Dallas Court of Appeals Rules on Non-Compete Agreement

2008-09-04 21:31:03 (GMT) (WiredPRNews.com - Dallas, Law)

The Dallas Court of Appeals recently found a confidentiality and non-compete agreement unenforceable for lack of consideration. Powerhouse Prods., Inc. v. Scott, No. 05-07-00700-CV, 2008 WL 3196174 (Tex. App.—Dallas Aug. 8, 2008, no pet. h.).

Since the 1990’s, Eric Scott worked for Powerhouse Productions, Inc., piloting a rocket pack in commercial shows. In 2004, he signed a confidentiality and non-compete agreement, but soon thereafter left Powerhouse to work for a competitor. Powerhouse sued Scott for breaching the agreement.

To be enforceable, a non-compete agreement must be supported by consideration. The contract at issue stated that, in exchange for his agreement not to compete with Powerhouse, Powerhouse would provide Scott with the opportunity to “become” a pilot. Because at the time he signed the agreement Scott had worked as a Powerhouse pilot for years, the trial court concluded that the stated consideration failed as a matter of law.

On appeal, Powerhouse argued that unstated consideration supported the agreement. The Court rejected Powerhouse’s argument that consideration existed in the form of continued opportunities to pilot because continued employment cannot support a non-compete agreement. The Court likewise rejected Powerhouse’s argument that it provided Scott with confidential information and training as consideration; past consideration cannot support a non-compete agreement and evidence failed to show that Powerhouse provided Scott with training or confidential information after he signed the agreement. The Court thus found the agreement unenforceable.

For more information regarding non-compete agreements, contact the Dallas employment law attorneys at Clouse Dunn Khoshbin LLP at info@cdklawyers.com.