A trial court’s order granting or denying a temporary injunction in a noncompete case is rarely reversed by the court of appeals. This week the Fourteenth Court of Appeals took the unusual step of reversing a trial court’s denial of an employer’s application for temporary injunction seeking to prohibit a former employee from engaging in certain competitive activities.
In EMS USA, Inc. v. Shary, EMS brought suit against its former employee (Shary) to enforce the terms of a noncompetition agreement. The agreement prohibited, in relevant part, Shary from soliciting any of the company’s customers existing as of the date of termination. The trial court issued a temporary restraining order and later held hearings on EMS’s application for temporary injunction. At two temporary injunction hearings the trial court did not take evidence but merely heard oral argument. Shary argued that the noncompete was overly broad as a matter of law because it was not limited to the customers that he actually dealt with but instead included all customers existing on the date of his termination. Without taking any evidence, the trial court concluded that EMS had not shown its entitlement to an injunction.
On appeal, EMS argued that the trial court abused its discretion in failing to take evidence addressing the reasonableness of the restrictions; whether the agreement should be reformed; and whether the restrictions were ancillary to or part of an otherwise enforceable agreement such as a personal services agreement.
The Fourteenth Court of Appeals held that the trial court abused its discretion in denying the temporary injunction without first hearing evidence. The appellate court found that the trial court should have heard evidence regarding the reasonableness of the restrictions; the circumstances surrounding the execution of the contract; and whether the former employee had dealings with all existing customers of EMS or only part of them. Consequently, the court of appeals reversed the denial of the temporary injunction and remanded the case to the trial court for further proceedings.
A copy of the opinion is available here.