FH1 Financial Services Inc. v. Debt Settlement America Inc.

• Court: Court of Appeals of Texas
• Decided: August 15, 2007
• Docket: 10-06-00167-CV
• Status: Published

Opinion

IN THE

TENTH COURT OF APPEALS

 

No. 10-06-00167-CV

No. 10-06-00199-CV

FH1 Financial Services, Inc., AND

Michael Rogers,

                                                                                    Appellants

 v.

Debt Settlement America, Inc.,

                                                                                    Appellee

From the 40th District Court

Ellis County, Texas

Trial Court No. 72-010

MEMORANDUM  Opinion

            FH1 Financial Services, Inc. (FH1) and Michael Rogers bring these interlocutory appeals from the trial court’s order granting a temporary injunction against each of the parties in favor of Debt Settlement America, Inc. (DSA).  In 10-06-00199, we will affirm the order granting the temporary injunction against Rogers in its entirety.  In 10-06-00167, we will modify the order granting the temporary injunction against FH1 and affirm that order as modified.

Review of Temporary Injunctions

The decision to grant or deny a temporary injunction lies within the sound discretion of the trial court, and we will not disturb that decision absent a clear abuse of discretion.  Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002).  Because these appeals are from interlocutory orders, we may not consider the merits of the underlying lawsuit.  Davis v. Huey, 571 S.W.2d 859, 861 (Tex. 1978).

Rogers formerly worked for DSA, and while employed there he signed a covenant not to compete.  When two of his colleagues left DSA to work for FH1, Rogers joined them.  DSA filed suit against FH1, Rogers, and another former DSA employee not part of this appeal.  The suit claims that Rogers violated the covenant not to compete by working at FH1 and that FH1 engaged in tortious interference with DSA employees’ contracts and fiduciary duties owed to DSA by its’ employees.  DSA requested a temporary injunction against both FH1 and Rogers.  Following a hearing, the court granted a temporary injunction against FH1 and a temporary restraining order against Rogers.  DSA then moved for substituted service on Rogers, which the court granted.  Rogers failed to appear at the hearing at which the court granted a temporary injunction against him.

Michael Rogers

10-06-00199-CV

We first address Rogers’s claims.  Rogers raises two issues on appeal. In issue one, he complains that the affidavit was insufficient to support substituted service, and that he did not receive timely notice of the injunction hearing. In his second issue, he argues that the trial court erred in taking judicial notice of prior testimony.

The affidavit filed by DSA in support of its motion for substituted service was sufficient.  Rogers complains that the process server’s affidavit was conclusory in that it did not state how the server received knowledge of Rogers’s residence and place of business.  However, no such statement is required.  Pao v. Brays Village East Homeowners Association, Inc., 905 S.W.2d 35, 37 (Tex. App.—Houston [1st Dist.] 1995, no writ).  The trial court did not abuse of its discretion in granting the motion for substituted service.

With regard to notice, Rogers complains that the four days’ notice he received by mail for the temporary injunction hearing was insufficient because Saturday and Sunday should not be counted.  Rule 21 requires that parties receive three days’ notice of a hearing.  Tex. R. Civ. P. 21.  Under the plain language of Rule 4, Saturday and Sunday are included in the three-day notice requirement.  Tex. R. Civ. P. 4.  Rogers failed to argue and preserve the issue that he was entitled to an additional three days notice because service was made by mail.  Tex. R. Civ. P. 21a.  Therefore, notice was sufficient.  We overrule Rogers’s first issue that service and notice were inadequate.

Rogers’s final issue complains of the trial judge taking judicial notice of the prior injunction hearing against FH1.  A trial judge may not take judicial notice of prior testimony without a transcript of the testimony being admitted into evidence.  Roberts v. Roberts, No. 10-05-00134-CV, 2006 WL 301099, at *2 n.4 (Tex. App.—Waco Feb. 8, 2006, pet. denied) (not designated for publication).  However, failure to object at the time notice is taken waives this error.  Id.  We overrule Rogers’s second issue.

FH1

10-06-00167-CV

In its sole issue, FH1 complains the trial court abused is discretion in granting the temporary injunction.  Through several sub-points, FH1 argues that: 1) DSA failed to show a probable right of recovery in that the covenant not to compete is unenforceable; 2) DSA failed to prove a probably injury; and 3) the temporary injunction as written is too broad and too vague to be enforceable.

The applicant must plead and prove three elements to obtain a temporary injunction: (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, 84 S.W.3d at 204.  FH1 contends that the covenant not to compete signed by DSA employees is invalid and therefore, cannot be enforced by a temporary injunction.  However, an appeal of an order granting a temporary injunction based on these types of business agreements does not present for appellate review the ultimate question of whether the agreement is enforceable.  Tom James of Dallas, Inc. v. Cobb, 109 S.W.3d 877, 882-83 (Tex. App.—Dallas 2003, no pet.).  Instead, we construe FH1’s argument to be that DSA cannot show a probable right of recovery on any cause of action.  Id.

To show a probable right to recovery DSA need only allege a cause of action and “offer evidence that tends to support the right to recovery on the merits.”  Monsanto Co v. Davis, 25 S.W.3d 773, 786 (Tex. App.—Waco 2000, no pet.) (emphasis added).  DSA’s managing director produced a copy of its employment agreement.[1]  The covenant restricts former employees from working for a competing business within fifty miles of DSA’s home office for two years.  It also prohibits a former employee from contacting DSA employees about employment for twelve months.  The director testified that these restrictions were necessary to protect the formula used to determine fees charged to clients, creditor contacts, and other confidential information.  FH1 offered no conflicting evidence.  Therefore, DSA produced sufficient evidence tending to support the right to recovery, and the trial court did not abuse its discretion in determining there was a probable right of recovery.  See Tom James, 109 S.W.3d at 885-88.

FH1 contends that former DSA employees have not divulged confidential information nor acted in a way to breach the duty of loyalty, and therefore, no probable injury has been proven.  At the hearing, DSA offered testimony that three former employees worked for FH1.  Conflicting testimony was offered regarding other DSA employees who had been approached by FH1 or had themselves inquired about moving to FH1.  The evidence showed that each of these employees had knowledge of DSA’s confidential information.  Further DSA’s director testified that profits had declined since FH1 hired DSA employees and money damages could not compensate the company for the divulging of its fee formula and other information.  DSA presented evidence that Rogers was being employed by FH1 in violation of his covenant not to compete.  FH1’s vice president, a former DSA employee, testified that FH1’s business was structured differently and that knowledge of DSA’s fees and contact is inapplicable to their system.  Also, he testified that he never used DSA’s confidential information.

Proof of a continued breach of a covenant not to compete by a highly-trained employee constitutes prima facie proof of a probable injury.  EMSL Analytical, Inc. v. Younker, 154 S.W.3d 693, 696 (Tex. App.—Houston [14th Dist.] 2004, no pet.).  If the trial court bases its decision on the temporary injunction on conflicting evidence, its decision is generally not an abuse of discretion.  Davis, 571 S.W.2d at 826; see also Paul v. Merrill Lynch Trust Co., 183 S.W.3d 805, 812 (Tex. App.—Waco 2005, no pet.).  Therefore, the trial court did not abuse its discretion in finding DSA had shown a probable injury.

Finally, the injunction prohibits FH1 from “seeking or causing to induce or inducing any current or former Plaintiff DSA employee to breach his or her fiduciary duties and duties of loyalty to Plaintiff DSA.”  FH1 argues this prohibition is too vague and too broad.  However, FH1 failed to note any lawful act precluded under this statement or any act whose legality would hinge on the ambiguity of the terms “fiduciary duty” and “duty of loyalty.”

Rule of Civil Procedure 683 provides in pertinent part that an order granting an injunction "shall be specific in terms."  To satisfy this requirement, an injunction order must be as precise as possible to inform the defendant of the acts he is restrained from doing.  Halverson v. Podlewski, No. 10-05-00303-CV, 2006 WL 2884777, at *4 (Tex. App.—Waco Oct. 11, 2006, pet. denied) (mem. op.) (citing San Antonio Bar Ass'n v. Guardian Abstract & Title Co., 291 S.W.2d 697, 702 (1956)).  The defendant should not be required to draw inferences about which persons may differ to determine what conduct is restrained.  See San Antonio Bar Ass'n, 291 S.W.2d at 702.  Nonetheless, an injunction must be broad enough to prevent repetition of the conduct sought to be enjoined.  Id.

Evidence showed that one DSA employee failed to work normal hours and had low performance in the month preceding his move to FH1.  Testimony showed that this decreased performance was a result of the employee working for FH1.  The court enjoined FH1 from inducing or causing such actions on the part of DSA employees.  Therefore, we hold the challenged terms are sufficiently precise to satisfy Rule 693.

Nonetheless, the injunction is overly broad in prohibiting FH1 from inducing such behavior from former employees.  The general duty of loyalty an employee owes his employer ends with the employment relationship.  See Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 201 (Tex. 2002).  Therefore, we modify the temporary injunction to prohibit FH1 from “seeking or causing to induce or inducing any current Plaintiff DSA employee to breach his or her duty of loyalty to Plaintiff DSA.”

We sustain FH1’s sole issue on appeal insofar as it contends that a portion of the temporary injunction is overbroad.  We modify the temporary injunction against FH1 to prohibit interference with current DSA employees’ duty of loyalty.  We leave uncharged the remainder of the injunction and affirm the order granting that injunction as modified.

Having overruled Rogers’s two issues, we affirm the order granting the temporary injunction against Rogers in its entirety.

FELIPE REYNA

Justice

Before Chief Justice Gray,

Justice Vance, and

Justice Reyna

Modified and Affirmed

Opinion delivered and filed August 15, 2007

[CV06]

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[1]               The covenant not to compete was added to the employment agreement after some DSA employees were hired. Rogers is the only DSA employee alleged to have violated the covenant not to compete.

adequate assistance and made all significant decisions in the exercise of reasonable professional judgment. See Strickland v. Washington, supra, 104 S.Ct. at page 2065.

      Appellant cites three examples of ineffectiveness on his counsel's part: (1) his failure to file pretrial motions or adopt Appellant's pro se motions; (2) his failure to request a hearing on the admissibility of Hayes's in-court identification; and (3) his failure to object to the State's evidence in the punishment phase of the trial. In our opinion, none of these contentions have merit.

      In his first argument, Appellant complains that his counsel should have filed or adopted the following pretrial motions: (a) a motion attacking the in-court identification of Appellant by Hayes; (b) a motion attacking the circumstances of his arrest as being without a warrant or probable cause; and (c) a motion to quash the indictment. Appellant has failed to show, however, that any of such motions would have been granted.

      We have, heretofore in this opinion, discussed the reasons why we believe that a motion to attack the in-court identification of Appellant is without merit. If such motion had been presented to the trial court, the court was within its discretion to either grant or refuse such a hearing. See Haggerty v. State, (Tex. App.—Houston [1st Dist.] 1992) 825 S.W.2d 545, 547, 548, no pet. There is nothing in the record that shows, had an identification hearing been granted, that Appellant would have met his burden of showing clear and convincing evidence of improper pretrial identification proceedings.

      With reference to counsel's failure to file an absence of probable cause (for arrest) motion, Appellant has failed to show that there was any evidence adduced subsequent to his arrest which was introduced at trial. Therefore, even assuming that Appellant's arrest was illegal, there were no fruits of arrest that granting of such a motion would have suppressed.

      Concerning counsel's failure to file a motion to quash the indictment (including the enhancement paragraphs) Appellant makes no showing of how this indictment was defective in any respect and, therefore, has failed to meet his burden of establishing either deficient conduct or prejudice under Strickland from the failure to file such motion.

      In summary, the record is insufficient to establish ineffective assistance on the part of trial counsel.

      With reference to the enhancement paragraphs in the indictment, Appellant stipulated in writing that he is the same person who was convicted in the documents showing the previous convictions. Likewise, the record does not show whether Appellant's decision to enter a plea of true to the previous convictions was pursuant to counsel's advice or in opposition to it. We overrule Appellant's third point of error.

      The judgment of the trial court is affirmed.

                                                                                     JOHN A. JAMES, JR.

                                                                                     Justice (Retired)

Before Justice Cummings,

      Justice Vance, and

      Justice James (Retired)

Affirmed

Opinion delivered and filed October 20, 1993

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