade secrets.  On October 23, 2001, the trial court entered a temporary injunction granting Eagle’s request for injunctive relief and enjoining Flake from: (1) using or disclosing confidential information or trade secrets in the course of his employment; (2) engaging in the freight forwarding business and related activities in a particular geographical area; and (3) contacting or soliciting from, or providing freight forwarding services to, particular Eagle customers and accounts. 

II.  POINTS OF ERROR ON APPEAL

On appeal, Flake argues the temporary injunction should be dissolved because:  (1) Eagle did not show a probable right to recover on the merits of its claim; (2) Eagle did not show probable injury; and (3) the trial court lacked authority to grant relief Eagle had not requested in its prayer for relief.

III.  STANDARD OF REVIEW

The review of the grant or denial of a temporary injunction is under an abuse of discretion standard. T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 21 (Tex. AppCHouston [1st Dist.] 1998, no pet.).  “Abuse of discretion does not exist if the trial court heard conflicting evidence, and evidence appears in the record that reasonably supports the trial court’s decision.”  CRC-Evans Pipeline, Int’l, Inc. v. Myers, 927 S.W.2d 259, 262 (Tex. App.CHouston [1st Dist.] 1996, no writ) (citations omitted).  The court will not substitute its judgment for that of the trial court, but will only determine whether the court=s action was so arbitrary as to exceed the bounds of reasonable discretion. T-N-T Motorsports, 965 S.W.2d at 21.  In doing so, the court will draw all legitimate inferences from the evidence in the light most favorable to the trial court’s order.  Id.  Because an appeal of an order granting a temporary injunction is an appeal from an interlocutory order, the merits of the applicant’s case are not presented for appellate review.  Id.

IV.  PROBABLE RIGHT TO RECOVER

To be entitled to a temporary injunction, an applicant must: (1) plead a cause of action; (2) show a probable right to recover upon that cause of action (by presenting evidence that tends to sustain that cause of action); and (3) show a probable injury in the interim.  Mfr.’s Hanover Trust Co. v. Kingston Investors Corp., 819 S.W.2d 607, 610 (Tex. App.C Houston [1st Dist.] 1991, no writ).  The applicant also must show that no adequate legal remedy exists.  Id.  Flake complains that Eagle did not demonstrate a probable right of recovery on the cause of action it pleaded, breach of the covenant not to compete. In order to demonstrate a probable right of recovery, Eagle had to produce evidence that tended to sustain the elements of breach of a covenant not to compete: (1) there is a valid enforceable contract containing a covenant not to compete between Eagle and Flake; and (2) Flake breached the covenant and will likely continue to breach the covenant. See id.

A.        Valid and Enforceable

First, we must determine whether the covenant not to compete is valid and enforceable.  In order to be enforceable, the covenant must be shown to be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made.  Tex. Bus. & Com. Code Ann. ' 15.50 (Vernon Supp. 2002).  For a covenant not to compete to be ancillary to an otherwise enforceable agreement, (1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer=s interest in restraining the employee from competing, and (2) the covenant must be designed to enforce the employee=s consideration or return promise in the otherwise enforceable agreement.  An at-will employment contract cannot be an otherwise enforceable agreement because neither party is bound to the promise of continued employment.  Travel Masters, Inc. v. Star Tours, Inc., 827 S.W.2d 830, 832B33 (Tex. 1991).  Thus, there is no consideration exchanged between the parties.  However, a covenant not to compete in an at-will employment contract may be enforceable if the contract contains another promise, as long as independent consideration is given in exchange for that promise and the consideration is not illusory. Curtis v. Ziff Energy Group, Ltd., 12 S.W.3d 114, 118 (Tex. App CHouston [14th Dist.] 1999, no pet.); see Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 644–45 (Tex. 1994) (holding that otherwise enforceable agreements can emanate from an at-will employment contract). 

1.         At-Will Relationship

Flake argues the covenant not to compete was not ancillary to an otherwise enforceable agreement because it was within an at-will employment contract.  However, as previously stated, a covenant not to compete included  in an at-will employment contract may still be enforceable if the contract contains another promise that is not dependent upon the illusory promise of continued employment.  For example, Flake’s employment agreement with Eagle included a promise that Eagle would provide Flake with confidential trade information and trade secrets, and, in return, Flake would not use or disclose Eagle’s confidential information or trade secrets.  The restricted use of trade secrets and confidential information clause in an employment agreement is sufficient consideration to support the covenant not to compete.  Curtis, 12 S.W.3d at 118 (holding that the employer’s consideration was to share the confidential information and trade secrets with the employee and, in return, the employee would not disclose or use the confidential information or trade secrets).  Eagle’s interest in restricting Flake from competing is designed to enforce Flake’s consideration not to disclose or use confidential information or trade secrets after employment.  See id.  Therefore, the trial court could have reasonably found that the covenant not to compete is enforceable because the covenant is ancillary to an otherwise enforceable agreement.

2.         Past Consideration

Flake asserts that he worked for Eagle for several years prior to signing this agreement, and no new trade secrets or greater information was passed onto him as a result of his signing the agreement. Therefore, he argues, any consideration he received from Eagle was past consideration and it does not support the covenant not to compete. 

Flake cites CRC in support of his argument.  927 S.W.2d 259.  In CRC, the trial court concluded that Myers, who was a sixteen-year veteran at operating CRC=s internal welding equipment, did not need or receive any new trade secrets or confidential information subsequent to his signing an at-will employment agreement. Id. at 264.  Myers had worked for CRC for six years before he was employed by CRC’s customers to work on the same type of equipment as he had worked on at CRC, and Meyers was subsequently re-employed by CRC and asked to sign an employment contract at that time.  Id.  The trial court was presented with conflicting testimony regarding whether Myers received new trade secrets or confidential information.  Id.  The appellate court held that when conflicting evidence is presented to the trial court and evidence in the record reasonably supports the trial court’s decision, there is generally no abuse of discretion by the trial court in the grant or denial of an injunction.  Id. at 264.  Therefore, it upheld the denial of the injunction. Id. at 266.

Like the trial court in CRC, in this case, the trial court was presented with conflicting testimony regarding whether Flake received new trade secrets or confidential information subsequent to signing the agreement containing the covenant not to compete.  Accordingly, we hold the trial court could have reasonably concluded that Flake received new consideration.

B.        Breach

Flake argues the trial court erred in granting the temporary injunction because there is no evidence he breached the agreement by using confidential information in violation of the agreement. 

A former employee may use the general knowledge, skill, and experience acquired during employment to his benefit; however, he may not use confidential information or trade secrets acquired during the employment relationship.  Anderson Chemical Co., Inc. v. Green, 66 S.W.3d 434, 442 (Tex. App.CAmarillo 2001, no pet.).  Confidential information and trade secrets include compilations of information that have a substantial element of secrecy and provide the employer with an opportunity for advantage over competitors.  Id.  Examples include pricing information, customer lists, client information, customer preferences, buyer contacts, and market strategies.  Id.  Business information can be confidential, even if it can be obtained by observation, experimentation, inspection, analysis or general inquiry.  Id.  The information is protected if the competitor gains it through a breach of confidence without the efforts of observation, experimentation, inspection, analysis or general inquiry.  Id.

In Anderson Chemical, the court found that the employee did not take any of the employer=s materials with him when he left, and the same information used by the employee was generally known by other competitors.  Id.  Therefore, the court held that the information was not confidential, and the employee did not breach the non-disclosure agreement. 

In this case, however, Flake admitted that the information he received from Eagle was confidential and that Eagle routinely provided him with it.  Specifically, Flake identified this confidential information to contain customer lists and pricing information.  In addition, Flake testified that he called on Eagle accounts the week he left Eagle, and he would continue to do so unless the court ordered him not to.  Therefore, the trial court could have reasonably concluded that the information given to Flake was confidential and, by using this confidential information and contacting former Eagle customers, Flake breached the non-disclosure agreement.

The trial court did not abuse its discretion in finding that Eagle demonstrated a probable right to recover on the merits of its claim.  We overrule Flake’s first point of error.

V.  PROBABLE INJURY

Flake argues that Eagle did not show a probable injury in the interim if a temporary injunction was not granted.  In order to be entitled to a temporary injunction, in addition to showing a probable right to recover, an applicant must show a probable injury in the interim. T-N-T Motorsports, Inc., 965 S.W.2d at 23.  An applicant must also show that no adequate legal remedy exists. Id.  A legal remedy is inadequate if damages are difficult to calculate or their award may come too late.  Id. at 24. 

An employee who possesses confidential information is in a position to use that information and compete directly with the employer.  Id. at 24.  Although any damages Eagle stands to suffer or has suffered are compensable through money damages, “[i]njunctive relief is proper to prevent a party, that has appropriated another’s trade secrets, from gaining unfair market advantage.” Id.  Therefore, the only effective relief available to an employer is to restrain the employee’s use of trade secrets and confidential information pending trial.  Id.

Flake acknowledged that he possessed confidential information and trade secrets.  Furthermore, Flake testified that he had already used these trade secrets and confidential information before trial and would continue to do so after trial without a court order.  Therefore, the trial court could have reasonably concluded injunctive relief was necessary to prevent Flake from continuing to disclose Eagle’s confidential information and trade secrets, and gaining an unfair market advantage.  We overrule Flake’s second point of error.

VI.  SCOPE OF INJUNCTION

Flake complains that the trial court granted relief for which Eagle did not pray.  Flake argues, the trial court did not have the authority to grant relief not prayed for, and therefore, the injunction must be dissolved or modified. 

We agree that persons seeking an injunction must be specific when pleading the relief sought, and courts are without authority to grant relief beyond that so specified.  See Shields v. State, 27 S.W.3d 267, 271 (Tex. App.CAustin 2000, no pet.).  In this case, however, the trial court granted only the relief specifically requested in Eagle’s pleading.  The additional findings of which Flake complains, (1) that the terms of the employment agreement are enforceable, (2) there has been no waiver of the right to enforce the agreement, (3) no legal duress existed in the execution of the agreement, and (4) it is unlikely that Flake can satisfy any judgment levied against him in this case, are merely findings of fact and conclusions of law set out by the trial court in compliance with Rule 683 of Texas Rules of Civil Procedure.

Rule 683 states in pertinent part:

Every order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail and not by reference to the complaint or other document, the act or acts sought to be restrained . . . .

Tex. R. Civ. P. 683. Therefore, we overrule Flake’s third point of error.

VII.  CONCLUSION

We overrule appellant’s points of error, and affirm the trial court’s order.

/s/        John S. Anderson

Justice

Judgment rendered and Opinion filed September 5, 2002.

Panel consists of Chief Justice Brister and Justices Anderson and Frost.

Do Not Publish C Tex. R. App. P. 47.3(b).