Production Instruments Sales and Service, Inc. d/b/a Croft Services and Energy Maintenance Services Group I, LLC v. Frank Croft--Appeal from 129th District Court of Harris County

Opinion issued November 29, 2007

In The

Court of Appeals

For The

First District of Texas

NO. 01-07-00434-CV

PRODUCTION INSTRUMENTS SALES AND SERVICE, INC. D/B/A CROFT SERVICES AND ENERGY MAINTENANCE SERVICES GROUP I, L.L.C., Appellants

V.

FRANK CROFT, Appellee

On Appeal from the 129th District Court

Harris County, Texas

Trial Court Cause No. 2007-16359

MEMORANDUM OPINION

This is an accelerated appeal from the trial court s denial of a request to issue a temporary injunction. See Tex. R. App. P. 28.1; see also Tex. Civ. Prac. & Rem. Code Ann 51.014(a)(4) (Vernon Supp. 2007). In one issue, appellants assert that the trial court abused its discretion by finding that the parties noncompetition agreement was not legally enforceable.

We affirm.

Background

Production Instruments Sales and Service, Inc. d/b/a Croft Services sells, services, repairs, and installs pneumatic and electronic flow measurement and gas control products, services, and systems to oil and gas well sites. In May 2005, Frank Croft, the sole and founding owner of Croft Services, sold the company to Energy Maintenance Service Group I, L.L.C. ( EMS ). Two days later, the parties signed a noncompetition agreement, which provided that:

[Croft] shall not, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, or render services or advice or other aid to, or guarantee any obligation of, any person engaged in or planning to become engaged in any other business located within a 200 mile radius of Kirvin, Texas, that is in competition with any business carried on by the Corporation or any of its affiliates (each a Competing Business ) . . . .

Neither Corporation nor Competing Business is defined in the stock purchase agreement or the non-competition agreement.

After the sale, Croft began working as a consultant for Valence Operating Company, which had been one of Croft Services largest customers for three years prior to the sale. Croft consulted as a subcontractor for EMS, which billed Valence directly and then paid Croft, less its markup and 25% share of his fees. As a consultant for Valence, Croft did the same kind of work that he had done prior to the sale of his company.

In fall 2006, Croft resigned as a subcontractor for EMS, and he accepted a position as a field foreman for Valence, i.e., as a salaried, direct employee of Valence. Croft testified that none of his field-foreman work is the same as the work he did for Valence before the sale of his company. As a field foreman, Croft authorizes contractors to do certain jobs, ordinarily selecting them from a Valence-approved vendor list. Croft testified that he assigned all pneumatic safety system work to EMS until EMS sued him.

In March 2007, EMS and Croft Services sued Croft for breach of the noncompetition agreement. In addition, they sought a temporary injunction to prohibit Croft from deleting information from his computers and from engaging in competition in violation of the [stock purchase agreement] and the Non-Competition Agreement.

After granting a temporary restraining order, the trial court held an evidentiary hearing in April 2007 on the application for temporary injunction. At the hearing, Harvey Schnitzer, EMS s chief financial officer, testified that EMS had seen a steep decline in revenue from Valence since Croft had become a Valence employee. He also testified that if Croft were to solicit business from other clients, Croft Services would suffer, but he could not quantify the damage. EMS and Croft Services argued that they were irreparably harmed by Croft s actions because of the decline in business and because Croft s actions established a precedent that could, in the future, lead Croft to start a new business to compete directly with EMS and Croft Services.

The trial court denied the application for temporary injunction without findings of fact or conclusions of law. The trial court, did, however, cite John R. Ray & Sons, Inc. v. Stroman, which held a non-competition agreement unenforceable. 923 S.W.2d 80, 84 86 (Tex. App. Houston [14th Dist.] 1996, writ denied). EMS and Croft Services appealed.

Standard of Review

We review the denial of an application for temporary injunction for abuse of discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). A trial court abuses its discretion when it acts without reference to guiding rules or principles; a trial court does not abuse its discretion if some evidence reasonably supports its decision. Id. In an interlocutory appeal from the grant or denial of an application for temporary injunction, we decide only whether the court abused its discretion: we do not resolve the merits of the underlying case. Tex. Indus. Gas v. Phoenix Metallurgical Corp., 828 S.W.2d 529, 532 (Tex. App. Houston [1st Dist.] 1992, no writ). Therefore, we do not reach the ultimate issue of whether the noncompetition agreement is enforceable under Texas law. Reach Group, L.L.C. v. Angelina Group, 173 S.W.3d 834, 837 n.3 (Tex. App. Houston [14th Dist.] 2005, no pet.). In addition, because the trial court did not make findings of fact or conclusions of law, we will uphold the trial court s order on any legal theory supported by the record. Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978).

Temporary Injunction

At a hearing for a temporary injunction, the only question before the trial court is whether the applicant is entitled to preserve the status quo pending trial on the merits. Tex. Indus. Gas, 828 S.W.2d at 532. Because it is an extraordinary remedy, a temporary injunction will not issue without pleading and proof of: (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. Butnaru, 84 S.W.3d at 204. A trial court may issue a temporary injunction to prevent a threatened injury, but the act to be enjoined must be more than speculative and the injury that flows from the act must be more than conjectural. Tex. Indus. Gas, 828 S.W.2d at 532. The injury to be prevented must also be irreparable, i.e., such that the injured party could not be adequately compensated in damages or such damages would not be capable of measurement by any certain pecuniary standard. Butnaru, 84 S.W.3d at 204. Generally, a court will not enforce contractual rights by injunction, because a party can rarely show that breach of contract damages are an inadequate legal remedy. Id. at 211.

Discussion

Appellants sole issue in this appeal is that the trial court abused its discretion as a matter of law when it incorrectly determined that the Non-Competition Agreement . . . was not legally enforceable as written. Because this issue goes to the merits of the appeal, this question is not properly before us in an interlocutory appeal from the denial of a temporary injunction. Reach Group, 173 S.W3d at 837 n.3. Moreover, appellants failed to show that the threatened injury was imminent or irreparable. EMS s chief financial officer speculated that if Croft solicited other Croft Services or EMS customers, such solicitation would damage the business and make it difficult if not impossible for Croft Services or EMS to regain the client.

In addition, EMS and Croft Services argued that Croft s actions set a precedent for Croft possibly to violate the noncompetition agreement in the future. However, there is no evidence in the record that Croft had solicited other EMS and Croft Services clients or that he intended to do so in the future. To the contrary, the evidence showed that Croft had accepted a position with Valence. Moreover, there is no evidence that the alleged, potential harm to EMS or Croft Services is not capable of measurement by any certain pecuniary standard. Therefore, we conclude that the trial court did not abuse its discretion by denying the application for temporary injunction because there was no proof of imminent and irreparable harm to be enjoined.

We overrule appellants only issue.

Conclusion

Having overruled appellants sole issue, we affirm the order of the trial court. The Clerk of this Court is directed to issue the mandates immediately. See Tex. R. App. P. 18.6.

Sam Nuchia

Justice

Panel consists of Justices Nuchia, Jennings, and Keyes.