You Got a Non-Compete Injunction, But Can You Make it Stick in Texas?

imagesLast month, the Dallas Court of Appeals ruled on two temporary injunction orders – one was affirmed (i.e. it continued to be enforce) and the other one was dissolved (i.e. it was declared void). What was the key difference? The first injunction, in HMS Holdings Corp., et al. v. Public Consulting Group, Inc., complied with all the requirements set out in the Texas Rules of Civil Procedure, but the second injunction, in Medi-Lynx Monitoring, Inc., et al. v. AMI Monitoring, Inc., did not, so it was dissolved. This means that all the hard work, time and money that went into getting ready for the temporary injunction hearing and obtaining the order from the district court judge, was all for naught. 

Businesses often seek injunctions against former employees and competitors who have violated their non-disclosure agreements or non-competition and non-solicitation agreements. In such circumstances, a temporary injunction order from a court is ideal because, if granted, it prohibits a former employee or a competitor from engaging in competitive activities or using confidential information that was shared under the non-disclosure agreement while the lawsuit between the parties goes on. Thus, a temporary injunction, provides the wronged company with immediate relief and helps prevent further damage to its business by stopping the hemorrhaging of clients, employees, or confidential information. Needless to say, when a business is loosing money due to wrongful activities of a former employee or a competitor, such an injunction order can be of paramount importance. 

In Medi-Lynx Monitoring, the injunction order was declared void by the Court of Appeals because it did not set the case for trial on the merits – an express requirement under the Texas Rules of Civil Procedure. The defendant against whom the order was entered, moved to dissolve it, and the Dallas Court of Appeals granted its motion finding that the trial court abused its discretion in granting a temporary injunction that did not set the cause for trial on the merits.  

In contrast, in Holdings Corp., the temporary injunction met all the requirements specified in the Texas Rules of Civil Procedure, and, therefore, was upheld by the Dallas Court of Appeals, event though it was challenged on other grounds.  

Takeway: A party seeking a temporary injunction from a Texas court in a non-compete or a trade secrets misappropriation case should make sure that the order contains all the bells and whistles required by the Texas Rules of Civil Procedure. 

Leiza has handled multiple temporary restraining order and temporary injunction hearings and has assisted clients in all aspects of trade secret protection, from audits to litigation. Contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

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