Henson Patriot Ltd. v. Andrew Medina, Clara Calderas Medina, Calderas Custom Printing, LLC
| Decision Date | 11 September 2014 |
| Docket Number | Civil Action No. SA-14-CV-534-XR |
| Court | U.S. District Court — Western District of Texas |
| Parties | HENSON PATRIOT LIMITED COMPANY, LLC, Plaintiff, v. ANDREW MEDINA, CLARA CALDERAS MEDINA, CALDERAS CUSTOM PRINTING, LLC, AND MARCEL MASUKAWA Defendants. |
On this day the Court considered Plaintiff's Motion for Preliminary Injunction (docket no. 26). For the following reasons the preliminary injunction is GRANTED in part and DENIED in part.
Henson Patriot Limited Company ("Plaintiff") purchased a specialty printer, America Color Labs (ACL), in December 2010. Defendant Andrew Medina was a partner at ACL and signatory to the purchase agreement. Defendants Andrew Medina and Marcel Masukawa were employees at ACL and continued working there after Plaintiff purchased ACL. Defendant Clara Calderas Medina, Andrew Medina's wife and former low-level employee at ACL, formed Texas corporation Calderas Custom Printing LLC on April 4, 2012. Calderas Custom Printing is the general partner in South Texas Digital, LP (STD). Clara Medina and Masukawa are partners in defendants Calderas Custom Printing and STD.
Plaintiff completed and memorialized its ACL stock purchase in a purchase agreement ("Purchase Agreement") negotiated between Daren Henson, partner at Plaintiff, and Cordell Gardner, majority partner at ACL prior to the purchase. Purchase Agreement ¶¶ 1-4 provide for a five-year non-compete in Bexar County and its contiguous counties for all sellers (Exhibit 1); of whom only Andrew Medina is relevant to this case. Clara Medina and Masukawa were not signatories to the Purchase Agreement. Purchase Agreement ¶ 5 sets forth an agreement between Plaintiff and sellers that a breach of the non-compete would be irreparable harm and an injunction is a proper remedy for breach.
After selling his stake in ACL to Plaintiff, Andrew Medina continued to work at the company first as a production manager, then in the sales department. While in sales, Andrew Medina had three accounts, Susan Komen Foundation, Color Concepts, and Alamo Group. Eventually, in June 2012, Andrew Medina left ACL to work as a salesman at Fellers, Inc., a printer-supply company. Clara Medina was formerly a low-level employee at ACL prior to Plaintiff's purchase of ACL. Masukawa worked in production at ACL for over ten years before departing April 16, 2012 to work at STD.
In early 2013, Plaintiff found Andrew Medina's old work phone that was never deactivated. On it, Plaintiff discovered several messages creating suspicion that Andrew Medina was aiding and advising STD in the launch and conduct of its business. Carla Aden, in her capacity as a Color Concepts representative, left voice messages for Andrew Medina referring to "opportunities" for STD. Aden copied Andrew Medina on emails that also carbon copied "orders@stxdigital.com." Andrew Medina discussed financing STD with his brother-in-law, Jose Elizondo. And on multiple occasions Clara Medina urged Andrew Medina to talk about STD when he was out of his office at ACL. Lastly, Andrew Medina appears to have discussedretrieving specific work product from ACL for STD's use with his daughter. Andrew Medina has also visited STD's storefront on multiple occasions, and all three of Andrew Medina's accounts at ACL, Susan Komen, Color Concepts, and Alamo Group, have used STD's services since the company formed, largely abandoning ACL.
Plaintiff filed the Complaint on June 12, 2014. Plaintiff then moved for a preliminary injunction on July 28, 2014. The Court held an evidentiary hearing on the preliminary injunction on September 4, 2014, where Daren Henson and Andrew Medina gave live testimony. The Court gave an oral order granting the preliminary injunction as to Andrew Medina, and denying as to the other defendants. This written order further explains the oral order.
This Court has subject matter jurisdiction over this matter under 28 U.S.C. § 1331 because Plaintiff raises a federal question by asserting a 15 U.S.C. § 1125(a) violation in the Complaint. This court has personal jurisdiction over the Defendants because they are residents or citizens of Texas.
The grant of injunctive relief is an extraordinary remedy which requires the movant to unequivocally show the need for its issuance. Opulent Life Church v. City of Holly Springs, Miss., 697 F.3d 279, 288 (5th Cir. 2012); Valley v. Rapides Parish Sch. Bd., 118 F.3d 1047, 1050 (5th Cir. 1997). A preliminary injunction should not be granted unless the movant demonstrates by a clear showing: (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable harm if the injunction is not granted; (3) that the threatened injury outweighs any harm that may result from the injunction to the non-movant; and (4) that the injunction will notundermine the public interest. Lindsay v. City of San Antonio, 821 F.2d 1103, 1107 (5th Cir. 1987); Valley, 118 F.3d at 1051. At the preliminary injunction stage, the procedures in the district court are less formal, and the district court may rely on otherwise inadmissible evidence, including hearsay evidence. Sierra Club, Lone Star Chapter v. F.D.I.C., 992 F.2d 545, 551 (5th Cir. 1993).
To determine the likelihood of success on the merits, the Fifth Circuit looks to the standards provided by the substantive law. Valley, 118 F.3d at 1051; see Miss. Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 622 (5th Cir. 1985). Therefore, to succeed on its motion for preliminary injunction, Plaintiff must show there was a valid non-compete, the non-compete applied to each defendant, and each defendant violated the non-compete.
"A covenant not to compete is enforceable . . . 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." TEX. BUS. & COM. CODE § 15.50; Marsh USA Inc. v. Cook, 354 S.W.3d 764, 777 (Tex. 2011); see Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006) (). The statute thus imposes a reasonableness test where time, geography, and scope of activity are the main factors. Oliver v. Rogers, 976 S.W.2d 792, 800 (Tex. App.—Houston 1st Dist. 1998). The three are factors, not elements. Indefinite time or unlimited geographic scope are not automatic bars. Oliver, 976 S.W.2d at 800. Texas courts have upheld five-year non-competes when the non-compete was necessary to protect thepurchaser's goodwill, and the covenant was not oppressive to the promisor. See Chandler v. Mastercraft Dental Corp. of Texas Inc., 739 S.W.2d 460, 464 (Tex. App.—Ft. Worth 1987, writ denied); Oliver, 976 S.W.2d at 800 (5-year non-compete upheld). Texas courts have upheld four-year non-competes that cover five entire states. Vaughn v. Intrepid Directional Drilling Specialists, Ltd., 288 S.W.3d 931, 938 (Tex. App.—Eastland 2009).
Plaintiff argues the non-compete is valid as applied to Andrew Medina because it is a reasonable restraint on trade. Here, the non-compete lasts five years. It encompasses Bexar County and all contiguous counties, and only includes activities related to specialty printing and other services provided by ACL. In addition, ACL's goodwill and other business interests are protected by the non-compete because it only covers this specific printing industry, protects contracts and relationships with existing clients, and the asserted violation of the non-compete coincides with loss of business to STD. Plaintiff also argues that, in the context of a purchase agreement, the non-compete should more likely be upheld because it was bargained for with valuable consideration, as opposed to an employee contract. Texas courts are more amenable to long non-competes in the purchase agreement context than the employer-employee context. See, e.g., Heritage Operating, LP v. Rhine Brothers, LLC, 2012 WL 2344864 (Tex. App.—Ft. Worth 2012, no pet.). The non-compete here is a reasonable restraint on trade because in the course of the sale of a business, a five-year non-compete limited to the small industry and a relatively small geographic scope is reasonable.
In the context of the sale of a business, Texas courts extend a non-compete to a non-signatory in two scenarios: (1) an entity is created by a signatory for the purpose of competing to circumvent, or perpetuate a "fraud" on, the non-compete, see Texas Shop Towel, Inc. v. Haire,246 S.W.2d 482, 484 (Tex. Civ. App.—San Antonio 1952, no writ), or (2) a signatory significantly aids, abets, consults, or advise another entity or person's competition with the buyer when the non-compete forbids aiding, abetting, consulting or advising. See Barrett v. Curtis, 407 S.W.2d 359, 362 (Tex. Civ. App.—Dallas 1966, no writ); see Pitts v. Ashcraft, 586 S.W.2d 685, 692 (Tex. Civ. App.—Corpus Christi 1979) ().1
Here, Andrew Medina's non-compete clearly forbids aiding, abetting, consulting, or advising in competition with Plaintiff.2 Therefore, Texas law would allow an extension of Andrew Medina's non-compete to entities or persons he significantly aided, abetted, consulted, or advised to compete with Plaintiff in some circumstances.
Given the evidence currently available, however, the...
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