Date: 04-24-2018

Case Style:

Case Number: 16-20628

Judge: Stephen A. Higginson

Court: United States Court of Appeals for the Fifth Circuit on appeal from the Southern District of Texas (Harris County)

Plaintiff's Attorney: Blaine Hummel and Mary Alice Parsons

Defendant's Attorney: George R Gibson, Michael Jay Kuper, Seth Adam Miller and Marc Lance Ellison

Description: In this employment dispute, Karen D’Onofrio sued her former employer,
Vacations to Go (“VTG” or “Vacation”), a division of Vacation Publications, Inc.,
the largest seller of ocean-going cruises in the world, for interfering with her
rights under the Family Medical Leave Act. Vacation counter sued, alleging
that Karen and her husband, Michael D’Onofrio, breached Karen’s covenant
not to compete, converted confidential information, and tortuously interfered
with its business relationships, among other things, by conspiring to establish
a competing vacation-sales franchise. A year after Vacation moved for
summary judgment, the district court granted that motion—terminating all
pending motions and entering final judgment on all claims, including those not
addressed in its order. Finding numerous disputes of material fact, we reverse
in part, affirm in part, vacate the district court’s award of attorneys’ fees,
damages, and injunctive relief, and remand for further proceedings.
I.
A.
Karen D’Onofrio began working as a sales representative for Vacation in
2012. Vacation provided Karen with specialized training in sales and
marketing and with industry knowledge and confidential information
including client information and marketing and sales techniques. The
employment contract she signed with Vacation stated that during the course
of her employment and for 18 months thereafter she would not, among other
things: (1) “[w]ork in any capacity . . . for any direct or indirect competitor of
Case: 16-20628 Document: 00514442515 Page: 2 Date Filed: 04/23/2018
No. 16-20628
3
VTG in any job related to sales or marketing of cruises, escorted or independent
tours, river cruises, safaris, or resort stays”; (2) “[d]isclose directly or indirectly
VTG’s . . . Confidential Information to any person . . . for any purpose or reason
whatsoever”; (3) [d]irectly or indirectly use VTG’s . . . Confidential Information
for [her] own benefit for any purpose whatsoever”; (4) “[s]olicit, engage in
selling to, engage in business with, or call upon any person or entity who or
which has purchased a cruise, escorted or independent tour, river cruise, safari
or resort stay from VTG within the preceding 3 years”; or (5) “[s]olicit or induce
any person that has been a customer of VTG within the preceding 3 years to
terminate its relationship with VTG.”
Michael is an aerospace engineer, but has supplemented his income
throughout his career with various direct-sales ventures, including cookware,
kitchen gadgets, and mattresses. In 2011, he was involved in a major car
accident in which he sustained severe and lasting injuries requiring multiple
surgeries. Due to the injuries he sustained, he found it impossible to continue
his direct-sales business as he could no longer carry the products he sold to
customers or trade shows. In April 2014, prior to undergoing major back
surgery, Michael decided to pursue a “long-held desire” to sell travel services,
which he could do without carrying heavy merchandise. He decided to
purchase a franchise of CruiseOne, a company that also sells cruises and other
travel-related products and services. In support of his application to purchase
the franchise, Michael attached a screenshot of Karen’s sales records at
Vacation, including her sales totals but not customer information. In May
2014, the D’Onofrios executed a franchise agreement between CruiseOne and
Tranquility Base Enterprises, an entity jointly owned by Michael and Karen.
On July 7, 2014, Karen received a confirmation e-mail stating that she
was scheduled to attend a CruiseOne training in Florida beginning on July 10.
On July 9, at the suggestion of Vacation’s human resources (“HR”) specialist,
Case: 16-20628 Document: 00514442515 Page: 3 Date Filed: 04/23/2018
No. 16-20628
4
Karen requested leave from Vacation pursuant to the Family Medical Leave
Act (“FMLA”), 29 U.S.C. § 2612(a)(1)(C), in order to care for Michael. Vacation
offered Karen two options: she could go on unpaid FMLA leave or she could
log in remotely a few times per week and continue to service her existing
accounts so that she could keep the commissions from those accounts while on
leave. Karen chose the latter option, and agreed to continue servicing existing
clients but not take new leads. On July 10, she attended the CruiseOne
training in Florida while Michael stayed home.
On July 14, 2014, Vacation’s senior director of HR e-mailed Karen
confirming that her FMLA leave had begun on July 11 and asking that she
update her e-mail away message to reflect that she was on leave but would be
responding to clients periodically. On July 17, Karen’s manager checked
Karen’s Vacation e-mail account to ensure that she had updated her away
message, and noticed that Karen had not responded to any e-mails since July
12. Her manager had also received several complaints from Karen’s clients
that she had not responded to their voicemails. The HR director then sent
Karen an e-mail reiterating Karen’s responsibilities if she wanted to continue
servicing clients and receiving commissions while on leave. Karen responded
on July 21, stating that her laptop had not been working. On August 11, after
not being able to reach Karen for over a week, her manager accessed Karen’s
Vacation e-mail account and found 220 unread e-mails. Karen had not read a
single e-mail since July 26.
In light of Karen’s failure to respond to client e-mails and voicemails, the
HR director decided to bring Karen’s clients in house while she was on leave.
He e-mailed her to inform her of the change, explaining that the clients would
be returned to her upon her return from FMLA leave. Karen was also locked
out of her Vacation accounts. The senior director of operations then e-mailed
Vacation’s in-house salespersons, informing them that they would be covering
Case: 16-20628 Document: 00514442515 Page: 4 Date Filed: 04/23/2018
No. 16-20628
5
Karen’s clients while she was on leave and asking that they inform Karen’s
clients of the arrangement. One manager mistakenly informed 23 clients via
e-mail that Karen was no longer working at Vacation. One such e-mail went
to Michael, as he had previously booked a cruise through his wife.
After being locked out of her Vacation accounts and learning of the email
that Michael received, Karen believed that she had been terminated from
Vacation. She filed for unemployment benefits on August 24, 2014. In
response, Vacation indicated that Karen was still employed and on FMLA
leave. In October 2014, Vacation e-mailed Karen confirming that her FMLA
leave had expired and asking whether she planned to return. Karen responded
that she was not returning because she believed that she had been terminated
in August.
Karen also alleges that she was sexually harassed during her
employment with Vacation. She alleges that one Vacation employee, an IT
technician, touched her breasts and, after she reported the conduct, continued
to hover around her work area, stare at her, and make unwanted physical
contact with her. After reporting the continued harassment, she was
reassigned to another department on a different floor, but other employees,
including supervisors, allegedly made inappropriate comments and jokes, used
obscene language, and engaged in unwanted physical contact.
B.
Because it is relevant to several of the issues raised on appeal, we
recount in some detail the tangled procedural history of this case. In February
2015, Karen filed suit against Vacation in state court alleging FMLA
violations. Vacation filed counterclaims against Karen for breach of contract,
conversion of confidential information, fraud, tortious interference with
existing and prospective business relations, and breach of fiduciary duty.
Vacation subsequently removed the case to federal court. It then sought and
Case: 16-20628 Document: 00514442515 Page: 5 Date Filed: 04/23/2018
No. 16-20628
6
received leave to join Michael as a third-party defendant, asserting claims
against him for conversion, civil conspiracy, tortious interference, and aiding
and abetting breach of fiduciary duties.
In June 2015, Karen moved to voluntarily dismiss her FMLA claims,
which Vacation opposed and the district court denied. In July, Michael moved
to dismiss the complaint against him for lack of subject-matter jurisdiction.
Then in August, Vacation moved for summary judgment on Karen’s FMLA
claims against it and its claims against both her and Michael. The next month,
Karen, proceeding pro se, filed a separate federal lawsuit asserting claims for
sexual harassment by two Vacation employees in violation of Title VII, which
was consolidated with this case in December 2015.
On August 22, 2016, the district court granted Vacation’s motion for
summary judgment.1 The court terminated all pending motions, including
Michael’s motion to dismiss for lack of subject-matter jurisdiction (which was
not addressed in the court’s order) and issued a final judgment disposing of all
claims, including the sexual harassment claims added in December 2015
(which were not addressed in either Vacation’s motion for summary judgment
or the court’s order). The D’Onofrios timely appealed.
II.
A.
Michael first contends that the district court lacked subject-matter
jurisdiction over the claims against him because they were state-law claims
that did not arise out of the same nucleus of operative fact as Karen’s federal
1 The district court’s order, which appears to be unchanged from the proposed order
submitted by Vacation with its motion for summary judgment, erroneously states that it was
issued in 2015. The district court’s docket, however, makes clear that the order was issued
in 2016.
Case: 16-20628 Document: 00514442515 Page: 6 Date Filed: 04/23/2018
No. 16-20628
7
FMLA claims against Vacation.2 We “review[] a district court’s assumption of
subject-matter jurisdiction de novo.” Arena v. Graybar Elec. Co., 669 F.3d 214,
218-19 (5th Cir. 2012). Once subject-matter jurisdiction is established, we
review the decision to exercise supplemental jurisdiction for abuse of
discretion. See Mendoza v. Murphy, 532 F.3d 342, 346 (5th Cir. 2008).3
Federal district courts have “supplemental jurisdiction over all . . . claims
that are so related to claims in the action within [the district court’s] original
jurisdiction that they form part of the same case or controversy under Article
III,” including “claims that involve the joinder or intervention of additional
parties.” 28 U.S.C. § 1367(a); see also State Nat. Ins. Co. v. Yates, 391 F.3d
577, 579 (5th Cir. 2004).4 “The question under section 1367(a) is whether the
supplemental claims are so related to the original claims that they . . . ‘derive
from a common nucleus of operative fact.’” Mendoza, 532 F.3d at 346 (quoting
United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966)).
Here, there is a “common nucleus of operative fact” between Karen’s
FMLA claims and Vacation’s state-law claims against Michael. Karen alleged
2 Michael also briefly suggests that he was improperly made a party under Rule 14 of
the Federal Rules of Civil Procedure. However, Vacation explicitly, and correctly, cited Rules
19 and 20 as the basis for joinder.
3 The district court never actually ruled on the motion to dismiss for lack of subjectmatter
jurisdiction. Rather, the motion remained pending for over a year and was simply
terminated after the district court granted Vacation’s motion for summary judgment—
including on the claims Michael sought to have dismissed for lack of jurisdiction. That was
error. A court may not assume its jurisdiction for purposes of deciding a case on the merits.
See Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94-95 (1998) (“The
requirement that jurisdiction be established as a threshold matter ‘spring[s] from the nature
and limits of the judicial power of the United States’ and is ‘inflexible and without exception.’”
(alternation in original) (quoting Mansfield, C. & L.M. Ry. Co. v. Swan, 111 U.S. 379, 382
(1884))). In light of the fact that the district court never actually ruled on the motion to
dismiss, it is unclear that a deferential standard of review should apply. Nonetheless, we are
satisfied that, even on de novo review, the exercise of supplemental jurisdiction was proper
here.
4 There are several exceptions contained in § 1367(b) for claims against joined parties
that are not relevant here. See 28 U.S.C. § 1367(b).
Case: 16-20628 Document: 00514442515 Page: 7 Date Filed: 04/23/2018
No. 16-20628
8
that Vacation interfered with her rights under the FMLA. In defense, Vacation
argued that Karen was not eligible for FMLA leave because she
misrepresented her reasons for taking leave and improperly used her leave to
help Michael establish a CruiseOne franchise, including by attending a
CruiseOne training. In its claims against Michael, Vacation alleges that he
conspired with Karen in committing fraud, breaching her covenant not to
compete, and breaching her fiduciary duty to Vacation. Thus, the question
whether Karen was entitled to FMLA leave—or, more to the point, whether
she misused her leave in order to start a competing enterprise with Michael—
derives from the same nucleus of operative facts as Vacation’s claims against
Michael. Accordingly, the district court had subject-matter jurisdiction over
Vacation’s state-law claims against Michael. See State Nat. Ins. Co., 391 F.3d
at 579, 581 (holding that district court had supplemental jurisdiction over
defendant’s state-law counterclaims against additional party).
Section 1367(c) provides that district courts may decline to exercise
supplemental jurisdiction over a claim if: (1) “the claim raises a novel or
complex issue of State law”; (2) “the claim substantially predominates over the
claim or claims over which the district court has original jurisdiction”; (3) “the
district court has dismissed all claims over which it has original jurisdiction”;
or (4) “in exceptional circumstances, there are other compelling reasons for
declining jurisdiction.” 28 U.S.C. § 1367(c). Here, consideration of those
factors, and of judicial economy, convenience, fairness, and comity, lead us to
conclude that the exercise of supplemental jurisdiction was proper in this case.
See Mendoza, 532 F.3d at 346 (stating that our review of the exercise of
supplemental jurisdiction is guided by the § 1367(c) factors and “considerations
of judicial economy, convenience, fairness, and comity”).
Of the § 1367(c) factors, only the second even conceivably weighs in favor
of declining supplemental jurisdiction. Vacation’s claims arguably
Case: 16-20628 Document: 00514442515 Page: 8 Date Filed: 04/23/2018
No. 16-20628
9
predominate “in terms of proof, . . . the scope of the issues raised, [and] the
comprehensiveness of the remedy sought,” Jackson v. Stinchcomb, 635 F.2d
462, 473 (5th Cir. 1981) (quoting Gibbs, 383 U.S. at 726), though, as discussed
above, the claims are intertwined. Regardless, the remaining three factors
weigh clearly in favor of retaining jurisdiction. The state-law issues raised,
while numerous, are neither novel nor complex; the district court had not
dismissed the FMLA claims; and no other exceptional circumstances compelled
declining jurisdiction.
Consideration of the common-law factors of judicial economy,
convenience, fairness, and comity further convince us that the district court
did not abuse its discretion by exercising supplemental jurisdiction. By the
time that Michael filed his motion to dismiss for lack of subject-matter
jurisdiction, the parties had exchanged substantial discovery.5 In fact,
Vacation’s motion for summary judgment was filed just one month later.
Finally, there does not appear to be, nor does Michael identify, any unfairness
resulting from the exercise of supplemental jurisdiction.
B.
Before turning to the D’Onofrios’ various challenges to the district court’s
grant of summary judgment, we first address their evidentiary challenges. See
Christophersen v. Allied-Signal Corp., 939 F.2d 1106, 1109 (5th Cir. 1991) (en
banc) (stating that, in an appeal from summary judgment raising evidentiary
issues, we first “review the trial court’s evidentiary rules, which define the
summary judgment record”), abrogated on other grounds by Daubert v. Merrell
5 It does not appear that Michael was ever able to obtain discovery from Vacation. In
April 2015, the district court issued an order quashing standard discovery and permitting
discovery only as ordered by the court. In July 2015, Michael filed a motion for discovery.
The district court never ruled on that motion, but simply terminated it after granting
Vacation’s motion for summary judgment. Nonetheless, Karen and Vacation had exchanged
discovery addressing the same nucleus of facts.
Case: 16-20628 Document: 00514442515 Page: 9 Date Filed: 04/23/2018
No. 16-20628
10
Dow Pharm., Inc., 509 U.S. 579 (1993). Rulings on motions for discovery are
reviewed for abuse of discretion. Atkinson v. Denton Publ’g Co., 84 F.3d 144,
147 (5th Cir. 1996).
1.
First, Karen contends that the district court erred by not sustaining her
objections to various statements in the depositions of three Vacation
employees. She argues that the following were either inadmissible conclusions
or made without personal knowledge: statements in the affidavit of Thain
Allen that Karen had violated the covenant not to compete, that the covenant
was enforceable, and that Karen had made material misrepresentations to
Vacation; statements in the affidavit of Emerson Hankamer that the covenant
not to compete was reasonable; and statements in the affidavit of Robert Baker
calculating damages based on his knowledge of “how commissions work in the
industry” generally rather than how they work at CruiseOne specifically.
Rule 56(c)(4) of the Federal Rules of Civil Procedure provides that “[a]n
affidavit or declaration used to support or oppose a motion must be made on
personal knowledge, set out facts that would be admissible in evidence, and
show that the affiant or declarant is competent to testify on the matters
stated.” Fed. R. Civ. P. 56(c)(4). At the summary judgment stage, evidence
relied upon need not be presented in admissible form, but it must be “capable
of being ‘presented in a form that would be admissible in evidence.’” LSR
Consulting, LLC v. Wells Fargo Bank, N.A., 835 F.3d 530, 534 (5th Cir. 2016)
(quoting Fed. R. Civ. P. 56(c)(2)). Neither legal conclusions nor statements
made without personal knowledge are capable of being so presented. See Fed.
R. Evid. 602, 701, 702.
The objected-to statements of Allen and Hankamer are legal conclusions
and thus are not competent summary judgment evidence. See Cutting
Underwater Techs. USA, Inc. v. Eni U.S. Operating Co., 671 F.3d 512, 515 (5th
Case: 16-20628 Document: 00514442515 Page: 10 Date Filed: 04/23/2018
No. 16-20628
11
Cir. 2012) (stating that conclusions of law cannot be utilized in a motion for
summary judgment). The objected-to calculation of damages in the Baker
affidavit is speculative and not adequately based on personal knowledge. See
Fed. R. Civ. P. 56(c)(4); Fed. R. Evid. 602. He bases his estimate of the
D’Onofrios’ commissions on his knowledge of “how commissions work in the
industry,” not how they work at CruiseOne in particular;6 calculates Vacation’s
damages to include all of the D’Onofrios’ revenues while identifying only one
former Vacation customer who subsequently did business with the D’Onofrios;7
and fails to adequately explain the reasoning behind his calculations.8 The
objected-to statements should not have been relied upon to support summary
judgment.9 See Salas v. Carpenter, 980 F.2d 299, 305 (5th Cir. 1992) (holding
that conclusory assertions in affidavit could not be relied upon in summary
judgment proceedings).
2.
Second, Michael contends that the district court erred by denying his
motion for discovery. Shortly after he was joined as a party, Michael moved
for permission to issue seven requests for production and nineteen
6 There is, in fact, evidence in the record refuting the notion that there is a uniform
commissions rate in the industry. The Hankamer affidavit explains that the commissions
paid in the industry vary depending on the different overhead expenses incurred by different
companies.
7 Furthermore, while the Baker affidavit calculates Vacation’s lost-profit damages
based on the D’Onofrio’s gross revenues, Texas law requires that lost-profits damages be
“based on net profits, not gross revenue or gross profits.” Kellmann v. Workstation
Integrations, Inc., 332 S.W.3d 679, 684 (Tex. App.—Houston [14th Dist.] 2010, no pet.).
8 Baker asserts in his affidavit that the “total sum of commissions” earned by the
D’Onofrios “equals eighty percent (80%) of the total commission on the sales” and multiplies
that amount by 1.25 to determine the “missing twenty percent (20%),” without ever
explaining where he derived the relevant eighty-percent and twenty-percent figures.
9 While it is unclear whether the district court relied upon the Allen and Hankamer
affidavits in granting summary judgment, the Baker affidavit is the only evidence of damages
in the record, and the district court’s final order awarded damages to Vacation in precisely
the amount calculated by Baker.
Case: 16-20628 Document: 00514442515 Page: 11 Date Filed: 04/23/2018
No. 16-20628
12
interrogatories and to depose a corporate representative of Vacation pursuant
to Rule 30(b)(6).10 The district court never ruled on that motion; it simply
terminated the motion when it granted Vacation’s motion for summary
judgment. Finding the evidence in the record sufficient to reverse the grant of
summary judgment against Michael, we need not reach the issue.
C.
Karen contends that the district court erred by granting summary
judgment against her on her claims of FMLA interference and hostile work
environment. She contends that Vacation interfered with her right to FMLA
leave by requiring her to perform work while on leave and that the district
court erred by granting summary judgment sua sponte on her hostile work
environment claim without giving her prior notice as required under Rule 56(f).
We affirm the district court with respect to the FMLA claims, but find
reversible error with respect to the hostile work environment claim.
1.
An employee is generally entitled to up to 12 weeks of unpaid leave to
care for a spouse with a serious health condition, and employers may not
interfere with the employee’s attempt to take such leave. See 29 U.S.C. §§
2612(a)(1)(C) & (c), 2615(a)(1). To establish a claim for FMLA interference, an
employee must show that the defendant “interfered with, restrained, or denied
her exercise or attempt to exercise FMLA rights, and that the violation
prejudiced her.” Bryant v. Tex. Dep’t of Aging & Disability Servs., 781 F.3d
764, 770 (5th Cir. 2015) (quoting Cuellar v. Keppel Amfels, L.L.C., 731 F.3d
342, 347 (5th Cir. 2013)). “An ‘interference claim merely requires proof that
the employer denied the employee [her] entitlements under the FMLA.’” Acker
10 The district court had previously entered an order quashing all standard discovery
and permitting only that discovery specifically ordered by the court. Accordingly, at the time
of Michael’s motion, no Rule 26 disclosures had been made and no interrogatories served.
Case: 16-20628 Document: 00514442515 Page: 12 Date Filed: 04/23/2018
No. 16-20628
13
v. Gen. Motors, L.L.C., 853 F.3d 784, 788 (5th Cir. 2017) (quoting Stallings v.
Hussmann Corp., 447 F.3d 1041, 1051 (8th Cir. 2006)).
The parties agree that Karen was given the option to either take unpaid
leave or continue to service her existing accounts while on leave in order to
continue to earn commissions on those accounts. Giving employees the option
to work while on leave does not constitute interference with FMLA rights so
long as working while on leave is not a condition of continued employment. See
Massey-Diez v. Univ. of Iowa Cmty. Med. Servs., Inc., 826 F.3d 1149, 1159-60
(8th Cir. 2016) (noting that FMLA regulations “permit voluntary and
uncoerced acceptance of work by employees on medical leave, so long as
acceptance is not a condition of employment”); cf. Evans v. Books-a-Million,
762 F.3d 1288, 1297 (11th Cir. 2014) (noting that an employer may violate
employee’s FMLA rights by coercing her to work while on leave). Here, Karen
entered a joint statement of fact stating that she was presented with the two
options and that she chose to continue servicing her existing accounts.
Accordingly, Vacation did not interfere with Karen’s FMLA rights and we
affirm the grant of summary judgment on Karen’s FMLA claims.
2.
Karen maintains that the district court also erred by granting summary
judgment sua sponte on her hostile work environment claim without giving
prior notice. While district courts may grant summary judgment sua sponte,
see Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit, 28
F.3d 1388, 1397 (5th Cir. 1994), they must first give the parties “notice and a
reasonable time to respond,” Fed. R. Civ. P. 56(f).11 We have “strictly enforced”
the notice requirement. Leatherman, 28 F.3d at 1397. However, “the harmless
11 Prior to 2010, the notice requirement was contained in Rule 56(c), which defined a
ten-day notice requirement. See Leatherman, 28 F.3d at 1397.
Case: 16-20628 Document: 00514442515 Page: 13 Date Filed: 04/23/2018
No. 16-20628
14
error doctrine applies to lack of notice required by rule 56[f],” and the sua
sponte grant of summary judgment may be affirmed “if the nonmoving party
admits that he has no additional evidence anyway” or if “the appellate court
evaluates all of the nonmoving party’s additional evidence and finds no
genuine issue of material fact.” Id. at 1398 (quoting Powell v. United States,
849 F.2d 1576, 1580, 1582 (5th Cir. 1988)).12
Here, the district court granted summary judgment on Karen’s hostile
work environment claim despite there being no pending motion for summary
judgment on that claim. It erred by failing to give notice of its intent to grant
summary judgment sua sponte, as required by Rule 56(f).13 Vacation defends
that error as harmless because, according to Vacation, Karen failed to present
sufficient evidence to support her hostile work environment claim. However,
Karen’s failure to marshal sufficient evidence before receiving any notice that
the district court was considering the merits of her hostile work environment
claim does not mean that the error was harmless. She contends that, had she
received notice, she would have deposed key Vacation witnesses, including the
individual employees who allegedly harassed her, and issued written discovery
12 Vacation contends that our review should be for plain error because Karen
challenges the grant of summary judgment for the first time on appeal. However, we apply
plain-error review when “the party against whom summary judgment is granted moves for
reconsideration under Fed. R. Civ. P. 59(e), but does not, in that motion, challenge the
procedural propriety of the summary judgment ruling.” Love v. Nat’l Med. Enters., 230 F.3d
765, 771 (5th Cir. 2000). Here, Karen did not file any Rule 59(e) motion. Instead, she directly
appealed the grant of summary judgment, which we permit. See Conley v. Bd. of Trs. of
Grenada Cty. Hosp., 707 F.2d 175, 178 (5th Cir. 1983) (stating that the non-moving party
“could have sought direct appeal” from the sua sponte grant of summary judgment without
notice).
13 The district court also erred by failing to state the reasons for granting summary
judgment with respect to the hostile work environment claim on the record, as is required by
Rule 56(a). See Fed. R. Civ. P. 56(a) (“The court should state on the record the reasons for
granting or denying the motion.”).
Case: 16-20628 Document: 00514442515 Page: 14 Date Filed: 04/23/2018
No. 16-20628
15
to Vacation on her harassment claim.14 Where, as here, the lack of notice
deprived the non-moving party of the opportunity to collect and submit
summary judgment evidence, the error is not harmless. See Powell, 849 F.2d
at 1582. We therefore reverse the grant of summary judgment on Karen’s
hostile work environment claim.
D.
The D’Onofrios next contend that the district court erred by granting
summary judgment in favor of Vacation on its various claims against them.
We address each claim in turn.
1.
Karen contends that the district court erred by granting summary
judgment on Vacation’s claim for breach of contract. She insists that the
covenants not to compete that Vacation alleges she breached were
unreasonable and therefore unenforceable under Texas law. We agree that the
covenants are unreasonable as written.
Reasonable covenants not to compete serve the legitimate business
interest of preventing departing employees from “using the business contacts
and rapport established” during their employment to take the employer’s
clients with them when they leave. Peat Marwick Main & Co. v. Haass, 818
S.W.2d 381, 387 (Tex. 1991). A covenant not to compete is enforceable under
Texas law if it is “ancillary to or part of an otherwise enforceable agreement at
the time the agreement is made to the extent that it contains limitations as to
time, geographical area, and scope of activity to be restrained that are
14 Any delay in discovery with respect to Karen’s hostile work environment claim in
the 11 months between the time it was filed and the time the district court granted summary
judgment appears not to be a failure on her part. The district court had issued an earlier
order quashing standard discovery and permitting discovery only as ordered by the court,
and it does not appear that the district court ever set a discovery schedule for the hostile
work environment claim.
Case: 16-20628 Document: 00514442515 Page: 15 Date Filed: 04/23/2018
No. 16-20628
16
reasonable and do not impose a greater restraint than is necessary to protect
the goodwill or other business interest of the promisee.” Tex. Bus. & Com.
Code § 15.50(a).15 In the case of personal services occupations, such as
salespersons, the employer has the burden of establishing that covenants not
to compete meet the requirements of § 15.50. Tex. Bus. & Com. Code § 15.51(b).
If a court determines that a covenant not to compete does not contain
reasonable time, geography, and scope limitations, but is otherwise
enforceable, then it “shall reform the covenant to the extent necessary to cause
the limitations contained in the covenant” to be “reasonable and to impose a
restraint that is not greater than necessary.” Id. § 15.51(c).
Under Texas law, covenants not to compete that “extend[] to clients
with whom the employee had no dealings during [her] employment” or amount
to industry-wide exclusions are “overbroad and unreasonable.” Gallagher
Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654 (Tex. App.—Houston
[1st Dist.] 2009, pet. denied) (quoting John R. Ray & Sons, Inc. v. Stroman,
923 S.W.2d 80, 85 (Tex. App.—Houston [14th Dist.] 1996, writ denied)).
Similarly, the absence of a geographical restriction will generally render a
covenant not to compete unreasonable. See Peat Marwick Main & Co., 818
S.W.2d at 387 (stating that a restrictive covenant “must not restrain [a former
employee’s] activities into a territory into which his former work has not taken
him” (quoting Wis. Ice & Coal Co. v. Lueth, 250 N.W. 819, 820 (Wis. 1933))).
Here, the covenants at issue prohibit Karen—for a period of 18 months after
her employment with Vacation—from, among other things, working “in any
capacity” for “any direct or indirect competitor of VTG in any job related to
sales or marketing of cruises, escorted or independent tours, river cruises,
15 The parties do not dispute that the covenants here at issue were part of an otherwise
enforceable agreement.
Case: 16-20628 Document: 00514442515 Page: 16 Date Filed: 04/23/2018
No. 16-20628
17
safaris, or resort stays” or doing any business with “any person or entity” who
has purchased a cruise or other travel product from Vacation in the preceding
3 years. The covenants amount to an industry-wide restriction—preventing
former employees from working in any job related to the sales or marketing of
not just cruises, but also a host of other travel products—and are not limited
as to either geography or clients with whom former employees actually worked
during their employment. Accordingly, they amount to unreasonable
restraints on trade and are therefore unenforceable. See Gallagher Healthcare
Ins. Servs., 312 S.W.3d at 654; Wright v. Sport Supply Grp., Inc., 137 S.W.3d
289, 298 (Tex. App.—Beaumont 2004, no pet.) (holding that covenant that
included geographical restriction but did “not limit the prohibitions just to
customers with whom [the former employee] had dealings while he was
employed” was “over broad” and an “unreasonable restraint[] of trade”).
Section 15.51 of the Texas Business and Commerce Code requires courts
to reform covenants found to be unreasonable as to time, geographical area, or
scope of activity. Tex. Bus. & Com. Code § 15.51(c). However, such reformation
is impossible when, as here, the record lacks the requisite information
concerning either the geographical territories in which the former employee
worked or the customers with whom she did business. A remand is therefore
appropriate to permit the district court to make those initial determinations
and reform the covenants accordingly. See Wright, 137 S.W.3d at 299
(remanding to trial court for reformation where record was unclear as to who
former employee’s customers were).
Case: 16-20628 Document: 00514442515 Page: 17 Date Filed: 04/23/2018
No. 16-20628
18
2.
The D’Onofrios further assert that the district court erred by granting
summary judgment on Vacation’s conversion of confidential information
claims. Finding material disputes of fact, we agree and reverse.
“The elements of a conversion cause of action are: (1) the plaintiff[]
owned, had legal possession of, or was entitled to possession of the property;
(2) the defendant assumed and exercised dominion and control over the
property in an unlawful and unauthorized manner, to the exclusion of and
inconsistent with the plaintiff’s rights; and (3) the defendant refused plaintiff’s
demand for the return of the property.” Cuidado Casero Home Health of El
Paso, Inc. v. Ayuda Home Health Care Servs., LLC, 404 S.W.3d 737, 748 (Tex.
App.—El Paso 2013, no pet.). There is no cause of action under Texas law for
“conversion of intangible property except in cases where an underlying
intangible right has been merged into a document and that document has been
converted.” Express One Int’l, Inc. v. Steinbeck, 53 S.W.3d 895, 901 (Tex.
App.—Dallas 2001, no pet.). For example, illegally taking a list of customer
information can give rise to a claim for conversion. See Deaton v. United Mobile
Networks, L.P., 926 S.W.2d 756, 763 (Tex. App.—Texarkana 1996) (“[T]he
illegal taking of the customer information would constitute conversion.”), aff’d
in part, rev’d in part on other grounds, 939 S.W.2d 146 (Tex. 1997).
Vacation argues that Karen had access to its confidential information
and trade secrets, including customer lists, while involved with CruiseOne, but
the only tangible property that it alleges she converted is a laptop computer.
Even assuming that electronic information accessible through a laptop is the
kind of “document” with which intangible rights can be merged and that can
Case: 16-20628 Document: 00514442515 Page: 18 Date Filed: 04/23/2018
No. 16-20628
19
thus be converted,16 there is a dispute of fact as to whether Karen exercised
dominion or control over that information in an unlawful manner. Vacation
points to evidence that Karen had access to such information, including during
the time in which she was on FMLA leave but also involved with the CruiseOne
franchise, but Karen points to evidence that she did not access any confidential
information during that time and that, in fact, she was unable to do so because
her access to Vacation’s network had been terminated. Furthermore, there is
no evidence that Karen shared any confidential information with Michael or
that Michael otherwise unlawfully exercised control over any such
information.17 Accordingly, a reasonable jury could find that the D’Onofrios
did not access or exercise control over customer lists or any other confidential
information by unlawful means.
There is also a dispute of fact as to whether Karen refused Vacation’s
demand for the return of the property. Vacation points to a March 2014 e-mail
from Vacation’s president reminding all employees that they were “prohibited
by their employment contracts and Texas law from diverting or stealing leads
or sales, or otherwise competing with VTG, while working for VTG or for
eighteen months after leaving VTG.” It argues that that e-mail constituted a
demand for return of VTG property which Karen ignored by maintaining
possession of the laptop while involved with CruiseOne approximately six
months later. A reasonable jury could find that the March 2014 e-mail was not
a demand for the return of the laptop.
16 We note that Vacation frames its conversion claim as a claim for conversion of
confidential information only, and does not contend that Karen converted the laptop itself.
17 While Karen did share a screenshot of her sales record with Michael, which Michael
subsequently sent to CruiseOne, Vacation offers no argument for why that information was
confidential. The shared screenshot included only information on the volume and amount of
Karen’s sales, not on the customers with whom she did business.
Case: 16-20628 Document: 00514442515 Page: 19 Date Filed: 04/23/2018
No. 16-20628
20
Finally, “[a] plaintiff must prove damages before recovery is allowed for
conversion.” United Mobile Networks, LP v. Deaton, 939 S.W.2d 146, 147 (Tex.
1997). The measure of damages for a conversion claim is generally “the fair
market value of the property at the time and place of the conversion.” Id. at
147-48. However, the only evidence of damages put forth by Vacation was the
speculative affidavit of Vacation’s Senior Director of Sales, discussed above,
calculating his estimate of the total gross revenues generated by the
D’Onofrios’ CruiseOne franchise. Aside from the speculative nature of the
calculation, Vacation failed to establish that the full gross revenues that the
D’Onofrios generated was equal to the fair market value of the allegedly
converted confidential information. In fact, Vacation points to only one former
Vacation customer, by the name of Focke, who did any business with the
D’Onofrios. Accordingly, we reverse the grant of summary judgment on this
claim.
3.
The D’Onofrios next challenge the district court’s grant of summary
judgment on Vacation’s claims against them for tortious interference with a
prospective business relationship and tortious interference with an existing
business relationship. We find issues of material fact that preclude summary
judgment and reverse.
The elements of tortious interference with a prospective business
relationship are “that (1) there was a reasonable probability that the plaintiff
would have entered into a business relationship with a third party; (2) the
defendant either acted with a conscious desire to prevent the relationship from
occurring or knew the interference was certain or substantially certain to occur
as a result of the conduct; (3) the defendant’s conduct was independently
tortious or unlawful; (4) the interference proximately caused the plaintiff
injury; and (5) the plaintiff suffered actual damage or loss as a result.”
Case: 16-20628 Document: 00514442515 Page: 20 Date Filed: 04/23/2018
No. 16-20628
21
Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex.
2013).
Here, there is question of material fact as to the first element. Vacation
argues that there is a reasonable probability that it would have entered into
business relationships with clients who had either previously booked travel
with Vacation or contacted it for travel bookings. However, the only evidence
of a possible future business relationship that Vacation points to is a single
customer, Focke, who had previously booked a cruise for her parents through
Vacation and subsequently booked a vacation through the D’Onofrios. But
Focke testified that she never had any plans to book another cruise. A
reasonable jury could conclude that there was not a reasonable probability that
Focke would have entered into a business relationship with Vacation in the
future. Accordingly, the district court erred by granting summary judgment
on this claim. See Caller-Times Pub. Co. v. Triad Commc’ns, Inc., 855 S.W.2d
18, 24-25 (Tex. App.—Corpus Christi 1993, no writ) (finding evidence
insufficient to establish tortious interference with a prospective business
relationship where evidence of future relationship was speculative).
To the extent that Texas recognizes a cause of action for tortious
interference with an existing business relationship,18 its elements are: “(1)
18 The D’Onofrios contend that there is no cause of action for tortious interference with
an existing business relationship, only tortious interference with a contract or tortious
interference with a prospective business relationship. In Whisenhunt v. Lippincott, 474
S.W.3d 30 (Tex. App.—Texarkana 2015, no pet.), the Texas Appeals Court noted the
uncertainty whether tortious interference with an existing business relationship and tortious
interference with a contract are separate torts, but then simply listed the elements of tortious
interference with a contract as the elements for tortious interference with an existing
business relationship. See id. at 44 & n.14. The Texas Supreme Court recently stated that
“Texas law recognizes two types of tortious-interference claims: one based on interference
with an existing contract and one based on interference with a prospective business
relationship.” El Paso Healthcare Sys. Ltd. v. Murphy, 518 S.W.3d 412, 421 (Tex. 2017). We
find it unnecessary to resolve the issue as Vacation has failed to establish that it is entitled
to judgment as a matter of law on either claim. To the extent its claim should be construed
Case: 16-20628 Document: 00514442515 Page: 21 Date Filed: 04/23/2018
No. 16-20628
22
unlawful actions undertaken by [the defendant] without a legal right or
justifiable excuse; (2) with the intent to harm [the plaintiff]; and (3) resulting
actual harm or damage.” Am. Med. Int’l, Inc. v. Giurintano, 821 S.W.2d 331,
335 (Tex. App.—Houston [14th Dist.] 1991, no writ); accord Apani Sw., Inc. v.
Coca-Cola Enters., 300 F.3d 620, 633-34 (5th Cir. 2002) (citing Morris v. Jordan
Fin. Corp., 564 S.W.2d 180, 184 (Tex. Civ. App.—Tyler 1978, writ ref’d n.r.e.)).
“It is not necessary to establish the existence of a valid contract, but the
interference with a general business relationship is actionable only if the
defendant’s interference is proven to be motivated by malice.” CF & I Steel
Corp. v. Pete Sublett & Co., 623 S.W.2d 709, 715 (Tex. Civ. App.—Houston [1st
Dist.] 1981, writ ref’d n.r.e.).
Here, at the very least, a question of material fact as to whether Vacation
suffered any actual harm or damage precludes summary judgment. As
discussed above, Vacation points to only one individual with whom it even
arguably had an existing business relationship, and that individual testified
that she did not intend to ever purchase another cruise. Accordingly, Vacation
has failed to show as a matter of law that the D’Onofrios caused it any harm
by doing business with Focke.
4.
Michael also challenges the district court’s grant of summary judgment
on Vacation’s claims against him for conspiracy to covert confidential
information and conspiracy to interfere with existing business relationships.19
as a claim for tortious interference with a contract, it has not pointed to any existing contract
with which the D’Onofrios allegedly interfered.
19 While the parties’ briefs also address a conspiracy to commit conversion claim
against Karen, Vacation’s Second Amended Counterclaim against Karen did not allege a
conspiracy count, and its motion for summary judgment sought judgment on conspiracy
claims against Michael only. In any event, any conspiracy claims against Karen would fail
for the same reasons as the conspiracy claims against Michael.
Case: 16-20628 Document: 00514442515 Page: 22 Date Filed: 04/23/2018
No. 16-20628
23
The elements of civil conspiracy are: “(1) two or more persons; (2) an object to
be accomplished; (3) a meeting of the minds on the object or course of action;
(4) one or more unlawful, overt acts; and (5) damages as the proximate result.”
Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). However,
conspiracy is a derivative tort, and a defendant’s liability for conspiracy
“depends on participation in some underlying tort.” Tilton v. Marshall, 925
S.W.2d 672, 681 (Tex. 1996). Where the underlying tort claim fails, so too does
the conspiracy claim. See Grant Thornton, LLP v. Prospect High Income Fund,
314 S.W.3d 913, 930-31 (Tex. 2010). Because we reverse summary judgment
on the underlying claims for conversion and tortious interference, so, too, do
we reverse summary judgment on the conspiracy claims.
5.
Next, the D’Onofrios challenge the district court’s grant of summary
judgment in favor of Vacation on its claims for breach of fiduciary duty against
Karen and knowing participation in a breach of fiduciary duty against Michael.
We find the evidence insufficient to support summary judgment and reverse.
“The elements of a breach of fiduciary duty claim are: (1) a fiduciary
relationship must exist between the plaintiff and defendant; (2) the defendant
must have breached his fiduciary duty to the plaintiff; and (3) the defendant’s
breach must result in injury to the plaintiff or benefit to the defendant.” Hunn
v. Dan Wilson Homes, Inc, 789 F.3d 573, 581 (5th Cir. 2015) (quoting Graham
Mortg. Corp. v. Hall, 307 S.W.3d 472, 479 (Tex. App.—Dallas 2010, no pet.)).
A third party who knowingly participates in the breach of a fiduciary duty
“becomes a joint tortfeasor with the fiduciary and is liable as such.” Id.
(quoting Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 514 (Tex.
1942)). “To establish a claim for knowing participation in a breach of fiduciary
duty, a plaintiff must assert: (1) the existence of a fiduciary relationship; (2)
that the third party knew of the fiduciary relationship; and (3) that the third
Case: 16-20628 Document: 00514442515 Page: 23 Date Filed: 04/23/2018
No. 16-20628
24
party was aware that it was participating in the breach of a fiduciary
relationship.” Meadows v. Hartford Life Ins. Co., 492 F.3d 634, 639 (5th Cir.
2007) (applying Texas law).
Karen first denies that she was in a fiduciary relationship with Vacation.
It is generally true that employees are not fiduciaries of their employers simply
by virtue of the employment relationship. However, under common-law
principles of agency, employees do owe certain limited fiduciary duties to not
compete with their employers. See Johnson v. Brewer & Pritchard, P.C., 73
S.W.3d 193, 202 (Tex. 2002). The scope of such duties has been carefully and
narrowly drawn to balance “an employer’s right to demand and receive loyalty”
with “society’s legitimate interest in encouraging competition.” Id. at 201. “An
at-will employee may properly plan to go into competition with his employer
and may take active steps to do so while still employed.” Id. (quoting Augat,
Inc. v. Aegis, Inc., 565 N.E.2d 415, 419 (Mass. 1991)). However, an employee
“may not appropriate his employer’s trade secrets[,] . . . solicit his employer’s
customers while still working for his employer . . . , [or] carry away certain
information, such as lists of customers.” Id. at 202 (quoting Augat, Inc., 565
N.E.2d at 419-20); accord M P I, Inc. v. Dupre, 596 S.W.2d 251, 254 (Tex. Civ.
App.—Fort Worth 1980, writ ref’d n.r.e.) (“It is only when an employee uses his
official position to gain a business opportunity which belongs to his employer
or when he actually competes for customers while still employed that a legal
wrong will have accrued.”).
Vacation contends that Karen breached her fiduciary duty by becoming
a fifty-percent owner in the franchise of a competitor, using a screenshot of her
sales record at Vacation to obtain the competing franchise, attending a training
for that competitor, and working for that competing franchise while still
employed by Vacation. However, becoming the part owner of a competing
franchise is insufficient to establish breach of a fiduciary duty. See Abetter
Case: 16-20628 Document: 00514442515 Page: 24 Date Filed: 04/23/2018
No. 16-20628
25
Trucking Co. v. Azripe, 113 S.W.3d 503, 511 (Tex. App.—Houston [1st Dist.]
2003, no pet.) (“To form his own company, Azripe had to incorporate or
otherwise establish a business entity, obtain permits, and obtain insurance.
These were permissible preparations to compete, not breaches of a fiduciary
duty.”). The same is true of the screenshot of Karen’s sales records. The
screenshot did not include client names, only sales information, and there is
no evidence that the list was used for any purpose other than to demonstrate
Karen’s sales abilities. Similarly, attending a training for a competitor is an
“active step” towards going into competition with one’s employer but does not
involve the appropriation of the employer’s trade secrets, confidential
information, or customers.
There is some evidence that Karen answered the phones for the
CruiseOne franchise as early as July 2014 (approximately a month before she
believed she had been terminated). In a July 27, 2014 e-mail—which appears
to relate to home repairs and not travel sales—Michael provides the phone
number for “our travel agency” and states that “mostly Karen works this as
her business line.” However, there is no evidence that Karen actually spoke to
customers on the phone or that she used her position at Vacation “to gain a
business opportunity belonging to” Vacation or solicited business away from
Vacation while still employed by Vacation.20 See Bray v. Squires, 702 S.W.2d
20 The only evidence that Vacation points to in the record of Karen’s providing travel
services to CruiseOne customers occurred in September 2014, after Karen contends that she
believed she had been terminated. An employee’s fiduciary duty to not compete with her
employer ends when the employment relationship ends. See Bray, 702 S.W.2d at 270 (“[O]nce
an employee resigns, he may actively compete with his former employer.”). Here, there is a
factual dispute as to when the employment relationship was terminated. A jury could
conclude that the employment relationship—and, with it, Karen’s fiduciary duty to not
compete—ended by August 11, 2014; on that day a Vacation manager sent an e-mail
indicating that Karen no longer worked at Vacation, and by then the company had already
locked Karen out of its computer network. While the duty to not use “confidential or
proprietary information acquired during the [employment] relationship . . . survives
termination of employment,” T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965
Case: 16-20628 Document: 00514442515 Page: 25 Date Filed: 04/23/2018
No. 16-20628
26
266, 270-71 (Tex. App.—Houston [1st Dist.] 1985, no writ) (affirming jury
verdict that former associates did not breach fiduciary duties where record was
open to the interpretation that the defendants had discussions with, but did
not solicit business from, law firm’s client before leaving firm).
Furthermore, while there is some evidence that the D’Onofrios wanted
to use Karen’s book of business from Vacation to build up their CruiseOne
business, there is also evidence that the sales Karen generated for CruiseOne
were the result of her own personal contacts and not any sales lists or other
confidential information from Vacation. See Ameristar Jet Charter, Inc. v.
Cobbs, 184 S.W.3d 369, 374-75 (Tex. App.—Dallas 2006, no pet.) (finding
evidence sufficient to support jury’s finding of no breach of fiduciary duty
where former employee denied taking confidential information and testified
that he solicited business using publicly available information); T-N-T
Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 22 (Tex.
App.—Houston [1st Dist.] 1998, pet. dism’d) (stating that duty to not disclose
confidential information “does not bar use of general knowledge, skill, and
experience”). A reasonable jury could conclude that Karen did no more than
prepare to compete with Vacation while still employed by it, and thus did not
breach her fiduciary duty.
Summary judgment on the claim against Michael for knowing
participation in the breach of a fiduciary duty cannot stand for the same
reasons. Because Vacation failed to establish that there is no dispute of
material fact as to whether Karen breached her fiduciary duty, it necessarily
failed to establish that there is no dispute of material fact as to whether
S.W.2d 18, 22 (Tex. App.—Houston [1st Dist.] 1998, pet. dism’d), there is no evidence that
the September 2014 communication involved the use of any confidential or proprietary
information.
Case: 16-20628 Document: 00514442515 Page: 26 Date Filed: 04/23/2018
No. 16-20628
27
Michael participated in any such breach. We reverse the grant of summary
judgment on these claims.
6.
We next turn to the district court’s grant of summary judgment on
Vacation’s fraud claims. Vacation asserted claims against Karen for commonlaw
fraud and fraud by nondisclosure, alleging that she misrepresented her
need for FMLA leave and failed to disclose her ownership interest in the
CruiseOne franchise and the fact that she was using her FMLA leave to travel
and attend a CruiseOne training. Once again, we find disputes of material fact
and reverse.
The elements of common-law fraud are: “(1) that a material
representation was made; (2) the representation was false; (3) when the
representation was made, the speaker knew it was false or made it recklessly
without any knowledge of the truth and as a positive assertion; (4) the speaker
made the representation with the intent that the other party should act upon
it; (5) the party acted in reliance on the representation; and (6) the party
thereby suffered injury.” Aquaplex, Inc. v. Rancho La Valencia, Inc., 297
S.W.3d 768, 774 (Tex. 2009) (quoting In re FirstMerit Bank, N.A., 52 S.W.3d
749, 758 (Tex. 2001). Vacation claims that Karen made false representations
regarding her need for FMLA leave, but a dispute of material fact as to her
purpose in taking leave precludes summary judgment.
There is evidence that Karen made plans to attend the CruiseOne
training in Florida before she made arrangements to go on leave, suggesting
that her purpose in taking leave may have been to attend the training rather
than care for Michael. However, that she did attend training while on leave
does not itself establish that she misrepresented her need for FMLA leave.
Vacation does not dispute that Michael needed care, and there is evidence
suggesting that Karen did, in fact, care for him while on leave. Karen also
Case: 16-20628 Document: 00514442515 Page: 27 Date Filed: 04/23/2018
No. 16-20628
28
testified that she was not even aware of the possibility of taking FMLA leave
until it was suggested to her by her supervisor, who was aware of the stress
she was under while working and also taking care of Michael. Accordingly,
there is evidence from which a reasonable jury could conclude that Karen did
not misrepresent her need for FMLA leave.
The district court also granted summary judgment on Vacation’s claim
for fraud by nondisclosure. “The elements of fraud by nondisclosure are (1) the
defendant failed to disclose material facts to the plaintiff that the defendant
had a duty to disclose; (2) the defendant knew the plaintiff was ignorant of the
facts and the plaintiff did not have an equal opportunity to discover the facts;
(3) the defendant was deliberately silent when the defendant had a duty to
speak; (4) by failing to disclose the facts, the defendant intended to induce the
plaintiff to take some action or refrain from acting; (5) the plaintiff relied on
the defendant’s nondisclosure; and (6) the plaintiff was injured as a result of
acting without that knowledge.” White v. Zhou Pei, 452 S.W.3d 527, 537 (Tex.
App.—Houston [14th Dist.] 2014, no pet.).
Vacation first argues that Karen failed to disclose her intent to compete
with it as the partial owner of a CruiseOne franchise. This claim fails for
essentially the same reasons as the breach-of-fiduciary-duty claim. “[A]n
employee who plans to compete with his employer has no general duty to
disclose his plans.” Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277, 285
(5th Cir. 2007) (citing Johnson, 73 S.W.3d at 201). As discussed above, a
reasonable jury could conclude that Karen made plans to compete with
Vacation but did not actively engage in any competitive conduct until after she
believed that she had been terminated. Accordingly, a reasonable jury could
find that she did not have a duty to disclose her plans.
Vacation also argues that Karen failed to disclose her intention to attend
a CruiseOne training while on FMLA leave. However, even assuming that the
Case: 16-20628 Document: 00514442515 Page: 28 Date Filed: 04/23/2018
No. 16-20628
29
other elements have been met, Vacation’s evidence with respect to damages is
insufficient to establish injury as a matter of law. As discussed above with
respect to the Baker affidavit, a reasonable jury could conclude that Vacation
failed to establish an injury caused by Karen’s allegedly wrongful conduct.
E.
Finally, the D’Onofrios argue that the district court committed a number
of errors relating to the relief awarded to Vacation. Because we reverse
summary judgment on all of Vacation’s claims against the D’Onofrios, we also
vacate the district court’s award of damages, injunctive relief, and attorneys’
fees.
We note that the award of damages was independently erroneous in light
of the infirm evidence used to support it, as discussed above. Furthermore,
with respect to attorneys’ fees, the district court awarded Vacation $50,000 in
fees “in the event an appeal is filed with the Fifth Circuit Court of Appeals,”
and additional fees if a petition for certiorari is filed with the Supreme Court.
However, “[a] trial court may not grant an unconditional award of appellate
attorneys’ fees.” Rittgers v. Rittgers, 802 S.W.2d 109, 115 (Tex. App.—Corpus
Christi 1990, writ denied); accord Hughes v. Habitat Apartments, 828 S.W.2d
794, 795 (Tex. App.—Dallas 1992, no writ) (“A trial court must condition an
award of appellate attorney’s fees upon the appellant’s unsuccessful appeal.”).
What’s more, under Texas law, the recovery of attorneys’ fees must be
authorized by statute, see Tony Gullo Motors I, LP v. Chapa, 212 S.W.3d 299,
310 (Tex. 2006), and we have been offered no such authorization here. While
Texas law authorizes the recovery of attorneys’ fees for claims based on “an
oral or written contract,”—as well as seven other categories of claims not
relevant here—see Tex. Civ. Prac. & Rem. Code § 38.001(8), for claims
involving the breach of a covenant not to compete, section 15.51(c) of the Texas
Business and Commerce Code “preempts an award of [attorney’s] fees under
Case: 16-20628 Document: 00514442515 Page: 29 Date Filed: 04/23/2018
No. 16-20628
30
any other law.” Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 645
(Tex. App.—Houston [1st Dist.] 2010, pet. denied) (alternation in original)
(quoting Perez v. Tex. Disposal Sys., Inc., 103 S.W.3d 591, 594 (Tex. App.—San
Antonio 2013, pet. denied)). And section 15.51(c) “makes no provision for an
award of fees to an employer.” Id.

Outcome: For the foregoing reasons, we AFFIRM in part, REVERSE in part,
VACATE the awards of damages, injunctive relief, and attorneys’ fees, and
REMAND for further proceedings consistent with this opinion.

Plaintiff's Experts:

Defendant's Experts:

Comments: