Court Opinion

ID: 6321329
Source: CourtListenerOpinion
Date Created: 2022-03-09 01:00:35.633478+00
Date Added: 2024-06-11T09:15:24.005179
License: Public Domain

Case: 21-30293     Document: 00516230014          Page: 1    Date Filed: 03/08/2022

              United States Court of Appeals
                   for the Fifth Circuit                            United States Court of Appeals
                                                                             Fifth Circuit

                                                                           FILED
                                                                       March 8, 2022
                                   No. 21-30293                       Lyle W. Cayce
                                                                           Clerk

   Rouses Enterprises, L.L.C.,

                                                            Plaintiff—Appellant,

                                       versus

   James B. Clapp II,

                                                            Defendant—Appellee.

                  Appeal from the United States District Court
                     for the Eastern District of Louisiana
                           USDC No. 2:20-CV-2378

   Before Wiener, Graves, and Duncan, Circuit Judges.
   Per Curiam:*
          Rouses Enterprises, L.L.C. appeals the dismissal of its suit to enforce
   a non-compete agreement against its former employee James B. Clapp II.
   Because Clapp was not employed by Rouses when he signed the agreement,
   it is unenforceable under Louisiana law. We therefore affirm.

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-30293      Document: 00516230014          Page: 2   Date Filed: 03/08/2022

                                    No. 21-30293

                                         I.
          Rouses is a grocery store chain operating in Louisiana, Mississippi,
   and Alabama. Clapp interviewed with Rouses for a position as Vice President
   of Center Store Merchandizing in December 2017. After an initial phone
   interview, Rouses sent Clapp an “Agreement not to Compete Against or
   Disclose Information of Rouses Enterprises, LLC.” The agreement does not
   refer to Clapp as an applicant or prospective employee, but as “an employee
   of Rouses.” Clapp signed the agreement on December 28, 2017. At that time,
   Clapp was not an employee of Rouses.
          Rouses offered Clapp the position on January 23, 2018. Clapp began
   his employment on February 12, 2018.
          Clapp worked for Rouses until January 2020, when he was asked to
   resign. In March 2020, Clapp began working for Brookshire Grocery
   Company, a competitor of Rouses based in Tyler, Texas. On March 18, 2020,
   Clapp walked the Rouses’ store in New Iberia, Louisiana, with other
   Brookshire employees. His visit did not go unnoticed: two days later, Rouses’
   HR director emailed Clapp and told him (1) he had been spotted in a Rouses
   and (2) to “[p]lease refer to the signed non-compete agreement . . . which
   forbids you to work in a Parish/County we conduct business in.”
          In July 2020, Rouses sued Clapp for damages and injunctive relief in
   Louisiana state court. Clapp removed the case to the Eastern District of
   Louisiana. After holding a bench trial in April 2021, the district court denied
   Rouses’ claims, finding Rouses failed to prove that the non-compete
   agreement was valid and enforceable under Louisiana law. Rouses appealed.
                                        II.
          “On appeal from a bench trial, we review the district court’s findings
   of fact for clear error and its conclusions of law de novo.” Hobbs v. EVO Inc.,

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Case: 21-30293      Document: 00516230014            Page: 3   Date Filed: 03/08/2022

                                      No. 21-30293

   7 F.4th 241, 247 (5th Cir. 2021) (citation omitted). “The enforceability of
   restrictive covenants is reviewed de novo.” Brock Servs., L.L.C. v. Rogillio,
   936 F.3d 290, 295 (5th Cir. 2019) (citation omitted).
          Because federal jurisdiction in this case is based on diversity,
   Louisiana law applies. Moore v. State Farm Fire & Cas. Co., 556 F.3d 264, 269
   (5th Cir. 2009) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)).
   “To determine Louisiana law, we look to the final decisions of the Louisiana
   Supreme Court.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th
   Cir. 2007) (citation omitted). Absent a “final decision by the Louisiana
   Supreme Court, we must make an Erie guess and determine, in our best
   judgment, how that court would resolve the issue if presented with the same
   case.” Ibid. (citation omitted).
                                         III.
          Rouses argues the district court erred in finding the non-compete
   agreement unenforceable and denying its claims for breach of contract and
   injunctive relief. The question before us is whether Louisiana law allows an
   employer to enforce a non-compete agreement signed by a prospective
   employee. The answer is no.
          “Restrictive covenants are unfavored in Louisiana and are narrowly
   and strictly construed.” Brock Servs., 936 F.3d at 296 (citing Arthur J.
   Gallagher & Co. v. Babcock, 703 F.3d 284, 288 (5th Cir. 2012)); see also SWAT
   24 Shreveport Bossier, Inc. v. Bond, 2000-1695, p. 4 (La. 6/29/01); 808 So. 2d
   294, 298. The pertinent statute provides that “every contract . . . by which
   anyone is restrained from exercising a lawful profession . . . except as
   provided in this Section, shall be null and void.” La. Rev. Stat. Ann.
   § 23:921(A)(1). But “every contract . . . which meets the exceptions as
   provided in this Section, shall be enforceable.” Ibid. Under one of those
   exceptions:

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                                     No. 21-30293

          [a]ny person . . . may agree with his employer to refrain from
          carrying on or engaging in a business similar to that of the
          employer . . . within a specified parish or parishes, municipality
          or municipalities, or parts thereof, so long as the employer
          carries on a like business therein, not to exceed a period of two
          years from termination of employment.
   Id. § 23:921(C). “A non-compete provision must strictly comply with the
   requirements of the statute.” Brock Servs., 936 F.3d at 296. (citation and
   internal quotation marks omitted).
          “Obligations of parties to a contract are fixed at the time the contract
   is entered into.” La. Smoked Prods., Inc. v. Savoie’s Sausage & Food Prods.,
   Inc., 96-1716, 96-1727, p. 8 (La. 7/1/97); 696 So. 2d 1373, 1378 (citation
   omitted). At the time Clapp signed the non-compete agreement, Rouses was
   not his employer. The plain text of section 23:921(C) permits non-compete
   agreements between employees and their “employer.” It does not allow for
   non-compete agreements between job applicants and potential employers.
   See Simpson v. Kelly Servs., Inc., 339 So. 2d 490, 495 (La. App. 2 Cir. 1976)
   (statute “applies only to persons in employee-employer relationships and
   will not be extended to other relationships by judicial construction or
   interpretation”), writ denied, 341 So. 2d 1121 (La. 1977); cf. Setpoint Integrated
   Sols., Inc. v. Kitely, 2022 WL 225093, 21-322, p. 26 (La. App. 3 Cir. 1/26/22);
   2022 WL 225093, at *11 (finding non-compete agreement signed after
   employee’s termination invalid because the “strict construction [required by
   Louisiana law] undermines any finding as to ‘employee’ status in this case”).
          In sum, the district court did not err in finding the non-compete
   agreement was unenforceable.
                                                                    AFFIRMED.

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