Summary
affirming trial court's order granting temporary injunction and rejecting argument that moving party had unclean hands because of breach of contract
Summary of this case from Stewart Beach Condominium Homeowners Ass'n v. Gili N Prop Investments LLCOpinion
No. 04-05-00228-CV
Delivered and Filed: August 24, 2005.
Appeal from the 224th Judicial District Court, Bexar County, Texas, Trial Court No. 2005-CI-03089, Honorable Michael P. Peden, Judge Presiding.
The Honorable David Peeples was the presiding judge of the 224th Judicial District Court, Bexar County, Texas. The Honorable Michael P. Peden presided over the hearing on the application for temporary injunction and signed the order granting the temporary injunction.
Affirmed.
Sitting: Sarah B. DUNCAN, Justice, Karen ANGELINI, Justice, Phylis J. SPEEDLIN, Justice.
MEMORANDUM OPINION
Rosemary Spring appeals from the trial court's order granting a temporary injunction against her in a lawsuit brought by her former employer, Walthall, Sachse Pipes, Inc. ("WSP") alleging breach of contract, theft of trade secrets and confidential information, breach of fiduciary duty, and unfair competition. We affirm the trial court's order.
Background
Rosemary Spring went to work for WSP, an insurance agency that sells a variety of insurance products to businesses and individual clients, initially as an independent contractor and then as a direct employee in 1993. Spring was a "producer" for WSP, selling insurance products to clients. When she became an employee of WSP, Spring executed an employment agreement containing non-competition and non-piracy provisions. Following a dispute with the company over the amounts she was receiving as commissions on some of her accounts, Spring tendered written notice of her resignation to WSP on February 16, 2005.
Spring's assistant, Nina Carlisle, also resigned from WSP on February 14, 2005. Carlisle then went to work for Spring in much the same capacity that she had worked for her while employed by WSP.
Prior to her resignation, Spring rented new office space and had phone lines installed there. In addition, Spring contacted one of her customers to advise them that she would be resigning from WSP. Within one week of her resignation, Spring contacted approximately thirty-three of her former WSP clients regarding her departure. Twenty-five of those clients ultimately signed agent of record letters indicating their desire to continue to do their insurance business with Spring rather than another producer with WSP. After receiving agent of record letters from these former clients, WSP filed suit against Spring alleging breach of contract, theft of trade secrets and confidential information, breach of fiduciary duty, and unfair competition by misappropriation and use. In its suit, WSP is seeking damages and attorney's fees, and to both temporarily and permanently enjoin Spring from certain conduct related to her business. After a hearing on the application for temporary injunction, the trial court granted an injunction to continue in effect until the case is resolved by a trial on the merits. The temporary injunction restrains Spring and her employees, agents, or other representatives from directly or indirectly:
The trial court also ordered WSP to pay $11,457.91 into the court's registry pending final resolution of the suit. This amount represents WSP's calculation of what it owed Spring in unpaid commissions as of the date of her resignation.
(a) Contacting the customers of [WSP] or such customers' owners, directors, officers, employees, or other representatives, in an effort to elicit or procure insurance business with such customers;
(b) Using any trade secret, customer lists, renewal information, applications, policy information or proprietary information procured from [WSP] in its business;
(c) Disseminating to any third party any of the confidential, trade secret, or other information obtained from [WSP];
(d) Altering, modifying, damaging, destroying, or in any way changing any of the confidential or proprietary information obtained from [WSP] in this case until further order of this Court; and
(e) Accepting any insurance business from any of [WSP's] customers; provided that [Spring] is not precluded from servicing those existing insurance policies which are in effect for customers or clients of [Spring] as of April 6, 2005, as reflected on attached Exhibit "A".
This interlocutory appeal followed.
Analysis
Spring contends on appeal that the trial court abused its discretion in granting injunctive relief because: (1) the covenant not to compete and non-piracy clauses in the employment agreement are unenforceable; (2) there was no breach of fiduciary duty; and (3) WSP came to court with "unclean hands."
Specifically, Spring claims that WSP breached the employment agreement by unilaterally altering her commission structure without notice to or consent from Spring. Spring contends that its breach precludes WSP from seeking enforcement of the employment agreement by injunction.
Standard of Review
A temporary injunction is an extraordinary remedy and does not issue as a matter of right. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993) (per curiam). In order to obtain a temporary injunction, the movant must show a cause of action against the defendant, a probable right to the relief sought after a trial on the merits, and a probable, imminent and irreparable injury in the interim. Id. at 57; Khaledi v. H.K. Global Trading, Ltd., 126 S.W.3d 273, 280 (Tex.App.-San Antonio 2003, no pet.). The applicant is not required to establish that it will ultimately prevail on final trial. Walling, 863 S.W.2d at 58; Khaledi, 126 S.W.3d at 280. The only question before the trial court is whether the applicant is entitled to preservation of the status quo pending trial on the merits. Walling, 863 S.W.2d at 58; see also Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Consequently, in an interlocutory appeal from a temporary injunction, this court does not review the merits of the ultimate issues. Davis v. Huey, 571 S.W.2d 859, 861 (Tex. 1978).
We review only the trial court's exercise of discretion in determining whether the plaintiff showed a likelihood of success on the merits of the issues at trial. Davis, 571 S.W.2d at 862. We reverse a trial court's grant of an injunction only for a clear abuse of discretion. Butnaru, 84 S.W.3d at 204. The trial court abuses its discretion when it "misapplies the law to the `established facts or when the evidence does not reasonably support the conclusion that the applicant has a probable right of recovery.'" Khaledi, 126 S.W.3d at 280 (quoting State v. Southwestern Bell Tel. Co., 526 S.W.2d 526, 528 (Tex. 1975)). All legitimate inferences from the evidence are to be drawn in favor of the trial court's judgment. Id. The trial court does not abuse its discretion when it bases its decision on conflicting evidence and the evidence in the record reasonably supports its conclusion. Id.; see also Butnaru, 84 S.W.3d at 211.
Temporary Injunction
We begin our analysis by noting that the issues Spring raises on appeal ask this court to address the ultimate issues presented by the underlying lawsuit — the enforceability of the contractual covenants, whether she breached a fiduciary duty, and whether WSP breached the employment agreement prior to Spring's resignation. We are not permitted to directly address the merits of the underlying claims in this interlocutory appeal. Davis, 571 S.W.2d at 861. While the trial court considers evidence on ultimate issues such as the enforceability of agreements at the hearing on the temporary injunction, it does so only to make a determination as to the applicant's probable right of recovery and, hence, entitlement to preservation of the status quo by injunction. We review the trial court's determination of the likelihood of success at trial for an abuse of discretion. Butnaru, 84 S.W.3d at 204; Khaledi, 126 S.W.3d at 280. To defeat WSP's application for injunction, Spring could have presented evidence to the trial court which would preclude the trial court from finding that WSP had shown a probability of succeeding on its claims, such as evidence establishing that the covenant not to compete was unenforceable as a matter of law. See Tex. Bus. Comm. Code Ann. § 15.50 (Vernon 2002); see, e.g., CRC-Evans Pipeline Int'l, Inc. v. Myers, 927 S.W.2d 259, 265 (Tex.App.-Houston [1st Dist.] 1996, no writ) (trial court did not abuse its discretion in concluding, based on the evidence before it, that non-compete covenant was unenforceable as a matter of law and, therefore denying temporary injunction). In this case, however, Spring presented no such evidence at the hearing.
Here, the trial court had before it the employment agreement signed by Spring containing both non-competition and non-piracy clauses. The non-competition provision provides in relevant part:
for a period of 12 months following termination of employment for any reason, [Spring] will not act for herself or for any other employer or for any other firm or corporation in any capacity whatsoever as agent, broker, insurance consultant or otherwise in competition with the Agency within a 25 mile radius of the Agency's principal place of business.
In the non-piracy covenant, Spring agreed that, "for a period of 3 years following termination of his/her employment relationship with the Agency, [Spring] will not use the knowledge of the Agency's clients or customers or their insurance needs to solicit or accept insurance business from any of the Agency's customers." The contract further provides, "[t]he parties agree that the ownership of all accounts, . . . all records and all goodwill and all other items relating to the Agency shall be and remains the exclusive property of the Agency." There was testimony that every employee of the company is required to sign non-compete and non-disclosure agreements which become part of the employee's file. Spring acknowledged that the employment agreement admitted into evidence was the agreement that she had signed.
The trial court heard testimony that after Spring's resignation, WSP became aware that some information was missing from WSP's files which would be helpful to a person in securing insurance business from its clients and necessary for the renewal of their applications. Spring also testified that she first contacted one of her clients regarding her resignation on the Friday before she actually resigned. She admitted that she contacted approximately thirty-three of her customers within one week of her resignation from WSP, and that twenty-five of those customers executed change of agent letters. While Spring testified that WSP owes her money for commissions that had been modified without her knowledge — an act which Spring contends constituted a breach of the employment agreement, a WSP executive testified that Spring had been paid all of the money to which she was entitled under her contract with the exception of a disputed amount associated with her last two paychecks. We conclude that the evidence in the record reasonably supports the trial court's conclusion that WSP would likely prevail on its claims against Spring; therefore, the trial court did not abuse its discretion in granting the temporary injunction. Davis, 571 S.W.2d at 862; see Khaledi, 126 S.W.3d at 283.
WSP requested, and the trial court ordered, that it be permitted to pay the money it calculated Spring was owed into the registry of the court pending trial based on WSP's intent to seek forfeiture of those funds as part of the permanent injunction.
Spring relies on Sands v. Estate of Buys in arguing the trial court abused its discretion in granting the injunction because WSP failed to establish a probability of success in proving at trial that the clients' identities deserved trade secret protection. See Sands v. Estate of Buys, 160 S.W.3d 684, 691 (Tex.App.-Fort Worth 2005, no pet.). The Sands case, however, is distinguishable because the plaintiff's request for temporary injunction depended solely on a claim for misappropriation of trade secrets and confidential information, and the record contained no evidence to support the trial court's conclusion that the clients' identities qualified for protection as trade secrets. See id. at 686 n. 1. Here, the temporary injunction was sought based on multiple claims, only one of which depends upon WSP's ability to establish a probability of success in proving that some of its information was deserving of trade secret protection. See U.S. Sporting Prod., Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 218 (Tex.App.-Waco 1993, writ denied) (claim for unfair competition by misappropriation and use does not require proof of secrecy); Thomason v. Collins Aikman Floorcoverings, Inc., No. 04-02-00870-CV, 2004 WL 624926, at *4 (Tex.App.-San Antonio Mar. 31, 2004, pet. denied) (not designated for publication). The trial court's order does not determine that any particular information qualifies as a "trade secret;" it merely prohibits Spring from using, disseminating, or destroying any trade secret, confidential, or proprietary information obtained from WSP until further order of the court. See Johnson v. Brewer Pritchard, 73 S.W.3d 193, 202 (Tex. 2002) (during employment and after termination, employees are obligated not to divulge their employers' trade secrets even if they are not bound by confidentiality agreements).
Conclusion
Because we conclude that the trial court did not abuse its discretion in determining that WSP was entitled to preservation of the status quo by injunction, we affirm the trial court's order granting the temporary injunction.
We note that, "trial courts are to be encouraged to proceed expeditiously from the granting or denying of temporary injunctive relief to full consideration of the merits so as to reduce the necessity for interlocutory appeals." Coalition of Cities for Affordable Util. Rates v. Third Court of Appeals, 787 S.W.2d 946, 947 (Tex. 1990) (orig. proceeding). The most expeditious way to obviate the hardship of an unfavorable preliminary order is to try the case on its merits. Tom James, 109 S.W.3d at 890; Changing Surface, Inc. v. Crum, No. 04-02-00056-CV, 2002 WL 1972078, at *3 n. 2 (Tex.App.-San Antonio Aug. 28, 2002, no pet.) (not designated for publication). This appeal decides nothing more than whether the trial court abused its discretion in granting the temporary injunction.