CMNC Healthcare Properties LLC, Meridian Healthcare Properties, LLC, Healthcare Development, Ltd., James Muska, Edward Neese and James T. Collier v. Medistar Corporation

• Court: Court of Appeals of Texas
• Decided: December 14, 2006
• Docket: 01-06-00182-CV
• Status: Published

Opinion

Opinion issued December 14, 2006

In The

Court of Appeals

For The

First District of Texas

NO. 01-06-00182-CV

__________

CMNC HEALTHCARE PROPERTIES, LLC, MERIDIAN HEALTHCARE PROPERTIES, LLC, HEALTHCARE DEVELOPMENT, LTD., JAMES T. MUSKA, EDWARD NEESE, A. FLOYD COOPER, AND JAMES T. COLLIER, Appellants

V.

MEDISTAR CORPORATION, Appellee

On Appeal from the 113th District Court

Harris County, Texas

Trial Court Cause No. 2004-36311

MEMORANDUM OPINION

Appellants, CMNC Healthcare Properties, LLC, Meridian Healthcare Properties, LLC, Healthcare Development, Ltd., James T. Muska, Edward Neese, A. Floyd Cooper, and James T. Collier, bring this accelerated interlocutory appeal ⁽¹⁾ challenging the trial court's order granting appellee, Medistar Corporation's, application to modify a temporary injunction. In their sole issue, appellants contend that the trial court erred in granting the application "because there is no evidence supporting the trial court's decision." We reverse the trial court's February 7, 2006 order modifying the temporary injunction and further order that such modified injunction be dissolved.

Factual and Procedural Background

In its original petition and application for injunctive relief, Medistar Corporation ("Medistar"), a real estate development firm specializing in the development of medical facilities, alleged that it had compiled "highly proprietary" and "confidential trade secret[s]" including financial pro formas, cost presentations, cost/profit analyses, and other information concerning clients, financial and equity sources, and contractors "involved in the development of medical facilities." It also alleged that appellants, former officers or employees of Medistar, left Medistar to form a competing development company and that appellants used Medistar's proprietary information and trade secrets in securing the rights to develop a medical center project that Medistar had been pursuing prior to appellants' departure. Medistar further alleged that, upon leaving Medistar, appellants took and used confidential client lists, financial source contacts, and "development reports" containing proprietary information on Medistar projects, "in an attempt to steal multiple additional projects." Medistar asserted claims of conversion, theft of trade secrets and proprietary and confidential information, tortious interference, fraud, and breach of fiduciary duties.

In its request for injunctive relief, ⁽²⁾ Medistar asserted that it would suffer immediate and irreparable harm for its "loss of valuable trade secrets and proprietary information" and that it did not have an adequate remedy at law. Medistar further asserted that appellants had impaired "its business operation and reputation" and had "threatened to cause the imminent loss of unique and irreplaceable ownership interests in existing development and pre-development projects." Thus, Medistar sought to enjoin appellants from using its trade secrets and proprietary information with respect to a number of projects.

In August 2004, the trial court entered a temporary injunction, restraining appellants from utilizing "[a]ny Medistar Development Reports, project files, financial pro formas, clients lists or financing source lists, or any information derived therefrom which was obtained by and/or disclosed to [appellants] while employed by Medistar . . . in connection with [certain] projects and entities," which were specifically named in an attached exhibit. The temporary injunction further restrained appellants from utilizing "said proprietary information and trade secrets to solicit Medistar's clients and financing sources or to otherwise compete or attempt to compete against Medistar" on the named projects. Appellants have not challenged in this appeal the original temporary injunction or the projects named therein. ⁽³⁾

On December 5, 2005, Medistar filed an application to modify the temporary injunction, alleging that Medistar had been "planning to perform work" on a project at the Northeast Medical Center Hospital ("NMCH"), but that when Neese left Medistar he "took this project for his personal financial benefit." Medistar requested that the trial court add NMCH to the list of projects identified in the original temporary injunction. Medistar attached a confidentiality agreement, dated December 19, 2002, between NMCH and Medistar "concerning possible real estate acquisition and development transactions" on NMCH's premises. The confidentiality agreement was signed by Neese on behalf of Medistar, but was not signed by NMCH. Medistar also attached deposition testimony from Neese, in which he stated that he started consulting work for NMCH in May 2005 for a new company, the Huntwick Group ("Huntwick"), ⁽⁴⁾ he had an agreement with Huntwick to be paid a salary of $9,000 per month, and he was in the process of preparing a "request for proposal" for NMCH to solicit bids from health care real estate investors. However, Neese stated that he did not work on this project when he was at Medistar and that, although he signed a confidentiality agreement with NMCH on behalf of Medistar in December 2002, he did not know what development was contemplated by NMCH at that time. Neese denied that he took any information that pertained to NMCH when he left Medistar. Medistar also attached the affidavit of Monzer Hourani, Medistar's chief executive officer, who stated that while Neese was employed at Medistar, he assigned Neese to an NMCH project.

In their response, appellants asserted that Neese, under his agreement with Huntwick, was not working with NMCH as a developer, but was instead working for NMCH as a consultant hired solely to "coordinate[] and facilitate[] information from the hospital to developers" and that he was not "interfering with Medistar's business opportunities." Neese testified in an attached affidavit that he was employed as a consultant with Huntwick, "a real estate research and coordinating company" that "does not engage in any like and/or similar business that Medistar performs," and there was nothing proprietary to Medistar that was relevant to his work for NMCH. Neese further testified that, as a consultant, he "coordinate[d] the reciprocal flow of information and bids between the hospital and potential developers," he was "legally prohibited from recommending one entity over the other and/or communicating information from one bid to any other potential bidding party," and he "in no way [could] participate in any development and profits from development relevant to any bidder/developer." Neese conceded that while at Medistar, he "attempted to present Medistar's interests to [NMCH] in initial communications," but that there was no "business relationship effectuated." However, Neese also stated that any proprietary information from Medistar "would not be relevant."

Appellants filed an amended response, and attached an affidavit from Syble Missildine, NMCH's chief executive officer, who testified that NMCH retained Neese on May 10, 2005, "to provide consulting services to a competitive bidding process" and not "as a developer and/or financier/investor." She also noted that Medistar "was offered the opportunity to submit a closed bid relevant to their ability to function as a developer and/or financier/investor," it submitted a sealed bid, and, although late, it was considered by NMCH. Missildine also explained that Neese did not participate in the unsealing or scoring of the bids and that Neese had "not interfered and/or been competitive with the business opportunities relevant to and/or touching on Medistar's operation as developer and/or financier/investor." Appellants also attached deposition testimony from David Glassburn, NMCH's former chief financial officer, who testified that he hired Neese to help him "put the bid packet together" and "evaluate the bid packet."

At the hearing on Medistar's application to modify the temporary injunction, Hourani testified that around December 2002, he assigned Neese to a development project at NMCH, Neese signed a confidentiality agreement on behalf of Medistar, Hourani and Neese reviewed a financial pro forma for the project, and Neese subsequently advised Hourani that the project had been placed on hold. Hourani agreed that NMCH did not conduct a sealed-bid process for any project in 2002. After Medistar learned Neese had become involved with NMCH, Medistar searched for its NMCH file, but could not locate it.

Medistar introduced into evidence a May 9, 2005 proposal from Huntwick to NMCH to provide "real estate consulting services" in a "bidding and sale process," which was accepted by NMCH on May 10, 2005 (the "consulting agreement"). ⁽⁵⁾ The consulting agreement set forth a number of "consulting services" that Neese, on behalf of Huntwick, agreed to provide to NMCH. Hourani testified that some of these services were "the type of work" that Neese performed while at Medistar and the "type of work" Medistar performs. For example, the consulting agreement stated that Huntwick would "[a]ssist the real estate attorney with drafting the development agreement, purchase and sale agreement[,] and the ground leases," "[a]ssist the architects with preparing a preliminary site plan and specification list for the new building," and "participate, as needed, in the closing of the sale of the existing building." Hourani asserted that Neese was doing more than just bidding work and instead was "doing things that [Neese] did at Medistar." Hourani also asserted that the NMCH project placed on hold in 2002 was the same project for which the bidding process was commenced in 2005.

Hourani conceded that Medistar markets itself as a company that develops hospitals and medical facilities and invests in real estate projects. Hourani agreed that in November 2005, pursuant to a request from NMCH, Medistar submitted a sealed bid to develop, acquire, and finance a project at NMCH and that NMCH never requested Medistar to serve in the capacity as a consultant. Hourani also agreed that NMCH had the right to hire a consultant to act on its behalf in assisting developers, reviewing development agreements, assisting architects with preparing site plans, representing NMCH's interests, and advising NMCH. Moreover, Hourani agreed that this was "separate and distinct from what Medistar would do if Medistar [had been] awarded the [NMCH] project." However, Hourani stated that Medistar would have been willing to act as a bid coordinator, even though doing so would have excluded Medistar from serving as a financier and developer of the project. In support of this assertion, Hourani stated that Medistar had, on one occasion in 1992, developed a bidding and evaluation process for a medical facility, but Hourani agreed that Neese had not performed this type of work while employed at Medistar.

Although Hourani agreed that Neese did not sign an employment agreement that limited Neese's ability to work for a hospital, Hourani provided somewhat contradictory testimony as to what, in his opinion, Neese should be prohibited from doing. Although Hourani agreed that Neese could work for any hospital entity in any capacity "short of being a developer," he then asserted that Neese could not work in any capacity at a facility where Medistar worked on a project.

Finally, Hourani asserted that Medistar had been damaged in the amount of $28 million, but he did not provide any testimony connecting this damage figure, or any other damage figure, to the alleged loss of the right to develop or the right to serve as a consultant on the NMCH project. Moreover, Hourani admitted that he did not bring any documents to the trial court to show that Medistar was injured. Hourani also agreed that he had no knowledge of whether Neese was present when NMCH unsealed the bids. Although Hourani alleged that Neese interfered with the bid process in 2005 and altered Medistar's bid, he conceded that he did not have any evidence that Neese assisted the winning bidder of the NMCH project or interfered with the sealed-bid process in any way.

Glassburn, NMCH's former chief financial officer, testified that Neese was "hired as a consultant to help [him] develop a bid packet to sell the existing office buildings and to find a developer that would buy the existing office buildings and to construct a similar office building" on NMCH's main campus. Glassburn stated that Neese was not hired as a developer because NMCH was sending out sealed bids to hire a developer, and instead Neese was hired to represent the interests of the hospital and not the interests of the developer. Glassburn hired Neese as a consultant "because of his general expertise as a developer," and he did not see a conflict of interest because Neese would not be bidding on the project.

Neese testified that when he left Medistar he was not working on an NMCH project, Medistar was a "developer of medical facilities," and Medistar never "attempted to engage in the business of consulting regarding bidding processes and scaling procedures." Neese stated that when he sent NMCH the confidentiality agreement in 2002, he had done so in regard to the possible acquisition of a facility on the NMCH campus, and he agreed that this acquisition was one of the assets at issue in the November 2005 sealed-bid offer. However, Neese's consulting agreement with NMCH was "to provide services to coordinate a bidding process," to act as NMCH's agent in the sealed-bid process, to assess and protect NMCH's interests, and to assist in the preparation of the proposed bid packets. He explained that these functions were distinct from what a developer and financier, like Medistar, would do. Neese noted that Medistar did not provide the types of services described in the consulting agreement and, because of his role, he was prohibited by law from participating in the project as an investor or developer. He also stated that he did not interfere with Medistar's ability to submit a sealed bid, did not interfere with the bid packet being sent to Medistar, did not take any proprietary information from Medistar to use in the sealed-bid process, was not present when the sealed bids were opened, had no discussions with bidders concerning the preparation of bids or any information contained in the sealed-bid package, and did not assist the winning bidder. Neese also stated that he did not have an employment agreement with Medistar prohibiting him from working with NMCH as a consultant.

On cross-examination, Neese agreed that he spoke with Glassburn in 2002 about the possible purchase of medical office buildings and he also agreed that some of the services outlined in the consulting agreement were services that Medistar could provide, but he qualified his answer by noting that Medistar would provide those services "from a developer's perspective." In regard to his specific duties, Neese stated that he was hired to prepare a set of documents to be presented to bidders so that they could prepare and submit their sealed bids for the items on which NMCH was seeking a bid. He also assisted NMCH in preparing the invitation to send to prospective bidders and he reviewed the bid packet before sending it to prospective bidders. Neese noted that Medistar was listed as a respondent for the bid packet. Finally, Neese reiterated that the "bid process was not something that [he] did at Medistar" and that he did not have any influence on awarding the project because he "was not a participant in the evaluation of the sealed bids."

The trial court granted Medistar's application to modify the temporary injunction and ordered that the August 2004 temporary injunction should be "supplemented to include any and all projects pertaining to the [NMCH]."

Standard of Review

The purpose of a temporary injunction is to preserve the status quo of a litigation's subject matter pending trial. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Trial courts have broad discretion in deciding whether to grant or deny a temporary injunction, and the standard of review is for a clear abuse of discretion. Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601, 607 (Tex. App.--Houston [1st Dist.] 2002, no pet.); see also T.F.W. Mgmt., Inc. v. Westwood Shores Prop. Owners Ass'n, 162 S.W.3d 564, 567 (Tex. App.--Houston [14th Dist.] 2004, pet. denied). Accordingly, we will not reverse a trial court's order granting a temporary injunction unless it is "so arbitrary as to exceed the bounds of reasonable discretion." Tel. Equip. Network, Inc., 80 S.W.3d at 607. An erroneous application of the law to undisputed facts constitutes an abuse of discretion. Id. However, we draw all legitimate inferences from the evidence in the light most favorable to the trial court's order. Id.

To obtain a temporary injunction, an applicant must plead and prove (1) a cause of action against a defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Butnaru, 84 S.W.3d at 204. A probable right of relief is shown by alleging a cause of action and presenting evidence that tends to sustain it. T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 23-24 (Tex. App.--Houston [1st Dist.] 1998, pet. dism'd). An irreparable injury is shown if there is no adequate remedy at law, i.e., the applicant cannot be adequately compensated in damages or damages cannot be measured by any certain pecuniary standard. Butnaru, 84 S.W.3d at 204; see also Ahmed v. Shimi Ventures, L.P., 99 S.W.3d 682, 692 (Tex. App.--Houston [1st Dist.] 2003, no pet.).

Temporary Injunction

In their sole issue, appellants argue that the trial court erred in granting Medistar's application to modify the temporary injunction "because there is no evidence supporting the trial court's decision." In support of their argument, appellants assert that the evidence established that Medistar did not engage in the type of consulting services provided by Neese, Neese did not act as a developer, manager, or financier of the NMCH project, and Neese in no way interfered with Medistar's bid to develop the NMCH project. Thus, Neese contends that Medistar presented "no evidence of imminent harm, irreparable injury, or lack of an adequate remedy at law."

Here, the undisputed facts show that Medistar is a developer and financier of medical facilities and related real estate projects and, in 2005, NMCH requested a sealed bid from a number of developers, including Medistar, to develop a project at NMCH. Medistar submitted a bid pursuant to this request, and NMCH awarded the project to another bidder. Medistar agrees that by submitting its bid to develop the project, it was legally prohibited from acting as a coordinator or consultant in the bidding process, the capacity in which Neese is seeking to act. Although Hourani, Medistar's CEO, initially stated that some of the services set forth in the consulting agreement were the type of work engaged in by Medistar, Hourani subsequently recognized that Neese, to the extent that he was even providing these services, would be providing them on behalf of NMCH and not as a developer or financier of the project. Specifically, Hourani agreed that a consultant hired to act on NMCH's behalf would provide services "separate and distinct from what Medistar would do" if awarded the project on which it was bidding.

Furthermore, although Hourani testified that Medistar would have been willing to act in the capacity of a consultant, Hourani agreed that NMCH did not ask it to provide such services, Medistar had performed a similar function on only one other occasion in 1992, and Neese did not perform in this capacity while at Medistar. NMCH witnesses supported Neese's testimony that Neese was hired solely to act as a consultant to assist in preparing the bid packet that was sent to prospective bidders and that Neese was hired to perform this function based on his general expertise in medical-facilities development. The record contains no evidence that Neese used, or even could have used, Medistar's proprietary information or trade secrets in performing the functions for which he was retained, and Medistar offered no explanation as to how this information would be relevant to a consultant, like Neese, who is assisting in the preparation of a bid packet to be submitted to a number of bidders, including Medistar. Moreover, Hourani agreed that, although he had his personal suspicions, he did not have any evidence that Neese interfered in any way with the bid process or exercised any influence over NMCH's selection of the winning bidder.

Finally, Hourani's vague reference to damages in the amount of $28 million did not establish Medistar's lack of an adequate remedy by law because the alleged damages figure was not connected to any another evidence relevant to the modified injunction. The record contains no evidence that the NMCH project was valued at $28 million, and Medistar failed to explain how Neese's contract, valued at approximately $170,000, could cause Medistar irreparable harm. Hourani himself even agreed at trial that he had not presented the trial court with any documentation of Medistar's injury. Thus, in regard to the modified portion of the temporary injunction, i.e., the portion of the injunction related to "any and all projects pertaining to NMCH," we conclude that Medistar has not demonstrated irreparable injury or imminent harm.

In support of its argument, Medistar makes several statements in its brief that are not supported by the record. For example, although Medistar asserts that Neese has "no independent information, experience or training that [is] not proprietary to Medistar," it does not provide any legal or factual basis for this extremely broad assertion. Medistar also asserts that "Neese misappropriated trade secrets by entering into a development agreement with NMCH," a development that Medistar asserts it "originated." However, the record contains no evidence that Neese ever entered into a development agreement with NMCH. In fact, even Hourani appeared to concede in his testimony the distinction between the development services offered by Medistar in its sealed bid and the services performed by Neese pursuant to the consulting agreement. Although Neese conceded that some of the services outlined in the consulting agreement were services Medistar could provide, he qualified his answer by noting that Medistar would provide those services "from a developer's perspective." Moreover, the record contains no evidence that Medistar "originated" the project at issue or had any vested right to develop the project. Instead, the evidence before us shows that NMCH conducted a sealed-bid process and awarded the bid to another developer without any interference from Neese.

There is also no evidence, as Medistar alleged, that upon leaving Medistar, Neese "took the [NMCH] project for his personal financial benefit." Rather, the undisputed evidence establishes that NMCH solicited sealed bids for the project, Neese was not and could not have been a bidder on the project, and the bid was awarded to a third party. There is no evidence that Neese conspired with this third party. Finally, Medistar failed to present any evidence to support its assertion that Neese "controlled the bid process for the [NMCH] project" and that "Medistar was not awarded the bid" because of Neese. As we previously stated, the evidence presented at the temporary injunction failed to demonstrate that Neese controlled the evaluating and scoring of the bids or that he had any influence on NMCH's decision to select a bidder. Moreover, Medistar presented no evidence that NMCH conducted the sealed-bid process in bad faith with assistance from Neese.

We note that our review is limited solely to the modified temporary injunction. The original temporary injunction makes clear that it was issued to restrain appellants from using any potential trade secrets or proprietary information obtained by appellants while employed by Medistar in connection with a number of projects and entities so that appellants could not use the information to solicit Medistar's clients or compete against Medistar on the identified projects. As asserted by Medistar in its brief: "the very purpose of the original temporary injunction was to prohibit appellants from benefitting and/or utilizing proprietary information belonging to Medistar in their continuing efforts to compete on various Medistar projects."

Here, there is no evidence to suggest that Neese was competing with Medistar in its efforts to secure the bid to serve as the developer or financier of the NMCH project and, consequently, there is no evidence that Medistar has been irreparably injured with respect to NMCH so as to warrant the modification of the temporary injunction. Accordingly, we hold that the trial court abused its discretion in modifying the temporary injunction.

We sustain appellants' sole issue.

Conclusion

We reverse the trial court's February 7, 2006 order modifying the temporary injunction. We further order that the trial court's February 7, 2006 order modifying the temporary injunction be dissolved. ⁽⁶⁾

Terry Jennings

Justice

Panel consists of Justices Nuchia, Jennings, and Higley.

1. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (Vernon Supp. 2006).

2.

See Tex. Civ. Prac. & Rem. Code Ann. § 65.011 (Vernon 1997).

3.

Furthermore, the parties have not presented this Court with the record of the original temporary injunction hearing.

4.

Medistar introduced evidence showing that Huntwick was an entity formed by Neese's girlfriend, and that Neese was Huntwick's only employee.

5.

The consulting agreement required NMCH to make six monthly payments of $10,000 to Neese and also provided for another $110,000 in contingent payments to Neese.

6.

All pending motions are denied.