A Tarrant County district court granted summary judgment in favor of an IMcP client, a physician, defeating his former employer’s attempt to enforce noncompetition, nonsolicitation, and nondisclosure covenants. The court’s ruling resulted in dismissal with prejudice of all claims asserted by the physician’s former employer (“OldCo”).

Case overview

OldCo, a company that manages hospitals and medical facilities in Texas, sued a former employee (a physician), alleging violations of his employment agreement. OldCo claimed the physician breached noncompetition, nonsolicitation, and nondisclosure provisions in his contract.

The physician retained IMcP to defend the lawsuit and challenge the enforceability of the restrictive covenants. IMcP moved for summary judgment, asking the court to dismiss OldCo’s breach of contract claims with prejudice.

The court’s ruling

OldCo opposed the motion, and the parties fully briefed the issues. After a hearing held approximately five months after the lawsuit was filed, the court sustained all of IMcP’s objections to OldCo’s summary judgment evidence and arguments. The court then granted IMcP’s motion and dismissed OldCo’s breach of contract claims with prejudice.

IMcP trial team

IMcP partner Greg McAllister served as lead counsel and worked closely with partner Joshua Iacuone. To learn more about IMcP’s Dallas noncompete lawyers, please see the attorney biographies linked above.

Case background

The plaintiff (“OldCo”) sued two former global sales representatives after they left to join a competitor, claiming they breached restrictive covenants in their employment agreements. OldCo alleged violations of noncompetition, nonsolicitation of employees and customers, and misuse of confidential information. Oldco secured an ex parte temporary restraining order (TRO) at beginning of the case.

The two defendants then hired IMcP.​

Employer’s injunction request

After obtaining the TRO, OldCo asked the court to enter a temporary injunction that would extend the TRO’s restrictions through trial. The requested injunction would have barred the IMcP clients from providing competitive services, soliciting OldCo’s employees or customers, and using OldCo’s alleged confidential information.​

Injunction denied and lawsuit dismissed

Following a full evidentiary hearing, with live witness testimony from both sides, the court completely denied OldCo’s request for a temporary injunction in its entirety. Just four days later, OldCo chose to voluntarily dismiss all of its claims against the IMcP clients.

IMcP trial team

IMcP partner Greg McAllister served as lead counsel for the defendants, working closely with partners Joshua Iacuone and Jesse Okiror. The result underscores IMcP’s experience defending employees and advisors in Texas noncompete and nonsolicitation disputes in courts across the state, including Travis County. Bios of IMcP’s Texas noncompete lawyers are above.

Case background

OldCo filed suit, alleging a departed nurse practitioner violated noncompete, nonsolicit, and nondisclosure provisions after moving to a new practice. The former employer sought emergency relief to restrict her ability to work, and she hired IMcP.

TRO and injunction efforts

OldCo first sought a temporary restraining order aimed at stopping the nurse practitioner from working at her primary office, but the court denied that request after a hearing. The employer later pursued a temporary injunction and a hearing was held – no temporary injunction order was ever entered.

Summary judgment win

Following the failed efforts to obtain injunctive relief, IMcP moved for summary judgment on all claims asserted against the nurse practitioner. The court granted the motion in full and ordered that all claims be dismissed.

Greg McAllister served as lead counsel, working closely with IMcP partner Joshua Iacuone. Bios of IMcP’s Dallas noncompete lawyers are above.

Case background

The prior employer (“OldCo”) filed suit in Dallas against a former Director, who departed and started a competing business. OldCo alleged breach of contract (noncompete, nonsolicit, and nondisclosure), tortious interference, breach of fiduciary duty, and trade secret misappropriation. OldCo obtained a TRO and applied for a preliminary injunction in federal court. The Director then hired IMcP.

Temporary injunction

OldCo’s preliminary injunction application sought to stop the Director from competing and running his new business. That failed. The order enjoined certain solicitation but the Director was not prohibited from running his new business and competing.

Arbitration

The case then proceeded solely in arbitration for a year on (a) OldCo’s claims and (b) counterclaims filed by the Director. After lengthy discovery and pre-trial proceedings, the final arbitration hearing lasted about two weeks. The arbitration award resulted in damages for both sides but awarded much more in damages to the Director. The case had fully flipped. Moreover, the arbitrator dissolved the injunction and denied OldCo’s request for any further injunctive relief.

Greg McAllister served as lead counsel, working closely with IMcP partner Joshua Iacuone. Their work transformed a case that began with the Director on the defensive into a result where he secured both greater damages and complete relief from injunctive constraints. Bios of IMcP’s Dallas noncompete lawyers are above.

Change of control agreements are intended to provide levels of protection for a company’s current executives when the company is about to be acquired or undergo some other significant change of control. That protection is important because new owners that are soon-to-be-in-charge may have different missions and goals – and possible plans to replace the original executives that helped build the company.

If an executive does such great work that the company is successful and targeted for acquisition, should that executive be terminated without reward? Should that executive be worried about being replaced and thus feel pressure to leave for a new job before an acquisition can be finalized? Such a scenario is not beneficial to the company either because any potential suitor for the company would likely want some of the executive team in place – at least for a while. The change of control lays the ground for protection and reward – often referred to as a “golden parachute.”

Triggering a change of control is defined, unique, and varies based on factors, such as the company’s size, whether it is private or public, time since initial incorporation or reorganization, and other matters. Examples of triggering events are countless but some are: (a) acquisition by any a person or entity of a threshold percentage of common stock or combined voting power; (b) individuals on the board (an “incumbent board”) cease to be a majority of a board of directors; (c) certain reorganizations, mergers, consolidations, or sales of company assets; and (d) stockholder approval to liquidate or dissolve. Each of those events would include additional specific modifications.

A critical issue with a change in control is to determine whether there is one trigger or two triggers. Under a single trigger, which is now more uncommon, only one event would need to occur for the executive to receive the reward (perhaps cash payments, vested stock, new contract, or other incentives).  Obviously, in negotiating an employment agreement, a single trigger is very executive friendly.

Most COCs include a second trigger. Under that situation, the first trigger may be that a company is acquired by a purchaser. After that event occurs, perhaps nothing changes to invoke the change of control contractual provision for the executive. Instead, there must later be a second trigger. For example, the second trigger could be that the executive (a) is terminated by the purchaser without a defined “Cause” or (b) is demoted in title or duties or (c) resigns for a defined “Good Reason.” Good Reason often includes breach of contract by the acquirer; diminution of the executive’s title, duties, or compensation; cease of operations; or other provisions such as relocation (those reasons to resign may be subject to a temporal cure provision). Usually, the second trigger would have to occur within a certain time period after the first trigger.

Some COCs will also define a “potential change in control.” Such a potential COC may be based on the (a) the company entering into an agreement that, if completed, would constitute in a COC; (b) public announcement of an intention to take actions that would later be a COC; (c) threshold percentage changes in voting powers (or combined voting powers); or (d) certain board of director resolutions. Such a “potential change in control” would also likely be tied to a “potential change in control period” based on certain time periods, such as a certain number of months or a determination by the company’s board of directors.

IMcP’s employment lawyers litigate change of control disputes. Those disputes involved whether, when, or how a change of control occurred, and the resulting damages. There are many strategic decisions to make in the course of such litigation. That starts before any lawsuit is filed. The pre-suit work involves closely reviewing the contract (and usually related contracts) and analysis regarding a potential suit’s jurisdiction, venue, potential for arbitration, governing law, and related provisions.

A related provision that is usually at issue is an attorney fee-shifting provision. Most COCs require the company to pay the executive’s legal fees in a lawsuit about a COC. Companies sometimes dispute fee-shifting based on the level of specificity regarding that fee-shifting provision, and those certainly vary from contract to contract. That analysis is part of both the pre-suit analysis and strategy during litigation. The strategy during litigation requires careful analysis regarding discovery, such as the document requests and potential deponents, which sets the stage for pre-trial and trial.

The employment lawyers at IMcP’s have the experience and decision-making necessary in any negotiation and litigation regarding change of control agreements.

FOOTNOTE: IMcP’s employment lawyers have been asked, and asked each other, “Is there a difference between ‘Change of Control’ vs ‘Change in Control’?” IMcP lawyers have seen both CIC and COC used without any distinction between the two, and searching EDGAR has not shown us anything to suggest otherwise. If anyone has that answer, please call McAllister so he can stop looking.