Court Opinion

ID: 4253983
Source: CourtListenerOpinion
Date Created: 2018-03-13 15:27:45.65334+00
Date Added: 2024-06-11T14:44:15.585860
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                        NO. 03-17-00863-CV

               SBI Investments, LLC, 2014-1; and L2 Capital LLC, Appellants

                                                   v.

                               Quantum Materials Corp., Appellee

      FROM THE DISTRICT COURT OF HAYS COUNTY, 428TH JUDICIAL DISTRICT
            NO. 17-2033, HONORABLE GARY L. STEEL, JUDGE PRESIDING

                             MEMORANDUM OPINION

                This accelerated, interlocutory appeal is from the trial court’s order granting

temporary injunction that enjoins Empire Stock Transfer, Inc., from conveying any shares that it

holds on behalf of appellee Quantum Materials Corporation to appellants SBI Investments, LLC,

2014-1, and/or L2 Capital LLC. See Tex. Civ. Prac. & Rem. Code § 51.014(a)(4) (authorizing

“person” to appeal from interlocutory order that grants temporary injunction). Because we cannot

conclude that the trial court abused its discretion, we affirm the trial court’s order granting temporary

injunction.

                                             Background

                Quantum is a publicly traded company located in San Marcos, Texas. In March 2017,

Quantum borrowed money from and issued promissory notes to appellants and agreed that

appellants could convert this debt into equity in the event that Quantum defaulted under the terms
of the notes. At the same time, Quantum delivered “irrevocable transfer agent instructions” to

Empire, the holder/transfer agent for the parties’ agreements, authorizing and instructing Empire to

“reserve a sufficient number of shares of common stock (“Common Stock”) of the Company

[Quantum] (initially [a set amount of] shares of Common Stock which should be held in reserve for

the Investor[s] [appellants] pursuant to the Note[s] and Warrant[s]) for issuance upon conversion of

the Note[s] and/or exercise of the Warrant[s], in accordance with the terms thereof.”

                After disputes arose between Quantum and appellants over payments on the notes and

other obligations of Quantum under the terms of the parties’ agreements, Quantum filed the

underlying suit against Empire at the end of September 2017 asserting the cause of action of

conversion. Quantum alleged that: (i) the notes were “not convertible unless there [was] an event

of default as defined in the notes”; (ii) in the event of a default, appellants “[could] convert their debt

into equity at a disproportionately favorable exchange rate in favor of the appellants”; and

(iii) appellants “[were] threatening to hold Quantum in default so that they [could] take these

disproportionately more valuable equity stakes.” Based on these factual assertions, Quantum sought

to temporarily enjoin Empire from transferring shares to appellants “to prevent conversion of

Quantum’s stock in this way.”

                The trial court entered a temporary restraining order on October 2, 2017, restraining

Empire from conveying any shares that it held on behalf of Quantum to appellants. In the order, the

trial court found that, “without the temporary restraining order, Plaintiff’s equity will be arrogated

by two of its lenders under a unilaterally declared default with no mechanism to return the equity to

Plaintiff and/or to instantiate the debt obligation that the lenders are trying to convert into equity.”

                                                    2
The trial court also set bond and October 12, 2017, as the date for the temporary injunction hearing.

Empire was served a few days later with a copy of the original petition and application for temporary

restraining order and temporary injunction and the trial court’s temporary restraining order, but it did

not answer or otherwise make an appearance in the underlying proceeding.

                On October 16, 2017, the trial court entered a subsequent order extending the

temporary restraining order and resetting the hearing for October 26, 2017. By the time of the reset

hearing, appellants had intervened in the proceeding, asserted affirmative claims for monetary

damages against Quantum, and opposed Quantum’s request for temporary injunctive relief. Shortly

after the beginning of the reset hearing, the trial court took judicial notice that Empire was in

compliance with the temporary restraining order. Quantum’s witnesses at the hearing were an expert

who was a forensic economist and the founder and CEO of Quantum. Appellants’ witness was a

principal of L2 Capital.

                The parties provided contrary evidence about whether Quantum was in default under

the parties’ agreements, including the notes, and the effect on Quantum in the event that the trial

court denied its request for a temporary injunction against Empire. The principal of L2 Capital

testified about Quantum’s alleged defaults, including making untimely and incorrect payments on

the notes, failing to file a registration statement as contractually required, and replacing its auditor

without seeking or obtaining appellants’ consent. It was his position that the notes had been

accelerated and were due in full because of Quantum’s defaults, explaining, “When a default occurs

in the agreement, the whole note is accelerated. So it’s due and payable at the time of the default,

which was ultimately in June.” The founder and CEO of Quantum, however, testified that Quantum

                                                   3
had made the required payments under the terms of the notes and that it was his understanding that

there were no other defaults under the parties’ agreements. Quantum’s expert testified that without

the temporary injunction to enjoin Empire from conveying the shares at issue to appellants,

Quantum’s damages would be irreparable. He explained about the economic situation of a “death

spiral” in these types of financial arrangements when the lender converts debt for stock.1

                The exhibits at the hearing included copies of the notes; the irrevocable transfer agent

instructions to Empire; a registration rights agreement and an equity purchase agreement between

       1
           When asked about his conclusions about this case, the expert testified:

                This case is like the grandson of many other cases that have come into being
       since the advent of mortgage-backed securities and other specialized security
       instruments in the late 1980s.
                If you sign the note where the lender has the rights to convert, under certain
       circumstances, the stock and they can obtain large amounts of stock instead of cash,
       they can sell that stock and depress the price thereby getting more shares; creating
       more defaults; and getting more shares; creating more defaults and so on.
                And the nickname of that type of arrangement in the generally accepted
       literature has come to be known as a death spiral. The more shares you get, the more
       you can sell; the more you can control at a lower price; create more defaults; get
       more shares. And eventually shares have been known to trade at one thousandths
       of a cent in other cases—not this one. And the literature has nicknamed that the
       death spiral.
                In this case based upon the notes of what is being asked of Quantum to issue
       additional shares—Quantum or Empire—for some party to issue large amounts of
       shares instead of cash or to issue shares because they didn’t get the cash on time or
       there’s some sort of default which might not be a real default—since I’m not a judge
       or an attorney, I don’t know if it’s a real default or if it’s an alleged default.
                And if all these shares are issued and the price falls and the death spiral
       comes into being, then Quantum will suffer irreparable damages for something that
       might not be. Since I’m not a judge, an attorney or a jury, I don’t know what it
       would be.
                But I do know that if what is being asked of Empire comes into being and it
       turns out that it’s wrong, there will be damages that you cannot reconstruct or
       overlook or turn the clock back on. The nickname for that is irreparable damages.

                                                   4
the parties; correspondence between Quantum, appellants, and Empire; and proof of payments by

Quantum on the notes by check and wire transfer. The correspondence included a request by SBI

Investments to Empire to convert Quantum’s note into common shares and Quantum’s response to

Empire, providing notice of its payments on the notes and its dispute over certain pre-payment

penalty charges and requesting that Empire remove “60% of [appellants’] request for reservation of

shares” from Empire’s system. In a letter dated October 2, 2017, the Chief Financial Officer of

Quantum also advised appellants that two of the promissory notes had been “paid in full” and

requested that appellants “unreserve” any Quantum common shares related to the notes.

               Following the hearing, the trial court entered its order temporarily enjoining Empire

from conveying any shares that it held on behalf of Quantum to appellants. In its order, the trial

court’s findings included the following:

       1.      Upon finding that Quantum Materials has carried its burden of showing (1) a
               cause of action against the defendant; (2) a probable right to relief sought;
               and (3) a probable, imminent, and irreparable injury in the interim, this
               Temporary Injunction is granted in accordance [with] Texas Rule of Civil
               Procedure 683, and the inherent equitable powers of the Court.

       2.      Without a temporary injunction Quantum Materials Corporation’s stock will
               be converted with no mechanism for return of the stock to Quantum Materials
               Corporation.

                                                 5
See Tex. R. Civ. P. 683 (addressing form and scope of injunctions and restraining orders). The trial

court also set the case for trial on the merits on April 16, 2018.2 Appellants thereafter non-suited

their claims seeking affirmative relief without prejudice and filed this interlocutory appeal.3

                                                Analysis

                 Appellants raise three issues on appeal. They contend that the trial court erred in

entering the temporary injunction because: (i) Empire was not provided notice of the temporary

injunction hearing; (ii) “Quantum gave Empire the stock at issue in accordance with the contract

such that there was no probable right to relief for conversion,” and (iii) there was no showing of

imminent or irreparable harm because “the damages here are monetary.”

Standard of Review and Applicable Law

                 “A temporary injunction is an extraordinary remedy and does not issue as a matter

of right.” Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002) (citing Walling v. Metcalfe,

863 S.W.2d 56, 57 (Tex. 1993)). The question before the trial court is whether the applicant is

entitled to preserve the status quo of the litigation’s subject matter pending a trial on the merits. Id.;

see State v. Southwestern Bell Tel. Co., 526 S.W.2d 526, 528 (Tex. 1975) (defining status quo as

“last, actual, peaceable, non-contested status that preceded the pending controversy”); Tom James

of Dall., Inc. v. Cobb, 109 S.W.3d 877, 882 (Tex. App.—Dallas 2003, no pet.) (noting that

        2
          The trial court’s original order granting temporary injunction set trial for April 16, 2017,
but the trial court entered a corrected order granting temporary injunction that sets the trial for
April 16, 2018.
        3
            Appellants’ petition in intervention was not included in the appellate record.

                                                    6
underlying merits of controversy are not legal issues before trial court during temporary injunction

hearing). “To be entitled to a temporary injunction, the applicant must plead a cause of action

and show a probable right to recover on that cause of action and a probable, imminent, and

irreparable injury in the interim.” Fox v. Tropical Warehouses, Inc., 121 S.W.3d 853, 857 (Tex.

App.—Fort Worth 2003, no pet.) (citing Butnaru, 84 S.W.3d at 204); see Southwestern Bell Tel. Co.,
526 S.W.2d at 528 (explaining that applicant seeking temporary injunction is not required to

establish that it will ultimately prevail in litigation).

                We review a trial court’s order granting temporary injunctive relief under an abuse

of discretion standard. See Butnaru, 84 S.W.3d at 204 (citing Walling, 863 S.W.2d at 57; State

v. Walker, 679 S.W.2d 484, 485 (Tex. 1984)). A trial court abuses its discretion when it acts

unreasonably or in an arbitrary manner or without reference to any guiding rules and principals. See

id. at 211. We will not disturb the trial court’s decision to grant injunctive relief absent a clear abuse

of discretion. Reagan Nat’l Advert. v. Vanderhoof Family Tr., 82 S.W.3d 366, 370 (Tex.

App.—Austin 2002, no pet.). The scope of review is limited to the validity of the order granting or

denying temporary injunctive relief. See id. (citing Walling, 863 S.W.2d at 58; Universal Health

Servs., Inc. v. Thompson, 24 S.W.3d 570, 576 (Tex. App.—Austin 2000, no pet.)). When reviewing

such an order, we view the evidence in the light most favorable to the order, indulging every

reasonable inference in its favor, and “determine whether the order was so arbitrary that it exceeds

the bounds of reasonable discretion.” Fox, 121 S.W.3d at 857; see Thompson, 24 S.W.3d at 576.

“A trial court does not abuse its discretion if it bases its decision on conflicting evidence and

                                                     7
evidence in the record reasonably supports the trial court’s decision.” Fox, 121 S.W.3d at 857. With

these standards in mind, we turn to appellants’ issues.

Notice to Empire

               In their first issue, appellants contend that the trial court erred in entering the

temporary injunction because Empire was never given notice of the hearing. See Tex. R. Civ. P. 681

(“No temporary injunction shall be issued without notice to the adverse party.”).

               As an initial matter, we address Quantum’s jurisdictional arguments challenging

appellants’ standing to challenge the temporary injunction entered against the third party Empire.

See, e.g., Heckman v. Williamson Cty., 369 S.W.3d 137, 150 (Tex. 2012) (“Standing is a

constitutional prerequisite to suit. A court has no jurisdiction over a claim made by a plaintiff who

lacks standing to assert it.”). Quantum argues that appellants do not have standing relative to the

temporary injunction because it does not affect them with any injury and that they have no standing

to litigate any procedural defects in service on Empire because they fully participated in the

temporary injunction hearing.

               A litigant, however, need not be a party to a temporary injunction in order to have

standing to appeal it. See Q’Max Am., Inc. v. Screen Logix, LLC, No. 01-15-00319-CV, 2016 Tex.

App. LEXIS 2136, at * 10–11 (Tex. App.—Houston [1st Dist.] Mar. 1, 2016, no pet.) (mem. op.)

(citing Tex. Civ. Prac. & Rem. Code § 51.014(a)(4) (authorizing “person” to appeal grant or denial

of temporary injunction)). A litigant has standing to appeal a temporary injunction if it is “personally

aggrieved by the entry of a temporary injunction” so as to have a “justiciable interest in the

controversy.” Id. Here appellants are personally aggrieved by the temporary injunction because it

                                                   8
enjoins Empire from conveying shares of stock to them. See id. (concluding that contractual

counterparty to enjoined party was personally aggrieved by entry of temporary injunction and

holding that contractual counterparty had standing to appeal temporary injunction). Thus, we

conclude that appellants generally have standing to appeal the temporary injunction.

                We, however, cannot conclude that appellants have standing to complain about

defective service on Empire. Appellants have failed to show how they were “personally aggrieved”

by the alleged lack of notice to Empire—a third party—of the temporary injunction hearing.4 See,

e.g., Heckman, 369 S.W.3d at 154–55 (explaining that plaintiff’s alleged injury is starting point

for standing inquiry and that “plaintiff must be personally injured—he must plead facts

demonstrating that he, himself (rather than a third party or the public at large), suffered the injury”);

Everett v. TK-Taito, L.L.C., 178 S.W.3d 844, 853 (Tex. App.—Fort Worth 2005, no pet.) (“The

determination of whether a plaintiff possesses standing to assert a particular claim depends on the

facts pleaded and the cause of action asserted.”). As the trial court recognized during the temporary

injunction hearing, Empire as the transfer agent in reality “doesn’t have a big dog in this fight,” and

        4
        Appellants recognize in their reply brief that “[a]t no point has Appellants ever represented
Empire or served as its proxy.”

                                                   9
appellants were present and participated in the temporary injunction hearing.5 On these bases, we

overrule appellants’ first issue.

Probable Right to Relief

                In their second issue, appellants argue that the trial court’s finding that Quantum

demonstrated a probable right to relief on its claim of conversion against Empire was not reasonably

supported by the evidence. Appellants argue that “it was not possible for Empire to have converted

the stock at issue” because “Quantum had already given that stock to Empire for safekeeping in the

event of a default”; “a contract specifically required that Empire acquire and later transfer the shares

at issue”; and Quantum had not asked Empire to return the shares to Quantum.

        5
           Further, even if we were to conclude that appellants have standing to raise this complaint,
we cannot agree with appellants’ contention that notice to Empire was defective. The record reflects
that Empire was served with copies of Quantum’s original petition and application for temporary
restraining order and temporary injunction and the temporary restraining order; the temporary
restraining order noticed the original hearing date for the temporary injunction hearing; Empire did
not answer or appear at the original setting for the hearing; and, at the original setting, the trial court
announced in open court that the hearing was reset to October 26, 2017, the date that the temporary
injunction hearing ultimately occurred.
         The record also reflects that Quantum’s attorney arranged to serve the order that extended
the temporary restraining order and noticed October 26, 2017, as the reset date for the temporary
injunction hearing and, at the reset hearing, Quantum’s attorney, as an officer of the court,
represented that Empire had been properly served with the order by e-file and facsimile. The
attorney explained to the trial court that, if Empire had not been served with the notice, the case
“wouldn’t be going on right now” and that there would have to be a “new case” because Empire
already would have conveyed the stock to appellants and “this company would be gone.” He further
represented to the trial court that “the [c]ourt announced [the reset date] in open court and corporate
counsel faxed [Empire] a copy of the order,” explaining that they “wanted to get it to [Empire] as
fast as [they] possibl[y] could because [they] did not want [Empire] destroying the company.” The
trial court accepted Quantum’s attorney’s unrefuted representation as an officer of the court
about service on Empire and took judicial notice that Empire had abided by the temporary
restraining order.

                                                    10
                “A probable right of recovery is shown by alleging a cause of action and presenting

evidence tending to sustain it.” Fox, 121 S.W.3d at 857. “To establish a probable right to recover,

a party ‘is not required to prove that [it] will prevail on final trial in order to invoke the trial

court’s discretion to grant a temporary injunction.’” University Interscholastic League v. Hatten,

No. 03-03-00691-CV, 2004 Tex. App. LEXIS 3372, at *6 (Tex. App.—Austin Apr. 15, 2004, no

pet.) (mem. op.) (quoting Oil Field Haulers Ass’n v. Railroad Comm’n, 381 S.W.2d 183, 196 (Tex.

1964)). “We will affirm the trial court’s decision as long as there are grounds to believe that the

claim has merit.” Id. (citing 183/620 Grp. Joint Venture v. SPF Joint Venture, 765 S.W.2d 901, 904

(Tex. App.—Austin 1989, writ dism’d w.o.j.) (noting that “appellee . . . required only to adduce

evidence that tends to support his right to recover on the merits”)); see Stewart Beach Condo.

Homeowners Ass’n v. Gili N Prop. Invs., LLC, 481 S.W.3d 336, 346 (Tex. App.—Houston [1st

Dist.] 2015, no pet.) (explaining that temporary injunction hearing is not “mini trial” and that, to

show probable right of recovery, applicant “‘must plead a cause of action and present some evidence

that tends to sustain it’” and that applicant’s “‘evidence must be sufficient to raise a bona fide issue

as to the applicant’s right to ultimate relief’” (quoting Intercontinental Terminals Co. v. Vopak N.

Am., Inc., 354 S.W.3d 887, 897 (Tex. App.—Houston [1st Dist.] 2011, no pet.))).

                Quantum’s asserted claim against Empire was conversion. To prevail on a claim for

conversion of personal property, “a plaintiff must prove that: (1) the plaintiff owned or had legal

possession of the property or entitlement to possession; (2) the defendant unlawfully and without

authorization assumed and exercised dominion and control over the property to the exclusion of, or

inconsistent with the plaintiff’s rights as an owner; (3) the plaintiff demanded return of the property;

                                                  11
and (4) the defendant refused to return the property.” Apple Imps., Inc. v. Koole, 945 S.W.2d 895,

899 (Tex. App.—Austin 1997, writ denied). The issue then is whether Quantum presented some

evidence that tended to support its right to recover under this claim. See Gili N Prop. Invs., LLC,
481 S.W.3d at 346; SPF Joint Venture, 765 S.W.2d at 904.

               Quantum presented testimony and documentary evidence that it had paid two of the

notes in full and requested appellants to “unreserve any [Quantum] shares related to these two notes”

and “return the original notes with a notation of Paid in Full”; that it had made payments when due

in accordance with the terms of the notes; that it was not in default under the terms of the parties’

agreements, including the pre-payment penalty provisions; that appellants had notified Empire that

Quantum was in default and instructed Empire to convert Quantum’s debt to appellants into common

shares of Quantum; that Quantum had notified Empire of payments on the notes and the

inapplicability of the pre-payment penalty because it had made the payments on the note on the

maturity date; and that Quantum had instructed Empire that “60% of [appellants’] request for

reservation of shares should be removed from [Empire’s] system.”

               The documentary evidence also included the notes and transfer agent instructions.

The conversion rights in the notes expressly were contingent on an event of default: “The Holder

shall have the right at any time on or after an Event of Default (as defined herein) occurs under the

Note, to convert all or any part of the outstanding and unpaid principal and amount and accrued and

unpaid interest of this Note into fully paid and non-assessable shares of Common Stock . . . .” And

the transfer agent instructions to Empire included the following:

                                                 12
          The shares shall be issued within two (2) business day[s] of receipt of a notice of
          conversion with respect to the Note . . . . A copy of the Conversion Notice shall be
          provided by [appellants] to both Empire, [Quantum] and its counsel. . . . Upon your
          firm’s receipt of the Conversion Notice . . . , your firm is hereby irrevocably
          authorized and instructed to issue shares of Common Stock of [Quantum] . . . to
          [appellants] at the request of [appellants] . . . without any further action or
          confirmation by [Quantum].

          ...

          [Appellants] and [Quantum] understand[] that Empire Stock Transfer, Inc. (the
          “Transfer Agent”) shall be required to perform any issuances or transfers of shares
          pursuant to this letter unless the respective issuance or transfer of shares is prohibited
          by a valid court order.

                  Although appellants presented contrary evidence, the trial court could have reasonably

found that Quantum had presented evidence tending to support its claim that it was not in default

under the terms of the notes and the parties’ agreements. And, based on that finding, the trial court

could have reasonably found that Quantum had presented some evidence that: (i) Empire had

assumed control over shares that it was holding on Quantum’s behalf inconsistent with Quantum’s

rights as the shares’ owner; (ii) Quantum had demanded that Empire unreserve certain shares and

refrain from conveying shares to appellants; (iii) Empire would refuse to comply with Quantum’s

demands without a court order prohibiting it from doing so; and, therefore, (iv) Quantum had

presented some evidence that tended to support its right to recover under its claim of conversion

against Empire. See Gili N Prop. Invs., LLC, 481 S.W.3d at 346; SPF Joint Venture, 765 S.W.2d

at 904.

                  Viewing the evidence in the light most favorable to the trial court’s order, we

conclude that the trial court did not abuse its discretion by finding that Quantum had carried its

                                                     13
burden of showing that it had a probable right of recovery on its claim of conversion against Empire.

See Fox, 121 S.W.3d at 857; see also Q’Max Am., Inc., 2016 Tex. App. LEXIS 2136, at *17–18

(observing that trial court does not abuse discretion “in entering an injunction based on its resolution

of a conflict in the evidence”). We overrule appellants’ second issue.

Imminent and Irreparable Harm

                In their third issue, appellants argue that the trial court abused its discretion in

granting the temporary injunction because “there was not a showing of imminent and irreparable

harm—the only damages to Quantum is the loss of value of the shares transferred.” An injury is

irreparable if damages would not adequately compensate the injured party or if they cannot be

measured by any certain pecuniary standard. Butnaru, 84 S.W.3d at 204; Fox, 121 S.W.3d at 857.

The claimed injury must not be “merely speculative; fear and apprehension of injury are not

sufficient to support a temporary injunction.” Fox, 121 S.W.3d at 861.

                Although appellants presented a countervailing theory at the injunction hearing

through the testimony of L2 Capital’s principal, Quantum presented evidence that supported a

reasonable inference that, if the trial court did not enjoin Empire from conveying shares of stock to

appellants, Quantum’s business would be disrupted during the interim before the trial on the merits.

See Occidental Chem. Corp. v. ETC NGL Transp., LLC, 425 S.W.3d 354, 364 (Tex. App.—Houston

[1st Dist.] 2011, pet. dism’d) (“Texas courts have recognized that ‘business disruptions’ may result

in irreparable harm for which a temporary injunction is appropriate.”); Liberty Mut. Ins. Co.

v. Mustang Tractor & Equip. Co., 812 S.W.2d 663, 666 (Tex. App.—Houston [14th Dist.] 1991, no

writ) (stating that disruption of business can be irreparable harm and type of harm for which

                                                  14
temporary injunction can issue); Miller v. K & M P’ship, 770 S.W.2d 84, 85, 87–88 (Tex.

App.—Houston [1st Dist.] 1989, no writ) (affirming temporary injunction to prevent transfer

of disputed stock shares and rejecting argument that appellees failed to show lack of

adequate remedy at law); see also Miller v. Talley Dunn Gallery, LLC, No. 05-15-00444-CV,

2016 Tex. App. LEXIS 2280, *24 (Tex. App.—Dallas Mar. 3, 2016, no pet.) (mem. op.)

(“Disruption to a business can constitute irreparable harm.”). Evidence showed that the notes

authorize appellants in the event of a default by Quantum to convert debt to equity at a significantly

discounted rate, and Quantum’s expert testified about the economic situation of a “death spiral” and

the dilution and devaluation of Quantum’s shares in that case. Viewing the evidence in the light

most favorable to the trial court’s order, we conclude that the trial court did not abuse its

discretion by finding that Quantum carried its burden of showing imminent and irreparable harm

in the interim before the trial on the merits. See Fox, 121 S.W.3d at 857; Q’Max Am., Inc.,

2016 Tex. App. LEXIS 2136, at *17–18.

                In the last sentence of their briefing on the third issue, appellants also argue that the

order granting temporary injunction does not comply with the specificity required under Texas Rule

of Civil Procedure 683. Rule 683 requires an order granting temporary injunction to “set forth the

reasons for its issuance.” Tex. R. Civ. P. 683; see Qwest Commc’rs. v. AT&T, Corp., 24 S.W.3d 334,

337 (Tex. 2000) (explaining that requirements of Rule 683 are mandatory and must be followed);

Vopak N. Am., Inc., 354 S.W.3d at 899 (observing Texas Supreme Court’s holding that “Rule 683

mandates that a trial court granting a temporary injunction must explain in the order its reasons for

believing that the applicant has shown that it will suffer injury if interlocutory relief is not granted”).

                                                    15
               Appellants argue that the order is noncompliant with Rule 683 because it states only

that, “[w]ithout a temporary injunction Quantum Materials Corporation’s stock will be converted

with no mechanism for return of the stock to Quantum Materials Corporation” and that “there is no

imminent and irreparable harm in stock being traded from one entity to another.” The trial court’s

stated reason for granting the temporary injunction to preserve the status quo, however, goes to the

crux of the parties’ dispute about the necessity of temporary injunctive relief and is supported by

Quantum’s evidence about its “imminent” and “irreparable” harm in the event that the trial court did

not enjoin Empire from following appellants’ instructions to convert Quantum’s debt to equity prior

to the trial on the merits. Thus, we conclude that the order is compliant with Rule 683.

               For these reasons, we overrule appellants’ third issue.

                                           Conclusion

               Having overruled appellants’ issues, we affirm the trial court’s order granting the

temporary injunction against Empire.

                                              __________________________________________
                                              Melissa Goodwin, Justice

Before Chief Justice Rose, Justices Goodwin and Field

Affirmed

Filed: March 8, 2018

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