Restrictive covenants and non-compete agreements have been a frequent topic of this blog in recent months, and rightly so. Non-competitors are generally thought to be effective tools to help firms protect trade secrets and competitive advantages. However, these agreements are falling out of favor across the country – the DOJ recently files a Statement of Interest in a state court case taking the position that non-competites may violate the Sherman Antitrust Act. Further, states continue to pass laws limiting or banning the use of noncompete agreements, including Illinois, Oregon, Nevada, DCand Colorado.
But one Texas court seems to buck this trend. Last month, Fort Bend County District Judge J. Christian Becerra granted a temporary restraining order (“TRO”) in a trade secret misappropriation case, forcing multiple former employees to stop work for a competing business, and limiting one particular employee from engaging in any competing work for any competitors. The catch? Not a single employee had a non-compete agreement.
The plaintiff in the case is DistributionNOW (“DNOW”), a Houston-based supplier of energy and industrial solutions, products and engineered equipment packages. The defendants are former employees including Toby Eoff, the former majority owner of Odessa Pumps. The complaint alleges that DNOW purchased Odessa Pumps from Eoff for over $170 million and Eoff stayed with the company as a Vice President, and rose up the ranks to Executive Vice President in 2021. Then, on April 1, 2022, Eoff retired from his position and allegedly took with him multiple files that contained “highly sensitive DNOW business information.” Shortly thereafter, at least 20 employees left their positions to join Permian Valve, a competitor of DNOW. Three of those employees allegedly took with them multiple documents containing proprietary information.
On the day DNOW sued Eoff and the other former DNOW employees, DNOW filed for a TRO seeking to enjoin the former employees from disclosing or using any of the proprietary information allegedly misappropriated from DNOW. The Texas Court granted the TRO, which prohibits the named former employees from working for Permian Valve, and specifically prohibits Eoff from “carrying on or engaging in activities in which Eoff directly or indirectly, owns, manages, operates, controls, funds, invests in , participates in, consults with, or is otherwise connected to, any business, individual, partnership, firm, corporation or other entity which engages in any activity that is in direct competition with DNOW and Odessa Pumps in the business of servicing and supplying pump equipment .”
The relief obtained is temporary, but it is far reaching. It grants a non-compete remedy when there appears to be no evidence of use. Certainly, the case bears watching. Stay tuned.
The case is DOWN LP vs. Toby Eoff et al., case number 22-DCV-294327, in the 434th District Court in Fort Bend County, Texas.