While otherwise affirming a judgment in the plaintiff’s favor, in Merrit Hawkins & Associates v. Gresham the Fifth Circuit vacated an award of exemplary damages under Texas law in a non-compete case. It distinguished the plaintiff’s authorities by saying: “Unlike in those cases, the only argument and evidence that [plainitff] MHA presented to the jury on the issue of exemplary damages was that [defendant] Consilium intentionally breached the non-compete contract. MHA claimed that ‘the circumstances of this case [were] quite egregious, that everything was intentional, [Consilium] knew [MHA] had these agreements . . . and they breached them anyway.’ However, this is the exact type of argument that the Texas Supreme Court explains is insufficient to show malice when an element of the underlying cause of action is willful harm. Even drawing all inferences in favor of MHA, the additional evidence MHA points to is insufficient to show that Consilium acted with specific intent to cause substantial harm to MHA. The proximity of the two businesses, without more, does not lead to the conclusion that Consilium acted with malice towards MHA. And the fact that Consilium’s founder was a partner at MHA was not raised for the purpose of showing that MHA engaged in a strategic plan of hiring away MHA employees to harm it, but rather to show that Consilium was aware that MHA’s employees had non-compete agreements. Moreover, MHA has never claimed that Consilium induced [the employee] to steal or use its proprietary information . . . .” No. 16-10439 (June 21, 2017).
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