Xenon Anesthesia of Texas PLLC and Mujtaba Ali Khan v. Xenon Health LLC and Haroon Chaudhry

• Court: Court of Appeals of Texas
• Decided: March 28, 2013
• Docket: 09-12-00553-CV
• Status: Published

Opinion

In The

Court of Appeals Ninth District of Texas at Beaumont ____________________ NO. 09-12-00553-CV ____________________

XENON ANESTHESIA OF TEXAS P.L.L.C. AND MUJTABA ALI KHAN, Appellants

V.

XENON HEALTH L.L.C. AND HAROON CHAUDHRY, Appellees _______________________________________________________ ______________

On Appeal from the 284th District Court Montgomery County, Texas Trial Cause No. 12-01-00014 CV ________________________________________________________ _____________

MEMORANDUM OPINION

Xenon Health L.L.C. (“Xenon Health”) and Haroon Chaudhry M.D.

(“Chaudhry”) sued Xenon Anesthesia of Texas P.L.L.C. (“Xenon Texas”) and

Mujtaba Ali Khan D.O. (“Khan”) for breach of contract, tortious interference, and

specific performance and obtained a temporary injunction against Xenon Texas

and Khan. In this interlocutory appeal, Xenon Texas and Khan present five

appellate issues challenging the trial court’s imposition of a temporary injunction.

1 See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (West Supp. 2012). We

affirm the trial court’s order.

Factual Background

At the temporary injunction hearing, Chaudhry testified that he is the

founder of Xenon Health and a licensed physician, but in that role, does not

practice clinical medicine. Chaudhry explained that Xenon Health is an anesthesia

management organization that obtains contracts to provide anesthesiology services

to facilities throughout the country, recruits and contracts with anesthesia

professionals to service these client facilities, and ensures that those professionals

have the necessary malpractice insurance, supplies, and equipment. He testified

that Xenon Health and its employees, including Chaudhry, do not administer

anesthesia to patients. Chaudhry found two potential clients in Texas who needed

these services immediately. However, Chaudhry testified that a Texas medical

license and a professional corporation are required to perform services in Texas.

Chaudhry began the process of acquiring a Texas license and forming Xenon

Texas. In the interim, the parties entered an agreement whereby Khan agreed to

own Xenon Texas until Chaudhry became licensed to practice medicine in Texas.

Chaudhry testified that, per this agreement, Kahn agreed to sell Xenon Texas to

Chaudhry once Chaudhry became licensed. Chaudhry testified that Xenon Health

2 recruited, ordered and maintained supplies and equipment, ensured compliance

with regulations, arranged billing and collections, and advanced funds for the

establishment of Xenon Texas.

In December 2011, Chaudhry received a letter in which Kahn stated that

Chaudhry failed to disclose an arrest and that Khan would be suspending the

parties’ agreement. Chaudhry explained that a former employee had filed a

complaint against him, but the complaint was later dismissed and the records

sealed, and that he had no duty to disclose this information to Khan. According to

Chaudhry, Khan told the Texas clients that he would be assuming the day-to-day

management of Xenon Texas. Although Chaudhry filed a lawsuit, Xenon Health

continued providing services to Xenon Texas.

Chaudhry obtained his administrative medical license in October 2012. He

explained that this type of license does not authorize the physical practice of

clinical medicine, but allows a person to administer the practice of medicine within

Texas. Chaudhry notified Khan that he had received his license, informed Khan of

his desire to execute the purchase and sale agreement, and demanded that Khan

provide Xenon Texas’s net collections. Chaudhry testified that he was willing and

able to pay the purchase price to execute the agreement. Chaudhry received no

response from Khan.

3 Chaudhry testified that he values Xenon Health’s “name as a brand in the

field of anesthesia services[]” and that Xenon Health has a good reputation and has

provided good services to its clients. He testified that Xenon Health is still

providing services to Xenon Texas in hopes that the agreement will be executed

and that Xenon Health will obtain control of Xenon Texas. Xenon Health pays for

these services because it has no access to Xenon Texas’s accounts, but Xenon

Texas has reimbursed Xenon Health for some costs. He explained that he had spent

time and resources establishing Xenon Health and its subsidiaries and that it would

be very difficult to start over. Chaudhry was unaware of any instances in which

Khan had transferred interests without Chaudhry’s consent. However, Chaudhry

believed it is possible that Khan would transfer his interests in Xenon Texas to a

third party, remove Xenon Texas’s assets during the pendency of the lawsuit, or

alter existing business contracts and relationships. Chaudhry believed that money

would be an inadequate remedy for the damages that would result.

Irreparable Injury

In issues one and two, appellants contend that the trial court abused its

discretion by granting the temporary injunction because, according to appellants,

appellees failed to present evidence of either irreparable injury or future

insolvency. Appellants argue that the testimony presented at the temporary

4 injunction hearing was speculative and did not establish that any funds are in

danger of loss or depletion.

A temporary injunction preserves the status quo pending a trial on the

merits. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). To obtain a

temporary injunction, the applicant 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. Id. The decision to grant or deny a

temporary injunction is within the trial court’s sound discretion. Id. We may not

overrule a trial court’s decision unless the trial court acted unreasonably or in an

arbitrary manner, without reference to guiding rules or principles, and we cannot

substitute our judgment for that of the trial court. Id. at 211. A trial court does not

abuse its discretion if some evidence reasonably supports the trial court’s decision.

Id.

An irreparable injury occurs when the injured party cannot be adequately

compensated in damages or the damages cannot be measured by any pecuniary

standard. Id. at 204. “[G]enerally, a court will not enforce contractual rights by

injunction, because a party can rarely establish an irreparable injury and an

inadequate legal remedy when damages for breach of contract are available.” Id. at

211. Additionally, fear and apprehension of injury cannot support a temporary

5 injunction. Frequent Flyer Depot, Inc. v. Am. Airlines, Inc., 281 S.W.3d 215, 227

(Tex. App.—Fort Worth 2009, pet. denied). However, disruption to a business can

constitute irreparable harm. Id. at 228. “[A]ssigning a dollar amount to such

intangibles as a company’s loss of clientele, goodwill, marketing techniques, and

office stability, among others, is not easy.” Id. “Threatened injury to a business’s

reputation and good will [sic] with customers is frequently the basis for temporary

injunctive relief.” Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354

S.W.3d 887, 895 (Tex. App.—Houston [1st Dist.] 2011, no pet.).

In this case, the trial court heard testimony regarding Xenon Health’s good

reputation among its clients and the lengths to which appellees went to ensure

Xenon Texas’s success. The trial court also heard testimony that Khan does not

have the experience that Chaudhry has with regard to an anesthesia management

company. The trial court heard evidence that Khan had suspended an agreement

that gave him limited authority to manage Xenon Texas and prohibited him from

transferring his interests without Chaudhry’s written consent, represented to Texas

clients that he would be assuming the day-to-day management of Xenon Texas,

refused to respond to Chaudhry’s communications, and removed Chaudhry from

Xenon Texas’s accounts.

6 Given the evidence discussed above, the trial court could reasonably

conclude that Khan’s actions threatened the business reputation and goodwill of

Xenon Texas and jeopardized Xenon Texas’s relationship with its Texas clients.

See id. Any transfer of interests or assets would certainly harm appellees’ business

and any award of damages would come too late to save appellees’ business. See

TCA Bldg. Co. v. Nw. Res. Co., 890 S.W.2d 175, 179 (Tex. App.—Waco 1994, no

pet.) (A situation in which damages alone are an inadequate remedy arises when

the “damage award may come too late to save the applicant’s business[.]”). Under

these circumstances, we conclude that the trial court did not abuse its discretion by

granting appellees’ request for a temporary injunction to maintain the status quo.

We overrule issues one and two.

Temporary Injunction Provisions

In issue three, appellants argue that the trial court’s temporary injunction

order allows Chaudhry to practice medicine without a medical license and,

therefore, violates the Medical Practices Act. The temporary injunction prohibits

appellants from “[c]ontacting client facilities, staffing companies, billing service

providers, anesthesia providers and other business partners which have existing

business relationships with Xenon Texas for the purpose of terminating or

renegotiating existing agreements.” Appellants contend that “Dr. Chaudhry wants

7 Dr. Khan to use his license to get contracts to provide anesthesiology care and staff

for surgical sites in exchange for which Xenon Health, LLC would receive the

profits made through Dr. Khan’s practice of medicine, thereby indirectly allowing

Xenon Health LLC to practice medicine without a license.”

The practice of “administrative medicine” is the “administration or

management utilizing the medical and clinical knowledge, skill, and judgment of a

licensed physician, and capable of affecting the health and safety of the public or

any person.” 22 Tex. Admin. Code § 172.17(b) (2011) (Tex. Med. Bd.). “An

administrative medical license does not include the authority to practice clinical

medicine, prescribe dangerous drugs or controlled substances, or delegate medical

acts or prescriptive authority.” Id. at § 172.17(c). Chaudhry testified that he does

not practice clinical medicine or administer anesthesia and that Xenon Health is an

anesthesia management organization that provides administrative services to its

clients. The record does not indicate that Chaudhry’s practice or the services that

his business provides conflict with the Texas Administrative Code’s definition of

“administrative medicine.” See id. at § 172.17(b). We overrule issue three.

In issue four, appellants challenge a provision that enjoins them from

making any expenditures or incurring any indebtedness or liabilities outside of the

ordinary course of business, unless specifically authorized by the trial court. The

8 provision also prohibits Khan from using Xenon Texas funds for any claims by or

against him in the lawsuit. Appellants maintain that because Chaudhry holds an

administrative medical license, he cannot control or manage Xenon Texas.

Individuals licensed as doctors of medicine by the Texas State Board of

Medical Examiners “may jointly form and own a professional association or a

professional limited liability company to perform professional services that fall

within the scope of practice of those practitioners.” Tex. Bus. Orgs. Code Ann. §

301.012(a) (West 2012). Each practitioner’s authority is limited by the scope of his

practice. Id. at § 301.012(a-4).1 “An organizer of the entity must be a physician and

ensure that a physician or physicians control and manage the entity.” Id. A

physician is a “person licensed to practice medicine in this state.” Tex. Occ. Code

Ann. § 151.002(a)(12) (West 2012). A limited license to practice administrative

medicine is a recognized type of limited medical license. See id. § 155.009 (West

2012). Chaudhry is a physician who received a limited medical license to practice

administrative medicine. We perceive no violation of section 301.012(a-4). See

Tex. Bus. Orgs. Code Ann. § 301.012 (a-4). We overrule issue four.

1 In their brief, appellants erroneously cite to section 301.012(a-4) of the Texas Occupations Code instead of the Business Organizations Code. 9 Bond

In issue five, appellants contend that the temporary injunction is void ab

initio for lack of a proper bond. In a temporary injunction order, the trial court shall

fix the amount of security to be given by the applicant. See Tex. R. Civ. P. 684.

Before the injunction issues, the applicant shall execute and file with the clerk a

bond in the amount set by the trial court to the adverse party. See id.

In its temporary injunction order, the trial court set a bond of $5000.

Appellants complain that the bond was not made payable to them and that a cash

bond was filed.2 A party may deposit cash in lieu of filing a surety bond. See Tex.

R. Civ. P. 14c; see also Adobe Oilfield Servs., Ltd. v. Trilogy Operating, Inc., 305

S.W.3d 402, 404 (Tex. App.—Eastland 2010, no pet.). The trial court’s order

granting appellees’ application for a temporary injunction was contingent on the

filing of a bond. A cash deposit constitutes a proper bond and insures that appellees

will abide by the decision in this cause and will pay all sums of money and costs

adjudged against them should the temporary injunction be dissolved. See Adobe,

305 S.W.3d at 405. Because a cash deposit is a proper bond, we overrule issue five

2 In their appendix, appellants attach documents reflecting that appellees deposited $5000 for the temporary injunction bond. These documents are not in the record and therefore cannot be considered on appeal. See City of Beaumont v. Stewart, No. 09-12-00316-CV, 2012 Tex. App. LEXIS 9052, at **7-8 n.1 (Tex. App.—Beaumont Nov. 1, 2012, no pet.) (mem. op.). 10 and affirm the trial court’s order granting appellees’ application for a temporary

injunction.

AFFIRMED.

________________________________ STEVE McKEITHEN Chief Justice

Submitted on January 29, 2013 Opinion Delivered March 28, 2013 Before McKeithen, C.J., Kreger and Horton, JJ.