ACCEPTED 04-14-00606-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 3/11/2015 2:43:35 PM KEITH HOTTLE CLERK
NO. 04-14-00606-CV
FILED IN 4th COURT OF APPEALS IN THE COURT OF APPEALS FOR THESAN ANTONIO, TEXAS FOURTH DISTRICT OF TEXAS 03/11/2015 2:43:35 PM SAN ANTONIO, TEXAS KEITH E. HOTTLE Clerk
ARGO GROUP US, INC., COLONY MANAGEMENT SERVICES, INC., COLONY INSURANCE COMPANY, COLONY NATIONAL INSURANCE COMPANY, COLONY SPECIALTY INSURANCE COMPANY, COLONY AGENCY SERVICES, INC., AND ARGO GROUP INTERNATIONAL HOLDINGS, LTD.,
Appellants,
v.
LOUIS D. LEVINSON, INTERNATIONAL FINANCIAL GROUP, INC., GUILFORD SPECIALTY GROUP, INC., GUILFORD INSURANCE COMPANY, AND THE BURLINGTON INSURANCE COMPANY,
Appellees.
Appeal from the 221st Judicial District Court, Bexar County, Texas Trial Court Cause No. 2014-CI-09550 Hon. Antonia Arteaga, Presiding
RESPONSE TO APPELLANTS’ MOTION FOR REHEARING
Pursuant to Texas Rule of Appellate Procedure 49.2 and this Court’s Order
of February 25, 2015, Appellees Louis D. Levinson, International Financial Group,
Inc., Guilford Specialty Group, Inc., Guilford Insurance Company, and The
12351783v.1 145360/00001 Burlington Insurance Company (collectively “Appellees”) hereby respond in
opposition to Appellants’ Motion for Rehearing and state as follows:
Pointing to the fact that they tried and failed below to obtain an injunction
ordering “equitable tolling” of the noncompete agreement with Louis Levinson,
Appellants seek rehearing of this Court’s determination that their appeal is moot.
To be sure, Appellants argued below that the noncompete clause should be
“equitably extended.” But the settled Texas case law—including the Supreme
Court’s decision in Weatherford Oil—makes clear that this appeal is nonetheless
moot. Appellants’ effort to upset the status quo and obtain an affirmative
injunction ordering IFG to fire Levinson, its president—more than six months after
the expiration of his noncompete—is moot and must fail.1 Appellants fail to
1 Even if this appeal were not moot, there is no legal or factual basis for equitable tolling in this case, as the trial court properly concluded following a three-day evidentiary hearing on the merits. See Merits Brief of Appellees at 45-50. The trial court’s ruling denying Appellants’ request for a temporary injunction was an exercise of its “sound discretion,” Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002), and this Court can reverse the trial court’s decision only if it was “so arbitrary that it exceeded the bounds of reasonable discretion.” Id. Moreover, this Court must affirm the judgment of the trial court if it is supported by any basis appearing in the record. Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978). As detailed in Appellees’ merits briefing, there are at least three such independent bases, in addition to mootness: (1) Appellants did not demonstrate a probable, imminent, and irreparable injury, see Br. for Appellees at 20-33, (2) Appellants did not establish a probable right to relief, see id. at 34-44, and (3) Appellants did not show that Levinson had “continuously and persistently” breached his restrictive covenants, see id. at 49-51.
-2- 12351783v.1 145360/00001 identify any court, anywhere, that has entered such an extraordinary order
upsetting the status quo.
ARGUMENT This case is controlled by Weatherford Oil. As Appellees explained in their
merits briefing, Texas law on mootness in the context of restrictive covenants is
clear: because “the period during which the restraint was to exist has now
expired,” the “injunction feature of [this] case is now moot.” Weatherford Oil Tool
Co. v. A.G. Campbell, 340 S.W. 2d 950, 953 (Tex. 1960) (emphasis added).
Appellants do not dispute, because they cannot, that the contractually-
specified term of Levinson’s restrictive covenants expired on August 25, 2014.
With the expiration of that restriction—and Appellants’ failure to obtain an
injunction—Levinson began working for Appellees the next day.2 Appellants
argue, however, that despite the expiration of the covenant and the fact that
Levinson has now been employed by Appellees for more than six months, the
courts have the power to “equitably extend” his expired covenant, to issue an order
removing Levinson from his job. Not so. Appellants point to no case in which any
court, in any jurisdiction, has entered an order removing an employee from his or
2 Sworn court testimony of a senior executive of Appellants confirms their understanding of an employee’s right to begin work for a competitor upon expiration of a noncompete. See, e.g., RR Vol. 4 at 163:2-5 (Testimony of Argo’s Excess & Surplus President Arthur Davis) (“Q. And at the end of [the noncompete, an employee] would be free to go work for any company that competed with Argo, right? A. I assume.”).
-3- 12351783v.1 145360/00001 her job following the expiration of a noncompete period for any reason, including
“equitable tolling” of the noncompete.
Indeed, the fact that Appellants’ desired “extension” would require
removing Levinson from his employment with Appellees shows precisely why the
mootness doctrine applies. The purpose of a temporary injunction “is to preserve
the status quo of the litigation’s subject matter pending a trial on the merits.”
Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002) (emphasis added).
The status quo at the time that Argo sought a temporary injunction was that
Levinson was not yet working for IFG, and Argo’s petition sought to preserve that
state of affairs “pending a trial on the merits.” Id. But, following a three-day
evidentiary hearing, the trial court denied that request for temporary injunction,
and Levinson began work with IFG after the noncompete period expired by its
terms some 10 days later—before Appellants took this appeal from the trial court’s
ruling. Thus, the state of affairs that Appellants sought to preserve no longer
exists, and what Appellants seek now is to upset the status quo. But once the status
quo has been altered, such an effort to seek an injunction to preserve the status quo
becomes moot.
Appellants have pointed to no case where a court has ruled that following
the denial of a temporary injunction, the act sought to be enjoined can be “undone”
by an appellate court once lawfully completed. To the contrary, Texas courts have
-4- 12351783v.1 145360/00001 refused such requests—on mootness grounds—in a variety of contexts. In Zuniga
v. U.S. Investors, Inc., 453 S.W.2d 811, 811-12 (Tex. 1970), for example, the
plaintiffs’ request for temporary injunction sought to prohibit the construction of a
nursing home in a residential area. Following the trial court’s denial of the
temporary injunction, and while the appeal was pending, the nursing home was
built. The Texas Supreme Court concluded that because the nursing home had
been built, there was nothing left to enjoin, so “the subject matter of the application
for temporary injunction is moot.” Id. at 811. The courts of appeals—including
this Court—have reached precisely the same conclusion. Toudouze v. Urban
Renewal Agency of San Antonio,
Free access — add to your briefcase to read the full text and ask questions with AI
ACCEPTED 04-14-00606-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 3/11/2015 2:43:35 PM KEITH HOTTLE CLERK
NO. 04-14-00606-CV
FILED IN 4th COURT OF APPEALS IN THE COURT OF APPEALS FOR THESAN ANTONIO, TEXAS FOURTH DISTRICT OF TEXAS 03/11/2015 2:43:35 PM SAN ANTONIO, TEXAS KEITH E. HOTTLE Clerk
ARGO GROUP US, INC., COLONY MANAGEMENT SERVICES, INC., COLONY INSURANCE COMPANY, COLONY NATIONAL INSURANCE COMPANY, COLONY SPECIALTY INSURANCE COMPANY, COLONY AGENCY SERVICES, INC., AND ARGO GROUP INTERNATIONAL HOLDINGS, LTD.,
Appellants,
v.
LOUIS D. LEVINSON, INTERNATIONAL FINANCIAL GROUP, INC., GUILFORD SPECIALTY GROUP, INC., GUILFORD INSURANCE COMPANY, AND THE BURLINGTON INSURANCE COMPANY,
Appellees.
Appeal from the 221st Judicial District Court, Bexar County, Texas Trial Court Cause No. 2014-CI-09550 Hon. Antonia Arteaga, Presiding
RESPONSE TO APPELLANTS’ MOTION FOR REHEARING
Pursuant to Texas Rule of Appellate Procedure 49.2 and this Court’s Order
of February 25, 2015, Appellees Louis D. Levinson, International Financial Group,
Inc., Guilford Specialty Group, Inc., Guilford Insurance Company, and The
12351783v.1 145360/00001 Burlington Insurance Company (collectively “Appellees”) hereby respond in
opposition to Appellants’ Motion for Rehearing and state as follows:
Pointing to the fact that they tried and failed below to obtain an injunction
ordering “equitable tolling” of the noncompete agreement with Louis Levinson,
Appellants seek rehearing of this Court’s determination that their appeal is moot.
To be sure, Appellants argued below that the noncompete clause should be
“equitably extended.” But the settled Texas case law—including the Supreme
Court’s decision in Weatherford Oil—makes clear that this appeal is nonetheless
moot. Appellants’ effort to upset the status quo and obtain an affirmative
injunction ordering IFG to fire Levinson, its president—more than six months after
the expiration of his noncompete—is moot and must fail.1 Appellants fail to
1 Even if this appeal were not moot, there is no legal or factual basis for equitable tolling in this case, as the trial court properly concluded following a three-day evidentiary hearing on the merits. See Merits Brief of Appellees at 45-50. The trial court’s ruling denying Appellants’ request for a temporary injunction was an exercise of its “sound discretion,” Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002), and this Court can reverse the trial court’s decision only if it was “so arbitrary that it exceeded the bounds of reasonable discretion.” Id. Moreover, this Court must affirm the judgment of the trial court if it is supported by any basis appearing in the record. Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978). As detailed in Appellees’ merits briefing, there are at least three such independent bases, in addition to mootness: (1) Appellants did not demonstrate a probable, imminent, and irreparable injury, see Br. for Appellees at 20-33, (2) Appellants did not establish a probable right to relief, see id. at 34-44, and (3) Appellants did not show that Levinson had “continuously and persistently” breached his restrictive covenants, see id. at 49-51.
-2- 12351783v.1 145360/00001 identify any court, anywhere, that has entered such an extraordinary order
upsetting the status quo.
ARGUMENT This case is controlled by Weatherford Oil. As Appellees explained in their
merits briefing, Texas law on mootness in the context of restrictive covenants is
clear: because “the period during which the restraint was to exist has now
expired,” the “injunction feature of [this] case is now moot.” Weatherford Oil Tool
Co. v. A.G. Campbell, 340 S.W. 2d 950, 953 (Tex. 1960) (emphasis added).
Appellants do not dispute, because they cannot, that the contractually-
specified term of Levinson’s restrictive covenants expired on August 25, 2014.
With the expiration of that restriction—and Appellants’ failure to obtain an
injunction—Levinson began working for Appellees the next day.2 Appellants
argue, however, that despite the expiration of the covenant and the fact that
Levinson has now been employed by Appellees for more than six months, the
courts have the power to “equitably extend” his expired covenant, to issue an order
removing Levinson from his job. Not so. Appellants point to no case in which any
court, in any jurisdiction, has entered an order removing an employee from his or
2 Sworn court testimony of a senior executive of Appellants confirms their understanding of an employee’s right to begin work for a competitor upon expiration of a noncompete. See, e.g., RR Vol. 4 at 163:2-5 (Testimony of Argo’s Excess & Surplus President Arthur Davis) (“Q. And at the end of [the noncompete, an employee] would be free to go work for any company that competed with Argo, right? A. I assume.”).
-3- 12351783v.1 145360/00001 her job following the expiration of a noncompete period for any reason, including
“equitable tolling” of the noncompete.
Indeed, the fact that Appellants’ desired “extension” would require
removing Levinson from his employment with Appellees shows precisely why the
mootness doctrine applies. The purpose of a temporary injunction “is to preserve
the status quo of the litigation’s subject matter pending a trial on the merits.”
Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002) (emphasis added).
The status quo at the time that Argo sought a temporary injunction was that
Levinson was not yet working for IFG, and Argo’s petition sought to preserve that
state of affairs “pending a trial on the merits.” Id. But, following a three-day
evidentiary hearing, the trial court denied that request for temporary injunction,
and Levinson began work with IFG after the noncompete period expired by its
terms some 10 days later—before Appellants took this appeal from the trial court’s
ruling. Thus, the state of affairs that Appellants sought to preserve no longer
exists, and what Appellants seek now is to upset the status quo. But once the status
quo has been altered, such an effort to seek an injunction to preserve the status quo
becomes moot.
Appellants have pointed to no case where a court has ruled that following
the denial of a temporary injunction, the act sought to be enjoined can be “undone”
by an appellate court once lawfully completed. To the contrary, Texas courts have
-4- 12351783v.1 145360/00001 refused such requests—on mootness grounds—in a variety of contexts. In Zuniga
v. U.S. Investors, Inc., 453 S.W.2d 811, 811-12 (Tex. 1970), for example, the
plaintiffs’ request for temporary injunction sought to prohibit the construction of a
nursing home in a residential area. Following the trial court’s denial of the
temporary injunction, and while the appeal was pending, the nursing home was
built. The Texas Supreme Court concluded that because the nursing home had
been built, there was nothing left to enjoin, so “the subject matter of the application
for temporary injunction is moot.” Id. at 811. The courts of appeals—including
this Court—have reached precisely the same conclusion. Toudouze v. Urban
Renewal Agency of San Antonio, 404 S.W.2d 821, 821 (Tex. Civ. App.—San
Antonio 1966, writ ref’d n.r.e.) (“It is now apparent that the relief sought by
appellants cannot be granted them, because it appears that the thing they were
trying to prevent from happening has already happened. This appeal is now
moot.”). See also Johnson v. Texas Parks and Wildlife Dept., No. 03-14-00085-
CV, 2014 WL 1432177, *2 (Tex. App.—Austin Apr. 8, 2014, no pet.) (“Because
the herd-reconciliation activities Johnson sought to enjoin have already occurred,
the subject matter of the application for temporary injunction . . . is moot.”);
Rawlings v. Gonzalez, 407 S.W.3d 420, 428 (Tex. App.—Dallas 2013, no pet.)
(“[T]he trial court can no longer enjoin the publication of the ordinance or prevent
the judges appointed by the ordinance from taking their oaths of office, because
-5- 12351783v.1 145360/00001 these events have already occurred.”); Young Trucking, Inc. v. Railroad Comm’n of
Texas, 781 S.W.2d 719, 720 (Tex. App.—Austin 1989, no writ) (“[W]hen an order
suspending a certificate or license expires by its own terms pending appeal, no
controversy remains and the case is moot.”).
Likewise, as Appellees explained in their merits briefing, the case law—
including the Supreme Court’s decision in Weatherford Oil—also instructs that
where a restrictive covenant has expired, a court no longer has the power to
enforce it because the effort to obtain an injunction has become moot. Holiday
Hill Stone Prods., Inc. v. Peek, 387 S.W.2d 731, 732 (Tex. Civ. App.—San
Antonio 1965, no writ) (where the trial court shortened the injunction period from
three years to one year and that one-year period expired by the time of the appeal,
the appeal of the trial court’s decision had become moot); Rimes v. Club Corp. of
Am., 542 S.W.2d 909, 912 (Tex. Civ. App.—Dallas 1976, writ ref’d n.r.e.) (“Here,
the parties entered into a contract providing for a noncompetitive period following
cessation of employment and such period is now past which causes the issue to
become moot.”); Leon’s Fine Foods, Inc. v. McClearin, No. 05-97-01198-CV,
2000 WL 277135 at *1 (Tex. App.—Dallas, Mar. 15, 2000, pet. denied) (not
designated for publication) (“The two-year term of the covenant ended on
December 31, 1995. . . . Once the non-competition period ends, the trial court’s
ability to enforce the covenant by injunction becomes moot. . . . The statutory
-6- 12351783v.1 145360/00001 remedy of injunctive relief was not available to Leon’s since the term of the
covenant had expired, before the court issued any injunction.”) (citing Weatherford
Oil and Rimes).
According to Appellants, this Court should ignore the Supreme Court’s
decision in Weatherford Oil and these many courts of appeals decisions because
they concern “reformation” and not “equitable extension.” See Mot. for Rehearing
at 4. The argument is specious.
First, as noted above and in Appellees’ merits briefing, neither the Texas
Supreme Court nor this Court has held that restrictive covenants in employment
contracts can be “equitably extended.” There is, therefore, no basis for Appellants’
insistence that Texas courts have carefully distinguished the concepts of “equitable
extension” and “reformation.” Moreover, courts that have recognized equitable
extension as a possible remedy for violation of restrictive covenants frequently use
the term “reformation” to refer to the extension of noncompete and nonsolicitation
provisions—the relief that Appellants seek here. See, e.g., Staples, Inc. v. Sandler,
No. 07-CV-0928, 2008 WL 4107656 at *5 (N.D. Tex. Aug. 29, 2008) (“The Court
is unwilling to reform the agreement to extend its time restraint.”) (emphasis
added) (vacated after settlement, Staples, Inc. v. Sandler, 2009 WL 1285838 (N.D.
Tex. May 7, 2009)); Stonhard, Inc. v. Carolina Flooring Specialists, Inc., 621
S.E.2d 352, 354 (S.C. 2005) (rejecting a request for equitable extension by
-7- 12351783v.1 145360/00001 concluding that “[e]ven if the agreement could be reformed in this manner under
New Jersey law, the agreement would be unenforceable in South Carolina because
the very act of adding a term not negotiated and agreed upon by the parties violates
public policy”) (emphasis added); Southern Intermodal Logistics, Inc. v. Taylor
Maid Transp., Inc., 338 S.E. 2d 678, 678 (Ga. 1986) (finding appeal moot where
“trial court refused to reform the contract to extend the period of non-
competition”) (emphasis added).
Thus, Appellants’ contention that mootness can apply only where a court is
asked to consider “reformation,” limited, for example, to shortening the duration or
narrowing the geographic scope of a noncompete, rather than “equitable
extension,” extending a noncompete, is hardly the “crucial distinction reflected in
Texas common law” that Appellants assert. See Mot. for Reconsideration at 2. To
the contrary, it is a meaningless and nonsensical distinction—which has nothing
whatsoever to do with mootness—baldy asserted without citation by Appellants
and never recognized by any Texas court.
Contrary to Appellants’ position that cases concerning restrictive covenants
are never moot so long as the petitioners pleaded a request for “extension” of the
covenant, Texas courts of appeals have recognized that Weatherford Oil stands for
the proposition that when a restrictive covenant expires while a denial of an
-8- 12351783v.1 145360/00001 injunction is on appeal, the appeal becomes moot. This Court should follow the
Texas Supreme Court in reaching the same conclusion here.
Appellants’ citation to Guy Carpenter & Co., Inc. v. Provenzale, 334 F.3d
459 (5th Cir. 2003) does not compel a contrary conclusion. Not only is Guy
Carpenter a Fifth Circuit case not binding on this Court, but it is also grounded in
Ohio and not Texas law.3 Had the Guy Carpenter court applied Texas law, as
articulated in Weatherford Oil, it would have dismissed the case as moot.
Compare Guy Carpenter, 334 F.3d at 464 (“The expiration of the one-year
contract limit does not make this issue moot.”) with Weatherford Oil, 340 S.W.2d
at 953 (because one-year contractual limit expired, “the injunction feature of the
case is now moot”).
Moreover, the only restrictive covenant at issue in Guy Carpenter was a
nonsolicitation covenant—and, unlike the covenant not to compete at issue here, its
extension would not have compelled the firing of an employee from his job. 334
F.3d at 463 (“Guy Carpenter alleged Provenzale began contacting and soliciting its
clients . . . in violation of the 1999 Agreement’s non-solicitation covenant.”).
3 While the Fifth Circuit purported to base its holding on Premier Indus. Corp. v. Tex. Indus. Fastener Co., 450 F.2d 444, 448 (5th Cir. 1971), which the Guy Carpenter court claimed “appl[ied] Texas law,” 334 F.3d at 464, Premier did nothing of the sort. In fact, Ohio law governed the Premier case. See id., 450 F.2d at 447 (“There does not appear to be any dispute . . . as to the state whose law governs these covenants. . . . The contract provides that the laws of the State of Ohio shall govern both as to interpretation and performance.”).
-9- 12351783v.1 145360/00001 Thus, there is no case identified by Appellants—including Guy Carpenter—where
a court issued an order that forced an employee to be terminated from his or her
job after the noncompete expired. See Marsh USA v. Cook, 354 S.W.3d 764, 776
(Tex. 2011) (one’s “right to use his own labor” in seeking lawful employment is
“one of the first and highest of civil rights”). See also Gaylord Broadcasting Co.
v. Cosmos Broadcasting Corp., 746 F.2d 251, 252 (5th Cir. 1984) (“Since Gansar
terminated her employment with Gaylord on September 30, 1983, Gaylord’s right
to enforce specifically the covenant not to compete ceased as of September 30,
1984, one year after Gansar’s employment with Gaylord ended.”); id. at 253 n. 2
(rejecting equitable extension after the expiration of a noncompete term,
“consistent with the rationale offered in every case addressing this issue which this
Court has discovered”) (collecting cases).
CONCLUSION The fact that Appellants asked the trial court to equitably extend Levinson’s
restrictive covenant has no bearing on the mootness of their appeal. As this Court
correctly held in its January 14, 2015 Memorandum Opinion and Order,
Appellants’ appeal is moot because Levinson’s restrictive covenants expired even
before this appeal was filed. Appellants’ Motion for Rehearing should therefore be
denied.
-10- 12351783v.1 145360/00001 Respectfully submitted,
/s/ Julia W. Mann________________ Lawrence Morales, II Julia W. Mann State Bar No. 24051077 State Bar No. 00791171 The Morales Law Firm, P.C. Jackson Walker L.L.P. 115 E. Travis, Suite 1530 112 E. Pecan Street, Suite 2400 San Antonio, Texas 78205 San Antonio, Texas 78205 (210) 225-0811 (210) 978-7700 (210) 501-0786 – Fax (210) 978-7790 – Fax lawrence@themoralesfirm.com jmann@jw.com
Attorney for Louis D. Levinson Anthony Herman Pro Hac Vice Covington & Burling LLP One CityCenter 850 Tenth Street NW Washington, DC 20001 (202) 662-5280 (202) 778-5280 – Fax aherman@cov.com
Attorneys for Appellees International Financial Group, Inc., Guilford Specialty Group, Inc., Guilford Insurance Company, and The Burlington Insurance Company
-11- 12351783v.1 145360/00001 CERTIFICATE OF COMPLIANCE The undersigned counsel certifies that this document contains 2,666 words (counting all parts of the document). The body text is in 14 point font and footnotes are in 14 point font.
/s/ Julia W. Mann Julia W. Mann
CERTIFICATE OF SERVICE This is to certify that on this 11th day of March, 2015, a true and correct copy of the RESPONSE TO APPELLANTS’ MOTION FOR REHEARING was served certified mail, return receipt requested, email or facsimile, upon:
Jonathan D. Pauerstein Stephen K. Lecholop II Rosenthal Pauerstein Sandoloski Agather LLP 755 E. Mulberry, Suite 200 San Antonio, Texas 78212 (210) 225-5000 (210) 354-4034 – Fax ATTORNEY FOR APPELLANTS Steven L. Manchel Michael G. Donovan 100 River Ridge Drive, Suite 308 Norwood, Massachusetts 02062 (617) 796-8920 (617) 796-8921 – Fax OF COUNSEL FOR APPELLANTS
-12- 12351783v.1 145360/00001