Background
Providence Title Company and Truly Title, Incorporated were competitors in the Texas title insurance market. After merger negotiations between the firms failed in 2019, executives from Providence, including Tracie Fleming and Mark Fleming, and a Team Leader named Kim Sheets-Sheffield, left to join Truly. Providence alleged that Truly knowingly participated in breaches of fiduciary duty by these employees and violated a non-disclosure agreement and a non-solicitation agreement. The district court granted summary judgment to Truly on all claims.
The court’s reasoning
The court reviewed the claims de novo, applying Texas law on fiduciary duties and contract interpretation. The court found that while employees may prepare to compete, they must not appropriate trade secrets or solicit customers while employed. However, the court held that Truly did not knowingly participate in any breach because there was no evidence that Truly contributed to, induced, or facilitated the employees’ actions. The court distinguished cases where a competitor actively solicited employees, noting that Truly merely hired at-will employees who had privately agreed to compete. Regarding the non-solicitation agreement, the court interpreted the one-year term as beginning on the date of execution, May 2019, rather than the end of negotiations. Since Providence waived claims accruing after May 2020, no viable claims remained. The court also found no evidence that Truly misused confidential information under the non-disclosure agreement.
What it means going forward
The ruling reinforces that competitors are not liable for knowing participation in fiduciary breaches unless they actively induce or facilitate the breach. It also clarifies that non-solicitation agreements are strictly construed based on their literal terms, and ambiguous effective dates are resolved against the drafter.
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