The opinion
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SUNBELT RENTALS, INC., §
§
Plaintiff, §
§
v. § Civil Action No. 3:21-CV-3241-N
§
JIMMY HOLLEY, §
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Defendant. §
MEMORANDUM OPINION AND ORDER
This Order addresses Plaintiff Sunbelt Rentals, Inc.’s (“Sunbelt”) motion for a
preliminary injunction. Sunbelt has demonstrated, as to a portion of its claim, a substantial
likelihood of succeeding on the merits of its breach of contract and misappropriation of
trade secrets claims, has shown that irreparable harm will result if the Court fails to enjoin
defendant Jimmy Holley’s conduct, that the balance of harms favors Sunbelt, and that
issuing the injunction will not adversely affect the public interest. Accordingly, the Court
grants in part and denies in part Sunbelt’s motion for a preliminary injunction.
I. THE ORIGINS OF THE DISPUTE
Sunbelt rents heavy equipment and accessories to institutional and retail customers.
Pl.’s Compl. ¶¶ 16–17 [1]. Holley worked at Sunbelt for over twenty years. Id. at ¶30.
For over a decade before he left the company last year, Holley served as a salesman,
primarily covering institutional accounts. Id. at ¶¶ 19, 31–32.
During his employment with Sunbelt, Holley signed an employment agreement that
contained various restrictive covenants. Id. at ¶ 34. In pertinent part, these read:
6.1 During the term of this Agreement and for a period of twelve (12)
months after the date of the expiration or termination of this Agreement
based on Employee’s voluntary resignation or Employee’s termination of
employment by Corporation (the “Restrictive Period”), Employee shall not
directly or indirectly:
. . . .
(ii) solicit the provision of products or services, similar to those provided
by Corporation at the “Designated Stores” (as defined below), to any person
or entity who purchased or leased products or services from Corporation at
any time during the twelve (12) calendar months immediately preceding the
termination or expiration of this Agreement for any reason and for or with
whom Employee had contact, responsibility or access to Confidential
Information related to such person or entity; provided, however, the
restrictions of this subsection (ii) shall be limited in scope to the “Territory”
(as defined below) and to any office, store or other place of business in which,
or in connection with which, Employee has had business contact with such
persons or entities during the twelve (12) calendar months immediately
preceding the termination or expiration of this Agreement for any reason.
. . . .
(iv) compete with the Corporation, its successors and assigns by engaging,
directly or indirectly, in the Business as conducted at the Designated Stores
or in a business substantially similar to the Business as conducted at the
Designated Stores, within the “Territory,” as hereinafter defined; or
(v) provide information to, solicit or sell for, organize or own any interest
in (either directly or through any parent, affiliate, or subsidiary corporation,
partnership, or other entity), or become employed or engaged by, or act as
agent for any person, corporation, or other entity that is directly or indirectly
engaged in a business in the “Territory”, as hereinafter defined, which is
substantially similar to the Business as conducted at the Designated Stores
or competitive with Corporation’s Business as conducted at the Designated
Stores[.]
Ex. A to Pl.’s Compl. (“Employment Agreement”) 4 [1-1]. The agreement defined
“Business” as:
(i) selling and renting equipment, tools, scaffolding and parts for use in
the manufacturing, industrial and construction industries, (ii) selling and
renting tools and homeowner repair equipment to retail customers, and (iii)
the provision of related services including the erecting and dismantling of
scaffolding . . . .
Id. The restrictions extended fifty miles from any store “in which, or in connection with
which,” Holley generated sales in the year preceding his departure. Id.
Holley testifies that he became insecure in his standing with Sunbelt and sought
alternative employment. Ex. 3 Pl.’s App. Supp. Mot. TRO 32:20–33:6, 45:1–47:14 [25].
The record is not entirely clear, but it appears that over the course of last summer Holley
engaged in a series of discussions with a contact at a Sunbelt competitor,
EquipmentShare.com (“Equipment Share”). Id. at 28:10–30:12. He resigned from Sunbelt
last August and began a new job with Equipment Share the next month, purportedly based
at Equipment Share’s Ardmore, Oklahoma store. See id. at 115:19–22, 118:21–119:1.
Sunbelt sued Holley in this Court late last year, alleging that he has actively solicited
former customers and worked on behalf of Equipment Share within the area covered by
the nonsolicitation and noncompetition of the employment agreement. Further, Sunbelt
seeks relief for the alleged theft and misuse of trade secret information with which Sunbelt
entrusted Holley. Sunbelt quickly moved for a preliminary injunction, and the Court issued
a Scheduling Order laying out a timeline for expedited discovery and briefing.
Pursuant to that Order, Sunbelt deposed Holley. He admitted to facilitating
equipment rentals to various former clients within fifty miles of his primary Sunbelt
location in Lewisville, Texas. See, e.g., id. at 195:10–23, 208:24–209:21, 217:20–24,
223:17–224:9, 231:4–232:25. Sunbelt thereafter sought and obtained a temporary
restraining order enjoining Holley from “directly or indirectly selling or renting” thirteen
enumerated categories of equipment within fifty miles of Sunbelt’s Lewisville, Texas
location. Sunbelt now seeks a preliminary injunction that continues the limitation imposed
by the TRO while also enjoining Holley from conduct violating the nonsolicitation clause
of his employment contract and from using Sunbelt’s allegedly trade secret information.
II. LEGAL STANDARD FOR A PRELIMINARY INUNCTION
The Fifth Circuit set out the requirements for a preliminary injunction in Canal
Authority of Fla. v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974). To prevail on a
preliminary injunction application, the movant must show (1) a substantial likelihood that
the movant will ultimately prevail on the merits, (2) a substantial threat that the movant
will suffer irreparable injury if the injunction is not granted, (3) that the threatened injury
to the movant outweighs whatever damage the proposed injunction may cause the opposing
party, and (4) that granting the injunction is not adverse to the public interest. Id.; see also
Nichols v. Alcatel USA, Inc., 532 F.3d 364, 372 (5th Cir. 2008).
To qualify for a preliminary injunction, the movant must clearly carry the burden of
persuasion with respect to all four requirements. Karaha Bodas Co. v. Perusahaan
Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357, 363 (5th Cir. 2003). If the
movant fails to establish any one of the four prerequisites to injunctive relief, relief will
not be granted. Women’s Med. Ctr. of Nw. Hous. v. Bell, 248 F.3d 411, 419 n.15 (5th Cir.
2001). A movant who obtains a preliminary injunction must post a bond to secure the
nonmovant against any wrongful damages it suffers as a result of the injunction. FED. R.
CIV. P. 65(c).
The decision to grant or deny preliminary injunctive relief is left to the sound
discretion of the district court. Miss. Power & Light Co. v. United Gas Pipe Line Co., 760
F.2d 618, 621 (5th Cir. 1985) (citing Callaway, 489 F.2d at 572). A preliminary injunction
“is an extraordinary and drastic remedy, not to be granted routinely, but only when the
movant, by a clear showing, carries the burden of persuasion.” White v. Carlucci, 862 F.2d
1209, 1211 (5th Cir. 1989) (quoting Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d
992, 997 (5th Cir. 1985)). Even when a movant satisfies each of the four Callaway factors,
the decision of whether to grant or deny a preliminary injunction remains discretionary
with the district court. Miss. Power & Light, 760 F.2d at 621.
III. SUBSTANTIAL LIKELIHOOD OF
SUCCESS ON THE MERITS
Breach of Restrictive Covenants
In its Order addressing Sunbelt’s request for a TRO, the Court held that adequate
consideration made the employment agreement enforceable and that the restrictive
covenants did not impose unreasonable limitations on Holley’s post-employment conduct.
The Court further concluded that Sunbelt had succeeded in demonstrating a substantial
likelihood of success on the merits of its claim that Holley breached the noncompetition
provisions of the restrictive covenants. Because nothing has changed to alter that analysis,
the Court adopts it in full. Accordingly, the Court concludes that Sunbelt has shown a
substantial likelihood of succeeding on its breach of contract claim as it pertains to Holley’s
breach of the noncompetition clauses in the employment agreement.
The Court next turns to whether Sunbelt has identified evidence sufficient to carry
its burden with respect to its breach of contract claim predicated on Holley’s alleged
violation of the nonsolicitation clause.
The parties disagree about the type of conduct that constitutes solicitation under the
meaning of the agreement and thus whether the evidence supports a substantial likelihood
of Sunbelt demonstrating a breach of the nonsolicitation clause. Holley acknowledges that,
as written, the restrictive covenants prohibit him from “solicit[ing] the provision” of
equipment (by lease or sale) of the type Sunbelt rents and sells, Employment Agreement ¶
6(ii), but contends that the verb “solicit” requires a showing of active conduct. In Holley’s
telling, his testimony goes only so far as to show that he contacted certain accounts shortly
after he left Sunbelt to inform them of his departure. Providing services to customers who
initiated contact with him — while potentially violative of the noncompete clause — does
not constitute solicitation. Sunbelt counters that the term solicit may embrace a wider
swath of conduct and that Holley’s admissions provide context to his conversations with
his clients that enable an inference that Holley had engaged in a transparent ploy to induce
his clients to quickly reach out to him at his new employer.
The Court largely agrees with Sunbelt’s construction. Post-employment contact
with former clients can be thought of as falling on a spectrum from active communication
directed by the employee and designed to culminate in new business at one end, to requests
instigated entirely at the will of the former client at the other. In between lie various factual
scenarios involving indirect solicitation or some act undertaken in the hopes of inducing a
former client to “initiate” contact. A reasonable construction of a nonsolicitation clause
must embrace more conduct than that falling at the most extreme end of the spectrum
because adopting such a restricted reading of a nonsolicitation agreement would subject
such clauses to transparent gamesmanship capable of rendering them mere nullities. The
Fort Worth Court of Appeals has endorsed the proposition that facts falling in the middle
of this spectrum may support a valid inference that the promisee has violated a
nonsolicitation agreement. See Hernandez v. Combined Ins. Co. of Am., 2021 WL 520456,
at *15–17 (Tex. App.—Fort Worth Feb. 11, 2021, no pet.) (discussing evidence available
to trial court at temporary injunction stage and concluding it could support an inference of
solicitation absent direct evidence of prohibited communications initiated by the
promisee). The Fort Worth court’s conclusion does not directly conflict with the primary
authority relied on by Holley; in that case the court concluded that the available evidence
would not support an inference of solicitation because it showed only that clients had
sought out and initiated contact with the former-employee defendants. Safeworks, LLC v.
Max Access, Inc., 2009 WL 959969, at *6 (S.D. Tex. April 8, 2009). In other words, the
record before the court in Safeworks lacked any evidence that the former employees had
taken any action either to solicit former clients directly or to indirectly induce the clients
to initiate conversations. For this reason, the available evidence in the two cases provides
a straightforward ground for reconciling the seemingly inconsistent holdings. The question
remains, however, whether the facts in this case merit an inference that Holley likely
breached his nonsolicitation agreement.
Comparing the available evidence in this case to that in Hernandez, the Court
declines to draw the inference that Holley likely violated the terms of the nonsolicitation
restriction. Hernandez involved the likely breach of a nonsolicitation clause that prohibited
the promisee from soliciting the employer’s employees for a set period. Hernandez, 2021
WL 520456, at *13. The defendant had served as a manager of a team of insurance
salespersons and had chosen to decamp to a different insurer. Id. at *2. A litany of bad
facts worked against the defendant: He convened a meeting to announce his resignation at
which two representatives of his new employer were present; the representatives began a
presentation regarding the defendant’s new company as soon as the defendant departed the
meeting and conducted a question-and-answer session after the presentation concluded;
documentary evidence suggested coordination of effort between the defendant and the
representatives; and the insurance company demonstrated that a high proportion of the
defendant’s new sales team consisted of agents from his former employer. Id. at *15–16.
Even though the appellate court conceded that the “evidence of solicitation and inducement
offered at the injunction hearing was hardly overwhelming,” a holistic appraisal of these
facts permitted the trial court to draw an inference of solicitation without abusing its
discretion. Id. at *13, 17.
The available evidence in this case does not reach the level of Hernandez, and the
Court declines to draw the inferences necessary for Sunbelt to obtain an injunction.
Without doubt, Holley’s deposition testimony discloses bad facts: He waited until after he
had resigned from Sunbelt (and signed an employment agreement with Equipment Share)
to contact his former customers and when he did so, he made the contacts via his personal
cellphone. Ex. 8 to Pl.’s App. Br. Supp. Prelim. Inj. 11:23–13:20 [38] Nevertheless, he
also testified that he communicated the contact information of the person at Sunbelt who
would handle the account going forward. Id. at 11:23–12:8. He denied providing any of
the clients the name of his new employer or explain what he would be doing next. Ex. 4
to Pl.’s App. Br. Supp. Prelim. Inj. 186:14–18 [33]. Holley’s testimony also suggests that
he shares long term personal relationships with his contacts at several of the clients,
supporting a countervailing inference that he did not feel the need to solicit them because
he expected they would seek him out in short order. See, e.g., id. at 187:11–16; 220:24:–
221:3; 230:14–17. While these facts make the issue a close one, the Court concludes that
it should decline to draw the inferences Sunbelt requests, in light of how close the issue is
and the extraordinary nature of the relief sought. Accordingly, the Court declines to hold
that Sunbelt has shown a substantial likelihood of prevailing on its breach of contract claim
with respect to the nonsolicitation provision of the restrictive covenants.
Misappropriation of Trade Secrets
To establish a violation of TUTSA, a plaintiff must show: (1) a trade secret existed,
(2) the trade secret was acquired through a breach of a confidential relationship or
discovered by improper means, and (3) use of the trade secret without authorization from
the plaintiff. Spear Mktg., Inc. v. BancorpSouth Bank, 791 F.3d 586, 600 (5th Cir. 2015);
see also Miller v. Talley Dunn Gallery, LLC, 2016 WL 836775, at *12 (Tex. App. – Dallas
Mar. 3, 2016, no pet.). TUTSA defines trade secret as “information” that (1) “derives
independent economic value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use” and (2) “is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.” TEX. CIV. PRAC. & REM. CODE § 134A.002(6);
see also Baxter & Assocs., LLC v. D & D Elevators, Inc., 2017 WL 604043, at *6 (Tex.
App. – Dallas Feb. 15, 2017, no pet.). In the context of a preliminary injunction
application, “the trial court does not decide whether the information sought to be protected
is a trade secret. Rather, it determines whether the applicant has established the
information is entitled to trade secret protection until a trial on the merits.” Talley Dunn
Gallery, 2016 WL 836775, at *12.
At least some of the information that Holley forwarded to his personal email account
deserves trade secret protection. In particular, the customer-specific pricing information
likely qualifies as trade secret. First, Sunbelt took reasonable steps to protect the
confidentiality of the customer-specific rates it set pursuant to agreements with institutional
clients. It subjected its employees to confidentiality obligations. Employment Agreement
¶ 5; Ex. 3 to Pl.’s App. Supp. Mot. Preliminary Inj. 93:19–96:11[33]; Ex. 4 to Pl.’s App.
Supp. Mot. Preliminary Inj. at 9. Likewise, the evidence shows that Sunbelt imposed
confidentiality limitations on its clients by contract. Ex. 12 to Pl.’s App. Supp. Mot.
Preliminary Inj. at 424–27, 430–31 [38]; Ex. 3 to Pl.’s App. Supp. Mot. Preliminary Inj.
101:4–11. Second, in his deposition, Holley twice conceded that this type of information
would have value in the hands of a Sunbelt competitor. Ex. 3 to Pl’s App. Supp. Mot.
Preliminary Inj. 107:3–7; 168:13–16. Finally, Holley’s act of forwarding customer-
specific pricing for key accounts to his personal email in the days before he departed
suggests that the information could not be easily reproduced from memory nor obtained by
legitimate means. See, e.g. Ex. 6 to Pl.’s App. Supp. Mot. Preliminary Inj. (detailing some
of the material forwarded to Holley’s personal email address).
Holley obtained this information through a breach of a confidential relationship.
The evidence shows that Holley had, on several occasions, acknowledged his duty to
protect the confidentiality of certain categories of information, including customer-specific
pricing. Employment Agreement ¶ 5; Ex. 3 to Pl.’s App. Supp. Mot. Preliminary Inj.
93:19–96:11. Shortly before resigning his employment with Sunbelt, Holley emailed
pricing information for multiple large accounts from his employer-provided email to a
personal account and a personal account apparently belonging to his wife. This conduct
constitutes a breach of the confidentiality obligation to Sunbelt found in the employment
agreement and acknowledged at subsequent times during Holley’s employment.
Finally, the evidence supports an inference of unauthorized use sufficient for
Sunbelt to prevail at this stage. The information would have value for someone looking to
compete with Sunbelt for business with the firms whose pricing was forwarded. Since his
departure from Sunbelt, Holley has held a nearly identical sales role at a competing
business. Activity between the account apparently belonging to Holley’s wife and Holley’s
own personal email account suggests that Holley was accessing some of this information
in the weeks following his departure from Sunbelt (after beginning employment with
Equipment Share). Taken together with the documented reduction in Sunbelt’s business
with certain accounts (and Holley’s admission that he had begun doing business with these
clients) the Court agrees that under “these circumstances, it is probable” that Holley will
use (or already has used) the information to his benefit. Rugen v. Interactive Bus. Sys., 864
S.W.2d 548, 552 (Tex. App.—Dallas 1993). Thus, Sunbelt has shown a substantial
likelihood of prevailing on its TUTSA claim.1
As for the other types of information identified by Sunbelt, the Court concludes that
it has not carried its burden. Assuming for the sake of argument that the customer lists and
jobsite information qualify for trade secret protection, Sunbelt identifies no evidence giving
rise to an inference that Holley has used this information to gain an unfair competitive
edge. Holley’s deposition suggests that the business he has engaged in with former clients
has largely flowed through preexisting contacts, not by travelling to jobsites contained in
the lists he forwarded to himself. Sunbelt has adduced not evidence that Holley has sought
to use its customer lists to expand his business. The crux of Sunbelt’s complaint is that
Holley has violated his restrictive covenants by engaging in substantial business with his
own former clients in the territory he used to cover for Sunbelt. Surely Holley did not need
a list to remember a small number of major clients with whom he has done substantial
business for over a decade. Accordingly, the Court will grant only a limited injunction on
the trade secrets claims, cabined only to the type of information as to which Sunbelt has
carried its burden of showing a substantial likelihood of success on the merits.
IV. IRREPARABLE HARM
“Under Texas law, covenants not to compete present the paradigm of irreparable
injury, so that reasonable enforcement appears to be the rule rather than the exception.”
1 Error! Main Document Only.Because the Court determines that Sunbelt has carried its
burden for preliminary injunction on its trade secret misappropriation claim under TUTSA,
the Court need not — and does not — assess the merits of the same claim under DTSA.
Ruscitto v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 777 F. Supp. 1349, 1354 (N.D.
Tex. 1991) aff’d 948 F.2d 1286 (5th Cir. 1991). Sunbelt alleges, and Holley admitted under
oath, that customers who previously accounted for millions of dollars of revenue have
followed Holley to a competitor. Texas courts have long recognized that the disclosure of
trade secret information constitutes irreparable injury as a matter of law. Williams v.
Compressor Engineering Corp., 704 S.W.2d 469, 470–71 (Tex. App.—Houston [14th
Dist.] 1986, writ ref’d n.r.e.). Sunbelt has established that absent an injunction, it will
likely suffer irreparable harm.
V. BALANCE OF HARMS
Sunbelt will suffer greater harm if the Court does not issue the injunction than
Holley will endure if the Court does grant relief. Continued violation of the agreement will
impose substantial impairment of Sunbelt’s goodwill, precisely the interest it sought to
protect by means of the restrictive covenants and confidentiality obligation. Enforcing this
agreement will limit Holley’s sales activities, but not unreasonably. He can continue to
work outside of the area defined in the restrictive covenants. This limitation should not
impose substantial hardship — his current employment arrangement is assertedly based in
Ardmore, Oklahoma. Moreover, the burden imposed by a temporary injunction goes no
further than the terms to which Holley voluntarily consented.
VI. PUBLIC INTEREST
Enforcement of restrictive covenants implicates a sensitive balancing of public
interests between the mobility of employees and the capacity of employers to protect their
investment in human capital. These public interest considerations, however, have become
subsumed into the substantive law that determines when a court will uphold a restrictive
covenant. As such, the Court has already addressed these considerations in its foregoing
analysis on the likelihood of Sunbelt’s succeeding on the merits. Beyond the concerns
already reflected in Chapter 15 of the Texas Business and Commerce Code, the public has
an interest in the enforcement of valid contracts. See, e.g., CyberX Grp., LLC v. Pearson,
2021 WL 1966813, at *12 (N.D. Tex. May 17, 2021). To that end, the Court concludes
that enforcing the nondisclosure of Sunbelt’s trade secret information is in the public
interest. As such, the Court concludes that enforcement of this agreement by way of
preliminary injunction will serve the public interest.
CONCLUSION
For the forgoing reasons, the Court concludes that Sunbelt has met its burden to
obtain a preliminary injunction as to some of its claims. Accordingly, the Court grants in
part and denies in part the motion for a preliminary injunction.
Signed April 7, 2022.
A. CL □
United States District Judge
ORDER — PAGE 14