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tortdamagesattorneyinjunctionappealtrialcorporation
damagesinjunctioncorporation

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DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 59 USLW 2001, 1990-2 Trade Cases P 69,147, 5 IER Cases 739

Facts

Edward DeSantis was employed by Wackenhut Corporation, a security services company headquartered in Florida, and signed a noncompetition agreement at the start of his employment in Texas. After resigning, he started a competing business and Wackenhut sued him for breach of the noncompetition agreement. The trial court granted Wackenhut a permanent injunction and attorney fees, while DeSantis counterclaimed for fraud and tortious interference. The case was appealed, leading to a review of the enforceability of the noncompetition agreement under Texas law.

Edward DeSantis was employed by Wackenhut Corporation, a security services company headquartered in Florida, and signed a noncompetition agreement at the start of his employment in Texas. After resigning, he started a competing business and Wackenhut sued him for breach of the noncompetition agreement.

Issue

Whether the noncompetition agreement signed by DeSantis is enforceable under Texas law despite the parties' choice of Florida law.

Whether the noncompetition agreement signed by DeSantis is enforceable under Texas law despite the parties' choice of Florida law.

Rule

The enforceability of noncompetition agreements is determined by the law of the state with the most significant relationship to the transaction and the parties. In this case, Texas law applies because the employee was to work in Texas and the agreement was executed there, despite the parties' choice of Florida law. Noncompetition agreements must be reasonable in scope and necessary to protect legitimate business interests, and if they are overly broad or unreasonable, they are unenforceable.

The enforceability of noncompetition agreements is determined by the law of the state with the most significant relationship to the transaction and the parties. In this case, Texas law applies because the employee was to work in Texas and the agreement was executed there, despite the parties' choice of Florida law. Noncompetition agreements must be reasonable in scope and necessary to protect legitimate business interests, and if they are overly broad or unreasonable, they are unenforceable.

Analysis

The court found that Texas had a more significant relationship to the transaction than Florida, as DeSantis was employed in Texas and the agreement was executed there. The court also determined that Wackenhut failed to demonstrate that the noncompetition agreement was necessary to protect any legitimate business interest, as the hardship on DeSantis outweighed any potential benefit to Wackenhut. Therefore, the agreement was deemed unreasonable and unenforceable under Texas law.

The court found that Texas had a more significant relationship to the transaction than Florida, as DeSantis was employed in Texas and the agreement was executed there. The court also determined that Wackenhut failed to demonstrate that the noncompetition agreement was necessary to protect any legitimate business interest, as the hardship on DeSantis outweighed any potential benefit to Wackenhut. Therefore, the agreement was deemed unreasonable and unenforceable under Texas law.

Conclusion

The Texas Supreme Court held that the noncompetition agreement was unenforceable under Texas law, and affirmed the lower court's ruling that denied DeSantis's claims for damages.

The Texas Supreme Court held that the noncompetition agreement was unenforceable under Texas law, and affirmed the lower court's ruling that denied DeSantis's claims for damages.

Who won?

Wackenhut Corporation prevailed in part as the court affirmed the permanent injunction against DeSantis, but the court also reversed parts of the lower court's ruling regarding the enforceability of the noncompetition agreement. The court found that Wackenhut did not establish a legitimate business interest that justified the noncompetition agreement, leading to the conclusion that the agreement was unreasonable and unenforceable under Texas law.

Wackenhut Corporation prevailed in part as the court affirmed the permanent injunction against DeSantis, but the court also reversed parts of the lower court's ruling regarding the enforceability of the noncompetition agreement.

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