Texas Supreme Court Upholds Enforceability of Covenants Not to Compete


For years, the conventional wisdom was that covenants not to compete in Texas were unenforceable. While never literally true, the difficulty in enforcement was highlighted by a series of Texas Supreme Court decisions between 1987 and 1994, starting with Hill v. Mobile Auto Trim Inc., 725 S.W.2d 168, 170-171 (Tex. 1987), and culminating in Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642 (Tex. 1994).

Then after twelve years of silence on the issue, the Supreme Court of Texas waded into the murky waters of Light and introduced a new era of Texas judicial interpretation of non-competition covenants. In Alex Sheshunoff Management Services, L.P. v. Johnson, 209 S.W.3d644 (Tex. 2006), the Court moved away from the highly technical analysis of non-competition agreements that had been emphasized in Light and restored the focus of enforcement upon the reasonableness of an agreement’s restrictions. This trend continued in several decisions that followed Sheshunoff, culminating with last Friday's decision in Marsh USA v. Cook, No. 09-0558 (Tex. June 24,2011).

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