Opinion

Opinion issued October 14, 2010

In The

Court of

Appeals

For The

First District

of Texas

————————————

NO. 01-10-00349-CV

———————————

Eten, Inc., Center

for the Advancement of Process Technology, Inc., Herbert W. Fortson, III,

Raymond R. Wuertz, Joanna Kile, Merv W. Treigle, Jr., John V. Dees, III, and

Steve Ames , Appellants

V.

College of the Mainland , Appellee

On

Appeal from the 122nd District Court

Galveston

County, Texas

Trial Court Case No. 09CV1379

MEMORANDUM OPINION

Appellants, ETEN, Inc., Center for the

Advancement of Process Technology, Inc., Herbert W. Fortson, III, Raymond R.

Wuertz, Joanna Kile, Merv W. Treigle, Jr., John V. Dees, III, and Steve Ames,

appeal the trial court’s granting of Appellee College of the Mainland’s

application for temporary injunction. In

three points of error, Appellants argue that the trial court abused its

discretion in granting the temporary injunction.

We affirm as modified.

Background

Plaintiff in the current suit is College of the Mainland,

a public college located principally in Galveston County, Texas. In 2002, College of the Mainland applied for

and received several National Science Foundation grants and, as a result,

established a department in the college known as Center for the Advancement of

Process Technology (the “Center”).

College of the Mainland appointed Joanna Kile as the director of the

Center. She held that position until her

contract was not renewed in 2007.

In January 2006, Kile, along with Herbert W. Fortson, III and

Merv W. Treigle, Jr. formed a

non-profit corporation known as Center for the Advancement of Process

Technology, Inc. (“CAPT, Inc.”).

Management of CAPT, Inc. was vested in the board of directors, referred

to by the company as its steering committee.

Kile, Fortson, and Triegle were appointed as CAPT, Inc.’s steering

committee. Kile was appointed as its

president. CAPT, Inc. serves as the

organizational body for nine alliances around the country that are related to

the petrochemical industry. CAPT, Inc.

alleges that these various alliances provided technical expertise for the

creation of various educational materials related to process technology. Process technology relates to the industry of

petrochemical technology. College of the

Mainland alleges that it developed these materials through its employees and

various contractors.

It is undisputed by the parties that, as a result of the

National Science Foundation grants, certain copyrighted materials were

created. What became disputed was who

had ownership of those copyrights, College of the Mainland, CAPT, Inc., or

both.

In 2008, College of the Mainland filed suit against CAPT,

Inc. (the “First Lawsuit”). Relatively

early in the litigation of the First Lawsuit, the trial court ordered the

parties to mediation. Mediation began in

September 2008. In May 2009, the parties

fully executed a settlement agreement.

As a result of this settlement, the First Lawsuit was dismissed with

prejudice.

A little more than one month prior to the execution of the

settlement agreement, Kile and Triegle, along with John V. Dees, III, created

ETEN, Inc. Fortson was its

incorporator. ETEN was formed as a

non-profit corporation.

Five days after ETEN was formed, CAPT, Inc. entered into a

copyright license agreement with ETEN.

Under the terms of the copyright license agreement, CAPT, Inc.

represented that it was a joint owner of an undivided interest in certain

copyrighted works iterated in an attached exhibit. CAPT, Inc. then granted to ETEN “a paid up

and world-wide non-exclusive, royalty-free licensee to make, use, and sell

copies of the Licensed Works, and to make, use, and sell derivative works based

on one or more of the Licensed Works for an irrevocable period of fifteen (15)

years.” The consideration for this license

was a one-time fee of $10.

The settlement agreement was executed a little more than

one month after the copyright license agreement was executed. Under the terms of the agreement, CAPT, Inc.

and College of the Mainland became joint owners with undivided interests in the

copyrighted materials except for copyrighted materials developed under the

current grant. The parties agreed that

the copyrighted materials developed under the current grant would be owned exclusively

by College of the Mainland until the expiration of the grant, at which point

those materials would be owned jointly by CAPT, Inc. and College of the

Mainland.

CAPT, Inc. also agreed to create a “combined CAPT

organization” by joining its operations with College of the Mainland’s Center. Thereafter, CAPT, Inc. would be “a

direct-support, not-for-profit, 501(c)(3) organization housed at the

College.” In order to effectuate this

change, CAPT, Inc. agreed to reorganize its board of directors—named under the articles

of incorporation as its “steering committee”—to include nine members from

process technology alliances, two members appointed by College of the Mainland,

two from the academic community outside of College of the Mainland, and “two

from the industry as identified by the Steering Committee after consultation

with the College President or designee.”

CAPT, Inc. agreed to amend its bylaws and articles of incorporation to

conform with the settlement agreement.

The parties also agreed that the chair of CAPT, Inc.’s

steering committee and the president of College of the Mainland, or his

designee, would “meet on a regular basis to discuss the combined CAPT

organization and concerns of the Steering Committee and of the College.”

Finally, the parties agreed that Joanna Kile would not be

affiliated with the combined CAPT organization in any manner.

As of the date of the temporary injunction hearing, the

combined CAPT organization had not been formed.

Emails were exchanged primarily between Jack Berry, the current director

of operations for College of the Mainland’s Center, and Steve Ames, the local

representative for CAPT, Inc. They also

met on certain occasions. College of the

Mainland asked that certain things be turned over to them, including CAPT,

Inc.’s bank account information, website access, and mailbox key, but CAPT,

Inc. refused.

Some time after the settlement agreement was signed,

College of the Mainland learned of ETEN’s existence as well as the licensing

agreement. College of the Mainland filed

suit on August 5, 2010, against the Defendants, alleging breach of contract,

breach of fiduciary duty, tortious interference with existing contract,

tortious interference with prospective relations, unfair competition by

misappropriation, fraudulent inducement, and violation of the Theft Liability

Act. The trial court held a hearing on

College of the Mainland’s application for a temporary injunction on December

17, 2009. Due to the length of the

testimony of the witnesses, the hearing had to be continued on another day,

January 27, 2010. The trial court issued

its temporary injunction on April 8, 2010.

The injunction (1) enjoined the defendants from “directly

or indirectly using, selling, copying, distributing or otherwise conveying the

process technology products to which College of the Mainland asserts ownership

(‘Products at Issue’) including” all of the works listed in CAPT, Inc.’s

copyright license agreement with ETEN; (2) enjoined the defendants from “diverting

and/or expending any and all current or future revenues generated by the use,

sale, copying, distribution, or any other conveyance of the Products at Issue”;

(3) ordered the defendants to “transfer any and all current and future revenue

generated by the sale of the Products at Issue to the College of the Mainland

immediately or within 5 business days of their receipt of such revenues”; and

(4) enjoined the defendants from “selling, licensing, or transferring any and

all intellectual property rights pertaining to the Products at Issue.”

Defendants brought this appeal arguing that College of the

Mainland failed to establish (1) that it had a probable right to any relief;

(2) that the claimed injuries were imminent; and (3) that College of the

Mainland failed to show that it owned or developed any of the products that

Defendants were enjoined from using.

Standard of Review & Applicable Law

A temporary injunction is an extraordinary remedy that

does not issue unless the party seeking relief pleads and proves three specific

elements: (1) a cause of action, (2) a probable right to the relief sought, and

(3) a probable, imminent, and irreparable injury in the interim. Butnaru v. Ford Motor Co. , 84 S.W.3d 198,

204 (Tex. 2002). The sole issue

presented to a trial court at a temporary injunction hearing is whether the

applicant is entitled to preserve the status quo pending trial on the

merits. Id. ; Davis v. Huey ,

571 S.W.2d 859, 862 (Tex. 1978). The

status quo is defined as the last, actual, peaceable, non-contested status that

preceded the pending controversy. In re Newton , 146 S.W.3d 648, 651 (Tex. 2004).

On appeal, the scope of review

is limited to the validity of the temporary injunction order. See Walling v. Metcalfe , 863 S.W.2d

56, 58 (Tex. 1993). We do not review the

merits of the underlying case. Davis ,

571 S.W.2d at 861 . Instead, we determine

whether there has been an abuse of discretion by the trial court in granting or

denying the relief. Id. at

862 . In making this determination, we

may not substitute our judgment for that of the trial court unless its decision

was so arbitrary that it exceeded the bounds of reasonableness. See Butnaru , 84 S.W.3d at 204 . A trial court abuses its discretion in

granting or denying a temporary injunction when it misapplies the law to the

established facts. See State

v. Sw. Bell Tel. Co. , 526 S.W.2d 526, 528 (Tex. 1975). Given the abuse-of-discretion standard, we

review the evidence submitted to the trial court in the light most favorable to

the court’s ruling, draw all legitimate inferences from the evidence, and defer

to the trial court’s resolution of conflicting evidence. See Davis , 571 S.W.2d at 862 ; CRC-Evans

Pipeline, Int’l, Inc. v. Myers , 927 S.W.2d 259, 262 (Tex. App.—Houston [1st

Dist.] 1996, no pet.).

Probable Right to Relief

Defendants argue that the trial court abused its

discretion in granting the application for the temporary injunction by claiming

that College of the Mainland failed to establish that it had a probable right

to recovery. To show a probable right of

recovery, an applicant need not establish that it will finally prevail in the

litigation, but it must, at the very least, present some evidence that, under

the applicable rules of law, tends to support its cause of action. Camp v. Shannon , 348 S.W.2d 517, 519

(Tex. 1961); see IAC, Ltd. v. Bell Helicopter Textron, Inc ., 160

S.W.3d 191, 197 (Tex. App.—Fort Worth 2005, no pet.).

In its breach of contract claim, College of the Mainland

alleged that CAPT, Inc. breached the settlement agreement by “1) failing and

refusing to take material steps towards combining its operations with [College

of the Mainland]; 2) failing to amend its bylaws and articles of incorporation

to conform to the Settlement Agreement; and 3) creating an affiliation between itself

and Defendant Kile by attempting to license [College of the Mainland]’s

products to ETEN, Inc.” The essential

elements of a breach of contract claim are: (1) the existence of a valid

contract; (2) performance or tendered performance by the plaintiff; (3) breach

of contract by the defendant; and (4) damages sustained as a result of the

breach. Williams v. Unifund CCR Partners

Assignee of Citibank , 264 S.W.3d 231 , 235–36 (Tex. App.—Houston [1st Dist.]

2008, no pet.).

In its fraud in the inducement claim, College of the

Mainland alleged that Fortson and Wuertz fraudulently induced it into entering

into the settlement agreement with CAPT, Inc.

Specifically, College of the Mainland argues that its fraudulent inducement

claim is based on the representation in the settlement agreement that Kile

would not be affiliated with the combined CAPT organization in any manner. To prevail on a fraud claim, a plaintiff must

prove that (1) the defendant made a material representation that was false; (2)

it knew the representation was false or made it recklessly as a positive

assertion without any knowledge of its truth; (3) it intended to induce the

plaintiff to act upon the representation; and (4) the plaintiff actually and justifiably relied upon the

representation and thereby suffered injury.

Coastal Bank SSB v. Chase Bank of

Tex., N.A. , 135 S.W.3d 840, 843 (Tex. App.—Houston [1st Dist.] 2004, no

pet.).

In the settlement agreement, both parties specifically

represented to each other that Joanna Kile would not be affiliated with the

combined CAPT organization in any manner—an organization that would be formed

by joining CAPT, Inc.’s operations with College of the Mainland’s Center. Seven months after protracted negotiations on

settlement of the First Lawsuit and barely more than one month before the final

draft of the settlement agreement was executed, two of the founders of CAPT,

Inc.—including Joanne Kile—formed a new company: ETEN. Days later, CAPT, Inc. granted to ETEN “a

paid up and world-wide non-exclusive, royalty-free licensee to make, use, and

sell copies of the Licensed Works, and to make, use, and sell derivative works

based on one or more of the Licensed Works for an irrevocable period of fifteen

(15) years.” The consideration for this

license was a one-time fee of $10. It

would not be an abuse of discretion for the trial court to determine that this

is some evidence of an association with Joanna Kile in violation of the terms

of the settlement agreement, thus constituting some evidence to support a claim

for fraudulent inducement to enter into the settlement agreement as well as an

anticipatory breach of the settlement agreement.

Furthermore, Berry testified that at least one of the

copyrighted materials licensed to ETEN was developed under the current National

Science Foundation grant. Under the

terms of the settlement agreement, CAPT, Inc. had no interest in any materials

created under the current grant until after the grant expired. This evidence further supports College of the

Mainland’s claims regarding breach of the settlement agreement and a fraudulent

inducement to enter into the settlement agreement.

Defendants argue that, as a matter of law, reliance on

representations made in an adversarial context is not justified. See

Coastal Bank , 135 S.W.3d at 843 .

However, the specific representation—that Joanna Kile would not be

affiliated with the combined CAPT organization in any manner—was a term of the

settlement agreement. Both CAPT, Inc.

and College of the Mainland agreed in the settlement agreement that the

agreement was signed without “reliance upon any statement, promise, or

representation not recited in the

Agreement .” (Emphasis added.) The trial court reasonably could have

concluded that the implication of this statement was that they were relying on

representations made in the settlement agreement.

We overrule appellants’ first point of error. [1]

Irreparable Injury

Defendants argue that College of the Mainland failed to

establish that it will suffer a probable injury. Probable injury includes elements of imminent

harm, irreparable injury and no adequate remedy at law for damages. T-N-T

Motorsports, Inc. v. Hennessey Motorsports, Inc. , 965 S.W.2d 18, 24 (Tex.

App.—Houston [1st Dist.] 1998, no pet.) To

establish that there is no adequate remedy at law for its damages, the

applicant must show that it “cannot be adequately compensated in damages or . . .

the damages cannot be measured by any certain pecuniary standard.” Ahmed v.

Shimi Ventures, L.P. , 99 S.W.3d 682, 692 (Tex. App.—Houston [1st Dist.]

2003, no pet.) (quoting Butnaru , 84

S.W.3d at 204 ). A remedy is adequate if

it gives complete, final, and equal relief.

Henderson v. KRTS, Inc. , 822

S.W.2d 769, 773 (Tex. App.—Houston [1st Dist.] 1992, no writ).

In the temporary injunction order, the trial court found

that there was a showing of a probable injury:

[T]o wit, the continued diversion and misuse of income

and the unauthorized exploitation of Plaintiff’s intellectual property by

Defendants. Plaintiff has further shown

that the injury is irreparable because Defendants’ conduct interferes with the

ability of Plaintiff’s Center . . . to become a self-sustainable

process technology center. Plaintiff has

further shown that there is no adequate remedy at law to rectify its injury.

Lisa Templer, College of the Mainland’s vice president for

financial services, testified that College of the Mainland would suffer injury

with ETEN publishing the same copyrighted materials as College of the

Mainland. The result of these competing

sales would be loss of revenue that would interfere with College of the

Mainland’s goal for self-sustainability for the Center. Templer testified that this in turn could

impact College of the Mainland’s ability to obtain future National Science

Foundation grants as well as cause lay-offs at the college.

Jack Berry, director for College of the Mainland’s Center,

testified that ETEN’s publishing the same copyrighted materials as College of

the Mainland was a loss of revenue for College of the Mainland. In addition, he testified that publishing the

same material caused confusion “around who owns the material, who is the real [Center

for the Advancement of Process Technology], the real Center, [and] who serves

the [process technology] community on behalf of the grant at College of the

Mainland.” Finally, Berry testified that

the copyrighted materials included examination material to qualify people for

various kinds of employment. Two

entities publishing varying examinations would cause confusion as to who took

which exam and whether the examinees were in fact qualified.

We hold that the trial court did not abuse its discretion

in determining that there was some evidence that College of the Mainland

established it would suffer a probable injury without the entry of the

temporary injunction.

We overrule Appellants’ second point of error.

College of the Mainland’s Ownership of

Enumerated Materials

CAPT, Inc. argues there is no evidence that College of the

Mainland owns the items enumerated in the temporary injunction. While CAPT, Inc.’s representative, Ames, was

testifying at the hearing, the following exchange took place:

Q. So,

what did CAPT, Inc. do?

A. CAPT,

Inc. gave a non-inclusive [sic] license to ETEN to also sell our process

technology copyrights that we had.

Q. Did

CAPT, Inc. feel like they had the authority or the right to do that?

A. Yes.

We’ve owned them for several years; so, we had that right.

The Court :

Just for purposes of my notes, the rights to the process technology that you

guys gave to ETEN, is that the one that’s co-owned with [College of the

Mainland] or something separate? Earlier you said that the ownership of those

things was co-owned, jointly owned with [College of the Mainland]. So, are we

talking about that or something separate?

The Witness: We’re talking about that. They had

rights to them that they get to sell to somebody and we have rights to them, as

well.

The Court: The same materials.

The Witness: Yes.

The only item enumerated in the injunction order that

is not listed in some manner in the license agreement between CAPT, Inc. and

ETEN is item 20: “Use of the ‘CAPT teardrop’ logo for commercial and

non-commercial purposes.” There is no

reference to this logo anywhere else in the record. Accordingly, there is no evidence that

College of the Mainland owns this logo or that CAPT, Inc. or any other

defendant should be enjoined from using it.

CAPT, Inc. pre-existed this dispute and, even under the terms of the

settlement agreement, will continue to exist into the future. To the degree that this logo is owned by

CAPT, Inc., there is no evidence in the record that CAPT, Inc. should be

required to refrain from using it.

We sustain Defendants’ third point of error as it relates

to item twenty in the temporary injunction order and overrule their point of error

as it relates to the remainder of the order.

Conclusion

We delete item 20 from the temporary injunction order and

affirm as modified.

Laura

Carter Higley

Justice

Panel consists of

Justices Keyes, Higley, and Bland.

[1] Because we have determined that the trial court could have

determined that College of the Mainland established a probable right to relief

under these causes of action, we do not need to address the other causes of

action. See Tex. R. App. P.

47.1.