Question

Larry G. Snodgrass and Mark Swinnea owned equal interests in two business entities, ERI Consulting Engineers, Inc. (ERI), and Malmeba Company, Ltd., which they operated together for approximately 10 years. ERI manages asbestos abatement projects for contractors. It leased office space from Malmeba, their partnership that owned the building. Snodgrass and ERI purchased Swinnea’s interest in ERI in 2001. ERI paid Swinnea $497,500 to redeem Swinnea’s ERI stock, and Snodgrass transferred his half-interest in Malmeba to Swinnea. ERI agreed to employ Swinnea for six years, and Swinnea agreed not to compete with ERI. At the same time, ERI agreed to continue leasing from Malmeba for six years. Unknown to Snodgrass, the wives of Swinnea and Chris Power, an ERI employee, had created a new company called Air Quality Associates a month before Swinnea and Snodgrass executed the buyout agreement. Air Quality Associates was created to perform mold abatement, but later engaged in asbestos abatement as a contractor even though neither wife had experience in the asbestos abatement field. Swinnea did not disclose the existence of Air Quality Associates to Snodgrass during the ERI buyout negotiations. Over a 33-month period Snodgrass suffered a total loss of profits of $178,000 for business lost to Swinnea. Was Swinnea free to outmaneuver Snodgrass in their buyout agreement as part of the competitive spirit of America? Do owners have a fiduciary duty to each other in negotiating a buyout agreement with a noncompete clause? Are Swinnea’s action’s so contrary to our public sense of justice and propriety to merit exemplary damages?
[ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867 (Tex.); Swinnea v. ERI Consulting Engineers, 364 S.W.3d 421 (Tex. App.)



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  • CreatedJune 06, 2014
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