Jottings By An Employer's Lawyer

Saturday, March 01, 2003

Temporary Injunction for Covenant Not To Compete - Irreparable Harm Required or Not?

The Texas law on covenants not to compete, has unusually strong language on the pre-emption of the common law. This was a result of a 1990's feud between the Texas Supreme Court and the legislature. The Court took a generally restrictive view of covenants not to compete, while the legislature favored enforceability. The pre-emption language is now the center of an important question: does it abolish the traditional requirements for a temporary injunction, such as showing irreparable harm? It is no exaggeration to say in many cases, that will be determinative of whether or not a party can obtain a temporary injunction. Within the last three months the question has been answered definitively by two separate courts of appeal. Unfortunately, for those who like predictability, it has been answered differently. In Norlyn Enterprises, Inc. v. APDP (Tex. App. - Houston [1st Dist.] 12/12/2002), the Court found irreparable harm was no longer required in light of the statute, reversing a district judge who had refused to enter a temporary injunction, sending the matter back for further proceedings in conformity with their ruling. However, this week, while noting the Norlyn Enterprises decision, reported here on 12/16/02, another court held that the traditional rules for temporary injunction were not displaced by the covenant not to compete statute, and upheld the denial of a temporary injunction because there was no showing of irreparable harm. NMTC, Corp. dba Matco Tools v. Conarroe.

Given the frequency of temporary injunction proceedings on covenant not to compete cases, and the importance of this issue, it seems likely it will end up in the hands of the Supreme Court. Hopefully soon.


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