Blase Industries Corporation, doing business as WILSON SOLUTIONS v. Anorad Corporation;

United States Court of Appeals
Fifth Circuit
F I L E D
March 1, 2006
Charles R. Fulbruge III
Clerk
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 04-21015
BLASE INDUSTRIES CORPORATION, doing business as WILSON
SOLUTIONS,
Plaintiff - Appellant,
v.
ANORAD CORPORATION; ET AL.
Defendants
ANORAD CORPORATION
Defendant - Appellee.
Appeal from the United States District Court
for the Southern District of Texas, Houston
Before BENAVIDES, STEWART, and OWEN, Circuit Judges.
BENAVIDES, Circuit Judge:
This is an appeal from a grant of summary judgment. The
district court based its decision on its finding that a no-hire
agreement between the parties was unenforceable. The parties
principally present arguments to assist the court in predicting how
the Texas Supreme Court would analyze the no-hire provision at
issue. We, however, choose to affirm the district court on
alternative grounds argued by the Appellee. Because the Appellant

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1A no-hire provision is an agreement between two employers
that prohibits one employer from hiring the other employer’s
employees.
2
did not prove its lost profit damages to a reasonable certainty, as
required in Texas, summary judgment was appropriate, and the
district court is AFFIRMED.
I. FACTUAL AND PROCEDURAL BACKGROUND
The Appellant, Wilson Solutions, is a computer software
consulting company, and the Appellee, Anorad, is a manufacturer.
Wilson Solutions hired Jason Schwartzman in April 1997 to work as
one of its consultants. One year later, it entered into a contract
with Anorad to provide consulting services at a daily fee of $2000.
The contract contained a no-hire provision.1 It stated:
Both parties agree to not, directly or indirectly, during
the period that Consultant [Wilson Solutions] provides
services for Client [Anorad], and for a period of one
year thereafter, solicit, employ or hire or induce to
hire any person who is or has been an employee of either
party unless otherwise consented to in writing.
The parties also agreed that Texas law would govern the contract.
In April 1998, Wilson Solutions placed Schwartzman as a consultant
for Anorad. Schwartzman was not aware of the no-hire provision and
did not consent to it.
On April 19, 1999, Schwartzman sent Wilson Solutions a
resignation letter. The letter stated that he wanted “to pursue
more stable positions . . . with less travel” and “to move back
into the corporate world—with structure, guaranteed bonus,

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benefits, and pensions.” After Schwartzman resigned, Anorad’s
chief financial officer, Paul Rossi, spoke with Wilson Solutions to
ask if the company would object if Anorad hired Schwartzman.
Wilson Solutions did not provide consent. Nevertheless, on April
26, 1999, Anorad sent Schwartzman a letter offering him employment.
On April 27, 1999, Rossi announced to all Anorad employees that
Schwartzman had become the company’s new director of information
systems.
The parties dispute whether Anorad offered Schwartzman a
position before Schwartzman resigned from Wilson Solutions. They
also dispute whether Wilson Solutions agreed to a modification of
the no-hire agreement. It is undisputed, however, that Anorad
provided no proof of written consent to the district court and that
Schwartzman was hired within one year of his resignation from
Wilson Solutions. Therefore, under the agreement’s language,
Anorad breached the no-hire provision.
Wilson Solutions seeks lost profit damages for the first year
Schwartzman worked for Anorad. Wilson Solutions is seeking
$341,000. This figure comes from an estimate of what Schwartzman
would have earned in consulting fees ($450,000) minus his salary
($99,000) and overhead expenses (approximately 10%). In his final
year at Wilsons Solutions, Schwartzman earned approximately
$441,000 in consulting fees for Wilson Solutions and received a
salary of $99,000 for himself.
Wilson Solutions filed this suit on April 30, 2003—four years

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after Anorad hired Schwartzman on April 26, 1999. Schwartzman left
Anorad on December 31, 2000. Wilson Solutions is only seeking
money damages because it could not seek injunctive relief due to
the date of its filing. The district court granted summary
judgment to Anorad on September 29, 2004 on grounds that the no-
hire provision was unreasonable and, therefore, unenforceable.
II. STANDARD OF REVIEW
This Court reviews a district court’s grant of summary
judgment de novo, applying the same standards as the district
court. Hirras v. Nat’l R.R. Passenger Corp., 95 F.3d 396, 399 (5th
Cir. 1996). The evidence should be viewed in the light most
favorable to the nonmoving party, and the record should not
indicate a genuine issue as to any material fact. Am. Home
Assurance Co. v. United Space Alliance, 378 F.3d 482, 486 (5th Cir.
2004). We may affirm the district court’s summary judgment ruling
on any ground supported by the record. Lifecare Hosps., Inc. v.
Health Plus of Louisiana, Inc., 418 F.3d 426, 439 (5th Cir. 2005).
III. DISCUSSION
A federal court with diversity jurisdiction must apply the law
of the state in which it sits. See Erie R. Co. v. Tompkins, 304
U.S. 64, 79–80 (1938). No Texas court has examined a damages
calculation that exactly mirrors the one at issue, one in which an

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2This could be a result of the scarcity of no-hire cases in
Texas. See Hosp. Consultants v. Potyka, 531 S.W.2d 657, 665
(Tex. Civ. App.—San Antonio 1975, writ ref’d n.r.e.) (“We know of
no case involving a covenant similar to that which we are now
considering.”). Hospital Consultants is the only no-hire case
heard by a Texas court.
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employer is seeking lost profit damages based on an at-will
employee’s potential earnings.2 Nonetheless, Texas courts have
examined the ability of an at-will employee, acting on his own
behalf, to seek damages based on future earnings. These cases and
the general rules for damages in Texas provide sufficient guidance.
They show that Wilson Solutions cannot survive the summary judgment
challenge.
A. Damages Must Be Proven to a Reasonable Certainty
In Texas, lost profit damages must be established with
“reasonable certainty.” Tex. Instruments Incorp. v. Teletron
Energy Mgmt., 877 S.W.2d 276, 281 (Tex. 1994). Lost profit damages
may not be based on evidence that is speculative, uncertain,
contingent, or hypothetical. Carter v. Steverson & Co., 106 S.W.3d
161, 165–66 (Tex. App.–Houston [1st Dist.] 2003, pet. denied). A
plaintiff must adduce evidence from which the jury can reasonably
estimate the amount of loss. Davis v. Small Bus. Inv. Co., 535
S.W.2d 740, 743 (Tex. Civ. App.–Texarkana 1976, writ ref’d n.r.e.).
While some uncertainty as to the amount of damages is permissible,
uncertainty as to the fact of damages will defeat recovery. Id.
No-hire agreements and covenants not to compete often include

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a liquidated damages provision to avoid the difficulty of
calculating damages. See, e.g., H & M Commercial Driver Leasing,
Inc. v. Fox Valley Containers, Inc., 805 N.E.2d 1177, 1184 (Ill.
2004) (no-hire agreement contained liquidated damages clause).
These provisions are valid when damages are uncertain and the
stipulated sum is reasonable. Mayhall v. Proskowetz, 537 S.W.2d
320, 322 (Tex. Civ. App.–Austin 1976, writ ref’d n.r.e.). The no-
hire provision at issue in the present case did not have a
liquidated damages clause.
Wilson Solutions cannot prove to a reasonable certainty the
fact that it was damaged by Anorad’s breach. The damages request
relies on the assumption that Schwartzman would continue working
for Wilson Solutions, earning consulting fees for the year in
question. This type of contingency, created by his at-will status,
is impermissible in Texas. Similarly, a jury would have difficulty
estimating the losses suffered by Wilson Solutions. The purpose of
lost profit damages it to put the nonbreaching party in the
position it would have been in had the contract been performed.
Osoba v. Bassichis, 679 S.W.2d 119, 122 (Tex. App.–Houston [14th
Dist.] 1984, writ ref’d n.r.e.). Here, because Schwartzman was an
at-will employee, it is impossible to determine that position with
the amount of certainty required by Texas law.
B. At Will Employees Cannot Collect for Future Lost Salary
“Damages for anticipated lost salary are inappropriate where

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employment is at will.” Allied Vista, Inc. v. Holt, 987 S.W.2d
138, 142 (Tex. App.–Houston [14th Dist.] 1999, pet. denied); see
also Ingram v. Fred Oakley Chrysler Dodge, 663 S.W.2d 561, 562
(Tex. App.–El Paso 1983, no writ) (“When the period of employment
is left to the discretion of either party . . . the loss of wages
that the employee would have earned in the indefinite future is not
a recoverable item of damages.”). In Allied Vista, the court
reasoned that a lack of certainty in an at-will employee’s future
work equated to a lack of reasonable certainty in damages. Id.
(overturning a jury award for lost profits). Intermediate court
decisions, like Allied Vista and Ingram, guide federal courts
applying state law. Herrmann Holdings Ltd. v. Lucent Technologies
Inc., 302 F.3d 552, 558 (5th Cir. 2002) (“[W]e defer to
intermediate state appellate court decisions, unless convinced by
other persuasive data that the highest court of the state would
decide otherwise.”).
Texas courts have acknowledged exceptions to the general rule
that at-will employees have no cause of action for termination and,
therefore, cannot collect for future earnings. In Winters v.
Houston Chronicle Publishing Co., the Texas Supreme Court outlined
those exceptions. 795 S.W.2d 723, 724 (Tex. 1990) (refusing to
make an exception for at-will employees who are whistleblowers).
The court acknowledged several statutory exceptions and two common
law exceptions. Id. One of the common law exceptions is no longer

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good law, making the only common law exception “where an employee
is terminated solely because he refused to perform an illegal act.”
Thompson v. El Centro del Barrio, 905 S.W.2d 356, 358 (Tex.
App.–San Antonio 1995, writ denied). The court’s unwillingness to
expand these exceptions and the lack of a relevant statutory
exception show that a Texas court would likely find that Wilson
Solutions cannot base its damages calculation on the future
earnings of an at-will employee.
This Court considered when an at-will employee can collect
damages for lost profits in Zenor v. El Paso Healthcare System,
Ltd., 176 F.3d 847, 866 (5th Cir. 1999). We held that the
plaintiff, an at-will employee, could not collect for future wages.
Id. (“[He] could not have proven that he was entitled to any future
earnings because he had no guarantee of future employment.”). Id.
This uncertainty stems, in part, from the fact that an at-will
employee can be “terminated at any time for any lawful reason.”
Id.
If Wilson Solutions had terminated Schwartzman, he would not
have been able to collect damages for his future earnings.
Likewise, Wilson Solutions cannot collect from Anorad based on
Schwartzman’s speculative future earnings. Schwartzman could have
left Wilson Solutions at any point during the year in question,

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3Schwartzman himself was not precluded from seeking
employment, including employment by Anorad, as he was not subject
to any type of covenant not to compete. In addition, the record
suggests that he contemplated leaving Wilson Solutions for
reasons independent of Anorad’s offer.
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and, in fact, did leave the company.3 Therefore, any consulting
fees Schwartzman would have potentially received are too uncertain
to serve as the basis for Wilson Solution’s request for damages.
C. No Disputed Facts Are Material
The record reveals two disputed facts relating to the damages
calculation: whether Wilson Solutions would have had any work for
Schwartzman had he stayed with the company and whether Schwartzman
resigned before or after Anorad hired him. The district court
found that these issues were material and precluded summary
judgment on damages grounds. To the extent that the district court
found the disputed facts to be material, we disagree. Taking these
facts in the light most favorable to Wilson Solutions, the damages
calculation still fails to satisfy the Texas requirement that a
plaintiff prove damages to a reasonable certainty. Schwartzman’s
status as an at-will employee is fatal under these facts and
summary judgment is, therefore, appropriate.
IV. CONCLUSION
For these reasons we AFFIRM the district court’s granting of
summary judgment to Anorad. We do so on the grounds that Wilson
Solutions failed to prove its damages to a reasonable certainty as

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required by Texas law.

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