Delta Fuel Co., Inc. v. Eddie Loyed

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

16-717

DELTA FUEL COMPANY, ET AL.

VERSUS

EDDIE LOYED

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APPEAL FROM THE
SEVENTH JUDICIAL DISTRICT COURT
PARISH OF CONCORDIA, DOCKET NO. 49953
HONORABLE KATHY JOHNSON, PRESIDING
**********

SYLVIA R. COOKS
JUDGE

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Court composed of Sylvia R. Cooks, Shannon J. Gremillion, and Phyllis M. Keaty,
Judges.

AFFIRMED.

Jennifer L. Anderson
C. Parker Kilgore
Jones Walker, LLP
Four United Plaza, Fifth Floor
8555 United Plaza Blvd.
Baton Rouge, LA 70809-7000
(225) 248-2181
ATTORNEY FOR PLAINTIFF/APPELLEE
Delta Fuel Company, et al.

Ravi Sangisetty
Michael Lillis
Sangisetty Law Firm
935 Gravier Street, Suite 835
New Orleans, LA 70112
(504) 662-1016
ATTORNEY FOR INTERVENOR/APPELLANT
Herring Gas Company, Inc.

Robert Landry
Tanner Magee
Landry Magee, LLC
7833 Main Street
Houma, LA 70360
(985) 655-0240
ATTORNEY FOR DEFENDANT/APPELLANT
Eddie Loyed

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COOKS, Judge.

This appeal arises out of Defendant, Eddie Loyed’s, prior employment with

Plaintiff, Delta Fuel Company, Inc. and his present employment with Herring Gas

Company, Inc. At issue is an “At Will Employment Agreement” (hereafter

Agreement) executed between Loyed and Delta Fuel on June 14, 2010.

Loyed worked in various capacities for Delta Fuel beginning with his hiring

in April of 2010. Loyed initially drove a truck that supplied propane and other

petroleum products to various businesses. After receiving additional training from

Delta Fuel, Loyed was named the Southern District Propane Manager for the

Natchez, Mississippi branch of Delta Fuel. His responsibilities included day-to-

day management of Delta Fuel’s propane business in the Southern District, which

included various parishes in Louisiana and counties in Mississippi. Loyed

prepared pricing information for current and potential clients, identified potential

clients, solicited business from potential clients, and maintained client/prospect

information. According to Delta Fuel, as a high ranking employee, Loyed had

access to significant confidential and proprietary business information related to

customers. This confidential and proprietary information included customer lists,

customer financial information, marketing materials, pricing arrangements and

business plans. Delta Fuel maintained if this information was obtained by a

competitor, it would give a significant advantage to any competitor seeking to

service Delta Fuel’s customers.

According to Delta Fuel, it had an issue with another former employee, and

in 2010, asked all current employees to review and enter into non-compete

agreements. Loyed was given a copy of the non-compete agreement and could

have consulted an attorney if he so chose. He signed the non-compete agreement

on June 14, 2010.

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Following a drop in oil prices and general slowdown in the oil business in

early 2016, Delta Fuel underwent internal restructuring. Some employees in the

Natchez office were laid off, but Loyed maintained his employment, salary and

benefits, although it was testified that the ability of employees to work overtime

hours was largely eliminated. Loyed was asked to resume driving a propane

delivery truck to make deliveries to customers, rather than some of his prior

managerial duties. Loyed let it be known to his supervisors and co-workers that he

was considering other employment. According to Steve Wiggington, a Divisional

Manager for Delta Fuel who was Loyed’s supervisor, he was asked by Loyed if

Delta Fuel would enforce his non-compete agreement if he resigned. Wiggington

told Loyed that it would be enforced. Loyed also asked the same question to

Victoria Bourke, who was responsible for the implementation of the non-compete

agreements, and was told by her Delta Fuel would likely enforce the non-compete

agreement.

On March 14, 2016, Loyed resigned from his position with Delta Fuel. He

them immediately began employment with Herring Gas. Delta Fuel asserts that

Herring Gas is its direct competitor. Two days after his resignation, Loyed showed

up at the Delta Fuel offices driving a Herring Gas truck.

Shortly thereafter, Delta Fuel filed the present action against Loyed seeking

temporary, preliminary, and permanent injunctive relief to enforce the non-

compete covenant. Initially, the trial court issued a temporary restraining order in

the matter on the basis of Delta Fuel’s motion for same, at which point Herring

Gas intervened in the proceedings.

A full hearing on the matter was held on May 31, 2016, after which the trial

court issued a preliminary injunction enjoining Loyed’s continued employment

with Herring Gas finding him in breach of the Agreement. The trial court gave the

following reasons in open court in support of its decision:

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The beginning paragraph of page eight -- I mean paragraph eight, it
does appear to be very definite as to what Mr. Loyed is agreeing to
refrain from engaging in, but when you go down to paragraph -- the
next paragraph, it says, “If employee becomes employed by a
competing business regardless of whether or not employee is an
owner or equity interest holder of that competing business, employee
shall be deemed to be carrying on or engaging in a business similar to
that of the company.” So I believe that the later sentence in that
paragraph does cover the business that Delta Fuel is seeking to restrict
Mr. Loyed from engaging in and I’m going to deny the request that
the preliminary injunction be dismissed.

The trial court signed a final judgment reflecting that ruling on June 14, 2016.

Both Loyed and Herring Gas have appealed the preliminary injunction, asserting

the trial court erred in finding that Loyed was in violation of the non-compete

agreement and in granting the motion for preliminary injunction.

ANALYSIS

Questions of contractual interpretation are questions of law, which under

Louisiana law are subject to a de novo standard of review. Mitchell v. Patterson

Ins. Co., 00-612 (La.App. 3 Cir. 12/6/00), 774 So.2d 366. Thus, in interpreting the

Agreement at issue, our review is de novo.

Historically, Louisiana’s public policy has disfavored non-competition

agreements. SWAT 24 Shreveport Bossier, Inc. v. Bond, 00-1695 (La.6/29/01), 808

So.2d 294. This policy is based on the state’s “desire to prevent an individual from

contractually depriving himself of the ability to support himself and consequently

becoming a public burden.” SWAT 24, 808 So.2d at 298. “Because such

covenants are in derogation of the common right, they must be strictly construed

against the party seeking their enforcement.” Id. at 298.

Louisiana Revised Statutes 23:921(C) provides an exception to Louisiana’s

public policy against non-competition agreements. It provides:

Any person, including a corporation and the individual shareholders
of such corporation, who is employed as an agent, servant, or
employee may agree with his employer to refrain from carrying on or
engaging in a business similar to that of the employer and/or from
soliciting customers of the employer within a specified parish or

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parishes, municipality or municipalities, or parts thereof, so long as
the employer carries on a like business therein, not to exceed a period
of two years from termination of employment.

Further, La.R.S. 23:921(D) provides, in pertinent part, that “a person who

becomes employed by a competing business, regardless of whether or not that

person is an owner or equity interest holder of that competing business, may be

deemed to be carrying on or engaging in a business similar to that of the party

having a contractual right to prevent that person from competing.”

The language in La.R.S. 23:921(D) makes it permissible for an employer to

prohibit an employee from seeking employment from a competitor in the restricted

territory. As Delta Fuel notes, the court in Restored Surfaces, Inc. v. Sanchez, 11-

529 (La.App. 5 Cir. 12/28/11), 82 So.3d 524, 528, explained that “the legislature

broadened the scope of non-compete agreements by amending La.R.S. 23:921” to

include the provisions of La.R.S. 23:921(D). The court further stated “[t]hus,

La.R.S. 23:921, as amended in 2003, now provides that a person who becomes

employed by a competing business, regardless of whether he is an owner or equity

interest holder of that business, may be deemed to be carrying or engaging in a

business similar to that of his former employer who seeks to enforce a non-

compete agreement.” Id. This is what Delta Fuel contends Mr. Loyed agreed to

when signing the Agreement.

Section 8 of the Agreement executed by Mr. Loyed and Delta Fuel states as

follows:

Non-Competition. Employee agrees to refrain from carrying on or
engaging in a wholesale gasoline, diesel fuel, propane, lubricants, or
other bulk fuel and petroleum products supply, storage, or service
business similar to that of the Company and from soliciting customers
of the Company within the parishes and counties listed in Appendix A
of this agreement, so long as the Company carries on a like business
therein, for a period of two (2) years after termination of employment.
If Employee becomes employed by a competing business, regardless
of whether or not Employee is an owner or equity interest holder of
that competing business, Employee shall be deemed to be carrying on
or engaging in a business similar to that of the Company. The parties

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acknowledge, agree, and stipulate that the Company currently carries
on the business specified above in each of the parishes and counties
listed in Appendix A of this Agreement.

This paragraph sets forth a “non-solicitation” agreement in which Loyed agreed to

refrain from soliciting any Delta Fuel customer for a period of two years. There

was specific testimony from Steve Wiggington that at the same time Loyed

changed jobs from Delta Fuel to Herring Gas, Goodrich Petroleum, a bulk fuel

customer of Delta Fuel, switched its business from Delta Fuel to Herring Gas.

Wiggington testified without contradiction that Herring is a direct competitor of

Delta Fuel. He testified as follows:

Q. How do you know Herring?

A. Well they’re one of our competitors in the area that we do
business in.

Q. So they’re essentially a direct competitor of Delta Fuel?

A. Yes.

Q. All right. Do Delta Fuel and Herring offer the same products?

A. Yes.

Q. Talk a little about that.

A. Well, we both deliver propane to, for instance, if there’s a grain
elevator, we both deliver to grain elevators. That’s – we have a bottle
filling station and they have a bottle filing station. We go a little
further in providing the cages and so forth, which they don’t. We
both do residential propane to the homes. They do tanks, provide
tanks for agricultural – I’m not sure if they provide the fuel for some
of their agriculturalist. So, pretty much everything that we do, they do
as well.

Q. So, and we’re talking both five gallon Blue Rhino –

A. Right.

Q. – type tanks?

A. Right.

Q. But then we’re talking large bulk fuel tanks, correct?

A. Correct. Correct.

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Q. So, for an oilfield operation, has there ever been a situation where
herring and Delta Fuel had customers that switched from one to the
other?

A. Uh-huh.

Q. Give me an example of that.

A. Well, we had for instance, we were doing Goodrich. We had, I
think, about nine or ten tanks down there and right after Mr. Loyed
left, the company switched over to Herring.

Q. And how big were these tanks?

A. Those are thousands, thousand gallons.

Q. So these weren’t little five gallon residential tanks? These were
large industrial operations.

A. Correct.

Q. And, so it was five to ten – five to ten thousand gallon tanks at
different well sites?

A. Yeah. You’re talking about total – thousand gallon tanks.

Q. And, and at five to ten well sites?

A. Yes. Right.

Q. And, so is Herring a direct competitor of Delta Fuel?

A. Absolutely.

Wiggington was cross-examined by both counsel for Loyed and Herring Gas, and

consistently maintained that Herring Gas was a direct competitor of Delta Fuel.

Loyed and Herring Gas failed to produce any testimony or evidence to contradict

Wiggington’s testimony in that regard.1 They also did not dispute that Goodrich

Petroleum switched its business from Delta Fuel to Herring Gas in the immediate

1
Herring Gas stated in brief that the trial court issued its ruling “in part before Defendants had
opportunity to present its case.” This statement conveniently ignores the actual events that
occurred below. As Delta Fuel notes, when it rested its case, the trial court provided Defendants
an opportunity to present their case. Rather than calling witnesses (who were present that day in
court), Defendants moved to dismiss the preliminary injunction. The trial court denied that
request. Despite that denial, Defendants moved to appeal the judgment rather than request to
present their witnesses or contrary evidence. Thus, there is no merit in Herring Gas’ contention
that it was denied an opportunity to present its case.
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aftermath of Loyed being hired by Herring Gas. We cannot say the trial court

erred in finding this constituted activities which breached Paragraph 8’s

prohibition against carrying on or engaging in any business similar to that of Delta

Fuel in specified parishes for twenty-four months after Loyed’s employment with

Delta Fuel ended.

The primary argument by both Loyed and Herring Gas focuses on the first

sentence of the Agreement, which states “Employee agrees to refrain from carrying

on or engaging in a wholesale gasoline, diesel fuel, propane, lubricants, or other

bulk fuel and petroleum products supply, storage, or service business . . .”

(Emphasis added.) Defendants specifically focus on the word “wholesale” as

describing all forms of business activities covered in the first sentence. They

contend Herring Gas is strictly a retail operation and does not perform wholesale

petroleum services. As set forth earlier, Defendants presented no testimony to

confirm that Herring Gas was not involved in any wholesale activities. This

contention was made only by counsel for Defendants at trial and in brief.

Moreover, it was specifically testified by Wiggington that “pretty much everything

that we (Delta Fuel) do, they (Herring Gas) do as well.”

Delta Fuel also argues Defendants mischaracterize the applicability of the

word “wholesale” as limiting any and all forms of business covered in the first

sentence. They maintain a “straightforward reading shows that the first sentence of

the agreement bars two distinct sets of conduct: (1) ‘carrying on or engaging in a

wholesale gasoline, diesel fuel, propane, lubricant’ business, or (2) ‘carrying on or

engaging in . . . other bulk fuel and petroleum products supply, storage, or service

business similar to that of’ Delta Fuel.” The clear testimony concerning Goodrich

Petroleum indicates that Herring Gas is involved in more than strictly retail sales,

and, at a minimum, involved in bulk fuel and petroleum products supply, as the

tanks filled at Goodrich were “five to ten thousand gallon tanks.” Thus, we agree

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with Delta Fuel that even if Defendant’s interpretation of the first sentence of the

Agreement is accepted as correct, Loyed’s employment with Herring Gas is still

barred by the Agreement.

CONCLUSION

The testimony established Herring Gas is a competitor of Delta Fuel in the

supply of bulk fuel and petroleum products. Paragraph 8 of Loyed’s Agreement

sets forth that if the employee “becomes employed by a competing business . . .

Employee shall be deemed to be carrying on or engaged in a business similar to

that of the Company.” Therefore, we find the trial court did not err in finding the

“At Will Employment Agreement” executed by Loyed and Delta Fuel prohibits

Loyed from being employed by Herring Gas in the restricted territories.

DECREE

For the foregoing reasons, the judgment of the trial court is affirmed. All

costs of this appeal are assessed one half to Defendant-Appellant, Eddie Loyed and

one-half to Intervenor-appellant, Herring Gas Company.

AFFIRMED.

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