COURT REINS IN RUNAWAY INJUNCTION

Retail Services WIS Corp. d/b/a Product Connections v. Crossmark, Inc.
Dallas Court of Appeals, No. 05-20-00937-CV (May 4, 2021)
Justices Schenck, Reichek, and Carlyle (Opinion linked here)

The Dallas Court of Appeals vacated for lack of specificity several provisions of a temporary injunction against a company’s former employees and its competitor (their new employer). The court affirmed other provisions of the order, and remanded to the trial court.

Crossmark and Product Connections compete for business providing “in-store consumer experience” services to large retailers. In a familiar scenario, Crossmark sued Product Connections and three former Crossmark employees for misappropriating trade secrets and improperly soliciting Crossmark employees and clients. Following an evidentiary hearing, the trial court entered a temporary injunction with nineteen separate provisions (in twelve paragraphs) prohibiting certain conduct and a “Device Turnover Order” (DTO) requiring defendants to produce all laptops and other digital storage devices to Crossmark’s counsel for forensic inspection. Defendants filed an accelerated interlocutory appeal.

The appeals court first rejected appellants’ arguments that Crossmark had not established a probable right to relief or irreparable injury. The court found Crossmark adduced sufficient evidence “to raise a bona fide issue as to its right to ultimate relief” and noted the misuse of confidential information “has been described as ‘the epitome of irreparable injury.’”

Turning to the specific relief granted by the order, the court applied the requirements of Texas Rule of Civil Procedure 683 that a temporary injunction “state the reasons for its issuance, be specific in terms, and describe in reasonable detail … the act or acts sought to be restrained.” The court concluded the order adequately explained the reasons underlying the prohibitive provisions, but did not justify the mandatory DTO.

The court then reviewed each of the prohibitions and found that eleven of the nineteen provisions failed to satisfy Rule 683’s specificity requirements, primarily because some material terms were not defined. For example, while the order adequately defined Crossmark’s “Confidential Information and Trade Secrets” for some provisions, other provisions enjoined conduct using terms that were not clearly defined, such as “confidential,” “proprietary,” and “business information.” Nor did the order adequately identify “Covered Clients and Customers.”

The DTO likewise failed the specificity test by failing to define “Crossmark information” or “other digital storage devices,” which gave another ground for reversing that part of the order. The court rejected, however, appellants’ argument that ordering turnover of digital devices without following the procedures governing pretrial discovery of “electronic or magnetic data” is always improper because it circumvents the protections provided by Rules 192-196 and In re Weekley Homes, 295 S.W.3d 311 (Tex. 2005). According to the court, neither the discovery rules nor Weekley precludes an injunction mandating turnover of electronic devices—provided the order complies with Rule 683.

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