Opinion issued May 3,=20 2007
For=20 The
DAVID =
HARDY and=20
BRENDAN J. FIELDING, Appellants MANN =
FRANKFORT STEIN=20
& LIPP ADVISORS, INC., MFSL GP, L.L.C., and MFSL EMPLOYEE =
INVESTMENTS,=20
LTD., Appellees
On =
Appeal from the=20
164th District Court Harris =
County,=20
Texas Trial =
Court Cause=20
No. 2004-09441
In three=20
issues, Fielding and Hardy contend that the trial court erred (1) =
by=20
declining to award attorney's fees to Fielding under the terms of =
his=20
employment agreement, (2) by refusing to award Fielding and Hardy =
their=20
attorney's fees under the Uniform Declaratory Judgments Act, In 1996,=20
when Hardy was hired to work in the tax department of an =
accounting firm,=20
he executed an employment agreement with that firm. In the =
agreement,=20
Hardy acknowledged he would have access to the firm's clients and =
that he=20
would gain experience that was valuable to the clients and to the =
firm.=20
The agreement also provided that Hardy, in consideration of the =
benefits=20
of his employment and the experience he would gain, would not =
"during or=20
after the period of active employment, disclose . . . proprietary=20
information of [his employer] such as financial records, data, =
programs,=20
etc." Hardy also agreed that he would "neither call nor solicit, =
either=20
for himself or for any other Person any of the clients of the firm =
for a=20
period of twenty-four (24) months immediately following [his] =
period of=20
active employment." The agreement provided that if Hardy provided=20
accounting services for any of his employer's clients during the =
24-month=20
period, he would pay the employer 150% of the amount of the fees =
billed to=20
the client by the employer in the previous year. Later, when =
Hardy's=20
employer was acquired by Mann Frankfort, Mann Frankfort also =
acquired=20
Hardy's employment agreement by assignment. Mann=20
Frankfort was merged into another entity, Centerprise Advisors, =
Inc.=20
("Centerprise"). As part of the merger, Mann Frankfort decided to =
provide=20
employees with the opportunity to become indirect owners of =
Centerprise by=20
allowing them to become limited partners of the partnership known =
as MFSL=20
Employee Investments, Ltd. MFSL Employee Investments holds an =
interest in=20
MFSL Investments, Ltd., which owns stock in Centerprise. In =
October 1999,=20
to receive an interest in MFSL Employee Investments, Fielding and =
Hardy=20
executed the MFSL Employee Investments, Ltd. Agreement of Limited=20
Partnership. They also executed an Amendment to the Agreement of =
Limited=20
Partnership several months later. Under the=20
Limited Partnership Agreement, Fielding and Hardy are referred to =
as=20
limited partners. Fielding and Hardy acknowledged and agreed that =
Mann=20
Frankfort expended and would continue to expend substantial time, =
effort,=20
and monies to acquire, develop, and safeguard secret and =
confidential=20
information pertaining to customers. Fielding and Hardy also =
acknowledged=20
and agreed that Mann Frankfort's secret and confidential =
information and=20
client relationships constitute valuable assets. According to the =
Limited=20
Partnership Agreement, if a limited partner leaves Mann Frankfort =
and=20
performs accounting, tax, or related services for a client of Mann =
Frankfort, fees must be paid to Mann Frankfort. Specifically, =
under these=20
circumstances, the limited partner is required to pay 90% of =
accounts=20
receivable due from the client and of unbilled time and "the total =
of the=20
billable time spent by [Mann Frankfort] and/or its employees in =
servicing=20
each such client during the twelve (12) month period immediately =
preceding=20
the date the Limited Partner ceases to be employed by [Mann =
Frankfort]."=20
The Limited Partnership Agreement, however, limited the clients =
affected=20
by this clause to those clients who were both (1) clients of Mann=20
Frankfort in the one year period before the employment =
relationship=20
between the limited partner and Mann Frankfort ended and (2) =
clients for=20
whom the limited partner provided accounting, tax, or other =
services.=20
In January=20
2004, Fielding and Hardy resigned from Mann Frankfort. By January =
21,=20
Fielding and Hardy had incorporated their own accounting firm, =
Fielding=20
& Hardy, P.C. Both Fielding and Hardy have performed tax work =
for=20
clients for whom they had performed similar work while employed =
with Mann=20
Frankfort. Fielding=20
and Hardy filed this suit seeking a declaration of their =
obligations under=20
the client-purchase provisions of their employment agreements and =
the=20
Limited Partnership Agreement. Mann counterclaimed, asserting =
claims for=20
breach of contract, breach of fiduciary duty, tortious =
interference with=20
existing and prospective business relationships, use of Mann =
Frankfort's=20
confidential information, misappropriation of trade secrets, and a =
request=20
for a declaratory judgment that the agreements were valid. The=20
counterclaim sought damages under the client-purchase provisions =
of the=20
agreements. Fielding and Hardy moved for partial summary judgment =
on the=20
ground that the client-purchase provisions in each of the =
agreements were=20
unenforceable as unreasonable restraints on trade. Fielding and =
Hardy=20
contended that the provisions were unenforceable because they were =
overbroad, unreasonable, and not ancillary to an otherwise =
enforceable=20
agreement. Mann filed a cross-motion for summary judgment for =
breach of=20
contract, seeking enforcement of the client-purchase provisions. =
The trial=20
court rendered summary judgment in favor of Fielding and Hardy. =
Mann=20
subsequently non-suited all claims, except for the claim for =
breach of=20
contract. Fielding=20
sought attorney's fees under paragraph 15 of his employment =
agreement.=20
Fielding filed a second motion for summary judgment asserting that =
he was=20
the prevailing party for the purpose of paragraph 15 of the =
employment=20
agreement and thus was entitled to attorney's fees. Mann filed a=20
cross-motion for summary judgment, which contended that because =
the trial=20
court had declared the client-purchase provisions of the agreement =
invalid, the entire agreement--including the provision for =
attorney's=20
fees--was invalid. The trial court granted Mann's motion for =
summary=20
judgment, thereby denying attorney's fees to Fielding under his =
agreement=20
with Mann. Fielding=20
and Hardy also requested attorney's fees under the Uniform =
Declaratory=20
Judgments Act. See Tex. Civ. Prac. & Rem. Code Ann. =
=A7 37.009=20
(Vernon 2006). Fielding and Hardy contended that they were =
entitled to an=20
award of their attorney's fees because they were the prevailing =
party in=20
the declaratory judgment action. The trial court, however, did not =
order=20
an award of attorney's fees to Fielding or Hardy under the Uniform =
Declaratory Judgments Act.Summary Judgment Standard of=20
Review We review=20
summary judgments de novo. Valence Operating Co. v. =
Dorsett, 164=20
S.W.3d 656, 661 (Tex. 2005). Traditional summary judgment is =
proper only=20
when the movant establishes that there is no genuine issue of =
material=20
fact and that the movant is entitled to judgment as a matter of =
law. Tex.=20
R. Civ. P. 166a(c). The motion must state the specific grounds =
relied upon=20
for summary judgment. Id. In reviewing a traditional =
summary=20
judgment, we must indulge every reasonable inference in favor of =
the=20
nonmovant, take all evidence favorable to the nonmovant as true, =
and=20
resolve any doubts in favor of the nonmovant. Valence, =
164 S.W.3d=20
at 661. When both=20
sides move for summary judgment and the trial court grants one =
motion and=20
denies the other, we review the summary judgment evidence =
presented by=20
both sides and determine all questions presented. Comm'rs Ct. =
v.=20
Agan, 940 S.W.2d 77, 81 (Tex. 1997); Cigna Ins. Co. v.=20
Rubalcada, 960 S.W.2d 408, 411-12 (Tex. App.--Houston [1st =
Dist.]=20
1998, no pet.). We render such judgment as the trial court should =
have=20
rendered. Agan, 940 S.W.2d at 81; Rubalcada, 960 =
S.W.2d=20
at 412. When, as here, a summary judgment does not specify the =
grounds on=20
which it was granted, we will affirm the judgment if any one of =
the=20
theories advanced in the motion is meritorious. Joe v. Two =
Thirty Nine=20
Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004). Declaratory =
judgments=20
decided by summary judgment are reviewed under the same standards =
of=20
review that govern summary judgments generally. Lidawi v. =
Progressive=20
County Mut. Ins. Co., 112 S.W.3d 725, 730 (Tex. App.--Houston =
[1st=20
Dist.] 2003, no pet.); Tex. Civ. Prac. & Rem. Code Ann. =A7 =
37.010=20
(Vernon 1997). In the=20
third issue in the cross-appeal, Mann contends that the trial =
court erred=20
by denying the motion for partial summary judgment for the breach =
of=20
contract claims because under "traditional contract principles" =
Fielding=20
and Hardy breached their agreements with Mann Frankfort by failing =
to=20
purchase the client accounts from Mann Frankfort. Mann contends =
that the=20
provisions in this case should not be construed as covenants not =
to=20
compete because they are much narrower than the damages provision =
found=20
unreasonable by the Supreme Court of Texas in Peat Marwick =
Main &=20
Co. v. Haass, 818 S.W.2d 381, 385 (Tex. 1991). Mann=20
asserts that the provisions here are narrower than in =
Haass and=20
are therefore enforceable. According to Mann, (1) the Limited =
Partnership=20
Agreements are narrower because they only require the purchase of =
clients=20
during the one-year period following Fielding's and Hardy's =
resignations=20
if they provide the same type of service to those clients within =
one year=20
of leaving Mann Frankfort; (2) the client-purchase provisions in =
their=20
employment agreements only require the purchase of clients who =
were=20
clients during their employment with Mann Frankfort and for whom =
they=20
perform services after their resignations from Mann Frankfort; and =
(3)=20
Mann Frankfort only required Fielding and Hardy to purchase the =
Mann=20
Frankfort clients they took with them upon their resignations and =
for whom=20
they had performed tax services within one year prior to their=20
resignations. Although the provisions are narrower than the =
agreement in=20
Haass, the penalty provisions in the agreements act as a=20
restraint of trade. According=20
to the Limited Partnership Agreement, Fielding and Hardy must pay =
a=20
substantial penalty of 90% of the funds receivable from clients =
that were=20
actually served by Fielding and Hardy in the one-year period =
before they=20
left their employment with Mann Frankfort and the total of all =
billable=20
time that Mann Frankfort or its employees spent working for the =
client in=20
the year prior to Fielding or Hardy leaving Mann. The individual=20
employment agreements include similar penalty provisions. =
Fielding's=20
agreement provides that if Fielding provided accounting services =
to a=20
client of Mann Frankfort in the one year period following the =
termination=20
of his employment with Mann Frankfort, he would pay 90% of amounts =
due to=20
Mann Frankfort from the client. Hardy's agreement provides that if =
Hardy=20
provided accounting services for any of his employer's clients =
during the=20
24-month period following the termination of his employment, he =
would pay=20
the employer 150% of the amount of the fees billed to the client =
by the=20
employer in the previous year. Although the agreements represent =
that Mann=20
Frankfort does not intend to discourage Fielding or Hardy from =
engaging in=20
their avocation, the onerous purchase price in the agreements =
operate as a=20
restraint of trade because the practical and economic reality of =
the=20
penalty is that it inhibits competition virtually the same as a =
covenant=20
not to compete. See id. In response=20
to the contention that Mann Frankfort was not a party to the =
Limited=20
Partnership Agreement, Mann replies that it "would receive no =
benefit"=20
from a covenant not to compete with it. The test, however, is not =
who=20
benefits by the covenant not to compete, but rather whether the =
"penalty's=20
deterrent effect functions as a covenant not to compete." See =
id.=20
at 385. Mann also=20
asserts that the purchase price in the client-purchase provision =
is merely=20
a fair and reasonable sale of a client base to a departing =
employee. We=20
cannot conclude that a damages provision set at 90% of the funds =
received=20
from a client or set at 150% of the fees billed to a client the =
previous=20
year is a fair and reasonable sale, or that the amount does not =
inhibit=20
competition in the same manner as a covenant not to compete. =
See=20
id. We hold that the damages provisions that set a penalty of =
90% of=20
the funds received from certain clients and that set a penalty of =
150% of=20
the fees billed to a client the previous year effectively act as =
covenants=20
not to compete, and should be evaluated for conformity with the =
Covenants=20
Not to Compete Act. See id. We overrule=20
Mann's third issue in its cross-appeal. Having determined that the =
provisions here act as covenants not to compete, we must next =
determine=20
whether the trial court erred by finding that the agreements were=20
unenforceable as covenants not to compete because they were not =
ancillary=20
to an otherwise enforceable agreement. Covenant Not to =
Compete=20
Ancillary to Otherwise Enforceable Agreement In the first =
and=20
second issues of its cross-appeal, Mann contends that the trial =
court=20
erred by rendering summary judgment in favor of Fielding and Hardy =
and=20
declaring the client-purchase provisions unenforceable because the =
provisions were not ancillary to an otherwise enforceable =
agreement. The=20
trial court declared that the client-purchase provisions are not=20
"ancillary to or part of an otherwise enforceable agreement at the =
time=20
the agreement [was] made." Whether a=20
covenant not to compete is enforceable is a question of law for =
the court.=20
Light v. Centel Cellular Co., 883 S.W.2d 642, 644 (Tex. =
1994);=20
TMC Worldwide, L.P. v. Gray, 178 S.W.3d 29, 36 (Tex.=20
App.--Houston [1st Dist.] 2005, no pet. h.). A covenant not to =
compete is=20
enforceable if it is (1) "ancillary to or part of an otherwise =
enforceable=20
agreement at the time the agreement is made" and (2) reasonable, =
not=20
imposing a greater restraint than is necessary to protect the =
goodwill or=20
other business interest of the employer. Tex. Bus. & Com. Code =
Ann. =A7=20
15.50(a) (Vernon 2002). For a=20
covenant not to compete to be ancillary to or part of an otherwise =
enforceable agreement, the employer must establish both "(1) that =
the=20
consideration given by the employer in the otherwise enforceable =
agreement=20
must give rise to the employer's interest in restraining the =
employee from=20
competing; and (2) that the covenant must be designed to enforce =
the=20
employee's consideration or return promise in the otherwise =
enforceable=20
agreement." Alex Sheshunoff Mgmt. Servs., L.P. v. =
Johnson, 209=20
S.W.3d 644, 649 (Tex. 2006) (quoting Light, 883 S.W.2d at =
647).=20
"[B]usiness goodwill and confidential or proprietary information" =
are=20
examples of interests that are worthy of protection by a covenant =
not to=20
compete. Id. However, for a covenant not to compete to be =
enforceable, the agreement must be designed to enforce the return =
promises=20
made by the employee. Id. In=20
Light, the Supreme Court of Texas explained why the =
covenant not=20
to compete between Light and United was not ancillary to or part =
of the=20
otherwise enforceable agreement as follows: While=20
United's consideration (the promise to train) might involve =
confidential=20
or proprietary information, the covenant not to compete is not =
designed to=20
enforce any of Light's return promises in the otherwise =
enforceable=20
agreement. Light did not promise in the otherwise enforceable=20
agreement to not disclose any of the confidential or proprietary=20
information given to her by United. Thus, the covenant not to =
compete=20
agreement between Light and United is unenforceable because it is =
not=20
ancillary to or a part of the otherwise enforceable agreement =
between=20
them. A.=20
The Limited Partnership Agreement Mann=20
contends that the trial court erred by declaring the =
client-purchase=20
provision in the Limited Partnership Agreement unenforceable =
because it=20
was ancillary to an otherwise enforceable agreement and was not an =
unreasonable restraint on trade. The Limited=20
Partnership Agreement states If a=20
limited partner in MFSL Employment Investments leaves Mann =
Frankfort and=20
performs accounting, tax, or related services similar to those =
provided by=20
Mann Frankfort for a client of Mann Frankfort, the limited partner =
is=20
required to pay 90% of accounts receivable due from the client and =
of=20
unbilled time, as well as "the total of the billable time spent by =
[Mann=20
Frankfort] and/or its employees in servicing each such client =
during the=20
twelve (12) month period immediately preceding the date the =
Limited=20
Partner ceases to be employed by [Mann Frankfort]." The Limited=20
Partnership Agreement, however, limited the clients affected by =
this=20
clause to those clients who were both (1) clients of Mann =
Frankfort in the=20
one-year period before the employment relationship between the =
limited=20
partner and Mann Frankfort ended, and (2) clients for whom the =
limited=20
partner provided accounting, tax, or other services. Although=20
Fielding and Hardy agreed that Mann had invested time and money to =
obtain=20
valuable confidential information, there is no agreement for Mann =
to=20
disclose confidential information to Fielding or Hardy, or that =
Fielding=20
or Hardy would gain access to confidential information. Further, =
the=20
agreement does not include any promise by Fielding or Hardy not to =
disclose any confidential information that belongs to Mann =
Frankfort.=20
We conclude=20
that Mann Frankfort gave no consideration to Fielding or Hardy =
because=20
Mann Frankfort did not promise to disclose confidential =
information or to=20
allow Fielding or Hardy to gain access to information. See =
id. We=20
also conclude that Fielding and Hardy did not promise not to =
disclose any=20
confidential information, and thus the client-purchase provision =
was not=20
"designed to enforce the employee's consideration or return =
promise in the=20
otherwise enforceable agreement." See id. We =
hold that=20
the trial court did not err in declaring the client-purchase =
provision of=20
the Limited Partnership Agreement unenforceable. B.=20
Fielding's Employment Agreement Mann=20
contends that the trial court erred by declaring the =
client-purchase=20
provision in Fielding's employment agreement unenforceable because =
it was=20
ancillary to or part of an otherwise enforceable agreement. Mann =
contends=20
that it promised to provide Fielding secret or confidential =
information in=20
exchange for Fielding's promise not to disclose or use the =
confidential=20
information at any time, except while employed by Mann Frankfort. =
Mann=20
also asserts that Fielding "was provided confidential=20
information." The=20
agreement signed by Fielding states, 7. Employee=20
shall not disclose or use at any time, except as part of his =
employment=20
hereunder, either during or subsequent to his employment, any =
secret or=20
confidential information or knowledge obtained by employee while =
employed=20
by Employer either from Employer, its other employees, or its=20
clients. . =
. . .=20
10. If at=20
any time within one (1) year after the termination or expiration =
hereof,=20
Employee directly or indirectly performs accounting services for=20
remuneration for any party who is a client of Employer during the =
term of=20
this Agreement, Employee shall immediately purchase from Employer =
and=20
Employer shall sell to Employee that portion of Employer's =
business=20
associated with each such client . . . . 11. The=20
purchase price for those portions of Employer's business which =
Employee=20
becomes obligated to purchase as aforesaid shall be determined and =
paid as=20
follows:
a. Ninety=20
(90%) percent of the face amount of accounts receivable due from =
each such=20
client . . . . b. Ninety=20
(90%) percent of unbilled time . . . . c. . . .=20
[T]he total of the billable time spent by Employer and/or its =
employees in=20
servicing each such client during the twelve (12) month period =
immediately=20
preceding the date of termination or expiration of this Agreement =
. . .=20
. . =
. .=20
. 13. . . .=20
[T]he parties further acknowledge and agree that Employer's secret =
and/or=20
confidential information and client relationships constitute value =
assets=20
. . . . Fielding's=20
employment agreement with Mann Frankfort states that he could not =
"at any=20
time" disclose "any secret or confidential information or =
knowledge=20
obtained . . . while employed" by Mann Frankfort. If Fielding =
disclosed=20
the confidential information by allowing himself to be hired by =
certain=20
clients of Mann Frankfort, Fielding was responsible to compensate =
Mann=20
Frankfort by paying 90% of the account's receivable and unbilled =
time for=20
that client and "the total of the billable time spent by [Mann =
Frankfort]=20
and/or its employees in servicing each such client during the =
twelve (12)=20
month period immediately preceding the date the Limited Partner =
ceases to=20
be employed by [Mann Frankfort]." Although Fielding's agreement =
required=20
him not to disclose confidential information that was valuable to =
Mann=20
Frankfort, the agreement does not state that Mann Frankfort will =
provide=20
confidential information to Fielding or that Fielding will receive =
confidential information from Mann Frankfort. The agreement merely =
provided a contingency that if Fielding received information, he =
could not=20
disclose it without incurring a financial penalty. We conclude =
that Mann=20
Frankfort gave no consideration to Fielding because it did not =
promise to=20
give any confidential information to Fielding. Mann=20
contends that the consideration is sufficient because (1) Fielding =
was=20
given confidential information throughout his employment and (2) =
the=20
agreement prohibited disclosure of confidential information. The=20
agreement, however, does not provide that Mann Frankfort had any =
duty to=20
give confidential information to Fielding, nor does it mention =
that=20
Fielding will receive confidential information from Mann =
Frankfort. Thus,=20
the mere fact that Mann Frankfort gave information to Fielding is =
no=20
evidence of consideration by Mann Frankfort. Mann also=20
contends that it made an "implied promise" to disclose =
confidential=20
information to Fielding. Mann cites Beasley v. Hub City Texas, =
L.P. to support its claim that an implied promise is =
sufficient=20
consideration to support a covenant not to compete. =
01-03-00287-CV, 2003=20
WL 22254692 (Tex. App.--Houston [1st Dist.] Sept. 29, 2003, no =
pet.) (mem.=20
op.). In Beasley, the employment agreement contained =
Beasley's=20
acknowledgment " Here,=20
Fielding's agreement differs from the agreement in =
Beasley.=20
Fielding did not acknowledge that he had received or would receive =
confidential information. Nor did the agreement contain =
representations=20
that Fielding was receiving consideration for agreeing to the=20
non-disclosure and client-purchase provisions. Thus, Fielding's =
employment=20
agreement did not contain an implied promise by Mann Frankfort =
that=20
obligated Mann Frankfort to disclose confidential information to=20
Fielding. We conclude=20
that Fielding's agreement fails to establish that it is ancillary =
to or=20
part of an otherwise enforceable agreement because Mann did not =
produce=20
any evidence to establish that "the consideration given by the =
employer in=20
the otherwise enforceable agreement [gave] rise to the employer's =
interest=20
in restraining the employee from competing." Id.; =
Light,=20
883 S.W.2d at 647. Here, because there is no consideration, the =
agreement=20
between Mann Frankfort and Fielding is unenforceable. We hold that =
the=20
trial court did not err by concluding that the client-purchase =
provision=20
in Fielding's employment agreement was unenforceable, and that the =
trial=20
court did not err by granting summary judgment for Fielding and by =
denying=20
Mann's cross-motion for breach of contract on this =
issue. C.=20
Hardy's Employment Agreement that was signed before the=20
Merger In contrast=20
to Fielding's agreement, Hardy's agreement specifically provided=20
that Hardy=20
would be given confidential information by his employer. Hardy's =
agreement=20
states as follows: 12. (a) The=20
Firm's Clients ("Clients") are a valuable and unique asset of the=20
Firm. (b)=20
Employee will be given access to the Client's in the conduct of =
business=20
on behalf of the Firm with the result that Employee will gain =
intimate=20
knowledge about a Client and his affairs, and technical skills in =
the=20
issues involving the Client . . . . (c) Without=20
such access during the course of and incident to his employment, =
Employee=20
would not be knowledgeable about the affairs of the clients and =
would not=20
develop the necessary expertise to become valuable to the=20
clients. 13. Hardy's=20
employment agreement with Mann Frankfort states that Hardy will =
have=20
access to intimate knowledge about clients and would gain =
experience that=20
was valuable to the clients and to the firm. The agreement also =
provides=20
that Hardy, in consideration of the benefits of his employment and =
the=20
experience he would gain, would not disclose proprietary =
information that=20
he gained while employed by Mann Frankfort. If Hardy disclosed the =
confidential information by allowing himself to be hired by =
certain=20
clients of Mann Frankfort, Hardy was responsible to compensate =
Mann=20
Frankfort by paying 150% of the funds received by the client. =
Hardy's=20
agreement thus includes a provision that Hardy will receive =
confidential=20
information that he may not later use without a financial penalty. =
Mann=20
produced evidence that Hardy received confidential information =
during the=20
course of his employment with Mann Frankfort. Under=20
Sheshunoff, even though the exchange of =
information was=20
not concurrent with the agreement, the covenant not to compete =
does not=20
fail for that reason alone, as long as the other requirements are =
met. 209=20
S.W.3d at 649. The record therefore shows that Hardy acknowledged =
that he=20
would be receiving confidential information and that he did =
receive=20
confidential information. Mann, thus, has established that Mann =
Frankfort=20
promised to give confidential information to Hardy, that Mann =
Frankfort=20
gave confidential information to Hardy, and that Hardy could not =
use any=20
of the information in obtaining work from clients of Mann =
Frankfort for a=20
certain period of time after Hardy left the employment of Mann =
Frankfort.=20
These facts are sufficient to show consideration. See=20
Light, 883 S.W.2d at 647. We hold=20
that the evidence establishes that Mann Frankfort gave =
consideration in=20
the agreement that gave rise to Mann Frankfort's interest in =
restraining=20
Hardy from competing, and that the covenant was designed to =
enforce=20
Hardy's consideration or return promise in the agreement. See=20
Sheshunoff, 209 S.W.3d at 649; Light, 883 =
S.W.2d at=20
647. We hold that the trial court erred by concluding that the=20
client-purchase provision in the employment agreement it had with =
Hardy=20
was unenforceable. See id. Having=20
determined that Hardy's agreement does not fail on the ground that =
it is=20
not ancillary to an otherwise enforceable agreement, we must =
determine=20
whether it fails for other reasons presented in the summary=20
judgments. In its=20
first and second issues in its cross-appeal, Mann also asserts =
that=20
summary judgment for Hardy cannot be based on any other ground =
that was=20
asserted in the motions for summary judgment. Hardy, however, =
contends=20
that the motions for summary judgment would also have properly =
been=20
granted on the other grounds that he presented in the motion. =
See=20
Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. =
1996)=20
("[T]he appellate court may consider other grounds that the movant =
preserved for review and the trial court did not rule on in the =
interest=20
of judicial economy."). Specifically, Hardy contends that the =
scope of the=20
restrictive covenant in his employment agreement was too broad to =
be=20
enforceable. Mann contends that the agreement with Hardy is not =
overly=20
broad because it is limited (1) only to clients served by Hardy=20
immediately before his resignation, (2) only to a short period of =
time,=20
and (3) only to a purchase price that was within the means of =
Hardy. Mann=20
asserts that accounting firms regularly use a multiple of =
year-prior=20
revenue as a method to value accounting firms, accounts, or=20
practices. A =
covenant=20
not to compete is unenforceable unless it meets the reasonableness =
standards of section 15.50 of the Texas Business and Commerce =
Code.=20
See John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d =
80, 85=20
(Tex. App.--Houston [14th Dist.] 1996, writ denied). The =
restriction must=20
be reasonable, not imposing a greater restraint than is necessary =
to=20
protect the goodwill or other business interest of the employer. =
Tex. Bus.=20
& Com. Code Ann. =A7 15.50(a). To be enforceable, a covenant =
must=20
"contain[] limitations as to time, geographical area, and scope of =
activity to be restrained that are reasonable and do not impose a =
greater=20
restraint than is necessary to protect the goodwill or other =
business=20
interest of the promisee." Id. A restraint is unnecessary =
if it=20
is broader than necessary to protect the legitimate interests of =
the=20
employer. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, =
682 (Tex.=20
1990). Whether a covenant is a reasonable restraint on trade is a =
question=20
of law for the court. Stroman, 923 S.W.2d at 85. A =
restrictive=20
covenant is "overbroad and unreasonable when it extends to clients =
with=20
whom the employee had no dealings during his employment."=20
Stroman, 923 S.W.2d at 85; see also =
Haass, 818=20
S.W.2d at 386-88. Hardy's=20
agreement states:
15. (Emphasis=20
in original). The=20
restrictive covenant here is unreasonable and imposes a greater =
restraint=20
than is necessary to protect Mann Frankfort's goodwill or other =
business=20
interest. See Tex. Bus. & Com. Code Ann. =A7 15.50;=20
DeSantis, 793 S.W.2d at 682. The pricing terms were =
unreasonable.=20
They required Hardy to pay 150% of the fees billed and accepted by =
the=20
client during the entire year before the client hired Hardy. Thus, =
as=20
Hardy points out, if Hardy prepared a $500 tax return for a =
client, and if=20
the same client paid $50,000 during the previous year for =
accounting=20
serviced provided by Mann Frankfort, Hardy would have to pay =
$75,000 to=20
Mann Frankfort. Hardy's=20
restrictive covenant is not limited to the clients that he served. =
The=20
agreement states that he may not call or solicit "any of the =
Clients of=20
the Firm" for 24 months. The client-purchase provision similarly =
refers to=20
"any Client of the Firm." This type of restrictive covenant that =
does not=20
require a connection between the clients and the person who is =
restricted=20
by the covenant is overbroad. See Haass, 818 S.W.2d at =
386-88;=20
Stroman, 923 S.W.2d at 85. The=20
agreement contains no geographical restrictions, no restrictions =
to=20
clients that were actually served by Hardy while he was employed =
by Mann=20
Frankfort, and an exorbitant fee for Hardy's service to clients =
that did=20
business with Mann Frankfort. We hold the restrictive covenant is=20
unenforceable due to its failure to comply with the requirements =
of the=20
Texas Business Code. See Tex. Bus. & Com. Code Ann.=20
=A7 15.50; Stroman, 923 S.W.2d at 84. Because =
Hardy's=20
agreement fails to comply with the Covenants Not to Compete Act, =
it is=20
unenforceable, as written. Mann asserts, however, that Hardy's =
agreement=20
can be enforced if it is reformed. Within its=20
first and second issue in the cross-appeal, Mann asserts that the =
trial=20
court should have reformed Hardy's agreement, instead of finding =
it=20
unenforceable. See Butler v. Arrow Mirror & Glass, =
Inc., 51=20
S.W.3d 787, 794 (Tex. App.--Houston [1st Dist.] 2001, no pet.) =
("[I]nstead=20
of invalidating a covenant not to compete, Texas courts have =
usually=20
reformed the covenant, revising the provisions to those which are=20
reasonable under the circumstances."). Other than making this =
general=20
statement in the appellate briefs, Mann does not explain how the =
trial=20
court should have reformed the agreement. The=20
Covenants Not to Compete Act provides, If the=20
covenant is found to be ancillary to or part of an otherwise =
enforceable=20
agreement but contains limitations as to time, geographical area, =
or scope=20
of activity to be restrained that are not reasonable and impose a =
greater=20
restraint than is necessary to protect the goodwill or other =
business=20
interest of the promisee, the court shall reform the covenant to =
the=20
extent necessary to cause the limitations contained in the =
covenant as to=20
time, geographical area, and scope of activity to be restrained to =
be=20
reasonable and to impose a restraint that is not greater than =
necessary to=20
protect the goodwill or other business interest of the promisee =
and=20
enforce the covenant as reformed, except that the court may =
not award=20
the promisee damages for a breach of the covenant before its =
reformation=20
and the relief granted to the promisee shall be limited to =
injunctive=20
relief. Tex. Bus.=20
& Com. Code Ann. =A7 15.51(c) (Vernon 2002) (emphasis added). =
In its=20
counterclaim filed with the trial court, Mann did not plead for=20
reformation of the client-purchase provisions. In its prayer, Mann =
only=20
sought damages from Fielding and Hardy. Mann did not plead or pray =
for=20
injunctive relief. We conclude that the reformation provision of =
the=20
Covenants Not to Compete Act does not apply, because the only =
relief=20
available under a reformed covenant--injunctive relief--was not =
sought by=20
Mann. See Haass, 818 S.W.2d at 388 (noting that for =
actions of=20
employee occurring before employer seeks reformation only =
injunctive=20
relief, and not damages, are available); Zep Mfg. Co. v.=20
Harthcock, 824 S.W.2d 654, 661 (Tex. App.--Dallas 1992, no =
writ)=20
(holding that trial court did not err by failing to reform =
covenant=20
because employer dropped claims for injunctive relief, seeking =
only=20
damages). We hold=20
that the trial court did not err by failing to reform Hardy's =
agreement.=20
We hold that the trial court did not err by granting summary =
judgment in=20
favor of Hardy and by denying Mann's cross-motion for breach of =
contract.=20
In the=20
fourth issue in the cross-appeal, appellees contend that the trial =
court=20
abused its discretion by sustaining Fielding and Hardy's =
objections to=20
Mann's summary judgment evidence. Mann asserts that the error was =
harmful=20
because the excluded portions of the affidavits raise a fact issue =
regarding whether Fielding and Hardy received confidential =
information and=20
became owners of Centerprise by virtue of owning shares in the =
limited=20
partnership. At issue are portions of three affidavits from Paul =
Mueller,=20
Mike Richter, and Richard H. Stein. Assuming=20
that the trial court erred by excluding the evidence, the trial =
court's=20
judgment does not turn on the evidence. See Mann also=20
asserts that the trial court erred by sustaining Fielding and =
Hardy's=20
objections to Stein's affidavit testimony that Fielding and Hardy =
became=20
"owners" of Centerprise by becoming "partners" in MFSL because the =
testimony mischaracterized the nature of the relationship among =
the=20
parties. Neither the trial court's decision nor our decision turns =
on this=20
evidence, which is not material to the trial court's ruling or to =
our=20
ruling. See id. Assuming the trial court erred by =
sustaining=20
objections to Mann's evidence, we hold that the error, if any, is =
not=20
harmful. See id. We overrule the fourth issue in the=20
cross-appeal. We affirm the summary judgment orders entered by the =
trial=20
court that are challenged in the cross-appeal. As a=20
threshold matter in Fielding and Hardy's appellate issues, Mann =
contends=20
that Fielding and Hardy waived any right to appeal the trial =
court's=20
denial of attorney's fees. Mann contends that Fielding and Hardy =
are=20
guilty of invited error by requesting the trial court to enter =
judgment=20
denying their attorney's fees, without qualifying their=20
request. In their=20
reply brief, Fielding and Hardy contend that they did not request =
the=20
trial court to render judgment on a jury verdict that they now =
challenge,=20
but instead "merely asked that the trial court reduce to writing =
an oral=20
ruling that had already been made so that the record contained a =
final=20
judgment that could be appealed." Fielding and Hardy contend that =
they did=20
not invite any error because by the time that they requested the =
written=20
order from the court, the court had already denied the claim, and =
thus any=20
error had already been made by the trial court. To preserve=20
the right to appeal a judgment, "a movant for judgment should =
state in its=20
motion to enter judgment that it agrees only with the form of the=20
judgment, and note its disagreement with the content and result of =
the=20
judgment." Casu v. Marathon Ref. Co., 896 S.W.2d 388, 390 =
(Tex.=20
App.--Houston [1st Dist.] 1995, writ denied) (citing First =
Nat'l Bank=20
of Beeville v. Fojtik, 775 S.W.2d 632, 633 (Tex. 1989)). However,=20
"merely provid[ing] a draft judgment to conform to what the court =
had=20
announced would be its judgment" does not result in waiver of the=20
appeal. John Masek Corp. v. Davis, 848 S.W.2d 170, 174-75 =
(Tex.=20
App.--Houston [1st Dist.] 1992, writ denied) (distinguishing =
holding in=20
Litton); In re Bahn, 13 S.W.3d 865, 875 (Tex. =
App.--Fort=20
Worth 2000, orig. proceeding) ("A party should not be estopped =
from=20
challenging a court's order when the party provides to the court a =
proposed order following what it believes was the court's ruling =
at the=20
hearing, and the court signs it."). Here,=20
Fielding and Hardy's "Motion for Entry of Orders, or, in the =
alternative,=20
Motion to Modify the Judgment" stated, [I]t is the=20
understanding of Plaintiffs that the Court has orally denied =
Plaintiffs'=20
Declaratory Judgment Act claim for attorneys' fees. However, the =
appellate=20
timetable may only commence upon a signed, written order. =
Accordingly,=20
Plaintiffs request that the Court sign an order on Plaintiffs' =
Declaratory=20
Judgment Act claim for attorneys' fees and costs so that final =
judgment is=20
achieved (if the judgment is not already final).
For the=20
foregoing reasons, Plaintiffs David Hardy [and] Brendan J. =
Fielding=20
. . . respectfully request the court to sign and enter =
the=20
attached two orders. (Citations=20
omitted).
Fielding=20
and Hardy, therefore, did not invite the trial court to commit any =
error=20
by requesting that the trial court enter a judgment in writing =
that=20
conformed to the trial court's earlier oral decision. Fielding and =
Hardy's=20
motion requesting that the trial court enter a judgment expressly =
states=20
that it was their "understanding" that the trial court had "orally =
denied"=20
their attorney's fees claim under the Uniform Declaratory =
Judgments Act.=20
We conclude that any error was not invited by Fielding and Hardy =
because=20
the denial of their claim had already been verbally ruled on by =
the trial=20
court in its summary judgment rulings. See John Masek =
Corp., 848=20
S.W.2d at 174; In re Bahn, 13 S.W.3d at 875. We hold that =
Fielding and Hardy have not waived their appellate =
issues. In their=20
second issue, Fielding and Hardy assert that the trial court erred =
by=20
refusing to award them attorney's fees in their declaratory =
judgment=20
action because they were the prevailing party and equity was in =
their=20
favor. Mann responds that it had legitimate rights to pursue under =
the=20
agreements, that case law supported their position that the =
agreements=20
were valid, and that the issue of whether the agreements were =
enforceable=20
was unclear and complex. Section=20
37.009 of the Texas Civil Practice and Remedies Code provides =
that, in a=20
declaratory action, the trial court has discretion to award costs =
and=20
reasonable and necessary attorney's fees as are equitable and =
just. Tex.=20
Civ. Prac. & Rem. Code Ann. =A7 37.009 (Vernon 1997). The =
Uniform=20
Declaratory Judgments Act "entrusts attorney fee awards to the =
trial=20
court's sound discretion, subject to the requirements that any =
fees=20
awarded be reasonable and necessary, which are matters of fact, =
and to the=20
additional requirements that fees be equitable and just, which are =
matters=20
of law." Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. =
1998).=20
Further, "the court may conclude that it is not equitable or just =
to award=20
even reasonable and necessary fees." Id. We will not =
reverse the=20
award absent a clear showing of an abuse of that discretion. =
Knighton=20
v. Int'l Bus. Mach. Corp., 856 S.W.2d 206, 210 (Tex. =
App.--Houston=20
[1st Dist .] 1993, writ denied). An award of=20
attorney's fees is "a matter of fairness in light of all the=20
circumstances." Ridge Oil Co. v. Guinn Invs. Inc., 148 =
S.W.3d=20
143, 162 (Tex. 2004). A trial court may conclude that it is =
reasonable and=20
just to award no attorney's fees at all, or to award less than the =
total=20
amount found reasonable and necessary by the trier of fact. =
Id.=20
at 161-62. An award of attorney's fees is not limited to the =
prevailing=20
party. Robinson v. Budget Rent-A-Car Sys., Inc., 51 =
S.W.3d 425,=20
433 n.2 (Tex. App.--Houston [1st Dist.] 2001, pet. denied). The =
trial=20
court may award attorney's fees to the non-prevailing party. =
Sava=20
Gumarska in Kemijska Industria D.D. v. Advanced Polymer Scis., =
Inc.,=20
128 S.W.3d 304, 324 (Tex. App.--Dallas 2004, no pet.). The =
prevailing=20
party is not entitled to attorney's fees. Ameristar Jet =
Charter, Inc.=20
v. Cobbs, 184 S.W.3d 369, 376 (Tex. App.--Dallas 2006, no =
pet.)=20
(citing Bocquet, 972 S.W.2d at 20). Numerous courts have =
affirmed=20
the denial of attorney's fees to the prevailing party. See, =
e.g., Oake=20
v. Collin County, 692 S.W.2d 454, 455-56 (Tex. 1985); =
Ameristar=20
Jet Charter, Inc., 184 S.W.3d at 376; Dallas Fire Ins. =
Co. v.=20
Tex. Contractors Sur. & Cas. Agency, 128 S.W.3d 279, 304 =
(Tex.=20
App.--Fort Worth), rev'd on other grounds, 159 S.W.3d 895 =
(Tex.=20
2004); Sharp v. Hobart Corp., 957 S.W.2d 650, 654 (Tex.=20
App.--Austin 1997, no pet.). Fielding=20
and Hardy contend that in light of the circumstances of this case, =
it=20
would be fair to award them attorney's fees. See Ridge Oil =
Co.,=20
148 S.W.3d at 162. The circumstances identified by Fielding and =
Hardy are=20
that Mann used its superior bargaining power to force the =
client-purchase=20
provisions on them; that they had no opportunity to negotiate the =
terms of=20
the provisions; that Mann drafted the provisions; that, when=20
a question arose as to the rights and obligations of the parties, =
they=20
sought a declaration, rather than force Mann to file suit to try =
to=20
enforce the provisions; and that Mann "refused to concede that the =
obviously unenforceable 'client-purchase' provisions were =
invalid,"=20
instead forcing Fielding and Hardy "to incur attorney's fees and =
costs=20
proving the obvious." Fielding=20
and Hardy contend that the record shows that the trial court =
committed an=20
abuse of discretion by arbitrarily refusing to award attorney's =
fees.=20
Fielding and Hardy rely upon a statement made by the trial court =
at the=20
hearing on their Motion for Attorney's Fees and Costs. During the =
hearing=20
the trial court stated "I've never awarded attorney's fees under =
the deck=20
[sic] action." Fielding and Hardy contend that this statement =
shows that=20
"[a]pparently the trial court has a policy of not awarding =
attorney's fees=20
under the Act no matter what the circumstances in each case may =
be."=20
Although Fielding and Hardy rely on the statement made by the =
trial court=20
to show that the trial court acted arbitrarily, the court's =
statement=20
during the hearing is not a formal finding of fact or conclusion =
of law.=20
See Marion v. Davis, 106 S.W.3d 860, 868 (Tex. =
App.--Dallas 2003,=20
pet. denied) (citing Sharp, 957 S.W.2d at 654). Moreover, =
the=20
mere fact that the court relayed that it had "never awarded" =
attorney's=20
fees in a declaratory judgment action does not mean that the court =
would=20
not order attorney's fees in an appropriate case. We presume=20
that the trial court acted within the bounds of its discretion =
unless the=20
record shows the contrary. Marion, 106 S.W.3d at 869. No =
findings=20
of fact or conclusions of law disclose the basis for the trial =
court's=20
denial of fees under the Declaratory Judgments Act. See =
id. at=20
868 (citing Sharp, 957 S.W.2d at 654). We may therefore =
uphold=20
the denial of attorney's fees on any legal theory that is =
supported by the=20
evidence. Sharp, 957 S.W.2d at 654 (citing In re =
W.E.R.,=20
669 S.W.2d 716, 717 (Tex. 1984)). Although the client-purchase =
provisions=20
are unenforceable, it is not disputed that confidential =
information and=20
goodwill are interests that Mann may protect with a covenant not =
to=20
compete. And although we found these provisions similar to those =
in=20
Haass, the trial court could have reasonably determined =
that Mann=20
was pursuing the enforcement of the provisions to protect its =
confidential=20
information and its goodwill with its clients. We hold that =
Fielding and=20
Hardy have failed to make a "clear showing" that the trial court =
abused=20
its discretion. See Marion, 106 S.W.3d at 869; =
Sharp,=20
957 S.W.2d at 654. We=20
overrule Fielding and Hardy's second issue. In their=20
third issue on appeal, Fielding and Hardy assert that the =
Covenants Not to=20
Compete Act does not preempt an award of attorney's fees under the =
employment agreement between Mann Frankfort and Fielding that =
provided for=20
attorney's fees. This issue concerns Fielding only because it =
pertains to=20
his agreement with Mann Frankfort. Fielding=20
asserts that the agreement that he has with Mann provides for =
attorney's=20
fees to the prevailing party in a lawsuit. Fielding contends that =
his=20
employment agreement that provides for an award of attorney's fees =
for the=20
prevailing party is not preempted by the Covenants Not to Compete =
Act=20
because the act concerns enforcement of covenants not to compete, =
and his=20
action was not to enforce the covenant, but rather to avoid =
its=20
enforcement. Mann=20
contends that the Covenants Not to Compete Act preempts the award =
of=20
attorney's fees under any other law. Mann relies in part on a =
broad=20
statement by the San Antonio court of appeals that "section 15.52 =
preempts=20
an award of [attorney's] fees under any other law." Perez v. =
Tex.=20
Disposal Sys., Inc., 103 S.W.3d 591, 594 (Tex. App.--San =
Antonio=20
2003, pet. denied). Mann also contends that because section =
15.51(c) of=20
the Act specifies the circumstances in which an employee may be =
awarded=20
attorney's fees, this is an indication that an employee's right to =
attorney's fees is limited by the Act. To=20
determine the meaning of the statute, we must rely primarily upon =
the=20
language of the statute itself to determine the legislature's =
intent.=20
Gage Van Horn & Assocs., Inc. v. Tatom, 26 S.W.3d =
730, 732=20
(Tex. App.--Eastland 2000), pet. denied improvidently =
granted, 87=20
S.W.3d 536 (Tex. 2002) (per curiam) (citing =
Bridgestone/Firestone,=20
Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex. 1994); =
Monsanto Co.=20
v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937, 939 (Tex. =
1993);=20
and RepublicBank Dallas, N.A. v. Interkal, Inc., 691 =
S.W.2d 605,=20
607 (Tex. 1985)). The=20
Business and Commerce Code provides, =A7 15.52.=20
Preemption of Other Law The=20
criteria for enforceability of a covenant not to compete provided =
by=20
Section 15.50 of this code and the procedures and remedies in an =
action to=20
enforce a covenant not to compete provided by Section 15.51 of =
this code=20
are exclusive and preempt any other criteria for enforceability of =
a=20
covenant not to compete or procedures and remedies in an action to =
enforce=20
a covenant not to compete under common law or =
otherwise. Tex. Bus.=20
& Com. Code Ann. =A7 15.52 (Vernon 2002). Section 15.51 =
applies to "an=20
action to enforce a covenants not to compete." =
Id. =A7=A7=20
15.51(c), 15.52 (emphasis added). According to section 15.51 of =
the=20
Business and Commerce Code, if the=20
[employee] establishes that [Mann] knew at the time of the =
execution of=20
the agreement that the covenant did not contain limitations as to =
time,=20
geographical area, and scope of activity to be restrained that =
were=20
reasonable and the limitations imposed a greater restraint than =
necessary=20
to protect the goodwill or other business interest of [Mann], and =
[Mann]=20
sought to enforce the covenant to a greater extent than was =
necessary to=20
protect the goodwill or other business interest of [Mann], the =
court may=20
award the [employee] the costs, including reasonable attorney's =
fees,=20
actually and reasonably incurred by the [employee] in defending =
the action=20
to enforce the covenant. The=20
Eastland court of appeals has strictly interpreted the language in =
the=20
Covenants Not to Compete Act by limiting it to actions that seek =
to=20
enforce covenants not to compete, and not applying it to actions =
that seek=20
to prevent enforcement of covenants not to compete. =
Tatom, 26=20
S.W.3d at 733. The Dallas court of appeals, citing Tatom, =
reached=20
the same conclusion. Contemporary Contrators, Inc. v. =
Strauser,=20
No. 05-04-00478-CV, 2005 WL 1774983, at *2, (Tex. App.--Dallas =
July 28,=20
2005, no pet.) (mem. op.). The only court that has suggested that =
all laws=20
are preempted by the Covenants Not to Compete Act is the San =
Antonio court=20
of appeals. We note, however, that the court's ruling concerned an =
employer's attempt to enforce a covenant not to =
compete=20
and an employer's request for attorney's fees. See=20
Perez, 103 S.W.3d at 594. Thus, the facts were unlike the =
facts here,=20
which concern an employee's request for attorney's fees in =
attempting to=20
prevent enforcement of a covenant not to compete. See id. =
Viewing the=20
plain language of section 15.52, we conclude that the preemption =
by the=20
Covenants Not to Compete Act applies only to actions that seek to =
"enforce=20
a covenant not to compete." See Tex. Bus. & Com. Code =
Ann. =A7=A7=20
15.51(c), 15.52; see also Tatom, 26 S.W.3d at =
733. We=20
hold that the Covenants Not to Compete Act does not preempt =
Fielding from=20
recovering attorney's fees under the agreement that he has with =
Mann=20
Frankfort. See id. We sustain Fielding's third =
issue. We have=20
already determined above (1) that the trial court properly =
determined that=20
the covenant not to compete was not enforceable in Fielding's =
agreement=20
and that Fielding was thus the prevailing party in the declaratory =
judgment lawsuit that sought to prevent enforcement of the =
covenant not to=20
compete and (2) that the agreement between Fielding and Mann =
Frankfort=20
provided that the prevailing party is entitled to an award of =
attorney's=20
fees. The only remaining question is whether the invalidity of the =
covenant not to compete causes the entire agreement to fail, or if =
the=20
invalid portion may be severed and the remainder of the agreement=20
enforced.Attorney's Fees Under Fielding's=20
Agreement In their=20
first issue, Fielding and Hardy assert that the trial court erred =
by=20
denying an award of attorney's fees to Fielding, whose employment=20
agreement included a section regarding attorney's fees. This issue =
concerns Fielding's agreement only. Mann's=20
motion for summary judgment asserted that Fielding's entire =
agreement was=20
void because the client-purchase provision was integral to the =
agreements=20
and non-severable. Mann contends that because the trial court =
found that=20
the client-purchase provision was unenforceable, the entire =
agreement is=20
unenforceable, including the section that provides for attorney's =
fees to=20
the prevailing party. Mann claims that the client-purchase =
provision was=20
the essential part of the employment agreement because without it, =
the=20
employment relationship between Fielding and Mann would not have =
existed.=20
According to Mann, "the issue is whether, based on the language of =
the=20
contract, the parties would have entered the agreement absent the =
illegal=20
parts." Mann points to an affidavit from a managing partner that =
stated=20
that Mann Frankfort considered the client-purchase provisions the =
primary=20
purpose of the agreements and that they were "integral" to the =
employment=20
agreements. Fielding=20
responds that the employment relationship was the =
indispensable=20
part of the employment agreement, and that the agreement contained =
numerous provisions other than the "client-purchase" provisions. =
Fielding=20
contends that the trial court erred by concluding that the =
agreement was=20
illegal because it does not cover an illegal subject matter, =
rather only=20
portions of the contract are illegal. See Rogers v. =
Wolfson, 763=20
S.W.2d 922, 924 (Tex. App.--Dallas 1989, writ denied). Fielding =
maintains=20
that as the prevailing party in the lawsuit, he is entitled to =
attorney's=20
fees under the remaining portions of the agreement that are =
outside of the=20
illegal portion concerning the covenant not to compete. "The mere=20
fact that a noncompete agreement is void does not render void the=20
remainder of the employment contract." Zep Mfg. Co., 824 =
S.W.2d=20
at 662. "Where a contracting party agrees to perform separable =
acts, and=20
one is void, the invalid provision may be severed from the valid =
provision=20
and the valid provision enforced if the intent of the parties is =
not=20
thereby frustrated." Id. Whether the invalidity of the =
covenant=20
not to compete voids the entire employment agreement depends on =
whether=20
the other provisions are mutually dependent promises. Hanks v. =
GAB=20
Bus. Servs. Inc., 644 S.W.2d 707, 708 (Tex. 1982). This is =
determined=20
by examining the intent of the parties at the time the contract =
was=20
formed, as evidenced by the language in the agreement. John R. =
Ray=20
& Sons, Inc., 923 S.W.2d at 86; Greenstein v. =
Simpson,=20
660 S.W.2d 155, 160 (Tex. App.--Waco 1983, writ ref'd n.r.e.). The =
invalidated covenant may be mutually dependent only if it is such =
an=20
indispensable part of what both parties intended that the contract =
would=20
not have been made without the covenant. John R. Ray & =
Sons,=20
Inc., 923 S.W.2d at 86; Greenstein, 660 S.W.2d at =
160. If=20
the employer received something of independent value in the =
agreement,=20
other than the covenant not to compete, the covenant may be =
considered=20
severable from the remainder of the agreement. John R. Ray =
& Sons,=20
Inc., 923 S.W.2d at 87-88. In contrast, if the parties would =
not have=20
entered into the agreement without the unenforceable provision, =
the=20
provision is integral to the remainder of the contract, and cannot =
be=20
severed. Id. at 86; Rogers, 763 S.W.2d at=20
925. The issue=20
of severability is a question of law. John R. Ray & Sons,=20
Inc., 923 S.W.2d at 86; Rogers, 763 S.W.2d at 924=20
(distinguishing "between a contract that is void because the =
subject=20
matter of the contract is illegal and a contract where the subject =
matter=20
is legal, but certain ancillary provisions in the contract are =
illegal").=20
In determining whether the illegal portion can be severed and the =
valid=20
portion of the contract enforced, we may consider whether the =
agreement=20
contains an express manifestation of the parties' intent that an=20
invalidated provision would not render the rest of the agreement=20
unenforceable. Transamerica Ins. Co. v. Avenell, 66 F.3d =
715,=20
721-22 (5th Cir. 1995). Excluding=20
the client-purchase provisions that are unenforceable, the =
agreement=20
contained other provisions governing the relationship between =
Fielding and=20
Mann Frankfort. The agreement here defined the employment =
relationship by=20
setting out Fielding's salary, benefits, work requirements, and =
the return=20
of property upon termination of employment, as well as other =
terms. We note=20
that the authority relied on by Mann concerns contracts that could =
not be=20
severed, unlike the agreement here. See Patrizi v. =
McAninch, 269=20
S.W.2d 343, 348 (Tex. 1954) (holding that royalty-payment =
provision was=20
consideration for illegal provisions and thus they were "so =
interdependent=20
and indivisible that they cannot be separated and must fall =
together");=20
In re Luna, 175 S.W.3d 315, 328 (Tex. App.--Houston [1st =
Dist.]=20
2004, orig. proceeding) (holding that cost provisions and remedy=20
limitations together deprived Luna of opportunity to vindicate his =
claim=20
in arbitral forum and therefore provisions were integral to =
purpose of=20
agreement and could not be severed); John R. Ray & Sons,=20
Inc., 923 S.W.2d at 87 (holding that "Since the primary =
purpose of=20
the Agreement was the covenant not to compete, it cannot be =
severed=20
without adversely affecting the issuance of stock given in =
consideration=20
therefor."); Whiteside v. Griffis & Griffis, P.C., =
902 S.W.2d=20
739, 745 (Tex. App.--Austin 1995, writ denied) (holding that =
payment of=20
good will factor was required only if shareholder complied with=20
restrictive covenant, and therefore payment provision was not =
severable).=20
We note further that although Mann produced an affidavit from a =
managing=20
partner that states that the client-purchase provisions were the=20
"essential provisions" of the agreement, it does not state that =
the=20
agreement served no other purpose. In addition, the intent of the =
parties=20
is to be determined from the language in the agreement itself. =
John R.=20
Ray & Sons, Inc., 923 S.W.2d at 86; Greenstein, =
660=20
S.W.2d at 160. We conclude=20
that, in accordance with the express language of the agreement =
showing=20
that the parties' intent was to allow unenforceable provisions of =
the=20
agreement to be severed, the parties retained their obligations =
under the=20
remainder of the agreement, with the exclusion of the invalid=20
client-purchase provisions. We hold that the trial court erred by=20
declining to award any attorney's fees to Fielding under the terms =
of the=20
employment agreement that provided that in "the event of =
litigation=20
between the parties hereto arising out of or connected with this=20
Agreement, the prevailing party shall be entitled to recover . . . =
actual=20
attorneys fees." We therefore remand to the trial court for =
determination=20
of the amount of attorney's fees to be awarded to =
Fielding. We reverse the trial court's =
denial of an=20
award of attorney's fees to Fielding and remand this cause for a=20
determination of the amount of attorney's fees that should be =
awarded to=20
Fielding under the terms of his agreement with Mann Frankfort. We =
affirm=20
the judgment of the trial court in all other =
respects. Elsa Alcala Justice Panel consists of Justices =
Taft, Alcala,=20
and Hanks. 1. See Tex. Civ. Prac. & Rem. =
Code Ann. =A7=20
37.009 (Vernon 1997).=20
2. See Tex. Bus. & Com. Code =
Ann. =A7 15.52=20
(Vernon 2002).=20
3. Darlene J. Plumly, another former Mann =
employee was=20
a plaintiff before the trial court and an appellant before this =
Court.=20
However, Mann and Plumly settled their disputes and Plumly was =
dismissed=20
from this case.=20
4. In Haass, the supreme court was =
applying=20
the common law test for reasonableness and enforceability, before =
the test=20
was codified in the Texas Business and Commerce Code. Peat =
Marwick=20
Main & Co. v. Haass, 818 S.W.2d 381, 385, 388 (Tex. =
1991). The=20
court stated that, for a covenant not to compete to be reasonable =
and=20
enforceable, it must satisfy three conditions: First, it=20
must [be] ancillary to an otherwise valid contract, transaction or =
relationship. Second, the restraint created must not be greater =
than=20
necessary to protect the promisee's legitimate interests such as =
business,=20
goodwill, trade secrets, or other confidential or proprietary =
information.=20
Third, the promisee's need for the protection given by the =
agreement must=20
not be outweighed by either the hardship to the promisor or any =
injury=20
likely to the public. Id.=20
at 386 (citations omitted).=20
6. Myers actually =
states=20
that the acknowledgment in that case meant that "[t]he trial court =
could have concluded that, at most, there was an =
implied=20
promise to provide appellees specialized training sometime during =
their=20
employment, if and when needed." CRC-Evans Pipeline Int'l, =
Inc.=20
v. Myers, 927 S.W.2d 259, 265 (Tex. App.--Houston =
[1st=20
Dist.] 1996, no writ) (emphasis added); cf. =
Strickland v.=20
Medtronic, Inc., 97 S.W.3d 835, 839 (Tex. App.--Dallas 2003, =
pet.=20
dism'd w.o.j.) (stating that recital that "this agreement is =
intended to=20
recognize that [Employer] provides the Employee with [confidential =
information]" did not obligate employer to provide =
confidential=20
information to employee).=20
7. The motion for judgment in =
Fojtik=20
stated, While=20
Plaintiffs disagree with the findings of the jury and feel there =
is a=20
fatal defect which will support a new trial, in the event the =
Court is not=20
inclined to grant a new trial prior to the entry of judgment, =
Plaintiffs=20
pray the Court enter the following judgment. Plaintiffs agree only =
as to=20
the form of the judgment but disagree and should not be construed =
as=20
concurring with the content and result. First=20
Nat'l Bank of Beeville v. Fojtik, 775 S.W.2d 632, 633 (Tex. =
1989).=20
8. We do not reach the issue of whether the =
Covenants=20
Not to Compete Act preempts an award of attorney's fees under the=20
Declaratory Judgments Act, which is part of Fielding and Hardy's =
third=20
issue, because we have determined that the trial court did not =
abuse it's=20
discretion by denying attorney's fees under the Declaratory =
Judgments Act.=20
9. Fielding's agreement states as=20
follows: 1. This=20
agreement supersedes all previous employment arrangements and =
agreements=20
between the parties. 2. Employer=20
hereby employs Employee and Employee hereby accepts employment =
with=20
employer for a term of one (1) year, commencing as of December 1, =
1995,=20
subject to terms of Paragraph 9 herein. After the expiration of =
such term,=20
this Agreement shall continue from month-to-month subject to the =
terms of=20
Paragraph 9 herein.
3. Employer=20
will pay employee at a monthly rate of not less than Three =
thousand=20
dollars and no/100 ($3000.00) in equal, semi-monthly installments =
. . . .=20
The foregoing wage is based upon a forty (40) hour week, fifty-two =
(52)=20
weeks per year . . . . 4. In=20
addition to the compensation aforesaid, Employee shall be entitled =
to=20
receive, during the term hereof, the further benefits set forth in =
Exhibit=20
A . . . . 5. Employee=20
shall perform such duties and do such accounting work as Employer =
shall=20
from time to time direct consistent with his professional skills =
and the=20
Ethical Standards of the Accounting Profession. 6. Employee=20
shall devote his full time, skill, efforts and attention =
exclusively to=20
his employment hereunder during the term of this Agreement and =
shall not,=20
during the term of this agreement, without full disclosure to =
employer and=20
with its prior written consent, engage in any other business =
activity=20
whether or not such business activity is pursued for gain, profit, =
or=20
other pecuniary advantage. Without limiting the generality of the=20
foregoing, Employee shall not, during the term hereof, engage in =
any=20
accounting activities whatsoever other than pursuant hereto. =
7. Employee=20
shall not disclose or use at any time, except as part of his =
employment=20
hereunder, either during or subsequent to his employment, any =
secret or=20
confidential information or knowledge obtained by employee while =
employed=20
by Employer either from Employer, its other employees, or its=20
clients. 8.=20
Forthwith upon expiration or termination of this Agreement, =
Employee shall=20
deliver to Employer all books, records, notes, memoranda and =
writing of=20
every kind and nature whatsoever in any manner relating to or =
obtained by=20
him in connection with any work done . . . .
9. . . . In=20
the event of termination of the employment of Employee =
. . .=20
Employee agrees to promptly return all office and equipment keys, =
access=20
cards, and other property of Employer. In the event of termination =
of=20
employment, however such termination may be brought about, =
Employer shall=20
not be obligated for any accrued but unpaid bonuses or "severance" =
pay.
[Sections=20
10 through 13 concern the client-purchase =
provision.] 14. . . .=20
Employee shall promptly and faithfully observe and perform all =
rules and=20
regulations as may be prescribed by Employer . . . .
15. In the=20
event of litigation between the parties hereto arising out of or =
connected=20
with this Agreement, the prevailing party shall be entitled to =
recover all=20
reasonable costs and expenses and all reasonable, actual attorneys =
fees=20
incurred by it or by him in the preparation for and conduct of =
such=20
litigation. 16.=20
Whenever possible, each provision of this Agreement shall be =
interpreted=20
in such a manner as to be effective and valid under the applicable =
law,=20
but if any provision(s) of this Agreement shall be prohibited by =
or be=20
determined to be invalid under applicable law, such provision(s) =
shall be=20
ineffective to the extent of such prohibition or invalidity, =
without=20
invalidating the remainder of such provision(s) or the remaining=20
provisions of this Agreement.
17. This=20
Employment Agreement contains all of the agreements between the =
parties .=20
. . .
O P=20
I N I O N