Kevin and Kathryn Conlin started Solarcraft, a company that designs and manufactures solar power products. They ran the company for just over a decade. In 2005, they sold a controlling interest in the company to Darrell Haun. At that point, the Conlins signed employment agreements with the company. The employment agreements contained non-compete provisions that prohibited the Conlins from engaging in any business that would be competitive with Solarcraft in the United States for three years after their employment was terminated.
Sometime between the signing of those agreements and early 2009, the Conlins stopped working for the company and Haun sued them for violating their non-compete agreements. Prior to the court ruling on Haun’s application for a temporary injunction, the parties signed an “Agreed Temporary Injunction” which contained provisions enjoining both parties from certain behavior. The order stated it would remain in effect until the case went to trial, but the blank in the order to be filled by a trial date was left blank.
A few months later, the Conlins moved to have the injunction dissolved. The motion was denied. Over three years later, after the non-compete agreements had expired, the Conlins once again moved to have the injunction dissolved. Once again the motion was denied. The Conlins appealed the second denial.
The Issue on Appeal
The Conlins argued the court was wrong to deny their motion to dissolve the injunction for two reasons. The first was that the injunction did not state the cause for its issuance nor did it set the case for trial. The second was that no basis for the injunction remained since the non-compete agreements had expired and the Conlins no longer owned any interest in the company.
Fortunately for the Conlins, the appellate court didn’t even have to consider the second and more complicated issue because the court found the injunction did not meet the requirements of the law. The Texas Rules of Civil Procedure require that a temporary injunction state the cause for its issuance and set the cause for trial. Haun did not argue that the injunction met these requirement, but he argued it did not need to because the Conlins agreed to it. However, this exact issue had been heard by other appellate courts which ruled that an agreed order still had to me the legal requirements. So the court fairly easily decided that the injunction against the Conlins had to be dissolved.
A Common Business Situation
Non-compete agreements are a common issue for business owners. That is especially true for small businesses or businesses that work in a niche market. If you are a small business owner, a partner in a small business, or an employee of a small business, it’s probably a good idea to consult with an attorney if you’re thinking of including a non-compete provision in employment contracts or if you are being asked to agree to one. Our civil attorneys at Guest & Gray would be happy to sit down with you in a initial consultation to discuss your specific situation. Give us a call today at (972) 564-4644.