Wednesday, October 27, 2010
The long legal battle between A&B Bolt and its founder continues. By Walter Pierce
Photos by Robin May
Louisiana's Third Circuit Court of Appeal has let stand a bitter, seven-year battle between an Acadiana oil and gas supply company and its founder.
Wednesday, October 27, 2010
The long legal battle between A&B Bolt and its founder continues. By Walter Pierce
Photos by Robin May
Louisiana's Third Circuit Court of Appeal has let stand a bitter, seven-year battle between an Acadiana oil and gas supply company and its founder.
A&B Bolt and Supply Inc. is suing company founder David "Scottie" Dawes for unspecified damages, alleging that Dawes violated the terms of a non-compete agreement when he left A&B Bolt and formed a new company.
In May 2001, after selling the company for $22 million to Industrial Holdings Inc. (which in turn sold A&B Bolt to T-3 Energy Services Inc.), Dawes agreed to stay on at A&B as a vice president and signed a two-year employment agreement that included a section titled "Covenant Not to Compete," the provisions of which were to be in effect while Dawes remained employed at A&B and for one year following his resignation or termination. The non-compete clause also stipulated that Dawes would not solicit fellow A&B employees to leave the company and join him in a competitive venture, and that he would not solicit business from A&B clients. The non-compete agreement applied to 31 Louisiana parishes considered by A&B Bolt to be its primary territory.
In the summer of 2003, while serving as an at-will employee - the two-year employment agreement signed in May 2001 had expired - Dawes was informed that his salary was being slashed and he would be reassigned to a subsidiary of A&B. In response, Dawes resigned his employment at A&B and formed a new company - Whitco Supply LLC - with Mindy Dawes, Melinda Falgout and Jenney Stockstill. Shortly after, Brandon Dawes joined the group. (Whitco's website states that Falgout and Stockstill had worked for the Dawes family's company in management and sales.)
According to court documents, "Dawes and Whitco admit Whitco directly engages in competition with A&B in the same oil-field-supply business in parishes comprising the territory described in the agreement and engages in business with customers of A&B. Dawes alleges he contacted an attorney before organizing Whitco who advised him that the non-compete agreement was not enforceable."
A&B sought to enforce the non-compete clause, and the case soon began an odyssey through the Louisiana court system, first in state district court in Lafayette where Judge Kristian Earles issued a temporary restraining order against Whitco doing business. But the TRO was soon dissolved by the judge after a hearing. A&B filed writs, first with the Third Circuit and then with the Louisiana Supreme Court, both of which declined to hear the case. Dawes and Whitco filed a motion to have the case dismissed, which Earles granted. A&B appealed to the Third Circuit, which overruled the district court and sent the case back to Lafayette for further proceedings. Earles then granted a summary judgment in favor of Dawes and Whitco, which the Third Circuit again overturned and sent back to Lafayette.
Eventually, with another failed writ application to the state Supreme Court and the conclusion of a related suit in Terrebonne Parish alleging corporate espionage by Whitco against A&B - that suit was settled out of court - Earles granted a motion for summary judgment removing Whitco from the suit, ruling that the company didn't exist at the time Dawes signed the non-compete agreement; but Earles let stand A&B's suit against Dawes, and the Third Circuit on Oct. 13 agreed, writing that as "to the assertion that the non-compete agreement is unenforceable as a matter of law, we note that, despite six years of litigation, no determination has been made as to the extent to which Dawes is precluded from competition with A&B under the non-compete agreement. There remain genuine issues of fact in dispute making summary judgment inappropriate."
"You have to look back at the law that was in place when the agreement was signed to what law is applied to the agreement," says an attorney familiar with contract litigation who asked not to be identified for this story. "Other states often don't have a particular statute addressing the issue, so they use a reasonableness standard. But in Louisiana, we're statutory-based law and not common law, so if the statute clearly sets out requirements and you meet those requirements, then it's enforceable."
The statue the attorney is referring to is Louisiana Revised Statute 23:921, which enumerates the conditions under which a non-compete clause may be considered violated. In 2001, the Louisiana Supreme Court, in a case titled "SWAT 24 Shreveport Bossier, Inc. v. Bond," ruled that the law only prevented owners and officers from competing with their former companies, but that non-compete clauses for employees were unenforceable. Lafayette television meteorologist Rob Perillo famously relied on the "SWAT 24" ruling in successfully challenging a non-compete agreement when he moved from KLFY to KATC.
But in 2003 the Legislature tightened LRS 23:921 to apply to any employee who has signed a non-compete agreement and leaves a company to join a competing company.
This change in the law also manifested itself on Lafayette's airwaves when former KATC reporter David D'Aquin, bound by a non-compete agreement with the station, was forced into a six-month hiatus from broadcasting per the clause in his contract when he chose to leave TV3. He now works in television in Baton Rouge.
How an interpretation of 23:921 applies to Dawes remains to be seen; no trial date has been set.
Attorneys representing both the defendant and the plaintiff in the case did not return calls seeking comment for this story.