Court Opinion

ID: 9364748
Source: CourtListenerOpinion
Date Created: 2023-01-20 01:00:43.912969+00
Date Added: 2024-06-11T17:15:39.696003
License: Public Domain

Case: 21-40578         Document: 00516616863            Page: 1      Date Filed: 01/19/2023

              United States Court of Appeals
                   for the Fifth Circuit                                       United States Court of Appeals
                                                                                        Fifth Circuit

                                                                                      FILED
                                                                               January 19, 2023
                                        No. 21-40578                             Lyle W. Cayce
                                                                                      Clerk

   Providence Title Company,

                                                   Plaintiff—Appellee/Cross-Appellant,

                                             versus

   Tracie L. Fleming,

                                                Defendant—Appellant/Cross-Appellee.

                      Appeal from the United States District Court
                           for the Eastern District of Texas
                                USDC No. 4:21-CV-147

   Before King, Duncan, and Engelhardt, Circuit Judges.
   Per Curiam:*
          Defendant-Appellant/Cross-Appellee Tracie Fleming appeals the
   district court’s July 1, 2021 preliminary injunction order, which prohibits her
   from employment in any capacity by Truly Title, Inc., or any competitor of
   Providence Title, Inc., within specified Texas counties, pending the
   resolution of this case. 1 Plaintiff-Appellee/Cross-Appellant Providence

          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
          1
             See 28 U.S.C. § 1292(a)(1) (authorizing appeals from interlocutory orders
   granting injunctions).
Case: 21-40578          Document: 00516616863                  Page: 2     Date Filed: 01/19/2023

                                           No. 21-40578

   Title, Inc., seeks affirmance of the district court’s entry of a preliminary
   injunction, but cross-appeals to seek an expansion of the scope of the
   injunction and a “correction” of the district court’s determination of the
   effective date of the parties’ noncompetition agreement. Finding no abuse
   of discretion in the district court’s rulings, we AFFIRM the district court’s
   July 1, 2021 preliminary injunction order.
                                                    I.
           Providence Title, Inc. provides title services in various parts of Texas,
   including Dallas/Fort Worth, Houston, and San Antonio. Prior to
   terminating her employment by Providence on February 3, 2021, Tracie
   Fleming served as Providence’s President and a member of its Advisory
   Committee. Providence’s Advisory Committee is a committee of
   shareholders charged with the management of its business and affairs,
   including determination of ownership compensation. It has complete control
   over    matters       normally      reserved          for   directors   and   shareholders.
   (Shareholders’ Agreement, Art.           3). 2   Before Fleming became Providence’s
   President, she was its Chief Operating Officer. Fleming’s employment at
   Providence commenced in 2008. 3
           Providence operates only in Texas. Truly, a competing title company
   operating in multiple states, expanded its business into Texas in 2019.
   Providence and Truly engaged in acquisition negotiations throughout 2019
   before ultimately deciding to cease negotiations. Thereafter, in December
   2020, Fleming, unbeknownst to Providence, entered into an employment
   agreement with Truly. After resigning her employment at Providence on

           2
               Providence does not have a board of directors.
           3
             Fleming’s submissions indicate that her work in Texas’ title insurance business
   began in 1998.

                                                    2
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   February 3, 2021, Fleming began work for Truly on February 4, 2021. In the
   roughly two months between Fleming’s agreeing to work for Truly and her
   actual departure from Providence, twenty additional employees, including
   Fleming’s husband, Mark Fleming, left Providence for Truly.
          Fleming appeals the district court’s July 1, 2021 preliminary
   injunction order. Referencing the noncompetition provision included in the
   First Amendment to Providence’s Shareholders’ Agreement, the order
   enjoins her from “maintaining employment in any capacity with Truly Title,
   Inc., or with any other competitor of Providence Title, Inc., within the Texas
   counties of Tarrant, Dallas, Harris, Bexar, or any Texas counties contiguous
   to those counties pending the resolution of this case.”
          Article 8 of Providence’s Shareholders’ Agreement addresses pur-
   chases and sales of Providence stock. The First Amendment to Providence’s
   Shareholders’ Agreement added Sections 8.3 and 8.4 to Article 8. 4 The non-
   competition provision, set forth in Section 8.4, provides as follows:
          Non-Compete. Offering Shareholder agrees for a period of twenty-
          four (24) months from the date of the Closing (defined in Section 8.1)
          he/she will not (i) serve as a partner, employee, consultant, officer,
          director, member, manager, agent, associate, investor, or other-
          wise, or (ii) directly or indirectly, own, purchase, organize or take pre-
          paratory steps for the organization of, or (iii) build, design, finance,
          acquire, lease, operate, manage, invest in, work or consult for or oth-
          erwise affiliate hisself [sic]/herself with, any business in competition
          with or otherwise similar to Providence’s business within the Texas
          counties of Tarrant, Dallas, Harris, Bexar or any Texas counties con-
          tiguous to such stated counties. Breach of this covenant shall entitle
          the payees of the promissory notes given in payment for the Shares

          4
            Providence’s Shareholders’ Agreement became effective on June 1, 2010. The
   First Amendment to Providence’s Shareholders’ Agreement, which Fleming and the other
   Providence shareholders signed, became effective on April 9, 2013.

                                            3
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          acquired under Section 8.2 herein to defer all payments for a period
          not to exceed twenty-four (24) months, without interest.

                                      II.
          We review an order granting a preliminary injunction for an abuse of
   discretion. Atchafalaya Basinkeeper v. U.S. Army Corps of Eng’rs, 894 F.3d
   692, 695–96 (5th Cir. 2018); Google, Inc. v. Hood, 822 F.3d 212, 220 (5th Cir.
   2016). “The district court abuses its discretion if it relies on clearly erroneous
   factual findings in deciding whether to grant a preliminary injunction or relies
   on ‘erroneous conclusions of law.’” Atchafalaya Basinkeeper, 894 F.3d at 696.
   The district court’s findings of fact are reviewed for clear error. Google, 822
   F.3d at 220. The district court’s legal determination are reviewed de novo.
   Id.
          A preliminary injunction is an “‘extraordinary and drastic remedy.’”
   Anderson v. Jackson, 556 F.3d 351, 360 (5th Cir. 2009) (quoting Holland Am.
   Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir. 1985)). To issue such
   relief, a court “must balance the competing claims of injury and must
   consider the effect on each party of the granting or withholding of the
   requested relief.” Winter v. Nat. Res. Def. Council, 555 U.S. 7, 24 (2008)
   (quoting Amoco Prod. Co. v. Vill. of Gambell, AK, 480 U.S. 531, 542 (1987)).
   And only when the movant has “clearly carried the burden of persuasion”
   should a court grant preliminary injunctive relief. Anderson, 556 F.3d at 360.
          To obtain a preliminary injunction, a movant must establish the
   following: (1) a substantial likelihood of success on the merits; (2) a
   substantial threat of irreparable injury if the injunction is not issued; (3) that
   the threatened injury if the injunction is denied outweighs any harm that will
   result if the injunction is granted; and (4) that the grant of an injunction will
   not disserve the public interest. Google, 822 F.3d at 220; Janvey v. Alguire,
   647 F.3d 585, 595 (5th Cir. 2011). If the movant fails to establish any one of

                                           4
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   these factors, the movant cannot obtain injunctive relief. See Lake Charles
   Diesel, Inc. v. Gen. Motors Corp., 328 F.3d 192, 196 (5th Cir. 2003) (explaining
   that a preliminary injunction “should not be granted unless the party seeking
   it has ‘clearly carried the burden of persuasion’ on all four requirements”
   (quoting Mississippi Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d
   618, 621 (5th Cir. 1985)).
              Under Texas law, the elements of a breach of contract claim are (1) a
   valid contract, (2) performance, (3) breach, and (4) damages resulting from
   the breach. Myan Mgmt. Grp., L.L.C. v. Adam Sparks Fam. Revoc. Tr., 292
   S.W.3d 750, 754 (Tex. App.—Dallas 2009, no pet.). In this matter,
   Providence claims that Fleming has breached her noncompetition
   agreement. For a “covenant not to compete” to be enforceable under Texas
   law, section 15.50(a) of the Texas Business and Commerce Code requires
   that it:
              (1) be ancillary to or part of an otherwise enforceable agreement;
              (2) contain reasonable limitations as to time, geographical area, and
                  scope of activity to be restrained; and
              (3) not impose a greater restraint than necessary to protect the
                  goodwill or other business interest of the promisee.
   See Tex. Bus. & Com. Code Ann. § 15.50(a).
                                            III.
              Arguing that the district court’s preliminary injunction should be
   vacated, Fleming maintains that the prerequisites for its entry have not been
   satisfied. She alternatively argues that the injunction is overbroad. Cross-
   appealing, Providence contends that the scope of the preliminary injunction
   should be expanded to prohibit Fleming from any employment by Truly, or
   any other competitor operating in one of the counties covered by the
   noncompetition agreement, regardless of Fleming’s physical work location.

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   Providence also seeks a “correction” of the district court’s order to reflect
   that Fleming’s noncompetition provision became effective immediately
   upon her February 3, 2021 resignation, rather than the “date of the Closing”
   that the parties have determined to be May 24, 2021.
                                     Fleming’s Appeal
           Our review of the July 1, 2021 preliminary injunction order begins with
   the district court’s determination that Providence has established a
   substantial likelihood of success on the merits of its breach of contract claim
   against Fleming. Arguing that the district court erred in this assessment,
   Fleming maintains that the noncompetition provision in Section 8.4 of
   Providence’s Shareholders’ Agreement does not satisfy the requirements of
   section 15.50(a) of the Texas Business and Commerce Code and, thus, is
   legally unenforceable. See Tex. Bus. & Com. Code Ann. § 15.50(a).
           Regarding § 15.50(a)’s first requirement—that the noncompetition
   covenant “be ancillary to or part of an otherwise enforceable agreement”—
   Fleming contends that Providence has not shown (1) that the consideration
   given by Providence in the “otherwise enforceable agreement,” i.e., the
   Providence Shareholders’ Agreement, is reasonably related to an “interest
   worthy of protection” by a noncompetition covenant; and (2) that the
   noncompetition covenant was “designed to enforce [Fleming]’s return
   consideration or return promise(s)” in Providence’s Shareholders’
   Agreement. 5 Our review of the record in this matter, however, reveals that

           5
             See Marsh USA Inc. v. Cook, 354 S.W.3d 764, 773–78 (Tex. 2011); Titan Oil & Gas
   Consultants, LLC v. Willis, 614 S.W.3d 261, 267 (Tex. App.—Texarkana 2020, pet.
   denied); Neurodiagnostic Tex., LLC v. Pierce, 506 S.W.3d 153, 163–66 (Tex. App.—Tyler
   2016). Goodwill, trade secrets, specialized training, and other confidential or proprietary
   information are protectable business interests. Marsh, 354 S.W.3d at 774; Neurodiagnostic
   Tex., 506 S.W.3d at 164.

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   Fleming did not timely make these arguments in the district court. 6 And,
   generally, arguments not raised in the district court are forfeited on appeal.
   See Rollins v. Home Depot USA, 8 F.4th 393, 397 (5th Cir. 2021) (“We do not
   ordinarily consider issues that are forfeited because they are raised for the
   first time on appeal).
           Of course, challenges to subject matter jurisdiction are excepted from
   this rule because they concern the court’s power to hear a case. Rollins, 8
   F.4th at 398. We also have discretion to consider an issue first raised on
   appeal if it involves a “pure question of law” and our refusal to consider it
   “would result in a miscarriage of justice.” Id. Circumstances satisfying these
   requirements, however, are rare.
           A “pure question of law” is one that does not require consideration of
   documents or other factual evidence in the record; instead, it can be decided
   simply by examining a statute or case. See Rollins, 8 F.4th at 399 (“[w]hether
   Rollins would have been able to establish a fact dispute [precluding summary
   judgment] is plainly not a pure question of law”); Colony Ins. Co. v. Wright,
   16 F.4th 1186, 1191–92 (5th Cir. 2021) (Costa, J., concurring) (“Once we start
   dissecting the record, we find ourselves exactly where the forfeiture rule says
   we should not be—deciding issues based on inadequately developed facts.”).
   Furthermore, this discretion is not controlled by mere inclination, bias, or
   sympathy. Rollins, 8 F.4th at 398. Instead, it is determined by reasoned
   “judgment guided by sound legal principles.” See Colony, 16 F.4th at 1191
   (Costa, J., concurring); Rollins, 8 F.4th at 398–99 (“We must be on guard
   for the risk of judicial bias” and “see no principled basis for addressing

           6
              Although Fleming’s opposition to Providence’s motion for preliminary
   injunction did contest the noncompetition provision’s enforceability, her arguments to the
   district court focused solely on the provision’s clarity and scope (relative to geographic
   breadth and types of employment/activities).

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                                          No. 21-40578

   Rollins’s forfeited issue here.”); id. (“nothing preventing Rollins from
   alleging a fact dispute in the district court”). Nor is forfeiture excused simply
   because the other party bears the burden of proof. Garcia v. Orta, 47 F.4th
   343, 349 (5th Cir. 2022); id. (“District court judges, as well as the judges on
   this court, depend on the arguments presented by the parties in making
   decisions[.]”).
           Fleming’s new enforceability challenges clearly do not present pure
   questions of law. And our refusal to consider them will not result in a
   miscarriage of justice. Fleming had ample opportunity to present these
   arguments prior to the district court’s July 1, 2021 ruling on Providence’s
   February 23, 2021 motion for preliminary injunction, 7 but did not, 8 and has
   not provided a valid excuse or justification for that omission. Furthermore,
   the injunction on appeal is preliminary, not permanent. Thus, on remand,
   she can still present these arguments, at the appropriate juncture, to the
   district court. For all these reasons, we decline to consider these arguments.
           Turning to Fleming’s next argument, she maintains, as she did in the
   district court, that section 15.50(a)’s second and third requirements—that
   the noncompetition provision “contain reasonable limitations as to time,
   geographical area, and scope of activity to be restrained” and not “impose a
   greater restraint than necessary to protect the goodwill or other business

           7
             Indeed, Fleming submitted four missives to the district court prior to the July 1,
   2021 ruling, and had the opportunity to present evidence and argument during the hearing
   held on April 7, 8, and 20, 2021.
           8
             “Raising an issue” sufficiently to preserve it for appeal requires that it be
   presented such that “the opposing party and the court [are] on notice that the issue is being
   raised.” Garcia, 47 F.4th at 349 (quoting Kelly v. Foti, 77 F.3d 819, 823 (5th Cir. 1996)).
   Although Fleming’s July 22, 2021 motion for reconsideration included the assertion that
   the noncompetition provision in Section 8.4 was not “designed to enforce her return
   consideration or return promise(s),” the district court declined to consider the motion,
   concluding that it lacked authorization to do so because, by then, this appeal was pending.

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   interest of the promisee”—are not met. To support this assertion, she argues
   the provision is unreasonably vague, prohibits her from working for a
   competing or similar business in any capacity (including as an at-will
   employee, a receptionist, or a bookkeeper), and applies to 26 Texas counties.
   Additionally, though protesting the propriety of any restriction on her ability
   to work in Texas’ title services industry, she alternatively maintains that the
   provision’s application, if any, should be limited to precluding her from
   owning a competing title company in Johnson County, where she previously
   opened offices for Providence and interacted directly with clients.
          Rejecting Fleming’s assertions regarding these requirements, the
   district court explained that “[t]he permissible breadth of the geographic
   applicability of a noncompete provision depends both on the nature of the
   business and the degree of the employee’s involvement in the business.”
   (citing AmeriPath, Inc. v. Hebert, 447 S.W.3d 319, 335 (Tex. App.—Dallas
   2014, pet. denied). Thus, “when an employee is involved in the higher levels
   of company management, greater geographic restrictions are often justified
   because the employee’s knowledge of and experience with the company
   extend beyond the location where she worked.” We agree. And, given
   Providence’s identification of the designated counties as those in which it
   conducts operations and that Fleming, as Providence’s President and/or
   Chief Operating Officer, had overseen for a number of years, we find no error
   in the district court’s treatment of Fleming’s position.
          In addition to challenging the district court’s assessment of the
   likelihood of Providence’s success on the merits of its breach of contract
   claim, Fleming also argues that the district court abused its discretion in
   evaluating the other preliminary injunction requirements, viz., a substantial
   threat of irreparable injury to Providence; threatened injury to Providence
   that outweighs threatened harm to Fleming; and that the preliminary

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   injunction would not disserve the public interest. On the instant record, we
   disagree.
          Given Fleming’s previous positions and roles at Providence, her
   acceptance of employment with Truly, a direct competitor—as its Executive
   Vice President and regional manager in one of the same large metropolitan
   areas in which Providence also operates—is sufficient to establish a
   substantial threat of irreparable injury to Providence, i.e., loss of goodwill,
   reputation, continuity of operations, and competitive advantage, that
   outweighs the threatened harm to Fleming. This is particularly true on the
   instant record given that approximately twenty other former Providence
   employees (with whom Fleming had worked and/or supervised) accepted
   employment with Truly just after Fleming did. Indeed, it is alleged that
   Fleming was personally involved in these employees being hired away.
          Finally, as noted by the district court, it is not as if Fleming was not
   aware of the existence of the noncompetition agreement in the First
   Amendment of Providence’s Shareholders’ Agreement. Furthermore, she is
   not barred from working in the title industry in every county of Texas, and the
   term is only two years.

                             Providence’s Cross-Appeal
          On cross-appeal, Providence urges this court to “correct” the district
   court’s determination that Fleming’s noncompetition provision became
   effective on the “date of the Closing,” which the parties have agreed is May
   24, 2021, rather than immediately upon her February 3, 2021 resignation
   from Providence. In seeking this relief, Providence essentially asks that we
   “re-write”—in its favor—a seemingly unambiguous contractual provision
   that it drafted (with the assistance of counsel). We will not. Although
   Providence apparently has decided, in hindsight, that the selected language
   is unfavorable to it, and its dissatisfaction is understandable, neither point

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   justifies disregarding the plain language of the contract. See Shareholders’
   Agreement, § 8.4 (“Offering Shareholder agrees for a period of twenty-four
   (24) months from the date of the Closing (defined in Section 8.1.) that he/she
   will not [compete]”). Nor does interpreting the provision as the district court
   did yield an “absurd” result. Regrettable perhaps, for Providence, but not
   absurd.
          Lastly, Providence also argues that, given the nature and location of
   its business operations, and Fleming’s previous roles with the company, the
   scope of the preliminary injunction should be expanded to prohibit Fleming
   from any employment by Truly, or any other competitor operating in one of
   the counties covered by the noncompetition agreement, regardless of
   Fleming’s physical work location. Considering the numerous technological
   tools currently available to today’s workforce, there is some logic to this
   argument. However, given the applicable abuse of discretion standard of
   review, the absence of a more developed record on this issue (including, but
   not limited to, Fleming’s current role and any protections that have been
   employed by Truly to guard against any such violations), and Providence’s
   ability to seek modification of the current injunction on remand, by means of
   a properly supported motion, we decline to alter the district court’s order.
                                        IV.
          Having carefully considered the parties’ briefs, applicable law, and the
   record in this matter, particularly including the district court’s July 1, 2001
   “Memorandum Order and Opinion,” we are not convinced, on the showing
   made, that the district court abused its discretion in ruling on Providence’s
   motion for preliminary injunction. Accordingly, we AFFIRM the district
   court’s July 1, 2021 preliminary injunction order.

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