Premier Polymers, LLC v Wendt
Filing
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MEMORANDUM OPINION AND ORDER GRANTING 1 Motion for injunction.(Signed by Judge Gray H. Miller) Parties notified.(rkonieczny, 4)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
PREMIER POLYMERS, LLC,
Plaintiff,
v.
GREGORY WENDT ,
Defendant.
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CIVIL ACTION H-15-1812
M EMORANDUM O PINION & O RDER
Pending before the court is plaintiff Premier Polymers, LLC’s (“Premier”) motion for an
injunction to require defendant Gregory Wendt to comply with his Confidentiality and NonSolicitation Agreement (“Agreement”) with Premier Polymers. Dkt. 1-2 at 12. Based on the
Agreement, the evidence presented at injunction hearing, and the applicable law, the court is of the
opinion that a permanent injunction should be GRANTED consistent with the parameters outlined
in the following opinion.
I. B ACKGROUND
Wendt worked for Premier starting in November 2010. Premier acquires, sells, distributes,
and markets commodity polymers to end use markets in the United States and Canada. Wendt’s title
was “Sales Representative — Account Manager,” and his duties included managing ongoing and
prospective customer accounts and soliciting new customers. As part of this job, Wendt had access
to various types of customer information, including but not limited to, customer sales histories,
product pricing and payment terms, and sales strategies. The polymers business is highly
competitive, and Premier required Wendt to sign the Agreement requiring that he not share
Premier’s confidential information, and not solicit Premier’s customers, suppliers or employees for
specified periods of time if Wendt left the company. Id. at 5–7. Wendt signed the Agreement as a
condition of his employment.
On or about March 3, 2015, Wendt resigned from Premier and began working for one of its
competitors, Genesis Polymers (“Genesis”). In the months that followed, Premier discovered
evidence that led them to believe that Wendt was breaching the Agreement. For example, Premier
discovered that during Wendt’s tenure at Premier, Wendt sold products on behalf of another
company (Global Polymers). Wendt had also been forwarding Premier pricing, strategy, and other
information to his personal email account. Also, at or around the time that Wendt resigned from
Premier, he was recruiting his Premier customers to buy product from his new employer Genesis.
Based on this information, Premier filed suit against Wendt in Harris County, Texas for
breach of contract, misappropriation of trade secrets, and breach of the duty of loyalty, and sought
monetary damages and preliminary and permanent injunctive relief. That day the state court issued
the first Temporary Restraining Order (“TRO 1"), enjoining Wendt from using or disclosing
Premier’s confidential information, and from activities such as soliciting or causing the loss of
Premier’s suppliers, customers or employees. Dkt. 1-3. TRO 1 was served on Wendt on June 6,
2015. Before the temporary injunction hearing was set, Wendt removed the case to this court.
Dkt. 1. Premier filed a supplemental application for a TRO (“TRO 2”) and, after a hearing before
the Magistrate Judge, this court granted TRO2. Dkt. 7. TRO2 essentially placed the same, but more
specific, restrictions on Wendt. Dkt. 7. At that time, the court noticed the parties that it would hear
plaintiff’s application for a preliminary and permanent injunction on July 8, 2015. Id. at 4. The
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court took evidence at the hearing, which continued on July 9, and based on the evidence, renders
the following opinion.
I. ENFORCEABILITY
Premier alleges several violations of the Agreement, which it claims entitle it to an injunction
restraining Wendt from violating the Agreement. At the hearing Wendt admitted several violations
including providing confidential customer names and volumes to Genesis as he was discussing
employment with them while still employed by Premier, and actually soliciting Premier customers
covered under the Agreement to Genesis. The provisions relating to Wendt soliciting customers and
sharing or using confidential information are forward looking, and can be enforced through an
injunction. Wendt challenges the enforceability of the non-solicitation and confidentiality provisions
of the Agreement and the construction of the terms used within non-solicitation provision.
A.
Consideration Defense
The court begins with Wendt’s argument that the Agreement is not enforceable because no
consideration was timely given by Premier. Wendt argued that the confidential information that was
supposed to be given in exchange for Wendt’s compliance with the Agreement was lacking until he
was walking out the door. According to Wendt, Premier feared its sales force would leave after
Premier reworked its sales compensation packages, so it began giving massive amounts of
unnecessary confidential information to its sales force in order to provide the required consideration
to make Premier’s non-solicitation agreements enforceable. However, the court heard evidence that
Wendt received some confidential information, such as reports on his sales and margin calculations,
shortly after joining Premier and began receiving additional confidential information about a year
before he left, which coincides with a new sales lead, strategy, and commission structure. The court
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is not persuaded that Premier data-dumped confidential information on its sales force to somehow
instantly make its agreements with its sales force enforceable. Regardless, the Supreme Court of
Texas has explained that there is no requirement “that the employee receive consideration for a noncompete agreement prior to the time the employer’s interest in protecting its goodwill arises.”
Marsh, 354 S.W.3d at 778. Such reasoning is persuasive as to the entire agreement, and the court
finds this defense without merit.
B.
Non-solicitation provision
The relevant portion of the non-solicitation of customers provision states:
[F]or an eighteen (18) month period, the [Wendt] will not, directly or indirectly,
either for himself or through any kind of ownership as a director, agent, employee,
or consultant, for any other person, firm, or corporation, call on, solicit, takeaway, or
cause the loss of [customers] of [Premier] with whom [Wendt] because acquainted
during his employment, nor [customers] that [Wendt] was acquainted with prior to
his employment, but with whom [Premier] has transacted business in the previous
twelve (12) months.
Plaintiff’s Exhibit 13 (“P. Ex. 13").
In Texas a specific act governs non-solicitation agreements: “a covenant not to compete is
enforceable if it is ancillary to or part of an otherwise enforceable Agreement at the time the
Agreement is made to the extent that it contains limitations as to time, geographical area, and scope
of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary
to protect the goodwill or other business interest of the promisee.” Tex. Bus. & Com. Code Ann.
§ 15.50 (West). If the covenant not to compete is not in compliance with the Act, “the court shall
reform the covenant to the extent necessary to cause the limitations contained in the covenant as to
time, geographical area, and scope of activity to be restrained to be reasonable and to impose a
restraint that is not greater than necessary . . . . Tex. Bus. & Com. Code Ann. § 15.50 (West).
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At the outset, the court notes that although the Agreement has a non-solicitation provision
relating to suppliers, Premier did not put forth any evidence that Wendt’s prior or current job
requires interaction with suppliers, or that Wendt contacted Premier suppliers after he left Premier,
and, the court will not consider enjoining such behavior. Therefore, the court focuses on the nonsolicitation provision as it relates to customers.
1. Part of an Enforceable Agreement
The customer non-solicitation provision was included in Wendt’s broader Agreement, which
the court finds is enforceable.
2. Geographic Scope
The geographic scope of the Agreement was not challenged and the court heard no evidence
upon which to question the reasonableness of the geographic scope.
3. Scope of Activity
As to the scope of activity to be restrained, the activity Wendt cannot do under the Agreement
is calling on, soliciting, taking away or causing the loss of customers. The question is whether the
restraint of these activities is “reasonable and [does] not impose a greater restraint than is necessary
to protect the goodwill or other business interest of the promisee.” Tex. Bus. & Com. Code Ann.
§ 15.50 (West).
During the hearing there was some dispute about what “calling on” entailed, and whether it
just involved a phone call or in-person visits. Wendt asserted that, if the provision was enforceable
at all, the court should interpret the provision to include only business solicitation-focused as
opposed to—for example—casual conversation at a trade convention or a personal friendship that
Wendt had with at least one of the Premier customers.
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The court agrees that the intent of the Agreement was to ultimately prevent the solicitation
and loss of Premier customers, and the scope of the activities to be restrained is reasonable only if
interpreted in that way. Therefore, the court interprets the activity to be enjoined as the soliciting
of business (including the solicitation-focused activities of calling on, taking away, or causing the
loss of), which would not include a casual conversation at a trade show or personal friendship that
did not also involve solicitation of business.
Additionally, there was dispute in the hearing about whether the term “customer” in the
Agreement referred to only those businesses that Premier had actually sold product to, or whether
it also included the targeted group of potential customers with whom sales representatives were
instructed to meet, negotiate, and cultivate a relationship, even though no transactions had occurred.
The court interprets the Agreement to only apply to those customers that have transacted business
with Premier, not potential customers.
The Agreement language was instructive in this
interpretation. To begin with, customers is not defined, and does not otherwise appear to include
potential customers. Further, paragraph three explains that the second group Wendt is restrained
from soliciting are those customers that “he was acquainted with prior to his employment, but with
whom Premier Polymers has transacted business in the previous twelve (12) months.” P. Ex. 13.
This language highlights what Premier considered to be the important characteristic of the term
customer: someone with whom Premier had transacted business. Premier has not provided any
persuasive authority or argument that the term customer should be interpreted more broadly.
Therefore, the court finds that a customer is an entity that has actually purchased something from
Premier. Under the Agreement as written, customer does not relate to potential customers, even if
samples were sent to the customer but payment was not received.
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4. Timing
As to the scope of timing, Wendt would be enjoined from the above activities for an 18
month period. The question is whether this is “reasonable and [does] not impose a greater restraint
than is necessary to protect the goodwill or other business interest of the promisee.” Tex. Bus. &
Com. Code Ann. § 15.50 (West). Premier urges that 18 months is reasonable for a sales
representative given that it can take up to 24 months to cultivate such a customer relationship.
Wendt put on contrary evidence that customer relationships can be built up in a matter of a few
months. Further, Wendt put on evidence that Premier’s competitors use an 18 month nonsolicitation Agreement only for sales managers—not lower-level account representatives—because
the representatives were given and used less confidential information than the sales managers, and
therefore, did not need such lengthy non-solicitation periods. Premier provided Wendt with
confidential information relating to other account manager’s customers and sales at least since 2014.
Although Wendt testified that the additional confidential information he received since 2014 did not
help him in his job as an account manager, there is no dispute that he was given substantial
additional confidential information from 2014 until he resigned from Premier on March 3, 2015.
The court recognizes that the relative size of companies and their parent companies, among
many other factors, dictate the amount of risk a company can bear, including the length of a nonsolicitation agreement. The court finds that for the amount and types of information Wendt was
given, 18 months from the time Wendt left Premier is a reasonable time period to restrain him from
soliciting customers covered under the Agreement.
Premier argues that the 18 month time frame should begin from the date of the injunction,
because Premier has been deprived of the benefit of the first four months of the non-solicitation
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period. Dkt. 33 at 7. The court disagrees. First, the court has already decided that 18 months, not
22 months, is a reasonable time frame for Premier to protect itself. And though Wendt undisputedly
injured Premier when he breached various provisions in his Agreement during the first four months
of the 18 month non–solicitation period, Premier is not without remedy. Premier can seek damages
for its injuries in the breach of contract action it brings before this court.
5. Unclean hands defense
Wendt raised the defense of unclean hands. He appeared to argue that Premier had benefitted
in the past when it hired sales representatives who breached their non-solicitation agreements with
prior employers. Therefore, Wendt argues, Premier has unclean hands and cannot enforce the nonsolicitation provision of the Agreement against Wendt. However, Wendt did not allege that Premier
had unclean hands with regard to enforcing his Agreement, the relevant issue for an unclean hands
defense. “The doctrine of unclean hands permits a court to deny equitable relief to a party guilty of
fraud, deceit, unconscionability, or bad faith relative to an issue present in the pending lawsuit.”
Compaq Computer Corp. v. Procom Tech., Inc., 908 F. Supp. 1409, 1428 (S.D. Tex. 1995)
(emphasis added). The evidence presented regarding former Premier employees and their nonsolicitation agreements does not relate to Wendt’s conduct or Agreement in this case. The court will
not consider this defense.
In conclusion, the court finds that the non-solicitation provision in the Agreement is
enforceable as to customers that meet the various time frames in the provision.
C.
Confidential information provisions
The disclosure of confidential information and trade secrets is not covered by the Texas
statute that governs the enforceability of non-compete agreements. Therefore, the court will simply
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look at whether this is an enforceable contract provision. In other words, was there an offer,
acceptance, and consideration. See Marsh USA Inc. v. Cook, 354 S.W. 3d 764, 773 (2011). The
parties both entered this Agreement freely, and with the intent to be bound by it. The purpose was
for Premier to be able to protect its interests, while providing Wendt a job. Premier’s consideration
was, at least, giving Wendt confidential information, including customer leads. For that information,
Wendt promised to keep the information confidential. This Agreement was clear about what it
covered, including the identity of Premier’s customers, the preferences of its customers, and the
products in which it deals. This information clearly had some value to Wendt as he e-mailed much
of it to a personal account, and began using the names of Premier customers—the identifies of which
were confidential information—for his benefit as a Genesis sales representative, even while he was
still being paid by Premier.
For the foregoing reasons, the provision relating to confidential information in the Agreement
is enforceable.
II. INJUNCTION
Because the court has found that the challenged portions of the Agreement are enforceable,
the court turns to whether Premier has met the elements required to enjoin Wendt from violating the
Agreement. The Agreement states that
[i]t is expressly agreed and understood that in the event of a breach or threatened
breach by the employee of any of these provisions, [Premier] shall, in addition to
other remedies, be entitled to extraordinary relief, including a restraining order or an
injunction restraining the employee from violating this Agreement. A breach or
threatened breach shall include without limitation soliciting business from
[Premier’s] suppliers and customers and disclosing, in whole or in part, any
confidential information or commercial concepts, or from rendering any services to
any person, firm, or corporation to whom such information may be disclosed or is
threatened to be disclosed.
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P. Ex. 13. The court noticed the hearing as covering a preliminary and permanent injunction, and
is satisfied that sufficient evidence was presented to support a permanent injunction.
“According to well-established principles of equity, a plaintiff seeking a permanent
injunction must . . . demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies
available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that,
considering the balances of hardships between the plaintiff and defendant, a remedy in equity is
warranted; and (4) that the public interest would not be disserved by a permanent injunction.” Aspen
Tech., Inc. v. M3 Tech., Inc., 569 F. App’x 259, 272–73 (5th Cir. 2014) (quoting eBay Inc. v. Merc
Exchange, L.L.C., 547 U.S. 388, 394, 126 S. Ct. 1837 (2006)). “The decision to grant or deny a
permanent injunction is grounded in principles of equity and is in the discretion of the district court.”
Choice Hotels Int’l, Inc. v. Patel, 940 F. Supp. 2d 532, 542 (S.D. Tex. 2013).
In terms of showing irreparable injury, at the very least, Wendt admitted that he solicited
Premier customers to Genesis and made sales to them at Genesis right after he resigned from
Premier, which also involved the sharing of Premier’s confidential information. This is clear harm
that has already occurred. Monetary damages are inadequate in this case to replace an ongoing
customer relationship and the intimate details that a sales representative learns about the customer.
Premier put on evidence that it needed the time outlined in the non-solicitation to build a relationship
between an existing customer and a new sales representative after a former sales representative
leaves. This time frame provides Premier a safe harbor in which to re-build the relationship with a
client without the former sales representative soliciting the customer away with all the confidential
information he learned from Premier. Accordingly, an injunction requiring Wendt to follow the
Agreement, as opposed to merely damages, is warranted.
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The balancing of hardships favors Premier being granted the injunction. As to the relative
hardship of requiring Wendt to follow the Agreement, Wendt put on evidence that his new employer
was large, established, and sophisticated and did not need Premier’s confidential information,
including information related to its customers. In addition, Wendt’s employment agreement with
Genesis even requires Wendt to not disclose to the company any confidential information that Wendt
knows from a third party. P. Ex. 14 (section 4(c)). On the other hand, Premier put on evidence that
it is relatively new to the business and small, and that the customer relationships Wendt took were
very important to its livelihood. Even under the terms of an injunction, there are quite a few
customers that Wendt can still contact.
Finally, the public will not be disserved through enforcement of this Agreement. Valid noncompete agreements encourage employers to entrust confidential information and client relationships
to key employees. Marsh, 354 S.W.3d 764 at 769. Such agreements also protect employers who
invest “significant resources in developing good will that an employee could otherwise immediately
take and use against them in business.” Id.
For the foregoing reasons, the court finds that principles of equity require injunctive relief
for Premier. As to the non-solicitation provision in the Agreement, Wendt admitted that under the
Agreement, the following customers would be subject to the non-solicitation provision: Alte-Rego;
Baughman Tile Co.; Bramcal Productions; Eagle Film Extruders; Flexaust; Future Polytech; Loose
Plastics; Millennium Flexible Packaging; Noble Polymers; Pinnacle Industrial and/or Pinnacle
Plastic Products; Poly Flex Products; Premier Poly Products; Soroc; Shuert Technologies and/or
Shuert Industries, Inc.; The Plastics Group; Uniram; Vantage Plastics & Airpark Plastics; and Versa
Pack. D. Ex. 32.
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Therefore, the court GRANTS Premier’s motion for a Permanent Injunction as follows:
1. Wendt is prohibited from using Premier Polymers’ Confidential Information (as defined
below) for his own personal benefit or the benefit of Genesis Polymers, or any other entity or
individual.
2. Wendt is prohibited from disclosing Premier Polymers’ Confidential Information (as
defined below) to Genesis Polymers, or any other entity or individual.
3. If he has not already done so, Wendt must return all of Premier Polymers’ Confidential
Information (as defined below) in his possession (or that of his attorneys), including all documents
and/or data in electronic format, within five business days after the date of this order.
4. Confidential Information is defined herein to include information and knowledge
pertaining to: customer and supplier accounts, including the names, contact information,
identification of those with decision making authority, sales history, pricing, profit margins, and
monthly sales reports of the accounts; long term business models and strategies, including the
company’s forecast for development, products, and markets; financial information, including profit
margins, pricing policies, internal costs and expenses; supplier information; the particular needs and
preferences of Premier Polymers’ customers; forms and methods and trade practices; Premier
Polymers’ arrangements, agreements, and terms with its suppliers and customers; the products in
which Premier Polymers deals; technical data relating to Premier Polymers’ services and production
of services; the source of Premier Polymers’ products method for transporting such products; the
employment terms and benefits available to Premier Polymers’ employees, including compensation;
and the commercial strategies which Premier Polymers employs or may employ in the future.
Premier Polymers’ Confidential Information includes that information maintained and/or compiled
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in the form of emails, spreadsheets, monthly sales reports, weekly sales reports, budget reports,
quarterly meeting presentations, contracts with suppliers and customers, PowerPoint presentations,
or in the ACT database. It also includes Confidential Information that was also provided to Wendt
verbally and in other forms of documentation during his lengthy employment at Premier.
5. For a period of eighteen months from March 3, 2015, Wendt is prohibited from directly
or indirectly either for himself or for an other individual or entity as an agent, employee, or
consultant, calling on, soliciting, taking away, or causing the loss of the following entities, together
with their affiliates and which entity names shall include all entity types regardless of the company
modifier included with any such entity name (e.g., Inc., Corp., LLC): Alte-Rego; Baughman Tile
Co.; Bramcal Productions; Eagle Film Extruders; Flexaust; Future Polytech; Loose Plastics;
Millennium Flexible Packaging; Noble Polymers; Pinnacle Industrial and/or Pinnacle Plastic
Products; Poly Flex Products; Premier Poly Products; Soroc; Shuert Technologies and/or Shuert
Industries, Inc.; The Plastics Group; Uniram; Vantage Plastics & Airpark Plastics; and Versa Pack.
It is so ORDERED.
Signed at Houston, Texas on July 17, 2015.
________________________________________
Gray H. Miller
United States District Judge
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