Sentinel Integrity Solutions, Inc. v. Mistras Group, Inc., Jody W. Olson and Carey Roberts , 414 S.W.3d 911 ( 2013 )

Opinion issued October 22, 2013
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-12-00370-CV
———————————
SENTINEL INTEGRITY SOLUTIONS, INC., Appellant
V.
MISTRAS GROUP, INC., JODY W. OLSON, AND CAREY ROBERTS,
Appellees
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Case No. 2010-11229
OPINION
Appellant, Sentinel Integrity Solutions, Inc. (“Sentinel”), sued appellees,
Mistras Group, Inc., Jody W. Olson, and Carey Roberts, for damages arising out of
Olson’s alleged breach of a covenant not to compete in his employment agreement
with Sentinel and Mistras’s alleged tortious interference with the employment
agreement. In bench conference before the submission of the charge to the jury,
Sentinel agreed with the defendants that the scope of the covenant not to compete
was overbroad as to its geographic limits. The trial court submitted eight questions
to the jury on Sentinel’s claims against Mistras and Olson’s claims for attorney’s
fees. The jury charge did not address the enforceability of the covenant not to
compete or Olson’s alleged breach, and Sentinel did not object to the charge. The
jury returned a verdict finding no liability on the part of any of the defendants.
After the jury reached its verdict, the court reformed the covenant not to compete
at Sentinel’s request. The trial court then entered judgment that Sentinel take
nothing on its claims and that it pay Olson’s attorney’s fees pursuant to Texas
Business and Commerce Code section 15.51.
In seven issues, Sentinel argues that: (1) “the covenant not to compete [was]
enforceable as a matter of law,” that “even if the contract was ‘at will,’ the
covenant was enforceable,” that the trial court had a mandatory duty under section
15.51(c) to reform the covenant not to compete to cause its limitations “to be
reasonable and to impose a restraint that is not greater than necessary” and “to
Enforce the covenant as reformed,” and that “[t]he trial court erred in determining
the covenant was unenforceable and ordering the parties to a jury trial” and “in
placing the issue of attorneys’ fees before the jury”; (2) the evidence was
2
insufficient to support the jury’s finding, pursuant to section 15.51, that Sentinel
knew at the time of execution of the employment agreement that the covenant did
not contain reasonable limitations and that it sought to enforce the limitations to a
greater extent than was necessary to protect its business interests; (3) the attorney’s
fees awarded were not “actually incurred” by Olson; (4) the attorney’s fees were
not properly segregated; (5) the conditional appellate attorney’s fees were not
actually and reasonably incurred; (6) the trial court’s award of $750,000 in
attorney’s fees for trial expenses and $200,000 in conditional appellate fees should
be reversed and rendered or reformed; and (7) the trial court erred in granting pre-
judgment interest on attorney’s fees.
We remand the award of appellate attorney’s fees. We further modify the
judgment to delete the award of pre-judgment interest and affirm as modified.
Background
Olson works as an inspector of oil and gas refinery equipment. He obtained
certification from the American Petroleum Institute in 2002 and worked for a
variety of companies supervising “turnarounds,” or inspections that are conducted
under time-sensitive conditions while the facility is shut down. In February 2008,
Olson began working for Sentinel, a Houston-based inspection company, as a
turnaround supervisor. In January 2009, Sentinel promoted Olson to the position
of assistant division manager of the Corpus Christi office.
3
On August 1, 2009, Sentinel’s general manager, Scott Corey, presented
Olson with an employment agreement. The agreement provided the effective date
for Olson’s promotion to assistant division manager and stated the covered duties
and managerial responsibilities covered by the agreement. The employment
agreement also contained a covenant not to compete, which provided, inter alia,
that Sentinel “has and will disclose” confidential information regarding customers,
customer representatives, employees, and specialized training. The covenant not to
compete required that Olson “refrain from competing with the Company or
otherwise engaging in ‘Restricted Activities’ (as defined below), for a reasonable
period of time” in order to protect the confidential information. The covenant
defined the “Restricted Period” as “a period of three (3) years after the Termination
Date [during which Olson] will not, directly or indirectly, as an employee, officer,
director, shareholder, proprietor, agent, partner, recruiter, consultant, salesman,
independent contractor or in any other individual or representative capacity engage
in any of the Restricted Activities.” The covenant also provided that, upon
termination without cause, or in other circumstances within Sentinel’s discretion, it
would pay Olson four weeks’ salary.
The covenant not to compete defined “Restricted Activities” as including:
(i) Conducting, engaging or participating in . . . Inspection, Risk
Based Inspection and Asset Integrity Management services in
any capacity in which Employee served while working with
Company, if such activity is on behalf of a customer that
4
Employee called upon or serviced while employed by
Company. Notwithstanding the foregoing, the term “Restricted
Activities” as defined herein shall apply only if Employee
voluntarily terminates his employment with Employer, or if
Employer terminates Employee’s employment with Employer
for cause as defined in this Agreement[;]
(ii) Recruiting, hiring, and/or attempting to recruit or hire . . . any
employees . . . of the Company; or contacting or
communicating with any other employees of the Company or
any of its Customers for the purpose or with the intent of
inducing such other employees to terminate their employment
with the Company or a Customer. . . ;
(iii) Communicating, by any means, . . . with any Customer or
Customer Representative, to or for which the Company has
provided services at any time during Employee’s employment
by Company;
(iv) Communicating, by any means . . . with an employee of the
Company after the Termination Date, provided, however, that
the foregoing shall not be deemed to preclude any casual
contacts which are strictly social . . . ;
(v) Using, disclosing, publishing, copying, distributing or
communicating any Company Information of any nature;
(vi) Using, disclosing, publishing, copying, distributing or
communicating any Confidential Information of any nature.
The covenant not to compete defined the “Restricted Area” as including
seven cities and four counties in Texas, plus locations in California, Utah,
Louisiana, Pennsylvania, Colorado, Wyoming, and Trinidad and Tobago. The
Restricted Area also included “a twenty (20) mile radius around all customers’
5
jobsites and/or project facilities that Employee called on or serviced on behalf of
Employer in all geographic regions, wherever located.”
The covenant not to compete also provided:
Employee and Company agree that the limitations as to time and
scope of activity to be restrained are reasonable and do not impose a
greater restraint on Employee than is necessary to protect the property
rights and other business interests of Company. Notwithstanding the
foregoing, Employee reserves the right to seek reformation of the
limitations as to the time and scope of activity in a court of competent
jurisdiction, in accordance with Section 9, paragraph (a) hereunder.
The modification provision in Section 9, paragraph (a) provided in relevant part:
If any part of this Agreement is adjudged by a court of competent
jurisdiction to exceed the applicable legal limitation, then such
provisions shall be reformed to the maximum time, geographic or
other limitations permitted by applicable law, it being the parties’
intention to permit the reviewing court to modify this Agreement to
the extent necessary to cure any such invalidity or unenforceability.
Olson signed the employment agreement on August 7, 2009. After several
months of employment as an assistant manager, Olson determined that the
demanding managerial position was a strain on his family and contacted appellee
Carey Roberts, a man Olson had met while working for a previous employer.
Roberts worked for Mistras, a company that specialized in non-destructive testing.
In the fall of 2009, Mistras offered Olson a job as a turnaround inspector—the type
of job he had previously had at Sentinel before his promotion to assistant manager
and the execution of the employment agreement. Olson remained at Sentinel as an
6
assistant manager until he gave his notice of termination in December 2009, and he
began working for Mistras as a turnaround supervisor in January 2010.
On February 23, 2010, Sentinel filed its original petition and request for
injunctive relief, alleging that the covenant not to compete was enforceable against
Olson under section 15.50(a) of the Texas Business and Commerce Code, 1 which
requires that, in addition to being part of otherwise enforceable agreement, a
covenant not to compete must contain reasonable limitations as to time,
geographical area, and scope of activity to be restrained in order to be enforceable;
that Olson breached the covenant not to compete; and that Mistras and Roberts
tortiously interfered with the contract between Olson and Sentinel by hiring
Olson.2 Sentinel’s petition sought damages and attorney’s fees, and it included a
demand for a jury trial. It also sought injunctive relief in the form of a request for
a temporary restraining order and a temporary injunction. Sentinel also pled, “In
the alternative, if the Court should find that the covenant not to compete is not
reasonably limited as to time, geographical area, or scope of activity, the Court
1
See TEX. BUS. & COM. CODE ANN. § 15.50(a) (Vernon 2011).
2
Sentinel also originally alleged that Olson breached a confidentiality agreement,
breached a fiduciary duty owed to Sentinel, misappropriated Sentinel’s trade
secrets, including theft of software productivity tools, and committed computer
fraud and abuse.
7
should reform the covenant as provided by Texas Business & Commerce Code
§ 15.51(c).”
The trial court conducted a hearing in May 2010, and, on July 12, 2010, it
denied Sentinel’s application for a temporary injunction and granted summary
judgment dismissing Sentinel’s claims for “theft/misappropriation of trade secrets
under the Theft Liability Act, theft of trade secrets, computer fraud abuse, civil
3
conspiracy, and breach of fiduciary duty.” Sentinel appealed the denial of its
application for a temporary injunction to this Court, but it eventually moved to
dismiss the appeal after the record and briefing were filed.4 This Court issued a
memorandum opinion granting Sentinel’s motion to dismiss on January 18, 2011.
The case was tried to a jury from September 27 through October 14, 2011.
Olson presented evidence that, prior to signing the employment agreement in
August 2009, he questioned Corey about the terms of the non-compete clause in an
e-mail exchange. Olson stated:
I have read the contract and I am happy with the terms and conditions
and ready to sign it and send it back. However the three year no
compete with two weeks of compensation seem[s] inadequate. . . .
3
The trial court also issued numerous other orders, including an order granting in
part Sentinel’s motion to compel arbitration, an order granting Sentinel’s
subsequent motion to vacate the order compelling arbitration, and an order
granting Olson’s motion for partial summary judgment.
4
The interlocutory appeal resulted in cause number 01-10-00607-CV.
8
Three years seem[s] a long time with two weeks of compensation. I
think six months would be fair for a three year no compete.
Corey responded:
The no compete does not prevent you from working TA’s, etc., or
from being employable within the inspection industry. So if you were
fired, laid-off, etc. tomorrow, you would simply pick up the phone
and call one of your many choices to go to work as an inspector.
During the agreement period (3 years) it provides 4 weeks of
compensation, not 2 as stated in your emails. . . . 4 weeks of
compensation is plenty considering that no one else in our industry
would even consider this. The 2 weeks you are referring to is for the
period of time following the expiration of the 3 year agreement, if that
were to even happen.
Olson also testified regarding the nature of his work for Mistras. He
testified that he worked as a turnaround supervisor, doing inspections just as he
had done prior to his promotion at Sentinel. He testified that he occasionally
contacted people on Mistras’s list of independent contractors to see who was
available to work on upcoming turnarounds, but he got those names from Mistras,
and the contractors were not employees of Sentinel. He did not have the authority
to hire them or determine their pay. He did not perform any managerial duties for
Mistras.
Corey testified at trial that Sentinel wanted to enforce the covenant not to
compete as written in the employment agreement. He stated that he believed
Olson was prevented from performing for a competitor any duties encompassed by
the role of a manager for Sentinel: “If he became a manager for us, and also that
9
included sweeping the floors at Sentinel, that means that he can’t go to [Mistras]
and sweep the floors, in my opinion. ‘In any capacity,’ is what it says. Now,
inspector, manager, supervisor, dishwasher, it doesn’t matter.”
Regarding the geographic area covered by the non-compete, Corey testified
that “[w]hen we wrote this geographic area that’s covered [in the covenant not to
compete], there’s no possible way we could have a crystal ball to know what Mr.
Olson, or any other manager, what projects or what areas they may be working in
tomorrow, next week, or next year.” He explained that they solved this problem by
including broad provisions: “So we do the best job we can to list the specifics that
we know about at the time a contract is put in place to cover pretty much all the
general areas that we think or anticipate would be covered. And if there’s other
areas that are added, then they would be covered; and that’s why we have
provisions that allow the court to modify it.”
John Zavitsanos, attorney for Olson, Mistras, and Roberts, testified
regarding Olson’s reasonable and necessary attorney’s fees.
Before submitting the case to the jury, Sentinel’s counsel stated, on the
record but outside the presence of the jury, “We agree that the geographical
restrictions are overbroad. We do not agree that the rest of the noncompete or the
agreement to which it is—otherwise enforceable agreement to which it is ancillary
or part of is unenforceable as written.” Counsel for Sentinel also agreed that the
10
“provision regarding the geographical scope” of the non-compete agreement
needed to be reformed. 5 Sentinel maintained, however, that it had a valid tortious
interference claim against Mistras “for interfering with the remainder of Mr.
Olson’s employment agreement.”
At the formal charge conference, the trial court presented a jury charge that
asked: whether Sentinel provided Olson a definite term of employment, specialized
training, or confidential information in connection with the non-competition
agreement (Question 1); whether Mistras intentionally interfered with the
employment agreement between Olson and Sentinel and, if so, whether Sentinel
suffered any damages as a result (Questions 2 through 6); whether Olson had made
the factual showing necessary to obtain attorney’s fees under section 15.51(c)
(Question 7); and the amount of Olson’s reasonable attorney’s fees for defending
against Sentinel’s claim that he breached the covenant not to compete (Question 8).
Sentinel did not object in any way to the jury charge. 6
In its verdict, returned on October 14, 2011, the jury found no liability on the
part of any of the defendants to Sentinel. It found that Sentinel had provided Olson
5
Sentinel states in its brief that it made a request for reformation “in open court.”
The agreement that the geographical area covered by the covenant would need to
be reformed is the only discussion of potential reformation recorded in the record.
6
The record does not contain any indication of the changes, if any, that were made
to the jury charge based on Sentinel’s concession that the geographical scope of
the covenant not to compete was overbroad and needed to be reformed.
11
with confidential information in connection with the non-competition agreement,
but it had not provided a definite term of employment or specialized training; that
Mistras did not intentionally interfere with the employment agreement between
Olson and Sentinel; that Sentinel knew at the time the employment agreement was
signed that the covenant not to compete contained limitations as to time,
geographical area, or scope of activity to be restrained that were not reasonable and
that it sought to enforce the limitations to a greater extent than necessary to protect
its business interest; and that “a reasonable fee for the necessary services of Jody
Olson’s attorneys in this case in defending the claim that Jody Olson breached the
non-competition agreement in this case” was $750,000 for preparation and trial,
$150,000 for an appeal to the court of appeals, and $50,000 for an appeal to the
Texas Supreme Court.
On October 17, 2011, Sentinel filed an application for reformation of the
covenant not to compete and permanent injunction, which it subsequently amended
on October 31, 2011. Sentinel asked the trial court to restrict Olson from
competing within a 100-mile radius of its Corpus Christi office, the area in which
Olson had worked for Sentinel, and from working or performing services for any
Sentinel clients for whom Olson “worked or [whom he] called on, regardless of
location.” It also sought reformation of the scope of activities, asking that Olson
be restricted from acting as a manager in the inspection business, as a turnaround
12
supervisor, or as a supervisor. On October 21, 2011, Sentinel moved to withdraw
the case from the jury, asking the trial court to render judgment, and on October
24, 2011, Sentinel filed a motion for judgment notwithstanding the verdict, arguing
that the evidence was legally insufficient on the attorney’s fees issue.
The trial court reformed the non-compete agreement, but it did not order a
permanent injunction. It also entered final judgment awarding Olson attorney’s
fees in the amount of $750,000 for fees incurred during litigation in the trial court
and $200,000 in conditional appellate attorney’s fees, and it awarded Olson,
Mistras, and Roberts court costs as prevailing parties. The final judgment also
included an award of pre-judgment interest on the amount of attorney’s fees
incurred by Olson that had already been paid.
Covenant Not to Compete
In part of its first issue, Sentinel argues that the trial court erred in failing to
determine enforceability as a matter of law and that the covenant not to compete
between it and Olson was enforceable as a matter of law. It argues, “Because the
covenant is enforceable, the trial court should have reformed it and abused its
discretion in failing to do so.”
A. Enforceability of the Covenant Not to Compete
Olson argues that Sentinel waived its complaints that the trial court erred in
failing to determine enforceability as a matter of law and that the covenant not to
13
compete was enforceable as a matter of law. We agree. Rather than seeking a
ruling from the trial court that the covenant not to compete was enforceable,
Sentinel requested a jury trial seeking damages against Olson and Mistras.
Sentinel then conceded on the last day of trial that the covenant was overbroad and,
therefore, not enforceable as written. Sentinel’s counsel agreed on the record that,
at least as to geographical area, the covenant not to compete was overbroad, and it
specifically informed the trial court that it believed that the geographical area
covered by the covenant required reformation. See TEX. BUS. & COM. CODE ANN.
§ 15.50(a) (Vernon 2011) (requiring that, in addition to being part of otherwise
enforceable agreement, covenant not to compete must contain reasonable
limitations as to time, geographical area, and scope of activity to be restrained in
order to be enforceable); see also Marsh USA Inc. v. Cook, 354 S.W.3d 764, 777
(Tex. 2011) (holding that “[t]he hallmark of enforcement is whether or not the
covenant is reasonable” and stating that “the statute’s core inquiry is whether the
covenant” contains reasonable limitations). Sentinel cannot now complain on
appeal that it got what it asked for. See Tittizer v. Union Gas Corp., 171 S.W.3d
857, 862 (Tex. 2005) (“[A] party cannot complain on appeal that the trial court
took a specific action that the complaining party requested, a doctrine commonly
referred to as ‘the invited error’ doctrine.”).
14
Furthermore, Sentinel did not object to the submission of Question 1, asking
the jury whether Sentinel provided additional consideration in connection with the
non-competition agreement. See Cruz v. Andrews Restoration, Inc., 364 S.W.3d
817, 829 (Tex. 2012) (complaint to jury charge is waived unless specifically
included in objection); Mo. Pac. R.R. Co. v. Cross, 501 S.W.2d 868, 873 (Tex.
1973) (holding that failure to object before charge is read to jury waives
complaint). Nor did Sentinel present the trial court with a request for a legal ruling
on this issue prior to the submission of the charge to the jury. See TEX. R. APP. P .
33.1 (providing that complaint by timely request, objection, or motion in trial court
is required to preserve issue for consideration on appeal).
Thus, Sentinel has waived, for purposes of appeal, any argument that the
trial court was obligated to make a legal ruling on the enforceability of the
covenant not to compete.
B. Reformation of the Covenant Not to Compete
Sentinel also argues that the trial court had a duty to reform the covenant not
to compete under Business and Commerce Code section 15.51. 7 Because the trial
court did reform the covenant, at Sentinel’s request, and Sentinel does not
7
In part of its second issue, Sentinel argues, “Then, there is the matter of the trial
court’s failure or refusal to act upon Sentinel’s continued requests for
reformation.” Sentinel does not support its assertion that it made repeated requests
for reformation with citations to the record, nor does our review of the record
reveal any request for reformation other than the motion for reformation Sentinel
filed after the jury returned its verdict.
15
challenge the reformed covenant on appeal, we construe this as an argument that
the trial court erred in failing to reform the covenant not to compete until after the
case had been submitted to the jury.
The Covenants Not to Compete Act provides procedures and remedies in
actions to enforce covenants not to compete. It provides:
If the covenant is found to be ancillary to or part of an otherwise
enforceable agreement but contains limitations as to time,
geographical area, or scope of activity to be restrained that are not
reasonable and impose a greater restraint than is necessary to protect
the goodwill or other business interest of the promisee, 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 to protect the goodwill or other business
interest of the promisee and enforce the covenant as reformed . . . .
TEX. BUS. & COM. CODE ANN. § 15.51(c) (Vernon 2011). Reformation pursuant to
section 15.51 is a remedy to be granted at a final hearing, whether on the merits or
by summary judgment, not as interim relief. Gray Wireline Serv., Inc. v. Cavanna,
374 S.W.3d 464, 470 (Tex. App.—Waco 2011, no pet.); Cardinal Health Staffing
Network, Inc. v. Bowen, 106 S.W.3d 230, 238–39 (Tex. App.—Houston [1st Dist.]
2003, no pet.).
The record reflects that, other than a one sentence pleading in the alternative
in its original petition, Sentinel maintained throughout the course of the litigation
that the covenant not to compete was enforceable as written. It did not abandon
this argument until almost the end of trial, when it conceded that, at least as to the
16
geographical area, the covenant did not contain reasonable restrictions and needed
to be reformed. It did not affirmatively ask the trial court to reform the agreement
until after jury had returned its verdict, but, once Sentinel requested reformation,
the trial court reformed the agreement. Because Sentinel never sought a final
hearing on this issue before the jury trial took place, and because it would have
been inappropriate for the trial court to reform the covenant without holding a final
hearing, we conclude that Sentinel has failed to show error on the part of the trial
court.
Moreover, Sentinel has made no showing or argument that, had it timely
sought reformation, rather than seeking it after rendition of the jury’s verdict on the
charge to which it agreed, the jury’s findings on liability would have been
different. See TEX. R. APP. P. 38.1(i) (requiring appellant’s brief to “contain a clear
and concise argument for the contentions made, with appropriate citations to
authorities and to the record”).
We overrule Sentinel’s first issue as it relates to the enforceability of the
covenant not to compete.
Attorney’s Fees
In its remaining issues, Sentinel complains of the award of attorney’s fees to
Olson under Business and Commerce Code section 15.51(c).
17
A. Facts Relating to Attorney’s Fees
John Zavitsanos, attorney for Olson, testified regarding the attorney’s fees
incurred in this case. He stated that Olson incurred attorney’s fees and that Mistras
advanced Olson’s fees pursuant to an agreement between them. Sentinel did not
object to this testimony. However, in its motion for judgment notwithstanding the
verdict, Sentinel argued that Olson did not properly disclose his indemnification
agreement with Mistras and that the evidence was legally insufficient to prove that
Olson incurred the expense of attorney’s fees because he did not admit into
evidence a copy of a written document demonstrating his arrangement with
Mistras. Mistras argued that it had disclosed the potential indemnity to Sentinel
and attached its responses to Sentinel’s requests for disclosure under Rule of Civil
Procedure 194.2, in which it stated, “Defendants . . . may have indemnity rights
pursuant [to] the Amended and Restated Bylaws of [Mistras].”
Mistras also attached to its motion for entry of judgment a copy of the
assignment of claims executed between Olson and Mistras, Mistras’s certificate of
incorporation and bylaws, and correspondence in which Mistras informed Sentinel
of its intention to seek reimbursement from Sentinel for fees Mistras had advanced
in defense of the claims against Olson. The assignment of claims stated that Olson
might be entitled to “Indemnification Rights” based on his employment with
Sentinel or other applicable law, that Mistras had advanced payment of attorney’s
18
fees and other costs “for Olson’s benefit through at least October 7, 2011,” and that
“Mistras [might] terminate advancement of Fees and Costs, in Mistras’s sole and
absolute discretion, at any time after October 7, 2011.” It also stated that “Mistras
shall have the sole and absolute right to recover its entire actual Fees and Costs,
without limitation, out of any recovery from the Indemnification Rights.”
Olson introduced a summary of the attorney’s fees incurred in the case,
supported by the billing records, which was admitted without objection.8 The
documentary evidence of Olson’s attorney’s fees included approximately 170
pages of redacted billing records reflecting the tasks performed by various
attorneys and support personnel, the amount of time required for those tasks, the
billable rate charged by the various attorneys and personnel, and other litigation
expenses incurred in the course of the litigation. The summary reflected total
actual billings of $734,750 and included an estimate that Olson would incur an
additional $100,000 in fees through the October 2011 trial, for a total of $834,750.
Olson also presented the testimony of Zavitsanos, his attorney. Zavitsanos
testified that Mistras paid the fees in this case because it “had an arrangement
where they would advance the fees for him.” Zavitsanos testified that the billings
submitted were “net hours” and did not include time that he “wrote off” for his
8
Olson also presented the affidavit of the business manager for Zavitsanos’s law
firm, attesting to the amount of attorney’s fees that Mistras had already paid on
Olson’s behalf.
19
own review of associate attorney work that he “did not feel was appropriate to
double up” or for extra research for which the client should not have been billed.
He also testified that the summary contained an estimate of the “time and money
that will be spent through the conclusion of this trial for the month of October” that
had not been billed to the client yet. He testified that during trial and “probably for
the two weeks before” the attorneys “probably work at least 12 to 14 hours a day,
maybe more.” He testified that the trial itself lasted three and half weeks.
Zavitsanos also testified that the summary and attached bills did not include
every expense incurred—he testified that he knew some attorneys had worked on
the case whose hours were not reflected in the billing. The summary also did not
include attorney time spent consulting with experts on damages or computer
forensics, expenses related to attorney travel to Memphis where Olson was
working at one point during the pending litigation, or expenses related to Roberts.
Zavitsanos stated, “I’m limiting myself to the fees that we are entitled to under the
Business and Commerce Code section that concerns noncompetes.”
Zavitsanos also testified generally about his qualifications and experience,
stating that he had been practicing law in the Houston area, among other locations,
since he graduated from law school in 1987 and had done “a fair number of
employment cases and trade secret cases and things of that sort.” He also testified
that he was board certified in civil trial law. He stated that he was familiar with the
20
rates charged by attorneys in Harris County and the rates for this specific type of
case involving employment disputes.
Regarding the work performed in this particular case, Zavitsanos testified
that the number of “emergency matters that Sentinel requested” early on in the case
required intensive work that prevented firm employees from working on other
matters. Zavitsanos also stated that discovery in this case was “very, very
challenging.” He outlined the usual course of discovery in a case of this
complexity, including written discovery, depositions, and forensic computer
experts, and he stated,
And all of that was done here; but it was done repeatedly, repeatedly,
repeatedly, repeatedly. I mean, I cannot recall—I have been doing
this almost 25 years. I cannot recall a case where we have had to
get—we have had to file so many motions to get basic information out
of the other side as much as this case.
He testified that the temporary injunction hearing was delayed by prolonged
discovery on Sentinel’s part, that when the hearing occurred, it lasted for a week as
opposed to the more typical two or three hour hearing, and that Sentinel also filed
an interlocutory appeal challenging the trial court’s denial of its application for
temporary injunction. Zavitsanos testified that the firm expended “close to
$100,000 responding to that appeal; and then right before we were to appear before
the court of appeals to argue the case, [Sentinel] dropped the appeal.”
21
After the parties had designated that they were prepared to proceed to trial
and the case had been assigned a preferential trial setting, Sentinel also pursued
arbitration “out of left field” against Olson, which it then subsequently dropped
after four months. Zavitsanos stated that this arbitration action “probably involved
over $150,000 in fees that [Mistras] paid, over 150,000 that was unnecessary”
because Sentinel later changed its position and returned to the trial court to try all
of its claims. He also testified that defending this case was very difficult because
Sentinel repeatedly changed legal theories and added and dropped numerous
factual allegations and because Sentinel had taken “some very novel [legal]
positions.”
Zavitsanos testified that “at least 90 percent” of the amount reflected in the
summary and billing had been devoted to defending Olson against the enforcement
of the “noncompetition agreement versus any of these other claims that . . . might
have been in and out of the case at other times or not before the jury at this time.”
He stated: “[A]ll the current claims, they all stem from the construction, the
application, the reading of Mr. Olson’s agreement.” He specifically stated that
“with the exception of about 10 percent” of the total included in the summary and
attached billings, “every minute is either directly related to . . . the noncompete
claims concerning Jody Olson or claims that are intertwined so tightly with the
noncompete that you can’t—you can’t separate one from the other.” He went on to
22
give the specific examples of “the week-long temporary injunction hearing, that
was only about a noncompete, nothing else” and stated that “the work reflected on
the invoices that we are requesting reimbursement for under the statute, it is either
directly related—directly related to the noncompete issues or intertwined with the
noncompete issues.” Although Sentinel’s counsel questioned Zavitsanos about the
“intertwined” nature of the claimed attorney’s fees, Sentinel did not object to the
evidence supporting the request for attorney’s fees on any basis.
Zavitsanos testified that, of the approximately $834,000 in billing presented
as evidence, Olson was requesting ninety percent of that as related to defending
against the claims under the covenant not to compete, which amounted to
$751,275. He stated that due to the length of the trial, and the fact that “an appeal
would involve a review of the entire record and research of the issues that they
have raised,” an appeal in this case “would be about $150,000.” In the event of
further appeal to the Texas Supreme Court, the fees would be an additional
$50,000 because “most of the work would have been done with the court of
appeals.” He testified that, based on his experience and familiarity with rates
charged for similar services, he believed that the rates reflected in the billing and
the amount of time billed were reasonable and necessary.
23
B. Submission of Olson’s Entitlement to Attorney’s Fees to Jury
In the second part of its first issue, Sentinel argues that the trial court erred
in submitting the issue of Olson’s entitlement to attorney’s fees to the jury. It
argues that the issue of attorney’s fees was a question of law for the trial court to
determine and that the trial court erred in “allowing an ‘advisory jury’ to
determine” the issues in Question 7 of the jury charge. In its second issue, it
argues that the trial court erred in granting judgment for attorney’s fees because
there is no evidence, or insufficient evidence, that Sentinel knew at the time of the
execution of the agreement that the covenant did not contain limitations as to time,
geographical area, and scope of activity to be restrained that were reasonable or
that it sought to enforce the covenant to a greater extent than was necessary.
Because this case involves the enforcement of a covenant not to compete,
the Covenants Not to Compete Act applies and preempts “any other . . . procedures
and remedies,” including the common law. TEX. BUS. & COM. CODE ANN. § 15.52
(Vernon 2011); Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 645 (Tex.
App.—Houston [1st Dist.] 2010, pet. denied).
Section 15.51(c) provides for the award of attorney’s fees to an employee in
limited circumstances:
If the primary purpose of the agreement to which the covenant is
ancillary is to obligate the promisor to render personal services, the
promisor establishes that the promisee knew at the time of the
execution of the agreement that the covenant did not contain
24
limitations as to time, geographical area, and scope of activity to be
restrained that were reasonable and the limitations imposed a greater
restraint than necessary to protect the goodwill or other business
interest of the promisee, and the promisee sought to enforce the
covenant to a greater extent than was necessary to protect the
goodwill or other business interest of the promisee, the court may
award the promisor the costs, including reasonable attorney’s fees,
actually and reasonably incurred by the promisor in defending the
action to enforce the covenant.
TEX. BUS. & COM. CODE ANN. § 15.51(c). Because the statute provides that “the
court may award” attorney’s fees, the award of attorney’s fees is within the trial
court’s discretion and is not mandatory. Spring v. Walthall, Sachse & Pipes, Inc.,
No. 04-09-00474-CV, 2010 WL 2102988, at *11 (Tex. App.—San Antonio May
26, 2010, no pet.) (mem. op.) (citing Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex.
1998) (holding that statutes providing that court “may award” are permissive and
require abuse of discretion to overturn order granting or denying award)).
As a predicate to an award of attorney’s fees under section 15.51(c), Olson
had to prove that (1) Sentinel knew at the time the employment agreement was
executed that the covenant did not contain limitations as to time, geographical area,
and scope of activity to be restrained that were reasonable and the limitations
imposed a greater restraint than necessary to protect Sentinel’s goodwill or other
business interest, and (2) Sentinel sought to enforce the covenant to a greater
extent than was necessary to protect its goodwill or other business interest. See
TEX. BUS. & COM. CODE ANN. § 15.51(c); Spring, 2010 WL 2102988, at *12.
25
Olson was required to establish these facts before the trial court could exercise its
discretion to award attorney’s fees. See TEX. BUS. & COM. CODE ANN. § 15.51(c);
Spring, 2010 WL 2102988, at *12.
Sentinel does not provide any argument on appeal that these determinations
should be construed as questions of law rather than as questions of fact. Sentinel
did not object to the jury charge in this case before it was submitted to the jury, and
it never requested that the trial court, rather than the jury, make the factual
determination required by section 15.51(c). Thus, it waived any complaint
regarding the submission of this issue to the jury. See Cruz, 364 S.W.3d at 829
(complaint to jury charge is waived unless specifically included in objection);
Cross, 501 S.W.2d at 873 (holding that failure to object before charge is read to
jury waives complaint).
However, the jury question complained of—Question 7—asked whether
“Sentinel (1) [knew] at the time the Employment Agreement was signed that the
covenant not to compete did not contain limitations as to time, geographical area,
or scope of activity to be restrained that were reasonable and (2) [sought] to
enforce the limitations to a greater extent than necessary to protect [its] business
interest[.]” It did not ask the jury whether Olson was ultimately entitled to
attorney’s fees based on that finding; that determination was made by the trial
court in rendering the final judgment. Cf. Burrow v. Arce, 997 S.W.2d 229, 245–
26
46 (Tex. 1999) (concluding that, although contested fact issues may be resolved by
jury, ultimate decision regarding equitable remedy of forfeiture of attorney’s fees
is discretionary but “must be made by the court”).
Sentinel argues, in its second issue, that “[t]he trial court erred in adopting
the ‘advisory jury’s’ answer to Question No. 7,” or, in the alternative, that the
evidence is legally and factually insufficient to support the jury’s answer to
Question 7. Regardless of whether the trial court or the jury made the required
resolution of the fact questions in Question 7, the sufficiency of the evidence
supporting the predicate findings of section 15.51 is subject to the same review.
See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994) (holding that trial
court’s findings of fact have same weight as jury’s verdict, and we review legal
and factual sufficiency of evidence used to support them as we would review jury’s
findings).
In a legal sufficiency, or “no-evidence” review, we determine whether the
evidence would enable reasonable and fair-minded people to reach the verdict
under review. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In
conducting this review, we credit favorable evidence if a reasonable fact-finder
could, and we disregard contrary evidence unless a reasonable fact-finder could
not. Id. We consider the evidence in the light most favorable to the finding under
review and indulge every reasonable inference that would support it. Id. at 822.
27
We must sustain a no-evidence contention only if (1) the record reveals a complete
absence of evidence of a vital fact; (2) the court is barred by rules of law or of
evidence from giving weight to the only evidence offered to prove a vital fact;
(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or
(4) the evidence establishes conclusively the opposite of the vital fact. Id. at 810.
In reviewing the factual sufficiency of the evidence, we “must consider and
weigh all the evidence and should set aside the judgment only if it is so contrary to
the overwhelming weight of the evidence as to be clearly wrong and unjust.” Arias
v. Brookstone, L.P., 265 S.W.3d 459, 468 (Tex. App.—Houston [1st Dist.] 2007,
pet. denied) (citing Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam)).
The jury found, and the trial court impliedly agreed, that Sentinel knew at
the time the employment agreement was signed that it did not contain reasonable
limitations and that Sentinel sought to enforce the limitations to a greater extent
than necessary to protect its business interests. Olson cites Corey’s testimony that
he purposely made the geographical area covered by the non-compete provision
broad “to cover pretty much all of the general areas that we think or anticipate
would be covered” and Corey’s testimony that he relied on a provision allowing a
trial court to reform the agreement if necessary. The covenant not to compete
expressly stated that “Employee and Company agree that the limitations as to time
and scope of activity to be restrained are reasonable,” but it was silent on the
28
reasonableness of the geographic area. Olson argues that this supports a
conclusion that Corey did not attempt to tailor the non-compete provisions to areas
where Olson would be working, even though the terms of the agreement itself
showed that Corey knew such specificity could be required by a court reforming
the agreement.
Olson also cites his e-mail to Corey, stating that the three-year time
limitation in the non-compete was excessive considering that he would only
receive two weeks’ severance pay, and Corey’s response, stating that Olson would
still be entitled to work as an inspector doing turnarounds. Olson argues that this
exchange supports a conclusion that Corey knew that the three-year period of
enforcement for the broad provisions regarding the activities to be restricted—
which included a general restriction against “[c]onducting, engaging or
participating in . . . Inspection, Risk Based Inspection and Asset Integrity
Management services in any capacity in which Employee served while working
with Company”—were unreasonable.
Olson also cites evidence supporting the finding that Sentinel attempted to
enforce the limitations of the non-compete to a greater extent that was necessary to
protect its business interests. Sentinel sought to enforce the non-compete
provision’s general ban on “competing,” including restricting Olson from working
in geographic areas that were not tailored to Olson’s work on behalf of Sentinel or
29
even to Sentinel’s own current business. Sentinel also sought to prevent Olson
from working for Mistras, where Olson worked conducting inspections, in spite of
Corey’s assurance in the e-mail that the non-compete did not prevent Olson from
working turnarounds as an inspector. Corey testified that Sentinel wanted to
prevent Olson from doing work for a competitor “in any capacity” that overlapped
with managerial duties at Sentinel: “If he became a manager for us, and also that
included sweeping the floors at Sentinel, that means that he can’t go to [Mistras]
and sweep the floors, in my opinion. ‘In any capacity,’ is what it says. Now,
inspector, manager, supervisor, dishwasher, it doesn’t matter.”
We agree that this evidence supports the jury’s factual determination in
Question 7. Viewing the evidence in the light most favorable to the finding, we
conclude that there is more than a scintilla of evidence that Corey knew at the time
he entered into the employment agreement on behalf of Sentinel that the non-
compete was unnecessarily broad and lacked reasonable limitations and that
Sentinel sought to enforce the covenant to a greater extent than necessary to protect
its interests. See City of Keller, 168 S.W.3d at 810, 822.
Sentinel, however, cites Corey’s testimony that he obtained the form for the
employment agreement with the covenant not to compete on the internet, Olson’s
testimony that he signed the employment agreement of his own free will, and the e-
mail Olson sent to Corey stating that he was happy with the terms and conditions
30
in the employment agreement to support its argument that the evidence was
insufficient to support the findings here. Nevertheless, even considering this
evidence, we cannot conclude that the finding was so contrary to the overwhelming
weight of the evidence as to be clearly wrong and unjust. See Arias, 265 S.W.3d at
468.
We conclude that the evidence was sufficient to support the predicate
findings required by section 15.51(c) to permit an award of attorney’s fees.
Even in light of the jury’s finding, Sentinel argues that Lazer Spot, Inc. v.
Hiring Partners, Inc. prevents an award of attorney’s fees here because, as it
argues in its brief, “the court of appeals expressly held that the new employers of a
promisor under a covenant not to compete with a former employer are not entitled
to recover attorney’s fees.” See 387 S.W.3d 40, 53 n.24 (Tex. App.—Texarkana
2012, pet. denied) (“Because the express language of the statute does not apply
here, Lazer Spot is not entitled to attorney’s fees under Section 15.51(c). We find
no authority to support the proposition that a third party, such as Lazer Spot, is
entitled to attorney’s fees pursuant to this section of the statute.”) (internal citations
omitted). However, Lazer Spot is distinguishable because the award of attorney’s
fees here was made to Olson himself, not to Mistras.
The only other argument that Sentinel advances on appeal opposing the trial
court’s determination that Olson was entitled to attorney’s fees is its argument that
31
the trial court’s error contributed to the attorney’s fees in this case: “Failing to
perform its duty as a matter of law, the trial court committed errors of law that
contributed to lengthy litigation, and unnecessary increased fees. The trial court
participated in and compounded the error resulting in the instant challenged fee
award.” We have already concluded that the trial court did not fail to perform its
duty to reform the covenant not to compete. Although the protracted litigation in
this case may have served to increase the amount of attorney’s fees incurred,
Sentinel, as the plaintiff, was in a better position to resolve the matter than the trial
court.
Thus, Sentinel has failed to show that the trial court abused its discretion in
awarding Olson attorney’s fees. See TEX. BUS. & COM. CODE ANN. § 15.51(c);
Spring, 2010 WL 2102988, at *11 (stating that because statute provides that “the
court may award” attorney’s fees, award of attorney’s fees is within trial court’s
discretion and is not mandatory).
We overrule Sentinel’s first and second issues.
C. Amount of Attorney’s Fees
In its third issue, Sentinel argues that the trial court erred in granting
judgment for $750,000 in attorney’s fees because the fees were not “actually and
reasonably incurred by the promisor in defending the action to enforce the
covenant.” See TEX. BUS. & COM. CODE ANN. § 15.51(c) (allowing promisor, like
32
Olson, who has established statutory predicate facts, to recover “the costs,
including reasonable attorney’s fees, actually and reasonably incurred by the
promisor in defending the action to enforce the covenant”).
The issue of the amount of attorney’s fees to be awarded here was a fact
question that was submitted to the jury. See Garcia v. Gomez, 319 S.W.3d 638,
642 (Tex. 2010) (“Generally, the determination of reasonable attorney’s fees is a
question of fact. . . .”); Bocquet, 972 S.W.2d at 21 (analyzing attorney’s fees under
Declaratory Judgments Act and stating, “In general, ‘[t]he reasonableness of
attorney’s fees, the recovery of which is authorized by . . . statute, is a question of
fact for the jury’s determination’”) (quoting Trevino v. Am. Nat’l Ins. Co., 168
S.W.2d 656, 660 (Tex. 1943) (analyzing award of attorney’s fees in conjunction
with suit on insurance policy)); Stewart Title Guar. Co. v. Aiello, 941 S.W.2d 68,
73 (Tex. 1997) (“The award of appellate fees is a question of fact for the jury. As
such, we will not disturb the jury’s decision to award the Aiellos less than they
requested.”).
The jury charge asked the jury, “What is a reasonable fee for the necessary
services of Jody Olson’s attorneys in this case in defending the claim that Jody
Olson breached the non-competition agreement in this case, stated in dollars and
cents?” The jury was given a list of factors to consider in determining the amount
of a reasonable fee. It found that Olson was entitled to $750,000 for preparation
33
and trial, $150,000 for an appeal to the Court of Appeals, and $50,000 for an
appeal to the Supreme Court of Texas.
Sentinel did not object to this question before the charge was submitted to
the jury. Thus, it has waived any complaint that the jury did not consider fees
“actually incurred” in reaching its answer. See Cruz, 364 S.W.3d at 829
(complaint to jury charge is waived unless specifically included in objection);
Cross, 501 S.W.2d at 873 (holding that failure to object before charge is read to
jury waives complaint). We measure the sufficiency of the evidence to support the
jury’s answer against the charge that was actually given. See Osterberg v. Peca,
12 S.W.3d 31, 55 (Tex. 2000) (“[I]t is the court’s charge, not some other
unidentified law, that measures the sufficiency of the evidence when the opposing
party fails to object to the charge.”); Soon Phat, L.P. v. Alvarado, 396 S.W.3d 78,
90 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (“When the parties have
not objected at trial to the substance of the law set forth in the jury charge, we
review sufficiency of the evidence in light of legal standards contained in the
unobjected-to charge.”).
Regarding the amount of attorney’s fees, the party applying for the award
bears the burden of proof. El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 762–63
(Tex. 2012). In El Apple, the supreme court stated:
That proof should include the basic facts underlying the lodestar,
which are: (1) the nature of the work, (2) who performed the services
34
and their rate, (3) approximately when the services were performed,
and (4) the number of hours worked. An attorney could, of course,
testify to these details, but in all but the simplest cases, the attorney
would probably have to refer to some type of record or documentation
to provide this information.
Id. at 763. Thus, the supreme court held that, when applying for a fee under the
lodestar method, “the applicant must provide sufficient details of the work
performed before the court can make a meaningful review of the fee request” and
that such evidence includes “documentation of the services performed, who
performed them and at what hourly rate, when they were performed, and how
much time the work required.” Id. at 764.
Here, the record contains a summary of Olson’s attorney’s fees, showing a
“grand total” of $834,750 in fees incurred through the end of trial. This summary
was supported by approximately 170 pages of redacted bills detailing the services
that resulted in those fees, including the type of services performed, the amount of
time expended on each service, the identity of the person who performed them and
their billable rates, and the dates the services were performed. Zavitsanos’s
testimony on the amount of fees incurred explained and expounded upon the
billings admitted into the record and the fees incurred as a result of the trial that
had not yet been billed to Olson. Zavitsanos further testified, based on his
knowledge of the rates in Harris County and his experience with similar litigation,
that the fees requested were reasonable and necessary. His testimony detailed the
35
work done on this case, including an emergency injunction hearing, a temporary
injunction hearing, an interlocutory appeal, extensive discovery, an aborted
arbitration, and numerous other motions and pleadings required to defend Olson
against Sentinel’s claim that he breached his covenant not to compete. Zavitsanos
opined that at least ninety percent of the work included in total billed amount of
$834,750 was work that either directly related to defending Olson on the non-
compete claim or was so intertwined that it could not be separated. The jury
awarded Olson almost ninety percent of the total billing.
Sentinel argues that “the evidence establishes the sum of $271,384.75 in
attorneys, paralegals, secretaries and others’ fees were billed from the inception of
the case until just after the trial court’s four day temporary injunction hearing
regarding the covenant not to compete.” However, Zavitsanos’s uncontested
testimony established that numerous legal proceedings occurred following the
temporary injunction hearing in which Olson incurred attorney’s fees in defending
against Sentinel’s claim that he breached the non-compete, including an
interlocutory appeal of the trial court’s denial of the temporary injunction,
Sentinel’s attempt to pursue arbitration against Olson, and a three-and-a-half-week
trial. Other than this argument, Sentinel does not contest the reasonableness of
Olson’s attorney’s rates or the amount of time spent on representing Olson.
36
We conclude that the evidence was sufficient to support the jury’s award of
$750,000 in attorney’s fees to Olson.
We overrule Sentinel’s third issue.
D. Segregation of Fees
In its fourth issue, Sentinel argues that the trial court erred in awarding
$750,000 in attorney’s fees because the fees were not segregated.
Because attorney’s fees are only recoverable pursuant to a contract or
statute, “fee claimants have always been required to segregate fees between claims
for which they are recoverable and claims for which they are not.” Tony Gullo
Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006) (citing Aiello, 941
S.W.2d at 73). However, the supreme court has recognized a narrow exception
“when discrete legal services advanced both a recoverable and unrecoverable
claim” and thus “are so intertwined that they need not be segregated.” Id. at 313–
14. The court stated:
This standard does not require more precise proof for attorney’s fees
than for any other claims or expenses. Here, Chapa’s attorneys did
not have to keep separate time records when they drafted the fraud,
contract, or DTPA paragraphs of her petition; an opinion would have
sufficed stating that, for example, 95 percent of their drafting time
would have been necessary even if there had been no fraud claim.
The court of appeals could then have applied standard factual and
legal sufficiency review to the jury’s verdict based on that evidence.”
Id. at 314.
37
Here, Zavitsanos testified that the amount included in the summary and
supporting bills introduced at trial did not include every fee and expense incurred
in the course of trial. For example, Zavitsanos testified that Carey Roberts, one of
the other defendants in this case, was “swallowing” his attorney’s fees because
there was no valid legal basis for him to request them from the court. Zavitsanos
further testified that the amounts sought by Olson were all for work related directly
to defending against Sentinel’s claim that he breached the covenant not to compete
or for work that was intertwined with that claim. Zavitsanos opined that, of the
work presented in the billing admitted at trial, “at least” ninety percent of it was
necessary in defending Olson against Sentinel’s claim for breach of the covenant
not to compete.
On appeal, Sentinel does not identify any specific amount of time or items of
work that were included in the fees requested by Olson that were attributable only
to non-recoverable legal fees, aside from its general allegation that “[t]here is no
evidence discre[te] legal services promoted both the defense of the tortious
interference claims against Mistras, as well as the claim for attorney fees to reform
the non-compete agreement.” As indicated above, Zavitsanos’s testimony is some
evidence that numerous, discrete legal services either related directly to the claim
against Olson or were intertwined with that claim.
38
Thus, we conclude that Olson’s evidence supporting his attorney’s fees was
sufficiently segregated. See id. at 313–14. We have already concluded that the
evidence was sufficient to support the jury’s award. See id. at 314.
We overrule Sentinel’s fourth issue.
E. Conditional Appellate Fees
In its fifth issue, Sentinel argues that the trial court erred in awarding Olson
conditional appellate attorney’s fees because there was “no evidence that such fees
were or have been actually and reasonably incurred.”
We read the trial court’s judgment as awarding appellate attorney’s fees only
after the expense is incurred as a result of Sentinel’s unsuccessful appeal. We
therefore reject Sentinel’s position and conclude that the record demonstrates,
based on Zavitsanos’s testimony, that Olson did incur attorney’s fees in defending
against Sentinel’s unsuccessful appeal to this Court. See Law Offices of Windle
Turley, P.C. v. French, 164 S.W.3d 487, 493 (Tex. App.—Dallas 2005, no pet.)
(rejecting argument that conditional appellate attorney’s fees had not been
“incurred” as required by Civil Practice and Remedies Code for award of
attorney’s fees). However, pursuant to the supreme court’s holding in El Apple,
we conclude that the record on appeal does not, at this time, contain sufficient
evidence supporting the amount of attorney’s fees incurred by Olson on appeal.
See 370 S.W.3d at 764 (“For purposes of lodestar calculations, [evidence
39
supporting a request for attorney’s fees] includes, at a minimum, documentation of
the services performed, who performed them and at what hourly rate, when they
were performed, and how much time the work required.”). The only evidence
supporting the award of appellate attorney’s fees was Zavitsanos’s very general
testimony that Olson would incur about $150,000 in fees if the case were appealed
to this Court and an additional $50,000 in fees in the event of an appeal to the
Texas Supreme Court.
Accordingly, we sustain part of Sentinel’s fifth issue and remand for the trial
court to adjust the amount of appellate attorney’s fees awarded to conform to the
applicable lodestar calculations.
F. Pre-judgment Interest on Attorney’s Fees
In its sixth issue, Sentinel argues that the trial court erred in granting pre-
judgment interest on attorney’s fees.
Sentinel first argues that award of pre-judgment interest on the attorney’s
fees was improper because section 15.52 preempts any other provisions or law that
might entitle Olson to relief. Olson does not address the preemption issue at all.
However, the statute permits recovery of “the costs, including reasonable
attorney’s fees, actually and reasonably incurred by the promisor in defending the
action to enforce the covenant.” TEX. BUS. & COM. CODE ANN. § 15.51(c)
(emphasis added). The purpose of pre-judgment interest is to compensate a party
40
for the lost use of money due as damages during the lapse of time between the
accrual of the claim and the date of the judgment. City of Houston v. Texan Land
& Cattle Co., 138 S.W.3d 382, 388 (Tex. App.—Houston [14th Dist.] 2004, no
pet.). While the lost use of the money paid as attorney’s fees might, in some
circumstances, be considered a cost incurred in defending the action to enforce the
covenant under section 15.51, that does not appear to be the situation here. Olson
did not pay the attorney’s fees, so he did not incur any costs in the form of lost use
of the money paid in attorney’s fees on his behalf by Mistras.
Thus, we conclude under the facts of this case, that the award of pre-
judgment interest on the attorney’s fees that had already been paid on Olson’s
behalf do not fall under the permitted statutory recovery. See TEX. BUS. & COM.
CODE ANN. § 15.51(c). This court and others have held that the Covenants Not to
Compete Act preempts “any other . . . procedures and remedies,” including the
common law. See id. § 15.52; Glattly, 332 S.W.3d at 645; Perez v. Tex. Disposal
Sys., Inc., 103 S.W.3d 591, 593–94 (Tex. App.—San Antonio 2003, pet. denied)
(concluding that employer that was not entitled to fees under section 15.51 was
also not entitled to fees under any other statute because section 15.51’s remedies
provisions, including provision addressing attorney’s fees, preempts award under
any other law).
41
We sustain Sentinel’s challenge on this issue, and delete the award of pre-
judgment interest from the judgment. 9
Conclusion
We reverse the award of conditional appellate attorney’s fees and remand for
further proceedings consistent with this opinion. We further modify the judgment
to delete the award of pre-judgment interest and affirm as modified.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Higley, and Bland.
9
Thus, we need not address Sentinel’s contention that there is a split in the courts of
appeals regarding the award of pre-judgment interest on paid attorney’s fees. See
Nova Cas. Co. v. Turner Constr. Co., 335 S.W.3d 698, 706 (Tex. App.—Houston
[14th Dist.] 2011, no pet.) (recognizing that some courts of appeals have held that
award of pre-judgment interest on attorney’s fees paid before judgment is
improper, but concluding that award of such pre-judgment interest is within trial
court’s discretion). Nor do we need to address Sentinel’s seventh issue, arguing
that the evidence was insufficient to support the trial court’s award of pre-
judgment interest.
42