Texas Divorce Attorney Blog
The division of a business in a Texas divorce can result in ongoing disputes, even after the divorce is finalized. This can be especially true when one party has control of the business while both parties maintain an ownership interest. A former wife recently appealed a temporary injunction enjoining her from filing lawsuits against the Company and other parties.
The parties divorced in 2019. They owned a corporation and other related entities together, collectively referred to by the appeals court as the “Company.” The divorce decree ordered the sale of the Company, and appointed a separate entity to do the sale.
The ex-wife appealed the property division in the divorce decree, and the appeals court affirmed. She also appealed a take-nothing judgment against her in a lawsuit in which she alleged the ex-husband had engaged in fraud and breach of fiduciary duty. That appeal was still pending at the time of the appeals court’s decision in this matter.
Temporary Injunction
The ex-husband filed an enforcement proceeding, alleging the ex-wife failed to comply with the provisions in the decree addressing the sale of the Company. He obtained a temporary restraining order, appointment of a receiver, and other temporary injunctions.
The trial court signed a temporary injunction that enjoined the ex-wife from filing lawsuits against the Company, the court-appointed receiver, or “any employee, officer, director, client, and/or potential client of the Company” unless she obtained approval from the Company’s Board of Directors or gave the board an opportunity to investigate the basis of the potential lawsuit.
The court found the receiver notified the ex-wife and her attorney that, on August 29,2024, the Company would go to market. Within about a week after receiving that information, the ex-wife’s attorney sent a litigation hold letter to the Company’s competitor, alleging the ex-wife “was wrongfully ostracized from her own companies.” According to the court, the attorney also stated that the anticipated litigation would involve allegations including “improper diversion, misclassification, and misallocation of commissions, fees, and assets. . .” The court stated the litigation hold letter was sent to 51 individuals and entities, including competitors, prospective buyers, and even some large clients of the Company. The court also found the ex-wife had entered int a tolling agreement regarding federal court litigation she had previously initiated against the ex-husband and members of the Company’s Board and Advisory Board. The court pointed out the agreement would expire and concluded the ex-wife was likely to file suit before that time. The court also concluded her purpose was to prevent the sale of the Company.
The court found she was “on the verge of commencing litigation” outside Texas and that the lawsuit would impede the receiver from selling the Company according to the court’s order. The court pointed out the Company had already gone to market and harm was imminent.
The court found a competitor had already lost interest in buying the Company as a result of the litigation hold letter. The court found that the value of the Company would be irreparably harmed because its confidential and proprietary information would be disclosed to the public and competitors could use that information in unfair competition. The court also noted the ex-husband would be unable to sell the Company as ordered. The court also stated the ex-wife’s threat to initiate litigation in New York threatened the court’s jurisdiction and ability to enforce its orders. Furthermore, the court stated the ex-husband “face[d] a threat of vexations and harassing litigation.” The court found the potential harm was imminent and the ex-husband and Company did not have an adequate remedy at law. The court also waived the bond requirement.
Federal Lawsuits
The ex-wife appealed, arguing the temporary injunction improperly enjoined her from filing a federal lawsuit.
Generally, a state court cannot enjoin someone from filing a lawsuit in federal court. The appeals court therefore concluded the temporary injunction was “void to the extent that it enjoins [the ex-wife] from filing an in personam action in federal court.”
Bond Waiver
The ex-wife also argued the order was void because it waived the bond. Tex. R. Civ. P 684 requires a court granting a temporary injunction to “fix the amount of security. . .”
The ex-husband argued, however, that a bond was not required because Tex. R. Civ. P 693a provides that a court may “dispense with the necessity of a bond in connection with an ancillary injunction” in a divorce case.
The appeals court pointed out that this matter was not a divorce proceeding, so rule 693a did not apply. The appeals court concluded the trial court erred in waiving the bond requirement.
Specificity
The ex-wife argued the order was vague, overbroad, and not specific enough pursuant to rule 683 because it enjoined her from filing lawsuits that were unrelated to her claims in this case.
The wife also argued that the order referred to the Company’s clients and potential clients, but she had not been involved with Company clients since 2018 and did not know the identify of current or potential clients. The order, she argued, enjoined her from filing lawsuits against parties she could not identify for claims that were not related to the current case. She argued that the language of the injunction would prohibit her from filing a personal injury suit against a delivery company, even though such a claim would be unrelated to this case. The appeals court considered the case law cited by the ex-wife, and agreed with her that order lacked specificity.
No Imminent Threat of Irreparable Injury
The ex-wife also argued there was no evidence of an imminent threat of irreparable injury, that the value of the Company would be “irreparably harmed” absent an injunction, or that the ex-husband did not have an adequate remedy at law. She pointed out that the receiver had testified that he could quantify any difference between the current anticipated sale price and the actual sale price. She also argued there was no evidence of an imminent lawsuit in state court, so there was no evidence of an imminent threat of irreparable injury.
The appeals court agreed with the ex-wife and concluded the court had abused its discretion when it concluded there would be irreparable harm to the Company’s value. The appeals court also concluded there was no evidence supporting the findings of an imminent threat of irreparable harm because there was no evidence of an imminent state court lawsuit.
The appeals court reversed the trial court’s order and dissolved the temporary injunction. It also awarded the ex-wife her appeal costs.
Call a Texas Divorce Lawyer
If you are a business owner and your marriage is ending, a knowledgeable Texas business divorce attorney can help you protect yourself and your business. Set up a consultation to discuss your case with McClure Law Group by calling 214.692.8200.