Veterinary Specialists of North Texas, PLLC, and Dr. Derek Burney v. Dr. Glen King ( 2022 )

AFFIRMED as MODIFIED and Opinion Filed February 9, 2022
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-21-00325-CV
VETERINARY SPECIALISTS OF NORTH TEXAS, PLLC, AND
DR. DEREK BURNEY, Appellants
V.
DR. GLEN KING, Appellee
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-20-12568
MEMORANDUM OPINION
Before Justices Myers, Molberg, and Garcia
Opinion by Justice Garcia
On our own motion, we withdraw our opinion of January 18, 2022, and vacate
the judgment of that date. The following is now the opinion of the Court.
This is an interlocutory appeal from a temporary injunction. The lawsuit is a
dispute over ownership and control of appellant Veterinary Specialists of North
Texas, PLLC (VSNT). Appellee Dr. Glen King obtained a temporary injunction that
generally required appellants to recognize King as a managing member of VSNT.
VSNT and its only other member, Dr. Derek Burney, appeal the temporary
injunction. We modify the injunction by striking provisions that require appellants
to make certain payments to King or for King’s benefit, and we affirm the injunction
as modified.
I. Background
Appellants sued King in September 2020. They allege the following facts in
their live pleading:
VSNT is a domestic professional limited liability company that operates a
specialty veterinary practice. Burney and King are both veterinarians, and they
became VSNT’s sole owners in 2014. VSNT is governed by an Amended Company
Agreement (“Agreement”), which became effective in April 2015 and made Burney
and King managers and 50% owners of VSNT. Over time, King lost the ability to
competently treat VSNT’s patients. King stopped treating patients in March 2020
and stopped coming to VSNT’s animal treatment facility in April 2020. In July 2020,
Burney invoked a “disability” provision in the Agreement and informed King that
VSNT would buy him out as prescribed in the Agreement. King refused to cooperate
with the buy-out.
After King’s refusal, appellants sued King for breach of contract and
declaratory judgment.
King answered and filed counterclaims against appellants for declaratory
judgment. He also asserted counterclaims against Burney on theories including
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breach of fiduciary duty, breach of contract, tortious interference, and fraud. King
also applied for a temporary restraining order and a temporary injunction.
The trial court granted King’s application for a temporary restraining order.
An associate judge later heard King’s application for a temporary injunction
and denied it.
King appealed that ruling to the presiding judge, who held a hearing, admitted
a transcript of the hearing before the associate judge into evidence, and took
additional evidence. The presiding judge then granted a temporary injunction that
encompasses a number of orders generally directed at reinstating King as a member
and manager of VSNT. The injunction sets the case for trial in March 2022.
Appellants timely perfected this interlocutory appeal.
II. Issues Presented
Appellants assert three issues on appeal, which we summarize as follows:
1. The trial court erred by issuing the injunction because King failed
to show a probability of success on the merits.
2. The trial court erred by ordering appellants to make money
payments to King and to third parties on his behalf.
3. The trial court erred by ordering appellants to give King clinical
access to clients.
III. Rules Governing Temporary Injunctions
and Standard of Review on Appeal
The purpose of a temporary injunction is to preserve the status quo of the
litigation’s subject matter pending trial on the merits. Butnaru v. Ford Motor Co.,
84 S.W.3d 198, 204 (Tex. 2002). The party seeking a temporary injunction must
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plead and prove three elements: (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 second element of a temporary injunction does not require the applicant
to show that he will prevail at trial, nor does it require the trial court to evaluate the
probability that the applicant will prevail at trial. Kim v. Oh, No. 05-19-00947-CV,
2020 WL 2315854, at *2 (Tex. App.—Dallas May 11, 2020, no pet.) (mem. op.).
Rather, it requires the applicant to present enough evidence to raise a bona fide issue
as to his ultimate right to relief. Id. Thus, the applicant must produce some evidence
supporting every element of at least one valid legal theory. Id.For purposes of the third element, an injury is irreparable if the injured party
cannot be adequately compensated in damages or if the damages cannot be measured
by any certain pecuniary standard. Butnaru, 84 S.W.3d at 204.
We review a trial court’s decision to grant a temporary injunction for abuse
of discretion. RWI Constr., Inc. v. Comerica Bank, 583 S.W.3d 269, 274 (Tex.
App.—Dallas 2019, no pet.). In the temporary-injunction context, a trial court abuses
its discretion if it misapplies the law to established facts or if the evidence does not
reasonably support the trial court’s determination that the applicant satisfied the
requisite elements. See id. at 274–75. We draw all legitimate inferences from the
evidence in the light most favorable to the trial court’s order. Id. at 274.
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IV. Analysis
A. Issue One: Did the trial court abuse its discretion by ruling that King
showed a probability of success on the merits?
1. The Parties’ Arguments
The parties focus on King’s breach-of-contract claim. The elements of breach
of contract are (1) a valid contract, (2) performance or tendered performance by the
plaintiff, (3) breach by the defendant, and (4) damages sustained by the plaintiff as
a result of that breach. Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574
S.W.3d 882, 890 (Tex. 2019).
In the trial court, King argued that he was a VSNT manager and member under
the Agreement and that appellants breached the Agreement by locking him out of
his contractual rights and benefits.
On appeal, appellants do not dispute that they locked King out. Rather, they
argue that they did not breach the Agreement because the evidence established that
King was no longer a VSNT manager or member when they locked him out.
Therefore, they conclude, King failed to show a probable right to continue as a
VSNT member or manager, which is what the temporary injunction orders.
King responds that he proved facts under which he continues to be a VSNT
member and manager, thus making the lockout a breach. He argues, among other
things, that he and Burney modified the Agreement’s provisions that appellants rely
on.
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Appellants reply that King adduced no evidence to support his modification
theory or any other theory that would allow him avoid the Agreement’s plain terms.
Thus, according to appellants, there is no probability that King will be able to
establish that he is still a manager and member of VSNT.
2. Application of the Law to the Facts
The Agreement provides that Burney and King are VSNT’s only members
and its only managers. Appellants’ argument that King ceased being a VSNT
manager or member before the November 5, 2020 lockout runs as follows:
1. The Agreement defines when a member shall be considered
“disabled.” The evidence established that, no later than the end
of June 2020, King became “disabled” under the Agreement as
written.
2. Under the Agreement as written, King’s disability automatically
terminated his position as a VSNT manager and entitled VSNT
to buy him out.
3. On or around July 31, 2020, Burney invoked the disability and
buy-out clauses. Under the Agreement as written, King ceased to
be a VSNT member on August 31, 2020, when VSNT tendered
consideration to King for his membership interest.
King does not directly dispute appellants’ premises, contending instead that,
for various reasons, appellants cannot enforce the Agreement as written.
Nevertheless, we must evaluate the correctness of appellants’ threshold argument
because appellants bear the burden to show reversible error, regardless of King’s
arguments. See Murray v. Devco, Ltd., 731 S.W.2d 555, 557 (Tex. 1987) (“[T]he
burden is on a party appealing from a trial court judgment to show that the judgment
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is erroneous in order to obtain a reversal.”); see also Schied v. Merritt, No. 01-15-
00466-CV, 2016 WL 3751619, at *6 (Tex. App.—Houston [1st Dist.] July 12, 2016,
no pet.) (mem. op.) (“An appellant cannot prevail on appeal merely because the
appellee does not file a brief.”).
Because we ultimately conclude that appellants’ third premise is incorrect, we
will assume without deciding that their first two premises are correct. That is, we
assume without deciding that (1) by the end of June 2020, King was “disabled” under
the terms of the Agreement as written and (2) King’s disability automatically
terminated his status as manager, again under the Agreement as written.
Appellants’ third premise is that King ceased to be a VSNT member under the
Agreement’s terms and the undisputed facts. As appellants argue, the evidence
showed that on or around July 31, 2020, Burney invoked the disability and buy-out
clauses, and, on August 31, 2020, VSNT tendered consideration to King for his
membership interest. But King testified, and the trial court was entitled to find, that
(1) King refused to sign a document that would have conveyed his membership
interest and (2) he has not cashed any of the checks VSNT has sent him as periodic
installment payments for his membership interest.
Appellants assert that the foregoing facts establish that King ceased to be a
VSNT member pursuant to Agreement § 8.4, which provides that if a member
becomes disabled “the Company shall have the right, at the sole discretion and
election of the other Member, to purchase the Impaired Member’s Member Interest.”
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Other provisions explain how the purchase price will be determined in that event.
But these provisions do not say that King immediately or automatically ceased to be
a member once VSNT tendered consideration for his membership interest. Indeed,
§ 8.4(e) contains detailed provisions governing the closing of the purchase of a
disabled member’s interest. But King testified that he refused to sign a document
conveying his membership interest, and we see no evidence that the conveyance ever
took place.
Thus, appellants have not shown that the trial court abused its discretion by
implicitly concluding that there was some evidence that (1) King remained a VSNT
member and thus (2) appellants were breaching the Agreement by not affording him
the rights and benefits of membership.
3. Conclusion
Because the record contains some evidence that King is still a VSNT member
and that appellants have breached the Agreement, we overrule appellant’s first
issue.1
B. Issue Two: Did the trial court abuse its discretion by ordering appellants
to make monetary payments to King?
Next, appellants attack three specific provisions of the injunction:
1
Appellants’ first issue argues only that the injunction is erroneous because the evidence established
that King is neither a manager nor a member of VSNT. Appellants do not argue that the injunction is
erroneous if the evidence established only that King is no longer a VSNT manager. Thus, we do not consider
that possibility. See State Bar of Tex. v. Evans, 774 S.W.2d 656, 658 n.5 (Tex. 1989) (per curiam) (court of
appeals may not raise arguments for reversal sua sponte).
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• an order restraining appellants from “refusing to pay [King]’s
manager compensation, salary, insurance, and benefits as they
existed prior to the filing of” the lawsuit;
• an order requiring appellants to “take all steps necessary,
including but not limited to making all policy payments, to
ensure that [King]’s health insurance, life insurance, key man life
insurance policy, disability insurance, long-term care insurance,
and all other forms of insurance for [King] remain in full force
and effect and do not lapse, and immediately reimburse [King]
for any and all insurance premiums and/or policy payments
[King] personally made to insurance carriers since November 5,
2020,” and
• an order requiring appellants to “cause [VSNT] to make an
equalization payment(s) to [King] in an amount equal to the
attorneys’ fees and costs paid by [VSNT] on behalf of Burney,
individually, arising from, related to, or connected with this
Lawsuit.”
Appellants contend these orders were abuses of discretion because King did not
show that (1) he faced extreme necessity or hardship or (2) an eventual judgment in
damages would be a manifestly inadequate remedy.
1. Applicable Law
This issue concerns the third element of a temporary injunction, irreparable
injury. See Butnaru, 84 S.W.3d at 204. As noted above, an injury is irreparable if the
injured party cannot be adequately compensated in damages or if the damages cannot
be measured by a certain pecuniary standard. Id. That is, an adequate remedy at law
generally exists, and injunctive relief is generally improper, if any potential harm
may be adequately cured by money damages. RWI Constr., 583 S.W.3d at 275. No
adequate remedy at law exists if the applicant’s damages are incapable of
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calculation, if the defendant is insolvent, or if the defendant is otherwise incapable
of responding in damages. See Loye v. Travelhost, Inc., 156 S.W.3d 615, 621 (Tex.
App.—Dallas 2004, no pet.).
Additionally, when a temporary injunction is mandatory (i.e., requires
conduct) rather than prohibitive (i.e., forbids conduct), the applicant must show that
the “mandatory order is necessary to prevent irreparable injury or extreme hardship.”
Retail Servs. WIS Corp. v. Crossmark, Inc., No. 05-20-00937-CV, 2021 WL
1747033, at *7 (Tex. App.—Dallas May 4, 2021, pet. denied) (mem. op.).
In RWI Construction, we addressed the irreparable-injury requirement in the
context of an injunction that compelled the defendants to deposit funds in the court’s
registry for protection against loss or dissipation. 583 S.W.3d at 274. We recognized
the general rule that a trial court may not issue a temporary injunction freezing the
defendant’s assets simply to assure the future satisfaction of a subsequent judgment.
Id. at 275, 277. Exceptions to the rule exist if (1) there is a logical and justifiable
connection between the claims alleged and the acts to be enjoined or (2) the plaintiff
claims a specific contractual or equitable interest in the assets it seeks to freeze. Id.
at 277. On the facts of the case, we affirmed the injunction as to specific funds that
the plaintiff could trace as collateral for the loan it was suing on, but we reversed the
injunction as to other funds that the trial court froze simply to assure their future
availability to satisfy a judgment. Id. at 277–78; see also Renovation Gurus, LLC v.
Lake Point Assisted Living, LLC, No. 05-19-00499-CV, 2020 WL 477135, at *3
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(Tex. App.—Dallas Jan. 29, 2020, no pet.) (mem. op.) (applicant must identify an
established right in the asset at issue; merely identifying a deposit of contested funds
is insufficient).
Here, the injunction grants the applicant even more relief than the RWI
Construction injunction did—the instant injunction does not merely freeze
appellants’ assets but actually requires appellants to pay money to King and for his
benefit. Other courts of appeals have reversed temporary injunctions that required
the respondent to pay money to the applicant. RP&R, Inc. v. Territo, 32 S.W.3d 396,
401–02 (Tex. App.—Houston [14th Dist.] 2000, no pet.) (reversing temporary
injunction that required ongoing paychecks to applicant, in part for lack of
irreparable injury or extreme hardship); LeFaucheur v. Williams, 807 S.W.2d 20, 23
(Tex. App.—Austin 1991, no writ) (reversing temporary injunction that required the
respondent to pay money to the applicant because it was, in effect, a prejudgment
garnishment imposed without proof of garnishment’s elements).
We conclude that, at a minimum, King bore the burden of proving irreparable
injury or extreme hardship to support the challenged orders. See Retail Servs. WIS
Corp., 2021 WL 1747033, at *7 (stating general rule for mandatory injunctions).
Because the record does not support the orders under that test, we do not consider
whether an even more stringent test should apply to orders requiring the respondent
to pay money to or for the benefit of the applicant.
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2. Applying the Law to the Facts
Appellants argue that the record contains no evidence that King will suffer an
irreparable injury or extreme hardship if appellants are not compelled to make the
challenged payments to him or to third parties for his benefit. We agree.
If an injury is compensable by money damages, it is, by definition, not
irreparable. Renovation Gurus, 2020 WL 477135, at *2. Here, King’s injuries in the
form of his unpaid manager benefits, his unpaid member distributions, and his
insurance premiums are injuries compensable by money damages. See In re S. Foods
Grp., LLC, No. 05-13-01348-CV, 2013 WL 5888255, at *1 (Tex. App.—Dallas Oct.
31, 2013, orig. proceeding) (mem. op.) (holding, in TRO context, that lost health-
insurance benefits could be compensated through damages). King cites no evidence
that appellants are insolvent or otherwise incapable of responding in damages, and
we see no such evidence in the record. See Loye, 156 S.W.3d at 621 (“A plaintiff
does not have an adequate remedy at law if the defendant is insolvent.”). Likewise,
King cites no evidence that he will experience extreme hardship if appellants are not
compelled to make these payments now, and we see no such evidence in the record.
See Retail Servs. WIS Corp., 2021 WL 1747033, at *7 (mandatory injunctions are
proper only if “necessary to prevent irreparable injury or extreme hardship”).
King attempts to defend the challenged orders by arguing that they are
necessary to preserve the status quo pending trial on the merits. It is true that the
purpose of a temporary injunction is to preserve the status quo of the litigation’s
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subject matter pending a trial on the merits. Butnaru, 84 S.W.3d at 204. But the
injunction applicant still must show “a probable, imminent, and irreparable injury in
the interim” to be entitled to injunctive relief. See id. Accordingly, we reject King’s
argument.
King also argues that the RWI Construction case supports the challenged
orders because those orders are connected to the Agreement just as the $800,000 in
RWI Construction was connected to the plaintiff’s loan as its cash collateral. We
disagree that there is a sufficient connection between the Agreement and King’s
claims on the one hand and the ordered payments on the other. As we later clarified,
the RWI Construction rule requires the applicant to trace the specific assets in
question and establish a right to those specific assets. See Renovation Gurus, 2020
WL 477135, at *3. King did not satisfy this requirement.
Finally, King argues that he will sustain irreparable injury if appellants are
allowed to deny him the right to participate in VSNT’s management. But this
argument misses the mark. Appellants’ second issue complains only about the orders
compelling them to pay money—not about orders compelling them to allow King to
participate in VSNT’s management.
3. Conclusion
Because the record does not show that the injunction’s orders requiring
appellants to pay money are necessary to remedy either an irreparable injury or
extreme hardship, we sustain appellants’ second issue.
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C. Issue Three: Did the trial court abuse its discretion by ordering that King
be given clinical access to clients?
In their final issue, appellants complain that the temporary injunction
improperly alters the status quo in one respect. Specifically, they complain about
parallel prohibitive and mandatory orders concerning King’s “clinical access to
clients.” The prohibitive order forbids appellants from interfering with King’s access
to “clinical access to clients,” and the mandatory order requires appellants to provide
King with “clinical access to clients.” Appellants construe “clients” to mean
“veterinary patients,” and they argue that the injunction changes the status quo
because King voluntarily stopped treating veterinary patients in March 2020, before
Burney invoked the disability clause.
King responds that appellants misinterpret the injunction. He contends that
VSNT’s “clients” are the pets’ owners and not the pets themselves. Because the
evidence showed that Burney and King agreed in early 2020 that King would engage
in administrative and marketing duties, King concludes, the orders giving King
access to VSNT’s clients are consistent with the status quo.
Appellants reply that King’s response reveals that the term “clients” is, at best,
ambiguous, and they argue that ambiguity is not permitted in a temporary injunction.
See TEX. R. CIV. P. 683 (injunction “shall be specific in terms” and “shall describe
in reasonable detail . . . the act or acts sought to be restrained”). However, we may
not consider arguments raised for the first time in a reply brief. Sanchez v. Martin,
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378 S.W.3d 581, 590 (Tex. App.—Dallas 2012, no pet.). We express no opinion
regarding appellants’ ambiguity argument
In the temporary-injunction context, the “status quo” is the last, peaceable,
non-contested status that preceded the pending controversy. Clint Indep. Sch. Dist.
v. Marquez, 487 S.W.3d 538, 555 (Tex. 2016).
Here, the record shows that the status quo was the state of affairs existing
before Burney invoked the disability clause on July 31, 2020. The question, then, is
whether the record supports the trial court’s implicit finding that King had clinical
access to clients before that event, thus making that access part of the status quo.
We conclude that the record supports the conclusion that King had clinical
access to clients before July 31, 2020. Although King testified that he did not provide
veterinary services for VSNT’s paying clients after March 2020, he also testified
that, in March 2020, Burney represented to King that his duties should shift from
clinical duties to managing and marketing. Although we see no evidence that King
actually interacted with VSNT’s clients after he stopped providing veterinary
services, appellants do not point to anything, in the Agreement or otherwise, that
forbade him from doing so. The trial court could reasonably conclude that managing
and marketing activities, by their very nature, might involve interaction with
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VSNT’s clients. Thus, the trial court could reasonably conclude that King had access
to VSNT’s clients before July 31, 2020.2
We conclude that appellants have not shown that the trial court abused its
discretion by ordering appellant to give King “clinical access to clients.”
Accordingly, we overrule appellants’ third issue.
V. Disposition
We modify the temporary injunction by deleting the provisions that (i) restrain
appellants from refusing to pay King his manager compensation, salary, insurance,
and benefits, (ii) order appellants to pay King’s insurance premiums and reimburse
him for insurance premiums that he has paid, and (iii) order appellants to make
“equalization payment(s)” based on Burney’s attorney’s fees. We affirm the
temporary injunction as modified.
/Dennise Garcia/
DENNISE GARCIA
JUSTICE
210325F.P05
2
Although appellants argue in their reply brief that the phrase “clinical access to clients” makes no
sense if “clients” is construed to mean the pets’ owners rather than the pets themselves, the phrase can be
reasonably construed to mean access to the pets’ owners while they are at VSNT’s clinic. See Clinical, THE
NEW OXFORD AMERICAN DICTIONARY (2001) (“of or relating to a clinic”).
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
VETERINARY SPECIALISTS OF On Appeal from the 160th Judicial
NORTH TEXAS, PLLC, AND DR. District Court, Dallas County, Texas
DEREK BURNEY, Appellants Trial Court Cause No. DC-20-12568.
Opinion delivered by Justice Garcia.
No. 05-21-00325-CV V. Justices Myers and Molberg
participating.
DR. GLEN KING, Appellee
We WITHDRAW our opinion and VACATE our judgment of January 18,
2022. This is now the judgment of the Court.
In accordance with this Court’s opinion of this date, the trial court’s
Temporary Injunction Order signed on April 16, 2021, is MODIFIED as follows:
• Paragraph (B) on page 4 of the Temporary Injunction Order is
deleted;
• Paragraph (B) on page 5 of the Temporary Injunction Order is
deleted; and
• Paragraph (D) on page 5 of the Temporary Injunction Order is
deleted.
It is ORDERED that, as modified, the Temporary Injunction Order is
AFFIRMED.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 9th day of February 2022.
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