A & B Bolt & Supply, Inc. v. David S. Dawes

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 06-1003

A & B BOLT & SUPPLY, INC.

VERSUS

DAVID S. DAWES, ET AL.

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. 20033999
HONORABLE KRISTIAN DENNIS EARLES, DISTRICT JUDGE

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JOHN D. SAUNDERS
JUDGE

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Court composed of Ulysses Gene Thibodeaux, Chief Judge, John D. Saunders, and
Billy Howard Ezell, Judges.

REVERSED.

H. Mark Adams
Jennifer Lynn Anderson
Alia S. Zohur
Jones, Walker
201 St. Charles Ave., 47th Fl.
New Orleans, LA 70170
(504) 582-8000
Counsel for Defendants/Appellees:
David S. Dawes
Whitco Supply, L.L.C.

Alan K. Breaud
Timothy Wayne Basden
Breaud & Lemoine
P. O. Drawer 3448
Lafayette, LA 70502
(337) 266-2200
Counsel for Plaintiff/Appellant:
A & B Bolt & Supply, Inc.

Jeffrey M. Baudier
Attorney at Law
500 Dover Blvd, Ste 120
Lafayette, LA 70503
(337) 406-5610
Counsel for Defendants/Appellees:
David S. Dawes
Whitco Supply, L.L.C.

SAUNDERS, Judge.

Employer, A & B Bolt & Supply, Inc. (A&B), filed a petition for temporary

restraining order (TRO), preliminary and permanent injunction, and damages against

former employee, David S. Dawes (Dawes), and his business, Whitco Supply, L.L.C.

(Whitco), for allegedly violating a covenant not to compete, which was granted. After

the TRO was subsequently dissolved, employee and his business filed a motion for

judgment on the pleadings.

The trial court granted the motion and dismissed the action with prejudice

basing its ruling on reasoning that the covenant not to compete was never effected

because the agreement between the parties expired by its own terms before employee

resigned.

The Third Circuit reversed this ruling by reasoning that the trial court did not

consider the effect of other provisions of the agreement indicating that the parties

intended the covenant not to compete to be effective regardless of whether employee's

employment was terminated under the terms of the agreement or whether the

agreement simply expired under its own terms.

On remand the employee filed a motion for summary judgment. The motion

was granted by the trial court and employer’s case was again dismissed with

prejudice. The trial court reasoned that the covenant not to compete had expired

because the agreement between the parties expired by its own terms before employee

resigned.

Employer appealed. We reverse.

FACTS AND PROCEDURAL HISTORY

David S. Dawes and other family members were once the owners of A&B.

After successfully developing the business, the Dawes family sold their interest in

A&B to Industrial Holdings, Inc., which sold it to T-3 Energy Services, Inc. (T-3),

the present owner. Dawes signed an Employment Agreement (Agreement) with T-3

that became effective May 7, 2001. The Agreement had an initial term of two years

and provided for two renewable terms of one year each. The Agreement also had a

Covenant Not to Compete that prevented Dawes from competing with A&B for one

year after his cessation of employment with A&B. The Agreement expired on May

7, 2003, but Dawes remained with T-3 as an “at will” employee until July 1, 2003,

when he resigned. At that time, he formed his own company, Whitco, which conducts

the same type of business that A&B conducts.

On July 23, 2003, A&B filed a Petition for Temporary Restraining Order,

Preliminary and Permanent Injunction and Damages, which was granted by the trial

court. The TRO was dissolved after a hearing on a motion filed by Dawes and

Whitco. A&B filed a writ application with this court seeking to reverse the action of

the trial court. The application was denied in an unpublished opinion. See A&B Bolt

& Supply, Inc. v. Dawes, 03-1073 (La.App. 3 Cir. 8/15/03). A&B's writ application

to the supreme court was also denied. See A&B Bolt & Supply, Inc. v. Dawes, 03-2411

(La. 9/5/03), 852 So.2d 1034.

Dawes and Whitco then filed a motion for judgment on the pleadings or,

alternatively, to clarify and/or correct judgment. After a hearing, the trial court

granted the motion and dismissed the action with prejudice.

A&B appealed the trial court's grant of a motion for judgment on the pleadings

and the trial court was reversed. See A&B Bolt & Supply, Inc. v. Dawes, 04-0699

(La.App. 3 Cir. 11/10/04), 888 So.2d 1023, writ denied, 05-265 (La. 4/1/05), 897 So.

2d 609.

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On remand, Dawes and Whitco filed a motion for summary judgment. The trial

court granted this motion reasoning that the covenant not to compete had expired

because the agreement between the parties expired by its own terms before Dawes

resigned. A&B appealed this ruling. We reverse.

ASSIGNMENT OF ERROR:

1. Did the trial court err in granting summary judgment in favor of Dawes and
Whitco on the basis that all obligations under the Agreement, including the
covenant not to compete, ended at the expiration of the two year term of
employment?

ASSIGNMENT OF ERROR #1:

A&B contends that the trial court erred in granting summary judgment

dismissing its claims against the defendants on the basis that all obligations under the

agreement, including the covenant not to compete, ended at the expiration of the two

year term of employment. We agree.

Appellate courts conduct a de novo review of rulings on motions for summary

judgment. “It is well established that a summary judgment shall be rendered if the

pleadings, depositions, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to material fact, and

that the mover is entitled to judgment as a matter of law.” Alfred Palma, Inc., v.

Crane Servs. Inc., 03-0614, p.3 (La.App. 3 Cir. 11/5/03), 858 So.2d 772, 774 (quoting

Shelton v. 700/Associates, 01-0587, p.5 (La. 10/16/01), 798 So.2d 60, 65); La.Code

Civ.P. art. 966.

“If the words of a contact are clear, explicit, and lead to no absurd results, it

must be interpreted by reference to the ‘four corners’ of the document and no further

interpretation can occur in search of the parties’ intent.” Hebert v. Insurance Center,

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Inc., 97-298, p.5 (La.App. 3 Cir. 1/7/98), 706 So.2d 1007, writ denied 98-353 (La.

3/27/98), 716 So.2d 888, La.Civ.Code art. 2046.

The Covenant Not to Compete is found in Section 3.3 of the Agreement and

is as follows: (emphasis supplied)

Employee hereby agrees that:

3.3.1 Business of Company. The business of the Company is to
distribute fastener related products, pipes, valves, fittings and other
supplies to companies in the oil and gas and industrial fabrication
industries (the “Business”).

3.3.2 During the Term of Employment and for one (1) year
following the termination or resignation of Employee’s employment
under this Agreement (the “Non-Compete Period”), he will not in
association with or as an officer principal, member, advisor, agent,
partner, director, stockholder, employee or consultant of any corporation
(or sub-unit, in the case of a diversified business) or other enterprise,
entity or association that competes with the Business of the Employer in
the Territory (as defined in Section 3.3.4 below), work on acquisition or
development of any line of business, property or project in with the
Employer is then involved or has worked with or evaluated in the last
year; and (Emphasis added)

3.3.3 During the Term of Employment and during the Non-
Compete Period, he will not solicit or induce any person who is or was
employed by the Employer at any time during such term or period (A)
to interfere with the activities or Business of the Employer, or employ
any such person in a business or enterprise which competes with the
Business of the Employer in the Territory. In addition, during the Term
of Employment and during the Non-Compete Period, he will not (C)
request any present or future customer or supplier of the Employer to
curtail or cancel its business with Employer in the Territory, or (D)
unless otherwise required by law, disclose to any person, firm or
corporation any details or organization or business affairs of the
Employer, any names of past or present customers of the Employer or
any other non-public information concerning the Employer.

The pertinent part of Section 9.2 of the agreement is as follows:

Any termination of Employee’s employment and any expiration of the
Term of Employment under this Agreement shall not affect the
continuing operation and effect of Section 3 hereof or this Section 9,
which shall continue in full force and effect with respect to employer

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and Employee and their respective heirs, executors, personal
representatives, successors or permitted assigns.

The trial court found that when the term of the contract ended both parties were

free to do whatever they wished. The court reasoned that if A&B did not have to

continue honoring their part of the contract, then Dawes no longer had to honor any

part of the contact he signed. The trial court reached this conclusion even in light of

Section 9.2 above. The court made this conclusion because it reasoned that Section

9.2 would only have effect if the contract was still in effect. We disagree.

Section 3.3.2 provides that Dawes may not compete with A&B “During the

Term of Employment and for one (1) year following the termination or resignation

of Employee’s employment under this Agreement.” His employment with A&B

“under this Agreement” ended May 7, 2003, when the contract expired and Dawes

became an “at will” employee. Accordingly, under section 3.3.2, Dawes was not

allowed to compete until May 7, 2004, one year from the day that his employment

“under this Agreement” was concluded. The fact that Dawes continued to work as an

“at will” employee does not change the terms of the agreement he signed and

certainly does not relieve Dawes from his contractual obligation to refrain from

competing with A&B for a period of one year after his employment ended “under this

Agreement.”.

The trial court reasoned that Dawes’ July 1, 2003, resignation did not trigger

the non-compete obligation as the resignation was from Dawes’ status as an “at will”

employee. It is true that Dawes’ July resignation did not trigger the non-compete

obligation, but it is equally true that the non-compete obligation was triggered by the

expiration of the Agreement on May 7, 2003.

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This court found in A&B Bolt and Supply, Inc, 888 So.2d at 1026 that “This

language [Section 9.2] indicates that the parties intended the Covenant Not to

Compete to be effective regardless of whether Dawes' employment was terminated

under the terms of the Agreement or whether the Agreement simply expired under its

own terms.” We see nothing in the record to change how this court has already ruled.

As such, the ruling of the trial court granting Dawes’ and Whitco’s motion for

summary judgment is reversed and this case is remanded for further proceedings not

inconsistent with this ruling.

CONCLUSION

The judgment of the trial court is reversed, and the case is remanded to the trial

court for further proceedings. The costs of this appeal are assessed to David S. Dawes

and Whitco Supply, L.L.C.

REVERSED.

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