                                                                                          ACCEPTED
                                                                                      12-15-00141-CV
                                                                         TWELFTH COURT OF APPEALS
                                                                                       TYLER, TEXAS
                                                                                 8/13/2015 3:50:20 PM
                                                                                        CATHY LUSK
                                                                                               CLERK

                          No. 12-15-00141-CV
                     ____________________________
                    IN THE COURT OF APPEALS            FILED IN
                                                12th COURT OF APPEALS
               TWELFTH JUDICIAL DISTRICT OF TEXAS TYLER, TEXAS
                          TYLER, TEXAS          8/13/2015 3:50:20 PM
                  _____________________________      CATHY S. LUSK
                                                                     Clerk

       MORRISON SUPPLY COMPANY, LLC and PATRIOT SUPPLY
                       HOLDINGS, INC.

                                     v.

                 SCOTT HILBURN and MIKE ANTHONY
                   _____________________________
                    REPLY BRIEF OF APPELLANTS
                    _____________________________
               On Appeal from the 7th Judicial District Court,
                           Smith County, Texas
                       Trial Court No. 15-0792-A
                  _______________________________

        Michael E. Starr                  Vanessa Griffith
        State Bar No. 19078400             State Bar No. 00790469
        COGHLAN CROWSON LLP               Thomas S. Leatherbury
        1127 Judson Road                   State Bar No. 12095275
        Suite 211                         Stephen S. Gilstrap
        Longview, Texas 75606              State Bar No. 24078563
        903.758.5543                      VINSON & ELKINS LLP
        mstarr@ccfww.com                  2001 Ross Avenue
                                          Suite 3700
                                          Dallas, Texas 75201
                                          214.220.7713
                                          214.999.7713 (facsimile)
                                          vgriffith@velaw.com
                                          tleatherbury@velaw.com
                                          sgilstrap@velaw.com

           Attorneys for Appellants Morrison Supply Company, LLC
                       and Patriot Supply Holdings, Inc.

Oral Argument Requested                                          August 13, 2015
                                              TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................. ii
INDEX OF AUTHORITIES..............................................................................................iv
RECORD REFERENCES ................................................................................................vi
RESPONSE TO APPELLEES’ STATEMENT OF FACTS....................................................... 1
ARGUMENT ................................................................................................................. 3
I.       Morrison Properly Challenged All Aspects of the Trial Court’s
         Ruling............................................................................................................... 3
         A.        Morrison Challenged Every Implied Finding Made by the Trial
                   Court, and Thus Presented All Arguments for Appellate
                   Review. .................................................................................................. 3
         B.        Regardless, the May 13, 2015 Letter Can Be Construed as
                   Findings of Fact/Conclusions of Law Under This Court’s
                   Precedents. ............................................................................................. 5
II.      The Evidence Demonstrates That Morrison Proved Each Element of
         Its Claim for a Temporary Injunction. ............................................................. 8
         A.        Morrison Proved the Existence of a Valid Contract. ............................ 8
                   1.       Anthony and Hilburn Received Consideration in
                            Exchange for Entering into the Agreements. .............................. 8
                   2.       The Restrictions Sought in the Temporary Injunction
                            Are Reasonable. ........................................................................ 14
         B.        The Evidence Demonstrates That Anthony and Hilburn
                   Breached the Agreements.................................................................... 15
                   1.       Anthony and Hilburn Breached Their Non-
                            Competition Obligations. .......................................................... 15
                   2.       Anthony and Hilburn Breached Their Non-
                            Solicitation Obligations. ........................................................... 16
         C.        None of Anthony and Hilburn’s Defenses Provides a Basis for
                   Denying Morrison’s Application for a Temporary Injunction. .......... 17
         D.        The Evidence Demonstrates That Morrison Has a Probable,
                   Imminent, and Irreparable Injury for Which There Is No
                   Adequate Remedy at Law. .................................................................. 19



                                                              ii
III.    This Court Should Order the Trial Court to Reform the Agreements
        on Remand. .................................................................................................... 22
        A.       This Court Has Jurisdiction to Consider This Issue and Order
                 Reformation. ........................................................................................ 22
        B.       Morrison Is Entitled to Reformation at this Stage of the
                 Proceedings. ........................................................................................ 25
CONCLUSION AND PRAYER ....................................................................................... 26
CERTIFICATE OF COMPLIANCE .................................................................................. 27
CERTIFICATE OF SERVICE .......................................................................................... 27




                                                          iii
                                       INDEX OF AUTHORITIES

Cases
Alex Sheshunoff Mgmt. Servs., LP. v. Johnson,
  209 S.W.3d 644 (Tex. 2006) ................................................................................10
Butler v. Arrow Mirror & Glass, Inc.,
  51 S.W.3d 787 (Tex. App.—Houston [1st Dist.] 2001, no pet.) .........................15
CDX Holdings, Inc. v. Heddon,
 No. 12-CV-126, 2012 WL 11019355 (N.D. Tex. Mar. 2, 2012) .........................24
Cobb v. Caye Publ’g Grp., Inc.,
  322 S.W.3d 780 (Tex. App.—Fort Worth 2010, no pet.) ....................................23
Curtis v. Ziff Energy Grp., Ltd.,
  12 S.W.3d 114 (Tex. App.—Houston [14th Dist.] 1999, no pet.).......................15
DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A.,
 112 S.W.3d 854 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) ..............18
Duddlesten v. Klemm,
  No. 06-08-00106-CV, 2009 WL 635153
  (Tex. App.—Texarkana Mar. 13, 2009, no pet.) ...................................................7
Frequent Flyer Depot, Inc. v. Am. Airlines, Inc.,
  281 S.W.3d 215 (Tex. App.—Fort Worth 2009, pet. denied) .............................20
Frey v. DeCordova Bend Estate Owners’ Ass’n,
  647 S.W.2d 246 (Tex. 1983) ................................................................................20
In re Estate of Miller,
   446 S.W.3d 445 (Tex. App.—Tyler 2014, no pet.) ...........................................5, 6
In re Halliburton Co.,
   80 S.W.3d 566 (Tex. 2002) ..................................................................... 13, 14, 18
In re Odyssey Healthcare, Inc.,
   310 S.W.3d 419 (Tex. 2010) ................................................................................13
Kendrick v. Garcia,
  171 S.W.3d 698 (Tex. App.—Eastland 2005, pet. denied) ...................................7
Marsh USA Inc. v. Cook,
 354 S.W.3d 764 (Tex. 2011) ..................................................................... 8, 13, 17
Martin v. Linen Sys. for Hosps., Inc.,
 671 S.W.2d 706 (Tex. App.—Houston [1st Dist.] 1984, no writ).......................20


                                                      iv
McNeilus Companies, Inc. v. Sams,
 971 S.W.2d 507 (Tex. App.—Dallas 1997, no pet.)............................................22
Moore v. Jet Stream Investments, Ltd.,
 315 S.W.3d 195 (Tex. App.—Texarkana 2010, pet. denied) ................................7
Poole v. U.S. Money Reserve, Inc.,
  No. 09-08-137-CV, 2008 WL 4735602
  (Tex. App.—Beaumont 2008, no pet.) ......................................................... 23, 25
Rugen v. Interactive Bus. Sys., Inc.,
  864 S.W.2d 548 (Tex. App.—Dallas 1993, no writ) ...........................................21
Sadler Clinic Ass’n, P.A. v. Hart,
  No. 09-09-00452-CV, 2010 WL 114241
  (Tex. App.—Beaumont Jan. 14, 2010, no pet.) ...................................................22
Stone v. Griffin Commc’ns & Sec. Sys., Inc.,
  53 S.W.3d 687 (Tex. App.—Tyler 2001, no pet.) ...............................................15
TransPerfect Translations, Inc. v. Leslie,
  594 F. Supp. 2d 742 (S.D. Tex. 2009) .......................................................... 23, 25
Tranter, Inc. v. Liss,
  No. 02-13-00167-CV, 2014 WL 1257278
  (Tex. App.—Fort Worth Mar. 27, 2014, no pet.) ......................................... 19, 23
Villa Nova Resort, Inc. v. State,
  711 S.W.2d 120 (Tex. App.—Corpus Christi 1986, no writ) ................................6
Webb v. Hartman Newspapers, Inc.,
 793 S.W.2d 302 (Tex. App.—Houston [14th Dist.] 1990, no writ) ....................23
Wright v. Sport Supply Grp., Inc.,
 137 S.W.3d 289 (Tex. App.—Beaumont 2004, no pet.) .............................. 23, 25
Wright v. Sydow,
 173 S.W.3d 534 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) ..............18
Statutes
TEX. BUS. & COMM. CODE § 15.51(c) ......................................................................23




                                                    v
                              RECORD REFERENCES
      Citations to the record and appendix are formatted as they were in the Brief

of Appellants, with the following addition:

(1)   Supplemental Reporter’s Record for the            Supp. RR Page: Line Nos.
      July 10, 2015 Hearing on Motion to Seal




                                         vi
TO THE HONORABLE TWELFTH COURT OF APPEALS:

       Morrison Supply Company, LLC and Patriot Supply Holdings, Inc.

(collectively, “Morrison”) respectfully submit this Appellants’ Reply Brief:

                  RESPONSE TO APPELLEES’ STATEMENT OF FACTS
       A central issue in this appeal is whether Morrison has shown irreparable

harm resulting from Anthony and Hilburn’s actions. The trial court found that

Morrison had an adequate remedy at law, see App. 1, and based that finding—at

least implicitly—on Anthony and Hilburn’s testimony that “they are currently

unemployed” and would not begin working for National Wholesale Supply, Inc.

(“National”) until “their legal responsibilities [were] determined,” App. 2 at 2.1

That testimony, however, was misleading, as shown (1) by the Van Kelley

Affidavit, see App. 8, and, more importantly, (2) by statements at a July 10, 2015

hearing where Anthony and Hilburn’s counsel admitted that they were working for

National, a violation of the Nonqualified Stock Option Award Agreements

(“Agreements”).      See Supp. RR 29:9:12 (“From what I understand, I think

[Anthony and Hilburn] might be working in the warehouse at National now. I

think we’re talking two weeks ago, they started working.”).




1
  Anthony and Hilburn’s testimony on this point was contradicted by other evidence in the
record, which suggested that they were employed at National before the trial court entered a
TRO. See Appellants’ Br. at 9-10 & n.6; see also 5RR, Exs. 1-2.

                                             1
      At the July 10, 2015 hearing, the trial court confirmed that Anthony and

Hilburn’s prior testimony about their employment had been misleading, stating:

          The fact that Anthony and Hilburn now are working at National

             “certainly was inconsistent with the factual testimony [the trial court]

             thought that [it] heard.” Id. at 29:1-4.

          “[The record] will be fairly read to suggest that [Anthony and

             Hilburn] said that . . . we filed this suit to get our rights determined

             and liability determined before we ever went to work or would go to

             work for the new prospective employer.” Id. at 29:22-30:1.

            “[I]f [Anthony and Hilburn] stuck with what they testified about,

             they’d still have been sitting at home on July 10th, not working for

             this new employer; waiting for the litigation to work itself out.” Id. at

             30:9-12.

While the trial court declined to address this new evidence at the July 10, 2015

hearing, it noted that such evidence “may cause [it] to give an expedited trial,” id.

at 31:9, and also “suggest[ed]” that Morrison’s counsel “point [this fact] out to the

appellate brethren and see what they do,” id. at 31:7-9.

      Given that Anthony and Hilburn have admitted that they now are working

for National, and that the trial court was misled by Anthony and Hilburn’s




                                           2
testimony at the temporary injunction hearing, this Court can and should take

notice of the fact that Anthony and Hilburn currently are employed at National.

                                      ARGUMENT

I.    Morrison Properly Challenged All Aspects of the Trial Court’s Ruling.
      Anthony and Hilburn incorrectly argue that Morrison “failed to properly

challenge” the trial court’s ruling. Resp. Br. at 18. Specifically, Anthony and

Hilburn claim that Morrison treated the trial court’s May 13, 2015 letter (to which

the Order Denying Morrison’s Temporary Injunction Application was attached) as

findings of fact/conclusions of law and, in so doing, failed to challenge the trial

court’s implied findings on each element of its temporary injunction claim. Id. at

18-24. This argument is wrong in every respect because: (1) Morrison did not treat

the trial court’s May 13, 2015 letter as findings of fact/conclusions of law in its

brief; and (2) Morrison challenged each and every implied finding that the trial

court possibly could have made in denying its Temporary Injunction Application.

      A.     Morrison Challenged Every Implied Finding Made by the Trial
             Court, and Thus Presented All Arguments for Appellate Review.
      First, there is no support for Anthony and Hilburn’s argument that Morrison

treated the trial court’s May 13, 2015 letter as findings of fact/conclusions of law.

Morrison recognized, in its brief, the possibility that the trial court’s letter might be

of limited significance, noting that “[w]hile the trial court’s [letter] is not a formal

order . . . and is not necessarily entitled to the same weight [as] a formal order,

                                           3
Morrison cites [it] because it provides further explanation . . . .” Appellants’ Br. at

11 n.7. Anthony and Hilburn ignore that statement. Moreover, if Morrison had

treated the trial court’s May 13, 2015 letter as findings of fact/conclusions of law,

then it would not have made many of the arguments in its brief because—to the

extent that letter could function as findings of fact/conclusions of law—the trial

court found that Morrison had proven several elements of its claim. For example,

the trial court stated in its letter: “The Court finds Paragraphs 7 [confidentiality

provision], 8 [non-competition provision], and 9 [non-solicitation provision] to be

ancillary to an otherwise enforceable agreement . . . .” App. 2 at 1. Had Morrison

treated this letter as the trial court’s findings of fact/conclusions of law, it would

not have spent an entire section of its brief arguing that the evidence showed that

the non-competition and non-solicitation provisions of the Agreements were

ancillary to or part of an otherwise enforceable agreement. See Appellants’ Br. at

17-20. Similarly, the trial court noted in its letter that the Agreements “do[] not

appear to be illusory,” App. 2 at 1, yet Morrison rebutted any purported evidence

to the contrary, see Appellants’ Br. at 27-29 (arguing that the Agreements were not

illusory because the evidence showed that Anthony and Hilburn received valuable

stock options and confidential information after signing the Agreements).

      Second, Morrison challenged each and every implied finding made by the

trial court, and a quick review of Morrison’s brief confirms that fact.            See


                                          4
Appellants’ Br. at xii (addressing each element of a temporary injunction claim in

the “Issues Presented”); id. at 16-26 (arguing that the evidence shows that

Morrison has a probable right to the relief requested because the Agreements are

enforceable, the restrictions sought by Morrison are reasonable, and Anthony and

Hilburn breached the Agreements); id. at 26-33 (addressing each of Anthony and

Hilburn’s affirmative defenses); id. at 33-38 (arguing that the evidence shows

imminent and irreparable injury to Morrison, that Morrison’s sought-after relief is

necessary, and that the trial court abused its discretion in concluding otherwise).

Once this Court reviews the arguments made in Morrison’s brief, it will see that

Anthony and Hilburn’s argument on this point is meritless.

       B.     Regardless, the May 13, 2015 Letter Can Be Construed as
              Findings of Fact/Conclusions of Law Under This Court’s
              Precedents.
       While Morrison did not, out of an abundance of caution, rely on (or treat)

the trial court’s May 13, 2015 letter as findings of fact/conclusions of law, under

this Court’s precedents, that letter can be given such weight. Anthony and Hilburn

recognize this fact and cite this Court’s decision in In re Estate of Miller, 446

S.W.3d 445 (Tex. App.—Tyler 2014, no pet.), for the proposition that “[i]t is

possible for findings and conclusions to be contained in a trial court’s letter to

counsel if the letter is filed of record.” Id. at 450.




                                            5
       A comparison of the letters in In re Estate of Miller and this case confirms

that the trial court’s May 13, 2015 letter can be construed as findings of fact and

conclusions of law because:

              Both letters were filed as part of the Clerk’s Record;

              Both letters were filed contemporaneously with the relevant

               order/judgment being appealed;

              Both letters provided an “explanation of the basis for [the trial court’s]

               ruling,” and thus “satisfie[d] the purpose of Rule 296”;2

              Both letters indicated that the trial court here and in In re Estate of

               Miller meant for the letters to be construed as findings of

               fact/conclusions of law because they discussed the evidence presented

               and used phrases such as the “Court finds”; and

              The trial court here and in In re Estate of Miller only filed letters to

               explain the rulings; they did not file separate findings of

               fact/conclusions of law.

Compare In re Estate of Miller, 446 S.W.3d at 450-52, with App. 2.

       Other courts of appeals have reached the same conclusion as this Court did

in In re Estate of Miller regarding similar trial court letters, and have treated such

2
 The Texas Rules of Civil Procedure do not require that findings of fact/conclusions of law be in
any particular form so long as they are in writing and are “filed with the Clerk and shall be part
of the record.” See Villa Nova Resort, Inc. v. State, 711 S.W.2d 120, 124 (Tex. App.—Corpus
Christi 1986, no writ).
                                                6
letters as findings of fact/conclusions of law. See, e.g., Duddlesten v. Klemm, No.

06-08-00106-CV, 2009 WL 635153, at *2 (Tex. App.—Texarkana Mar. 13, 2009,

no pet.) (“Here, the trial court specifically stated the letter set out the findings of

fact and conclusions of law, the letter was filed with the clerk, and the court did not

enter other findings or conclusions. While we do not hold that every letter written

by a trial court to the attorneys will qualify, the facts of this case authorize us to

consider the trial court’s letter as its findings of fact and conclusions of law.”);

Kendrick v. Garcia, 171 S.W.3d 698, 702 (Tex. App.—Eastland 2005, pet. denied)

(construing a prejudgment letter as findings of fact/conclusions of law where the

trial court “did not enter formal findings of fact and conclusions of law which

appellants are attempting to alter with the trial court’s letter ruling”).3

       To the extent this Court construes the trial court’s May 13, 2015 letter as

findings of fact/conclusions of law, this Court need only consider (1) whether the

trial court abused its discretion in determining that Morrison failed to show an

imminent and irreparable injury, and (2) whether the trial court should have

reformed the Agreements at the temporary injunction stage. See App. 1 (finding an

adequate remedy at law); App. 2 at 2 (discussing Anthony and Hilburn’s testimony

related to imminent/irreparable harm).               And considering that the trial court’s

3
   Moore v. Jet Stream Investments, Ltd., 315 S.W.3d 195 (Tex. App.—Texarkana 2010, pet.
denied), is inapposite because, unlike that case, the trial court’s letter here did not conflict with
its order. See id. at 209 (“This is especially true in light of the fact that the subsequent judgment
conflicts with the trial court’s letter on the issue of attorney’s fees.”).
                                                 7
finding on irreparable/imminent injury was based on Anthony and Hilburn’s

misleading and now-contradicted testimony, see supra at 1-3, that issue should be

resolved in Morrison’s favor. The reformation issue likewise should be resolved in

Morrison’s favor because the statute itself and several cases suggest that

reformation is appropriate at the temporary injunction stage. See infra at 22-26.

II.   The Evidence Demonstrates That Morrison Proved Each Element of Its
      Claim for a Temporary Injunction.

      A.     Morrison Proved the Existence of a Valid Contract.
             1.    Anthony and Hilburn Received Consideration in Exchange for
                   Entering into the Agreements.

      The evidence demonstrates that Anthony and Hilburn received two types of

consideration in exchange for signing the Agreements, each of which is

independently sufficient to establish an enforceable and valid contract: (1)

confidential information after signing the Agreements; and (2) valuable stock

options. See Appellants’ Br. at 17-20. Anthony and Hilburn do not dispute that

these types of consideration can make a contract enforceable. See Resp. Br. at 27-

28 (admitting that Morrison only needed to show that Anthony and Hilburn

received confidential information after signing the Agreements); id. at 31 (“A

stock option can support an agreement not to compete.” (citing Marsh USA Inc. v.

Cook, 354 S.W.3d 764, 774-76 (Tex. 2011))). Rather, Anthony and Hilburn argue

that Morrison did not provide them with confidential information after they


                                         8
executed the Agreements and that any stock option award was illusory. Both

arguments fail.

                  a.     Anthony and Hilburn Received Confidential Information
                         After Signing the Agreements.

      The temporary injunction record was replete with specific examples of

confidential information that Anthony and Hilburn received after signing the

Agreements. Morrison introduced six such exhibits, several of which are examples

of confidential documents that Anthony and Hilburn received on a weekly—or

even daily—basis. The trial court temporarily sealed those exhibits when it issued

its temporary injunction order, and now has permanently sealed them. See App. 3;

Supp. RR 16:14-19. Those exhibits are:

       One example of an email setting forth the price Morrison paid for several
        key products where the email was password protected. See 4RR 10:3-
        14:23; see also 5RR, Ex. 22.

       A detailed report showing Morrison’s pricing strategy, including
        objectives for each region, ways to improve margins, and performance of
        each region; this document was labeled confidential and proprietary. See
        3RR 87:24-92:7; see also 5RR, Ex. 12.

       One example of a “weekly dashboard” for each branch under Anthony
        and Hilburn’s supervision, which contains all of the branch’s financial
        transactions for the week as well as an analysis of the transactions, such
        as the “customer trends” section, which evaluates whether the branch is
        making money from a customer, whether the amount of money earned
        from that customer is increasing or decreasing, how the goods are being
        priced, and similar information that is key to understanding whether the
        branch is profitable. See 3RR 77:1-81:24; see also 5RR, Ex. 9.



                                         9
       One example of “Customer Evaluation” report, which sets forth detailed
        information regarding a particular customer including the customer’s
        purchases, what the company’s margin is on those purchases, and
        whether there are opportunities for additional sales or increased margins
        with this customer. See 3RR 82:2-85:21; see also 5RR, Ex. 10.

       One example of a “Daily Audit Summary,” which contains a list of every
        transaction in a particular branch and the details of those transactions
        including price, volume, and customer name. See 3RR 85:24-87:20; see
        also 5RR, Ex. 11.

       Information regarding pricing from Western Pottery, which is below
        market. See 4RR 15:2-16:17; see also 5RR, Ex. 23.

      Ignoring that the trial court ordered these confidential documents to be

sealed, Anthony and Hilburn assert that these documents are not confidential

because: (1) Morrison is in a buying group, and pricing information is known to

and is the same for everyone in the buying group; (2) some of this information is

“stale” because certain pricing information “would change daily”; and (3) other

Morrison employees—who did not sign Agreements with non-competition or

confidentiality covenants—also were able to view some of this information. See

Resp. Br. at 26-33. These responses do not call into question the confidential

nature of these documents or the fact that Anthony and Hilburn received them after

signing the Agreements, thereby making the Agreements enforceable under Texas

law. See Alex Sheshunoff Mgmt. Servs., LP. v. Johnson, 209 S.W.3d 644, 649

(Tex. 2006) (finding an employer’s non-competition agreement was enforceable




                                       10
because the employer had provided confidential information to the employee as

promised in the employment agreement).

      First, even though Morrison was in a buying group, the evidence at the

temporary injunction hearing showed that Morrison often negotiated prices

individually, which led to certain pricing information that was not known to others

in the buying group. See 4RR 9:6-23 (“Q. Does Morrison always and only pay the

price that’s been negotiated by the buying group? A. No, ma’am. Q. And do you

share those deals, the terms of those deals with other companies in the industry?

A. No, ma’am. Q. Do you consider the terms of those deals to be confidential? A.

Yes, ma’am. Q. And why is that? A. Because it is an advantage for us as a

company to have those programs.”).

      Second, while some pricing information might change regularly, the

evidence at the temporary injunction hearing demonstrated that the confidential

information received by Anthony and Hilburn (and sealed by the trial court) was

not stale and continued to be used by Morrison. See 3RR 96:24-97:4 (stating that

certain confidential pricing information received by the Former Managers is used

to analyze Morrison’s overall margins and that it would be included in a data set

for a 12-month “look back”); 4RR 102:7-103:1 (noting that pricing strategy, which

Morrison continues to use, is not “stale” confidential information).




                                         11
      Third, Anthony and Hilburn’s argument that other Morrison employees also

received some of this confidential information does not change the nature of that

information.   Anthony and Hilburn cite no case where this factor was even

considered to be relevant in determining whether a non-competition agreement was

enforceable, and Morrison is not aware of any such case. Because this information

was kept within Morrison and was protected (by passwords or other security

measures, see 4RR 10:3-14:23), it was (and remains) confidential.

                   b.    Anthony and Hilburn Received Valuable Stock Options.

      There is no dispute that Anthony and Hilburn received stock options in

exchange for signing the Agreements and that those options had value. See 3RR

109:10-14 (“The individuals that participate [in the stock option award program]

have the opportunity, again, to have a small degree of ownership, as far as in the

business, as far as an option holder with the ability” to obtain proceeds.).

Nevertheless, Anthony and Hilburn complain that these options were not valid

consideration because: (1) the Agreements only provided stock “options,” not

stock itself; (2) Anthony and Hilburn were never provided with a copy of the

Patriot “Stock Award Agreement”; and (3) Anthony and Hilburn, as at-will

employees, could lose their stock options if they were terminated for cause. See

Resp. Br. at 31-32. Again, each of these arguments fails.




                                        12
      First, the Texas Supreme Court has spoken clearly on the issue about stock

“options” versus stock ownership. In Marsh, the Texas Supreme Court held that it

was the grant or award of stock options—not the exercise of those options—that

made a non-competition agreement enforceable. See 354 S.W.3d at 777 (“By

awarding Cook stock options, Marsh linked the interests of a key employee with

the company’s long-term business interests.”) (emphasis added).             Notably,

Anthony and Hilburn fail to address Marsh.

      Second, Anthony and Hilburn fail to argue how allegedly not receiving the

Patriot “Stock Award Agreement,” deprived their stock options of value. And

while Anthony and Hilburn claim that the “Stock Award Agreement” revealed that

Patriot had the unilateral and unfettered right to destroy their stock options at any

time, Resp. Br. at 32, that argument simply is not true. Under the “Stock Award

Agreement,” Patriot could not take any action that “adversely affect[ed] in any

material respect the rights granted to any Participant under any outstanding

Awards.” 5RR, Ex. 13 at 9. Because Patriot could only take prospective actions

with regard to the stock option awards, the stock options Anthony and Hilburn

received had value. See, e.g., In re Halliburton Co., 80 S.W.3d 566, 569-70 (Tex.

2002) (holding that a contract is enforceable even when one party has the right to

amend or terminate it unilaterally, so long as the right is restricted in some

manner); In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 422 (Tex. 2010) (same).


                                         13
       Third, Anthony and Hilburn’s argument that the stock options were illusory

because they might forfeit options if they were terminated for cause fails because

this possible forfeiture was “restricted in some manner,” and thus the consideration

was not illusory. E.g., In re Halliburton Co., 80 S.W.3d at 569-70.

       In sum, the evidence presented at the temporary injunction hearing confirms

that Anthony and Hilburn received valuable consideration in exchange for signing

the Agreements,4 thereby making them enforceable. To the extent the trial court

found otherwise, it abused its discretion.

              2.     The Restrictions Sought in the Temporary Injunction Are
                     Reasonable.

       Anthony and Hilburn do not argue that the geographic restrictions—or any

other type of restrictions—sought in Morrison’s Application for a Temporary

Injunction are overbroad. See Resp. Br. at 33-35. Rather, they only assert that a

nationwide restriction is overbroad because “Anthony and Hilburn’s work for

Morrison only involved the branches in East Texas and Shreveport. Resp. Br. at

34.   But, as Morrison has confirmed, it is only seeking to enforce the non-

competition provision in the limited geographic area where Anthony and Hilburn

worked. Appellants’ Br. at 21 (“[W]e are seeking a very specific injunction . . . .

It would be limited to the specific region in which Mr. Anthony and Mr. Hilburn

4
  Because Morrison gave Anthony and Hilburn valuable consideration in exchange for signing
the Agreements, Anthony and Hilburn’s argument that “the evidence is conflicting as to whether
Morrison [performed under the Agreements]” fails. See Resp. Br. at 35.
                                             14
work.” (quoting 4RR 73:15-24)).              Because this type of limited geographic

restriction repeatedly has been upheld by this Court and other Texas courts of

appeals,5 Anthony and Hilburn’s argument is both irrelevant and meritless.

       B.     The Evidence Demonstrates That Anthony and Hilburn Breached
              the Agreements.
              1.      Anthony and Hilburn Breached Their Non-Competition
                      Obligations.

       Anthony and Hilburn’s argument that they did not breach the non-

competition provision in the Agreements is based on the false premises that they

are not currently working for National and that no evidence at the temporary

injunction hearing showed that they worked for National before the TRO was

entered.6 See supra at 1-3. While Anthony and Hilburn continue to cite the

temporary injunction hearing transcript that misled the trial court, see id., there

cannot now be any dispute that Anthony and Hilburn are working for National in

violation of the Agreements. Anthony and Hilburn’s counsel admitted that fact to

the trial court, and this Court should not ignore it. See Supp. RR 29:9:12 (“From

what I understand, I think [Anthony and Hilburn] might be working in the


5
  See, e.g., Stone v. Griffin Commc’ns & Sec. Sys., Inc., 53 S.W.3d 687, 694 (Tex. App.—Tyler
2001, no pet.) (enforcing covenant in specific geographic area where former employee had
worked); Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 794 (Tex. App.—Houston [1st
Dist.] 2001, no pet.) (similar); Curtis v. Ziff Energy Grp., Ltd., 12 S.W.3d 114, 119 (Tex. App.—
Houston [14th Dist.] 1999, no pet.) (similar).
6
  Further, as noted in Morrison’s brief, any testimony that Anthony and Hilburn were not
working for National at the time of the temporary injunction hearing is irrelevant because they
were subject to TRO at that time. See Appellants’ Br. at 9-10.

                                               15
warehouse at National now. I think we’re talking two weeks ago, they started

working.”). Further, other evidence at the temporary injunction hearing supported

Morrison’s argument that Anthony and Hilburn worked at National before the

TRO was issued. See 5RR, Exs. 1-2.

              2.   Anthony and       Hilburn    Breached    Their   Non-Solicitation
                   Obligations.

      Anthony and Hilburn’s only response to the overwhelming evidence,

outlined in Morrison’s brief, that they violated the non-solicitation provision in the

Agreements is to argue that “[w]itnesses testified that Hilburn and Anthony did not

recruit any employees to leave Morrison and go to work for National.” Resp. Br.

at 36. Beyond the fact that “solicitation” covers a broader array of activities than

simply “recruiting,” see, e.g., 5RR, Ex. 3 at 5 (defining “solicitation”), the

testimony that Anthony and Hilburn cite for this proposition consists of Hilburn’s

self-serving statements, as well as a statement from Ronnie Rice, in which he said

only that Anthony and Hilburn did not recruit him—as opposed to any of the other

Morrison employees—to work for National. See 3RR 23:2-5, 53:4-13, 63:1-3;

4RR 43:3-8.

      This testimony does not change the fact that Anthony and Hilburn admitted

to breaching the non-solicitation provision in the Agreements by speaking with

numerous Morrison employees about going to work for National, see 2RR 28:1-7;

3RR 17:21-18:6, and by meeting with Charlie Reynolds (the President of National)

                                         16
and Morrison employees months before the April 13, 2015 resignations, see 2RR

26:5-14, 28:10-23; 3RR 21:8-17. This testimony also does not change the fact that

Hilburn admitted to helping his brother resign from Morrison by requesting that

Anthony send him a resignation form for his brother to use, see 3RR 23:20-25:10,

and that Hilburn submitted at least 28 signed resignation forms on behalf of other

employees, see 5RR, Ex. 6.

       Given that Anthony and Hilburn indisputably now work at National in

competition with Morrison and the overwhelming evidence showing that Anthony

and Hilburn breached the non-solicitation provision in their Agreements, the trial

court abused its discretion to the extent it concluded that the evidence failed to

show that Anthony and Hilburn breached the Agreements.

       C.     None of Anthony and Hilburn’s Defenses Provides a Basis for
              Denying Morrison’s Application for a Temporary Injunction.
       As outlined in Morrison’s brief and above, none of Anthony and Hilburn’s

defenses justifies denying Morrison’s Temporary Injunction Application. There is

no indication that the trial court denied the temporary injunction on any of these

bases but, to the extent the trial court did so, it abused its discretion.

       Alleged Defense                       Why Alleged Defense Fails
“Hornsby represented ‘he          In Marsh, the Texas Supreme Court held that it was
was giving us stock in the        the grant or award of stock options—not the
company’ when in fact the         exercise of those options—that made the non-
agreement is only an illusory     competition agreement enforceable.         See 354
stock option.” Resp. Br. at       S.W.3d at 777; see also Appellants’ Br. at 27-29.
37 (internal citation omitted).

                                            17
    Alleged Defense                         Why Alleged Defense Fails
“Hornsby said the non-        Anthony and Hilburn could not have justifiably relied
compete clause ‘was not       on any such assertion because it was contradicted by the
worth the piece of paper      Agreements’ plain language.         See DRC Parts &
it was written on,’           Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d
contrary to the position      854, 858 (Tex. App.—Houston [14th Dist.] 2003, pet.
Morrison is taking . . . .”   denied); see also Appellants’ Br. at 30-31.
Resp. Br. at 37 (internal
citation omitted).            Hornsby never told the Former Managers that the
                              Agreements were invalid, unenforceable, or “not worth
                              the paper they were written on.” 3RR 115:14-116:1.
“Hornsby said the non-        Anthony and Hilburn could not have justifiably relied
compete ‘was only good        on any such assertion because it was contradicted by the
for 12 months from the        Agreements’ plain language.       See DRC Parts &
day we signed it,’            Accessories, L.L.C., 112 S.W.3d at 858; see also
contrary to the position      Appellants’ Br. at 30-31.
Morrison is taking . . . .”
Resp. Br. at 37 (internal Hornsby told Anthony and Hilburn that the non-
citation omitted).          competition provisions ran for one year from the date of
                            their departure from Morrison—not from the date it was
                            signed. See 3RR 112:17-113:8.
“Morrison      executives Anthony and Hilburn fail to assert how this alleged
never gave [Anthony oversight deprived their stock options of any value.
and Hilburn] the actual Further, under the “Stock Award Agreement,” Patriot
stock plan . . . .” Resp. could only take prospective actions with regard to stock
Br. at 37.                  option awards; thus the stock options Anthony and
                            Hilburn received had value. See In re Halliburton Co.,
                            80 S.W.3d at 569-70; see also Appellants’ Br. at 27-28.
“Anthony and Hilburn There was no evidence of duress presented at the
were pressured into temporary injunction hearing, see 4RR 61:23-25 (noting
signing                the lack of evidence), and, in any event, Anthony and
[A]greements.” Resp. Hilburn cannot meet the standard required to show
Br. at 37.                  duress, see Wright v. Sydow, 173 S.W.3d 534, 544 (Tex.
                            App.—Houston [14th Dist.] 2004, pet. denied).

                              Any argument that Anthony and Hilburn were pressured
                              or rushed into signing the Agreements is contradicted by
                              the record. See Appellants’ Br. at 31-32.


                                           18
      D.    The Evidence Demonstrates That Morrison Has a Probable,
            Imminent, and Irreparable Injury for Which There Is No
            Adequate Remedy at Law.
      Anthony and Hilburn currently are working for National in violation of the

non-competition provision in the Agreements they signed. See supra at 1-3. This

continued breach of the Agreements “creates a rebuttable presumption that

[Morrison] is suffering an irreparable injury.” Tranter, Inc. v. Liss, No. 02-13-

00167-CV, 2014 WL 1257278, at *7 (Tex. App.—Fort Worth Mar. 27, 2014, no

pet.). Anthony and Hilburn put forward no argument or evidence to rebut that

presumption, choosing instead to argue only that “Anthony and Hilburn were not

working for National” at the time of the temporary injunction hearing. See Resp.

Br. at 39. This argument is irrelevant, see supra at 15 n.6, and this Court should

not condone Anthony and Hilburn’s attempt to hide behind their self-serving and

misleading statements.

      Anthony and Hilburn also have no response for Morrison’s argument—

based on uncontradicted testimony—that Anthony and Hilburn’s actions resulted

in (1) Morrison losing more than 50% of its workforce in East Texas; (2)

Morrison’s name, reputation, and other elements of its goodwill being harmed; (3)

Morrison’s ability to operate being hampered; and (4) harm to Morrison’s

relationships with its customers and vendors.     See, e.g., 3RR 126:15-127:21

(Hornsby testifying that Anthony and Hilburn’s departures harmed Morrison


                                       19
because, inter alia, they helped develop strategies and customer relationships and

because their departures harmed Morrison’s reputation among the customer base

and suppliers). These types of damages are not easily quantifiable, and Texas

courts of appeals have held that such damages constitute irreparable injuries. See,

e.g., Frequent Flyer Depot, Inc. v. Am. Airlines, Inc., 281 S.W.3d 215, 228 (Tex.

App.—Fort Worth 2009, pet. denied) (“Disruption to a business can be irreparable

harm. Moreover, assigning a dollar amount to such intangibles as a company’s

loss of clientele, goodwill, marketing techniques, and office stability, among

others, is not easy.” (internal citations omitted)); Martin v. Linen Sys. for Hosps.,

Inc., 671 S.W.2d 706, 710 (Tex. App.—Houston [1st Dist.] 1984, no writ).

      Finally, Anthony and Hilburn argue that “fear and apprehension that [they]

might in the future violate the terms of the non-compete” is insufficient to obtain a

temporary injunction. See Resp. Br. at 39. Anthony and Hilburn are incorrect and

the case they rely on—Frey v. DeCordova Bend Estate Owners’ Ass’n, 647

S.W.2d 246, 248 (Tex. 1983)—is distinguishable because that case involved a

situation where no injury had occurred. Here, Morrison already has been injured

because Anthony and Hilburn (1) violated the non-competition provision in the

Agreements by working for National before the TRO was issued and by resuming

their employment there, see supra at 1-3, 15; 5RR, Exs. 1-2, and (2) violated the

non-solicitation provision in the Agreements, causing Morrison to lose half of its


                                         20
East Texas workforce, see supra at 16-17. Moreover, Anthony and Hilburn (who

received confidential information from Morrison) currently are working for

National in the same geographic region, thereby causing the constant and imminent

threat to Morrison that its confidential information will be disclosed. See 3RR

127:5-12 (Hornsby testifying that the Former Managers “have an enormous

amount of information related to [Morrison’s] strategy” and that the potential harm

caused by disclosure could not “be easily or clearly remedied with payment of

money”). This type of threat is sufficient to demonstrate imminent harm. See,

e.g., Rugen v. Interactive Bus. Sys., Inc., 864 S.W.2d 548, 552 (Tex. App.—Dallas

1993, no writ) (“Rugen is in possession of IBS’s confidential information and is in

a position to use it. Under these circumstances, it is probable that Rugen will use

the information for her benefit and to the detriment of IBS. At times, an injunction

is the only effective relief an employer has when a former employee possesses

confidential information.”).

      The evidence shows that the trial court’s finding that Morrison had an

adequate remedy of law was based on the misleading testimony of Anthony and

Hilburn that they were not working for National and would not work for National

until this litigation was resolved. There now is no dispute that Anthony and

Hilburn are working for National, that their solicitation of other Morrison

employees caused Morrison injury, and that Morrison faces the constant threat that


                                        21
its confidential information will be used to its detriment. To the extent the trial

court concluded that Morrison had not presented evidence of irreparable and

imminent injury, it abused its discretion.7

III.   This Court Should Order the Trial Court to Reform the Agreements on
       Remand.
       A.      This Court Has Jurisdiction to Consider This Issue and Order
               Reformation.
       Anthony and Hilburn—again, hoping to avoid the merits of Morrison’s

arguments—attempt to convince this Court that it lacks jurisdiction to consider

whether reformation is appropriate at the temporary injunction stage. Anthony and

Hilburn’s arguments are based on a handful of cases8 that are at odds with more

persuasive decisions from both state and federal courts in Texas. These more

persuasive cases stand for the proposition that reformation can be ordered at the

temporary injunction stage.



7
  Nothing suggests that the trial court found that the equities favor Anthony and Hilburn and, to
the extent it did, it abused its discretion. Given the evidence outlined in Morrison’s brief and
reply brief, the equities favor Morrison and support the issuance of a temporary injunction here.
Anthony and Hilburn’s arguments to the contrary are based on assertions that are contradicted by
the record. For example, Anthony and Hilburn argue that there never received any confidential
information, see Resp. Br. at 41, but that is not true, see supra at 20-21. Similarly, Anthony and
Hilburn focus on the geographic scope of the Agreements as written, see Resp. Br. at 42, but
ignore that Morrison is only seeking to enforce the Agreements in the limited geographic area
where Anthony and Hilburn worked, see supra at 14-15. In sum, Anthony and Hilburn’s
“equitable” arguments should be rejected. To the extent the trial court denied the temporary
injunction on this basis, it abused its discretion.
8
  See, e.g., McNeilus Companies, Inc. v. Sams, 971 S.W.2d 507 (Tex. App.—Dallas 1997, no
pet.); Sadler Clinic Ass’n, P.A. v. Hart, No. 09-09-00452-CV, 2010 WL 114241, at *3 (Tex.
App.—Beaumont Jan. 14, 2010, no pet.).
                                               22
       As outlined in Morrison’s brief, several Texas courts have held that

“reformation is not only a final remedy” and should—in certain circumstances—be

ordered at an interlocutory stage.9 Liss, 2014 WL 1257278, at *10; see also, e.g.,

Poole v. U.S. Money Reserve, Inc., No. 09-08-137-CV, 2008 WL 4735602, at *9

(Tex. App.—Beaumont 2008, no pet.) (holding that a temporary injunction was

overbroad and remanding to the trial court to determine reasonable reformation);

Wright v. Sport Supply Grp., Inc., 137 S.W.3d 289, 294 (Tex. App.—Beaumont

2004, no pet.) (suggesting that reformation at the temporary injunction stage was

appropriate, but remanding for additional fact-finding). And federal courts in

Texas have followed suit in reliance on these state court cases. See TransPerfect

Translations, Inc. v. Leslie, 594 F. Supp. 2d 742, 756 (S.D. Tex. 2009) (reforming

agreement at temporary injunction stage and noting that (1) under section 15.51,

“[t]he court need not wait for the parties to request [reformation],” and (2) “[s]ome

Texas appeals courts have suggested . . . that reformation is appropriate at the

temporary injunction stage); CDX Holdings, Inc. v. Heddon, No. 12-CV-126, 2012




9
  Anthony and Hilburn assert that Morrison only cited two cases for this proposition in its brief.
Resp. Br. at 47-48. In fact, Morrison cited half a dozen cases, which stand for the proposition
that reformation is not only a final remedy. See Appellants’ Br. at 42-43 & n.15. And, in
addition to those cases, some Texas courts have reformed agreements at the temporary injunction
stage without commenting on the propriety of such reformation. See, e.g., Cobb v. Caye Publ’g
Grp., Inc., 322 S.W.3d 780, 782 (Tex. App.—Fort Worth 2010, no pet.); Webb v. Hartman
Newspapers, Inc., 793 S.W.2d 302, 305 (Tex. App.—Houston [14th Dist.] 1990, no writ).

                                               23
WL 11019355, at *11 (N.D. Tex. Mar. 2, 2012) (“Some Texas court[s] have

suggested that reformation may be appropriate at the temporary injunction stage.”).

      An approach which permits courts to reform overbroad non-competition

agreements at the temporary injunction stage also is supported by the text of the

statute, which provides: “If the covenant is found to be ancillary to or part of an

otherwise enforceable agreement but contains [overbroad] limitations . . . the court

shall reform the covenant to the extent necessary to cause the limitations . . . to be

reasonable . . . .” TEX. BUS. & COMM. CODE § 15.51(c) (emphasis added). Here,

because the trial court already has noted that the Agreements are enforceable but

contain overbroad geographic restrictions, see App. 2 at 1, the statute requires the

court to reform the Agreements. The statute includes no language suggesting that

reformation should (or must) wait until trial or final judgment, and this Court

should not read any such requirements into the statute’s plain language.          Put

simply, since the trial court has found that the two conditions precedent exist

(enforceability and overbreadth), the statute requires reformation at this stage of

the proceedings.

      For these reasons, this Court has jurisdiction to consider whether the trial

court abused its discretion by not reforming the Agreements at the temporary

injunction stage.




                                         24
       B.     Morrison Is Entitled to Reformation at this Stage of the
              Proceedings.
       In addition to the statutory argument outlined above, see supra at 23,

Morrison is entitled to reformation at this stage because—without that remedy—

Morrison will be unable to recover damages against Anthony and Hilburn for their

ongoing breaches of the non-competition covenant in the Agreements between

now and when the Agreements ultimately are reformed. That is especially true

because where, as here, the overbroad geographic provision has been identified and

is not disputed, there is no need for further discovery or litigation before

reformation. See TransPerfect Translations, Inc., 594 F. Supp. 2d at 756 (stating,

at the temporary injunction phase, that “the Court will . . . reform the contract as

necessary based on the current evidence, noting that any reformation or permanent

injunction to be entered may differ from this temporary reformation . . . .”).

       This Court should order the trial court to reform the Agreements at this stage

of the proceedings so Morrison is not prevented from recovering certain damages

going forward.10       The trial court denied Morrison the relief of a temporary

injunction and the possibility of recovering certain of its damages going forward

10
   Anthony and Hilburn take issue with the fact that the proposed temporary injunction covers
two counties where they claim they had no responsibilities. See Resp. Br. at 49. On remand, the
trial will have the opportunity to conduct fact-finding to ensure that the reformation is
reasonable. See, e.g., Poole, 2008 WL 4735602, at *9 (holding that a temporary injunction was
overly broad and remanding to the trial court to determine reasonable reformations); Wright, 137
S.W.3d at 298-99 (suggesting that reformation at the temporary injunction stage was appropriate,
but remanding for additional fact-finding). These types of fact-based disputes cannot serve as a
basis for refusing to reform the Agreements at this stage of the proceedings.

                                              25
because the Agreements were not reformed. Such an outcome does not accomplish

substantial justice and constitutes error and an abuse of discretion.

                               CONCLUSION AND PRAYER
       For these reasons, this Court should reverse the trial court’s Order Denying

Temporary Injunction and remand the action with instructions that the trial court

(1) grant Morrison’s requested temporary injunction, and (2) reform the

Agreements at this stage of the proceedings. Morrison also prays for all such

further relief to which it is justly entitled.

                                                 Respectfully submitted,

                                                  /s/ Vanessa Griffith
          Michael E. Starr                        Vanessa Griffith
          State Bar No. 19078400                   State Bar No. 00790469
          COGHLAN CROWSON LLP                     Thomas S. Leatherbury
          1127 Judson Road                         State Bar No. 12095275
          Suite 211                               Stephen S. Gilstrap
          Longview, Texas 75606                    State Bar No. 24078563
          903.758.5543                            VINSON & ELKINS LLP
          mstarr@ccfww.com                        2001 Ross Avenue
                                                  Suite 3700
                                                  Dallas, Texas 75201-2975
                                                  214.220.7713
                                                  214.999.7713 (facsimile)
                                                  vgriffith@velaw.com
                                                  tleatherbury@velaw.com
                                                  sgilstrap@velaw.com

              Attorneys for Appellants Morrison Supply Company, LLC
                          and Patriot Supply Holdings, Inc.




                                             26
                         CERTIFICATE OF COMPLIANCE
       The undersigned hereby certifies that this Appellants’ Reply Brief complies
with the applicable word count limitations in the Texas Rules of Appellate
Procedure. This Reply Brief contains 6,525 words, excluding the parts exempted
by Tex. R. App. P. 9.4(i)(1). In making this certification, the undersigned has
relied on the word-count function in Microsoft Word, which was used to prepare
this Reply Brief.
                                            /s/ Vanessa Griffith
                                            Vanessa Griffith


                           CERTIFICATE OF SERVICE
       I hereby certify that a true and correct copy of the foregoing Appellants’
Reply Brief has been served upon the following counsel of record via electronic
filing on August 13, 2015:

                                Keith Dollahite
                            State Bar No. 05958550
                            M. Keith Dollahite, P.C.
                           5457 Donnybrook Avenue
                              Tyler, Texas 75703
                                 903.581.2110
                               keith@mkdlaw.us

                                Trey Yarbrough
                            State Bar No. 22133500
                               Dallas W. Tharpe
                            State Bar No. 24052036
                          YARBROUGH WILCOX, PLLC
                         100 East Ferguson, Suite 1015
                              Tyler, Texas 75702
                                 903.595.3111
                            trey@yw-lawfirm.com
                           dallas@yw-lawfirm.com

                                            /s/ Vanessa Griffith
                                            Vanessa Griffith

US 3680840
                                       27
