Rosemary Spring v. Walthall, Sachse & Pipes, Inc.--Appeal from 224th Judicial District Court of Bexar County

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No. 04-05-00228-CV


Rosemary SPRING,








From the 224th Judicial District Court, Bexar County, Texas

Trial Court No. 2005-CI-03089

Honorable Michael P. Peden, Judge Presiding //

Opinion by: Phylis J. Speedlin, Justice

Sitting: Sarah B. Duncan, Justice

Karen Angelini, Justice

Phylis J. Speedlin, Justice

Delivered and Filed: August 24, 2005



Rosemary Spring appeals from the trial court s order granting a temporary injunction against her in a lawsuit brought by her former employer, Walthall, Sachse & Pipes, Inc. ( WS&P ) alleging breach of contract, theft of trade secrets and confidential information, breach of fiduciary duty, and unfair competition. We affirm the trial court s order.


Rosemary Spring went to work for WS&P, an insurance agency that sells a variety of insurance products to businesses and individual clients, initially as an independent contractor and then as a direct employee in 1993. Spring was a producer for WS&P, selling insurance products to clients. When she became an employee of WS&P, Spring executed an employment agreement containing non-competition and non-piracy provisions. Following a dispute with the company over the amounts she was receiving as commissions on some of her accounts, Spring tendered written notice of her resignation to WS&P on February 16, 2005. //

Prior to her resignation, Spring rented new office space and had phone lines installed there. In addition, Spring contacted one of her customers to advise them that she would be resigning from WS&P. Within one week of her resignation, Spring contacted approximately thirty-three of her former WS&P clients regarding her departure. Twenty-five of those clients ultimately signed agent of record letters indicating their desire to continue to do their insurance business with Spring rather than another producer with WS&P. After receiving agent of record letters from these former clients, WS&P filed suit against Spring alleging breach of contract, theft of trade secrets and confidential information, breach of fiduciary duty, and unfair competition by misappropriation and use. In its suit, WS&P is seeking damages and attorney s fees, and to both temporarily and permanently enjoin Spring from certain conduct related to her business. After a hearing on the application for temporary injunction, the trial court granted an injunction to continue in effect until the case is resolved by a trial on the merits. // The temporary injunction restrains Spring and her employees, agents, or other representatives from directly or indirectly:

(a) Contacting the customers of [WS&P] or such customers owners, directors, officers, employees, or other representatives, in an effort to elicit or procure insurance business with such customers;

(b) Using any trade secret, customer lists, renewal information, applications, policy information or proprietary information procured from [WS&P] in its business;

(c) Disseminating to any third party any of the confidential, trade secret, or other information obtained from [WS&P];

(d) Altering, modifying, damaging, destroying, or in any way changing any of the confidential or proprietary information obtained from [WS&P] in this case until further order of this Court; and

(e) Accepting any insurance business from any of [WS&P s] customers; provided that [Spring] is not precluded from servicing those existing insurance policies which are in effect for customers or clients of [Spring] as of April 6, 2005, as reflected on attached Exhibit A .


This interlocutory appeal followed.


Spring contends on appeal that the trial court abused its discretion in granting injunctive relief because: (1) the covenant not to compete and non-piracy clauses in the employment agreement are unenforceable; (2) there was no breach of fiduciary duty; and (3) WS&P came to court with unclean hands. //

Standard of Review

A temporary injunction is an extraordinary remedy and does not issue as a matter of right. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993)(per curiam). In order to obtain a temporary injunction, the movant must show a cause of action against the defendant, a probable right to the relief sought after a trial on the merits, and a probable, imminent and irreparable injury in the interim. Id. at 57; Khaledi v. H.K. Global Trading, Ltd., 126 S.W.3d 273, 280 (Tex. App. San Antonio 2003, no pet.). The applicant is not required to establish that it will ultimately prevail on final trial. Walling, 863 S.W.2d at 58; Khaledi, 126 S.W.3d at 280. The only question before the trial court is whether the applicant is entitled to preservation of the status quo pending trial on the merits. Walling, 863 S.W.2d at 58; see also Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Consequently, in an interlocutory appeal from a temporary injunction, this court does not review the merits of the ultimate issues. Davis v. Huey, 571 S.W.2d 859, 861 (Tex. 1978).

We review only the trial court s exercise of discretion in determining whether the plaintiff showed a likelihood of success on the merits of the issues at trial. Davis, 571 S.W.2d at 862. We reverse a trial court s grant of an injunction only for a clear abuse of discretion. Butnaru, 84 S.W.3d at 204. The trial court abuses its discretion when it misapplies the law to the established facts or when the evidence does not reasonably support the conclusion that the applicant has a probable right of recovery. Khaledi, 126 S.W.3d at 280 (quoting State v. Southwestern Bell Tel. Co., 526 S.W.2d 526, 528 (Tex. 1975)). All legitimate inferences from the evidence are to be drawn in favor of the trial court s judgment. Id. The trial court does not abuse its discretion when it bases its decision on conflicting evidence and the evidence in the record reasonably supports its conclusion. Id.; see also Butnaru, 84 S.W.3d at 211.

Temporary Injunction

We begin our analysis by noting that the issues Spring raises on appeal ask this court to address the ultimate issues presented by the underlying lawsuit the enforceability of the contractual covenants, whether she breached a fiduciary duty, and whether WS&P breached the employment agreement prior to Spring s resignation. We are not permitted to directly address the merits of the underlying claims in this interlocutory appeal. Davis, 571 S.W.2d at 861. While the trial court considers evidence on ultimate issues such as the enforceability of agreements at the hearing on the temporary injunction, it does so only to make a determination as to the applicant s probable right of recovery and, hence, entitlement to preservation of the status quo by injunction. We review the trial court s determination of the likelihood of success at trial for an abuse of discretion. Butnaru, 84 S.W.3d at 204; Khaledi, 126 S.W.3d at 280. To defeat WS&P s application for injunction, Spring could have presented evidence to the trial court which would preclude the trial court from finding that WS&P had shown a probability of succeeding on its claims, such as evidence establishing that the covenant not to compete was unenforceable as a matter of law. See Tex. Bus. & Comm. Code Ann. 15.50 (Vernon 2002); see, e.g., CRC-Evans Pipeline Int l, Inc. v. Myers, 927 S.W.2d 259, 265 (Tex. App. Houston [1st Dist.] 1996, no writ) (trial court did not abuse its discretion in concluding, based on the evidence before it, that non-compete covenant was unenforceable as a matter of law and, therefore denying temporary injunction). In this case, however, Spring presented no such evidence at the hearing.

Here, the trial court had before it the employment agreement signed by Spring containing both non-competition and non-piracy clauses. The non-competition provision provides in relevant part:

for a period of 12 months following termination of employment for any reason, [Spring] will not act for herself or for any other employer or for any other firm or corporation in any capacity whatsoever as agent, broker, insurance consultant or otherwise in competition with the Agency within a 25 mile radius of the Agency s principal place of business.


In the non-piracy covenant, Spring agreed that, for a period of 3 years following termination of his/her employment relationship with the Agency, [Spring] will not use the knowledge of the Agency s clients or customers or their insurance needs to solicit or accept insurance business from any of the Agency s customers. The contract further provides, [t]he parties agree that the ownership of all accounts, . . . all records and all goodwill and all other items relating to the Agency shall be and remains the exclusive property of the Agency. There was testimony that every employee of the company is required to sign non-compete and non-disclosure agreements which become part of the employee s file. Spring acknowledged that the employment agreement admitted into evidence was the agreement that she had signed.

The trial court heard testimony that after Spring s resignation, WS&P became aware that some information was missing from WS&P s files which would be helpful to a person in securing insurance business from its clients and necessary for the renewal of their applications. Spring also testified that she first contacted one of her clients regarding her resignation on the Friday before she actually resigned. She admitted that she contacted approximately thirty-three of her customers within one week of her resignation from WS&P, and that twenty-five of those customers executed change of agent letters. While Spring testified that WS&P owes her money for commissions that had been modified without her knowledge an act which Spring contends constituted a breach of the employment agreement, a WS&P executive testified that Spring had been paid all of the money to which she was entitled under her contract with the exception of a disputed amount associated with her last two paychecks. // We conclude that the evidence in the record reasonably supports the trial court s conclusion that WS&P would likely prevail on its claims against Spring; therefore, the trial court did not abuse its discretion in granting the temporary injunction. Davis, 571 S.W.2d at 862; see Khaledi, 126 S.W.3d at 283. //


Because we conclude that the trial court did not abuse its discretion in determining that WS&P was entitled to preservation of the status quo by injunction, we affirm the trial court s order granting the temporary injunction. //

Phylis J. Speedlin, Justice