STONE v. GRIFFIN COMMUN. AND SEC. SYSTEMS

DAVIS, Justice.

Bobby C. Stone, Individually ("Stone") and Brent Wade Jones, Individually and D.B.A. East Texas Telecom ("Jones") (collectively "Appellants") appeal the trial court's order granting a temporary injunction in favor of Appellee, Griffin Communications and Security Systems, Inc. ("Griffin").1 Appellants raise eight issues on appeal. We reform, and affirm the temporary injunction as reformed.

BACKGROUND

Griffin sells, installs, repairs, maintains and monitors communication and security systems throughout a twenty-two county area in East Texas. Griffin has been in the telephone and security business for over fifteen years, and during such time, has developed a large customer base consisting of approximately 1500 accounts of both businesses and individuals. Griffin has written service agreements with each of its customers whereby Griffin agreed to maintain their telephone and security systems.2

During the time in which it has been in business, Griffin has developed a customer data base consisting of each customer's individual needs and details regarding the customer's equipment. The information contained in Griffin's database is compiled by Griffin based on its interaction with its customers and is not freely available to the public.

Jones and Stone were hired by Griffin in 1998. Subsequently, On October 12, 1998, Jones and Stone, each entered into an employment contract with Griffin. Each of the employment agreements (the "1998 contracts") stated that "the employment of the Employee shall continue only as long as the services rendered by the Employee are satisfactory to the Employer, regardless of any other provision contained in this Agreement." The contracts further stated that "the Employer shall be the sole judge as to whether the services of the Employee are satisfactory." The 1998 contracts also contained non-competition agreements, which stated:

On January 1, 1999, Appellants each executed subsequent, twelve-month, written employment agreements with Griffin (the "1999 contracts"). The 1999 contracts expressly supercede all other agreements between the parties, but are substantially the same as the 1998 contracts.3 The only notable difference between the 1998 and 1999 contracts is that the 1999 contracts expanded the geographical area covered by the non-compete clause to include twelve additional counties.

Jones resigned his employment with Griffin in August 2000. Stone resigned in October 2000. Subsequently, Jones began operating his own business, known as East Texas Telecom, which engaged in the selling, leasing, installation and maintenance of telephone systems within the geographic region restricted by the non-competition agreement. Following his resignation from Griffin, Stone began to work for Jones.

Griffin filed suit to enforce the provisions of the non-competition agreement and filed an application for temporary injunction. Following an evidentiary hearing, the trial court granted Griffin's application for temporary injunction and ordered that Appellants be enjoined from:

STANDARD OF REVIEW

A trial court has great discretion in granting or denying a temporary injunction and we will not disturb the trial court's ruling absent a clear abuse of discretion. See Davis v. Huey, 571 S.W.2d 859, 861-62 (Tex.1978), reversed on other grounds, Davis v. Huey, 620 S.W.2d 561 (Tex.1981); see also Burgess v. Permian Court Reporters, Inc., 864 S.W.2d 725, 727 (Tex.App.—El Paso 1993, writ dism'd w.o.j.). We must draw all legitimate inferences from the evidence in a light most favorable to the trial court's order. See Burgess, 864 S.W.2d at 727. An abuse of discretion does not exist when the trial court bases its decision on conflicting evidence. See Davis, 571 S.W.2d at 862. A trial court abuses its discretion in this area only when the record reflects that the findings necessary to support the order are not supported by some evidence of a substantial and probative character. See Burgess, 864 S.W.2d at 727.

DISCUSSION

In their first seven issues, Appellants contend that the trial court erroneously granted the temporary injunction against them because the covenant not to compete did not meet the criteria set forth in Section 15.50 of the Texas Business and Commerce Code. Section 15.50 states:

TEX. BUS. & COM.CODE ANN. § 15.50(a) (Vernon Supp.2001).

Appellants contend that the covenant not to compete in the instant case is not ancillary to an otherwise enforceable agreement because Appellants were at-will employees, and thus, any consideration for Appellants to sign the employment contract was illusory. Consideration for a promise, by either the employee or the employer in an at-will employment context, cannot be dependent on a period of continued employment. See Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 644-45 (Tex.1994) (emphasis added). However, Griffin contends that its employment relationship with Appellants was not at-will, but rather, was terminable by Griffin only if Griffin determined that Appellants' work was not satisfactory. Griffin further contends that the promise of continued employment under such circumstances is adequate consideration for the employment agreement.

In order to determine the nature of the relationship between Griffin and Appellants, we need look no further than the contracts, which were introduced as evidence at the hearing on Griffin's application for temporary injunction. Although Article 5 of the contracts sets forth circumstances which will result in termination,4 Appellants do not contend that any of those terms create an at-will relationship. Rather, Appellants contend that the following portion of the contracts creates an at-will relationship:

Appellants argue that since the satisfactory nature of Appellants' services was left to Griffin's sole discretion, the employment relationship was at-will. In Zep Mfg. Co. v. Harthcock, 824 S.W.2d 654, 659 (Tex. App.—Dallas 1992, no writ), the Dallas Court of Appeals dealt with such a scenario. In its analysis, the Court stated:

Harthcock, 824 S.W.2d at 659.

We find the logic espoused by the Court in Harthcock persuasive and adopt it for the purposes of our analysis of the case at hand. The language of the satisfaction clause at issue in the present case is nearly identical to the clause in Harthcock. Id. at 658. Thus, for the reasons set forth above, we conclude, that the language of the contracts constitutes sufficient evidence to support the trial court's finding that Appellants' respective employments were not terminable at-will, but rather, were terminable only on the occasion of Griffin's bona fide dissatisfaction or cause for discharge. Id. at 659. Having concluded that Appellants' employment by Griffin was not at-will, we further conclude that there was sufficient evidence to support the trial court's finding that the contracts were based on adequate consideration. See Currie v. International Telecharge, Inc., 722 S.W.2d 471, 475 (Tex. App.—Dallas 1986, no writ), citing Garcia v. Laredo Collections, Inc., 601 S.W.2d 97, 98-99 (Tex.Civ.App.—San Antonio 1980, no writ) ("Texas courts have held that continued employment is sufficient consideration for a covenant not to compete").5

Appellants next contend that the trial court erred in finding that restrictions as to time, scope and geographic location set forth in the covenants not to compete were reasonable pursuant to Section 15.50. We will sustain Appellants' contention only if the record reflects that the findings necessary to support the order are not supported by some evidence of a substantial and probative character. See Burgess, 864 S.W.2d at 727.

First, we consider the reasonableness of the scope of the agreement. Our determination is governed by (1) whether the restriction is greater than necessary to protect the business and goodwill of the employer, (2) whether the employer's need for protection outweighs the economic hardship which the covenant imposes on the departing party, and (3) whether the restriction adversely affects the interests of the public. See Peat Marwick Main & Company v. Haass, 818 S.W.2d 381, 386 (Tex.1991). The restrictive covenant must bear some relation to the activities of the employee and must not restrain his activities into a territory into which his former work has not taken him or given him the opportunity to enjoy undue advantages in later competition with his former employer. Id. at 387.

In the instant case, at the hearing on Griffin's application for temporary injunction (the "hearing"), Toby Ben Griffin ("T.B. Griffin"), the president of Griffin, testified that the nature of Griffin's business was related to the selling, leasing, installation and maintenance of security systems. T.B. Griffin further testified that Appellants had gained substantial knowledge, training and experience in selling, leasing, installing and maintaining of security and telephone systems during the period of their employment. The record reflects that Griffin had been in business for fifteen years and, during such time, had developed a unique customer base. The record further reflects that, during their employment by Griffin, Appellants gained access to information regarding Griffin's customers and had received knowledge about the specific equipment possessed and operated by each of Griffin's customers. Specifically, Jones testified that he learned the identity of Griffin's customers, where they were located, and the type of equipment that they were utilizing. Moreover, T.B. Griffin testified regarding Appellants' training. He testified that either he or another experienced technician would accompany new employees for an extended period of time giving them on-site training. The record further reflects that Griffin's employees were provided the opportunity to attend industry-specific schools and training sessions at Griffin's expense.

The covenant not to compete at issue restricts Appellants from (1) engaging in the selling or leasing of security systems, or related equipment, (2) soliciting any customer of Griffin on whom the Appellants called or with whom they became acquainted during the term of employment, and (3) disclosing the names and addresses or any other information pertaining to Griffin customers. Our review of the record reveals that there was some probative evidence that the scope of the agreement was limited to the scope of the business engaged in by Griffin, namely, the selling and leasing of security systems. Contrary to Appellants contentions, the covenant does not impose industry-wide restrictions as it does not prevent them from performing installation or maintenance of systems, so long as they do not sell or lease such systems. Moreover, the non-solicitation clause does not prevent Griffin customers from contacting Appellants for services, so long as Appellants do not solicit business from such customers. Further, the non-solicitation portion of the agreement properly relates only to such customers with whom Appellants had contact while they were employed by Griffin. See, e.g., John R. Ray & Sons, Inc. v. Stroman, 923 S.W.2d 80, 85 (Tex.App.— Houston [14th Dist.] 1996, writ denied). We conclude that there was some probative evidence to allow the trial judge to conclude that the restraint created was not greater than necessary to protect Griffin's legitimate interests. We further conclude that there was evidence to support the trial court's finding that the necessity of the restraint created was not outweighed by the hardship to the promisor or injury to the public. Thus, we hold that the covenant not to compete was reasonable as to the scope of activity restrained.

However, while the testimony adduced at trial generally tends to support the scope of the covenant not to compete, we note that the temporary injunction entered by the trial court imposes more restrictions than those set forth in the covenant not to compete. Specifically, the trial court's temporary injunction also prevents Appellants from installing and maintaining security systems. While the record reflects that such activity was part of Appellants' duties while they were employed by Griffin, it is clear from the language of the covenants themselves, that such restrictions were not contemplated by the parties when they entered into the agreement. The purpose of a temporary injunction is to preserve the status quo of the subject matter of the litigation, pending the trial on the merits. See Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.1993). Further, appellate courts may modify an overly broad injunction. See T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 25 (Tex.App.—Houston [1st Dist.] 1998, no writ), citing San Augustine Ind. Sch. Dist. v. Woods, 521 S.W.2d 130, 133 (Tex.Civ.App.—Tyler 1975, no writ). In the case at hand, because it placed additional restrictions on Appellants that were not set forth in the covenant not to compete, the temporary injunction exceeds the preservation of the status quo and was overly broad. Therefore, we hold that by issuing an overly broad order the trial court abused its discretion. See, e.g., Koch v. Koch, 27 S.W.3d 93, 95 (Tex.App.—San Antonio 2000, no pet.) ("a trial court abuses its discretion in the following ways: (1) when it attempts to exercise a power that it does not legally possess, (2) if it declines to exercise a power of discretion vested in it by law when the circumstances require that the power be exercised, (3) if it purports to exercise its discretion without sufficient information upon which a rational decision may be made, and (4) if it exercises its power of discretion by making an erroneous choice as a matter of law in the following ways: (i) by making a choice that is not within the range of choices permitted by law, (ii) by arriving at its choice in violation of an applicable legal rule, principle, or criterion, or (iii) by making a choice that is legally unreasonable in the factual-legal context in which it is made") (emphasis added).6

We next turn to the question of whether the geographic restriction in the covenant not to compete is reasonable. Texas courts have generally held that a geographical limitation imposed on the employee which consists of the territory within which the employee worked during his employment is a reasonable geographical restriction. See Evan's World Travel, Inc. v. Adams, 978 S.W.2d 225, 232-33 (Tex. App.—Texarkana 1998, no writ), citing Property Tax Assocs., Inc. v. Staffeldt, 800 S.W.2d 349, 351 (Tex.App.—El Paso 1990, writ denied); Diversified Human Resources Group, Inc. v. Levinson-Polakoff, 752 S.W.2d 8, 12 (Tex.App.—Dallas 1988, no writ); Justin Belt Co. v. Yost, 502 S.W.2d 681, 685 (Tex.1973). In the instant case, the 1999 contracts, which expressly supercede the 1998 contracts, restrict Appellants from conducting certain activities in twenty-two counties located in East Texas. Our review of the record reveals that T.B. Griffin testified that Griffin conducted business in each of these counties. Jones further testified that he, on behalf of Griffin, provided services for persons or business located in the counties restricted by the covenant not to compete in the 1999 contracts. Neither Appellant testified that he worked only in certain counties covered by the 1999 contracts, exclusive of other such counties. Therefore, since the covenant not to compete contained geographical restrictions which were consistent with the area in which Griffin conducted business while Appellants were employed by Griffin, and the record contained uncontradicted evidence that Appellants worked in the covered counties while employed by Griffin, we conclude that such geographical restrictions are reasonable.7

Finally, we consider whether the five-year restriction contained in the covenant not to compete is reasonable. Appellants cite Stroman in support of their contention that a five-year limitation has been held unreasonable. Although the covenant in Stroman contained a five-year restriction, such a five-year restriction was not found to be unreasonable. See Stroman, 923 S.W.2d at 85. Rather, the Houston Court of Appeals concluded that another restriction of the covenant not to compete was unreasonable because it was unlimited as to time.8 Id. (emphasis added). Contrary to Appellants' contentions, two to five years has repeatedly been held a reasonable time restriction in a non-competition agreement. See AMF Tuboscope v. McBryde, 618 S.W.2d 105, 108 (Tex.Civ. App.—Corpus Christi 1981, writ ref'd n.r.e.), citing Arevalo v. Velvet Door, Inc., 508 S.W.2d 184 (Tex.Civ.App.—El Paso 1974, writ ref'd n.r.e.); Electronic Data Systems Corp. v. Powell, 508 S.W.2d 137 (Tex.Civ.App.—Dallas 1974, writ ref'd n.r.e.); Weber v. Hesse Envelope Co., 342 S.W.2d 652 (Tex.Civ.App.—Dallas 1960, no writ). Although no evidence was introduced specifically stating that five years was a reasonable period of restraint, there is ample evidence in the record showing that it would take five years for the information received by Appellants while they were employed by Griffin to become outdated. Appellants have provided no evidence contradicting this fact. It follows that there was some evidence on which the trial court could base its finding that five years was a reasonable period of restraint. Therefore, we conclude that the five-year time restriction as set forth in the covenant not to compete is reasonable. Subject to our reformation of the scope of the trial court's order granting temporary injunction, Appellants' issues one through seven are overruled.

In its final issue, Appellants contend that the trial court erred in setting the bond for an amount that was insufficient to protect Appellants' respective interests. The appellate courts determine the adequacy of the bond set by the trial court on a case-by-case basis after reviewing the record before them. See Currie, 722 S.W.2d at 475, citing Johnston v. American Speedreading Academy, Inc., 526 S.W.2d 163, 167 (Tex.Civ.App.—Dallas 1975, no writ). As a general rule, the amount of the bond required on the issuance of a temporary injunction rests within the sound discretion of the trial court and will not be disturbed on appeal in the absence of an abuse of discretion. See Currie, 722 S.W.2d at 475. In the case at hand, the record furnishes no reliable information which would guide us in setting the proper amount of the bond. Appellants contend that they were earning a total amount of $3,600.00 per month in salaries from Griffin and their "income per month should exceed that amount now." However, such speculation as to present earnings is wholly insufficient to allow us to conclude that the trial court, in setting the amount of the bond at $5,000, abused its discretion. Appellants' eighth issue is overruled.

As set forth above, because we have concluded that the scope of activity restricted by the temporary injunction exceeds the restrictions contemplated in the covenants not to compete, we order that the language in the temporary injunction located on page 2, paragraph (c) be reformed to limit the scope of activity as follows:

The trial court's order granting injunctive relief as reformed is affirmed.