Finnegan, Henderson, Farabow,Garrett & Dunner, LLP v. Melvin Ray Mercer ( 2009 )

IN THE
TENTH COURT OF APPEALS
No. 10-09-00250-CV
FINNEGAN, HENDERSON,
FARABOW,GARRETT & DUNNER, LLP,
Appellant
v.
MELVIN RAY MERCER,
Appellee
From the 85th District Court
Brazos County, Texas
Trial Court No. 09-001936-CV-85
MEMORANDUM OPINION
In this interlocutory appeal, Appellant Finnegan, Henderson, Farabow, Garrett &
Dunner, LLP (Finnegan) complains that the trial court erred in denying its request for a
temporary injunction. We will affirm.
Background
Finnegan sued Appellee Melvin Ray Mercer for breach of contract and sought
declaratory relief, a temporary restraining order, temporary and permanent injunctive
relief, and attorney’s fees. The following evidence was presented at the temporary
injunction hearing.
Finnegan, a national law firm, defended Sony Corporation, Sony EMCS
Corporation, and Sony Electronics Inc. (collectively “Sony”) in a patent-infringement
suit filed by O2 Micro International Limited (O2 Micro). Mercer was hired to act as a
“technical expert and consultant” for Finnegan in the case. Mercer signed a Retainer
Agreement, which provides in part:
3. The discussions between Dr. Mercer and Finnegan . . . and
any information received by Dr. Mercer relative to this Retainer
Agreement or that he provides to Finnegan . . . will be kept in strict
confidence by him. To the extent anyone from O2 Micro, its attorneys, or
its agents contacts Dr. Mercer, he agrees not to have any discussions with
them outside the physical presence of Finnegan . . . and only after
providing Finnegan . . . with reasonable written notice of the time and
place of such discussions. Further, Dr. Mercer acknowledges and agrees
to assist Finnegan . . . , to the extent necessary and appropriate, in
retaining any privilege, either attorney-client or work product, with
respect to the materials which Finnegan . . . turns over to him during the
course of this Retainer Agreement and further agrees not to waive any
attorney-client privilege or work product immunity without the prior
written permission of Finnegan . . . .
4. Dr. Mercer has advised Finnegan . . . , and confirms, that
retaining him as a technical expert and consultant for the Civil Action will
not create any conflict or potential conflicts with any responsibilities that
he has as a result of his present or former employment or as a result of his
other consulting work. Moreover, Dr. Mercer agrees that although he will
function as a non-exclusive consultant to Finnegan . . . , he will not
establish any new consulting or employment relationships in conflict with
his obligations under this Agreement. In the event Dr. Mercer proposes to
establish any additional consulting or employment relationships that may
result in a conflict or potential conflict, during the period this Agreement
is in effect, Dr. Mercer agrees that he will notify Finnegan . . . of the name
and address of the other organization and will disclose to Finnegan . . . the
nature of the other consulting arrangement to the extent it is permitted by
the other organization. At that time, the parties will determine whether
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 2
an actual or potential conflict exists and the best manner of avoiding such
a conflict, including possible termination of this Agreement.
5. This Agreement shall be for a term commencing on the date
of execution by Dr. Mercer and will extend until terminated by either
party to this Agreement. Finnegan . . . or Dr. Mercer may terminate this
Agreement at any time by providing the other party with written notice of
such termination. However, the obligations assumed by Dr. Mercer
pursuant to Paragraphs 3 and 4 shall survive termination of this
Agreement for a period of three years.
Darren Jiron, a patent attorney with Finnegan, testified that, after Mercer had
signed the Retainer Agreement, Jiron sent Mercer the five patents that were at issue in
the Sony litigation for him to review. The patents are public documents. Finnegan
attorneys also communicated with Mercer about setting up a face-to-face meeting to
discuss the issues in the case. Those communications led to a videoconference between
three Finnegan attorneys, including Jiron, and Mercer. Jiron stated that the first thirty
minutes of the videoconference were spent getting to know Mercer and learning about
his background and experience. They also discussed the technology involved in the
case, including an overview of the five patents that Mercer had been asked to review,
and spent some time talking about the allegations in the case and the general case
strategies that the Finnegan attorneys had developed.1 The videoconference lasted
approximately four and one-half hours.
Jiron testified that he did not recall conversing with Mercer after the
videoconference until July 3, 2007, approximately four and one-half months later, when
he e-mailed Mercer that the Sony litigation was subject to a stay pending potential
1 Mercer denies that Finnegan provided him with any of Sony’s confidential information during
the videoconference.
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 3
settlement. Sony later signed a license agreement that settled the litigation. Mercer did
not submit a bill for payment for his services.
On October 1, 2008, Mercer contacted Jiron by both voicemail and e-mail to
inform him that he had been approached by O2 Micro with a consulting opportunity in
unrelated litigation and that he wanted confirmation for his files that he was not bound
by the Retainer Agreement since it was his understanding that the Sony case had settled
long ago and he had neither requested nor received payment for his services in that
case. On October 7, 2008, Jiron sent Mercer a reply e-mail, stating that the Sony case
had settled but that the Retainer Agreement “remains binding.” Jiron also stated in his
reply e-mail that Finnegan was checking with Sony regarding Mercer’s request to work
with O2 Micro on a project unrelated to the dispute between O2 Micro and Sony;
however, Finnegan did not contact Sony. Instead, Finnegan determined that the issue
involved its own work product, and it thus did not need to contact Sony.
Jiron testified that in February 2009, Finnegan began representing Monolithic
Power Systems, Inc. (MPS) and ASUSTek (ASUS) in another suit filed by O2 Micro. On
April 23, 2009, pursuant to the ground rules in the International Trade Commission
(ITC) investigation, O2 Micro identified to all the parties in the case its intent to share
confidential information with two individuals, one of them being Mercer. Jiron testified
that Finnegan was shocked and, pursuant to the ground rules, raised an objection to the
other side. Jiron explained that there is a ten-day period after an objection is raised in
which the parties are to confer and see if they can resolve the dispute. Jiron testified
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 4
that Finnegan had several communications with opposing counsel, but the dispute was
not resolved.
Finnegan then filed a motion to intervene in the ITC investigation for the limited
purpose of attempting to enforce the provisions of the Retainer Agreement and to
disqualify Mercer as an expert in the case. The administrative law judge denied
Finnegan’s motion to intervene, and Mercer was not disqualified as an expert. Jiron
testified that Mercer’s breach of the Retainer Agreement was causing Finnegan to suffer
irreparable harm.
After Jiron testified at the temporary injunction hearing, the trial court asked
Finnegan’s counsel to explain why he believed Finnegan had standing. The court then
signed an order stating that, after determining Finnegan lacked standing and had an
adequate remedy at law, Finnegan’s request for a temporary injunction was denied.
Discussion
A temporary injunction’s purpose is to preserve the status quo of the litigation’s
subject matter pending a trial on the merits. Butnaru v. Ford Motor Co., 84 S.W.3d 198,
204 (Tex. 2002). A temporary injunction is an extraordinary remedy and does not issue
as a matter of right. Id. To obtain a temporary injunction, the applicant must plead and
prove three specific 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. A probable right to the relief sought is shown by alleging a cause of action
and presenting evidence that tends to sustain it. Vaughn v. Intrepid Directional Drilling
Specialists, Ltd., 288 S.W.3d 931, 936 (Tex. App.—Eastland 2009, no pet.); Tanguy v. Laux,
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 5
259 S.W.3d 851, 857 (Tex. App.—Houston [1st Dist.] 2008, no pet.). 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.
In its first issue, Finnegan argues that the trial court erred in denying its request
for a temporary injunction based on lack of standing.
Standing is a component of subject-matter jurisdiction and is a constitutional
prerequisite to maintaining a lawsuit. See Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852
S.W.2d 440, 443-44 (Tex. 1993). The standing doctrine requires that there be a real
controversy between the parties that will be actually determined by the judicial
declaration sought. Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005);
Brown v. Todd, 53 S.W.3d 297, 305 (Tex. 2001). A plaintiff has standing when it is
personally aggrieved, regardless of whether it is acting with legal authority. Nootsie,
Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996). Because
standing is a component of subject-matter jurisdiction, we consider Finnegan’s standing
as we would a plea to the jurisdiction. See Brown, 53 S.W.3d at 305 n.3; Dass, Inc. v.
Smith, 206 S.W.3d 197, 201 (Tex. App.—Dallas 2006, no pet.).
Generally, a trial court looks to the allegations of a plaintiff’s petition to
determine standing. See Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226
(Tex. 2004). However, under certain circumstances, when deciding a jurisdictional
challenge, a trial court may go beyond the allegations in the pleadings and consider
evidence. See id. at 227 (citing Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex.
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 6
2000)); Sarah v. Primarily Primates, Inc., 255 S.W.3d 132, 142-43 (Tex. App.—San Antonio
2008, pet. denied) (in determining jurisdictional issue, court considered contract entered
into evidence at hearing on motion to dismiss). Here, Finnegan’s petition incorporated
the Retainer Agreement by reference. Finnegan’s trial counsel also entered the Retainer
Agreement into evidence at the temporary injunction hearing. Thus, the Retainer
Agreement is evidence that the trial court considered in deciding Finnegan’s request for
injunctive relief, and, because it is necessary to resolve the jurisdictional issue, we will
consider it on appeal. See Miranda, 133 S.W.3d at 227.
Finnegan argues that it, in addition to Sony, has standing to sue on the Retainer
Agreement because it has its own rights and interests in the contract. Conversely,
Mercer argues that Finnegan has no independent interest in the Retainer Agreement
outside of the interest owned by Sony. We agree with Mercer.
Finnegan is not a party to the Retainer Agreement. See Am. Heritage, Inc. v. Nev.
Gold & Casino, Inc., 259 S.W.3d 816, 820 (Tex. App.—Houston [1st Dist.] 2008, no pet.)
(“A party to a contract has standing to maintain a suit on the contract.”) (citing Interstate
Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 618 (Tex. 2004)). The first paragraph
of the Retainer Agreement expressly states: “This Agreement is entered into by and
between Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. (“Finnegan,
Henderson”), on behalf of Sony Corporation, Sony EMCS Corporation, and Sony
Electronics Inc., (collectively “Sony”) and Dr. Melvin Ray Mercer (“Dr. Mercer”) . . . .”
(Emphasis added.) Likewise, Finnegan signed the Retainer Agreement as “Attorneys
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 7
for Sony Corporation, Sony EMCS Corporation, and Sony Electronics Inc.,” rather than
in its principal capacity.
Generally someone who is not a party to an agreement has no interest in the
terms of that contract. Wells v. Dotson, 261 S.W.3d 275, 284 (Tex. App.—Tyler 2008, no
pet.) (citing Grinnell v. Munson, 137 S.W.3d 706, 712 (Tex. App.—San Antonio 2004, no
pet.)); El Paso Cmty. Partners v. B & G/Sunrise Joint Venture, 24 S.W.3d 620, 626 (Tex.
App.—Austin 2000, no pet.). However, a person who is not in privity to the written
agreement may show that he is eligible to bring an action on the contract as a third-
party beneficiary. Wells, 261 S.W.3d at 284.
There is a presumption against conferring third-party-beneficiary status on
noncontracting parties. S. Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007). In
deciding whether a third party may enforce or challenge a contract between others, it is
the contracting parties’ intent that controls. Id. The intent to confer a direct benefit
upon a third party “must be clearly and fully spelled out or enforcement by the third
party must be denied.” Id. (quoting MCI Telecommc’ns Corp. v. Tex. Utils. Elec. Co., 995
S.W.2d 647, 651 (Tex. 1999)). Incidental benefits that may flow from a contract to a third
party do not confer the right to enforce the contract. Id. A third party may only enforce
a contract when the contracting parties themselves intend to secure some benefit for the
third party and entered into the contract directly for the third party’s benefit. Id. To
qualify as one for whose benefit a contract was made, the third party must benefit more
than incidentally; he must be either a donee or creditor beneficiary. Id. A person is a
donee beneficiary if the performance promised will come to him as a pure donation. Id.
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 8
If performance will come to satisfy a duty or legally enforceable commitment owed by
the promisee, then the third party is considered a creditor beneficiary. Id.
Finnegan contends that, by entering into the Retainer Agreement, the parties to
the contract intended to protect Finnegan’s own personal interest in its confidences and
work product. However, the Retainer Agreement expressly provides, “Dr. Mercer
acknowledges that any information received under this Agreement remains the
property of Sony.” (Emphasis added.) The language of the contract thus reveals that
the parties’ intent was to protect the interests of Sony, not Finnegan. Therefore, we
conclude that Finnegan lacks standing to sue Mercer for breach of contract.
Nor has Finnegan shown that it has standing to seek declaratory relief regarding
the Retainer Agreement. Section 37.004(a) of the Declaratory Judgment Act provides in
pertinent part, “A person . . . whose rights, status, or other legal relations are affected by
a . . . contract . . . may have determined any question of construction or validity arising
under the . . . contract . . . and obtain a declaration of rights, status, or other legal
relations thereunder.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a) (Vernon 2008).
However, as explained above, Finnegan possesses no enforceable contractual rights
under the Retainer Agreement.
Because Finnegan lacks standing to sue Mercer for breach of contract or for
declaratory relief, Finnegan did not establish that it has a cause of action against Mercer.
See Butnaru, 84 S.W.3d at 204. As a result, we hold that the trial court properly denied
Finnegan’s request for a temporary injunction because Finnegan lacked standing. We
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP v. Mercer Page 9
overrule Finnegan’s first issue and need not address its second issue. See TEX. R. APP. P.
47.1.
Conclusion
Having overruled Finnegan’s first issue, we affirm the trial court’s order denying
Finnegan’s request for a temporary injunction.
REX D. DAVIS
Justice
Before Chief Justice Gray,
Justice Reyna, and
Justice Davis
(Chief Justice Gray dissents to the Court’s affirmation of the trial court’s
judgment. A separate opinion will not issue. Chief Justice Gray notes, however, that if
the Court is to maintain a parochial view of the legal profession, the result may be
correct. But because he believes the Court must recognize the national and
international implication of our decisions, the Court cannot take such a narrow view of
this proceeding. He believes when the transaction is taken in context, it is Finnegan’s
contract that recognizes the client’s obligation to pay, or at the very least, Finnegan was
an intended third party beneficiary of the contract known to Mercer. Under either
view, the trial court erred by not granting a temporary injunction. He respectfully
dissents.)
Affirmed
Opinion delivered and filed December 30, 2009
[CV06]
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