Reformation of Overbroad Non-Compete Agreements in Texas (Part II)

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

Yesterday we discussed the reformation of overbroad non-compete agreements. Today we will discuss the timing of reformation.

Regarding the timing of reformation, in TransPerfect Translations, Inc., Judge Ellison recently noted that some Texas appeals courts have suggested, but not held, that reformation is appropriate at the temporary injunction stage. 594 F. Supp. 2d at 756. Judge Ellison decided to reform the non-compete agreement and grant a preliminary injunction based on it. Id. As he stated, “In light of this unsettled law, the Court will enter a limited injunction and reform the contract as necessary based on the current evidence, noting that any reformation or permanent injunction to be entered may differ from this temporary reformation based on arguments presented in the parties’ dispositive motions or at trial.” Id. In reforming the covenant, the court should take the individual circumstances of the case into account. Am. Nat’l Ins. Co., 86 S.W.3d at 808. The court must then enforce the covenant as reformed. TEX. BUS. & COM. CODE § 15.51(c). For example, in Inter/National Rental Ins. Services, Inc. v. Albrecht, NO. 4:11-CV-00853, 2012 WL 4506140, at *6 (E.D. Tex. Mar 14, 2012), the court enforced a noncompetition agreement against a former salesperson, but reformed the agreement so that the plaintiff was not precluded from soliciting his former employer’s “active prospective customers.”

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