GARCIA v. DALLAS COUNTY HOSPITAL DISTRICT (2025)

OPINION

Appellant Diana Garcia worked for appellee Dallas County Hospital District (d/b/a Parkland Hospital) as a nurse. In her employment contract, she agreed to pay Parkland $20,000 if her employment ended on or before February 2, 2019. Parkland sued Garcia for breach of contract, alleging that she terminated her employment in March 2018 but did not pay Parkland the $20,000. Garcia's defenses included that the contract was an unlawful restraint of trade and that the $20,000 damages provision was an unenforceable penalty. The trial judge granted summary judgment in favor of Parkland on its breach-of-contract claim. Garcia appealed, and we issued an opinion and judgment reversing the summary judgment and remanding the case for further proceedings.

Garcia filed a motion for rehearing challenging our rejection of her restraint-of-trade argument, and Parkland filed a motion for reconsideration en banc seeking affirmance of its summary judgment.

We deny Garcia's motion for rehearing. On our own motion, we withdraw our memorandum opinion and judgment of December 31, 2024. This is now the opinion of the Court. We affirm the trial court's judgment.

I. Background

A. Factual Allegations

Parkland alleged the following facts in its live pleading.

In September 2015, appellant Diana Garcia entered into a contract with Parkland called a Resident/Graduate Nurse Program Employment Agreement. In the Agreement, Garcia promised to participate in the program through February 2, 2016, and she further promised to remain a Parkland employee as an RN I from February 3, 2016, through February 2, 2019. Section VII of the Agreement recited that it was impossible to estimate the damages Parkland would sustain if Garcia left Parkland's employment before the end of the specified term, and it provided that Garcia would pay Parkland $20,000 if she left Parkland's employment anytime from November 21, 2015, through February 2, 2019.

Garcia terminated her employment with Parkland on March 31, 2018, and she did not pay Parkland the $20,000 as promised.

B. Procedural History

Initially, Parkland sued Garcia and four other similarly situated former employees for breach of contract. Parkland later filed a first amended petition increasing the number of defendants to thirteen.

Garcia filed a traditional motion for summary judgment in which she argued that (i) the Agreement is an unlawful restraint of trade, (ii) Section VII's liquidated-damages clause is an unenforceable penalty, and (iii) the Texas Business and Commerce Code preempts Parkland's claim for attorneys’ fees. Parkland filed a response with evidence, and Garcia filed objections to Parkland's evidence. The trial judge overruled Garcia's objections and denied her motion.

Then Parkland filed a motion for summary judgment against Garcia. Garcia filed a response that repeated the arguments she had made in her summary-judgment motion. The trial judge granted Parkland's motion, awarding Parkland $20,000 in damages, attorneys’ fees, and court costs.

The trial judge later severed Parkland's claim against Garcia into a separate action, thereby making the interlocutory summary judgment final. Garcia timely appealed.

II. Issues Presented

Garcia asserts three issues on appeal, which we paraphrase as follows:

1. The trial judge erred by granting Parkland's summary-judgment motion and denying Garcia's summary-judgment motion.

2. The trial judge erred by awarding Parkland attorneys’ fees because Chapter 15 of the Business and Commerce Code preempts Chapter 38 of the Civil Practice and Remedies Code.

3. The trial judge erred by overruling Garcia's objections to Parkland's summary-judgment evidence.

III. Standard of Review and Scope of Appeal

We review a summary judgment de novo. Trial v. Dragon, 593 S.W.3d 313, 316 (Tex. 2019). If there are cross-motions for summary judgment, and the trial judge grants one and denies the other, we consider all the evidence presented and render the judgment that the trial judge should have rendered. Id. at 316–17. In this case, however, the trial judge heard and denied Garcia's summary-judgment motion before Parkland filed its summary-judgment motion. Under these circumstances, the motions are not properly considered “cross-motions,” and only the granting of Parkland's summary-judgment motion is properly before us. See Murphy v. Petersen, No. 04-13-00357-CV, 2013 WL 6097959, at *2 (Tex. App.—San Antonio Nov. 20, 2013, no pet.) (mem. op.) (reaching same result on similar facts); see also Aguilar v. LVDVD, L.C., No. 08-01-00438-CV, 2002 WL 1732520, at *7 (Tex. App.—El Paso July 25, 2002, pet. denied) (not designated for publication) (holding that motions for summary judgment were not “competing” where one motion was denied before the other was heard, and thus evidence attached to first motion was not before the trial court when it heard the second motion).

When we review a summary judgment in favor of a claimant, we determine whether the claimant established every element of its claim as a matter of law. Alexander v. Wilmington Sav. Fund Soc'y, FSB, 555 S.W.3d 297, 299 (Tex. App.—Dallas 2018, no pet.). We consider the evidence in the light most favorable to the nonmovant, indulge every reasonable inference in favor of the nonmovant, and resolve any doubts against the movant. Id. If the nonmovant relies on an affirmative defense to defeat summary judgment, she must present evidence sufficient to raise a fact issue on each element of the defense. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984).

We review a trial judge's rulings on objections to summary-judgment evidence for abuse of discretion. Allbritton v. Gillespie, Rozen, Tanner & Watsky, P.C., 180 S.W.3d 889, 892 (Tex. App.—Dallas 2005, pet. denied). An abuse of discretion occurs when either (1) the trial judge fails to analyze or apply the law correctly or (2) with regard to a factual or discretionary matter, the trial judge could reasonably reach only one decision and failed to do so. In re C.J., 689 S.W.3d 417, 420 (Tex. App.—Dallas 2024, no pet.).

IV. Analysis

A. Issue One: Is the Agreement an unlawful restraint of trade?

In issue one, Garcia argues that Parkland was not entitled to summary judgment for two reasons: (i) the Agreement is an unlawful and unenforceable restraint of trade under Chapter 15 of the Business and Commerce Code and (ii) the $20,000 liquidated-damages clause in Section VII is an unenforceable penalty provision. We address her restraint-of-trade argument first, and we reject it for the following reasons.

1. Summary of the Parties’ Arguments

Garcia argues that the Agreement is unenforceable under Business and Commerce Code section 15.05(a), which provides that “[e]very contract ․ in restraint of trade or commerce is unlawful.” Tex. Bus. & Com. Code Ann. § 15.05(a). She urges that the Agreement is a restraint of trade because Section VII limits her professional mobility and restricts her right to render personal services as she chooses. Further, she argues that the Agreement does not qualify for the exception to the rule of unenforceability that section 15.50 carves out for covenants not to compete that meet certain statutory requirements.

Parkland responds that the Agreement is not an unlawful restraint of trade because it does not limit Garcia's right to compete with Parkland, and that section 15.50 is inapplicable because the Agreement is not a covenant not to compete.

In our original opinion, we rejected Garcia's argument because (1) under DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 686–88 (Tex. 1990), a contract violates section 15.05(a) only if it violates the antitrust “rule of reason” by adversely affecting competition in the relevant market, and (2) Garcia adduced no evidence that the Agreement had the required anticompetitive effect.

On rehearing, Garcia argues that we misinterpreted DeSantis. She contends that the antitrust rule of reason applies only when a party asserts an affirmative claim for damages under section 15.05(a), and not when a party asserts restraint of trade as a defense to a contract's enforceability. Parkland responds that Garcia's proposed distinction is incorrect, that the antitrust rule of reason applies to any contention that an agreement is unlawful under section 15.05(a), and that section 15.05(a) is the only restraint-of-trade argument available to Garcia because the Agreement is not a covenant not to compete.

2. Applicable Law

Two distinct aspects of Texas law can render a contract unenforceable as an unlawful restraint of trade: the common law and Chapter 15 of the Business and Commerce Code. As discussed below, the common law addresses covenants not to compete, and Chapter 15 addresses all contracts.

“At one time the common law generally prohibited all restraints on trade, ․ and Texas jurisprudence once held covenants not to compete to be unenforceable because they were in restraint of trade and contrary to public policy.” Marsh USA Inc. v. Cook, 354 S.W.3d 764, 771 (Tex. 2011) (citations omitted); see also DeSantis, 793 S.W.2d at 681 (referring to “fundamental common law principles” that govern covenants not to compete). But since at least 1899, the common law permitted covenants not to compete to be enforced if they satisfied certain reasonableness criteria. See Marsh, 354 S.W.3d at 771–72 (tracing evolution of the common law). In 1989, the legislature enacted the Covenants Not to Compete Act, which also addressed the requirements to make a covenant not to compete enforceable. See id. at 772 (citing Bus. & Com. § 15.50(a)).

Contracts in restraint of trade are also prohibited by Chapter 15 of the Business and Commerce Code. See Bus. & Com. § 15.01 (labelling Chapter 15 the “Texas Free Enterprise and Antitrust Act of 1983”). Chapter 15 provides, “Every contract, combination, or conspiracy in restraint of trade or commerce is unlawful.” Id. § 15.05(a). And, as mentioned above, Chapter 15 also contains a provision that specifically addresses the enforceability of covenants not to compete:

Notwithstanding Section 15.05 ․, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.

Id. § 15.50(a). Read together, sections 15.05(a) and 15.50(a) provide that a contract in restraint of trade is unlawful and unenforceable unless it is a covenant not to compete that meets the requirements set forth in section 15.50(a).

The DeSantis case demonstrates that the common-law and statutory proscriptions against restraints of trade both remain operative. In that case, Wackenhut sued its former employee DeSantis for violating a covenant not to compete, and DeSantis counterclaimed that the covenant violated Chapter 15. DeSantis, 793 S.W.2d at 676. After a jury trial, the trial court ruled for Wackenhut and granted injunctive relief against DeSantis. The court of appeals affirmed. Id. at 676–77. The Supreme Court affirmed in part and reversed in part. First, the Court held that the covenant not to compete was unenforceable unless it met certain reasonableness criteria. Id. at 681–83. It held that Wackenhut's covenant not to compete failed to satisfy those criteria, regardless of whether the Court applied the common-law criteria or the criteria found in the newly adopted section 15.50. Id. at 683–85. As a result, the Court vacated the injunction against DeSantis. Id. at 689. But then the Court held that the trial court properly rejected DeSantis's counterclaim under sections 15.05(a) and 15.21(a). Noting that section 15.05(a) was taken from federal antitrust law, the Court held that section 15.05(a) prohibits only contracts that unreasonably restrain trade. Id. at 687. It then held that a post-employment non-competition agreement violates section 15.05(a) only if it fails the rule-of-reason test, meaning that the agreement has an adverse effect on competition in the relevant market. Id. at 688. DeSantis adduced no evidence of either an anticompetitive effect or a relevant market, so the trial court correctly denied him recovery on his Chapter 15 counterclaim—even though the covenant not to compete was unenforceable under the common law and section 15.50. Id.

In this case, Garcia did not address the rule of reason in her summary-judgment response, nor did she adduce any evidence about the relevant market or any anticompetitive effect of the Agreement. She argues on rehearing, however, that this is not fatal to her position because DeSantis means that the antitrust rule-of-reason requirement applies only to a party asserting an affirmative antitrust claim for damages, and not to a party (like her) who relies on section 15.05(a) only defensively against a breach-of-contract claim.

We reject Garcia's argument for two reasons.

First, Garcia's argument has no basis in the statutory language. Section 15.05(a) makes contracts in restraint of trade unlawful in universal terms, without any qualifications based on whether the statute is asserted offensively or defensively. Thus, Garcia's argument would require us to rewrite the statute. We decline to do so. See Lippincott v. Whisenhunt, 462 S.W.3d 507, 508 (Tex. 2015) (per curiam) (“A court may not judicially amend a statute by adding words that are not contained in the language of the statute.”).

Second, Garcia misinterprets the part of DeSantis that held that Wackenhut's covenant not to compete was unenforceable. That holding did not depend on giving section 15.05(a) different meanings depending on whether it was asserted offensively or defensively—indeed, the Court's enforceability analysis never mentioned section 15.05(a) at all. See DeSantis, 793 S.W.2d at 681–85. Rather, the Court relied on the common-law principle that covenants not to compete restrain trade and are therefore unenforceable unless they are determined to be reasonable under certain criteria. See id. The Court acknowledged that the legislature had recently intervened in the development of the common law by statutorily defining (in section 15.50) the reasonableness criteria applicable to noncompetition agreements. See id. at 684–85. But the premise that noncompetition covenants are generally unenforceable remains a common-law rule that does not incorporate the antitrust rule-of-reason test. As the Court explained,

[r]ule of reason analysis under antitrust laws must not be confused with reasonableness analysis under the common law. Rule of reason analysis tests the effect of a restraint of trade on competition. By contrast, whether a noncompetition agreement is reasonable depends upon its effect on the parties, the competitors, as it were. The two standards are not directly related․ [A]n agreement may be unreasonable as between the parties and yet not violate the rule of reason test under the antitrust laws․

․ [W]e hold that a post-employment noncompetition agreement does not violate section 15.05(a) unless it fails the same rule of reason analysis that would be applied under federal law.

Id. at 688 (footnote omitted). We later drew the same distinction between the common law and section 15.05(a):

The rule of reason test used in antitrust analysis is distinct from the reasonableness test applied to noncompetition agreements under section 15.50 and common law.

Am. Chiropractic Clinics, P.C. v. Spence, No. 05-93-01971-CV, 1995 WL 731786, at *4 (Tex. App.—Dallas Dec. 11, 1995, writ denied) (not designated for publication); see also BioTE Med., LLC v. Carrozzella, 705 S.W.3d 793, 802 n.16 (Tex. App.—Fort Worth 2023) (mem. op.) (noting that DeSantis distinguished between “noncompete analysis and Chapter 15 analysis, conducting each analysis separately”), vacated without reference to the merits & dism'd as moot, No. 23-0724, 2025 WL 817439 (Tex. Mar. 12, 2025) (order).

Cases decided since DeSantis support our interpretation. When a party contends that a covenant not to compete is an unlawful restraint of trade under section 15.05(a), courts require the party to show an anticompetitive effect that violates the rule of reason. See Am. Chiropractic Clinics, 1995 WL 731786, at *3–4; Tex. Indus. Servs., Inc. v. Soucy, No. C14-90-00441-CV, 1991 WL 28936, at *2 (Tex. App.—Houston [14th Dist.] Mar. 7, 1991, writ denied) (not designated for publication). But when a party argues only that a covenant not to compete is unenforceable under the common law and section 15.50, courts do not require the party to prove a violation of the antitrust rule of reason. See, e.g., Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848–52 (Tex. 2009) (not mentioning section 15.05 or the antitrust rule of reason); Dale v. Hoschar, No. 05-13-01135-CV, 2014 WL 3907997, at *2–3 (Tex. App.—Dallas Aug. 12, 2014, no pet.) (mem. op.) (same).

Thus, we conclude that when a party defends a breach-of-contract claim on the ground that the contract is an unlawful restraint of trade, the party may rely on section 15.05(a) or on the common law. If the party relies on section 15.05(a), she must prove that the contract violates the antitrust rule of reason, i.e., has an adverse effect on competition in the relevant market. DeSantis, 793 S.W.2d at 687. If she relies on the common law, she must show that the contract is a covenant not to compete, and then the reasonableness criteria specific to such covenants come into play. See id. at 681–85; Bus. & Com. § 15.50.

But what is a covenant not to compete? Chapter 15 does not define the term, nor has the Texas Supreme Court adopted a comprehensive definition. See Exxon Mobil Corp. v. Drennan, 452 S.W.3d 319, 329 (Tex. 2014) (“It is not necessary here to answer the question of what it means to be a covenant not to compete ․”). But the term has a generally accepted meaning: “A promise, usu. in a sale-of-business, partnership, or employment contract, not to engage in the same type of business for a stated time in the same market as the buyer, partner, or employer.” Covenant, Black's Law Dictionary (12th ed. 2024) (subdefinition for covenant not to compete); see also Eric A. Posner, The Antitrust Challenge to Covenants Not to Compete in Employment Contracts, 83 Antitrust L.J. 165, 165–66 (2020) (“Noncompetes are clauses in employment contracts that forbid workers to work for competitors of their former employer, for a certain period of time and over a defined geographic area.”); Joel W. Mohrman, Covenants Not to Compete: Make Them Work for You, 38 Brief 30, 30 (2008) (“A covenant not to compete is an agreement between two parties where one party agrees to refrain from conduct that competes with the business of the other party.”). As one court of appeals has said, the common denominator of all covenants not to compete is “a limit on the restrained party's ability to—as the name implies—compete.” BioTE Med., 705 S.W.3d at 798.

3. Application of the Law to the Facts

Garcia does not claim, even on rehearing, that she adduced any evidence that the Agreement involved in this case had an adverse effect on competition in the relevant market. Accordingly, we adhere to our holding that Garcia did not raise a genuine fact issue that the Agreement is unlawful under section 15.05(a). See DeSantis, 793 S.W.2d at 686–88. The question, then, is whether she raised a genuine fact issue that the Agreement is a covenant not to compete that is unenforceable under the common law and section 15.50(a). See BioTE Med., 705 S.W.3d at 798–801 (concluding that contract was not a covenant not to compete and therefore did not have to satisfy covenant-not-to-compete criteria to be enforceable).

On its face, Section VII seems not to be a covenant not to compete because it does not limit Garcia's ability to compete with Parkland. Section VII imposes adverse financial consequences on her if she quits or is fired early for almost any reason, but it applies regardless of whether she subsequently competes with Parkland by working as a nurse elsewhere, switches to a different field of employment, or drops out of the workforce altogether. Thus, it lacks “the one thing that is common among all other noncompetes, i.e., a limit on the restrained party's ability to—as the name implies—compete.” Id. at 798; cf. Heder v. City of Two Rivers, Wis., 295 F.3d 777, 780–81 (7th Cir. 2002) (concluding that training-repayment clause was not a covenant not to compete under Wisconsin law); O'Brien v. Smoothstack, Inc., No. 1:23-cv-491, 2025 WL 1921433, at *10–11 (E.D. Va. July 11, 2025) (concluding that “Training Repayment Agreement Provision” was not a covenant not to compete under Virginia law); City of Oakland v. Hassey, 78 Cal. Rptr. 3d 621, 634 (Cal. Ct. App. 2008) (concluding that training-repayment provision was not a covenant not to compete under California law).

There is another reason to conclude that Section VII is not a covenant not to compete: the reasonableness criteria that can make a covenant not to compete enforceable make no sense when applied to an early-termination payment provision. A covenant not to compete can be enforceable “to the extent it contains [reasonable] limitations as to time, geographical area, and scope of activity to be restrained.” Bus. & Com. § 15.50(a). But limitations based on time, geographical area, or scope of activity do not fit Section VII—it is a one-time obligation triggered by the end of employment rather than by competitive activity. See Jonathan F. Harris, Unconscionability in Contracting for Worker Training, 72 Ala. L. Rev. 723, 758 (2021) (“[I]t would be illogical to apply the noncompete reasonableness factors—scope, geography, and time of the competition restriction—to [training repayment agreements] that do not contain facial restrictions on competition.”). The fact that the enforceability criteria applicable to covenants not to compete make no sense when applied to Section VII suggests that Section VII is not a covenant not to compete.

Garcia argues that we should treat the Agreement like a covenant not to compete because it limits employee mobility, and she cites two Texas Supreme Court cases for support. See Peat Marwick Main & Co. v. Haass, 818 S.W.2d 381 (Tex. 1991); Frankiewicz v. Nat'l Comp Assocs., 633 S.W.2d 505 (Tex. 1982). But those cases are distinguishable because the contract clauses at issue in those cases specifically targeted competitive behavior. The clause in Haass required the employee to make payments to his former employer if he quit the firm and took firm clients with him. 818 S.W.2d at 383. Thus, the Court analyzed the enforceability of that clause under the same reasonableness rules applicable to covenants not to compete. Id. at 385. Similarly, the clause in Frankiewicz required the employee to forfeit vested commissions if he left his employer and competed with it, and the Supreme Court held that the clause was unenforceable under the rules applicable to covenants not to compete. 633 S.W.2d at 506–08. Section VII of the Agreement does not target competitive behavior the way the contracts did in Haass and Frankiewicz.

Garcia also argues that we should follow the factually similar case of Rieves v. Buc-ee's Ltd., 532 S.W.3d 845 (Tex. App.—Houston [14th Dist.] 2017, no pet.). In that case, Rieves became an assistant manager at a Buc-ee's convenience store, and she contractually promised to repay Buc-ee's some of her compensation if she did not work for Buc-ee's for a minimum of forty-eight months. Id. at 847. She quit after about three years, and Buc-ee's sued her under the contract for about $66,000. Id. at 848. Buc-ee's won summary judgment, and on appeal Rieves argued that the repayment provision was an unenforceable restraint of trade. Id. at 849. The court of appeals agreed with Rieves, holding that the payment provision was similar enough to covenants not to compete to justify the same treatment under the law—the repayment provision was unlawful unless it satisfied the reasonableness criteria found in section 15.50(a). Id. at 851. The court further held that the repayment provision did not satisfy those criteria and thus was unenforceable. Id. at 851–52. In a footnote, the court added that even if the provision was not a covenant not to compete subject to section 15.50(a), it was still unenforceable because then it fell within the general rule prohibiting contracts in restraint of trade. Id. at 851 n.5.

We decline to follow either holding in Rieves. First, for the reasons already given, we do not agree that a payment clause like Section VII is a covenant not to compete. Citing Haass, the Rieves court reasoned that the Buc-ee's repayment provision inhibited employee mobility in virtually the same manner as a covenant not to compete because the provision imposed a severe economic penalty on Rieves if she exercised her right to quit. Id. at 851. We disagree with this reasoning. The Buc-ee's provision was triggered if Rieves stopped working for Buc-ee's within four years, regardless of whether Rieves ever competed with Buc-ee's. In Haass, by contrast, the payment provision was triggered only if Haass solicited or serviced his former employer's clients. 818 S.W.2d at 383 n.3. Thus, payment provisions like the ones in Rieves and the instant case do not have the same specifically anticompetitive effect as provisions that prohibit or penalize competition. Second, Rieves’s alternative holding that the payment provision failed as a restraint of trade even if it was not a noncompetition agreement, 532 S.W.3d at 851 n.5, errs because it ignores DeSantis’s holding that section 15.05(a) prohibits only unreasonable restraints of trade that involve harm to competition in the relevant market, 793 S.W.2d at 686–88.

Finally, Garcia appeals to broad language in the Marsh opinion stating that “[c]ovenants that place limits on former employees’ professional mobility or restrict their solicitation of the former employers’ customers and employees are restraints on trade and are governed by the [Covenants Not to Compete] Act.” 354 S.W.3d at 768. But the parties in Marsh agreed that the contract in that case was a covenant not to compete, id. at 768, and the Court later recognized that Marsh did not actually present the question of whether the contract in that case was a covenant not to compete, Drennan, 452 S.W.3d at 328. Also, if taken literally the Marsh dictum quoted above would make every employment contract for a definite term a “covenant not to compete,” since the risk of a breach-of-contract lawsuit would automatically “limit” the employee's professional mobility by discouraging the employee from quitting early. Moreover, Drennan confirms that not every clause that discourages competition is a covenant not to compete; the Court held that the covenant-not-to-compete label did not apply where the contract in question provided that an employee would forfeit retirement benefits that the employee had not contributed to if the employee competed with his employer. See id. at 327–29.

We recognize that payment provisions like Section VII of the Agreement arguably raise some of the same public-policy concerns that covenants not to compete do.² Nevertheless, we have no Texas Supreme Court authority holding that a provision like Section VII, which does not specifically prohibit or penalize competitive behavior, constitutes a covenant not to compete for purposes of unenforceability as a common-law restraint of trade. Rieves aside, we find no authority to support treating Section VII as a covenant not to compete, and both logic and the other persuasive authorities we have found weigh against it. Accordingly, we hold that Section VII is not a covenant not to compete subject to challenge under the common law and section 15.50(a). See BioTE Med., 705 S.W.3d at 798–801 (concluding that contract was not a covenant not to compete and therefore did not have to satisfy covenant-not-to-compete criteria to be enforceable).

4. Conclusion

For the foregoing reasons, we conclude that Garcia did not raise a genuine fact issue that the Agreement is unenforceable because it is an unlawful restraint of trade.

B. Issue One: Is Section VII of the Agreement an unenforceable penalty?

Next we consider Garcia's argument that Parkland was not entitled to summary judgment because Section VII of the Agreement is an unenforceable penalty under the law of contracts.

1. Summary of the Parties’ Arguments

Section II of the Agreement provided that Garcia would work for Parkland from September 25, 2015, through February 2, 2016, as a participant in Parkland's Critical Care Resident/Graduate Nurse Program, and then from February 3, 2016, through February 2, 2019, as a member of Parkland's nursing staff. In Section VII, Garcia promised that she would pay Parkland $20,000 if her employment with Parkland ended after November 20, 2015, and before February 3, 2019.³

Garcia argues, as she did in the trial court, that Section VII is an unenforceable penalty clause rather than an enforceable liquidated-damages clause because (1) Section VII imposes the same damages regardless of the severity of Garcia's breach and (2) alternatively, Parkland did not show that its actual damages were incapable of estimation.

Parkland responds that Section VII is an enforceable liquidated-damages clause.

In our original opinion, we held that Section VII was an unenforceable penalty on its face as a “one size fits all” provision. Parkland argues in its motion for en banc reconsideration that we erred. On our own motion, we reconsider our holding.

2. Applicable Law

Although Texas law favors freedom of contract, this policy is tempered by the rule that breach-of-contract damages are limited to just compensation for the loss or damage actually sustained. Atrium Med. Ctr., LP v. Houston Red C LLC, 595 S.W.3d 188, 192 (Tex. 2020). Accordingly, Texas courts carefully review liquidated-damages provisions to ensure that they adhere to the principle of just compensation. Id. A provision that violates the principle of just compensation is deemed an unenforceable penalty. Id. Just compensation for a breach of contract can involve expectancy damages that give the plaintiff the benefit of the bargain, reliance damages that compensate the plaintiff for out-of-pocket expenses, and restitution damages that restore to the plaintiff a benefit that it conferred on the defendant. Id. at 193.

A claimant seeking to recover on a liquidated-damages clause bears the burden of showing two elements: (1) the harm that will be caused by the breach is difficult or incapable of estimation and (2) the stipulated amount of damages is a reasonable forecast of just compensation.⁴ Id. at 192. Both elements are examined as of the time the agreement is made. Id. A liquidated-damages clause is facially unreasonable if it (1) imposes damages that are a multiplier of actual damages or (2) uses the same measure of damages “for breaches of varying magnitude.” Id. at 195–96; see also Shops at Legacy (RPAI) L.P. v. Del Frisco's Grille of Tex., LLC, No. 05-19-01274-CV, 2020 WL 4745548, at *5 (Tex. App.—Dallas Aug. 17, 2020, pet. denied) (mem. op.) (“Even in cases where the alleged breach is material, a ‘one size fits all’ liquidated damages provision will not be enforced.”).

Additionally, even a clause that satisfies the two required elements will not be enforced if it turns out in fact that the damages estimate is inaccurate and an “unbridgeable discrepancy” exists between the actual damages and the amount stipulated. Atrium Med. Ctr., 595 S.W.3d at 193. The unbridgeable-discrepancy rule is a defense that the breaching party bears the burden of proving. Id.

The ultimate question of whether a liquidated-damages clause is enforceable is a question of law for the court to decide, but the court may have to resolve factual issues before reaching the ultimate question of enforceability. FPL Energy, LLC v. TXU Portfolio Mgmt. Co., L.P., 426 S.W.3d 59, 70 (Tex. 2014).

3. Application of the Law to the Facts

a. Facial Invalidity

Garcia argues first that Section VII is invalid on its face because it prescribes the same amount of liquidated damages ($20,000) regardless of the magnitude of Garcia's breach. We disagree with Garcia's argument for the following reasons.

(1) The Parties’ Arguments

Garcia's argument is simple. Under Section VII, Garcia was required to pay Parkland $20,000 if she stopped working for Parkland anytime from November 21, 2015, to February 2, 2019. Thus, the amount of liquidated damages Garcia was required to pay was the same whether she quit working for Parkland after two days of work or after completing 99% of her term. Thus, she concludes, Section VII stipulates the same amount of damages for breaches of differing magnitudes, and it is facially invalid. See Atrium Med. Ctr., 595 S.W.3d at 196 (“[P]rovisions that use the same damage measure for breaches of varying magnitude are also facially unreasonable.”) (footnote omitted).

In its appellee's brief, Parkland makes two responses to Garcia's contention that Section VII is a facially invalid one-size-fits-all clause. First, it points out that Section VII does not define the liquidated damages as a multiple of actual damages. This is true but not responsive to Garcia's argument; a liquidated-damages clause is facially unreasonable if it either stipulates damages as a multiple of actual damages or prescribes the same measure of damages for breaches of varying magnitudes. See id. at 195–96. Garcia relies on the second theory, not the first. Second, Parkland argues that Garcia did not present any evidence that there was an unbridgeable discrepancy between Parkland's actual damages and the $20,000 stipulated sum. This argument is also inapposite; Garcia's argument that Section VII is invalid on its face did not require her to produce evidence of an unbridgeable discrepancy in fact.

In its motion for reconsideration en banc, Parkland raises new arguments in opposition to Garcia's one-size-fits-all argument. It is appropriate for us to consider those arguments. See In re Troy S. Poe Tr., 646 S.W.3d 771, 779 (Tex. 2022) (holding that an appellee need not raise every argument supporting a trial court's judgment in its appellee's brief and that appellees can raise arguments arising from court of appeals’ judgment in a motion for rehearing). Although Parkland raises several arguments, they generally support a single premise—it is actually not apparent on the Agreement's face that the magnitude of a breach by Garcia decreases the longer she works for Parkland. For the reasons given below, we conclude that this premise is correct.

(2) Application of the Law to the Facts

The Agreement contains a recital that explains the specific uncertainty of loss that undergirds Section VII's stipulated-damages clause: “the costs of [Garcia's] training are difficult to quantify with certainty, but at a minimum involve the providing of classroom instruction, residency training opportunities, and provision of facilities to provide residency and graduate nurse training.” Those out-of-pocket losses to Parkland would not diminish no matter how long Garcia worked for Parkland. See Atrium Med. Ctr., 595 S.W.3d at 193 (“[R]eliance damages [for breach of contract] compensate the plaintiff for out-of-pocket expenses[.]”). Arguably Parkland's reliance damages would be offset by the value of any performance rendered by Garcia. See Scott Skelton & Holli Pryor-Baze, Overview of Common Law Breach of Contract Damages and Practice Tips, 108 The Advoc. 18, 19 (Fall 2024) (“As with benefit-of-the-bargain damages, the complaining party must account for the value of the breaching party's performance to determine reliance damages.”). But the value of Garcia's performance and the size of the offset, if any, would depend on the consideration of extrinsic evidence, and we cannot conclude from the face of the Agreement that Parkland's reliance damages—and thus the magnitude of Garcia's breach—would vary significantly depending on how long Garcia worked for Parkland under the Agreement.

Parkland further argues, and we agree, that the same result is reached under an expectancy measure of damages. Parkland would suffer expectancy damages if Garcia quit early and Parkland incurred losses in order to obtain a replacement nurse for the remainder of Garcia's term. But it is not apparent on the face of the Agreement that Parkland's expectancy damages would be higher if Garcia quit earlier in her term than if she quit later. It is possible—and a matter for proof by extrinsic evidence—that Parkland could suffer lower expectancy damages if it hired a replacement nurse for a longer term rather than for a shorter term. Parkland's expectancy damages could also vary depending on how much notice Garcia gave Parkland and how much lead time Parkland had to fill her position. Thus we conclude that it is not apparent on the face of the Agreement that Parkland's expectancy damages would necessarily decrease in proportion to how long Garcia worked for Parkland under the Agreement.

Parkland's position is supported by Bunker v. Strandhagen, No. 03-14-00510-CV, 2017 WL 876374 (Tex. App.—Austin Mar. 3, 2017, no pet.) (mem. op.). In that case, a doctor entered a seven-year employment contract with a $500,000 liquidated-damages clause if her employment ended early. Id. at *1. When her employment ended after just two years, the doctor sued for a declaratory judgment that the provision was an unenforceable penalty, and she won summary judgment. Id. at *1–2. The court of appeals reversed, holding that the doctor had not established that the provision was unreasonable on its face as a one-size-fits-all provision. The court gave multiple reasons for its holding:

• the contract did not show on its face that the harm from her early termination would decrease with the passage of time;

• the contract contained exceptions to the stipulated-damages clause, showing that the clause was narrowly drafted and would not be triggered by immaterial breaches; and

• the liquidated-damages clause was triggered by a breach of only one specific promise rather than by breaches of different promises of varying importance.

Id. at *8–9.

Like the Bunker court, we have concluded that the face of the Agreement does not permit us to assume that Parkland's damages actually decrease over time. We further note that the Agreement contains a carve-out that reduces the likelihood that Section VII will be triggered by immaterial breaches. Specifically, the Agreement allows Garcia to quit early in the training period, from September 25 through November 20, 2015, without triggering the $20,000 payment obligation. (Parkland argues that there is a second carve-out excusing Garcia from Section VII if Parkland terminated her in the first 120 days of her employment for lack of skills and qualifications, but we conclude that the Agreement is unclear on that point.) Although the contract involved in Bunker contained more exceptions to the liquidated-damages clause than Parkland's Agreement does, we conclude that the exception in the Parkland Agreement nevertheless weighs against concluding that Section VII is facially invalid as a one-size-fits-all provision. And, as in Bunker, Section VII is triggered by only a single kind of breach—early termination—and not by different kinds of breaches of varying importance.

Garcia cites cases from our Court to support her position, but we conclude that they are distinguishable. For example, we once held that a covenant not to compete that included a $10,000 liquidated-damages clause was unenforceable because (1) there was no evidence that the plaintiff actually lost any business because of the defendant's breach and (2) the clause prescribed the same damages regardless of whether the employee breached the covenant for one day or for two years. Eberts v. Businesspeople Pers. Servs., Inc., 620 S.W.2d 861, 864 (Tex. App.—Dallas 1981, no writ). Since Eberts, the Texas Supreme Court has clarified that the defendant bears the burden of showing an unbridgeable discrepancy between the liquidated-damages amount and the plaintiff's actual damages, Atrium Med. Ctr., 595 S.W.3d at 193, so our no-evidence conclusion misplaced the burden of proof. And, as we have explained above, it is not apparent on the face of Parkland's Agreement that either its reliance damages or its expectancy damages would vary in proportion to the timing of Garcia's breach of the Agreement.

In another case, we invalidated a liquidated-damages clause because the contract prescribed the same damages for any breach of many different covenants in the contract, including some that were quite minor. Mayfield v. Hicks, 575 S.W.2d 571, 575 (Tex. App.—Dallas 1978, writ ref'd n.r.e.). In the instant case, by contrast, Section VII is limited to a single kind of breach—early termination—and it is not apparent on the face of the Agreement that the magnitude of Garcia's breach depends on its timing.

Similarly, in Shops at Legacy, we invalidated liquidated-damages clauses that used the same formula to calculate the plaintiff's damages even if the defendant breached the contract in a minor way unlikely to cause any injury to the plaintiff. 2020 WL 4745548, at *5; accord Tempo Transp., LLC v. J.W. Logistics Operations, LLC, No. 05-22-01035-CV, 2024 WL 3311144, at *6 (Tex. App.—Dallas July 5, 2024, no pet.) (mem. op.) (following Shops at Legacy). Again, the Agreement involved in the instant case prescribed liquidated damages for only one kind of breach, and it is not apparent on the face of the Agreement that the magnitude of Garcia's breach varies with the breach's timing.

(3) Conclusion

We reject Garcia's argument that Section VII is invalid on its face as a one-size-fits-all liquidated-damages clause.

b. Whether Parkland Established that Its Damages Were Not Capable of Estimation

Garcia argues in the alternative that Parkland failed to establish that its damages were incapable of estimation at the time of contracting. As stated above, a party seeking to recover liquidated damages bears the burden to show that the harm that would be caused by the breach is incapable or difficult of estimation at the time the agreement was made. Atrium Med. Ctr., 595 S.W.3d at 192.

Specifically, Garcia argues that Parkland's own evidence showed that it could and did estimate the cost of its nurse resident/graduate program at $50,440 for a three-month program, $91,830 for a six-month program, and $128,980 for a nine-month program. Parkland provided these figures in an affidavit by Allen Kirby, who was “the Clinical Education Manager, Program Director for the Parkland Bridge Transition Program.” According to Garcia, Parkland could estimate the damages from any given nurse's departure at the time of breach by simply calculating the percentage of the nurse's remaining contractual term and applying that percentage to the estimated cost of the program. For example, a nurse who quits after completing 75% of her contractual term causes damages equal to 25% of the cost of the training program.

We reject Garcia's argument. Parkland's burden was to show that at the time of contracting it was impossible or difficult to estimate what harm would be caused by Garcia's breach. See id. The Kirby affidavit explains why that calculation was difficult at the time of contracting—because it was uncertain when any particular nurse would breach the Agreement by leaving Parkland's employment and whether Parkland would receive adequate services from any particular nurse in return for the residency program. Garcia's argument, however, is that damages would become capable of estimation once a nurse actually left Parkland's employment early. Her argument misses the mark because it focuses on the calculability of damages at the time of breach rather than at the time of contracting. See id. at 194 (“Because courts assess the difficulty of estimation from the perspective of the parties at the time of contracting, however, [the defendant's] argument that damages became calculable at the time of the breach is unavailing.”) (footnote omitted).

We reject Garcia's argument that Parkland failed to establish that its damages were incapable or difficult of estimation at the relevant time—the time of contracting.

4. Conclusion

For the foregoing reasons, we conclude that Garcia has not shown that the trial judge erred by concluding that Section VII was enforceable under the law governing liquidated-damages clauses.

We overrule Garcia's first issue on appeal.

C. Issue Two: Is Parkland's claim for attorneys’ fees preempted by Texas Business and Commerce Code § 15.52?

Parkland sought and recovered its attorneys’ fees under Chapter 38 of the Texas Civil Practice and Remedies Code, which permits the recovery of attorneys’ fees in conjunction with a claim for breach of contract. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001(b)(8). In her second issue, Garcia argues that Parkland's claim for fees is preempted by section 15.52 of the Business and Commerce Code, the governing version of which provided:

[T]he procedures and remedies in an action to enforce a covenant not to compete provided by Section 15.51 of this code are exclusive and preempt any other ․ procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise.

Bus. & Com. § 15.52.⁵

Under its plain language, section 15.52 applies only to covenants not to compete. We have already held that Section VII of the Agreement is not a covenant not to compete under the plain meaning of that term. Chapter 15 does not provide a special definition for the term “covenant not to compete,” and we see no contextual or other reasons to depart from the term's plain meaning. See In re Tex. Educ. Agency, 619 S.W.3d 679, 687–88 (Tex. 2021) (orig. proceeding) (summarizing the rules of statutory construction). Accordingly, we conclude that Section VII is not a covenant not to compete within the meaning of section 15.52, so that section does not apply.

We overrule Garcia's second issue on appeal.

D. Issue Three: Did the trial judge err by overruling Garcia's objections to Parkland's summary-judgment evidence?

In issue three, Garcia argues that the trial judge erred by overruling her objections to some of Parkland's summary-judgment evidence, specifically the affidavit of Allen Kirby. She argues that Kirby's affidavit did not show that he had personal knowledge of the facts stated, that Kirby's affidavit actually shows that he obtained some his knowledge from others and from Parkland's records, and that he did not proffer any expert testimony that might be exempted from the personal-knowledge requirement.

We reject Garcia's third issue for lack of error preservation.

In the trial court, Parkland first filed the Kirby affidavit in response to Garcia's summary-judgment motion. Garcia filed objections to the affidavit. The trial judge then denied Garcia's summary-judgment motion and signed an order overruling her objections. Then, Parkland filed its own summary-judgment motion, supported again by the Kirby affidavit. Garcia's response to Parkland's summary-judgment motion contained objections to the Kirby affidavit, but the appellate record does not show that the trial judge ever ruled on these objections. There is no express order ruling on the objections, and the trial judge's summary-judgment order in Parkland's favor contains no implicit ruling on them either. (The order recites that the judge considered “all competent summary judgment evidence,” but the Supreme Court has held that this language does not constitute an implicit ruling on summary-judgment objections. See Seim v. Allstate Tex. Lloyds, 551 S.W.3d 161, 163, 166 (Tex. 2018) (per curiam).) And the trial judge's ruling on Garcia's objections in connection with her summary-judgment motion did not preserve error as to Parkland's subsequent filing of and reliance on the same affidavit in connection with Parkland's own motion. See Ganter v. Indep. Bank, No. 05-15-00413-CV, 2016 WL 4376284, at *5 n.4 (Tex. App.—Dallas Aug. 16, 2016, pet. denied) (mem. op.) (“Absent a running objection, [a] party must object to objectionable [summary-judgment] evidence every time it is offered or the objection is waived.”) (citations omitted).

Thus, because Garcia did not obtain a ruling on her objections to the copy of the Kirby affidavit attached to Parkland's summary-judgment motion, her objections to the form of the affidavit are forfeited but her objections to defects in its substance are not. See Gold's Gym Franchising LLC v. Brewer, 400 S.W.3d 156, 163 (Tex. App.—Dallas 2013, no pet.) (“The failure to obtain rulings waives any objections to defects in the form of the affidavits; it does not waive objections to defects in the substance of the affidavits.”). Her complaint is that Kirby's affidavit shows on its face that he did not have personal knowledge of the facts stated therein. See Tex. R. Civ. P. 166a(f) (“Supporting and opposing affidavits shall be made on personal knowledge ․ and shall show affirmatively that the affiant is competent to testify to the matters stated therein.”). In this Court, “[a]n affidavit that, on its face, establishes the affiant's lack of personal knowledge [suffers from] a defect of substance that may be raised for the first time on appeal.” Old Republic Ins. Co. v. Cross, No. 05-14-01204-CV, 2015 WL 8014402, at *2 (Tex. App.—Dallas Dec. 7, 2015, no pet.) (mem. op.). By contrast, a mere failure to show that the affiant has personal knowledge is a forfeitable defect of form. See Giese v. NCNB Tex. Forney Banking Ctr., 881 S.W.2d 776, 782 (Tex. App.—Dallas 1994, no writ). The question, then, is whether the Kirby affidavit establishes on its face that Kirby lacked personal knowledge of the facts stated therein.

Garcia relies on the first paragraph of the Kirby affidavit, which recites as follows:

My name is Allen Kirby․ I am personally acquainted with the facts herein stated and they are true and correct. The facts stated herein are based upon my personal knowledge, information I obtained from my predecessors and supervisors at [Parkland], as well as my review of Parkland's records.

Garcia contends that Kirby's reference to his obtaining information from predecessors, supervisors, and records shows that he lacked personal knowledge of at least some of the facts stated in his affidavit. Parkland disagrees, arguing that the affidavit adequately shows that Kirby had personal knowledge of all the facts he stated.

We conclude that the above-quoted language does not establish on its face that Kirby lacked personal knowledge of the facts he stated, and therefore any defect in Kirby's proof of personal knowledge is at most a forfeited defect of form. Kirby states that he is “personally acquainted with the facts herein stated,” which is a sufficient averment of personal knowledge for summary-judgment purposes. See Cooper v. Circle Ten Council Boy Scouts of Am., 254 S.W.3d 689, 698 (Tex. App.—Dallas 2008, no pet.) (“Stating that one is ‘personally acquainted’ with the facts contained in the affidavit is sufficient to meet the personal knowledge requirement.”). The next sentence of the affidavit recites that the facts stated are based on three different sources of information, one of which is personal knowledge. As written, the sentence does not exclude the possibility that all of the stated facts are based on Kirby's personal knowledge, with some or all of those facts also being supported by information he received from others or derived from records. The affidavit is admittedly unclear on the point, but the question under our error-preservation cases is whether the affidavit establishes on its face that Kirby lacked personal knowledge of the facts stated therein. We conclude that it does not, so any defect is one of form that was forfeited in the trial court in the absence of a ruling on Garcia's objection. See Old Republic Ins. Co., 2015 WL 8014402, at *2; Giese, 881 S.W.2d at 782.

Garcia cites a case from this Court for the premise that a summary-judgment affidavit must state the bases for the affiant's personal knowledge “without reliance on inferences.” Abuzaid v. EFYU JO, L.L.C., No. 05-17-00976-CV, 2018 WL 2749640, at *3 (Tex. App.—Dallas May 31, 2018, no pet.) (mem. op.). We conclude that Abuzaid is not on point. Abuzaid discusses the sufficiency of summary-judgment affidavits on the merits, but here we are deciding Garcia's third issue based on the separate question of error preservation. Because we do not reach the merits of Garcia's third issue, Abuzaid is inapposite.

We overrule Garcia's third issue on appeal.

V. Disposition

Having overruled all of Garcia's issues, we affirm the trial court's judgment.

FOOTNOTES

2.   See Rachel S. Arnow-Richman, Bargaining for Loyalty in the Information Age: A Reconsideration of the Role of Substantive Fairness in Enforcing Employee Noncompetes, 80 Or. L. Rev. 1163, 1221–22 (2001) (asserting that repayment agreements are “potentially as problematic as noncompetes”); see also Harris, supra, at 728–29 (arguing that training-repayment provisions should be reviewed for unconscionability using factors similar to those applied to covenants not to compete); Stuart Lichten & Eric M. Fink, “Just When I Thought I Was Out ․”: Post-Employment Repayment Obligations, 25 Wash. & Lee J. Civ. Rts. & Soc. Just. 51, 56 (2018) (arguing that repayment clauses restrain employees’ freedom of exit and should receive heightened scrutiny like covenants not to compete do). But see Sanders v. Future Com, Ltd., No. 02-15-00077-CV, 2017 WL 2180706, at *10 (Tex. App.—Fort Worth May 18, 2017, no pet.) (mem. op.) (rejecting argument that training-repayment provision was “an unreasonable restraint on trade and against public policy”).

3.   Section VII of the Agreement provides:[I]n the event that the Employee is terminated, or leaves the employment of the Employer subsequent to November 20, 2015, the parties hereby agree that the Employee shall pay to the Employer the sums set forth below as liquidated damages to compensate Employer for injury by reason of said breach․September 25, 2015 to November 20, 2015No ReimbursementNovember 21, 2015 to February 2, 2019$20,000(Emphasis in original.) Section VII also provides that Garcia's payment obligation would be excused if the sole reason she left Parkland's employ during the relevant period was “a formal reduction in workforce undertaken by” Parkland. Finally, Parkland points out that Section III of the Agreement states that Garcia was hired for an “initial employment period” of 120 days and that if she did not demonstrate the skills and qualifications to be a successful contributor to “the unit,” Parkland could terminate her employment at its sole discretion “without liability to” Garcia.

4.   Parkland argues that Garcia bears the burden of disproving these elements, citing our decision in Baker v. International Record Syndicate, Inc., 812 S.W.2d 53, 55 (Tex. App.—Dallas 1991, no pet), for support. To the extent Baker stands for this proposition, Atrium Medical Center has disapproved it.

5.   This section was amended in 2025, but the amendments apply only to covenants not to compete entered into or renewed on or after September 1, 2025. Act of May 28, 2025, 89th Leg., R.S., ch. 816, §§ 4–5, sec. 15.52. Accordingly, we quote the version of the statute applicable to this case.

Opinion by Justice Garcia