Tom James of Dallas, Inc. v. Cobb

• Decision Date: 11 July 2003
• Docket Number: No. 05-02-00449-CV.,05-02-00449-CV.
• Citation: 109 S.W.3d 877
• Parties: TOM JAMES OF DALLAS, INC., d/b/a Tom James of Dallas # 80, d/b/a Tom James Company, and d/b/a Tom James of Dallas, Appellant, v. Chris E. COBB, James D. Knight, Pat May, and Michael A. Moon, Appellees.
• Court: Texas Court of Appeals

109 S.W.3d 877

TOM JAMES OF DALLAS, INC., d/b/a Tom James of Dallas # 80, d/b/a Tom James Company, and d/b/a Tom James of Dallas, Appellant, v. Chris E. COBB, James D. Knight, Pat May, and Michael A. Moon, Appellees.

No. 05-02-00449-CV.

Court of Appeals of Texas, Dallas.

July 11, 2003.

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Julia F. Pendery, Goodwin Gruber, P.C., Dallas, for Appellant.

T. Wesley Holmes, Andrew T. Turner, Fisher, Holmes & Turner, Dallas, Joel Pate Smyer, Howell, Dorman, Anderson & Smyer, Fort Worth, Kevin Wayne Vice, Sifford, Anderson, Vice, & MacFarlane, Dallas, for Appellee.

Before Justices MORRIS, MOSELEY, and FRANCIS.

OPINION

Opinion By Justice MOSELEY.

Tom James of Dallas, Inc., d/b/a Tom James of Dallas # 80, d/b/a Tom James Company, and d/b/a Tom James of Dallas (Tom James), appeals the denial of its application for a temporary injunction against Chris E. Cobb, James D. Knight, Pat May, and Michael A. Moon (appellees). In three issues, Tom James argues its noncompete covenants with appellees were enforceable; certain information acquired by appellees from Tom James was confidential and constituted trade secrets; and that although proof of irreparable harm was unnecessary, Tom James showed it would suffer irreparable harm if the temporary injunction was not granted. Tom James requests that we reverse the trial court's order denying its application for temporary injunction and remand the case with orders that the trial court grant the temporary injunction as requested. We affirm.

BACKGROUND

Appellees were salesmen for Tom James, a custom clothing manufacturer that sells ready-made and custom clothing directly to customers. Appellees signed employment agreements containing covenants not to compete against Tom James for a period of two years after appellees left the company. The agreements also contained provisions preventing appellees from disclosing any confidential information or trade secrets of Tom James acquired during their employment for two years after that employment was terminated.

In January 2002, Appellees left Tom James and began selling custom clothing in their former sales territories. Tom James sued for breach of the employment agreements, breach of fiduciary duty, misappropriation of trade secrets, unfair competition, tortious interference with contract and prospective economic relationships, and theft of trade secrets. Tom James alleged `that when appellees left, they took Tom James's confidential and trade secret information with them, including customer lists, documents, and computerized information. Tom James obtained a temporary restraining order, and requested temporary and permanent injunctions to enforce the covenants not to compete and to prevent disclosure and use of the allegedly confidential and trade secret information. After hearing testimony over four days, the trial court denied Tom James's application for a temporary injunction. Tom James filed an interlocutory appeal of this order.

While this accelerated appeal was pending, appellees filed a motion for summary judgment in the trial court, which the trial court granted on December 24, 2002.¹ The interlocutory summary judgment became final on February 12, 2003 when the trial court signed an order granting appellees' non-suit of their counterclaim for attorneys' fees. Normally, this would have rendered moot the interlocutory appeal of the order denying the temporary injunction. See Isuani v. Manske-Sheffield Radiology Group, P.A., 802 S.W.2d 235, 236 (Tex.1991); Save Our Springs Alliance, Inc. v. Austin Indep. Sch. Dist., 973 S.W.2d 378, 384 (Tex.App.-Austin 1998, no pet.). However, Tom James timely filed a motion for new trial and to reconsider the summary judgment.

On April 24, 2003, the trial court entered an order granting Tom James's motion for new trial. The order states:

After reconsideration of Defendants' Motion for Summary Judgment, the Court denies it and awaits the decision of the Court of Appeals for further action on this case.

IT IS, THEREFORE, ORDERED that the order granting summary judgment to Defendants signed by the court on December 24, 2002, is VACATED. Defendants' Motion for Summary Judgment is DENIED. The case will be abated until Plaintiffs interlocutory appeal is decided by the Fifth District Court of Appeals.

Thus, there is no final judgment and the interlocutory appeal is not moot.

SCOPE AND STANDARD OF REVIEW

The purpose of the temporary injunction is to preserve the status quo until the case can be tried on its merits. Rugen v. Interactive Business Systems, Inc., 864 S.W.2d 548, 550 (Tex.App.-Dallas 1993, no pet.). An applicant for a temporary injunction must plead and prove: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Thus, the legal issues before the trial court at a temporary injunction hearing are whether the applicant showed a probability of success and irreparable injury; the underlying merits of the controversy are not presented. Concomitantly, any appeal of an order granting or denying a temporary injunction based on a covenant not to compete does not present for appellate review the ultimate question of whether the covenant is enforceable under section 15.50 of the business and commerce code. TEX. BUS. & COM.CODE ANN. 15.50 (Vernon 2002). See Diesel Injection Servs., Inc. v. Renfro, 656 S.W.2d 568, 575-76 (Tex.App.-Corpus Christi 1983, writ ref'd n.r.e.) (prior appeals of denial of temporary injunction did not determine reasonableness of non-compete covenant because review was restricted to abuse of discretion; review in appeal from trial on merits is not so restricted). We review only the trial court's exercise of discretion in determining that Tom James did not show that it would likely succeed on the merits of the issue at final trial. We reverse a temporary injunction order only if we determine that the record shows the trial court clearly abused that discretion. Rugen, 864 S.W.2d at 550-51.

In making that determination on appeal, we do not substitute our judgment for that of the trial court, but determine only whether the court's action was so arbitrary as to exceed the bounds of reasonable discretion. Id. at 551. We draw all legitimate inferences from the evidence in the light most favorable to the trial court's judgment. Id. When the trial court bases its decision on conflicting evidence, there is no abuse of discretion. Id. However, the trial court abuses its discretion when it misapplies the law to established facts or when the evidence does not reasonably support the trial court's determination of the existence of probable injury or probable right of recovery. Id. at 551. We do review de novo any determinations on questions of law the trial court made in support of its order. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992). However, we only review the trial court's decision on the issues before the court.

The trial court's order denying the application for temporary injunction states in part:

The Court specifically finds that Plaintiff has not demonstrated that the information gathered by Defendants during and in the course of their employment with Plaintiff constituted "trade secrets" or was otherwise confidential and proprietary.

The Court further specifically finds that the non-compete agreements in question were made without consideration given by Plaintiff and are not ancillary to an otherwise enforceable agreement.

The Court finally finds that Plaintiff has demonstrated no likelihood of imminent or irreparable harm in the event the Application is denied. While the Court notes that such a showing may not be required under the Covenants Not to Compete Act, TEX. BUS. & COM. CODE ANN. §§ 15.50, 15.51(a), Butler v. Arrow Mirror & Glass, Inc., (Tex.App.-Houston [1st Dist.] 2001), the requirement is still applicable to a trade-secrets case where the covenants have been held to be unenforceable, as here.

Tom James states that it recognizes the ultimate merits of the case are not presented in an application for temporary injunction. However, based on the wording of the second paragraph of the trial court's order quoted above, it argues the trial court in fact reached the ultimate legal question of the enforceability of the covenants not to compete. On that basis, Tom James invites us to reach the merits of the case, apply a de novo standard of review, and hold that the covenants not to compete are enforceable under section 15.50. TEX. BUS. & COM.CODE ANN. § 15.50. Notwithstanding the breadth of the trial court's language, we decline this invitation for several reasons.

First, the above "findings" do not meet the requirements of Texas Rule of Civil Procedure 299a. See TEX.R. CIV. P. 299a (requiring findings of fact to be separately filed and not simply recited in judgment); Casino Magic Corp. v. King, 43 S.W.3d 14, 20 n. 6 (Tex.App.-Dallas 2001, pet. denied). Accordingly, in this case we use the standard of review applicable to cases where no findings have been requested or filed. See id. Where no findings of facts or conclusions of law are filed, the trial court's determination of whether to grant or deny a temporary injunction "must be upheld on any legal theory supported by the record." Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978).

Moreover, even if we considered the language embedded in the trial court's order to constitute findings of fact and conclusions of law, such findings and conclusions do not control the outcome of this case. In an appeal from an interlocutory order, the trial judge may file findings and conclusions, but is not required to do so. TEX. R.APP. P. 28.1. See Humble Exploration Co. v. Fairway Land Co., 641 S.W.2d 934, 937 (Tex.App.-Dallas 1982, writ ref'd n.r.e.). Findings of fact and conclusions...