Allied Home Mortgage Capital Corporation v. Jonathan Fowler ( 2011 )

Affirmed and Memorandum Opinion filed June 9, 2011.

In The

Fourteenth Court of Appeals

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NO. 14-10-00992-CV

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Allied Home Mortgage Capital Corporation, Appellant

V.

Jonathan Fowler, Appellee

On Appeal from the 215th District Court

Harris County, Texas

Trial Court Cause No. 2010-54286

MEMORANDUM OPINION

Appellant, Allied Capital Home Mortgage Capital Corporation appeals from the trial court’s denial of its request for a temporary injunction.[1] We affirm.

Factual and Procedural Background

            Appellant functions as both a mortgage banker and broker.  Prior to the collapse of the mortgage industry in 2008, appellant had between 400 and 450 branch offices throughout the United States.  At the time of the temporary injunction hearing on September 10, 2010, appellant had approximately 200 branch offices.  As a result of this dramatic reduction in size, appellant laid-off many employees. One of those laid-off employees was appellee, Jonathan Fowler.

Fowler began working for appellant in September 1999.  Fowler started as a branch office manager and worked his way up to become the “senior vice president, production manager, business development.”  In that position Fowler was responsible for developing new branches.  On October 9, 2005, after Fowler had worked for appellant for approximately six years, he executed an Employment Agreement (the “Agreement”).[2] The relevant sections of the Agreement provide:

1.1       [Appellant] hereby employs [Fowler] and [Fowler] hereby accepts employment with [appellant].  [Appellant] and [Fowler] agree that this employment shall be at will and is subject to termination by either [appellant] or [Fowler] at any time, for any reason, with or without cause or notice. (emphasis in the original.)

4.1       [Fowler] during the term of employment under this Agreement will have access to and become familiar with various company terms, forms, procedures, and records, which are owned by [appellant] and which are regularly used in the operation of the business of [appellant].  [Fowler] shall not disclose any of the aforesaid company forms, procedures, or records, nor use them in any way during the term of this Agreement, except as required in the course of [Fowler’s] employment, and at no time thereafter.  All files, records, documents, drawings, specifications, proprietary information, and similar items relating to the business of [appellant], whether prepared by [Fowler] or otherwise coming into [Fowler’s] possession, shall remain the exclusive property of [appellant] and shall not be copied or removed from the premises of [appellant] under any circumstances whatsoever without the prior written consent of [appellant].

4.2       During the term of this Agreement, [Fowler] shall not, directly or indirectly in any manner, … engage or participate in any business competing in any manner whatsoever with the business of [appellant]. [Fowler] further agrees that for a period of one (1) year from the date of termination of employment by [Fowler] or [appellant], for any reason, that [Fowler] will not disclose the name of or contact or solicit business from any person, partnership, business or entity who at the time of such termination is a customer of [appellant], or refers business to [appellant] within a 25 miles radius of the office at which [Fowler] works.  Nor shall [Fowler] during the term of this Agreement have additional employment … in the mortgage or real estate industry….

4.3       During the term of [Fowler’s] employment and upon termination of employment by [Fowler] or [appellant], and for a period of one year thereafter, [Fowler] shall not, either directly or indirectly, interfere with the business of [appellant], nor shall [Fowler] solicit, attempt to hire or hire any other personnel or employees of [appellant] or any of its subsidiaries or affiliates without written approval of [appellant]….

5.2       This Agreement supersedes any and all other agreements, either oral or in writing between the parties hereto with respect to the employment of [Fowler] by [appellant] and contains all of the covenants and agreements between the parties with respect to such employment in any manner whatsoever.  This Agreement may not be modified except in writing signed by both [appellant] and [Fowler].   

Fowler was laid-off by appellant effective May 1, 2009.  On or about December 31, 2009, Fowler was hired by Iwayloan, L.P.  Iwayloan started conducting business in 1998 as an internet-based mortgage lender, and it competed with appellant for mortgage business.  In addition to Fowler, Iwayloan also hired several other former at-will employees of appellant:  Linda Bullington, Darrin Dunn, Jane Stathas, Tracy Cheatham, Jennifer Bazor, Stacy Rios, Ivan Socaski[3], and Fowler’s brother, Cory Fowler.[4]

Appellant filed suit against Fowler on August 30, 2010.  In the suit appellant sought “to restrain [Fowler] from soliciting our current employees and placing them in positions that it would be inevitable that they’re going to use our trade secret information.”  Appellant successfully obtained a temporary restraining order against Fowler.  The hearing on appellant’s application for a temporary injunction occurred on September 10, 2010.  Much of the evidence was focused on the former Allied employees listed above.

The evidence introduced during the temporary injunction hearing established that Bullington served as the Pennsylvania state manager for appellant.  As a result of internal problems at appellant, Bullington became increasingly dissatisfied with her position working for appellant.  The evidence also demonstrated Bullington was friends with Fowler and approached him as early as March 2010 to help her find new employment.  The evidence also established that Fowler consistently refused to discuss the issue with Bullington during the one-year period following his discharge.  In fact, Fowler denied soliciting Bullington at all.   Instead, while Fowler admitted he was involved in the hiring of Bullington, he testified: “Bullington came to Iwayloan because of me, but I didn’t recruit her.”  Bullington signed an employment agreement with Iwayloan on May 3, 2010.  According to Larry Lobb, one of the owners of Iwayloan, Bullington’s signature did not mean she was actually employed at that point by Iwayloan, but only that she had completed a step in the approval process.  Bullington resigned from appellant on June 7, 2010 and started working for Iwayloan as a branch manager in Pennsylvania on June 8, 2010.

            The evidence established that Dunn served as a loan processor for appellant and that he stopped working for appellant in January 2007, more than two years before Fowler was laid-off.  It was undisputed that Dunn was hired by Iwayloan in the summer of 2010 to work as a branch manager in Pennsylvania.  Stathas was fired by appellant in March 2009.  Stathas then worked for two different mortgage companies before she was hired by Iwayloan as a Dallas branch manager in August 2010.  Fowler admitted he recruited both Dunn and Stathas to join Iwayloan.

            Cheatham testified during the temporary injunction hearing.  She stated that she was employed by appellant as a branch operations manager.  When appellant eliminated her position, Cheatham was laid-off on January 22, 2010.  Cheatham was hired by Iwayloan on March 10, 2010.  Fowler testified that he did not recruit Cheatham.  Instead, Fowler testified that he was aware Cheatham needed a job and Iwayloan needed someone with her experience, so he “called her and set-up an interview.”  Subsequently, Cheatham was hired.

            Bazor was an IT help-desk administrator, loan processor, and loan originator for appellant. Bazor resigned from appellant’s employ on July 21, 2010.  Iwayloan hired Bazor as a loan processor during July 2010.  Fowler denied that he recruited Bazor to join Iwayloan.

            Rios was the manager of appellant’s world development program.  Rios stopped working for appellant in October 2008, approximately six months before Fowler was laid-off. After Rios stopped working for appellant, she worked for two different companies before joining Iwayloan in July 2010.

            Socaski worked for appellant as an underwriter.  Socaski ceased working for appellant in November 2007, more than a year before Fowler was laid-off.  Socaski was hired by Iwayloan long before Fowler began working there in December 2009.

            Fowler’s brother, Cory, was employed by appellant, but left in March 2003, more than six years before Fowler was laid-off.  Like Socaski, Cory’s employment with Iwayloan began before his brother was hired.

            Appellant also alleged Fowler had possession of and was using appellant’s confidential information.  Fowler admitted that, at one point in time after his employment with appellant ended, he did possess three items from appellant: (1) an old branch operations manual; (2) marketing materials; and (3) a utility or training disk.  Sandra Wiley, a senior vice-president for appellant, testified that appellant considered each of these items to be confidential.[5]  Wiley also testified that, at Fowler’s request, she emailed an old version of appellant’s operations manual to Fowler.[6] During the hearing, Fowler described how he took possession of the other two items.  According to Fowler, at the end of his last day of employment, he exited his office without taking any personal possessions.[7]  Later, some of appellant’s employees packed his personal items and they mistakenly included marketing materials and the utility disk.  Fowler testified he did not request that the employees include those items with his personal property.  Fowler stated that when he spoke with appellant’s employees, he probably referred to the operations manual and utility disk as reference materials.  Fowler also testified that he did not consider any of the three items to be appellant’s confidential information.  Fowler further testified that appellant had not informed him that those items were considered to be confidential.  All three items were returned to appellant by Fowler’s attorney on September 6, 2010.  Finally, Fowler testified that he was not currently soliciting any of appellant’s employees to join Iwayloan and bring confidential information belonging to appellant with them.[8]

            A single witness at the temporary injunction hearing addressed the harm appellant allegedly has suffered as a result of Fowler’s allegedly improper conduct.  Stell, appellant’s director of compliance, when responding to a question asking about the harm appellant had suffered, told the court that was a “hard one to answer.” Ultimately, she testified that appellant’s harm was the loss of investment or the expense appellant would endure going back and developing new training materials.

            Following the hearing, the trial court denied appellant’s request for a temporary injunction.  No findings of fact and conclusions of law were requested or filed.  This interlocutory appeal followed.

Discussion

In a single issue on appeal appellant contends the trial court abused its discretion when it denied appellant’s application for a temporary injunction.

I.         The standard of review and applicable law.

            A trial court has broad discretion in deciding whether to deny a temporary injunction.  Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). We review the denial of a temporary injunction for a clear abuse of discretion without addressing the merits of the underlying case.  Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993).  We will uphold the trial court’s determination against issuing injunctive relief unless the trial court’s action was so arbitrary that it exceeded the bounds of reasonable discretion.  Butnaru, 84 S.W.3d at 204.  In reviewing the trial court’s exercise of discretion, the appellate court must draw all legitimate inferences from the evidence in the light most favorable to the trial court’s decision.  EMS USA, Inc. v. Shary, 309 S.W.3d 653, 657 (Tex. App.—Houston [14th Dist.] 2010, no pet.).  When, as here, no findings of fact or conclusions of law are filed, the trial court’s determination of whether to grant or deny a temporary injunction must be upheld on any legal theory supported by the record.  Id.

            An applicant for a temporary injunction seeks extraordinary relief.  In re Tex. Natural Res. Conservation Comm’n, 85 S.W.3d 201, 204 (Tex. 2002).  The sole issue before the trial court in a temporary injunction hearing is whether the applicant may preserve the status quo of the litigation’s subject matter pending trial on the merits.  Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978).  The status quo is the last actual, peaceable, noncontested status which preceded the pending controversy.  RP & R, Inc. v. Territo, 32 S.W.3d 396, 402 (Tex. App.—Houston [14th Dist.] 2000, no pet.)

To obtain a temporary injunction, the applicant must plead a cause of action against the defendant and show both a probable right to recover on that cause of action and a probable, imminent, and irreparable injury in the interim.  EMS USA, Inc. v. Shary, 309 S.W.3d 653, 657 (Tex. App.—Houston [14th Dist.] 2010, no pet.) (citing Butnaru, 84 S.W.3d at 204).  To show a probable right of recovery, the applicant must plead and present evidence to sustain the pleaded cause of action.  Id.  An injury is irreparable when the injured party cannot be adequately compensated in damages or if damages cannot be measured by any certain pecuniary standard.  Id.  An existing legal remedy is adequate if it is as complete, practical, and efficient to the ends of justice and its prompt administration as is equitable relief.  Hilb, Rogal & Hamilton Co. of Texas v. Wurzman, 861 S.W.2d 30, 32 (Tex. App.—Dallas 1993, no writ.).   There is no adequate remedy at law if the plaintiff cannot calculate damages or if a defendant is incapable of responding in damages.  Id. The party applying for a temporary injunction has the burden of production, which is the burden of offering some evidence that establishes a probable right to recover and a probable interim injury.  Dallas Anesthesiology Associates, P.A. v. Texas Anesthesia Group, P.A., 190 S.W.3d 891, 897 (Tex. App.—Dallas 2006, no pet.).  If an applicant does not discharge its burden, it is not entitled to injunctive relief.  Id.

II.        Appellant did not establish that the trial court abused its discretion by denying appellant’s request for a temporary injunction.

The applicant for a temporary injunction bears the burden to present evidence sufficient to demonstrate a probable, imminent, and irreparable injury.  The harm is irreparable when the injured party cannot be adequately compensated in damages or if the damages cannot be measured by any certain pecuniary standard.  EMS USA, 309 S.W.3d at 657.  Based on the evidence in the appellate record, the trial court could have reasonably concluded that monetary damages would adequately compensate appellant for any alleged loss of investment if it prevailed at trial.  Daily Int’l Sales Corp. v. Eastman Whipstock, Inc., 662 S.W.2d 60, 64 (Tex. App.—Houston [1st Dist.] 1983, no writ).  An applicant for a temporary injunction has the burden to establish all of the requirements for a temporary injunction.  A trial court has broad discretion to determine whether the applicant met that burden.  Hilb, Rogal & Hamilton Co. of Texas, 861 S.W.2d at 33.  We conclude that, when viewed in the light most favorable to the trial court’s order, the evidence supports the trial court’s refusal to grant injunctive relief. Therefore, we conclude the trial court did not abuse its discretion by denying appellant’s application for a temporary injunction.  We overrule appellant’s single issue on appeal.

Conclusion

            Having overruled appellant’s issue, we affirm the trial court’s order denying appellant’s request for a temporary injunction.

                                                                        /s/        John S. Anderson

                                                                                    Justice

Panel consists of Justices Anderson, Seymore, and McCally.

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[1] Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (West 2008).

[2] Appellant also introduced into evidence during the temporary injunction hearing a “Confidentiality Agreement” executed by Fowler on September 24, 1999.  Because the Agreement contains a merger clause, we conclude the September 24, 1999 Confidentiality Agreement was superseded by the Agreement and therefore has no bearing on Fowler’s duties during his employment or after it was terminated.  See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of America, No. 08-0989, 2011 WL 1445950, at *6 (Tex. April 15, 2011) (discussing the purpose of standard merger clauses, which ensure “that the contract at issue invalidates or supersedes any previous agreements, as well as negating the apparent authority of an agent to later modify the contract’s terms.”)

[3] During the temporary injunction hearing, the witnesses were unsure of the exact spelling of this person’s name; therefore we adopt the spelling used by appellant in its’ appellate brief.

[4] Appellant also alleged Iwayloan hired appellant’s former general counsel and executive vice president, Tony Musgrave.  The evidence introduced during the temporary injunction hearing was undisputed that Musgrave was not hired by Iwayloan; instead he served as outside counsel for Iwayloan.

[5] Jeanne Stell, the director of compliance for appellant, testified during the temporary injunction hearing.  According to Stell, appellant considers everything it has developed and done over the years to be confidential and proprietary information.  Stell, when asked if there was anything that a former employee of appellant could say about appellant that was not considered confidential, she responded: “just what a good company it is.”

[6] As a result of her disclosure that she had sent Fowler a copy of the operations manual, Wiley was terminated soon after the temporary injunction hearing.

[7] Fowler also testified he took all of his office keys and security badges with him that day.  According to Fowler, appellant never asked for them back.  Fowler testified he eventually returned them to an employee of appellant at a social function.

[8] Lobb testified Iwayloan has a policy prohibiting employees from using any confidential information belonging to former employers.