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Delta Fuel Co. v. Loyed

Court of Appeals of Louisiana, Third Circuit

April 20, 2017



          Jennifer L. Anderson C. Parker Kilgore Jones Walker, LLP ATTORNEY FOR PLAINTIFF/APPELLEE Delta Fuel Company, et al.

          Ravi Sangisetty Michael Lillis ATTORNEY FOR INTERVENOR/APPELLANT Herring Gas Company, Inc.

          Robert Landry Tanner Magee Landry Magee, LLC ATTORNEY FOR DEFENDANT/APPELLANT Eddie Loyed

          Court composed of Sylvia R. Cooks, Shannon J. Gremillion, and Phyllis M. Keaty, Judges.


         This appeal arises out of Defendant, Eddie Loyed's, prior employment with Plaintiff, Delta Fuel Company, Inc. and his present employment with Herring Gas Company, Inc. At issue is an "At Will Employment Agreement" (hereafter Agreement) executed between Loyed and Delta Fuel on June 14, 2010.

         Loyed worked in various capacities for Delta Fuel beginning with his hiring in April of 2010. Loyed initially drove a truck that supplied propane and other petroleum products to various businesses. After receiving additional training from Delta Fuel, Loyed was named the Southern District Propane Manager for the Natchez, Mississippi branch of Delta Fuel. His responsibilities included day-today management of Delta Fuel's propane business in the Southern District, which included various parishes in Louisiana and counties in Mississippi. Loyed prepared pricing information for current and potential clients, identified potential clients, solicited business from potential clients, and maintained client/prospect information. According to Delta Fuel, as a high ranking employee, Loyed had access to significant confidential and proprietary business information related to customers. This confidential and proprietary information included customer lists, customer financial information, marketing materials, pricing arrangements and business plans. Delta Fuel maintained if this information was obtained by a competitor, it would give a significant advantage to any competitor seeking to service Delta Fuel's customers.

         According to Delta Fuel, it had an issue with another former employee, and in 2010, asked all current employees to review and enter into non-compete agreements. Loyed was given a copy of the non-compete agreement and could have consulted an attorney if he so chose. He signed the non-compete agreement on June 14, 2010.

          Following a drop in oil prices and general slowdown in the oil business in early 2016, Delta Fuel underwent internal restructuring. Some employees in the Natchez office were laid off, but Loyed maintained his employment, salary and benefits, although it was testified that the ability of employees to work overtime hours was largely eliminated. Loyed was asked to resume driving a propane delivery truck to make deliveries to customers, rather than some of his prior managerial duties. Loyed let it be known to his supervisors and co-workers that he was considering other employment. According to Steve Wiggington, a Divisional Manager for Delta Fuel who was Loyed's supervisor, he was asked by Loyed if Delta Fuel would enforce his non-compete agreement if he resigned. Wiggington told Loyed that it would be enforced. Loyed also asked the same question to Victoria Bourke, who was responsible for the implementation of the non-compete agreements, and was told by her Delta Fuel would likely enforce the non-compete agreement.

         On March 14, 2016, Loyed resigned from his position with Delta Fuel. He them immediately began employment with Herring Gas. Delta Fuel asserts that Herring Gas is its direct competitor. Two days after his resignation, Loyed showed up at the Delta Fuel offices driving a Herring Gas truck.

         Shortly thereafter, Delta Fuel filed the present action against Loyed seeking temporary, preliminary, and permanent injunctive relief to enforce the non-compete covenant. Initially, the trial court issued a temporary restraining order in the matter on the basis of Delta Fuel's motion for same, at which point Herring Gas intervened in the proceedings.

         A full hearing on the matter was held on May 31, 2016, after which the trial court issued a preliminary injunction enjoining Loyed's continued employment with Herring Gas finding him in breach of the Agreement. The trial court gave the following reasons in open court in support of its decision:

          The beginning paragraph of page eight -- I mean paragraph eight, it does appear to be very definite as to what Mr. Loyed is agreeing to refrain from engaging in, but when you go down to paragraph -- the next paragraph, it says, "If employee becomes employed by a competing business regardless of whether or not employee is an owner or equity interest holder of that competing business, employee shall be deemed to be carrying on or engaging in a business similar to that of the company." So I believe that the later sentence in that paragraph does cover the business that Delta Fuel is seeking to restrict Mr. Loyed from engaging in and I'm going to deny the request that the preliminary injunction be dismissed.

         The trial court signed a final judgment reflecting that ruling on June 14, 2016. Both Loyed and Herring Gas have appealed the preliminary injunction, asserting the trial court erred in finding that Loyed was in violation of the non-compete agreement and in granting the motion for preliminary injunction.


         Questions of contractual interpretation are questions of law, which under Louisiana law are subject to a de novo standard of review. Mitchell v. Patterson Ins. Co., 00-612 (La.App. 3 Cir. 12/6/00), 774 So.2d 366. Thus, in interpreting the Agreement at issue, our review is de novo.

         Historically, Louisiana's public policy has disfavored non-competition agreements. SWAT 24 Shreveport Bossier, Inc. v. Bond, 00-1695 (La.6/29/01), 808 So.2d 294. This policy is based on the state's "desire to prevent an individual from contractually depriving himself of the ability to support himself and consequently becoming a public burden." SWAT 24, 808 So.2d at 298. "Because such covenants are in derogation of the common right, they must be strictly construed against the party seeking their enforcement." Id. at 298.

         Louisiana Revised Statutes 23:921(C) provides an exception to Louisiana's public policy against ...

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