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Fifth Circuit Rules in Non-Compete Matter

The Fifth Circuit Court of Appeals recently ruled in a non-compete matter.

November 08, 2015

(press release: cdklawyers) // Dallas, Texas, United States // Keith Clouse

The Fifth Circuit Court of Appeals recently ruled in a non-compete matter. Cardoni v. Prosperity Bank, No. 14-20682 (5th Cir. Oct. 29, 2015), available at http://www.ca5.uscourts.gov/opinions/pub/14/14-20682-CV0.pdf.

After a Texas-based bank acquired an Oklahoma-based bank, it entered into covenants not to compete, not to solicit, and not to disclose confidential information with key bankers located in Oklahoma. These agreements provided that Texas law would govern any disputes. After four bankers left to work for a competitor, litigation ensued. The case came to the Court at the temporary injunctive stage, so the Court examined whether the bank had a substantial likelihood of success on the merits. As part of that determination, the Court conducted a choice-of-law analysis.

Even though the parties contractually agreed to apply Texas law to any dispute, policy could render that provision unenforceable. If Texas law applies, the non-compete terms would likely be enforceable. If Oklahoma law applies, the non-compete terms would likely be unenforceable because non-compete agreements are disfavored in Oklahoma. After reviewing the parties’ arguments, the Court concluded that the choice of law provision would likely be unenforceable as it related to the non-compete clause but that it would likely be enforceable with respect to the nonsolicitation clause and the nondisclosure clause. The Court remanded the case for further proceedings.

This article is presented by the Dallas employment law lawyers at Clouse Dunn LLP. To speak to a non-compete lawyer about a non-compete matter, send an email to debra@clousedunn.com or call (214) 239-2705.