Covenants Not To Compete: The Swinging Pendulum Of Enforceability

I. A BRIEF HISTORY OF NONCOMPETE LAW IN TEXAS... 1

A. The First “Reasonable” Period ... 1

B. Section 15.50... 3

C. The Incredible Darkness of Light ... 3

1. “An Otherwise Enforceable Agreement at the Time the Agreement is Made.”... 3

2. “Ancillary” to an Otherwise Enforceable Agreement ... 4

D. The Light Dims with Sheshunoff ...5

1. An “Otherwise Enforceable Agreement” and Sheshunoff and Mann Frankfort ... 5

2. Marsh Turns Out the Final Part of Light ...7

II. TIME, GEOGRAPHY AND SCOPE OF ACTIVITY ... 9

1. Time... 9

2. Geography and Scope of Activity... 10

III. ACCOMPANYING PROVISIONS TO THE COVENANT NOT TO COMPETE... 11

A. Non-disclosure/Confidentiality Agreements ... 11

B. Non-Piracy Provisions...12

C. Stock and Stock Options ... 13

D. Liquidated Damages and Forfeiture Provisions ...13

E. Severance and Settlement Agreements ... 13

F. Arbitration Clauses... 15

G. Tolling Provision... 16

H. No Violation Clause ...16

I. The Sale of a Business... 16

J. Choice of Law and Forum Selection Clauses, and AutoNation ... 17

K. Other Clauses ... 18

IV. CONCLUSION...19