Brief Fact Summary.
Plaintiff sued Defendant for breach of a noncompetition agreement. Defendant argued that the agreement was unenforceable.
Synopsis of Rule of Law.
Under Restatement Second of Conflicts of Law § 187, choice of law previously determined in an agreement is not enforceable if another state has a more significant relationship with the parties, has a materially greater interest in deciding enforceability, and has a fundamental policy contravened by application of the law of the chosen state.
We understand why the Legislature and the courts would not allow an employer to spring a non-compete covenant on an existing employee and enforce such a covenant absent new consideration from the employer, An agreement not to compete, like any other contract, must be supported by consideration.View Full Point of Law
Wackenhut Corporation (Plaintiff), a security provider in Florida, hired Edward DeSantis (Defendant) as area manager in Texas. Defendant later resigned and created his own security consulting company, sending letters to his previous Wackenhut clients about his new company. Plaintiff sued Defendant for violating the noncompetition agreement he signed when employed by Plaintiff. Defendant argued that the noncompetition agreement was unenforceable. The noncompetition agreement contained a choice of law provision that stated its enforcement would be governed by Florida law.
As a matter of Texas public policy, should the enforcement of the noncompetition agreement in this case be assessed under Texas law, despite the agreement stating Florida law would govern?
Yes, the noncompetition agreement must be assessed under Texas, not Florida, law. The judgment of the lower court is reversed.
The Court concluded that Texas was the state with the most significant relationship to the parties because Defendant was hired and worked in Texas, the noncompetition agreement was executed by Defendant in Texas, and the restrictions in the noncompetition agreement regarded employment in Texas. Texas also had a materially greater interest in the enforcement of the noncompetition agreement because the agreement was about competitive business and employment in Texas. Finally, the Court determined that application of Florida law would be contrary to fundamental policy of Texas because unreasonable restraints on employees in the state are a matter of public policy.