Kelly Clark v. Hastings Equity Partners, LLC

• Decision Date: 20 January 2022
• Docket Number: 01-20-00749-CV
• Citation: 651 S.W.3d 359
• Parties: Kelly CLARK, Alan Swindoll, Courtney Swindoll and Als Associates, Inc., Appellants v. HASTINGS EQUITY PARTNERS, LLC, Axios Industrial Group, LLC and A&L Ultimate Holdings, LLC, Appellees
• Court: Texas Court of Appeals

651 S.W.3d 359

Kelly CLARK, Alan Swindoll, Courtney Swindoll and Als Associates, Inc., Appellants

v.HASTINGS EQUITY PARTNERS, LLC, Axios Industrial Group, LLC and A&L Ultimate Holdings, LLC, Appellees

NO. 01-20-00749-CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued January 20, 2022

William J. Boyce, Alexander Dubose & Jefferson LLP, 1844 Harvard Street, Houston, Texas 77008, George H. Lugrin IV, Reece Rondon, Neil Giles, Hall Maines Lugrin, P.C., Wililliams Tower, 64^th Floor, 2800 Post Oak Boulevard, Houston, Texas 77056-6125, for Appellant.

Chris Dove, J. Michael Rose, Evan Blankenau, Locke Lord LLP, 600 Travis St., Ste. 2800, Houston, Texas 77002, for Appellee.

Panel consists of Justices Goodman, Hightower, and Rivas-Molloy.

Veronica Rivas-Molloy, Justice

In this accelerated interlocutory appeal, Appellants Kelly Clark, Alan Swindoll, Courtney Swindoll, and ALS Associates, Inc. ("Appellants") appeal the trial court's granting of temporary injunctive relief in favor of Appellees Hastings Equity Partners, LLC, Axios Industrial Group, LLC, and A&L Ultimate Holdings, LLC ("Appellees").¹ In two issues, Appellants challenge the validity of the temporary injunction order and the sufficiency of the $250,000 temporary injunction bond set by the trial court. They argue the trial court's grant of temporary injunctive relief (1) is void because the order does not comply with the mandatory requirements of Texas Rule of Civil Procedure 683, and (2) even if not void, it should be reversed and remanded to the trial court because the order is overbroad, impermissibly vague, and unsupported by the evidence.

We hold the temporary injunction order violates Rule 683 and is thus void. We dissolve the injunction and remand the case to the trial court.

Factual Background

This appeal involves claims stemming from a series of corporate transactions. Alan Swindoll ("Swindoll") owned two companies that provide sandblasting, painting, and related services for petroleum facilities, chemical plants, and other industrial operations: A&L Sandblasting & Painting, Inc. ("Old A&L") and ALS Associates, Inc. ("ALS"). In 2018, Swindoll, Kelly Clark ("Clark"), Courtney Swindoll ("C. Swindoll"), and ALS entered into a Securities Purchase Agreement ("SPA") with Hastings IV Splitter (A&L), LLC ("Splitter") pursuant to which Swindoll sold his interest in Old A&L. Under the SPA, a new entity, A&L Ultimate Holdings, LLC ("A&L Ultimate"), obtained ownership of Old A&L and Splitter obtained control of A&L Ultimate. Splitter obtained 70% of the outstanding equity interest in A&L Ultimate, Swindoll retained 28%, and Clark and C. Swindoll each retained 1%. Swindoll received a cash payment of approximately $16,000,000 as part of the sale and a bonus of $6,400,000. Under the SPA, Swindoll, Clark, C. Swindoll, and ALS agreed to certain non-competition and non-solicitation covenants, with certain noted exceptions and carveouts.

In June 2020, A&L Ultimate merged with Axios Industrial Group, LLC ("Axios"), an industrial services company. According to Appellants, as part of this merger, Splitter "traded its majority stake to become a minority owner" of A&L Ultimate. Appellants contend that after the merger, Splitter and Axios actively worked together and "have forced Clark and Swindoll out of the business entirely." ALS gave notice of early termination under the SPA. It argued that, given Splitter's transfer of its majority interest, ALS's "ability to compete ended," an issue Appellees dispute.

Procedural Background

In September 2020, the parties filed separate suits against each other. Appellants Clark, Swindoll, and ALS sued Hastings Equity Partners, LLC, A&L Ultimate, and Axios seeking declaratory relief involving the enforceability and scope of the restrictive covenants in the SPA. They also asserted claims for civil theft and misappropriation. In turn, Axios, Splitter, and A&L Ultimate filed a separate suit against Swindoll, Clark, C. Swindoll, and ALS for breach of the same restrictive covenants and requesting injunctive relief. The two suits were eventually consolidated.

Appellees Splitter, A&L Ultimate, and Axios filed an application for temporary injunction against Appellants Clark, Swindoll, C. Swindoll, and ALS in the consolidated action. On October 15 and 16, 2020, the trial court conducted a hearing on the application, at which both sides appeared and presented evidence. On October 16, 2020, the trial court issued a temporary injunction order ("October Order") prohibiting Appellants from, among other things:

(i) engaging in any business involving the furnishing of scaffolding, insulation, sandblasting and painting to industrial or commercial customers in Texas and/or Louisiana, except as provided below;

(ii) soliciting or inducing by any means any customer of Axios Industrial Group, LLC, A&L Ultimate Holdings, LLC, A&L Intermediate Holdings, LLC, A&L Sandblasting & Painting, Inc. and Streamline Services, LLC to enter into or engage in any business with Respondents or any affiliated entity, except as provided below;

(iii) soliciting or inducing by any means any customer of Axios Industrial Group, LLC, A&L Ultimate Holdings, LLC, A&L Intermediate Holdings, LLC, A&L Sandblasting & Painting, Inc. and Streamline Services, LLC to cease doing business or cancelling any existing business relationship with any of the Petitioner entities;

(iv) soliciting or inducing by any means any employee or independent contract laborer of Axios Industrial Group, LLC, A&L Ultimate Holdings, LLC, A&L Intermediate Holdings, LLC, A&L Sandblasting & Painting, Inc. and Streamline Services, LLC to resign or terminate their employment with any of the Petitioner entities or offer employment of any nature to any such individual with or for Respondents or any affiliated entity[.]

The October Order also contains what the parties call a carveout provision. It provides that "[t]he foregoing notwithstanding," Appellants "shall be entitled to provide and they are not restrained from providing" the following:

(i) Civil services of the type currently described on https://alsindustrial.com;

(ii) Mechanical, welding or fabrication services;

(iii) Painting, insulation and sandblasting related to new tanks fabricated and supplied for tank builders, provided that such work or services are done in Respondents’ shop facilities in Rosharon, Texas or inside a tank terminal or facility.

The order also set a $250,000 temporary injunction bond.

Appellants filed an emergency motion seeking to modify the October Order and a motion to stay, along with a proposed temporary injunction order with their requested modifications. Appellants argued Appellees had waived and released the non-compete restrictions in the SPA and therefore, the injunction should be dissolved. They further argued that the October Order was impermissibly vague, restricted conduct not prohibited by any agreement, and granted relief not supported by the evidence.

Appellants asserted that paragraph (iv) of the October Order concerning solicitation of employees prohibited conduct beyond that restricted by the SPA and was not supported by evidence of any purported violation or resulting harm. They also argued that paragraph (ii) of the October Order carveout, allowing Appellants to provide "[m]echanical, welding or fabrication services," was too narrow, vague, and lacked specificity over whether certain important incidental services such as scaffolding were allowed, and further that the carveout in paragraph (iii) allowing "[p]ainting, insulation and sandblasting" was too narrow and contrary to the evidence. Appellants also asked the trial court to increase the bond amount from $250,000 to $1,250,000.

In response to Appellants’ motion, the trial court issued an "Order" on November 2, 2020 ("November Order") that "clarified and "amended" certain provisions in the October Order. The trial court did not sign the proposed order submitted by Appellants in support of their motion for modification. Instead, the trial court drafted its own order, making substantive changes to the scope of the restrictions in the October Order. The November Order states in its entirety:

ORDER

On November 2, 2020, the Court considered Plaintiff's Emergency Motion to Modify Temporary Injunction and Motion to Stay , filed October 23, 2020, together with Plaintiff's Supplement to Their Emergency Motion to Modify Temporary Injunction and Motion to Stay, and Objection to Temporary Injunction Bond , filed October 29, 2020. Defendants filed their original response in opposition on October 26, 2020.

In consideration of the matters raised by Alan Swindoll, Courtney Swindoll, Kelly Clark, and ALS Associates, LLC in the present motions, the response thereto, and the evidence presented on October 15 and 16, 2020, the Temporary Injunction signed herein on October 16, 2020, is clarified and amended as follows.

The injunction expressed in sub-paragraph (iv), at page two, is clarified and amended to allow ALS Associates LLC to hire and/or to solicit for hiring any former employee or contractor of Axios Industrial Group, LLC, A&L Holdings, LLC, A&L Intermediate Holdings, LLC, A&L Sandblasting & Painting, Inc. and/or Streamline Services, LLC (a) after the expiration of 90 days following said person's permanent termination from employment or contract relationship at the instance of Axios Industrial Group, LLC, A&L Holdings, LLC, A&L Intermediate Holdings, LLC, A&L Sandblasting & Painting, Inc. and/or Streamline Services, LLC; or, (b) after 180 days following the resignation or termination of the relationship of such employee or contractor of such relationship at his/her or its initiation.

Sub-paragraph (ii) under the paragraph beginning "The foregoing notwithstanding" on page 2 of the Temporary Injunction is amended to clarify that the permitted performance of "mechanical, welding or fabrication services" includes such additional functions as routinely and necessarily accompany the provision of

...