BRETT BIHNER, Aрpellant V. BIHNER CHEN ENGINEERING, LTD., BIHNER CHEN ENGINEERING, GP, LLC, AND YUBO CHEN, Appellees
NO. 01-21-00086-CV
In The Court of Appeals For The First District of Texas
September 14, 2021
On Appeal from the 11th District Court, Harris County, Texas, Trial Court Case No. 2020-81627
In this business divorce case, appellant, Brett Bihner, appeals the trial court‘s order granting a temporary injunction in favor of appellees, Bihner Chen Engineering, LTD., Bihner Chen Engineering, GP, LLC, and Yubo Chen. In two
We affirm.
Background
The History of the Bihner Chen Entities
In December 2005, Brad Bihner and Yubo Chen formed a Texas limited partnership called Bihner Chen Engineering, Ltd. (“Bihner Chen“) to provide structural engineering services to clients in the greater Houston area and throughout Texas. Brad is Brett‘s father.
Bihner Chen specialized in low-rise and mid-rise commercial and industrial buildings. Bihner Chen consisted of one general partner, Bihner Chen Engineering GP, LLC, and two equal limited partners, Yubo and Brad, who were licensed engineers, managers, and equal co-owners of Bihner Chen Engineering GP, LLC. At times, we refer to Bihner Chen and Bihner Chen Engineering GP, LLC together as the Bihner Chen entities.
Brad and Yubo executed ten formation documents, including a limited partnership agreement and a noncompete agreement, for Bihner Chen. They made
Under the noncompete agreement, Yubo paid Brad $38,800 as consideration for Brad agreeing not to competе against Yubo or Bihner Chen for as long as Brad was a partner and for five years after he was no longer a partner.2 The noncompete agreement prohibited “use in any competition, solicitation, or marketing effort any Confidential Information, any proprietary list, or any information concerning customers of [Bihner Chen].” The noncompete agreement provided that Brad would protect Bihner Chen‘s confidential information and goodwill. The noncompete agreement reflected Brad‘s acknowledgment that Bihner Chen owned сonfidential information, which included:
pricing information, cost information . . . customer lists, customer leads, documents identifying past, present and future customers, customer profiles and preference data . . . and other confidential, proprietary and/or trade secret information concerning its operations and expansion plans.
Brad and Yubo agreed that the noncompete agreement would “inure to the benefit of and be binding [ ]on [Brad and Yubo] and their respective permitted successors and permitted assigns.” Yubo assigned all his “interest, rights, and benefits” under
Brett‘s Interest in the Bihner Chen Entities
About seven years later, Brad decided to retire and wanted to transfer his interest in the Bihner Chen entities to his son, Brett, who was also a licensed engineer. At that time, Brett had been a Bihner Chen employee for many years. Article 8.5 of both Bihner Chen‘s limited partnership agreement and Bihner Chen Engineering, GP, LLC‘s regulations granted Yubo the right of first refusal to purchase Brad‘s interest in the Bihner Chen entities. Yubo waived his Article 8.5 rights and agreed to allow Brad to transfer his rights and interest to Brett. Yubo provided Brett with one of the formation document binders, and Brett did not object to any of the agreements in the binder.
In December 2012, Brett and Yubo entered into a written agreement that Brett would assume all of Brad‘s rights, title, and interest in the Bihner Chen entities (“written consent“). Under the written consent, Brett agreed to be “bound by all of the governing documents, bylaws, and regulations of [the Bihner Chen entities], as is, without limitation.” Unlike his transaction with Brad, Yubo did not give Brett any money. As soon as Yubo and Brett executed the written consent, Brad retirеd from engineering.
The Buy-Sell Transaction and the Alleged Misconduct
In September 2020, Brett invoked the buy-sell provision of Bihner Chen‘s limited partnership agreement and Bihner Chen Engineering, GP, LLC‘s regulations. Under the buy-sell provision, Yubo could either sell his interest in the Bihner Chen entities to Brett for $600,000 or purchase Brett‘s interest in the Bihner Chen entities for the same price. The next month, Brett and Yubo met at Bihner Chen‘s office. Yubo presented a letter to Brett and elected to purchase all of Brett‘s interest in the Bihner Chen entities. The letter outlined the details to finalize the buy-sell transaction and reminded Brett of his obligations and duties to the Bihner Chen entities until the transaction closed. Brett became very angry, announced his
Yubo‘s counsel sent a letter to Brett reminding him of his duties and obligations to the Bihner Chen entities. The letter specifically alerted Brett that starting a cоmpeting firm would violate the noncompete agreement. It also stated that Yubo and the Bihner Chen entities would sue Brett and seek injunctive relief if he did so.
Disregarding Yubo‘s letter, Brett filed a certificate of formation for Bihner Engineering, PLLC before the buy-sell transaction had finalized. The certificate listed Brett as the registered agent, provided his home address as the company‘s business address, and described the company‘s purpose as a “professional service” that provided “structural engineering consultation and design services.” Brett advertised Bihner Engineering, PLLC on the website for the Texas Board of Professional Engineers & Land Surveyors. He bought an internet domain for Bihner Engineering, PLLC, www.bihner.net. The internet domain Brett bought was much like the internet domain that the Bihner Chen entities held since 2005: www.bihnerchen.net. After Brett had formed Bihner Engineering, PLLC, advertised his company, and bought an internet domain for it, the buy-sell transaction closed and Brett received $600,000 from Yubo in December 2020.
Yubo discovered that Brett had solicited one of Bihner Chen‘s clients. One of Bihner Chen‘s clients mistakenly emailed Yubo and requested payment for services from Brett‘s new company, Bihner Engineering, PLLC. The invoice displayed Brett‘s name and home address. The email and invoice alarmed Yubo becаuse he had paid this client for services days earlier.
Yubo‘s counsel sent Brett a litigation hold letter requesting written confirmation that Brett would refrain from using “Bihner Engineering, PLLC” as his business name and misappropriating Bihner Chen‘s trade secrets. The letter underscored Brett‘s obligation to honor the noncompete agreement.
The Lawsuit and Legal Proceedings
Brett filed a petition against Yubo and the Bihner Chen entities and sought an order declaring that he could use his surname in his new business and that the noncompete agreement was unenforceable against him. He argued that he never executed a noncompete agreement or agreed to be bound by its terms. He also never
Yubo and the Bihner Chen entities filed an answer and an application for a temporary restraining order and a temporary injunction against Brett, alleging that Brett breached the noncompete agreemеnt and that he misappropriated Bihner Chen‘s trade secrets—its Christmas card list and fee schedule—in violation of the
The trial court conducted an evidentiary hearing on Yubo and the Bihner Chen entities’ application for temporary injunction. The trial court then entered a temporary injunction, finding that Yubo and the Bihner Chen entities’ evidence supported an injunction against Brett for breaching the noncompete and misappropriating Bihner Chen‘s trade secrets.
This appeal followed.3
In his first issue, Brett contends the trial court abused its discretion by granting the temporary injunction.
A. Standard of review
We review a trial court‘s order granting a temporary injunction under an abuse of discretion standard. Abbott v. Anti-Defamation League Austin, Sw., & Texoma Regions, 610 S.W.3d 911, 916 (Tex. 2020) (per curiam). “We will not reverse the trial court‘s order unless the trial court‘s action was ‘so arbitrary that it exceeded the bounds of reasonable discretion.‘” Midway CC Venture I, LP v. O&V Venture, LLC, 527 S.W.3d 531, 533 (Tex. App.—Houston [1st Dist.] 2017, no pet.) (quoting Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601, 607 (Tex. App.—Houston [1st Dist.] 2002, no pet.)). A trial court does not abuse its discretion if some evidence reasonably supports the trial court‘s decision. Henry v. Cox, 520 S.W.3d 28, 34 (Tex. 2017). Wе review the evidence submitted to the trial court in the light most favorable to its ruling, drawing all legitimate inferences from the evidence and deferring to the trial court‘s resolution of conflicting evidence. Shor v. Pelican Oil & Gas Mgmt., LLC, 405 S.W.3d 737, 748 (Tex. App.—Houston [1st Dist.] 2013, no pet.). “We limit the scope of our review to the validity of the [temporary injunction] order, without reviewing or deciding the underlying merits” of the case. Henry, 520 S.W.3d at 33–34.
B. Probable right of relief
Brett claims that Yubo and the Bihner Chen entities did not present any reasonable evidence to establish a probable right of recovery on their trade-secret misappropriation claim. Brett specifically argues that Yubo and the Bihner Chen entities did not prove that the Christmas card list and the fee schedule were trade secrets. Brett also argues that they did not prove that he misappropriated the purported trade secrets.
A plaintiff shows a probable right of success on the merits by alleging a cause of action and presenting evidence that tends to sustain it. Tel. Equip. Network, 80 S.W.3d at 607. A plaintiff can establish a claim for trade-secret misappropriation by showing: (1) the existence of proprietary information or a trade secret, (2) a brеach of a confidential relationship or improper discovery of the information or secret, (3)
1. Trade secret
Brett argues that the Christmas card list and fee schedule did not contain trade secret information because they were retained in his memory and developed from public sources. Moreover, the Bihner Chen entities did not mark the Christmas card list or fee schedule as confidential. Nor did Brett sign any document designating these materials confidential. In resрonse, Yubo and the Bihner Chen entities contend that the evidence supports trade secret protection for the Christmas card list and the fee schedule. At the temporary injunction stage, a trial court does not decide whether the information to be protected is a trade secret. Rather, Yubo and the Bihner Chen entities must establish that they have the right to trade secret protection until a trial on the merits. Fox v. Tropical Warehouses, Inc., 121 S.W.3d 853, 860 (Tex. App.—Fort Worth 2003, no pet.).
all forms and types of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prоtotype, pattern, plan, compilation, program device, program, code, device, method, technique, process, procedure, financial data, or
list of actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if: (A) the owner of the trade secret has taken reasonable measures under the circumstances to keep the information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
At the temporary injunction hearing, Yubo testified that the binder of documents controlled the formation and internal affairs of the Bihner Chen entities. He testified that when he gave Brett the binder of documents and asked him if there were any problems with the existing agreements, Brеtt told him no. Yubo introduced the noncompete agreement, containing a “Confidential Information” provision that tracks the statutory definition of trade secret:
Bihner acknowledges that Chen and/or the Partnership owns or has developed and will continue to develop unique concepts, sales presentations, marketing programs, marketing strategies, business practices, methods of operation, pricing information, cost information, technical information, proprietary information, computer software programs, tapеs and disks concerning its operations systems, customer lists, customer leads, documents identifying past, present and future proprietary and/or trade secret information concerning its operations and expansion plans (“Confidential Information“).
The Christmas card list was part of Bihner Chen‘s marketing strategies, business practices, and customer lists. Yubo testified that the Christmas card list consisted of
There was also evidence that Yubo and Brett sought to maintain the secrecy of its information. Yubo testified in great detail about the measures undertaken by Bihner Chen to protect the Christmas list and fee schedule from disclosure to its employees and the public. Yubo testified that he and Brett were the only people with access to Bihner Chen‘s confidential material that was stored on Bihner Chen‘s server in either a PDF or an Excel file, except for the Christmas list that Brett kept. No other employee knеw the credentials to access the server.
The fee schedule contained Bihner Chen‘s pricing information. Yubo testified that the fee schedule was a one-page document that he and Brett used as a pricing guideline when they bid on projects. Like the Christmas card list, only Yubo and Brett could access the fee schedule. The pricing guidelines were based on the details of the potential job, including the scope of work, the client, and the type of project. Yubo testified that the pricing strategy was confidential.
Yubo and the Bihner Chen entitiеs presented evidence showing that both the Christmas card list and fee schedule were valuable and unavailable to the public. Yubo testified that Bihner Chen considered the information in the Christmas card list and fee schedule valuable because he and Yubo tracked how much business their
Yubo testified that Bihner Chen considered information about its clients, competition, plans, estimates, and other project information to be confidential. Yubo and the Bihner Chen entities presented Bihner Chen‘s Employee Handbook as evidence. The section titled “Confidentiality” stated:
During the course of your employment at Bihner Chen, you will be working with our clients, their competition, future plans, estimates, and other project information that we consider confidential. Maintaining this confidentiality is important to our competitive position in the industry, and ultimately our success and stability. Employees must protеct this information by safeguarding it when in use, filing it properly when not in use, and discussing it only with those who have a legitimate business “need to know.” Some clients require signing their specific confidentiality agreement. Do not discuss our list of clients
outside the office with anyone other than your family. Any work done for Bihner Chen may not be reproduced without permission.
Brett testified that he hired counsel to draft the Employee Handbook and that he reviewed it. Thus, it was undisputed that Brett was aware of Bihner Chen‘s intention to keep certain information confidential. In fact, Brett testified that, in his dual capacity as a partner and an employee of Bihner Chen, the confidentiality provision, along with the other provisions in the Employee Handbook, applied to him. He conceded that Bihner Chen considered the identity of its customers to be confidential and expected employees, including him, to safeguard that information.
Brett‘s contention that information committed to memory could not be trade secrets is unavailing. His reliance on Oxford Global Res., Inc. v. Weekley-Cessnun, No. CIV.A. 3:04-CV-0330-, 2005 WL 350580 (N.D. Tex. Feb. 8, 2005), is misplaced for two reasons. First, the court did not address whether information сommitted to memory precluded this information from being a trade secret under TUTSA. Id. at *2. Second, the court issued its memorandum opinion in 2005, and TUTSA was enacted many years later in 2013. See
2. Unauthorized use of trade secrets
Brett argues that there was “no reasonable evidence of ‘actual’ or ‘threatened’ misappropriation of a trade secret.” He also argues that Yubo and the Bihner Chen entities did not present reasonable evidence that he had “aсquired, disclosed, or used
At the temporary injunction stage, the necessary inquiry is whether the applicant presented some evidence that the non-applicant is “in possession of the [trade secret] information and in a position to use it.” Daniels v. Radley Staffing, LLC, No. 14-19-00054-CV, 2021 WL 282630, at *5 (Tex. App.—Houston [14th Dist.] Jan. 28, 2021, no pet.) (mem. op.) (citing Fox, 121 S.W.3d at 860). “Use of [a] trade secret means commercial use by which the offending party sеeks to profit from the use of the secret,” and includes “any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant” or any reliance on the trade secret to “assist or accelerate research or development.” Berry-Helfand, 491 S.W.3d at 722. Unauthorized use of a company‘s trade secret information may be shown by evidence of a former employee using trade secrets acquired during the employment relationship. See Sharma v. Vinmar Intern., Ltd., 231 S.W.3d 405, 424 (Tex. App.—Houston [14th Dist.] 2007, no pet.). This evidence must show mоre than just the former employee‘s “general knowledge, skill, and experience acquired during employment.” Id.
Here, the evidence shows that Brett had unfettered access to the Christmas card list and the fee schedule. Yubo testified that Brett kept a copy of the Christmas
Brett testified that he sent “roughly a hundred” holiday cards advertising his competing engineering firm to people he recalled by memory. Brett testified that he acquired addresses of the holiday card recipients through public searches on the internet. He also testified that he had names and telephone numbers of these contacts saved in his phone, which he gleaned from working at Bihner Chen. Yubo testified that some of Bihner Chen‘s customers and referral sources on Bihner Chen‘s Christmas card list received Brett‘s holiday cards. A former Bihner Chen employee sent Yubo an email informing him that Brett had sent him a holiday card announcing his new company. Similarly, a current Bihner Chen employee received a holiday card from Brett and sent a picture of it to Yubo.
The evidence also shows that discovered that Brett solicited one of Bihner Chen‘s clients. One of Bihner Chen‘s clients inadvertently attached an invoice to an email and sent it to Yubo. Yubo and the Bihner Chen entities introduced a copy of this invoice into evidence. The invoice identified Brett as the point of contact, Bihner
Viewing this evidence in the light most favorable to the order and indulging reasonable inferences in favor of the ruling, Yubo and the Bihner Chen entities presented some evidence from which the trial court could have determined that Brett had their Christmas card list and might use it. T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc., 965 S.W.2d 18, 24 (Tex. App.—Houston [1st Dist.] 1998, pet. dism‘d) (holding that appellant possessed former employer‘s confidential information and could use possibly it, so appellant was likely to use information to former employer‘s detriment).
Because Brett did not carry his burden of establishing that the trial court‘s order granting the temporary injunction was an abuse of discretion, we need not address his remaining irreparable harm arguments. See
In his second issue, Brett contends that the noncompete agreement that Yubo and Brad executed was unenforceable because he never signed it or received consideration for a covenant not to compete against the Bihner Chen entities. In response, Yubo and the Bihner Chen entities argue that a dispute about the enforceability of the noncompete agreement is not ripe for appellate review. We agree.
The purpose of a temporary injunction is to “maintain the status quo rather than adjudicate the matter on the merits.” In re M-I L.L.C., 505 S.W.3d 569, 576 (Tex. 2016). At a temporary injunction hearing, the trial court only addresses the legal issues related to whether the applicant showed a probability of success and irreparable injury. Loye v. Travelhost, Inc., 156 S.W.3d 615, 619 (Tex. App.—Dallas 2004, no pet.) (op. on reh‘g). The merits of the controversy are not at issue at the temporary injunction stage of the legal proceedings. Id.; Thomas v. A*Med Mgmt., Inc., No. 01-19-00564-CV, 2020 WL 5269412, at *8 (Tex. App.—Houston [1st Dist.] Sept. 3, 2020, no pet.) (mem. op.). Because the merits of the controversy are not before the trial court at temporary injunction hearings, a trial court does not address the ultimate issue of whether a covenant not to compete is enforceable under
For these reasons, we will not consider whether the noncompete agreement is enforceable against Brett. That determination must await a final judgment on the merits. See Smith v. Livingston Hearing Aid Ctr., Inc., No. 07-06-0204-CV, 2006 WL 2686623, at *1–2 (Tex. App.—Amarillo 2006, no pet.) (mem. op.) (“[I]f the trial court cannot use the interim procedure to resolve the merits of the underlying claim, neither can the reviewing court . . . by arguing that the covenant at bar fails to comport with
We affirm.
Sarah Beth Landau
Justice
Panel consists of Chief Justice Radack and Justices Landau and Countiss.