OPINION
Appellants Subodh Sonwalkar, M.D. and Wolley Oladut, M.D. held partnership units in appellee St. Luke’s Sugar Land Partnership, L.L.P (“the Partnership”). They applied for a temporary injunction to enjoin the Partnership and its managing partner, appellee St. Luke’s Community Development Corporation — Sugar Land (the “Managing Partner”) from terminating their partnership interests and taking other actions. The trial court denied the application. Sonwalkar and Oladut filed notice of an accelerated appeal. See Tex. Civ. PRAC. & Rem. Code Ann. § 51.014(a)(4) (West 2008). We reverse the order denying the application and remand the case to the trial court for further proceedings consistent with our opinion.
Background
The Partnership is a Texas limited liability partnership, which owns and operates St. Luke’s Sugar Land Hospital in Sugar Land, Texas. Under the original partnership agreement, the ownership of the Partnership was divided into two classes of partnership units: Class A units, which were reserved for physicians, and Class B units, which were reserved for the Partnership’s managing partner. At the Partnership’s formation, Class A units were owned by three physicians, and Class B units were owned by SLEHS Holdings, Inc., a Texas corporation. Under the original partnership agreement, Class A units always represented 49% of the “Percentage Interest” of the Partnership and Class B units always represented 51% of the “Percentage Interest,” regardless of the number of outstanding Class A units and Class B units. The original partnership agreement defined a partner’s “Percentage Interest” as “the percentage of the total Partnership Interest in the Partnership held by a Partner, which percentage shall be calculated by dividing the number of Units held by the Partner by the total number [of] Units issued and outstanding
The day after its formation, the Partnership offered Class A units to physicians at the hospital in exchange for $40,000 each. As part of that initial offering, Sonwalkar and Oladut purchased two units each. Shatish Patel and Hemalatha Vijayan, who are co-plaintiffs in the trial court but no longer parties to this appeal, purchased four units each. Other physicians purchased Class A units as part of that first offering as well.
The Partnership made a second offering of Class A units in July 2007. In connection with that second offering, the Partnership adopted the Amended Partnership Agreement. Under the Amended Partnership Agreement, SLEHS Holdings assigned all of its Class B units to the Managing Partner. Paragraph 4.01, concerning the classification of partnership units and the manner for calculating Percentage Interest, was substantially altered, including the elimination of the provision that Class A Units always represented 49% of the Percentage Interest and Class B Units always represented 51% of the Percentage Interest. Instead, any partner’s Percentage Interest was calculated by “dividing the number of Units held by the Partner by the total number [of] Units issued and outstanding among all Partners at the time, all irrespective of class.” The affirmative vote of partners holding at least 75% of the Partnership Interest was required to approve several types of major actions. For instance, Paragraph 8.03 provided that “neither the individual Partners nor the Governing Board nor the Managing Partner shall have any authority to ... cause the Partnership to ... amend or otherwise change this Agreement” without “the consent of Partners holding at least seventy-five percent (75%) of the Partnership Interest.” Similarly, Article 11 provided that the partnership agreement could be amended “only by a written instrument executed by Partners holding at least seventy-five (75%) of the Partnership Interest.”
An exhibit attached to the Amended Partnership Agreement displayed a table showing the following ownership of partnership units at the time of the agreement’s adoption:
Name of Partner Current Ownership
% of Partnership
Interest # of Units
Managing Partner: 51% 147.79592
Class A Partners: 49% 142
The Amended Partnership Agreement gave the Managing Partner the right to purchase Class B units, including fractional units, when new Class A units were issued, in order “to permit the Unit ownership to remain proportionate among the two classes of Partners.” Thus, when the Partnership issued 54 additional Class A units in connection with the second offering, the Managing Partner acquired 56.20408 Class B units, such that the final ratio of Class B units to Class A units was 204 to 196, thus maintaining the percentage ratio of 51% to 49%.
The Amended Partnership Agreement, like the original partnership agreement, also established a Governing Board to manage several aspects of the Partnership. Paragraph 8.01 provided that the number of Governing Board members was fixed at 15, with 8 reserved for members appointed by the Managing Partner. The remaining members of the Governing Board, called “Physician Representatives,” were appointed by partners holding Class A units. The amended agreement also provided that “all decisions of the Governing Board shall be decided by the affirmative vote of Board Members controlling greater than fifty percent (50%) of the voting interest of
In April 2011, Patel sued the Partnership, alleging that when he purchased his Class A units he was promised healthy returns, but instead the Partnership was operating at a net loss. He further alleged that after an unsuccessful attempt to obtain financial information from the Partnership, he was forced to resign his hospital privileges and also to resign as a member of the Governing Board. He asserted various causes of action including breach of fiduciary duty, fraud, misrepresentation, and theft. Vijayan subsequently joined the suit as Patel’s co-plaintiff, and the Managing Partner was joined as the Partnership’s co-defendant.
A few weeks after the litigation commenced, the Partnership sent a “Rescission Offer” letter to each owner of Class A units. According to the letter, the Partnership was concerned that other Class A unit holders might assert claims because the disclosures made in connection with offering those units might have been inadequate. Therefore, the letter explained, the Governing Board decided to send the “Rescission Offer” in order to mitigate that risk of litigation. The letter provided each recipient 30 days to elect to rescind his or her purchase of Class A units in exchange for a repayment of the purchase price plus six percent interest from the date of purchase. Upon accepting the “Rescission Offer,” a Class A unit holder also agreed to release the Partnership, Managing Partner, and others associated with the Partnership from any and all claims and causes of action. Although almost all of the Class A owners signed and returned acceptances of the Rescission Offer, Patel, Vijayan, Sonwalkar, and Oladut did not.
On the same date of the “Rescission Offer” letter, Patel and Vijayan applied for a temporary injunction (“First Temporary Injunction Application”). Patel and Vijay-an requested that the Partnership and the Managing Partner be enjoined from the following actions:
A. Taking any further action on the “Rescission Offer”;
B. Making any offer to rescind a purchase of Class A units;
C. Making any offer to purchase, redeem, or otherwise acquire Class A units;
D. Taking any action to alter the make-up of the Governing Board; and
E. Taking any action to alter the then current ratio of Class A partners to Class B partners.
The trial court granted Patel and Vijayan’s requested relief of a temporary injunction, and it additionally restricted the Partnership and the Managing Partner from:
F. Taking any action that would alter the organization and corporate make-up of the Partnership;
G. Taking any action to initiate a capital call, without further court order; and
H. Taking any action to alter in any manner the Amended Partnership Agreement.
Shortly after the trial court granted this injunctive relief, the Partnership and the Managing Partner filed a motion to modify or vacate the temporary injunction. At a hearing on the motion, the Partnership and the Managing Partner offered, in lieu
The Partnership continued with the rescission of the issuance of Class A units with respect to those physician owners who had accepted the offer. In an email message sent to current and former Class A unit holders, the Partnership indicated that after the overwhelming acceptance of the rescission offer, the Class A units that were still outstanding represented less than 15% of the Partnership’s total Percentage Interest. The same communication announced the adoption of a new amendment to Paragraph 8.01 of the partnership agreement concerning the composition of the Governing Board. Pursuant to the amendment, the Managing Partner retained the right to elect eight members, but the Class A unit holders had the right to elect only one member for each seven percent of the Percentage Interest owned by all Class A unit holders. A subsequent notice was sent to the remaining Class A unit holders to announce a meeting at which they could elect one director to the new Governing Board.
Following this notice, Patel and Vijayan applied for a temporary restraining order and temporary injunction (“Second Temporary Injunction Application”). They argued that despite the completion of the rescission offer, the Class A unit holders still owed 49% of the Partnership. They argued that “[ajbsent preliminary injunc-tive relief, Plaintiffs will be irreparably harmed by being deprived of their unique right to participate in the management and control of the Partnership.” Patel and Vijayan asked the trial court to enjoin the Partnership from calling a meeting of Class A partners to elect less than seven representatives to the Governing Board and from taking other major actions requiring at least 75% of the Percentage Interest or Voting Interest. The trial court denied the application.
Shortly after the Second Temporary Injunction Application was denied, the Partnership sent notice of a capital call to the remaining Class A partners: Patel, Vijay-an, Sonwalkar, and Oladut. From Patel and Vijayan, who each owned four units, the Partnership demanded $487,037.00 each, and from Sonwalkar and Oladut, who each owned two units, the Partnership demanded $243,518.50 each. The notice warned that if their capital call payments were not timely received, the Partnership could terminate their respective partnership interests. Attached to the notice was the Managing Partner’s “Written Consent in Lieu of Meeting to Action by the Partners.” This document stated that the Managing Partner held more than 75% of the Partnership Interest, and it purported to authorize the capital call without the requirement of a Governing Board meeting.
After the notice of capital call was sent, Sonwalkar and Oladut joined the lawsuit as Patel and Vijayan’s co-plaintiffs. In addition to filing a joint amended petition, Patel, Vijayan, Sonwalkar, and Oladut filed a joint application for temporary injunction (“Third Temporary Injunction Application”) in which they contended that “changed circumstances,” specifically the Partnership’s capital call, entitled them to injunctive relief. They argued, as the pri- or applications argued, that the Amended Partnership Agreement provided them with 49% of the Voting Interest of the Partnership. They also argued that the
The trial court held a hearing on the Third Temporary Injunction Application. After the hearing but before the trial court ruled on the application, the Partnership’s Governing Board delivered to Patel, Vijay-an, Sonwalkar, and Oladut’s counsel a notice stating that their partnership interests were terminated for failure to pay the required contribution. In response, Patel, Vijayan, Sonwalkar, and Oladut filed a supplemental brief to apprise the trial court about the termination of their interests and to urge a prompt ruling on their application.
A couple of weeks later, the trial court denied the Third Temporary Injunction Application. Patel, Vijayan, Sonwalkar, and Oladut requested findings of fact and conclusions of law, but the trial court did not act on the request. They then timely filed a joint notice of accelerated appeal from the denial of their Third Temporary Injunction Application. Subsequently, Sonwalkar and Oladut filed an amended notice stating that Patel and Vijayan decided not to pursue the appeal.
Analysis
In their first issue on appeal, Sonwalkar and Oladut argue that the trial court erred in denying the Third Temporary Injunction Application because the Amended Partnership Agreement unequivocally entitled the Class A unit holders to 49% of the Voting Interest on the Governing Board, which means that the capital call and the termination of their partnership interests were not authorized. In their second issue, they alternatively argue that the legal effect of the rescission of the other Class A units was to reduce the number of Class B units held by the Managing Partner, because rescissions always restore the parties to their relative positions prior to entering into the transaction.
I. Legal framework for interlocutory appeal
a. Standard of review
In general, a temporary injunction is an extraordinary remedy and does not issue as a matter of right. Walling v. Metcalfe,
The decision to grant or deny a temporary injunction lies in the discretion of the trial court, and the court’s ruling is subject to reversal only for a clear abuse of that discretion. Id. A trial court abuses its discretion in granting or denying a temporary injunction when it misapplies the law to the established facts. INEOS Grp. Ltd. v. Chevron Phillips Chem. Co.,
b. Scope of interlocutory review
The Partnership and the Managing Partner contend that Sonwalkar and Ola-dut’s arguments on appeal concern the “ultimate issue” of the underlying case, and therefore this court cannot entertain them. They argue that in order to decide the interlocutory appeal as Sonwalkar and Ola-dut have presented it, this court will necessarily delve into their causes of action for breach of contract and breach of fiduciary duty.
Sonwalkar and Oladut respond that they have asked this court to review only the denial of the application for a temporary injunction and not any other matter pending in the trial court. They also argue that because we must determine as part of our review whether they have a “probable right to the relief sought,” see Butnaru,
We recognize that the scope of our review is strictly limited to determining whether the trial court clearly abused its discretion in denying the Third Temporary Injunction Application. See Davis,
c. Changed circumstances justifying successive applications
The Partnership and Managing Partner contend that the trial court’s dissolution of the first temporary injunction barred Son-walkar and Oladut from reapplying for injunctive relief because the circumstances at the time that the first temporary injunction was dissolved were identical to those at the time that the Third Temporary Injunction Application was filed. They argue that in order to deter piecemeal applications for injunctive relief, Sonwalkar and
Sonwalkar and Oladut respond that they were not parties to the suit until the Third Temporary Injunction Application was filed and therefore this application was their first and only request seeking injunc-tive relief. They also point out that they did not file their application until after the Partnership and the Managing Partner sent the capital call notice demanding $243,518.50 from each of them and warning that their partnership units were subject to termination if they failed to pay the demanded contribution. Sonwalkar and Oladut argue that these events represented a change of circumstances that permitted them to apply for a temporary injunction despite the prior applications and the dissolution of the first injunction.
The dissolution of a temporary injunction bars a second application for such injunctive relief, unless the second request is based on changed circumstances not known by the applicant at the time of the first application. State v. Ruiz Wholesale Co.,
The Partnership and the Managing Partner contend that State v. Ruiz Wholesale Co.,
Subsequently, the TABC issued a letter to all holders of general and local distributors licenses about the dissolution order and advised the distributors “to make sure that you are in compliance with the law.” Then, the beer distributor who had applied for the first temporary injunction applied for a second application in which it raised legal grounds that it did not previously raise. Id. at 775. The trial court denied the second application, and the beer distributor timely filed an interlocutory appeal. Id.
The court of appeals held that the trial court did not abuse its discretion in deny
We conclude that Ruiz is distinguishable from this case. Even if Sonwal-kar and Oladut had been parties to the lawsuit from the outset, it would have been futile for them to have argued in the first and second applications that the possibility of a capital call entitled them to injunctive relief. Although the Partnership might have had at all times the power to make a capital call, that prospect alone would not have entitled Sonwalkar and Oladut to in-junctive relief because the “commission of the act to be enjoined must be more than just speculative, and the injury that flows from the act must be more than just conjectural.” Tex. Indus. Gas v. Phoenix Metallurgical Corp.,
We hold that the Partnership’s notice of capital call and accompanying warning that Sonwalkar’s and Oladut’s Class A units were subject to termination for failure to make payment evinced a change of circumstances that permitted Sonwalkar and Ola-dut to seek injunctive relief, despite the prior applications and the dissolution of the first temporary injunction.
II. Availability of temporary injunc-tive relief
a. Cause of action
To be entitled to temporary injunctive relief, the applicant must plead a cause of action. See Butnaru,
The sixth amended petition, which was Sonwalkar and Oladut’s live pleading at the time the trial court ruled on the Third Temporary Injunction Application, purported to state claims for common law fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, conversion, civil conspiracy, promissory estoppel, and declaratory relief. The Partnership and Managing Partner did not specially except to this pleading, nor do they dispute on appeal that Sonwalkar and Oladut pleaded a cause of action. Accordingly, for purposes of this interlocutory appeal, Sonwal-kar and Oladut have pleaded a cause of
b. Irreparable injury
Ordinarily, applicants seeking a temporary injunction must show, in addition to a probable right to relief, that they will be irreparably harmed if the injunctive relief does not issue. See Butnaru,
The Partnership and the Managing Partner do not dispute the general principle that when a statute specifically provides “injunctive relief’ to enforce a right, it dispenses with the common law’s irreparable harm requirement. However, they point out that Section 152.211 provides for “equitable relief’ without specifying “injunctive relief.” They argue that the difference is crucial, and the general authorization of “equitable relief’ does not eliminate the common-law requirement of showing irreparable harm will result in the absence of injunctive relief. The Partnership and the Managing Partner argue that Sonwalkar and Oladut cannot meet this requirement because, if they are entitled to relief, they have an adequate legal remedy in the form of money damages to compensate them for the loss of their Class A units.
At common law, the applicant seeking an injunctive relief must plead and prove a probable, imminent, and irreparable injury for which no adequate remedy at law exists. See Butnaru,
In Town of Palm Valley v. Johnson,
A writ of injunction may be granted if ... the applicant is entitled to the relief demanded and all or part of the relief requires the restraint of some act prejudicial to the applicant ....
Tex. Civ. Prac. & Rem. Code Ann. § 65.011(1). The Supreme Court concluded that the Legislature had not intended by this statute to replace the equitable remedy of an injunction with a statutory one. Johnson,
Appellate courts have held that various other statutes providing for injunctive relief do dispense with the common law’s irreparable injury requirement. See, e.g., State v. Tex. Pet Foods,
Like other circumstances in which the irreparable injury requirement has been abrogated by statute, Sonwalkar and Ola-dut argue that Section 152.211(b) of the Business Organizations Code supersedes the common law in this regard. That statute provides:
A partner may maintain an action against the partnership or another partner for legal or equitable relief, including an accounting of partnership business, to:
(1) enforce a right under the partnership agreement;
(2) enforce a right under this chapter...."
(3) enforce the rights and otherwise protect the interests of the partner, including rights and interests arising independently of the partnership relationship; or
(4) enforce a right under Chapter 11 [concerning winding up and termination of domestic entities].
However, Section 152.211(b) of the Business Organizations Code, although generally authorizing injunctions to “enforce a right under the partnership agreement” and the like, does not define the requisite injury entitling the applicant to injunctive relief. We conclude that this provision is more comparable to Section 65.011(1) of the Civil Practice and Remedies Code, which the Supreme Court held in Town of Palm Valley v. Johnson does not supersede the irreparable injury requirement despite its general authorization of injunctive relief to restrain “some act prejudicial to the applicant.” Tex. Civ. Prac. & Rem. Code Ann. § 65.011(1). Accordingly, Section 152.211(b) does not supersede the common law’s irreparable injury requirement, and Sonwalkar and Oladut were required to meet this requirement in order to be entitled to injunctive relief.
“An injury is irreparable if the injured party cannot be adequately compensated in damages or if the damages cannot be measured by any certain pecuniary standard.” Butnaru,
The alleged irreparable injury in this case is the termination of interests in a limited liability partnership. That circumstance alone does not demonstrate that a remedy on appeal would be inadequate per se. For example, in North Cypress Medical Center Operating Co. v. St. Laurent,
The undisputed evidence in the record indicates that St. Laurent is at risk for loss of only his proportionate share in the partnership’s net income and any future distributions. Both of these items represent an interest in money. Therefore, St. Laurent has not shown that breach-of-contract damages would be inadequate to compensate him for any such monetary losses.
Id. The court of appeals held that St. Laurent had not shown an irreparable injury and it reversed and dissolved the temporary injunction. Id. at 180; see also Doerwald v. MBank Fort Worth, N.A.,
Under different circumstances, however, an appeal was found to offer an inadequate remedy in Health Discovery Corp. v. Williams, 148 S.W.Sd 167 (Tex.App.-Waco 2004, no pet.). In Williams, a corporation sued several of its officers and directors who had allegedly acquired shares in the corporation without complying with the statutory requirements pertaining to such transactions. Williams,
Turning to the circumstances presented in this appeal, the Third Temporary Injunction Application alleged that the Partnership was, among other things, “denying
We conclude based on the circumstances of this case that Sonwalkar and Oladut have pleaded and proved that they would be irreparably injured if the temporary injunction did not issue. With the termination of their partnership interests, they lose several management rights, including the right to participate with other Class A unit holders in selecting a Governing Board representative who wields 49% of the Voting Interest and can block several major actions, such as capital calls. These non-pecuniary management rights distinguish this case from North Cypress and Doerwald, in which the applicants for injunctive relief had only rights to share in profits, which could be restored to them as a money judgment at the end of the ordinary appeal process. Because the management rights at issue in this case “cannot be measured by any certain pecuniary standard,” Butnaru,
c. Probable right to relief
Turning to the final element necessary to obtain a temporary injunction, Sonwal-kar and Oladut argue that they demonstrated a probable right to the injunctive relief sought because the Amended Partnership Agreement provides that Class A unit owners control 49% of the Voting Interest on the Governing Board, and therefore the Governing Board lacked the authority to make the capital call. They rely on the language of Paragraph 8.09 of the Amended Partnership Agreement, which provides that the “Physician Representatives [on the Governing Board], whether one or more, shall collectively control forty-nine percent (49%) of the Voting Interest, which shall be allocated among the Physician Representatives in attendance at the meeting (whether in person or by proxy) on a per capita basis.” Sonwalkar and Oladut also argue that the legal effect of any rescission is to restore the parties to the position before the contract was made. Thus, they contend that the effect of the rescission of the other Class A Units was to reduce the number of Class B Units owned by the Managing Partner to 12.48980 such units. If this were so, the percentage ratio of all outstanding Class B Units to all outstanding Class A Units would be 51% to 49% — the same ratio as before the consummation of the rescission offers — rather than the approximate percentage ratio of 94% to 6% that the Managing Partner and the Partnership maintain is accurate.
Partnership agreements are construed and interpreted pursuant to the applicable law of contracts. Park Cities Corp. v. Byrd,
Under this partnership agreement, “Percentage Interest” and “Voting Interest” are not synonymous terms. Paragraph 8.09 provides that the “Physician Representatives [on the Governing Board], whether one or more, shall collectively control forty-nine percent (49%) of the Voting Interest, which shall be allocated among the Physician Representatives in attendance at the meeting (whether in person or by proxy) on a per capita basis.” The amendment to Paragraph 8.01 effectively reduced the number of Physician Representatives on the Governing Board to one. Despite this, under the plain and unamended terms of Paragraph 8.09, the one Class A Unit representative on the Governing Board controls 49% of the Voting Interest. Paragraph 8.09 further provides that the affirmative vote of Board Members controlling at least 75% of the Voting Interest is required for a capital call. Because it is undisputed that no Physician Representative on the Governing Board approved the capital call at issue, the capital call necessarily was not approved by 75% of the Voting Interest as required by the Amended Partnership Agreement.
Pursuant to the partnership agreement as currently amended, we hold that Sonwalkar and Oladut have demonstrated a probable right to injunctive relief to prevent the Partnership and the Managing Partner from taking actions requiring 75% of the Voting Interest, including the making of a capital call.
Conclusion
In summary, we have determined that a change of circumstances permitted Son-walkar and Oladut to seek injunctive relief despite the fact that two prior applications for injunctive relief had been filed by other
On the merits of the request for temporary injunctive relief it is undisputed that Sonwalkar and Oladut pleaded a cause of action. Because their valuable management rights under the Amended Partnership Agreement would be terminated absent injunctive relief, and because such rights cannot be compensated by any certain pecuniary standard, they proved an irreparable injury. We also determined a probable right to relief because the capital call was disallowed under the Amended Partnership Agreement due to the lack of approval by the 75% supermajority of the total Voting Interest required for such action. Because the capital call was disallowed, Sonwalkar’s and Oladut’s interests could not be terminated for failure to pay the capital call.
We conclude that Sonwalkar and Oladut pleaded and proved that under the current version of the Amended Partnership Agreement they had a right to a temporary injunction to enjoin the termination of their partnership interests, and we further conclude that the trial court erred by denying that relief. We do not reach Son-walkar and Oladut’s second issue on appeal, regarding whether the legal effect of the rescission of Class A units was to reduce the number of Class B units, as it is not necessary to the disposition of this appeal. See Tex. R. App. P. 47.1.
We reverse the trial court’s order denying the Third Temporary Injunction Application and remand the case for further proceedings consistent with this opinion.