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DSC COMMUNICATIONS CORPORATION, Plaintiff, v. EVAN BROWN, Defendant. |
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IN THE DISTRICT COURT OF COLLIN COUNTY, TEXAS 219TH JUDICIAL DISTRICT |
LYNN STODGHILL MIELSHEIMER & TILLOTSON, L.L.P.
Michael P. Lynn, P.C.
Texas Bar No. 12738500
Eric W. Pinker
Texas Bar No. 16016550
750 North St. Paul Street
Suite 1400
Dallas, Texas 75201
(214) 981-3800 - Telephone
(214) 981-3839 - Telecopy
ATTORNEYS FOR PLAINTIFF.
DSC COMMUNICATIONS CORPORATION
Black v. Victoria Lloyds Ins. Co., 797 S.W.2d 20 (Tex. 1990)
Buddy "L, " Inc. v. General Trailer Co., 672 S.W.2d 541 (Tex.App.--Dallas 1984, writ ref'd n.r.e.)
Carr v. Norstok Bldg. Systems, Inc., 767 S.W.2d 936 (Tex.App.--Beaumont 1989, no writ)
Champlin Petroleum Co. v. Pruitt, 539 S.W.2d 356 (Civ. App.--Fort Worth 1976, ref. n.r.e.)
Cherokee Communications v. Skinny's, Inc., 893 S.W.2d 313 (Tex.App.--Eastland 1994, writ denied)
CRC-Evans Pipeline International, Inc. v. Myers, 927 S.W.2d 259 (Tex.App.--Houston [1st Dist.] 1996, no writ)
Cubic Corporation v. Marty, 185 Cal. App.3d 438, 229 Cal.Rptr. 828 (Cal. Ct. App. 4th 1986)
Delgada v. Burns, 656 S.W.2d 428 (Tex. 1983)
Fourtieq v. Firemans Fund Ins. Co., 679 S.W.2d 562 (Tex.App.--Dallas1984, no writ)
Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex. 1970)
Goldwasser v. Smith Corona Corp., 817 F.Supp. 263 (D.Conn. 1993)
Gosami v. Metropolitan Sav. & Loan Ass'n, 751 S.W.2d 487 (Tex. 1988)
Harp v. Hamilton, 177 S.W. 565 (Tex. Civ.App.--Amarillo 1915, no writ)
Hi-Line Elec. Co. v. Dowco Elec. Prods., 765 F.2d 1359 (5th Cir. 1985)
Hoagland v. Finholt, 773 S.W.2d 740 (Tex. App.--Dallas 1989, no writ)
Hutchings v. Slemons, 141 Tex. 448, 174 S.W.2d 487 (1943)
Ichiban Records v. Rap-A-Lot Records, 933 S.W.2d 546 (Tex. App.--Houston.[1st Dist.] 1996, no writ)
Lake LBJ Mun. Util. Dist. v. Coulson, 692 S.W.2d 897 (Tex. App.--Austin 1985) (same), rev'd on other grounds, 734 S.W.2d 649 (Tex. 1987)
Lemon v. Walker, 482 S.W.2d 713 (Civ.App.--Amarillo 1972, no writ)
Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642 (Tex. 1994)
Merchants' Nat. Bank v. Voudouris, 248 S.W. 810 (Civ. App.--Dallas 192' , no writ)
Miller Paper Co. v. Roberts Paper Co., 901 S.W.2d 593 (Tex.App.--Amarillo 1995. no writ)
Nalana Development Ass'n v. Carsi, 682 S.W.2d 246 (Tex. 1984)
Nixon v. Mr. Property Management Co., 690 S.W.2d 546 (Tex. 1985)
Roark v. Stallworth Oil and Gas, Inc., 813 S.W.2d 492 (Tex. 1991)
Security Drilling Co. v. Rathke Oil Co., 41 S.W.2d 1019 (Tex.Civ.App.--Fort Worth 1931, writ dis.)
Syntex Ophthalmics, Inc. v. Novicky, 795 F.2d 983 (Fed. Cir. 1986)
Tag Resources v. Petroleum Well Services, 791 S.W.2d 600 (Tex.App.--Beaumont 1990, no writ)
Williams v. Glash, 789 S.W.2d 261 (Tex. 1990)
Zep Manufacturing Co. v. Harthcock, 824 S.W.2d 654 (Tex.App.--Dallas, no writ)
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DSC COMMUNICATIONS CORPORATION, Plaintiff, v. EVAN BROWN, Defendant. |
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IN THE DISTRICT COURT OF COLLIN COUNTY, TEXAS 219TH JUDICIAL DISTRICT |
TO THE HONORABLE JUDGE OF SAID COURT:
DSC Communications Corporation ("DSC") files this Response to Defendant Evan Brown's ("Brown") Motion for Summary Judgment and Brief in Support and would respectfully show the following:
Through his Motion, Brown now seeks to avoid his contractual obligations by arguing that this Agreement is not supported by consideration. Brown's argument is untenable for two reasons. First, DSC's full performance of this Agreement constitutes sufficient consideration to support this type of unilateral agreement. Second, the covenant not to compete cases upon which Brown relies are wholly inapplicable to this case, and by statute impose a standard that is legally incorrect under these facts. For these reasons, and as more fully explained below, Brown's Motion for Summary Judgment should be denied.
See SOF, Ex. 3. Brown sent this memorandum in an effort to secure a release of the Solution from DSC, as required by the Employment Agreement. This memorandum was an effort by Brown to comply with the requirements of the Employment Agreement. See SOF, pp. 100-101, 108.
This Response is based on the following Summary Judgment evidence: (1) Plaintiff s First Amended Original Petition; (2) the Affidavit of Eric W. Pinker, attaching excerpts from the deposition of Evan Brown (Exhibit "A") and the May 2, 1997 Statement of Facts (Exhibit "B"); (3) the Affidavit of Matt Bilbo; and (4) the Affidavit of Dan Allman,
On a motion for summary judgment, the moving party bears the burden of proving that there exists no genuine issue of material fact and that they are entitled to judgment as a matter of law. Gosami v. Metropolitan Sav. & Loan Ass'n, 751 S.W.2d 487, 491 (Tex. 1988); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). In making this proof, the evidence must be viewed in the light most favorable to the non-movant, with all conflicts in evidence disregarded and evidence supporting the position of non-movant accepted as true. Gosami, 751 S.W.2d at 491; Nixon, 690 S.W.2d at 548-49. All doubts as to the existence of a genuine issue of material fact are resolved against the non-movant and every reasonable inference must be indulged in favor of the non-movant. Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990); Nixon, 690 S.W.2d at 548-49. To be entitled to summary judgment on the affirmative defense of no consideration, Brown has the burden of conclusively negating at least one of the elements of consideration as a matter of law. Roark v. Stallworth Oil and Gas, Inc., 813 S.W.2d 492, 495 (Tex. 1991).
A summary judgment for the defendant disposing of the entire case is proper only if, as a matter of law, Plaintiff could not succeed upon any of the theories pled. Delgada v. Burns, 656 S.W.2d 428, 429 (Tex. 1983); Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970). Because Defendant's Motion for Summary Judgment is directed solely against DSC's breach of contract claim, and does not address the other claims alleged in DSC's First Amended Petition (e.g. promissory estoppel, misappropriation of trade secrets, unfair competition and breach of fiduciary duty), Brown's request to dispose of the entire case is improper. Black v. Victoria Lloyds Ins. Co., 797 S.W.2d 20, 27 (Tex. 1990)(holding that the trial court erred by granting summary judgment on causes of action not addressed in movant's motion).
In his Motion for Summary Judgment, Brown argues that he is entitled to judgment on DSC's breach of contract claim on the ground that the Employment Agreement is not supported by consideration. Contrary to his argument, the Employment Agreement is supported by valid consideration, making the contract enforceable.
Consideration is the "something of value" given to induce the making of a contract. Lemon v. Walker, 482 S.W.2d 713, 715 (Civ. App.--Amarillo 1972. no writ); Merchants' Nat. Bank v. Voudouris, 248 S.W. 810, 812 (Civ. App.--Dallas 1923, no writ). Consideration may consist of a right, interest, profit, or benefit that accrues to one party. Alternatively, it may consist of a forbearance, loss, or responsibility that is undertaken or incurred by the other party. Champlin Petroleum Co. v. Pruitt, 539 S.W.2d 356, 361 (Civ. App.--Fort Worth 1976, ref n.r.e.). In short, "[c]onsideration for a contract may consist of either a benefit to the promisor or a detriment to the promisee." Hoagland v. Finholt, 773 S.W.2d 740, 743 (Tex.App.--Dallas 1989, no writ). A promisor benefits when he or she acquires a legal right to which he or she would not otherwise be entitled in exchange for a promise. A promisee suffers legal detriment when, in return for a promise, he or she forbears some legal right that he or she otherwise would have been entitled to exercise. Security Drilling Co. v. Rathke Oil Co., 41 S.W.2d 1019, 1022 (Tex. Civ.App.--Fort Worth 1931, writ dis.); Harp v. Hamilton, 177 S.W. 565, 566 (Tex.Civ.App.--Amarillo 1915, no writ).
A signed written contract is presumed to be supported by consideration. Nalana Development Ass'n v. Carsi, 682 S. W.2d 246, 250 (Tex. 1984); Tag Resources v. Petroleum Well Services, 791 S.W.2d 600, 605-06 (Tex. App.--Beaumont 1990, no writ). Moreover, when a written contract recites that a particular consideration was provided, such a recitation creates a presumption that the consideration exists and is sufficient to support the contract. Hoagland, 773 S.W.2d at 743 (citing Fourtieq v. Firemans Fund Ins. Co., 679 S.W.2d 562, 566 (Tex.App.--Dallas 1984, no writ); Buddy "L, " Inc. v. General Trailer Co., 672 S.W.2d 541, 547 (Tex. App.--Dallas 1984, writ ref'd n.r.e.).
In this case, the Employment Agreement explicitly recites the consideration provided by DSC in exchange for Brown's obligations under the Employment Agreement:
See SOF, Ex. 1. This consideration is presumptively valid and sufficient.
Texas law has long stood for the proposition that:
Cherokee Communications v. Skinny's, Inc., 893 S.W.2d 313, 316 (Tex.App.--Eastand 1994, writ denied) (emphasis added) (quoting Hutchings v. Slemons, 141 Tex. 448,174 S.W.2d 487,489(1943). Under this standard.- "[t]he test for mutuality is to be applied at the time when enforcement is sought, not as of the time where the promises are made." Id. (citing Hutchings, 174 S.W.2d at 489). As such, where a party to a contract has performed, the contract is valid and enforceable against the other party to the contract. Carr v. Norstok Bldg. Systems, Inc., 767 S.W.2d 936, 939 (Tex.App.-Beaumont 1989, no writ) ("A party to a contract cannot enforce it or recover damages for a breach unless that party shows that it has performed the obligations imposed upon it or that it has offered to performed the obligations upon it."); Lake LBJ Mun. Util. Dist. v. Coulson, 692 S.W.2d 897, 907 (Tex. App.--Austin 1985) (same), rev'd on other grounds, 734 S.W.2d 649 (Tex. 1987). See also Farnsworth, Contracts, $ 2.3 (2nd ed. 1990).
Consistent with these principles, the Employment Agreement in this case is enforceable because DSC rendered full performance of its obligations under the contract. In accordance with its promise to employ Brown, DSC employed Brown for ten (10) years, disclosed to Brown numerous trade secrets of DSC, and provided him with other valuable consideration incident to his employment by DSC, including benefits and training. DSC's performance under the contract between it and Brown constitutes valid consideration sufficient to make the Employment Agreement enforceable against Brown.
Other jurisdictions that have evaluated similar Patent, Trademark, and Invention Agreements regularly hold such agreements to be enforceable. For example, in Cubic Corporation v. Marty, 185 Cal. App.3d 438, 229 Cal.Rptr. 828 (Cal. Ct. App. 4th 1986), the court enforced an employment contract with language remarkably similar to Brown's Employment Agreement. In Cubic, the employee signed an invention and secrecy agreement which provided in pertinent part that the employee agreed:
Id. at 443. The court in Cubic rejected the employee's arguments on appeal and upheld a declaratory judgment of patent ownership in favor of the Company and breach of the employment agreement by the employee. Id. See also, Goldwasser v. Smith Corona Corp., 817 F.Supp. 263 (D.Conn. 1993) (holding that employee breached confidential information and invention agreement by failing to assign employer ideas embodied in computer software patent); Syntex Ophthalmics, Inc. v. Novicky, 795 F.2d 983 (Fed. Cir. 1986) (upholding judgment that employee had made two inventions J embodied in patents while employed by corporation and applied for patents, in violation of employment agreement).
Brown's contention that the Employment Agreement is not supported by consideration is founded on the mistaken premise that the Employment Agreement is a bilateral contract. See Motion for Summary Judgment, p. 4. Contrary to Brown's assumption, the consideration supporting the Employment Agreement is not a promise. Rather, the Employment Agreement is a unilateral contract under which DSC accepted Brown's promises through its performance -- by employing Brown and disclosing to him confidential and proprietary information of DSC. The most recent Texas Supreme Court opinion cited in Brown's Motion supports and explains DSC's position on this point. In Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 647-48 (Tex. 1994), the court held that an at-will employee's covenant not to compete was unenforceable under Section 15.50 of the Texas Business and Commerce Code ("Section 15.50"). In so holding, the Court distinguished its holding from other types of enforceable unilateral contracts:
Id. at 645 n. 6 (emphasis added).
As described in Light, the Employment Agreement is a unilateral contract between DSC and Brown. Brown promised through the Employment Agreement not to disclose DSC's confidential information, and to-assign to DSC all rights to any invention that he created during his employment with DSC. DSC accepted these promises through performance, by employing Brown and providing him with DSC's confidential and trade secret information. This performance constitutes sufficient consideration to bind Brown to the promises that he made in the Employment Agreement.
Compounding his mistaken analysis of the Employment Agreement as a bilateral contract, Brown cites to a series of cases which, with one exception, arise in the context of evaluating the enforceability of covenants not compete. These cases are governed by Section 15.50, which impose several requirements that are incompatible with general contract principles applied outside of the context of covenants not to compete. As such, Brown's reliance on this authority is misplaced for several reasons.
First, the Employment Agreement does not contain or in any way relate to a covenant not to compete. Brown has identified no Texas cases or secondary authority that supports applying the legal principles associated with covenants not to compete to an unrelated contract between an employer and an employee. To the contrary, Texas law stands firmly in opposition to extending covenant not to compete principles outside of that limited context.
For example, the Dallas Court of Appeals recently refused to extend the requirements of $ 15.50 to other types of agreements between an employer and employee, such as a nondisclosure agreement. See Zep Manufacturing Co. v. Harthcock, 824 S.W.2d 654 (Tex.App. --Dallas, no writ). In Zep, the former employee had signed a noncompetition agreement with his former employer that also included a nondisclosure provision. When the former employer sued seeking to enforce this contract, the Dallas Court of Appeals held that the covenant not to compete was unenforceable, but held the nondisclosure covenant to be fully enforceable. In so holding, the court stated that the "mere fact that a noncompete covenant is void does not render void the remainder of the employment contract." 824 S.W.2d at 662 (citing Hi-Line Elec. Co. v. Dowco Elec. Prods., 765 F.2d 1359, 1363 n. 5 (5th Cir. 1985) (applying Texas law). The court continued by observing as follows:
824 S.W.2d at 663 (citations omitted). Similarly, in Miller Paper Co. v. Roberts Paper Co., 901 S.W.2d 593 (Tex.App.--Amarillo 1995, no writ), the Amarillo Court of Appeals held unenforceable a covenant not to compete that was contained in an at-will contract. In reaching this conclusion, however, the court acknowledged that such a holding would not extend to other types of agreements "Due to the differing purposes and effects, a covenant restricting competition may well be unenforceable where one pertaining to disclosure is not." Id. at 599. As such, not only is there no authority to support Brown's request for an extension of the test set forth in Section 15.50, but the authority actually opposes such an extension of that test beyond the limited confines of covenants not to compete. (Note:3)
Second, Brown's reliance upon covenant not to compete cases is ill-placed because the test utilized by these cases is inconsistent with the general test for determining the enforceability of contracts. Section 15.50 provides the exclusive criteria for evaluating the enforceability of covenants not to compete. See Tex. Civ. Prac. & Rem. Code $ 15.52 ("The criteria for enforceability of a covenant not to compete provided by Section 15.50 of this code ... are exclusive and preempt any other criteria for enforceability of a covenant not to compete . . . ."). Section 15.50 provides:
Notwithstanding Section 15.05 of this code, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.
Tex. Bus. & Comm. Code, $ 15.50 (emphasis added).
The test established by Section 15.50 is inconsistent with the general legal principles that govern the enforceability of contracts that do not contain a covenant not to compete. Section 15.50 explicitly requires that the covenant not to compete must be "ancillary to or part of an other-wise enforceable agreement at the time the agreement is made." As the Houston Court of Appeals recently explained:
CRC-Evans Pipeline International, Inc. v. Myers, 927 S.W.2d 259 (Tex.App.--Houston [1st Dist.] 1996, no writ)(citing Light, 883 S.W.2d at 644-45). Indeed, this requirement to evaluate the contract only "at the time the agreement is made" formed the basis for the Court's holding in Light. In that case, the Supreme Court observed that the parties had entered into a unilateral contract which could be accepted by future performance, but that such future performance would not satisfy Section 15.50's requirement that consideration be present "at the time the agreement is made." Light, 883) S.W.2d at 645 n. 6. As such, the test, and the decisions cited by Brown, necessarily ignore the parties conduct after the instant in time when the agreement is entered into.
Because Section 15.50 precludes a court from evaluating actual performance under the terms of the contract, it requires courts to evaluate only the promise that is made at the instant in time that the contract is entered into. Under this limited evaluation, courts have rightly characterized the promise of future or continued employment as illusory. See e.g. Light, 883 S.W.2d at 644-45. This characterization is premised on the proposition that the promise of future or continued at-will employment "fails to bind the promisor who retains the option of discontinuing employment in lieu of performance." Id. at 645 (emphasis added). Because section 15.50 prevents a court from evaluating actual performance, and instead requires the court to focus exclusively on the promise, the courts have concluded such promises are illusory.
In contrast to the requirements imposed by Section 15.50, it is generally improper for a court to limit its evaluation of the enforceability of a contract to the instant in time at which the contract was entered into. General contract principles require that the court evaluate actual performance of a contract, which performance can make an executory contract fully enforceable. See supra, Section V(B).
Not only is the legal standard urged by Brown inapplicable, the factual basis for his arguments is equally flawed. Covenants not to compete arising in the context of at-will employment siutations involve a disparity in performance. The employee assumes an obligation not to compete against the employer for a definite period of time (in addition to whatever period of time that person remains in the employ of the employer), whereas the employer assumes no such definite obligation -- the employer remains free to fire the employee at will.
The Employment Agreement stands in stark contrast to the situation that is present in at-will covenant not to competes. In this case, Brown assumed an obligation to disclose and assign only those inventions made or conceived by him "from the time of entering the Company's employ until I leave." SOF, Ex. 1 (emphasis added). As such, his obligation to perform is necessarily interconnected with DSC's obligation to perform -- if DSC does not perform (ie., employ Brown), then Brown has no obligations under the Employment Agreement; if DSC terminated Brown, then his obligations under the Employment Agreement cease. There is, therefore, no basis for the finding of an illusory promise. Both parties have made a promise that was performed simultaneously throughout Brown's employment with DSC.
Finally, in recognition of the fact that he relies almost exclusively on covenant not to compete cases in support of his argument, Brown asserts that the final case upon which he relies is not a covenant not to compete case. See Brown's Motion for Summary Judgment, p. 9 (citing Ichiban Records v. Rap-A- Lot Records, 933 S.W.2d 546 (Tex. App.--Houston [1st Dist.] 1996, no writ). Brown's citation to Ichiban is highly misleading. Brown argues that the Ichiban court held that contract in question, which was characterized as an exclusive services contract, was " unenforceable" because it was effectively a contract for employment at-will. See Motion for Summary Judgment, p. 9. Nowhere in the body of this opinion does the Ichiban court hold the contract unenforceable. In Ichiban, the employer (RAL) sought an injunction to enforce a restrictive covenant that precluded its employee (Dennis) from working for competitors of RAL. In overturning the injunction entered by the trial court, the appellate court held that the contract "has no time limitation," and that Dennis could therefore have "terminate[d] the contract anytime without cause." Id. at 552. As the dissent correctly observed:
Id. at 552. Stated otherwise, Dennis was free to lawfully terminate the contract at any time, thereby terminating any future obligations he had in connection with the restrictive covenant contained in that contract. Id. at 551 (observing that the restrictive covenant was "intended to operate during the term of the contract and not afterward as is generally the case with covenants not to compete"). This holding provides no support for Brown's request to be excused from past performance obligations -- disclose and assign an invention conceived during his employment by DSC.
Brown has failed to meet his burden of proof in connection with his Motion for Summary Judgment. He has presented no authority, outside the limited and inapplicable context of covenants not to compete, to support his contention that the Employment Agreement is not supported by consideration. Because that contention is incorrect and unsupportable, and because DSC has demonstrated that it rendered substantial actual performance under the terms of the Employment Agreement, Brown's Motion for Summary Judgment should be denied.
By:----------------------
<< signature >>
Michael P. Lynn, P.C.
State Bar No. 12738500
Eric W. Pinker
State Bar No. 16016550
750 North St. Paul Street
Suite 1400
Dallas, Texas 75201
(214) 981-3800 - Telephone
(214) 981-3839 - Telecopy
ATTORNEYS FOR PLAINTIFF
DSC COMMUNICATIONS CORPORATION
DSC'S RESPONSE TO EVAN BROWN'S
MOTION FOR SUMMARY JUDGMENT AND BRIEF IN SUPPORT - Page 17
Note:1
While Brown claims to have begun thinking about the Solution in 1975, see Brown's Motion, p. 2,
Brown stated in the Employment Agreement that he had no inventions at the time he began working for
DSC. See SOF, Ex. 1, Section F. Moreover, Brown has conceded that the Solution was not complete at
the time he began his employment with DSC, see SOF, p. 98 and Brown Depo. p. 73, and in fact, he did
not even think the Solution was possible at that time. Id. at p. 99.
Note:2
The Court continued that the unilateral contract between Light and United could be accepted by
future performance, but that such future performance was not sufficient under the narrow provisions
of Section 15.50, which require that there be an "otherwise ancillary agreement at the time the
contract is made." Because Section 15.50 is inapplicable to this case, see infra, Section V(D),
DSC's future performance under the Employment Agreement is sufficient to constitute consideration
in this case.
Note:3
Moreover, in asking the Court to adopt the portion of Section 15.50's test discussing the
requirement of an "otherwise ancillary contract," Brown ignores the second half of the test
established in Section 15.50. The second half of the test requires that the agreement contain
reasonable time, geographic area and scope of activity restraints. Obviously, none of those
criteria are capable of being applied or evaluated in connection with the Employment Agreement.
The inability to utilize the entirety of the test urged by Brown provides yet another reason why
this test is inapplicable to this case.
Affidavit of Dan Allman
Exhibit B - IRS - W-4A form}
Affidavit of Matt Bilbo
Exhibit B - Statement of Facts (May 2,1997 - Temporary Injunction Hearing - Judge Roach)
- Exhibit 3 - Software Tools Weekly Status Report (Oct 18,1993)}
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