Lifeguard Benefit Services, Inc. and the Amacore Group, Inc. v. Direct Medical Network Solutions, Inc. and Consumer Assistance Services Association ( 2010 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-09-267-CV
LIFEGUARD BENEFIT SERVICES, APPELLANTS
INC. AND THE AMACORE
GROUP, INC.
V.
DIRECT MEDICAL NETWORK APPELLEES
SOLUTIONS, INC. AND
CONSUMER ASSISTANCE
SERVICES ASSOCIATION
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FROM THE 153RD DISTRICT COURT OF TARRANT COUNTY
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OPINION
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I. INTRODUCTION
Appellants Lifeguard Benefit Services, Inc. and The Amacore Group, Inc.
bring this accelerated, interlocutory appeal from the imposition of a temporary
injunction (1) enjoining Appellants from denying Appellees Direct Medical
Network Solutions, Inc. (“DirectMed”) and Consumer Assistance Services
Association (“CASA”) access to and possession of data and information
regarding Appellees’ members and customers, (2) requiring Appellants to turn
over to Appellees data and information regarding Appellees’ members and
customers, and (3) requiring Appellants to turn over to a third party data and
information regarding individuals whom Appellants contend are their customers
only. In one issue, divided into three subissues, Appellants argue that the trial
court abused its discretion by entering the injunction because Appellees did not
demonstrate an extreme hardship and prove an imminent threat of irreparable
harm, the injunction alters the status quo and provides Appellees the ultimate
relief sought in the suit, and the order granting the injunction is vague and
overly broad. We will modify the temporary injunction and affirm it as modified.
II. F ACTUAL AND P ROCEDURAL B ACKGROUND
Ty Bruggemann founded CASA, DirectMed, and Lifeguard. Bruggemann
is the president of CASA and DirectMed. Lifeguard merged with Amacore in
2007; Amacore is Lifeguard’s parent company. Lifeguard terminated
Bruggemann’s employment in 2008.
CASA is a not-for-profit association organized under the laws of the State
of Illinois. Consumers who purchase a membership in CASA qualify to
purchase benefit plans marketed by DirectMed and other retailers. DirectMed
2
is a corporation organized under the laws of the State of Delaware. It is a third-
party retailer of health and lifestyle benefit plans that provides its members
discounts on medical services and lifestyle benefits. All DirectMed customers
are members of CASA, but all CASA members are not customers of DirectMed;
CASA members qualify to purchase plans from retailers other than DirectMed.
CASA has approximately 10,000 members, “over 35% of which have
purchased DirectMed plans.”
Lifeguard engages in a number of business activities, including packaging
lifestyle and benefit plans that are sold through third-party marketers and
providing back-office administrative services for private label clients like
DirectMed. The back-office support includes managing customer accounts.
Lifeguard contracted with CASA to sell CASA memberships and to
provide CASA with back-office administrative support. Lifeguard’s packages
do not always include CASA benefits. Lifeguard also entered into an agreement
with DirectMed to market and service DirectMed’s products. According to
Appellees’ original petition, the agreements between Lifeguard and CASA and
between Lifeguard and DirectMed are the only reason that Lifeguard and
Amacore have possession of data concerning DirectMed’s and CASA’s
members. According to Bruggemann, “Under the Contracts between Lifeguard
3
and DirectMed and CASA, the data concerning its members, their claims, and
benefits belongs to DirectMed and CASA.”
On or about June 24 or 25, 2009, DirectMed received a Civil
Investigative Demand (“CID”) from the Office of the Attorney General of the
State of Minnesota. The CID states in part that “the Attorney General has
received complaints alleging that Direct Medical Network Solutions, Inc.
engages in deceptive and fraudulent misrepresentations in the sale of its
services to Minnesota consumers, in violation of Minnesota law.” It also
required DirectMed to answer interrogatories and to deliver documents
requested for production.
On June 24, 2009, Scott Smith, Amacore’s chief operating officer and
Lifeguard’s operations officer, notified Bruggemann that effective immediately,
all DirectMed data could be accessed via a web-based portal to Lifeguard’s
software system referred to as L.I.S.A. (Lifeguard Integrated Software
Application).1 According to Appellees, the data that DirectMed was able to
access through the portal was “very limited” and insufficient to fully respond
to the CID.
1
… According to Rocky Williams, a DirectMed employee, data and
information about DirectMed and CASA members is located in the L.I.S.A.
software system.
4
On June 25, 2009, Bruggemann requested that he be given access to all
of the DirectMed and CASA data and records under the control of Lifeguard and
Amacore.2 Several DirectMed representatives visited Lifeguard’s offices the
next day but were told that the data was not ready. On June 30, 2009, Smith
responded to Bruggemann’s request and said that the agreements between
Lifeguard and DirectMed and between Lifeguard and CASA “govern the data,
materials, etc. to which you are entitled”; that DirectMed has access “to a wide
range of data through the web portal access provided to you by Lifeguard”; that
Lifeguard was assembling the requested data and information; and that
“Lifeguard is committed to assisting in any way possible and practicable to help
meet the requests of the” Minnesota Attorney General. Smith also indicated
that “[to the extent we determine that we are not contractually required to
produce one or more categories of requested documents, we will notify you of
the basis for our objection.”
On July 1, 2009, Bruggemann sent Smith an itemized list of information
that DirectMed was requesting from Lifeguard. Lifeguard responded to the data
request a few days later, providing responses to the requests, objecting to
2
… The demand included, but was not limited to, “all of the client records,
member records, billing records, agent records, member complaints,
promotional material[,] and all other member & financial data with regards to
DirectMed and CASA.”
5
certain requests, and stating that Lifeguard will produce certain documents. In
an attached letter, Lifeguard indicated that some of DirectMed’s requests
exceeded the scope of the information requested by the CID and that much of
the information requested is “readily available” to Bruggemann and “entirely
under [his] control as the President of DirectMed and through . . . access to the
LISA system.” At the hearing on Appellees’ motion for the temporary
injunction, when asked about Lifeguard’s response to DirectMed’s request for
information, Bruggemann testified that Lifeguard refused to provide the data
and information that DirectMed was seeking pursuant to the information
request.
Appellees filed their original petition and application for a temporary
restraining order and injunctive relief on July 9, 2009. They alleged that
Lifeguard provides back-office administrative support for each of them, that
Lifeguard maintains possession of all of the data and information concerning
their members and customers, that they had demanded full access to all of their
customer and member data being held by Lifeguard in order to prepare
responses to the CID, and that Appellants had refused to turn over the member
and customer data and information. In addition to seeking injunctive relief,
Appellants alleged claims for a declaratory judgment, breach of contract, and
conversion.
6
On July 10, 2009, Appellants and Appellees entered into a rule 11
agreement providing in part as follows:
•Appellants shall provide Appellees possession of and unfettered
access to all data, information, and records regarding DirectMed
and CASA members in their health and wellness plan and their full
access to all data which is Appellants.
•Appellees will provide today a record layout for the data, records,
and information to be transferred to it. Appellants will transfer all
data, records, and information concerning all DirectMed customers
and CASA members to Appellees within twenty-four hours unless
that time frame is impracticable.
•Appellants shall continue providing Appellees all electronic data,
information, and records concerning customers or members of
DirectMed and CASA on a daily basis to the extent practical. The
transfer shall be accomplished by transferring the data through an
FTP site and then a record layout to be identified by Appellees.
The trial court held a hearing on Appellees’ application for a temporary
injunction on July 23, 2009. Williams, who was DirectMed’s liaison to
Lifeguard, testified about the events that transpired relevant to the rule 11
agreement after its entry. He recalled that Appellees had agreed to use a record
layout provided by Appellants but that the layout they provided was incomplete
and not “all-inclusive.” 3 Also, Lifeguard provided Appellants with data on a
3
… According to Williams,
There was information that - - files that would not be usable
because there was misalignment, or there was fields that were left
blank, which by designation in the record layout it would have
7
memory stick instead of transferring the data by way of an FTP site. According
to Williams, the data transferred was incomplete and unusable. Williams met
with Smith and eventually reached an agreement on a record layout to provide
the data and information that Appellees were requesting, but Appellants have
not provided Appellees with a subsequent “data dump.” Williams visited
Lifeguard’s offices and was given an opportunity to look through and take
information that was provided to him. Williams opined that Appellees have only
approximately 20% of the data and information that they have demanded.
Smith testified that the record layout to be used to transfer the data has
changed several times and that Lifeguard is in the process of furnishing
DirectMed and CASA their data. He agreed that DirectMed and CASA are
entitled to all of the data and information that belong to them, but he testified
that Lifeguard has possession of a large amount of data and information that
does not belong to DirectMed and CASA, and he expressed concern about who
should and who should not be considered a member of CASA. One such
example of Lifeguard’s disagreement with DirectMed over who should be
considered a member of CASA concerned those who are members or customers
contained specific data. And in the review of that data, there was
no information in those fields, which then leaves the question of
why is this blank? What’s the problem here?
8
of the Lifeguard Health Options program. Williams testified that Lifeguard was
selling memberships in CASA through the Lifeguard Health Options program,
and he discussed a fulfillment materials package for Lifeguard Health Options
that members receive, which includes a reference that Lifeguard Health Options
is a product provided through CASA. Smith, on the other hand, denied that
those who are members of the Lifeguard Health Options program are also
members of CASA.4 Smith testified that Lifeguard does not want to turn over
to DirectMed and CASA data concerning the members of the Lifeguard Health
Options program because DirectMed and CASA could then effectively divert the
billing of those contracts away from Lifeguard, resulting in Lifeguard losing
money.
The trial court granted Appellees’ request for a temporary injunction and
found as follows:
Unless Defendants Lifeguard Benefit Services, Inc. and The
Amacore Group, Inc., together with their agents, servants,
employees and those acting in concert with them are immediately
enjoined, Plaintiffs will suffer immediate and irreparable injury and
extreme hardship for which there is no adequate remedy at law.
In part, the Court finds that absent a temporary injunction,
(1) Plaintiffs will be denied possession of the data, information and
records regarding [DirectMed] and [CASA] members to which they
have the right of possession[;] (2) Plaintiffs will not be able to
4
… The order granting the temporary injunction refers to these individuals
as the “Contested CASA Members.”
9
properly respond to the Minnesota Attorney General’s [CID] or
other investigations; (3) Plaintiffs will not be able to properly
prepare and defend itself in connection with such investigations;
(4) Plaintiff’s failure to prepare and respond adequately to any
investigations or actions by Defendants would create grounds for
further action against them, could affect the nature of the
investigation, potentially expose Plaintiffs and/or its officers to
charges being initiated, and impact their goodwill, business, client
relationships, reputation in the business community, and ability to
compete on a level playing field in the industry; (5) any charges
arising from the failure to respond to any investigation or complaint
would cause Plaintiffs immediate irreparable harm and damage
through the loss of customers, damage to its relationships with
clients, benefit providers, vendors, loss of good will, and the
permanent injury to Plaintiffs’ business reputation; (6) failing to
have possession of the data, information, and records concerning
all of its customers[‘] and members[‘] records would injure their
ability to service and direct service of those customers and
members and their benefits and to investigate and evaluate the
services being provided to those customers and members[.]
The trial court ordered as follows:
1) That [Lifeguard] and [Amacore] . . . are hereby enjoined from
denying Plaintiffs . . . from having immediate possession of
and unfettered access to all data, information and records,
regarding DirectMed and CASA members, excluding
“Contested CASA Members” as hereafter defined;
2) Defendants shall, on or before 5:00 P.M. on August 17,
2009, transfer an external hard drive devise to be provided
by Plaintiffs, and to deliver to Plaintiffs, all data, information
and records including but not limited to credit card and bank
information, regarding DirectMed and CASA members,
excluding Contested CASA Members, in the record layout
format attached to this Order as Appendix A.
3) Defendants shall on or before 5:00 P.M. on August 17, 2009
transfer to an independent third party vendor mutually
10
selected by the parties by use of an external hard drive
devise to be provided by Plaintiffs file all data, information
and records regarding Contested CASA Members in the same
record layout format as that specified in the preceding
paragraph. If the parties are unable to mutually [select] a
third party vendor by 5 P.M. on August 10, 2009, then the
court appoints Edwin Bell to act as the third party vendor and
authorizes Edwin Bell to hire and obtain such services as may
be necessary.
4) Defendants shall update the transfers referred to in
Paragraphs 2 and 3 hereof on a daily basis by use of an SFTP
site designated by Plaintiffs.
5) The term “Contested CASA Members” shall mean those
members and participants in plans offered or administered by
the Defendants whose plan documents reference, mention,
or allude to [CASA] in any manner but whom Defendants
assert are not DirectMed customers or CASA Members.
6) The third party vendor selected to receive the data,
information and records regarding Contested CASA Members
as set forth in Paragraph 3 above shall hold and maintain the
data, information and records transmitted to it in accordance
with this Order and shall permit the parties to this litigation
access to the data, information, and records to verify
compliance with the orders of this Court but shall not permit
copying of the data except as further ordered by the Court.
7) The third party vendor shall not permit dissemination of the
data, information and records except as set forth above and
subject to further order of the Court.
8) Use of data, information, and records transmitted to the third
party vendor shall be for litigation purposes only unless and
until further order of the Court.
9) The cost of the third party vendor shall be shared equally by
the parties hereto.
11
10) The Defendants, their agents, servants and employees shall
within twenty-four (24) hours of receipt of any inquiry,
investigative demand, or like communication received by
Defendants regarding the Plaintiffs, their members or any
plan offered by the Plaintiffs forward the same to Plaintiffs.
11) The Defendants shall be enjoined from engaging in any
responses or communications with the Minnesota Attorney
General or any other investigative unit purportedly on
Plaintiffs’ behalf.
III. S TANDARD OF R EVIEW
The purpose of a temporary injunction 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 will not issue as a matter of right. Id. To obtain a
temporary injunction, an 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.; Frequent Flyer
Depot, Inc. v. Am. Airlines, Inc., 281 S.W.3d 215, 220 (Tex. App.—Fort Worth
2009, pet. denied).
In an appeal from an order granting or denying a temporary injunction, the
scope of review is restricted to the validity of the order granting or denying
relief. Argyle ISD ex rel. Bd. of Trustees v. Wolf, 234 S.W.3d 229, 237 (Tex.
App.—Fort Worth 2007, no pet.). Whether to grant or deny a request for a
12
temporary injunction is within the trial court’s discretion, and we will not
reverse its decision absent an abuse of discretion. Butnaru, 84 S.W.3d at 204.
Under an abuse of discretion standard, the court of appeals cannot overrule the
trial court’s decision unless the trial court acted unreasonably or in an arbitrary
manner, without reference to guiding rules and principles. Id. at 211. A trial
court does not abuse its discretion if some evidence reasonably supports the
trial court’s decision. Id. When reviewing a trial court’s order on an application
for temporary injunction, we cannot substitute our judgment for that of the trial
court, even if we would have reached a contrary conclusion. Greenpeace, Inc.
v. Exxon Mobil Corp., 133 S.W.3d 804, 808 (Tex. App.—Dallas 2004, pet.
denied). Instead, we view the evidence in the light most favorable to the trial
court’s order, indulging every reasonable inference in its favor, and determine
whether the order is so arbitrary that it exceeds the bounds of reasonable
discretion. Amend v. Watson, No. 05-08-01585-CV, 2009 WL 1912693, *1
(Tex. App.—Dallas July 6, 2009, no pet.).
IV. IRREPARABLE INJURY
In the first subissue of their only issue, Appellants argue that the trial
court abused its discretion by entering the temporary injunction because
Appellees failed to introduce clear and compelling evidence of an extreme
hardship and failed to prove an imminent threat of irreparable harm.
13
The party seeking injunctive relief bears the burden to demonstrate
irreparable injury. N. Cypress Med. Ctr. Operating Co., Ltd. v. St. Laurent, 296
S.W.3d 171, 175 (Tex. App.—Houston [14th Dist.] 2009, no pet.);
Marketshare Telecom, L.L.C. v. Ericsson, Inc., 198 S.W.3d 908, 925 (Tex.
App.—Dallas 2006, no pet.) (“A trial court abuses its discretion in granting a
temporary injunction unless ‘it is clearly established by the facts that one
seeking such relief is threatened with an actual irreparable injury if the
injunction is not granted.’”). A party proves irreparable injury for injunction
purposes by proving that damages would not adequately compensate the
injured party or cannot be measured by any certain pecuniary standard.
Butnaru, 84 S.W.3d at 204; Frequent Flyer Depot, 281 S.W.3d at 227.
Damages are an inadequate remedy if they are difficult to calculate; “assigning
a dollar amount to such intangibles as a company’s loss of clientele, goodwill,
marketing techniques, and office stability, among others, is not easy.”
Frequent Flyer Depot, 281 S.W.3d at 228–29. But an injunction is not proper
when the claimed injury is merely speculative. Id. at 227.
A. Mandatory or Prohibitive Injunction
Appellants initially contend that the injunction is mandatory both as to the
“Contested CASA Members” and the DirectMed and non-contested CASA
members because the injunction’s paragraph 2 requires Appellants to transfer
14
to Appellees data and information regarding DirectMed and CASA Members,
excluding “Contested CASA Members,” and paragraph 3 requires Appellants to
act by affirmatively transferring records relating to Contested CASA Members
to a third-party vendor. A prohibitive injunction forbids conduct, and a
mandatory injunction requires it. RP&R, Inc. v. Territo, 32 S.W.3d 396, 400
(Tex. App.—Houston [14th Dist.] 2000, no pet.). A mandatory injunction is
proper when necessary to prevent irreparable injury and extreme hardship.
Iranian Muslim Org. v. City of San Antonio, 615 S.W.2d 202, 208 (Tex. 1981).
Appellees concede that the injunction can be viewed as either
prohibitive—because it requires that traditionally provided data continue to be
transferred—or mandatory—because it requires Appellants to provide data and
information.
B. DirectMed
DirectMed pleaded that it will suffer immediate, irreparable injury in the
absence of a temporary injunction because it will not be able to respond,
prepare, and defend itself in regard to the CID and because any future
investigation or charges would “undoubtedly cause [it] potential harm and
damage through the loss of customers, loss of good will, and the permanent
injury to [its] business reputation due to the implicit belief of wrongdoing.”
DirectMed further pleaded that its potential damages attributable to Appellants’
15
refusal to turn over the demanded data and information cannot be calculated
and that it will suffer irreparable injury because Appellants’ conduct will subject
them to potential civil or criminal liability and jeopardize their business
reputation and their relationship with their customers.
At the hearing on DirectMed’s application for a temporary injunction,
DirectMed introduced evidence that the Office of the Attorney General for the
State of Minnesota had issued the CID. The CID indicates that Minnesota’s
Attorney General has received complaints alleging that DirectMed engages in
deceptive and fraudulent misrepresentations in the sale of its services to
Minnesota consumers in violation of Minnesota law. The CID also propounds
interrogatories, requests the production of documents, and requires DirectMed
to respond to the interrogatories within twenty days of the service of the CID
and to respond to the requests for production within fifteen days of service of
the CID.
Bruggemann testified that DirectMed needs access to its data held by
Lifeguard in order to fully and properly respond to the Minnesota CID. Williams
testified that it is important to have DirectMed’s data so that it can properly
respond to the CID, and he opined that having only part of the data that it has
demanded could interfere with its ability to defend itself against claims of
fraudulent misrepresentation and deceptive trade practices with consumers.
16
Bruggemann testified that the data DirectMed was able to access from the
L.I.S.A. system through the web-based portal was insufficient to fully respond
to the CID, and Williams thought that Appellees have only approximately 20%
of the data and information that they have demanded from Appellants. In the
absence of a response complying with the CID, the Minnesota Attorney General
may apply to a court for an order compelling compliance in accordance with
Minnesota law and, consistent with the trial court’s order, Bruggemann testified
that he was concerned about DirectMed’s potential loss of goodwill, loss of
reputation in the industry, and loss of customers.
The evidence thus demonstrates that DirectMed cannot fully and properly
respond to the CID without the data and information that Lifeguard possesses.
DirectMed has a remedy for damages against Lifeguard for breach of contract,
but the damages resulting from Lifeguard’s failure to abide by the terms of its
agreement with DirectMed would be difficult to determine or calculate and,
consequently, inadequate because DirectMed is threatened with the Minnesota
Attorney General’s pursuit of remedies it deems necessary against DirectMed
and the potential resulting adverse impact on DirectMed’s reputation, business
goodwill, and customer base.
Underlying Appellants’ argument is the contention that DirectMed’s
claimed injury is merely speculative. This argument is belied not only by the
17
evidence that the Minnesota Attorney General may seek remedies against
DirectMed for failure to comply with the CID but also by the evidence
demonstrating the clear disagreement between Lifeguard and DirectMed
regarding whether customers or members of the Lifeguard Health Options
program are members of CASA. Lifeguard does not consider that customers
or members of the Lifeguard Health Options program are members of CASA
even though materials received by those customers include a reference that
Lifeguard Health Options is a product provided through CASA. The trial court
could have reasonably inferred from this evidence that Lifeguard (or a third-
party marketer) was selling memberships that included literature indicating
membership in CASA but not considering those who purchased the
memberships to be members of CASA. In light of the CID’s statement that the
Minnesota Attorney General has received complaints that DirectMed—whose
back-office support is handled by Lifeguard—engages in deceptive and
fraudulent misrepresentations in the sale of its services, DirectMed’s claimed
injury is not merely speculative.
Regarding imminency, the Minnesota Attorney General granted DirectMed
an extension of time to respond to the CID with no set response date, but we
decline to accept Appellants’ suggestion that DirectMed offered no evidence
18
regarding the imminency of the irreparable injury it will suffer simply because
the response date has been deferred once.
Although a court will generally 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, this
circumstance is tempered by the abuse of discretion standard of review, which
prohibits this court from substituting its judgment for that of the trial court.
Butnaru, 84 S.W.3d at 211. Viewing the evidence in the light most favorable
to the trial court’s order, indulging every reasonable inference in its favor, we
hold that DirectMed presented some evidence reasonably supporting the trial
court’s conclusion that DirectMed will suffer irreparable injury in the absence
of a temporary injunction, whether the injunction is considered mandatory or
not. Thus, the trial court’s conclusion that DirectMed will suffer irreparable
injury was not arbitrary and unreasonable nor made without reference to guiding
rules and principles. We overrule this part of Appellants’ first subissue.
C. CASA
To obtain a temporary injunction, CASA, like DirectMed, had to
demonstrate irreparable injury. The evidence shows that CASA and DirectMed
are distinct business entities organized under the laws of different states. All
19
DirectMed customers are also members of CASA, but all CASA members are
not customers of DirectMed.
The CID is directed to DirectMed, not CASA. It states that the Minnesota
Attorney General has information establishing reasonable grounds to believe
that DirectMed, not CASA, has violated one or more Minnesota consumer
protection statutes. The CID also requires that DirectMed, not CASA, answer
interrogatories and respond to requests for production. The CID thus advises
of no grounds or allegations related to CASA’s conduct, and it requires that no
action be taken by CASA.
Bruggemann, CASA’s president, opined that because CASA is referenced
in the CID, he (presumably on behalf of DirectMed, CASA, or both) needs
CASA’s data and information in Lifeguard’s possession so that DirectMed can
fully respond to the CID. Bruggemann was referring to interrogatory number
two, which requests that DirectMed provide certain information about CASA’s
and DirectMed’s business relationship. Interrogatory number two, however,
does not request that CASA provide any information in response to the CID,
and it requests that DirectMed provide information related to other entities in
addition to CASA, including “Beech Street Corporation,” “United Health Care,”
“The United States Life Insurance Company in the City of New York,” and “The
Health Connection.” There is no evidence that DirectMed requires any
20
information from these entities, who are not parties to this litigation, to fully
respond to the CID.
Appellees commingle the arguments and evidence that they contend
support the trial court’s conclusion that they each will suffer irreparable harm.
Having distinguished DirectMed’s evidence of irreparable harm, CASA directs
us to no evidence that it will suffer any irreparable injury if DirectMed fails to
fully and properly respond to the CID.5 Viewing the evidence in the light most
favorable to the trial court’s order, we hold that the trial court abused its
discretion by concluding that CASA will be irreparably injured in the absence of
a temporary injunction. See Butnaru, 84 S.W.3d at 204. We sustain this part
of Appellants’ first subissue.
V. S TATUS Q UO AND U LTIMATE O BJECT OF S UIT
In the second subissue of their only issue, Appellants argue that the trial
court abused its discretion by entering the temporary injunction because it
destroys the status quo and provides Appellees with the ultimate object of the
suit. Appellants contend that prior to Appellees’ demand for data and
information, Lifeguard had never provided Appellees with access to credit card
5
… Nor do Appellees argue or point to any evidence that in terms of their
business relationship, CASA is so inextricably intertwined with DirectMed that
CASA will be irreparably injured without the temporary injunction.
21
and bank account information regarding DirectMed members and non-contested
CASA members or to any of the records relating to the “Contested CASA
Members.”
“Status quo is defined as ‘the last, actual, peaceable, noncontested
status which preceded the pending controversy.’” Universal Health Servs., Inc.
v. Thompson, 24 S.W.3d 570, 577 (Tex. App.—Austin 2000, no pet.) (quoting
Transp. Co. v. Robertson Transps., Inc., 152 Tex. 551, 261 S.W.2d 549,
553–54 (1953)). “If an act of one party alters the relationship between that
party and another, and the latter contests the action, the status quo cannot be
the relationship as it exists after the action.” Benavides ISD v. Guerra, 681
S.W.2d 246, 249 (Tex. App.—San Antonio 1984, writ ref’d n.r.e.).
It is undisputed that Lifeguard performs back-office support for
DirectMed.6 Bruggemann testified that Lifeguard’s operations include a
“fulfillment operation,” customer service, an IT department, an account
management department, a claims department, and “so on and so forth.” The
6
… In a letter addressed to Bruggemann dated June 30, 2009, Smith
acknowledged that “Lifeguard entered into Servicing Agreements with . . .
DirectMed many years ago.” In another letter addressed to Bruggemann dated
June 30, 2009, Smith stated that there are areas of common interest in which
Lifeguard may be helpful in providing the Minnesota Attorney General with
materials, “[g]iven the Servicing Agreement in place between Lifeguard and
DirectMed.”
22
agreement between Lifeguard and DirectMed, which is still in effect, provides
that part of Lifeguard’s duties and responsibilities include providing access to
products and services for health benefits and services to DirectMed’s
customers, providing toll-free 800 services for DirectMed’s members to access
providers, providing an internet website for members to locate provider and
access web links, and providing DirectMed with fulfillment information required
to support the benefits offered by Lifeguard to DirectMed. Lifeguard
acknowledged DirectMed’s exclusive rights to the names, addresses, and
telephone numbers of its customers. During the hearing on Appellees’
application for a temporary injunction, Bruggemann agreed that Lifeguard
routinely provides social security numbers and credit card and bank information
to its clients like DirectMed. The following exchange occurred:
[Appellees’ counsel]: And would you read the - - the second
sentence of that e-mail, this file contains?
[Bruggemann]: This file contains Social Security numbers, credit
card and bank information, so it needs to be encrypted. As soon
as we receive IAC’s PGP key, we can transmit the data. The file
will be - - is in the format that they provided us.
[Appellees’ counsel]: So Lifeguard would routinely send Social
Security numbers, credit card and bank information to its - - its
clients like DirectMed?
[Bruggemann]: Yes.
23
Appellees thus presented some evidence supporting the trial court’s order
requiring Appellants to turn over DirectMed’s customer credit card and bank
information. We overrule this part of Appellants’ second subissue.
We need not address Appellants’ argument that the temporary injunction
destroys the status quo and awards Appellees the ultimate relief they seek in
the suit due to the injunction’s requirement that Lifeguard turn over to a third
party data and information relating to the “Contested CASA Members” because
we have already determined above that the trial court abused its discretion by
concluding that CASA will be irreparably harmed in the absence of a temporary
injunction. Because CASA did not demonstrate irreparable harm, an essential
element of injunctive relief, it is not entitled to a temporary injunction requiring
Appellants to turn over data and information regarding its members, whether
they are “Contested CASA Members” or non-contested CASA members.
We hold that the trial court’s temporary injunction properly preserves the
status quo pending resolution of the suit and does not award Appellees the
ultimate relief they seek in the suit. We overrule Appellants’ second subissue
arguing to the contrary.
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VI. V AGUE, O VERLY B ROAD, N OT S PECIFIC
In the third subissue of their only issue, Appellants argue that the order
granting the temporary injunction is unenforceable because it is vague, overly
broad, and not specific in its terms.
Rule of civil procedure 683 provides in relevant part that every order
granting an injunction shall set forth the reasons for its issuance, shall be
specific in terms, and shall describe in reasonable detail and not by reference
to the complaint or other document the act or acts sought to be restrained.
Tex. R. Civ. P. 683. The requirements of rule 683 are mandatory, and an order
granting a temporary injunction that does not meet them is subject to being
declared void and dissolved. InterFirst Bank San Felipe, N.A. v. Paz Constr.
Co., 715 S.W.2d 640, 641 (Tex. 1986); see Qwest Commc’ns Corp. v. AT&T
Corp., 24 S.W.3d 334, 337 (Tex. 2000).
A. Paragraphs 6, 7, & 8
Appellants argue that the injunction is unenforceable because its
paragraphs 6, 7, and 8 are vague and overly broad. Paragraphs 6, 7, and 8
concern only the third-party vendor’s handling of the “Contested CASA
Members’” data and information. As with Appellants’ status quo argument
regarding “Contested CASA Members,” we need not address this argument
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because CASA failed to demonstrate irreparable harm, negating its entitlement
to injunctive relief.
B. “Unfettered”
Appellants argue that the order is unenforceable because the term
“unfettered” as used in the injunction’s paragraph 1 is vague and overly broad.
They contend that they are or have been in possession of DirectMed and CASA
records that are not in electronic form and that “[i]f read literally, ‘unfettered’
access would enable Appellees to demand to see the records at any time of day
or night, on weekends and holidays, and as often as they wish.” We disagree.
Paragraph 1 enjoins Appellants from denying Appellees unfettered access to “all
data, information and records, regarding DirectMed and CASA members,
excluding ‘Contested CASA Members.’” Paragraph 2 determines how the
“data, information and records” will be transferred—it requires that Appellants
transfer the data and information to Appellees via a hard drive device.
Paragraph 4 requires Appellants to update daily the data transferred pursuant
to paragraph 2 using an SFTP site. The injunction thus requires the transfer of
data, information, and records through electronic means only. Appellants’
argument speculating about how data that is not in electronic form will be
transferred is irrelevant to whether the order is enforceable because no part of
the injunction requires the transfer of data in a form other than electronic.
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Appellees’ argument is also unpersuasive because it examines the term
“unfettered” in a vacuum and not in light of the evidence presented at the
injunction hearing. Appellees filed this lawsuit primarily because they requested
access to all of the DirectMed and CASA data and records under the control of
Lifeguard and Amacore but were provided with only part (approximately 20%,
according to Williams) of that data and information. The trial court’s use of the
term “unfettered” is unambiguously intended to prohibit Lifeguard from cherry-
picking what data and information it turns over to Appellees. We hold that the
trial court’s use of the term “unfettered” is not vague and overly broad, and we
overrule this part of Appellants’ third subissue.
C. Amacore
Appellants argue that the injunction is unenforceable as to Amacore
because there is no evidence that Amacore has possession of any of the data
and information that the order requires be turned over. We agree.7 Amacore
is Lifeguard’s parent company. It is undisputed that Lifeguard is in possession
of Appellees’ data and information because of agreements that it, not Amacore,
7
… Appellees’ response that Appellants failed to preserve this argument
for appellate review by not asserting it at the trial court level is without merit.
See Big D Props., Inc. v. Foster, 2 S.W.3d 21, 23 (Tex. App.—Fort Worth
1999, no pet.) (“We . . . hold that rule 683’s requirements may not be
waived.”); see also Kaufmann v. Morales, 93 S.W.3d 650, 655 n.2 (Tex.
App.—Houston [14th Dist.] 2002, no pet.) (same).
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has with Appellees. According to Williams, the data and information that
Appellees seek is retained in the L.I.S.A. system. Bruggemann testified that “if
you have full access to the LISA system you can see every aspect, every - -
every ounce of information that’s been collected on - - on each member for - -
under each plan, under each group, and under each client.” According to
Bruggemann, L.I.S.A is maintained by Lifeguard. Bruggemann testified that
Amacore owns a call center that sells DirectMed’s products, but there is no
evidence that Amacore has possession of any of the data that Appellees seek.
We sustain this part of Appellants’ third subissue.
D. Date Limitation
Appellants argue that the temporary injunction order is overly broad
because it does not contain a date limitation consistent with the CID request
for information. They contend that the primary reason for the relief granted by
the injunction order was so that Appellees could properly respond to the CID;
that the CID requires information and documents from July 1, 2003, to the
present; and that Appellees did not present any evidence of the need for
information and documents prior to July 1, 2003.
The CID does not limit the information and documents that DirectMed
may produce from July 1, 2003, to the present. Rather, it also states, “If it is
necessary to refer to a prior time to fully answer an interrogatory or respond to
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a request for production of documents, YOU should do so.” [Emphasis added.]
Because the CID permits DirectMed to produce information and documents from
before July 1, 2003, in order to fully respond to its demands, the trial court did
not abuse its discretion by not including in its order a date limitation of July 1,
2003. We overrule this part of Appellants’ third subissue.
VII. M OTION TO S TRIKE A FFIDAVIT
Appellants filed a motion to strike the affidavit of Robert T. Trautmann,
an attorney who works with an attorney representing Appellees. The affidavit,
which is dated September 21, 2009, and is attached to Appellees’ brief as part
of the appendix, purports to relate information regarding the Minnesota
Attorney General’s ongoing investigation of DirectMed. “It is axiomatic that an
appellate court reviews actions of a trial court based on the materials before the
trial court at the time it acted.” Methodist Hosps. of Dallas v. Tall, 972 S.W.2d
894, 898 (Tex. App.—Corpus Christi 1998, no pet.) (citing Univ. of Tex. v.
Morris, 162 Tex. 60, 64, 344 S.W.2d 426, 429 (reasoning that appellate
court’s “action must be controlled by the record made in the trial court at the
time the injunction was issued”), cert. denied, 366 U.S. 9 (1961))).
Trautmann’s affidavit was not part of the evidence adduced by either party at
the hearing on Appellees’ application for a temporary injunction and was not
considered by the trial court in entering the temporary injunction order, which
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was signed on August 3, 2009. We grant Appellants’ motion to strike Robert
T. Trautmann’s affidavit.
VIII. C ONCLUSION
Having (1) sustained part of Appellants’ first subissue complaining that
CASA failed to demonstrate irreparable injury, (2) sustained part of Appellants’
third subissue complaining that there is no evidence that Amacore has
possession of the data and information sought by Appellees, and (3) overruled
the remainder of Appellants’ subissues and arguments, we modify the trial
court’s findings and rulings set forth on pages one through two of the order as
follows:
Unless Defendant Lifeguard Benefit Services, Inc. (Lifeguard)
is immediately enjoined, Plaintiff Direct Medical Network Solutions,
Inc. (DirectMed) will suffer immediate and irreparable injury and
extreme hardship for which there is no adequate remedy at law.
In part, the Court finds that absent a temporary injunction,
(1) Plaintiff DirectMed will be denied possession of the data,
information, and records regarding DirectMed members to which
they have the right of possession; (2) Plaintiff DirectMed will not
be able to properly respond to the Minnesota Attorney General’s
Civil Investigative Demand or other investigations; (3) Plaintiff
DirectMed will not be able to properly prepare and defend itself in
connection with such investigations; (4) Plaintiff DirectMed’s failure
to prepare and respond adequately to any investigations or actions
by Defendant Lifeguard would create grounds for further action
against it, could affect the nature of the investigation, potentially
expose Plaintiff DirectMed and/or its officers to charges being
initiated, and impact their goodwill, business, client relationships,
reputation in the business community, and ability to compete on a
level playing field in the industry; (5) any charges arising from the
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failure to respond to any investigation or complaint would cause
Plaintiff DirectMed immediate irreparable harm and damage through
the loss of customers, damage to its relationships with clients,
benefits providers, vendors, loss of goodwill, and the permanent
injury to Plaintiff DirectMed’s business reputation; (6) failing to
have possession of the data, information, and records concerning
all of its customers’ and members’ records would injure Plaintiff
DirectMed’s ability to service and direct service of those customers
and members and their benefits and to investigate and evaluate the
services being provided to those customers and members.
We modify paragraph 1 of the temporary injunction order to read as follows:
That Defendant Lifeguard is hereby enjoined from denying Plaintiff
DirectMed and its agents, employees, and/or contractors from
having immediate possession of and unfettered access to all data,
information, and records regarding DirectMed members.
We modify paragraph 2 to read as follows:
Defendant Lifeguard shall, on or before 5:00 P.M. on the tenth day
after the Supreme Court of Texas dissolves or lifts the stay entered
on September 14, 2009, in Cause No. 09-0768, transfer an
external hard drive device to be provided by Plaintiff DirectMed,
and to deliver to Plaintiff DirectMed all data, information, and
records, including but not limited to credit card and bank
information regarding DirectMed members, in the record layout
format attached to the trial court’s Order as Appendix A.
We modify paragraph 4 to read as follows:
Defendant Lifeguard shall update the transfers referred to in
Paragraph 2 hereof on a daily basis by use of an SFTP site
designated by Plaintiff DirectMed.
We modify paragraph 10 to read as follows:
Defendant Lifeguard, shall within twenty-four hours of receipt of
any inquiry, investigative demand, or like communication received
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by Defendant Lifeguard regarding Plaintiff DirectMed, its members,
or any plan offered by Plaintiff DirectMed, forward the same to
Plaintiff DirectMed.
We modify paragraph 11 to read as follows:
Defendant Lifeguard shall be enjoined from engaging in any
responses or communications with the Minnesota Attorney General
or any other investigative unit purportedly on Plaintiff DirectMed’s
behalf.
We further modify the temporary injunction order to delete paragraphs 3, 5, 6,
7, 8, and 9, as those paragraphs are only relevant to the transfer of data and
information relating to the “Contested CASA Members.” We affirm the
temporary injunction as modified.
BILL MEIER
JUSTICE
PANEL: LIVINGSTON, WALKER, and MEIER, JJ.
DELIVERED: February 11, 2010
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