Opinion
01-20-00095-CV
06-03-2021
MYRTLE CONSULTING GROUP, LLC, Appellant v. RESULTING PARTNERS, INC., Appellee
On Appeal from the 11th District Court Harris County, Texas Trial Court Case No. 2019-88632
Panel consists of Chief Justice Radack and Justices Goodman and Farris.
MEMORANDUM OPINION
APRIL L. FARRIS, JUSTICE
In this case, Myrtle Consulting Group, LLC, initiated arbitration proceedings against Resulting Partners, Inc., and its principal, Javier Rodriguez Lojo, who is not a party to this interlocutory appeal. Resulting Partners filed suit and sought a declaratory judgment that it was not a party to any arbitration agreement with Myrtle and therefore was not required to arbitrate Myrtle's claims against it. Resulting Partners applied for a temporary restraining order and a temporary injunction to prevent the arbitration proceedings from moving forward while the trial court determined whether Resulting Partners was subject to arbitration. The trial court granted both the temporary restraining order and the temporary injunction in favor of Resulting Partners.
In three issues, Myrtle contends that (1) the trial court abused its discretion when it failed to grant Myrtle's motions for expedited discovery prior to the temporary injunction hearing; (2) the trial court abused its discretion by finding that Resulting Partners would suffer irreparable injury if the temporary injunction did not issue; and (3) Resulting Partners was not entitled to a temporary injunction under the doctrine of unclean hands. We affirm.
Background
A. Relationship Between the Parties
Myrtle Consulting Group is an operations consulting company headquartered in Houston. It has clients in numerous industries throughout the world. In October 2016, Myrtle hired Javier Lojo as a business development executive. Almost immediately thereafter, Lojo created Resulting Partners, a Florida corporation. Resulting Partners performs consulting work similar to the work that Myrtle performs.
On February 20, 2017, Lojo signed a "Confidentiality and Non-Compete Agreement." This agreement stated that it was between Myrtle Consulting Group, LLC, and "the Employee signed below," Lojo. In this agreement, Lojo agreed to work solely for Myrtle and "not engage in any other business interest or activities." He agreed not to disclose or publish any of Myrtle's confidential information during his employment "and perpetually thereafter." He further agreed that, for two years after the end of his employment with Myrtle, he would not accept employment or enter into a business relationship with any company that provides similar goods and services to Myrtle's clients.
The agreement also included an arbitration provision, in which Myrtle and Lojo agreed that any dispute or claim arising from or relating to the agreement shall be settled by binding arbitration conducted by the American Arbitration Association (AAA). Resulting Partners did not sign this agreement, nor was it mentioned in the agreement.
B. Suit Against Lojo and Arbitration Proceedings
In November 2018, Myrtle sued Lojo, and the suit was assigned to the 80th District Court of Harris County. Resulting Partners is not a party to this suit. Myrtle asserted causes of action against Lojo for breach of contract related to the confidentiality and non-compete agreement, conversion, violations of the Federal Defend Trade Secrets Act and the Texas Uniform Trade Secrets Act, and tortious interference with existing and prospective contracts. Lojo moved to dismiss the suit under the Texas Citizens Participation Act (TCPA). That motion was overruled by operation of law. Lojo appealed the denial of his motion to dismiss, and that appeal remains pending before the Fourteenth Court of Appeals.
In October 2019, Myrtle filed a demand for arbitration with the AAA and named Lojo and Resulting Partners as respondents. In the demand, Myrtle provided a brief description of the dispute and stated:
Claimant and Respondent entered into an Employment and Confidentiality and Non-Compete Agreements. Claimant alleges Respondent breached said agreements and alleges violations of the Federal Defend Trade Secrets Act (DTSA), Texas Uniform Trade Secrets Act (TUTSA), breach of contract, conversion, tortious interference with prospective contracts, unjust enrichment, and exemplary damages.
Myrtle sought monetary damages, attorney's fees, exemplary damages, and other equitable relief. Myrtle also filed a "Statement of Claims in Arbitration" and provided specific factual allegations for each of its claims against Lojo and Resulting Partners. Specifically, Myrtle alleged that, during Lojo's employment, he had several meetings in June and July of 2017 with representatives of a company called Ecopetrol, a potential client. Lojo quit working for Myrtle at the end of July 2017. Several months later, Myrtle learned that Ecopetrol hired Resulting Partners for consulting services similar to those Myrtle had offered.
Counsel for Lojo and Resulting Partners informed the AAA of the stay in place in Lojo's pending appeal before the Fourteenth Court of Appeals and argued that Myrtle's demand for arbitration violated the stay. See Tex. Civ. Prac. & Rem. Code § 51.014(b) (providing that interlocutory appeal of order denying TCPA motion to dismiss stays commencement of trial and "all other proceedings in the trial court" pending resolution of appeal). Counsel stated that because of the stay, Lojo and Resulting Partners would not be filing an answer to Myrtle's arbitration demand unless they are compelled to arbitrate. Finally, counsel stated that "Resulting Partners, Inc. is not a party to the arbitration agreement and has not been ordered by any court to arbitrate . . . ."
The AAA's Manager of ADR Services asked Myrtle to "comment on the request to stay the arbitration and arbitrability as to Resulting Partners, Inc." Myrtle filed a brief with the AAA in support of arbitrating its claims against Resulting Partners. The AAA requested that Resulting Partners provide any reply by December 17, 2019.
C. Proceedings Before the Trial Court
On December 17, 2019, Resulting Partners filed suit against Myrtle, and the suit was assigned to the 11th District Court of Harris County. Lojo is not a party to this suit. Resulting Partners sought a declaratory judgment that it was not a party to any arbitration agreement with Myrtle and that, therefore, it was not subject to arbitration. Resulting Partners sought a temporary restraining order and a temporary injunction "to stay the arbitration until this Court can rule on whether [Resulting Partners] is subject to any arbitration with Myrtle." Resulting Partners argued that, if the trial court did not grant temporary relief, it would suffer irreparable injury because Myrtle would continue with the arbitration proceedings "with the risk that the arbitrator will attempt to determine arbitrability as between [Resulting Partners] and Myrtle." Resulting Partners further argued that an anti-suit injunction was appropriate because allowing arbitration to proceed "presents a threat to this Court's jurisdiction to determine arbitrability" and "subjects [Resulting Partners] to harassing and vexatious litigation." Resulting Partners also sought a permanent injunction permanently enjoining Myrtle from continuing any arbitration proceeding against it.
On December 18, 2019, the Harris County ancillary judge granted a temporary restraining order enjoining Myrtle from continuing with the arbitration proceedings against Resulting Partners or filing any other demand for arbitration against Resulting Partners arising out of the same transaction or occurrence. In this order, the ancillary judge expressly found that no arbitration agreement exists between Myrtle and Resulting Partners. The ancillary judge also found that Resulting Partners would be irreparably injured if the temporary restraining order did not issue because Myrtle's arbitration demand "creates a threat to this Court's jurisdiction and/or constitutes vexatious or harassing litigation" and threatens Resulting Partners' opportunity to have the issue of arbitrability decided by the trial court as opposed to the arbitrator. The order set Resulting Partners' application for temporary injunction for a hearing on January 6, 2020. Due to a scheduling conflict, the trial court later reset the date for the hearing to January 13, 2020.
On December 19, 2019, Myrtle filed a motion for expedited discovery, stating that Myrtle "needs and requests limited discovery to adequately prepare for the temporary injunction hearing." Myrtle attached twelve requests for production and two requests for admissions and requested that the court order Resulting Partners to respond this written discovery by December 27, 2019. Myrtle also requested that the court order the deposition of Resulting Partners' corporate representative for December 30, 2019. This motion was not set for a hearing. Resulting Partners filed a motion to quash the deposition of its corporate representative, arguing that the deposition and expedited discovery was not necessary in advance of the temporary injunction hearing. The trial court did not rule on Myrtle's motion or Resulting Partners' motion to quash.
Myrtle filed an amended motion for expedited discovery on December 30, 2019. Myrtle stated that it believed Resulting Partners was required to arbitrate because Resulting Partners was Lojo's alter ego. Myrtle argued that it must introduce evidence to establish alter ego and its discovery requests "are the minimum necessary to show the relationship between [Lojo] and Resulting Partners." Myrtle requested that the trial court order Resulting Partners to comply with the written discovery requests by January 7, 2020, and order the deposition of Resulting Partners' corporate representative for January 9, 2020. This motion was not set for a hearing, and the trial court did not rule on it.
In advance of the temporary injunction hearing, Myrtle filed a brief arguing that the trial court lacked the authority to issue a temporary injunction enjoining arbitration and that the court should, instead, stay all proceedings and compel arbitration. Resulting Partners also filed a pre-hearing brief in support of the temporary injunction and argued that Myrtle had no legal basis for demanding that Resulting Partners-a non-signatory to the only agreement containing an arbitration provision-be compelled to arbitrate Myrtle's claims against it. Resulting Partners sought both a common-law temporary injunction and a statutory anti-suit injunction protecting it from participating in the arbitration proceeding.
Myrtle also filed a separate motion to compel arbitration in which it argued that its claims against Resulting Partners are within the broad scope of the arbitration provision contained within the confidentiality and non-compete agreement that Lojo signed.
On the day of the temporary injunction hearing, January 13, 2020, Myrtle filed a brief with the trial court addressing whether Resulting Partners would suffer irreparable injury if no temporary injunction issued. In this brief, Myrtle also argued that Resulting Partners was not entitled to equitable relief under the doctrine of unclean hands. Specifically, Myrtle argued that Resulting Partners cannot obtain relief, such as a temporary injunction, in a court of equity because Resulting Partners-created and owned by Lojo-knew that Lojo had breached his confidentiality and non-compete agreement with Myrtle by providing Ecopetrol as a client for Resulting Partners.
At the hearing, Resulting Partners offered into evidence Myrtle's demand for arbitration filed with AAA, the temporary restraining order that issued on December 18, 2019, and the petition that Myrtle filed against Lojo in November 2018. No witnesses testified at this hearing, and Myrtle did not introduce any evidence. Counsel for Myrtle brought up the two motions for expedited discovery that it had filed, stating that he believed the requested discovery was "necessary for the temporary injunction hearing." When the trial court asked if counsel had set the motions for a hearing, counsel responded that he was informed that the court was not having any hearings until January 6, 2020. The trial court stated, "So, those hearings are supposed to be heard by the ancillary judge. Did you file it with ancillary?" When counsel responded that the motions were filed with the trial court, the court stated, "Those go to ancillary."
Myrtle had attached four exhibits to its demand for arbitration: its October 2016 offer of employment to Lojo; the confidentiality and non-compete agreement that Lojo signed in February 2017; Resulting Partners' articles of incorporation, which indicated they were filed with the Florida Secretary of State four days after Lojo agreed to work for Myrtle; and three screenshots of the Resulting Partners website.
Myrtle's counsel stated that alter ego was one theory under which Resulting Partners, as a non-signatory, could be compelled to arbitrate, but Myrtle had not been able to obtain discovery to support that theory. Resulting Partners argued that Myrtle never set the motions for expedited discovery for a hearing. Resulting Partners also stated that it did not agree to the discovery requests because the issue before the court at the temporary injunction hearing was purely legal, the theories to compel a non-signatory to arbitrate were not applicable to this case, and "no amount of discovery is going to change that."
After the hearing, the trial court granted the requested temporary injunction. The trial court made several specific findings in the order, including findings that Myrtle made a demand for arbitration with the American Arbitration Association and asserted claims against Resulting Partners. The court also found that it is undisputed that Resulting Partners is not a signatory to an arbitration agreement with Myrtle. The court further found:
(f) Resulting Partners has a probability of success on its right to disclaim its participation in the AAA Arbitration. Resulting Partners has raised the defense to its participation in arbitration that it is a non-signatory to the Agreement.
(g) Myrtle has failed to present evidence that an exception applies to allow it to compel non-signatory Resulting Partners to the AAA Arbitration.
(h) Specifically, Myrtle has failed to present evidence showing the application of any exception necessary to compel a non-signatory, Resulting Partners, to arbitrate.
(i) Resulting Partners therefore has a likelihood of success on disclaiming arbitration as to the AAA Arbitration.
(j) Resulting Partners would suffer irreparable injury if the arbitration were allowed to go forward before the Court determines whether it is subject to the arbitration agreement.
(k) Specifically, Resulting Partners' irreparable injury would include depriving it of the full procedural and evidentiary rules of this Court and a trial by jury.
(l) Requiring Resulting Partners to participate in the AAA Arbitration would threaten this Court's jurisdiction and would deprive Resulting Partners of this Court's decisions on important issues.
(m) Myrtle's conduct in filing the AAA Arbitration constitutes vexatious and harassing legal action for which Resulting Partners cannot recover monetary damages and/or which monetary damages are difficult or impossible to calculate.
The trial court entered a temporary injunction prohibiting Myrtle from continuing with the arbitration proceedings against Resulting Partners and from filing any other demand for arbitration against Resulting Partners arising out of the same transaction or occurrence. The trial court set the case for trial in October 2020.
After the trial court granted the temporary injunction, Myrtle filed counterclaims against Resulting Partners, alleging that Resulting Partners was vicariously liable for Lojo's actions because he was a vice principal. Myrtle further alleged that Resulting Partners conspired with Lojo to commit fraud and misappropriate Myrtle's trade secrets. Myrtle also asserted causes of action against Resulting Partners for misappropriation of trade secrets, violation of the federal Defend Trade Secrets Act and Texas Uniform Trade Secrets Act, conversion, tortious interference with prospective relations, unjust enrichment, common-law fraud, fraud by nondisclosure, and breach of covenant not to compete.
Motion to Expedite Discovery
In its first issue, Myrtle contends that the trial court abused its discretion by failing to grant its motions for expedited discovery before holding the temporary injunction hearing. As an initial matter, we must determine whether we have appellate jurisdiction to consider Myrtle's first issue.
Generally, a party may take an appeal only from a final judgment or certain interlocutory orders that the Texas Legislature has deemed appealable. See Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001). Civil Practice and Remedies Code section 51.014 is one statute in which the Legislature has set out appealable interlocutory orders. See Tex. Civ. Prac. & Rem. Code § 51.014(a); Ahmed v. Shimi Ventures, L.P., 99 S.W.3d 682, 688 (Tex. App.-Houston [1st Dist.] 2003, no pet.) ("Generally, we have jurisdiction to hear an appeal from an interlocutory order only if a statute explicitly makes the order appealable."). This section specifically allows a party to appeal from an interlocutory order that grants or refuses a temporary injunction. See Tex. Civ. Prac. & Rem. Code § 51.014(a)(4); Eichelberger v. Hayton, 814 S.W.2d 179, 182 (Tex. App.-Houston [1st Dist.] 1991, writ denied) ("Temporary orders that do not grant injunctive relief are not generally subject to appeal.").
We strictly construe the grant of jurisdiction over interlocutory orders in section 51.014 "because the Legislature intended it to be a narrow exception to the general rule that only final judgments are appealable." Ahmed, 99 S.W.3d at 688. An appeal of a temporary injunction may not be used as a vehicle to grant jurisdiction to the appellate court to address matters outside the scope of section 51.014. See Letson v. Barnes, 979 S.W.2d 414, 417 (Tex. App.-Amarillo 1998, pet. denied); R.R. Comm'n v. Air Prods. & Chems., Inc., 594 S.W.2d 219, 221 (Tex. App.- Austin 1980, writ ref'd n.r.e.) ("Non-appealable interlocutory orders cannot be attacked in an appeal from an appealable interlocutory order, except insofar as the question raised might affect the validity of the appealable order.").
In Sharma v. Vinmar International, Ltd., the Fourteenth Court of Appeals addressed whether, in an appeal from an order granting a temporary injunction, it also had appellate jurisdiction to review the trial court's order denying discovery concerning whether the applicant had engaged in a bribery scheme. See 231 S.W.3d 405, 421-22 (Tex. App.-Houston [14th Dist.] 2007, no pet.). Such discovery was allegedly relevant to the defendants' affirmative defense of unclean hands. The Fourteenth Court noted that it must strictly and narrowly construe section 51.014, which does not expressly provide for an interlocutory appeal of an order denying discovery. Id. at 422. The court therefore concluded that it lacked appellate jurisdiction to consider the portion of the appellants' issue complaining about the order denying discovery. Id.
This Court reached a similar conclusion in Eichelberger. See 814 S.W.2d at 182. There, we considered whether an applicant met statutory requirements to be entitled to a temporary injunction. Id. However, we refused to review the merits of a portion of the injunction order that compelled the defendants to produce documents. We explained that "[i]f a portion of an order is injunctive, then that part is reviewable, even though a portion of the order may be interlocutory and nonappealable." Id.; see Hastings Oil Co. v. Tex. Co., 234 S.W.2d 389, 398 (Tex. 1950) (considering whether trial court properly granted temporary injunction, but refusing to consider trial court's order denying plea in abatement because that ruling "was an interlocutory order and is not appealable, although it comes along with the interlocutory order of temporary injunction").
To the extent the trial court denied Myrtle's motions for expedited discovery, we conclude that that ruling is a non-appealable interlocutory order, and we lack appellate jurisdiction to review that ruling. See Sharma, 231 S.W.3d at 422; Eichelberger, 814 S.W.2d at 182; see also W. I-10 Volunteer Fire Dep't v. Harris Cty. Emergency Servs. Dist. No. 48, 507 S.W.3d 356, 359 (Tex. App.-Houston [1st Dist.] 2016, no pet.) ("When a portion of an order is injunctive, and another portion is not, we may review only that portion granting or denying injunctive relief and may not address the other portions.") (citations omitted).
Myrtle relies on Collins v. Cleme Manor Apartments, 37 S.W.3d 527 (Tex. App.-Texarkana 2001, no pet.), to support this Court's exercise of appellate jurisdiction to review a ruling on a motion to expedite discovery. That case is inapposite. Collins was an appeal from a final judgment in a forcible entry and detainer action, not an interlocutory appeal. See id. at 529.
Temporary Injunction
In its second issue, Myrtle argues that the trial court abused its discretion in granting the temporary injunction because it erroneously found that Resulting Partners would suffer irreparable injury if the temporary injunction did not issue.
A. Entitlement to Temporary Injunction
A temporary injunction acts to preserve the status quo of the subject matter of the litigation pending a trial on the merits. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002); Intercontinental Terminals Co. v. Vopak N. Am., Inc., 354 S.W.3d 887, 892 (Tex. App.-Houston [1st Dist.] 2011, no pet.) ("In the injunction context, the status quo is 'the last, actual, peaceable, non-contested status that preceded the pending controversy.'") (quoting In re Newton, 146 S.W.3d 648, 651 (Tex. 2004) (orig. proceeding)). Temporary injunctions are an extraordinary remedy and they do not issue as a matter of right. Butnaru, 84 S.W.3d at 204. To obtain a temporary injunction, the applicant must plead and prove: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Id.
We need not resolve the ultimate merits of the plaintiff's claim in order to determine whether it has established a probable right to relief; instead, the plaintiff must demonstrate that the claim will probably succeed on the merits. Abbott v. Anti-Defamation League Austin, Sw., & Texoma Regions, 610 S.W.3d 911, 917 (Tex. 2020) (per curiam); Intercontinental Terminals, 354 S.W.3d at 897. 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, 84 S.W.3d at 204. Generally, the existence of an adequate remedy at law will bar equitable relief. Campbell v. Wilder, 487 S.W.3d 146, 152 (Tex. 2016).
The decision whether to grant or deny a temporary injunction is within the trial court's sound discretion. Butnaru, 84 S.W.3d at 204. We will reverse an order granting injunctive relief only if the trial court abused its discretion. Id.; see Henry v. Cox, 520 S.W.3d 28, 33 (Tex. 2017) (stating that we review order granting temporary injunction for "clear abuse of discretion"). We view the evidence in the light most favorable to the trial court's ruling and indulge every reasonable inference in its favor. Cheniere Energy, Inc. v. Parallax Enters. LLC, 585 S.W.3d 70, 77 (Tex. App.-Houston [14th Dist.] 2019, pet. dism'd); Regal Entm't Grp. v. iPic-Gold Class Entm't, LLC, 507 S.W.3d 337, 346 (Tex. App.-Houston [1st Dist.] 2016, no pet.) (stating that when reviewing order granting temporary injunction, "we draw all legitimate inferences from the evidence in a manner most favorable to the trial court's order"). We do not review or decide the underlying merits of the case; instead, we limit our review to the validity of the order. Henry, 520 S.W.3d at 33- 34; Cheniere Energy, 585 S.W.3d at 77.
We must not substitute our judgment for that of the trial court "unless the trial court's action was so arbitrary that it exceeded the bounds of reasonable discretion." Butnaru, 84 S.W.3d at 204. The trial court does not abuse its discretion if some evidence reasonably supports its decision. Henry, 520 S.W.3d at 34; Butnaru, 84 S.W.3d at 211. The trial court, however, has no discretion to incorrectly analyze or apply the law. See Abbott, 610 S.W.3d at 916; Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding) (stating that clear failure by trial court to analyze or apply law correctly constitutes abuse of discretion).
B. Analysis
On appeal, Myrtle does not challenge the first and second elements that Resulting Partners must establish to obtain a temporary injunction: whether it has a cause of action against Myrtle and whether it has a probable right to the relief sought. Instead, Myrtle argues that Resulting Partners did not prove that it would suffer an irreparable injury if the trial court did not grant the temporary injunction.
At the temporary injunction hearing, Resulting Partners' evidence included Myrtle's demand for arbitration along with the attached confidentiality and non-compete agreement that Lojo and Myrtle signed. This agreement contained an arbitration provision. It is undisputed that Resulting Partners did not sign this agreement or any other document in which it agreed to arbitrate with Myrtle. Myrtle, however, initiated arbitration proceedings against both Lojo and Resulting Partners.
Resulting Partners argued that it would suffer irreparable injury if the trial court did not grant the temporary injunction because it was a non-signatory to the contract containing the arbitration provision. According to Resulting Partners, the question whether a non-signatory can be compelled to arbitrate is a matter for the trial court to determine. Resulting Partners also argued that if it is forced to arbitrate-and if the arbitrator decides in favor of Myrtle and renders an award against Resulting Partners-then Resulting Partners would have very limited grounds for appealing a judgment confirming that arbitration award.
Texas law favors settling disputes by arbitration. See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996) (orig. proceeding) (per curiam); Jones v. Brelsford, 390 S.W.3d 486, 491 (Tex. App.-Houston [1st Dist.] 2012, no pet.). However, arbitration is "a matter of contract between the parties" and "is a way to resolve those disputes-but only those disputes-that the parties have agreed to submit to arbitration." Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518, 525 (Tex. 2019) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995)). "Arbitration is thus governed by two fundamental principles: arbitration agreements are contracts that must be enforced according to their terms, and a party cannot be compelled to arbitrate any dispute absent an agreement to do so." Id.; see San Antonio River Auth. v. Austin Bridge & Road, L.P., 601 S.W.3d 616, 620 (Tex. 2020) (stating that arbitration "is a matter of consent, not coercion" and party "cannot be forced to arbitrate absent a binding agreement to do so") (quoting In re Merrill Lynch Tr. Co. FSB, 235 S.W.3d 185, 192 (Tex. 2007) (orig. proceeding), and Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 632 (Tex. 2018)). "Arbitration is a matter of contract, and that which the parties agree must be arbitrated shall be arbitrated." Jody James Farms, 547 S.W.3d at 631; see Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 90 (Tex. 2011) (stating "well established" rule that "[a]n arbitrator derives his power from the parties' agreement to submit to arbitration") (quoting City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009)).
Although both federal and state law favors arbitration, arbitrators "wield only the authority they are [contractually] given." Robinson, 590 S.W.3d at 525 (quoting Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407, 1416 (2019)). To ensure that parties are not forced to arbitrate matters without their agreement, the question whether the parties have actually agreed to submit a particular dispute to arbitration is a gateway matter for the trial court to determine unless the parties clearly and unmistakably provide otherwise. Id.; see Bonsmara Nat. Beef Co. v. Hart of Tex. Cattle Feeders, LLC, 603 S.W.3d 385, 397 (Tex. 2020) ("Whether parties have committed their disputes to arbitration is a gateway matter for the court to decide and is 'controlled by state law governing the validity, revocability, and enforceability of contracts generally.'") (quoting Jody James Farms, 547 S.W.3d at 631 & n.12). The parties can agree to have the arbitrator determine gateway issues such as arbitrability of claims. See RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 121 (Tex. 2018). Nevertheless, there is a presumption favoring adjudication of arbitrability by the courts "absent clear and unmistakable evidence of the parties' intent to submit that matter to arbitration." Jody James Farms, 547 S.W.3d at 631.
In certain situations, non-signatories to a contract containing an arbitration clause may be required to arbitrate. See G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 524 (Tex. 2015); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005) (orig. proceeding) (listing recognized theories under which non-signatory may be bound to arbitration agreement or may invoke arbitration agreement). Determining whether a claim involving a non-signatory must be arbitrated is a gateway matter for the trial court, not the arbitrator. Jody James Farms, 547 S.W.3d at 629.
The Texas Supreme Court has stated that who may properly adjudicate arbitrability-the trial court or the arbitrator-is "critical to ascertaining the appropriate standard of review," noting that the trial court's arbitrability determinations are reviewed de novo, but an arbitrator's determinations are entitled to deference. Id. at 630-31. Furthermore, after an arbitration award is entered, both the Federal Arbitration Act (FAA) and the Texas General Arbitration Act (TAA) set out limited grounds for vacating an award. See 9 U.S.C. § 10 (providing grounds for vacating arbitration award under FAA); Tex. Civ. Prac. & Rem. Code § 171.088(a) (providing grounds for vacating arbitration award under TAA); Jody James Farms, 547 S.W.3d at 631 (stating that under FAA "an arbitration award must be confirmed except in extremely limited circumstances"); Jones, 390 S.W.3d at 492 ("[J]udicial review of an arbitration award is extraordinarily narrow and focuses on the integrity of the process, not the propriety of the result.").
Resulting Partners presented evidence that Myrtle has initiated arbitration proceedings against it, but the contract containing an arbitration provision-the confidentiality and non-compete agreement-was signed by Myrtle and Lojo. Resulting Partners was not a signatory to this agreement, nor was it mentioned in this agreement. The arbitration provision contained in the contract does not provide that the arbitrator is to decide questions concerning the arbitrability of claims involving non-signatories. See Jody James Farms, 547 S.W.3d at 632 ("A contract that is silent on a matter cannot speak to that matter with unmistakable clarity, so an agreement silent about arbitrating claims against non-signatories does not unmistakably mandate arbitration of arbitrability in such cases."). Resulting Partners thus presented evidence that, in this case, the trial court-not the arbitrator-should determine the arbitrability of Myrtle's claims against it.
Although arbitration is favored by federal and Texas law as a method of resolving disputes, it "is a matter of consent, not coercion." See San Antonio River Auth., 601 S.W.3d at 620. Depriving Resulting Partners of the ability to have the trial court determine whether it, as a non-signatory to the arbitration agreement, should be compelled to arbitrate Myrtle's claims against it is not compensable by any measure of monetary damages. We therefore conclude that Resulting Partners demonstrated that absent a temporary injunction enjoining Myrtle from continuing the arbitration proceedings, Resulting Partners would suffer an irreparable injury by losing the ability to have the trial court determine whether Myrtle's claims against it should be submitted to arbitration.
Two of our sister courts of appeals have held that the trial court did not abuse its discretion by granting a temporary injunction enjoining arbitration proceedings pending a determination by the trial court of whether certain claims are arbitrable. See Lambda Constr. Co. v. City of Alice, 729 S.W.2d 377, 381 (Tex. App.-San Antonio 1987, no writ); C P & Assocs. v. Pickett, 697 S.W.2d 828, 831 (Tex. App.- Corpus Christi-Edinburg 1985, no writ).
In Lambda Construction, the parties signed a contract that included an arbitration provision. See 729 S.W.2d at 379. After a dispute arose between the parties concerning the payment of delay damages, the City of Alice filed a declaratory judgment action seeking declarations that the arbitration provision had been revoked and that the question whether the City was liable for delay damages was not an arbitrable issue. Id. at 378-79.
The trial court granted a temporary injunction in favor of the City, ruling that allowing Lambda Construction to proceed with arbitration would alter the status quo and make a judgment in favor of the City ineffectual. Id. at 379. The court also ruled that the City would lack an adequate remedy at law in part because the City would be deprived of the opportunity to have the court decide issues such as whether the FAA applied to the controversy, whether the City had revoked the arbitration provision, and whether the issue of delay damages was an arbitrable issue under the contract. Id. Ultimately, the San Antonio Court of Appeals concluded that the trial court did not clearly abuse its discretion by enjoining Lambda Construction from proceeding with arbitration before the trial court could determine the threshold question of arbitrability. Id. at 381.
Similarly, in C P & Associates, the court of appeals held that the trial court did not abuse its broad discretion in enjoining the defendants from proceeding in arbitration until discovery was complete and the court could rule on the arbitrability of the claim. See 697 S.W.2d at 831; cf. Haddock v. Quinn, 287 S.W.3d 158, 168, 176, 182 (Tex. App.-Fort Worth 2009, pet. denied) (holding that trial court had jurisdiction to determine questions of arbitrability, including whether defendant waived arbitration by substantially invoking judicial process, and trial court did not abuse its discretion in permanently enjoining arbitration on basis of waiver).
This case is analogous to Lambda Construction. After an arbitration demand had been filed against it, Resulting Partners filed a declaratory judgment action seeking a declaration that it was not required to submit to arbitration because it was not a signatory to any contract with Myrtle containing an arbitration provision. Resulting Partners sought a temporary injunction enjoining Myrtle from proceeding with arbitration before the trial court could determine the gateway question whether Resulting Partners, as a non-signatory to the confidentiality and non-compete agreement Lojo signed with Myrtle, could be compelled to arbitrate. The trial court found that depriving Resulting Partners of the ability to have the court decide this gateway matter of arbitrability constitutes an irreparable injury. Like the San Antonio Court of Appeals in Lambda Construction, we cannot conclude that the trial court clearly abused its discretion in reaching this decision. See 729 S.W.2d at 381.
On appeal, Myrtle attempts to distinguish Lambda Construction, noting that the San Antonio Court of Appeals stated that its "affirmance of the trial court's action follows only because the trial court indicated its intention to speedily resolve the threshold question of arbitrability and that the temporary injunction was granted to that end." See Lambda Constr. Co. v. City of Alice, 729 S.W.2d 377, 381 (Tex. App.-San Antonio 1987, no writ). In contrast, the trial court here made no such statement. Although the trial court did not make a similar representation, counsel for Resulting Partners stated that he intended to respond to Myrtle's motion to compel arbitration and that "we also intend to file a motion for summary judgment reasonably soon after this hearing to ask the Court to go ahead and make a final determination."
We conclude that the trial court did not abuse its discretion in granting the temporary injunction in favor of Resulting Partners. We therefore overrule Myrtle's second issue.
Myrtle also argues that the trial court abused its discretion by ruling that Myrtle's conduct in filing the arbitration demand constituted a "vexatious and harassing legal action." According to Myrtle, filing the arbitration demand did not meet the requirements for declaring Myrtle a vexatious litigant under Civil Practice and Remedies Code Chapter 11 and did not meet the requirements for issuing an anti-suit injunction. We note that the trial court's temporary injunction order did not declare Myrtle to be a vexatious litigant or otherwise reference Civil Practice and Remedies Code Chapter 11. See Tex. Civ. Prac. & Rem. Code §§ 11.001-.104 (setting out provisions governing trial court's determination that plaintiff is vexatious litigant). Furthermore, because we hold that Resulting Partners established each element entitling it to a common-law temporary injunction, an independent basis that supports the trial court's issuance of the temporary injunction, we need not address whether the trial court's injunction order is also proper as an anti-suit injunction. See Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615, 623 (Tex. 2005) (setting out situations in which granting anti-suit injunction is appropriate); Wyrick v. Bus. Bank of Tex., N.A., 577 S.W.3d 336, 356 (Tex. App.- Houston [14th Dist.] 2019, no pet.) (noting that anti-suit injunction is "unique and extraordinary remedy" that will issue "only in very special circumstances").
Unclean Hands
Finally, in its third issue, Myrtle argues that the trial court erred by granting the temporary injunction because Resulting Partners was not entitled to equitable relief under the doctrine of unclean hands.
This doctrine allows a court to refuse to grant equitable relief "sought by one whose conduct in connection with the same matter or transaction has been unconscientious, unjust, or marked by a want of good faith, or one who has violated the principles of equity and righteous dealing." Stewart Beach Condo. Homeowners Ass'n, Inc. v. Gili N Prop Invs., LLC, 481 S.W.3d 336, 351 (Tex. App.-Houston [1st Dist.] 2015, no pet.) (quoting Park v. Escalera Ranch Owners' Ass'n, Inc., 457 S.W.3d 571, 597 (Tex. App.-Austin 2015, no pet.)). The clean hands doctrine "requires that one who seeks equity, does equity." Dunnagan v. Watson, 204 S.W.3d 30, 41 (Tex. App.-Fort Worth 2006, pet. denied). Relief is "not warranted when the plaintiff has engaged in unconscionable, unjust, or inequitable conduct with regard to the issue in dispute." Id.
This rule is not absolute, however. Id. A party seeking to invoke the doctrine of unclean hands must demonstrate that it has been seriously harmed and that the wrong complained of cannot be corrected without applying the doctrine. Stewart Beach, 481 S.W.3d at 351 (quoting City of Fredericksburg v. Bopp, 126 S.W.3d 218, 221 (Tex. App.-San Antonio 2003, no pet.)). The determination of whether a party has come to court with unclean hands "is left to the discretion of the trial court." Dunnagan, 204 S.W.3d at 41.
Myrtle argues that the trial court should not have granted a temporary injunction to Resulting Partners because Resulting Partners did not come to court with clean hands. Myrtle argues that four days after Lojo accepted employment with Myrtle, he formed Resulting Partners, a company that provides consulting services similar to those that Myrtle provides. While Lojo was employed at Myrtle, he allegedly had several contacts with a company called Ecopetrol, which was seeking consulting services. Lojo resigned from Myrtle in July 2017. Shortly thereafter, Ecopetrol contracted with Resulting Partners, in breach of Lojo's agreement not to misappropriate trade secrets or compete with Myrtle. Myrtle argues that as a result of this conduct, Resulting Partners should not be allowed to obtain equitable relief. See Crown Constr. Co. v. Huddleston, 961 S.W.2d 552, 559 (Tex. App.-San Antonio 1997, no pet.) (holding that doctrine of unclean hands applied because plaintiff was in breach of lease it was attempting to extend, and plaintiff "may not seek relief from the provisions of that lease based upon claims of equity").
Here, after Myrtle initiated arbitration proceedings against it before the AAA, Resulting Partners filed suit seeking a declaration that it was not required to submit to arbitration because it was not a signatory to any arbitration agreement with Myrtle. Resulting Partners sought a temporary injunction enjoining Myrtle from continuing with the arbitration proceeding until the trial court had the opportunity to rule on whether Resulting Partners could be compelled to arbitrate.
The unclean hands doctrine does not apply here. The only question before the trial court at the temporary injunction hearing was whether to maintain the status quo pending trial on the merits of Resulting Partners' declaratory judgment action. The court was not asked to determine the ultimate rights of the parties. See Butnaru, 84 S.W.3d at 204 (stating that temporary injunction acts to preserve status quo of subject matter of litigation pending trial on merits); Keystone Life Ins. Co. v. Mktg. Mgmt., Inc., 687 S.W.2d 89, 93 (Tex. App.-Dallas 1985, no writ) (unclean hands doctrine did not preclude plaintiff, which had allegedly committed anticipatory breach of contract, from obtaining temporary injunction because plaintiff had introduced evidence supporting its cause of action and court had discretion "to reserve matters of a purely defensive nature to the plenary hearing"). The trial court determined that Resulting Partners had established the elements entitling it to a temporary injunction, and we have concluded that this was not an abuse of discretion.
Additionally, the only cause of action pending before the trial court at the time of the temporary injunction hearing was Resulting Partners' declaratory judgment action seeking a declaration that it was not subject to arbitration because it was not a signatory to any arbitration agreement with Myrtle. Even if Myrtle is correct that Resulting Partners acted with unclean hands and impermissibly solicited Ecopetrol as a client in violation of Lojo's employment contract and non-compete agreement, Myrtle cites no law holding that this conduct would require Resulting Partners to arbitrate claims against it when it has not agreed to do so.
We also note that, after the temporary injunction hearing, Myrtle amended its answer and asserted several counterclaims against Resulting Partners. These counterclaims were for misappropriation of trade secrets, fraud, conversion, tortious interference with prospective relations, and breach of Lojo's covenant not to compete. These counterclaims are now pending before the trial court. Applying the doctrine of unclean hands at this stage of the proceedings to invalidate the temporary injunction in favor of Resulting Partners is therefore not necessary to correct the wrong that Myrtle complains of concerning Resulting Partners' alleged inequitable conduct, which forms the basis for all of Myrtle's counterclaims. See Stewart Beach, 481 S.W.3d at 351 (stating that party seeking to invoke doctrine of unclean hands must demonstrate that it has been "seriously harmed" and that "the wrong complained of cannot be corrected without applying the doctrine"). The trial court will have the opportunity to determine the ultimate rights of the parties and may permissibly consider Resulting Partners' alleged bad conduct, if proven by Myrtle, at that point.
Whether to apply the doctrine of unclean hands is a question that lies within the discretion of the trial court. See Dunnagan, 204 S.W.3d at 41. We conclude that the trial court did not abuse its discretion by refusing to apply the doctrine of unclean hands to preclude Resulting Partners from obtaining a temporary injunction.
We overrule Myrtle's third issue.
Conclusion
We lack appellate jurisdiction to review the trial court's denial of Myrtle's motions for expedited discovery. We affirm the order of the trial court granting the temporary injunction in favor of Resulting Partners.