tips on expedited and extraordinary relief 6.14 on expedited... · misappropriation of trade...

TIPS ON EXPEDITED AND EXTRAORDINARY RELIEF

AARON Z. TOBIN SARA G. WITMEYER Anderson Tobin PLLC

One Galleria Tower 13355 Noel Road, Suite 1900

Dallas, Texas 75240

State Bar of Texas 39th Annual

ADVANCED CIVIL TRIAL COURSE San Antonio – July 13-15, 2016

Dallas – August 17-19, 2016 Houston – October 26-28, 2016

CHAPTER 16

Tips on Expedited and Extraordinary Relief Chapter 16

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TABLE OF CONTENTS

I. INTRODUCTION ......................................................................................................................... 1 II. TYPES OF RELIEF ..................................................................................................................... 1

A. Temporary Restraining Orders and Temporary Injunctions ...................................... 1

1. Overview of Temporary Restraining Orders and Temporary Injunctions ............... 1

2. Procedure to Obtain Temporary Injunctive Relief ................................................. 1

a. Availability of Temporary Injunctive Relief ............................................... 1

b. Application for Temporary Injunctive Relief .............................................. 2

c. Temporary Restraining Order ...................................................................... 2

d. Findings in Order Granting Temporary Injunctive Relief .......................... 3

e. Order Granting Temporary Injunctive Relief Must Set Bond ..................... 3

f. Notice and Hearing Required for Temporary Injunction ............................ 3

g. Temporary Injunction Order Must Set Trial ................................................ 4

h. Writ of Injunction ........................................................................................ 4

3. Responding to Temporary Injunctive Relief ........................................................... 4

a. Motion to Dissolve Temporary Restraining Order ...................................... 4

b. Motion to Dissolve Temporary Injunction .................................................. 5

c. Review of Temporary Injunctive Relief ...................................................... 5

d. Wrongful Injunction .................................................................................... 5

4. Recent Cases of Interest ........................................................................................... 5

a. Jurisdiction to Enter Injunction ................................................................... 5

b. Temporary Injunctions and Arbitration ....................................................... 5

c. Character and Function of Order Determine Whether It Is an Injunction ..................................................................................................... 5

d. Order Must Set Trial on the Merits and Bond, Regardless of Surrounding Circumstances ......................................................................... 6

e. Order Must Include Specific Findings ......................................................... 6

f. Attachments to Temporary Injunction Order .............................................. 7

g. Agreed Order Needs to Comply with Rules 683 and 684 .......................... 7

h. Order Does Not Need to Make Specific Finding if There Is Evidentiary Support ......................................................................................................... 7

i. Breadth of Order .......................................................................................... 8

j. Order Granting Temporary Injunction Must Be Supported by Evidence .... 8

k. Examples of Irreparable Harm in Business Litigation ................................ 8

l. More Than Just Fear or Apprehension Is Required to Show Probable, Imminent, and Irreparable Injury ................................................................ 8


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m. Wrongful Issuance of Injunction Where No Jurisdiction ............................ 9

n. Covenants Not to Compete .......................................................................... 9

o. Misappropriation of Trade Secrets ............................................................ 10

B. Receivership ................................................................................................................... 11

1. Overview of Receivership ..................................................................................... 11

2. Procedure to Obtain Receiver ................................................................................ 11

a. Availability of Receivership ...................................................................... 11

b. Application for Appointment of Receiver ................................................. 12

c. Bond for Receivership ............................................................................... 12

3. Receiver’s Qualifications, Bond, and Oath ........................................................... 13

4. Receiver’s Powers and Duties ............................................................................... 13

5. Receiver’s Claims and Liabilities .......................................................................... 13

6. Receiver’s Compensation ...................................................................................... 13

7. Responding to Receivership .................................................................................. 14

a. Motion to Vacate Receivership ................................................................. 14

b. Review of Receivership ............................................................................. 14

c. Wrongful Receivership .............................................................................. 14

8. Duration of Receivership and Discharge of Receiver ........................................... 14

9. Recent Cases of Interest ......................................................................................... 14

a. Receivership and Arbitration ..................................................................... 14

b. Waiver Through Requested Appointment ................................................. 14

c. Prior Agreement for Receiver Is Not Binding on Court ........................... 15

d. Some Errors Will Invalidate Receivership ................................................ 15

e. Other Errors Will Not Invalidate Receivership ......................................... 15

f. Showing of No Other Remedy at Law Not Required in All Circumstances ........................................................................................... 15

g. Suits Against Receiver ............................................................................... 15

h. Property in the Estate ................................................................................. 16

i. Cases Under the Texas Business Organizations Code ............................. 16

j. Receiver’s Authority Is Dictated by the Order of Appointment ................ 16

C. Garnishment ................................................................................................................... 16

1. Overview of Garnishment ...................................................................................... 16

2. Procedure to Obtain Writ of Garnishment ............................................................. 17

a. Availability of Garnishment ...................................................................... 17

b. Application for Writ of Garnishment ........................................................ 17

c. Order for Writ of Garnishment .................................................................. 17


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d. Garnishment Bond ..................................................................................... 17

e. Writ of Garnishment .................................................................................. 17

3. Responding to Writ of Garnishment ...................................................................... 18

a. Replevy of Garnished Property ................................................................. 18

b. Motion to Substitute Collateral .................................................................. 18

c. Motion to Dissolve Writ of Garnishment .................................................. 18

d. Review of Garnishment ............................................................................. 18

e. Wrongful Garnishment .............................................................................. 18

4. Garnishee’s Answer ............................................................................................... 18


a. Statutory Requirements Must Be Followed, Even When Seeking a Default or Agreed Judgment ...................................................................... 19

b. Constructive Service May Be Sufficient Under Rule 663a ...................... 19

c. Compensation to the Garnishee ................................................................. 19

D. Attachment ................................................................................................................... 19

1. Overview of Attachment ........................................................................................ 19

2. Procedure to Obtain Writ of Attachment ............................................................... 20

a. Grounds for Writ of Attachment ................................................................ 20

b. Property Available for Attachment ............................................................ 20

c. Application for Writ of Attachment .......................................................... 20

d. Order for Writ of Attachment .................................................................... 20

e. Attachment Bond ....................................................................................... 21

f. Writ of Attachment .................................................................................... 21

3. Responding to Writ of Attachment ........................................................................ 21

a. Replevy of Attached Property ................................................................... 21

b. Motion to Substitute Property .................................................................... 21

c. Motion to Dissolve Writ of Attachment .................................................... 21

d. Review of Attachment ............................................................................... 21

e. Wrongful Attachment ................................................................................ 21

4. Motion to Sell Perishable Property ........................................................................ 22


a. Order Requiring Funds Be Deposited into the Registry of the Court May .. Be an Attachment ...................................................................................... 22

E. Sequestration ................................................................................................................... 22

1. Overview of Sequestration .................................................................................... 22

2. Procedure to Obtain Writ of Sequestration ............................................................ 22


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a. Application for Writ of Sequestration ....................................................... 22

b. Order for Writ of Sequestration ................................................................. 23

c. Sequestration Bond .................................................................................... 23

d. Writ of Sequestration ................................................................................. 23

3. Responding to Writ of Sequestration ..................................................................... 23

a. Replevy of Sequestered Property ............................................................... 23

b. Motion to Dissolve Writ of Sequestration ................................................. 23

c. Review of Sequestration ............................................................................ 23

d. Wrongful Sequestration ............................................................................. 24

4. Plaintiff’s Replevy of Sequestered Property .......................................................... 24

5. Sale of Property Likely to Be Wasted or Destroyed .............................................. 24

III. GENERAL PRACTICE TIPS ........................................................................................ 24

A. Contract for All Remedies .................................................................................. 24

B. Warrant Specifics ................................................................................................ 24

C. Do Not Delay in Seeking Expedited Relief ........................................................ 24

D. Assess the Potential Costs and Disruption to Business.................................... 24

E. Determine Bankruptcy Status Before Seeking Relief ...................................... 24

F. Ascertain the Defendant’s Assets Before Seeking Relief ................................. 24

G. Closely Follow the Statutory and Procedural Requirements ......................... 25

H. Know and Follow the Local Rules and Orders ................................................ 25

I. Check with the Clerk About Requirements and Forms .................................. 25

J. Contact Surety Before Filing .............................................................................. 25

K. Be Clear About the Relief Sought and Provide Reasons and Evidence ............. Supporting That Relief ........................................................................................ 25

L. Draft Proposed Orders that Strictly Comply with the Law and Are ............... Sufficiently Specific or Broad as Needed .......................................................... 25

M. Evaluate Whether to Seek Relief Ex Parte ........................................................ 25

N. Do Not Forget to Address the Amount of Bond ............................................... 25

O. Assess Whether to Serve Defendant After Property Has Been Seized .......... 25

P. Timely Appeal Interlocutory Receivership Orders and Temporary ................ Injunctions and Do Not Delay in Seeking Mandamus Review ....................... 25


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AARON Z. TOBIN ANDERSON TOBIN, PLLC 13355 Noel Road, Suite 1900

Dallas, Texas 75240 Phone: 972-789-1160 Fax: 972-789-1606

[email protected]

PRACTICE AREAS Business Trial and Appellate – First chaired over $72 million in jury verdicts in business cases Bankruptcy Litigation Creditors Rights Employment Litigation Fiduciary Litigation Financial Services Litigation Oil and Gas Litigation Real Estate Litigation Securities Litigation Surety Litigation RECOGNITION Named to “Best Lawyers in Dallas” by D Magazine on multiple occasions Named a Texas Super Lawyer in 2014-2016 and a Rising Star from 2009-2014 by Thompson Reuters. This honor is only bestowed on the top 2 ½ percent of Texas lawyers eligible for the award. Barrister, Patrick E. Higginbotham American Inn of Court Texas Bar Foundation Fellow Dallas Bar Association Fellow Dallas Association of Young Lawyers, Life Fellow Recipient of Presidential Citations for Chairing Dallas Bar Association’s Equal Access to Justice and Public Forum Committees PROFESSIONAL AND COMMUNITY INVOLVEMENT Dallas Bar Association, Board of Directors (2012-present) Vice Chair, Board of Directors, Dallas Bar Association (2016) Co-Chair, Equal Access to Justice Campaign, Dallas Bar Association (2013-2014) Community Service Fund, Board of Directors (2013-present) Chair, Finance Committee, Dallas Bar Association (2014-present) Guest Instructor, Dallas Bar Association, Trial Academy Co-Chair, Professionalism Committee, Dallas Bar Association (2015) Chair, Media Relations Committee, Dallas Bar Association (2012) Chair, Public Forum Committee, Dallas Bar Association (2011) Vice-Chair, Bench Bar Committee, Dallas Bar Association (2013) Member, Committee for a Qualified Judiciary (2012-present) Board of Trustees, DAYL Foundation (2010-2013) Board of Directors, Dallas Association of Young Lawyers (2009) Co-Chair, Dallas Association of Young Lawyers Leadership Class (2011-present) Co-Chair, Affair of the Art, Junior Associates, Dallas Museum of Art Junior Associates, Dallas Museum of Art Steering Committee (2010-2013)


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Volunteer, Big Brothers, Big Sisters of North Texas EDUCATION Juris Doctor, Southern Methodist University School of Law (2000) University College, Oxford England, Summer 1998 University of Kentucky, B.B.A. (1996), cum laude, departmental honors; Member, Beta Gamma Sigma and the Golden Key National Honor Societies BAR ADMISSIONS State Bar of Texas State Bar of North Carolina Fifth Circuit Court of Appeals United States District Courts for the Northern, Southern, Eastern, and Western Districts of Texas Northern District of Illinois


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SARA G. WITMEYER ANDERSON TOBIN, PLLC 13355 Noel Road, Suite 1900

Dallas, Texas 75240 Phone: 972-789-1160 Fax: 972-789-1606

[email protected]

PRACTICE AREAS Business Litigation Real Estate Litigation Employment Litigation Bankruptcy/Creditor’s Rights PROFESSIONAL AND COMMUNITY INVOLVEMENT Dallas Bar Association Dallas Association of Young Lawyers St. Thomas Aquinas Bar Association Barrister, Ferguson-White American Inn of Court (2012-2014) Pupil, J. Clifford Cheatwood American Inn of Court (2009-2011) Producers Board, David A. Straz, Jr. Center for the Performing Arts (2009-2014) Committee, Gasparilla Festival of the Arts (2009-2012) Guardian ad Litem EDUCATION Juris Doctor, summa cum laude, Florida State University College of Law (2006) Bachelor of Arts, with Honors in the Liberal Arts, University of Wisconsin-Madison (2002) BAR ADMISSIONS State Bar of Florida State Bar of Texas United States District Courts for the Middle and Southern Districts of Florida United States Bankruptcy Court for the Middle District of Florida United States District Courts for the Northern and Eastern Districts of Texas


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TIPS ON EXPEDITED AND EXTRAORDINARY RELIEF

I. INTRODUCTION

In various types of business litigation, including actions for breach of covenants not to compete, misappropriation of trade secret cases, partnership or shareholder disputes, fraudulent transfer actions, property disputes, and actions brought by secured or unsecured creditors, it may be important to move quickly for immediate relief to preserve rights and property. This paper will address expedited and extraordinary relief in the context of prejudgment remedies used in Texas business litigation, specifically temporary restraining orders and injunctions, receivership, garnishment, attachment, and sequestration. It will outline basic requirements and procedural considerations for each form of relief addressed. This paper also will discuss recent cases of interest, including developments and trends, concerning these prejudgment remedies, and practice tips to consider when litigating these remedies.

II. TYPES OF RELIEF

A. Temporary Restraining Orders and Temporary Injunctions

1. Overview of Temporary Restraining Orders and Temporary Injunctions One of the most frequently used expedited and

extraordinary remedies is temporary injunctive relief, which is aimed at preserving the status quo regarding a matter in controversy. See Cannan v. Green Oaks Apartments, Ltd., 758 S.W.2d 753, 755 (Tex. 1988); Hand v. State, 335 S.W.2d 410, 419 (Tex. Civ. App.—Houston 1960, writ ref’d n.r.e.). An injunction is either mandatory and commands a defendant to take an action or prohibitory and requires a defendant to refrain from taking an action. See Cartwright v. Warren, 177 S.W. 197, 199 (Tex. Civ. App.—Dallas 1915, no writ). It is a remedial writ that depends on the issuing court’s equity jurisdiction. Qwest Commuc’ns Corp. v. AT&T Corp., 24 S.W.3d 334, 336 (Tex. 2000) (per curiam).

A temporary restraining order seeks immediate relief, which may be ex parte, and is limited in duration. See FED. R. CIV. P. 65(b); TEX. R. CIV. P. 680; Del Valle Indep. Sch. Dist. v. Lopez, 845 S.W.2d 808, 809 (Tex. 1992). A temporary injunction or preliminary injunction is issued after notice and a hearing, and if issued, is effective until trial on the merits. See FED. R.

CIV. P. 65; TEX. R. CIV. P. 680, 681, 683; Del Valle Indep. Sch. Dist., 845 S.W.2d at 809.

In Texas, temporary restraining orders and temporary injunctions are authorized by Chapter 65 of the Texas Civil Practice and Remedies Code, and the procedures for obtaining the relief are set forth in Texas Rules of Civil Procedure 680 to 693A. The federal procedural counterpart for obtaining temporary restraining orders and preliminary injunctions is Federal Rule of Civil Procedure 65.

In addition, other statutes provide authority for injunctions in specific contexts, including, but not limited to, where there is actual or threatened misappropriation of a trade secret (TEX. CIV. PRAC. &

REM. CODE § 134A.003); in a fraudulent transfer action (TEX. BUS. & COM. CODE § 24.008); and for a breach of a covenant not to compete (TEX. BUS. & COM. CODE §

15.51).

2. Procedure to Obtain Temporary Injunctive Relief

A temporary injunction is an extraordinary remedy and does not issue as a matter of right. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 203 (Tex. 2002). The remedy must be carefully regulated and confined to proper cases. El Tacaso v. Jireh Star, Inc., 356 S.W.3d 740, 743 (Tex. App.—Dallas 2011, no pet.).

a. Availability of Temporary Injunctive Relief To obtain a temporary restraining order or

temporary injunction under Texas law, an applicant generally 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. See Butnaru v. Ford Motor Co., 84 S.W.3d 198, 203 (Tex. 2002). 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. Id.

Practice Tip: To establish irreparable harm and an inadequate remedy at law to support a temporary restraining order or temporary injunction, a party must establish why damages are inadequate. If the party’s position in seeking the injunctive relief is that it is impossible to determine the damages, then that may work against the party in later trying to prove up the damages sought. These remedies are certainly not mutually exclusive, but some thought needs


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to be given on presentation of the injunction application so as to not later harm the party’s ability to recover damages.

Section 65.011 of the Texas Civil Practice and Remedies Code lists some general grounds when a writ of injunction may be granted under Texas law, including when (1) the applicant is entitled to the relief demanded, all or part of which requires the restraint of an act prejudicial to the applicant; (2) a party performs or is about to perform or is procuring or allowing the performance of an act relating to the subject of pending litigation, in violation of the rights of the applicant, and the act would tend to render the judgment in the litigation ineffectual; (3) the applicant is entitled to a writ of injunction under the principles of equity and Texas statutes relating to injunctions; (4) a cloud would be placed on the title of real property being sold under an execution against a party having no interest in the real property subject to execution at the time of sale, irrespective of any remedy at law; or (5) irreparable injury to real or personal property is threatened, irrespective of any remedy at law. TEX. CIV. PRAC. &

REM. CODE § 65.011.

To obtain a temporary restraining order or preliminary injunction in federal court, a movant generally must plead and prove elements similar to those under Texas law, as well as additional elements. The movant must show (1) a substantial likelihood of success on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is denied; (3) that the threatened injury outweighs any damage that the injunction might cause the defendant; and (4) that the injunction will not disserve the public interest. See Affiliated Prof’l Home Health Care Agency v. Shalala, 164 F.3d 282, 285 (5th Cir. 1999).

b. Application for Temporary Injunctive Relief A party seeking a temporary restraining order or

temporary injunction must state specific facts supporting such relief in plain and clear language in a verified petition or complaint, or in affidavits. See TEX. R. CIV. P. 682. But see Mattox v. Jackson, 336 S.W.3d 759, 763 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (“A verified petition for injunctive relief is not required to grant a temporary injunction . . . when a full evidentiary hearing on evidence independent of the petition has been held.”).

c. Temporary Restraining Order Under both Texas and federal law, temporary

restraining orders must be limited in duration and must include specific findings.

In Texas and federal court, every temporary restraining order must (1) be endorsed with the date and hour of issuance; (2) be filed in the clerk’s office and entered of record; (3) define the injury and state why it is irreparable and why the order was granted without notice; and (4) expire by its terms within such time after signing, not to exceed fourteen days, as the court sets, unless within the time so set the order, for good cause shown, is extended for a like period or unless the party against whom the order is directed consents that it may be extended for a longer period. See FED. R. CIV. P. 65(b)(2); TEX. R. CIV. P. 680; In re Office of Attorney Gen., 257 S.W.3d 695, 697 (Tex. 2008) (orig. proceeding) (per curiam); In re Tex. Nat. Res. Conservation Comm’n, 85 S.W.3d 201, 204 (Tex. 2002) (orig. proceeding) (explaining that all temporary restraining orders in Texas are subject to Rule 680’s limitations on duration). The reasons for the extension must be entered of record. FED. R. CIV. P. 65(b)(2); TEX. R. CIV. P. 680. No more than one extension may be granted unless subsequent extensions are unopposed. TEX. R. CIV. P. 680.

Temporary restraining orders may be granted ex parte and without notice, but a party seeking a temporary restraining order without notice to the adverse party must state specific facts in a verified petition or verified complaint or in affidavits showing that immediate and irreparable injury, loss, or damage will result to the applicant before notice can be served and a hearing held. See FED. R. CIV. P. 65(b)(1); TEX. R. CIV. P. 680. In federal court, the movant’s attorney must certify in writing any efforts made to give notice and the reasons why it should not be required. See FED. R. CIV. P. 65(b)(1).

Practice Tip: Many jurisdictions and even specific judges have local rules which require notice or limit the circumstances where temporary restraining orders are granted without notice. It is important to understand local procedure before seeking any measure of extraordinary relief.

If a temporary restraining order is issued without notice, the motion for a temporary injunction or preliminary injunction must be set for hearing at the


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earliest possible time, taking precedence over all other matters except hearings on older matters of the same character. See FED. R. CIV. P. 65(b)(3); TEX. R. CIV. P. 680. At the hearing, the party who obtained the temporary restraining order must proceed with the application or motion or the court will dissolve the temporary restraining order. See FED. R. CIV. P. 65(b)(3); TEX. R. CIV. P. 680.

In Texas, every restraining order must include an order setting a certain date for hearing on the temporary or permanent injunction sought. TEX. R. CIV. P. 680.

d. Findings in Order Granting Temporary Injunctive Relief Temporary restraining orders and orders granting temporary injunctions or preliminary injunctions must include specific findings as required by Texas Rule of Civil Procedure 683 and Federal Rule of Civil Procedure 65.

Every order granting an injunction and every restraining order must (1) set forth the reasons for its issuance; (2) must be specific in terms; and (3) must describe in reasonable detail and not by reference to the complaint or other document, the act or acts sought to be restrained. See FED. R. CIV. P. 65(d)(1); TEX. R. CIV. P. 683. The order is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participating with them who receive actual notice of the order by personal service or otherwise. See FED. R. CIV. P. 65(d)(2); TEX. R. CIV. P. 683.

The purpose of Rule 683’s requirements is to adequately inform a party of what he is enjoined from doing and the reason why he is enjoined. See El Tacaso, Inc. v. Jireh Star, Inc., 356 S.W.3d 740, 744 (Tex. App.—Dallas 2011, no pet.). A trial court’s order stating its reasons for granting a temporary injunction must be specific and legally sufficient on its face and not merely conclusory. Id. Disobedience of an injunction may be punished by the court as a contempt. See TEX. R. CIV. P. 692.

Practice Tip: Practitioners should consider incorporating these express elements in the proposed order, as well as the factual findings that establish the elements.

e. Order Granting Temporary Injunctive Relief Must Set Bond In the temporary restraining order or order

granting temporary injunction or preliminary injunction, the court also must fix the amount of security to be given by the applicant. See TEX. R. CIV. P. 684; see also FED. R. CIV. P. 65(c). A federal court, however, may elect to require no security. See Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 628 (5th Cir. 1996).

In Texas, before issuance of the temporary restraining order or temporary injunction, the applicant must execute and file with the clerk a surety bond as required by Texas Rule of Civil Procedure 684, conditioned that the applicant will pay all sums of money and costs that may be adjudged against him if the restraining order or temporary injunction is dissolved in whole or in part. See TEX. R. CIV. P. 684. A party in lieu of filing the bond may deposit cash with the clerk of court. See TEX. R. CIV. P. 14c.

Similarly, unless a federal court has elected not to require security, a federal court may issue a preliminary injunction or temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. See FED. R. CIV. P. 65(c); Kaepa, Inc., 76 F.3d at 628.

Practice Tip: Traditional sureties are reticent to issue litigation bonds these days. Practitioners should have a cash bond or letter of credit ready when they seek extraordinary relief.

f. Notice and Hearing Required for Temporary Injunction Unlike a temporary restraining order, which

may be entered ex parte in both Texas and federal court, a temporary injunction and a preliminary injunction may only be issued after notice to the adverse party. See FED. R. CIV. P. 65(a)(1); TEX. R. CIV. P. 681.

Moreover, in Texas, in the absence of an agreement by the parties, the proof required to support an order issuing a writ of temporary injunction must be in the form of evidence presented at a hearing, not just an affidavit or sworn petition. See Millwrights Local Union No. 2484 v. Rust Eng’g Co., 433 S.W.2d 683, 687 (Tex. 1968).

In federal court, if the facts are not disputed, an evidentiary hearing is not required: the parties just need


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to be given an ample opportunity to present their views on the legal issues. See Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 628 (5th Cir. 1996). Moreover, even if the facts are disputed, a court may rely on otherwise inadmissible evidence such as affidavits, deposition transcripts, and hearsay evidence. See Sierra Club Lone Star Chapter v. FDIC, 992 F.2d 545, 551 (5th Cir. 1993). On or after beginning of the hearing on a motion for a preliminary injunction, the court may advance the trial on the merits and consolidate it with the hearing. FED. R. CIV. P. 65(A)(2).

Practice Tip: In light of the timing constraints on temporary restraining orders (as well as possible timing constraints or limitations with the court’s docket at a temporary injunction hearing), a party may want to seek expedited discovery, including written discovery and depositions, in order to be prepared to present evidence at a temporary injunction hearing.

Practice Tip: In seeking a temporary injunction for the misappropriation of trade secrets, the applicant will need to prove that the information sought to be protected is entitled to trade secret protection pending trial on the merits. In doing so, the applicant will need to present evidence to the court at a hearing. One way to protect such sensitive information for the purpose of a temporary injunction hearing is to seek a temporary sealing order under Texas Rule of Civil Procedure 76a.

Practice Tip: If the parties wish to conserve resources, rather than potentially frontload litigation expenses, and can come to terms regarding an injunction though trial as well as the requisite findings, it may be prudent to consider agreeing to a temporary injunction. In such a case, make sure the agreed order has all the requisite requirements to hold up on appeal if you represent the plaintiff, and if you represent the defendant, make sure that it does not waive rights.

g. Temporary Injunction Order Must Set Trial In addition to making the requisite findings,

every order granting a temporary injunction in Texas must set the cause for trial on the merits with respect to

the ultimate relief sought. TEX. R. CIV. P. 683. The requirements requiring the setting of trial on the merits and bond are mandatory and must be strictly followed, and an order granting a temporary injunction that fails to do so is subject to being declared void and dissolved. See Qwest Commuc’ns Corp. v. AT&T Corp., 24 S.W.3d 334, 337 (Tex. 2000) (per curiam).

h. Writ of Injunction When the petition, order of the judge, and bond have been filed, the clerk will issue the temporary restraining order or temporary injunction in conformity with the terms of the order and deliver it to the sheriff or constable, or to the applicant, for service. TEX. R. CIV. P. 688. The form of the writ in Texas is mandated by rule. See TEX. R. CIV. P. 687.

Practice Tip: Once the order is granted, it takes time to obtain a bond, have process issued, and have a sheriff or constable serve the writ, especially when multiple defendants are involved. Practitioners should consider on top of serving the required process also sending notice by more expedited means such as e-mail. While not always effective service, courts will not take kindly to conduct in violation of their orders when one has actual notice. Defense counsel would be wise to warn their clients to not engage in conduct that is contrary to an injunction order by solely relying on the fact that the writ has not been officially served yet. Plaintiff’s counsel should also consider early whether to move for a fourteen-day extension as allowed for under the rules. See FED. R. CIV. P. 65(b)(2); TEX. R. CIV. P. 680.

3. Responding to Temporary Injunctive Relief A defendant may respond to a temporary restraining order or temporary injunction in several ways, including by answering, moving to dissolve the temporary restraining order or temporary injunction, seeking appellate review or mandamus relief, or bringing a claim for wrongful injunction.

a. Motion to Dissolve Temporary Restraining Order

In both federal and Texas courts, an adverse party may move to dissolve or modify a temporary restraining order obtained ex parte on two days’ notice to the party who obtained the order or on shorter notice


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set by the court. See FED. R. CIV. P. 65(b)(4); TEX. R. CIV. P. 680. The court must then hear and decide the motion as expeditiously as justice requires. See FED. R. CIV. P. 65(b)(4); TEX. R. CIV. P. 680.

b. Motion to Dissolve Temporary Injunction A movant may seek to dissolve a temporary

injunction based on changed circumstances, including a change in the law, or fundamental error that may have been made by the court in issuing the injunction. See Chase Manhattan Bank & Bank One, N.A. v. Bowles, 52 S.W.3d 871, 878-79 (Tex. App.—Waco 2001, no pet.). The movant must show a change in conditions occurring since the granting of the temporary injunction. See Murphy v. McDaniel, 20 S.W.3d 873, 878 (Tex. App.—Dallas 2000, no pet.).

c. Review of Temporary Injunctive Relief Interlocutory orders granting or denying a

temporary injunction or granting or overruling a motion to dissolve a temporary injunction as provided by Chapter 65 of the Texas Civil Practice and Remedies Code are immediately appealable. See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(4). Such appeals are accelerated appeals, and the time for perfecting them is 20 days from the date of the order. See TEX. R. APP. P. 26.1(b), 28.1(a). A temporary restraining order is generally not appealable, but mandamus relief may be available. See In re Tex. Nat. Res. Conservation Comm’n, 85 S.W.3d 201, 205, 207 (Tex. 2002) (orig. proceeding).

d. Wrongful Injunction There are two separate causes of action for wrongful injunction: (1) one upon a bond ordinarily filed to obtain the injunction; and (2) one for malicious prosecution. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 685 (Tex. 1990). To prevail on a cause of action on an injunction bond, the claimant must prove that the temporary restraining order or temporary injunction was issued or perpetuated when it should not have been and that it was later dissolved. Id. at 685-86. To prevail on a cause of action for malicious prosecution, the claimant must prove that the injunction suit was prosecuted maliciously and without probable cause and was terminated in his favor. Id. at 686. Under either cause of action, the claimant must prove that the issuance of the injunction caused him damages. Id. In an action on an injunction bond, the damages that may be recovered are limited to the amount of the bond. Id. In a malicious

prosecution action, all actual damages may be recovered. Id.

4. Recent Cases of Interest

a. Jurisdiction to Enter Injunction In Campbell v. Wilder, No. 14-0379, 2016 Tex. LEXIS 237, at *2-*14 (Tex. Apr. 1, 2016), the Texas Supreme Court held that section 65.023(b) of the Texas Civil Practice and Remedies Code, which provides that “[a] writ of injunction granted to stay proceedings in a suit or execution on a judgment must be tried in the court in which the suit is pending or the judgment was rendered” did not deprive the trial court of jurisdiction over a challenge to the district clerk’s collection of court costs from parties who had filed affidavits on indigency in proceedings before a civil district court other than the one that had entered the temporary injunction.

b. Temporary Injunctions and Arbitration Recent federal and state cases also have

addressed the interplay between temporary and preliminary injunctions and arbitration. See, e.g., Janvey v. Alguire, 647 F.3d 585, 593-95, 605 (5th Cir. 2011) (affirming preliminary injunction asset freeze under the Texas Uniform Fraudulent Transfer Act and holding that court can grant preliminary injunction before deciding whether to compel arbitration); SEC v. Stanford Int’l Bank, Ltd., 424 F. App’x 338, 340-42 (5th Cir. 2011) (affirming denial of motion for modification of injunction against all judicial, administrative, or other proceedings, including arbitration); Amegy Bank N.A. v. Monarch Flight II, LLC, 870 F. Supp. 2d 441, 451-54 (S.D. Tex. 2012) (holding that preliminary injunction entered to protect the status quo pending resolution of a motion to compel arbitration would remain in effect during arbitration); Senter Invs. v. Veerjee & Al-Waahid, Inc., 358 S.W.3d 841, 845-46, 848 (Tex. App.—Dallas 2012, no pet.) (affirming temporary injunction order entered after court had compelled parties to arbitration, holding that temporary injunction order was not void because it did not set trial on the merits but instead properly abated trial court proceedings in light of prior order compelling parties to arbitration, and holding that specific provisions of the Texas Arbitration Act controlled over Rule 683).

c. Character and Function of Order Determine Whether It Is an Injunction It is well-settled that the character and function of an order determines whether it is an injunction. See


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Del Valle Indep. Sch. Dist. v. Lopez, 845 S.W.2d 808, 809 (Tex. 1992). Nevertheless, parties frequently seek orders that are effectively temporary injunctions but fail to follow the requirements for such relief, and such orders are struck down on appeal. See, e.g., Tatum v. Wells Fargo Home Mortg., Inc., No. 01-13-00855-CV, 2014 Tex. App. LEXIS 13909, at *33-*36 (Tex. App.—Houston [1st Dist.] Dec. 30, 2014, no pet.) (mem. op.) (holding that order requiring party to make “adequate-protection” payments during pendency of wrongful foreclosure case functioned as a temporary injunction and was void because it did not comply with the requirements in Rules 683 and 684); City of Hous. v. Downstream Envtl., LLC, No. 01-13-01015-CV, 2014 Tex. App. LEXIS 11918, at *11-*16 (Tex. App.—Houston [1st Dist.] Oct. 30, 2014, pet. dism’d by agr.) (mem. op.) (holding that agreed order between city and company entered after company sought temporary injunctive relief and after temporary injunction hearing functioned as a temporary injunction and was void because it did not set forth the reasons for its issuance or fix the amount of security to be given by the applicant); In re Robinson Family Entities, No. 11-12-00258-CV, 2014 Tex. App. LEXIS 9766, at *3-*10 (Tex. App—Eastland Aug. 29, 2014, no pet.) (mem. op.) (holding that order that on application for injunctive relief that ordered family members not to compete was effectively a temporary injunction and was void because it failed to provide for bond and set trial on the merits, among other reasons); In re Estate of Skinner, 417 S.W.3d 639, 641-45 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (holding that order entered after request for injunction and hearing on the request, which stated that court was granting request in part and ordered opposing party to deposit negotiable instruments into the court’s registry, was a temporary injunction and was void as it did not set trial on the merits or bond); In re Pierce, No. 13-12-00125-CV, 2012 Tex. App. LEXIS 6881, at *6-*11 (Tex. App.—Corpus Christi Aug. 10, 2012, orig. proceeding) (mem. op.) (holding that order incorporating recommendations from special master and directing that board election take place, a special master be in charge of election, and that a new board recognize one property owners association was tantamount to a temporary injunction that failed to comply with the procedural requirements of Rule 683 and was void).

d. Order Must Set Trial on the Merits and Bond, Regardless of Surrounding Circumstances

Although the existence of a bond for a temporary restraining order or a separate order setting trial might seem to weigh against the need for temporary injunction orders to set trial on the merits and bond, such surrounding circumstances do not obviate the need for the temporary injunction order to specifically address those requirements. See, e.g., DeVoll v. Demonbreun, No. 04-13-00900-CV, 2014 Tex. App. LEXIS 4113, at *3-*6 (Tex. App.—San Antonio Apr. 16, 2014, no pet.) (mem. op.) (holding that temporary injunction was void because it did not set case for trial and fact that court signed separate order setting cause for trial the same day it signed injunction order did not alter that conclusion); Beeler v. Hanchey, No. 09-14-00038-CV, 2014 Tex. App. LEXIS 6436, at *8-*11 (Tex. App.—Beaumont Apr. 9, 2014, no pet.) (mem. op.) (holding that temporary injunction order that said that the bond requirement was waived was void where nothing in the record reflected that it had been waived); State Bd. for Educator Certification v. Montalvo, No. 03-12-00723-CV, 2013 Tex. App. LEXIS 4389, at *2-*5 (Tex. App.—Austin Apr. 3, 2013, no pet.) (mem. op.) (holding that temporary injunction order was void where there was no trial date in order and rejecting applicant’s argument that trial date could not have been entered in order because case had not yet been assigned to a specific judge); Leighton v. Rebeles, 343 S.W.3d 270, 274 (Tex. App.—Dallas 2011, no pet.) (holding that temporary injunction order enjoining parties from engaging in certain activities regarding partnership property pending the winding up of the partnership that did not set the cause for trial on the merits was void and nothing in the business organizations code and revised partnership act excused temporary injunctions from the statutory requirements of Rule 683); Chen v. Chen, No. 09-10-00440-CV, 2011 Tex. App. LEXIS 994, at *3-*5 (Tex. App.—Beaumont Feb. 10, 2011, no pet.) (mem. op.) (holding that temporary injunction order was void because it did not set bond and did not state that the temporary restraining order bond remained in effect for purposes of the temporary injunction).

e. Order Must Include Specific Findings In addition to setting trial on the merits and

bond, temporary injunction orders must include the reasons for their issuance and specific findings. Recent cases show that conclusory recitations do no suffice.


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See, e.g., Rocklon, L.L.C. v. Paris, No. 09-15-00245-CV, 2015 Tex. App. LEXIS 11098, at *1-*5 (Tex. App.—Beaumont Oct. 29, 2015, no pet.) (mem. op.) (holding that temporary injunction order freezing alleged tortfeasor’s assets was void because, among other reasons, it did not state the reasons for its issuance); Estate of Benson, No. 04-15-00087-CV, 2015 Tex. App. LEXIS 9477, *10-*14 (Tex. App.—San Antonio Sept. 9, 2015, pet. dism’d by agr.) (mem. op.) (concluding that order granting temporary injunction was void because it failed to identify what harm would occur to applicant or how she would suffer injury in the absence of the injunction); Johnson-Todd v. Morgan, No. 09-15-00073-CV, 2015 Tex. App. LEXIS 4904, at *8 (Tex. App.—Beaumont May 14, 2015, pet. denied) (mem. op.) (noting that specificity requirement of Rule 683 is not satisfied by mere recital of no adequate remedy at law and irreparable harm and holding that order in case did not even include such recitals and should be dissolved); Law Funder, LLC v. Allison, No. 13-13-00375-CV, 2014 Tex. App. LEXIS 2504, at *15-*22 (Tex. App.—Corpus Christi, Mar. 6, 2014, no pet.) (mem. op.) (holding that anti-suit temporary injunction was void because it did not state reason for its issuance or explain why irreparable harm would issue if not granted and just referenced findings and rulings on record); El Tacaso, Inc. v. Jireh Star, Inc., 356 S.W.3d 740, 746-48 (Tex. App—Dallas 2011, no pet.) (holding that temporary injunction prohibiting lessor from interfering with lessee’s business was void because conclusory statement that lessee had shown that it would suffer irreparable injury for which it had no other adequate legal remedy was not enough to meet Rule 683’s requirements).

f. Attachments to Temporary Injunction Order Although orders granting a temporary

injunction must be specific in their terms and describe in reasonable detail the acts to be restrained, Rule 683 is not violated when documents are attached to the injunction order and referenced in the injunction order. See, e.g., Parham Family L.P. v. Morgan, 434 S.W.3d 774, 789 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (noting that injunction order did not violate Rule 683 by referring to warranty deed because deed was attached to injunction order); Layton v. Ball, 396 S.W.3d 747, 753 (Tex. App.—Tyler 2013, no pet.) (holding that temporary injunction order did not violate Rule 683’s requirements by describing the conduct

enjoined by reference to specific laws and by reference to conduct described in attachments to the order, which became part of the injunction itself).

g. Agreed Order Needs to Comply with Rules 683 and 684

Although at least one appellate case previously held that a party could not later challenge an agreed temporary injunction order that failed to strictly comply with Rule 683, see Henke v. Peoples State Bank of Halletsville, 6 S.W.3d 717, 720 (Tex. App.—Corpus Christi 1999, pet. dism’d w.o.j.), more recent cases have disagreed and have held that orders that do not strictly comply with Rules 683 and 684, regardless of whether they are agreed to in form or substance, are void, see, e.g., Conlin v. Darrell Haun & Solarcraft, Inc., 419 S.W.3d 682, 684-87 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (holding that agreed temporary injunction order that failed to state reasons for its issuance and set trial on the merits as required by Rule 683 was void and must be dissolved, and noting appellate court’s similar holding in In re Garza, 126 S.W.3d 268 (Tex. App.—San Antonio 2003, orig. proceeding)); Indep. Capital Mgmt., L.L.C. v. Collins, 261 S.W.3d 792, 795-96 & n.3 (Tex. App.—Dallas 2008, no pet.) (holding that temporary injunction order agreed to in form that did not specify the facts the court relied on was void); see also Morrison v. Gage, No. 02-15-00026-CV, 2015 Tex. App. LEXIS 6862, *19 (Tex. App.—Fort Worth July 2, 2015, no pet.) (mem. op.) (holding that because there was no indication on the record that the adverse party agreed to the conclusion that the plaintiff would probably prevail on the trial of the cause and the evidence was insufficient to support such a conclusion, the order should be dissolved).

h. Order Does Not Need to Make Specific Finding if There Is Evidentiary Support Although an applicant must show a probable

right of recovery, the order granting a temporary injunction need not expressly state that the court finds a probable right of recovery, so long as there is sufficient evidence in the record. See Intercontinental Terminals Co. v. Vopak N. Am., Inc., 354 S.W.3d 887, 898-99 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (holding that Rule 683 does not require that the trial court’s order expressly state that the trial court found a probable right of recovery and concluding that applicant had presented sufficient evidence of a probable right of recovery).


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i. Breadth of Order An order granting a temporary injunction must

not be so broad that it enjoins activities that a party has a legal right to perform. See, e.g., Miller v. Talley Dunn Gallery, LLC, No. 05-15-00444-CV, 2016 Tex. App. LEXIS 2280, at *19-*21 (Tex. App—Dallas Mar. 3, 2016, no pet.) (mem. op.) (holding that provision of temporary injunction enjoining party from communicating to client or collectors certain information was an unconstitutional prior restraint on free speech and modifying injunction order to delete the offensive paragraph); Lasser v. Amistco Separation Prods., No. 01-13-00690-CV, 2014 Tex. App. LEXIS 1363, at *14-*16 (Tex. App.—Houston [1st Dist.] Feb. 6, 2014, no pet.) (mem. op.) (holding that portion of temporary injunction order enjoining party from deletion of electronic records and files unrelated to the subject of the lawsuit was impermissibly overbroad).

j. Order Granting Temporary Injunction Must Be Supported by Evidence

A party must not only plead the requisite elements but must also prove them through admissible evidence. See, e.g., Shamoun & Norman, LLP v. Yarto Int’l Grp., LP, 398 S.W.3d 272, 284 (Tex. App.—Corpus Christi May 31, 2012, pet. denied) (holding trial court abused its discretion in granting anti-suit temporary injunction because sworn petition, argument of counsel, and six unauthenticated documents were insufficient as evidence on which to base injunction).

k. Examples of Irreparable Harm in Business Litigation Recent cases include examples of the types of

showings necessary to establish probable, imminent, and irreparable injury in the context of partnership or shareholder disputes. See, e.g., Lane v. Lane, No. 06-12-00048-CV, 2012 Tex. App. LEXIS 7472, at *13-*17, *24 (Tex. App.—Texarkana Sept. 4, 2012, no pet.) (mem. op.) (affirming temporary injunction in suit between business partners where partner’s actions disrupted the business and threatened reputation and goodwill of business with customers and financing companies, among other things); Sonwalkar v. St. Luke’s Sugar Land P’ship, L.L.P., 394 S.W.3d 186, 197-201 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (holding that section 152.211 of the Texas Business Organizations Code’s general authorization of injunctions to enforce a right under a partnership agreement did not supersede the common law’s

irreparable injury requirement and that applicants pleaded and proved irreparable injury insofar as with the termination of their partnership interests, they would lose management rights that could not be measured by any certain pecuniary standard and were unique and irreplaceable); Fischer v. Rider, No. 02-10-00294-CV, 2011 Tex. App. LEXIS 385, at *14-*16 (Tex. App.—Fort Worth, Jan. 13, 2011, no pet.) (mem. op.) (affirming temporary injunction order restraining use of corporate funds because there was evidence of probable, imminent, and irreparable injury insofar as minority shareholder was at risk of not ever being repaid for his shares and because of risk that unsecured loans and other financial practices would continue in future without temporary injunction).

Recent cases also continue to demonstrate that threatened injury to a business’s reputation and goodwill are frequently the basis for injunctive relief. See, e.g., Xenon Anesthesia of Tex. P.L.L.C. v. Xenon Health L.L.C., No. 09-12-00553-CV, 2013 Tex. App. LEXIS 3969, at *4-*7 (Tex. App.—Beaumont Mar. 28, 2013, no pet.) (mem. op.) (holding that trial court could reasonably conclude that doctor’s actions in suspending an agreement that gave him limited authority to manage business and prohibited him from transferring his interests without plaintiff’s written consent, representing to clients that he had taken over day-to-day management of operations, refusing to respond to plaintiff’s communications, and removing plaintiff from business’s accounts threatened the business’s reputation and goodwill and jeopardized business’s relationship with its clients); Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354 S.W.3d 887, 893-96 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (compiling Texas appellate cases concerning threats to company’s goodwill, customer lists, and reputation and finding that testimony supported trial court’s conclusion that company’s restrictions on railway track would cause business disruption, loss of goodwill, loss of reputation in the marketplace, customer uncertainty, delay in servicing customers, backlog costs, and demurrage fees and that the loss of reputation and goodwill threatened would be very difficult to calculate).

l. More Than Just Fear or Apprehension Is Required to Show Probable, Imminent, and Irreparable Injury

To establish a probable, imminent, and irreparable injury, the applicant must present evidence


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that is more than mere speculation of an injury. See, e.g., Health Care Serv. Corp. v. E. Tex. Med. Ctr., No. 12-15-00287-CV, 2016 Tex. App. LEXIS 4538, at *13-*15 (Tex. App.—Tyler Apr. 29, 2016, no pet. h.) (dissolving temporary injunction requiring insurer to place hospital in its preferred provider network because hospital failed to produce evidence of probable, imminent, and irreparable injury of having to close hospital or cut services and opinions as to injury were speculative); Schmidt v. Richardson, 420 S.W.3d 442, 445-47 (Tex. App.—Dallas 2014, no pet.) (holding that applicants failed to establish they would be subjected to imminent harm of unexercised contractual rights of foreclosure without injunctive relief where notice of default was required to be given under mortgages and notice had not yet been given); Legacy Home Health Agency, Inc. v. Apex Primary Care, Inc., No. 13-13-00087-CV, 2013 Tex. App. LEXIS 11782, at *6-*18 (Tex. App.—Corpus Christi - Edinburg Sept. 19, 2013, pet. denied) (mem. op.) (concluding that opinion testimony not supported by proof of clients actually lost and conclusory testimony that business might be shut down was insufficient to establish that company faced irreparable injury); James v. Easton, 368 S.W.3d 799, 805 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (holding no abuse of discretion in court denying temporary injunction where the applicant only established theoretical possibility that harassing acts would continue in future).

m. Wrongful Issuance of Injunction Where No Jurisdiction If a federal court lacks subject matter

jurisdiction, a party against whom a preliminary injunction is wrongfully imposed may be entitled to damages. See, e.g., XO Energy LLC v. Zhao, No. 4:15-CV-599, 2016 U.S. Dist. LEXIS 47456, at *4 (S.D. Tex. Apr. 8, 2016) (granting damages against bond for wrongful issuance of preliminary injunction because case was dismissed for lack of subject matter jurisdiction as plaintiffs had not met burden to establish complete diversity of citizenship).

n. Covenants Not to Compete Appellate decisions make clear that a party

seeking temporary injunctive relief to enforce a covenant not to compete under section 15.51 of the Texas Business and Commerce Code must establish probable, imminent, and irreparable injury. See, e.g., Argo Grp. US, Inc. v. Levinson, 468 S.W.3d 698, 702

(Tex. App.—San Antonio 2015, no pet.); Tranter, Inc. v. Liss, No. 02-13-00167-CV, 2014 Tex. App. LEXIS 3398, at *21 (Tex. App.—Fort Worth Mar. 27, 2014, no pet.) (mem. op.); Down Time-S. Tex., LLC v. Elps, No. 13-13-00495-CV, 2014 Tex. App. LEXIS 3047, at *1, *19 (Tex. App.—Corpus Christi - Edinburg Mar. 20, 2014, no pet.) (mem. op.); Primary Health Physicians, P.A. v. Sarver, 390 S.W.3d 662, 664-65 (Tex. App.—Dallas 2012, no pet.).

The cases also show that even if language in the parties’ agreement contemplates the need for injunctive relief in the event of a breach, such language does not necessarily establish entitlement to it. See, e.g., Argo Grp. US, Inc. v. Levinson, 468 S.W.3d 698, 702-05 (Tex. App.—San Antonio 2015, no pet.) (holding that although language in agreement might be some evidence that former employee’s violation of noncompete clause may cause irreparable injury, the trial court did not abuse its discretion in denying temporary injunction where the covenant not to compete would expire seven days after the temporary injunction hearing).

Moreover, the failure to join a new employer as a party in a suit by former employer against a former employee to enforce the provisions of a noncompete agreement may serve as a basis to deny temporary injunctive relief. See Down Time-S. Tex., LLC v. Elps, No. 13-13-00495-CV, 2014 Tex. App. LEXIS 3047, at *14-*20 (Tex. App.—Corpus Christi - Edinburg Mar. 20, 2014, no pet.) (mem. op.) (holding that trial court did not abuse discretion in ruling that current employer was a necessary party whose absence precluded the plaintiff from establishing its entitlement to preservation of the status quo pending final judgment where plaintiff sought injunction prohibiting defendant from continued employment with current employer). But see Whittier Heights Maint. Ass’n v. Colleyville Home Owners’ Rights Ass’n, No. 02-10-00351-CV, 2011 Tex. App. LEXIS 4265, at *9-*10 (Tex. App.—Fort Worth June 2, 2011, no pet.) (mem. op.) (holding that trial court did not err by failing to require the joinder of all necessary parties before issuing a temporary injunction).

Furthermore, restrictions in a temporary injunction that go beyond what is prohibited by the covenant not to compete may be overbroad and may be subject to being modified or struck down on appeal. See, e.g., Bellefeuille v. Equine Sports Med. & Surgery, Weatherfod Div., PLLC, No. 02-15-00268-CV, 2016


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Tex. App. LEXIS 3048, *13-*15, *24 (Tex. App.—Fort Worth Mar. 24, 2016, no pet.) (mem. op.) (modifying language of order on appeal and holding that language of order prohibiting former employee from practicing any form of veterinary medicine went beyond scope of residency agreement).

If the noncompetition agreement itself is unreasonable and unenforceable as written but may be reformed, an applicant may still establish a probable right to recovery for a claim for permanent injunctive relief under section 15.51 of the Texas Business and Commerce Code. See Tranter, Inc. v. Liss, No. 02-13-00167-CV, 2014 Tex. App. LEXIS 3398, at *6-*21 (Tex. App.—Fort Worth Mar. 27, 2014, no pet.) (mem. op.) (holding that because applicant provided evidence that the noncompete at issue was ancillary to or part of an otherwise enforceable agreement and because the noncompete could be reformed to contain reasonable limitations as to time, geographic area, and scope of activity that did not impose a greater restraint than was necessary, the applicant established a probable right to recovery on its permanent injunction claim against former employee).

Practice Tip: Parties should consider the likelihood of reformation at the outset. If reformed, the party could lose its right to recover damages, which could be a momentum shift in the case in favor of the defendant. See Tranter, Inc. v. Liss, No. 02-13-00167-CV, 2014 Tex. App. LEXIS 3398, at *16 (Tex. App.—Fort Worth Mar. 27, 2014, no pet.) (mem. op.).

o. Misappropriation of Trade Secrets Although Texas previously had a common law cause of action for misappropriation of trade secrets, the Texas Legislature enacted the Texas Uniform Trade Secrets Act in 2013 (“Trade Secrets Act”), which allows the court to grant an injunction for actual or threatened misappropriation. See Texas Uniform Trade Secrets Act, 83rd Leg., R.S. ch. 10, § 1, 2013 Tex. Gen. Laws 12-13 (codified as TEX. CIV. PRAC. & REM. CODE § 134A). More recently, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”), which amends the Economic Espionage Act of 1996 to create a federal private cause of action for trade secret misappropriation. The DTSA also authorizes injunctive relief for actual or threatened misappropriation. See

Defend Trade Secrets Act of 2016, S. 1890, 114th Cong., Pub. L. No. 114-153.

Some of the more frequently litigated issues in misappropriation of trade secrets cases include whether the information at issue is entitled to trade secret protection pending trial on the merits, the sufficiency of the description of information that the adverse party is prohibited from using or disclosing, and the breadth of the action prohibited. See, e.g., HMS Holdings Corp. v. Pub. Consulting Grp., Inc., No. 05-15-00925-CV, 2016 Tex. App. LEXIS 3131, at *5-*7 (Tex. App.—Dallas Mar. 28, 2016, no pet.) (mem. op.) (holding that in trade secret misappropriation case, trial court did not abuse its discretion by including language in order that effectively struck balance between protecting applicant’s rights and allowing legitimate competition); Miller v. Talley, No. 05-15-00444-CV, 2016 Tex. App. LEXIS 2280, at *36-*44 (Tex. App.—Dallas Mar. 3, 2016, no pet.) (mem. op.) (holding that trial court did not abuse discretion in determining that general ledger was entitled to trade secret protection pending trial on the merits and that the specific examples of items comprising “trade secrets” and “confidential information,” when read in the context of the suit, provided the defendant with adequate notice of the information that he was prohibited from using or disclosing); Lasser v. Amistco Separation Prods., Inc., No. 01-13-00690-CV, 2014 Tex. App. LEXIS 1363, at *11-*15 (Tex. App.—Houston [1st Dist.] Feb. 6, 2014, no pet.) (mem. op.) (holding that by failing to define the confidential information and trade secrets that the defendant was prohibited from using and disclosing, the temporary injunction violated Rule 683); Reliant Hosp. Partners, LLC v. Cornerstone Healthcare Grp. Holdings, Inc., 374 S.W.3d 488, 502-03 (Tex. App.—Dallas June 8, 2012, pet. denied) (holding that language that barred defendants from trying to develop or pursue any acquisitions or other opportunities, rather than only those opportunities learned about through confidential information, was overbroad and modifying order to delete overbroad language); see also Glycobiosciences v. Woodfield Pharm., LLC, NO. 4:15-CV-02109, 2016 U.S. Dist. LEXIS 56358, at *17-*27 (S.D. Tex. Apr. 27, 2016) (applying the elements for preliminary injunctive relief in context of trade secret misappropriation under Texas law).

In In re M-I, L.L.C., No. 14-1045, 2016 Tex. LEXIS 389, at *1-*2, *21-*22 (Tex. May 20, 2016), the


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Texas Supreme Court held that the trial court abused its discretion by summarily refusing the plaintiff’s request to conduct portions of a temporary injunction hearing involving alleged trade secrets outside the presence of the defendant’s designated representative without balancing the competing interests at stake. In reaching this holding, the Court noted that the Trade Secrets Act requires trial courts to take reasonable measures to protect trade secrets and creates a presumption in favor of granting protective orders to preserve the secrecy of trade secrets, which may include provisions for, among other things, “holding in camera hearings.” Id. at *17 (citing TEX. CIV. PRAC. & REM. CODE § 134A.006). The Court agreed that when a third person, to whom the secret has not yet been disclosed, is a party, an in camera hearing implies that he may be excluded without injustice. Id. at *18.

B. Receivership

1. Overview of Receivership A receiver is a neutral third party appointed by

a court to hold possession of property. See First S. Props., Inc. v. Vallone, 533 S.W.2d 339, 343 (Tex. 1976); Kokernot v. Roos, 189 S.W. 505, 508 (Tex. Civ. App.—San Antonio 1916, no writ). A receiver is an agent of the court and represents and protects the interests of all persons in the property, including creditors, owners, and shareholders. See Sec. Trust Co. of Austin v. Lipscomb Cnty., 180 S.W.2d 151, 158 (Tex. 1944). Appointment of a receiver may be authorized by statute or in equity. See Benefield v. State ex. rel. Alvin Cmty. Health Endeavor, Inc., 266 S.W.3d 25, 31 (Tex. App.—Houston [1st Dist.] 2008, no pet.). In proceedings arising out of equity, the application for a receiver is ancillary to an independent cause of action. See Sims v. Stegall, 197 S.W.2d 514, 515 (Tex. Civ. App.—Texarkana 1946, no writ). In proceedings authorized by statute, the application for a receiver does not require an independent cause of action. See id. Unless inconsistent with general law, the rules of equity govern all matters relating to the appointment, powers, duties, and liabilities of a receiver and the powers of a court regarding a receiver. See TEX. CIV. PRAC. & REM. CODE § 64.004.

The primary statutes governing receivership in Texas are found in Chapter 64 of the Texas Civil Practice and Remedies Code. In addition, Texas Rules of Civil Procedure 695 and 695a apply to receivership proceedings. In federal court, Federal Rule of Civil

Procedure 66 applies to actions involving a receiver and provides that the Federal Rules of Civil Procedure govern an action in which the appointment of a receiver is sought or a receiver sues or is sued. See FED. R. CIV. P. 66.

2. Procedure to Obtain Receiver The appointment of a receiver is a harsh,

drastic, and extraordinary remedy, to be used cautiously. Benefield v. State ex. rel. Alvin Cmty. Health Endeavor, Inc., 266 S.W.3d 25, 31 (Tex. App.—Houston [1st Dist.] 2008, no pet.).

a. Availability of Receivership Section 64.001 lists various circumstances in

which a receiver may be appointed, including (1) in an action by a vendor to vacate a fraudulent purchase of property; (2) in an action by a creditor to subject property or fund to his claim; (3) in an action between partners or others jointly owning or interested in a property or fund; (4) in an action by a mortgagee for the foreclosure and sale of mortgaged property; (5) for a corporation that is insolvent, is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights; or (6) in any other case in which a receiver may be appointed under the rules of equity. TEX. CIV. PRAC. & REM. CODE § 64.001(a). In the aforementioned actions by a vendor, creditor, or joint owner, the property or fund must be in danger of being lost, removed, or materially injured. TEX. CIV. PRAC. &

REM. CODE § 64.001(b). In the aforementioned action by a mortgagee, a receiver may be appointed only if: (1) it appears that the mortgaged property is in danger of being lost, removed, or materially injured; or (2) the condition of the mortgage has not been performed and the property is probably insufficient to discharge the mortgage debt. See TEX. CIV. PRAC. & REM. CODE § 64.001(c).

In addition to being appointed pursuant to section 64.001, receivers may be appointed pursuant to other statutes that provide specific authority and requirements for receivers in particular situations, including but not limited to the following: for business entities and the property of business entities, such as to rehabilitate or liquidate a domestic or foreign entity (TEX. BUS. ORGS. CODE §§ 11.401-.414); for a religious congregation that had maintained regular forms of work and worship in a community at regular intervals but had ceased to function in those capacities for at least one year (TEX. CIV. PRAC. & REM. CODE §§ 126.001-.013);


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in dissolution of marriage proceedings for the preservation and protection of spousal property (TEX. FAM. CODE §§ 6.502(5), 6.709(3)); for an insolvent insurer (TEX. INS. CODE § 443.001-.402); to preserve a mineral interest or leasehold interest under a mineral lease owned by a nonresident or absent defendant (TEX. CIV. PRAC. & REM. CODE §§ 64.091-.092); in post-judgment turnover proceeding to assist in satisfaction of a judgment (TEX. CIV. PRAC. & REM. CODE § 31.002(b)(3)); in a partition action (TEX. R. CIV. P. 770); for property owned by missing persons (TEX. CIV. PRAC. & REM. CODE §§ 64.101-.108); and for hazardous real property (Tex. Loc. Gov’t Code § 214.0031).

Under Federal Rule of Civil Procedure 66, the appointment of a receiver can be sought by anyone showing an interest in certain property or a relation to the party in control or ownership thereof such as to justify conservation of the property by a court officer. Santibanez v. Weir McMahon & Co., 105 F.3d 234, 241 (5th Cir. 1997).

b. Application for Appointment of Receiver Unless a court appoints a receiver on its own

motion, a party must file an application or petition seeking the appointment with a court of competent jurisdiction. See TEX. CIV. PRAC. & REM. CODE § 64.001; Hunt v. State, 48 S.W.2d 466, 467-69 (Tex. Civ. App.—Austin 1932, no writ); Associated Bankers Credit Co. v. Meis, 456 S.W.2d 744, 748-50 (Tex. App.—Corpus Christi 1970, no writ). The burden of proof to show the existence of circumstances justifying the appointment of a receiver rests on the party seeking the appointment. Benefield v. State ex. rel. Alvin Cmty. Health Endeavor, Inc., 266 S.W.3d 25, 32 (Tex. App.—Houston [1st Dist.] 2008, no pet.). A court generally will not appoint a receiver if another remedy exists. See id. at 31. The application must show a necessity for appointment of a receiver, a probability of ultimate recovery by the applicant, and accurately describe the property to be placed in control of the receiver. See Associated Bankers Credit Co., 456 S.W.2d at 749.

A verified pleading is not required. See Hunt v. State, 48 S.W.2d 466, 467-69 (Tex. App.—Austin 1932, no writ). The application, however, must have support in the record, whether by affidavit, testimony, or otherwise. See Chapa v. Chapa, No. 04-12-00519-CV, 2012 Tex. App. LEXIS 10702, at *19-*21 (Tex. App.—San Antonio Dec. 28, 2012, no pet.) (mem. op.).

Although the quantum and form of evidence required on a motion requesting appointment of a receiver is a matter of judicial discretion in federal court, factors considered by federal courts in evaluating whether to appoint a receiver include (1) whether the party seeking the appointment has a valid claim; (2) the probability that fraudulent conduct has occurred or will occur to frustrate the claim; (3) whether there is imminent danger that the property will be concealed, lost, or diminished in value; (4) the inadequacy of legal remedies; (5) the lack of a less drastic equitable remedy; and (6) the likelihood the appointment of a receiver will do more good than harm. See Santibanez v. Weir McMahon & Co., 105 F.3d 234, 241-42 (5th Cir. 1997).

Prior to the appointment of a receiver, adverse parties generally should be given notice and an opportunity to be heard. See Morris v. N. Fort Worth State Bank, 300 S.W.2d, 314, 315 (Tex. Civ. App.—Fort Worth 1957, no writ). Furthermore, in certain circumstances, ex parte appointment is not allowed; for example, except where otherwise provided by statute, a receiver cannot be appointed without notice to take charge of property that is fixed and immovable. See TEX. R. CIV. P. 695.

Even when allowed, a receiver should not be appointed without notice unless it appears that the party seeking relief would suffer some material injury by the delay necessary to give notice. See Morris, 300 S.W.2d at 315. A party seeking appointment of a receiver ex parte must make supported allegations of specific facts, as distinguished from conclusions, that affirmatively and clearly show the emergency that warrants an immediate appointment. See id.

Practice Tip: Some courts will not allow ex parte relief without first attempting to give notice. Also, some judges will allow the parties to agree on a receiver; however, other judges will never appoint an agreed receiver. Practitioners should know the judge’s position on these issues.

c. Bond for Receivership A receiver cannot be appointed until the

applicant has filed with the clerk of the court a surety bond as required by Texas Rule of Civil Procedure 695a, conditioned for the payment of all damages and costs in the suit in case it is decided that the receiver was wrongfully appointed to take charge of the property. See TEX. R. CIV. P. 695a. A party in lieu of filing the


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bond may deposit cash with the clerk of court. See TEX. R. CIV. P. 14c.

3. Receiver’s Qualifications, Bond, and Oath To be appointed as a receiver for property that

is located entirely or partly in Texas, a person must meet the following qualifications: (1) the person must be a citizen and a qualified voter of Texas at the time of the appointment; (2) the person must not be a party, attorney, or other person interested in the action for appointment of a receiver; and (3) the person must retain actual residence in Texas during the receivership. See TEX. CIV. PRAC. & REM. CODE § 64.021.

Before assuming the duties as receiver, a person must be sworn to perform the duties faithfully and must execute a good and sufficient bond conditioned on the faithful discharge of his duties and obedience to the court’s orders. See TEX. CIV. PRAC. & REM. CODE §§ 64.022-.023.

Practice Tip: Vet potential receivers before the hearing takes place. Practitioners should have several candidates in mind that hopefully the judge and opposing counsel will be comfortable with. Even if the other side will not agree to your suggested receiver, have a methodology in place to appoint the receiver (e.g., each side submits a name and the court picks between the two submissions). The court is free to appoint whomever it deems appropriate, but practitioners should do everything they can to assure an appointment of someone that their side can work with.

4. Receiver’s Powers and Duties As soon as possible after appointment, a

receiver must return to the appointing court an inventory of all property received. See TEX. CIV. PRAC. & REM. CODE § 64.032.

The order appointing the receiver governs the receiver’s authority and duties. See Ex parte Hodges, 625 S.W.2d 304, 306 (Tex. 1981) (explaining that a receiver has only the authority conferred by the court’s order appointing him). Under section 64.031, a receiver may, subject to the control of the court (1) take charge and keep possession of the property; (2) receive rents; (3) collect and compromise demands; (4) make transfers; and (5) perform other acts in regard to the property as authorized by court. TEX. CIV. PRAC. &

REM. CODE § 64.031. In addition, a receiver may bring

suits in his official capacity without permission of the appointing court. TEX. CIV. PRAC. & REM. CODE § 64.033.

Practice Tip: Take great care in drafting the order that grants the receiver’s powers. An order granting the receiver broad powers may lead to unintended consequences. For instance, if an order is interpreted broadly enough to grant the receiver wide powers such as filing for bankruptcy, it can have a dramatic impact on the leverage the receiver has over all parties.

5. Receiver’s Claims and Liabilities A receiver who holds property in Texas may be sued in his official capacity in a court of competent jurisdiction without permission of the appointing court. See TEX. CIV. PRAC. & REM. CODE § 64.052(a). A judgment against a receiver is paid from the funds held by the receiver. See TEX. CIV. PRAC. & REM. CODE § 64.053. The judgment is a lien on the property held by the receiver and is superior to the mortgage lien of a mortgagee who instituted the receivership. See TEX. CIV. PRAC. & REM. CODE § 64.054.

A court-appointed receiver acting within the scope of his authority is entitled to derived judicial immunity. Davis v. West, 317 S.W.3d 301, 307 (Tex. App.—Houston [1st Dist.] 2009, no pet.).

6. Receiver’s Compensation The receiver’s fees are considered part of the

court costs and are generally payable out of the receivership property or its earnings or proceeds. See TEX. CIV. PRAC. & REM. CODE § 64.051; Hodges v. Peden, 634 S.W.2d 8, 12 (Tex. App—Houston [14th Dist.] 1982, no writ); Jordan v. Burbach, 330 S.W.2d 249, 251-52 (Tex. Civ. App.—El Paso 1959, writ ref’d n.r.e.). The taxation of the costs of the receivership and the manner of their collection are within the court’s discretion. Hill v. Hill, 460 S.W.3d 751, 767 (Tex. App.—Dallas 2015, pet. denied).

A receivership is subject to vested rights, however, and a lienholder’s interest in property held in receivership has priority over costs and expenses incurred in the administration and operation of the receivership. CitiMortgage, Inc. v. Hubener, 345 S.W.3d 193, 197 (Tex. App.—Dallas 2011, no pet.). The only exceptions to this rule are when (1) the receivership is formed at the instigation of the


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lienholder, or the lienholder acquiesces to the receivership and seeks its benefits; or (2) when the lienholder knows of and consents to the receivership fees and expenses, and debts are incurred from the receiver’s operation of a business affected with a public interest. See id.

7. Responding to Receivership A party may respond to the appointment of a

receiver by moving to vacate the receivership, seeking review of a qualified receivership order, or seeking costs for a wrongful receivership.

a. Motion to Vacate Receivership A motion to vacate a receivership must be based

on one of the following grounds: (1) a fact that was previously unknown to the trial court concerning the propriety of the order appointing the receiver; or (2) a fundamental error that renders the order appointing the receiver void. See Buck v. Johnson, 495 S.W.2d 291, 299-300 (Tex. Civ. App.—Waco 1973, no writ).

b. Review of Receivership Interlocutory orders that appoint a receiver or

that overrule a motion to vacate an order that appoints a receiver are immediately appealable. See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(1), (2). Such appeals are accelerated appeals, and the time for perfecting them is 20 days from the date of the order. See TEX. R. APP. P. 26.1(b), 28.1(a). Orders that resolve discrete issues in a receivership are appealable, final orders. See Chase Manhattan Bank & Bank One, N.A. v. Bowles, 52 S.W.3d 871, 878 (Tex. App—Waco 2001, no pet.). In contrast, interlocutory orders that dissolve a receivership are not appealable. See Waite v. Waite, 76 S.W.3d 222, 223 (Tex. App.—Houston [14th Dist.] 2002, no pet.).

c. Wrongful Receivership A party subjected to a wrongful receivership

may be entitled, under equity principles, to recover costs and the receivership’s fees and expenses from those who have provoked the receivership. See Netsphere, Inc. v. Baron, 703 F.3d 296, 311-12 (5th Cir. 2012).

8. Duration of Receivership and Discharge of Receiver The duration of a receivership is within the

discretion of the court that appointed the receiver. See Gilles v. Yarborough, 224 S.W.2d 720, 722 (Tex. Civ. App.—Fort Worth 1949, no writ). Nonetheless, the court’s discretion may be otherwise circumscribed; for example, section 64.072 limits the duration for a

corporation in receivership and establishes the method by which the receivership can be extended. See TEX. CIV. PRAC. & REM. CODE § 64.072.

When a receivership ends, the court must conduct the necessary proceedings to discharge the receiver. Hill v. Hill, 460 S.W.3d 751, 763 (Tex. App.—Dallas 2015, pet. denied). The proceedings and order of discharge ordinarily include (1) a final accounting submitted by the receiver and approved by the court; (2) a determination of the amount of the receiver’s fees; (3) restoration of the property held by the receiver to the owner of the property; and (4) a final discharge of the receiver. See Humble Exploration Co. v. Walker, 641 S.W.2d 941, 945 (Tex. App.—Dallas 1982, orig. proceeding).

Discharge of a receiver does not abate a suit against the receiver or affect the right of a party to sue the receiver. TEX. CIV. PRAC. & REM. CODE § 64.052(d).


a. Receivership and Arbitration Courts have found that where an entity in

receivership would be bound by an arbitration agreement to arbitrate claims, the receiver for the entity stands in the shoes of the entity, possesses no greater rights than the entity had, and is subject to any agreements the entity entered. See, e.g., Rich v. Cantilo & Bennett, L.P., No. 03-15-00408-CV, 2016 Tex. App. LEXIS 1255, at *7-*14 (Tex. App.—Austin Feb. 9, 2016, pet. filed) (holding that arbitration agreement bound a receiver for claims accruing independently of the receiver’s appointment and arising under the arbitration agreement).

A federal district court also recently held that where the agreement between the parties included a bargained-for-provision contemplating a court-ordered receivership pending arbitration, the party seeking a receiver ancillary to an arbitration proceeding arising out of a breach of the agreement stated a claim that could be granted. See Wells Fargo Bank, N.A. v. Star Tex. Gasoline & Oil Distribs., No. 2:14-CV-453, 2015 U.S. Dist. LEXIS 10673, at *9-*10, *12 (S.D. Tex. Jan. 29, 2015).

b. Waiver Through Requested Appointment Courts also have held recently that a party could

not challenge a receivership or the qualifications of the receiver where the party had requested and agreed to the receiver’s appointment. See I-10 Colony, Inc. v. Lee,


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No. 01-14-00465-CV & No. 1-14-00718-CV, 2015 Tex. App. LEXIS 4136, at *7-*10 (Tex. App.—Houston [1st Dist.] Apr. 23, 2015, no pet.) (mem. op.) (holding that company waived its complaints regarding the appointment of a receiver and the scope of the receiver’s authority by requesting the appointment and agreeing to confer upon the receiver the authority about which it later complained); In re Davis, 418 S.W.3d 684, 690 (Tex. App.—Texarkana 2012, no pet.) (finding that appellant failed to preserve issue concerning receiver’s qualifications where he had sought and agreed to the appointment of receiver).

c. Prior Agreement for Receiver Is Not Binding on Court Although parties may contract for a receivership in the event of a default, such agreements are not necessarily binding on a court See, e.g., U.S. Bank N.A. v. Grayson Hosp., Inc., No. 4:14CV570, 2014 U.S. Dist. LEXIS 176249, at *10, *13 (E.D. Tex. Dec. 22, 2014) (recommending denial of application for receiver even though defendants had contractually agreed to a receivership in the event of default, and noting that such an agreement was one of the equities to be considered).

d. Some Errors Will Invalidate Receivership Recent cases show that in some circumstances

actions taken with regard to the appointment of a receiver or with regard to the receivership may result in a void order that may be subsequently successfully challenged. See, e.g., In re C.D. Henderson Constr. Servs., Ltd., 2013 Tex. App. LEXIS 9681, at *2-*3 (Tex. App.—Dallas Aug. 1, 2013, no pet.) (mem. op.) (holding that order appointing receiver over entities was void where they were not named as defendants in the case, served with process, or notified of hearings on the receivership); Sutton v. Angell, No. 04-12-00802-CV, 2013 Tex. App. LEXIS 8779, at *3-*4 (Tex. App.—San Antonio July 17, 2013, no pet.) (mem. op.) (holding that court reversibly erred in appointing a receiver without ordering applicant to file a bond pursuant to Texas Rule of Civil Procedure 695a); Elliott v. Weatherman, 396 S.W.3d 224, 229 (Tex. App.—Austin 2013, no pet.) (holding that court abused its discretion in appointing receiver for real property held by trust where adverse parties did not receive a hearing upon three days’ notice).

e. Other Errors Will Not Invalidate Receivership A party may be estopped from challenging

other errors, though. See, e.g., Unit 82 Joint Venture v. Int’l Commercial Bank of China, 460 S.W.3d 616, 627-29 (Tex. App.—El Paso 2014, pet. denied) (concluding that party untimely objected to extension of receivership).

Similarly, other irregularities in the receivership may be subsequently cured. See, e.g., Green Diesel, LLC v. VicNRG, LLC, No. 14-13-00017-CV, 2013 Tex. App. LEXIS 8038, at *12-*14 (Tex. App.—Houston [14th Dist.] July 2, 2013, no pet.) (mem. op.) (holding that failure to fix applicant’s bond may be subsequently cured).

f. Showing of No Other Remedy at Law Not Required in All Circumstances Although a party seeking the appointment of a

receiver in equity or pursuant to a statute that requires a showing that all other remedies available at law or in equity are inadequate may need to make such a showing, a party seeking appointment of a receiver pursuant to a statute that does not require an applicant to prove elements of equity does not need to make such a showing. See Estate of Benson, No. 04-15-00087-CV, 2015 Tex. App. LEXIS 9477, at *20-*22 (Tex. App.—San Antonio Sept. 9, 2015, no pet.) (mem. op.) (holding that applicant did not have to establish that other remedies were inadequate where statute under which receiver was sought, section 114.008(a)(5) of the Texas Property Code, did not require such a showing).

g. Suits Against Receiver The jurisdiction and appropriateness of suits

against a receiver is one of the more frequently litigated issues in receivership cases. See, e.g., Baron v. Vogel, No. 3:15-CV-232-L, 2016 U.S. Dist. LEXIS 44294, at *1-*10, *20-*22 (N.D. Tex. Mar. 31, 2016) (dismissing with prejudice action against receiver and attorney for receiver in Netsphere litigation); U.S. CFTC v. U.S Ventures, LC, No. H-11-0040, 2011 U.S. Dist. LEXIS 134601, at *10-*12 (S.D. Tex. Nov. 22, 2011) (concluding that suit against receiver who was winding up the affairs of the company so that the funds he was able to collect could be returned to the allegedly defrauded investors was an action that did not fall into exception to Barton doctrine and thus leave had to be obtained from appointing court before suit could be brought in another court); Glasstex, Inc. v. Arch Aluminum & Glass Co., No. 13-07-00483-CV, 2016


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Tex. App. LEXIS 1869, at *10-*11, *14-*15 (Tex. App.—Corpus Christi Feb. 25, 2016, no pet.) (mem. op.) (affirming dismissal of suit on the basis of lack of subject matter jurisdiction where receiver was shielded by derived judicial immunity in suit brought by property owner); Wilkinson v. USAA Fed. Sav. Bank Trust Servs., No. 14-13-00111-CV, 2014 Tex. App. LEXIS 7091, at *28-*37 (Tex. App.—Houston [14th Dist.] July 1, 2014, pet. denied) (mem. op.) (holding that receiver was entitled to summary judgment based on derived judicial immunity because receiver’s alleged conduct was intimately associated with his function and authority as a court-appointed receiver).

h. Property in the Estate The specific nature of the receivership property

may be important in determining the success of a party challenging the receivership or later seeking to dissolve the receivership. See, e.g., Netsphere, Inc. v. Baron, 703 F.3d 296, 311 (5th Cir. 2012) (holding that receivership improperly targeted assets outside the scope of litigation to pay claims of principal’s former attorneys and control his litigation tactics); Bennett v. Broocks Baker & Lange, LLP, No. 01-13-00674-CV, 2014 Tex. App. LEXIS 7317, at *5-*7 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (mem. op.) (holding that trial court acted within its discretion in appointing receiver over property, including PLLC for whom appellant was sole owner); CitiMortgage, Inc. v. Huebner, 345 S.W.3d 193, 196-98 (Tex. App.—Dallas 2011, no pet.) (holding that trial court erred in failing to terminate receivership upon intervening lienholder’s motion where there was no equity in the property and all proceeds from a sale would go to satisfy the unpaid lien).

i. Cases Under the Texas Business Organizations Code

When a receiver is sought for a business entity, the specific showings of appropriateness of a receiver under the Texas Business Organizations Code must be made. See, e.g., Spiritas v. Davidoff, 459 S.W.3d 224, 234-37 (Tex. App.—Dallas 2015, no pet.) (reversing order appointing receiver where there were no showings made to support appointment under various provisions of Texas Business Organizations Code); Hillwood Inv. Props. III, Ltd. v. Radical Mavericks Mgmt., LLC, No. 05-11-01470-CV, 2014 Tex. App. LEXIS 9348, at *8-*10, *13 (Tex. App—Dallas Aug. 21, 2014, no pet.) (mem. op.) (affirming summary judgment in favor of company because expert’s affidavit raised no genuine

issue of material fact that company was unable to pay debts as they became due in the usual course of business or affairs); Chapa v. Chapa, No. 04-12-00519-CV, 2012 Tex. App. LEXIS 10702, at *19-*21 (Tex. App.—San Antonio Dec. 28, 2012, no pet.) (mem. op.) (holding that trial court abused discretion in appointing receiver pursuant to section 11.404 of the Texas Business Organizations Code where there was no evidence in the record to support the need for a receiver); Xr-5, LP v. Margolis, No. 02-10-00290-CV, 2011 Tex. App. LEXIS 2181, at *8-*11 (Tex. App.—Fort Worth Mar. 24, 2011, no pet.) (mem. op.) (holding that trial court abused discretion by appointing a receiver over a corporation, its assets, and business operations in the absence of evidence supporting the appointment and that parties challenging appointment did not waive challenge to receivership on appeal by indicating at hearing that testimony was not necessary).

j. Receiver’s Authority Is Dictated by the Order of Appointment A receiver’s authority and powers are

established by the order appointing the receiver, and actions taken without the requisite authority are invalid. See Clay Expl., Inc. v. Santa Rosa Operating, LLC, 442 S.W.3d 795, 798-802 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (holding that lease entered into by receiver was invalid where receiver had only been granted authority to execute and deliver a mineral lease to a different, specified company).

C. Garnishment

1. Overview of Garnishment Garnishment is a statutory proceeding whereby

the property, money, or credits of a debtor in the possession of a third party are applied to the payment of the debt. Bank One v. Sunbelt Sav., 824 S.W.2d 557, 558 (Tex. 1992).

Although garnishment is a remedy that is ancillary to a suit between a creditor and debtor, it is docketed as a separate action. See TEX. R. CIV. P. 659. The three parties to the garnishment are the plaintiff creditor, defendant debtor, and garnishee, who holds the property, money, or credits of the debtor. Garnishment is often used to seize funds in a debtor’s deposit account with a financial institution. See, e.g., First Nat. Bank in Dall. v. Banco Longoria, S.A., 356 S.W.2d 192 (Tex. Civ. App.—San Antonio 1962, writ ref’d n.r.e.).

In Texas, garnishment is authorized by Chapter 63 of the Texas Civil Practice and Remedies Code, and


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the procedures for obtaining it are set forth in Texas Rules of Civil Procedure 657 to 679. Garnishment may be sought in federal court as well, pursuant to Federal Rule of Civil Procedure 64.

2. Procedure to Obtain Writ of Garnishment Garnishment is an extraordinary remedy that is

summary and harsh, and strict compliance with the statutory and procedural requirements is necessary. See In re Tex. Am. Express, Inc., 190 S.W.3d 720, 725 (Tex. App.—Dallas 2005, no pet.).

a. Availability of Garnishment Prejudgment garnishment is available to a

plaintiff if: (1) an original attachment has been issued; or (2) the plaintiff sues for a debt and makes an affidavit stating that (a) the debt is just, due, and unpaid, (b) within the plaintiff’s knowledge, the defendant does not possess property in Texas subject to execution sufficient to satisfy the debt, and (c) the garnishment is not sought to injure the defendant or the garnishee. TEX. CIV. PRAC. & REM. CODE § 63.001(1), (2). Garnishment is only available if the debt is liquidated and not contingent. See Fogel v. White, 745 S.W.2d 444, 446-47 (Tex. App.—Houston [14th Dist.] 1988, orig. proceeding).

The effects of the debtor that may be garnished are funds or items of personal property that are not otherwise exempt from garnishment. See, e.g., TEX. CIV. PRAC. & REM. CODE § 63.004 (providing that current wages for personal service are not subject to garnishment).

b. Application for Writ of Garnishment A writ of garnishment may be issued at the

initiation of a suit or at any time during the progress of a suit. See TEX. R. CIV. P. 658. An application for a writ of garnishment must comply with all statutory requirements and state the grounds for issuing the writ and specific facts relied upon by the plaintiff to warrant the required findings by the court. Id. The application must be supported by affidavits of the plaintiff, his agent, his attorney, or other persons having knowledge of relevant facts. Id.

c. Order for Writ of Garnishment A writ of garnishment may not be issued before

final judgment except upon written order of the court after a hearing, which may be ex parte. TEX. R. CIV. P. 658. The order granting the writ must include (1) specific findings of fact to support the statutory grounds found to exist; (2) the maximum value of the property

or indebtedness that may be garnished; (3) the amount of bond required of the plaintiff, which shall be in an amount which, in the opinion of the court, will adequately compensate the defendant in the event the plaintiff fails to prosecute his suit to effect, and to pay all damages and costs which may be adjudged against him for wrongfully suing out the writ of garnishment; and (4) the amount of bond required of the defendant to replevy, which shall be in an amount of the plaintiff’s claim, one year’s accrual of interest if allowed by law on the claim, and the estimated court costs. Id.

d. Garnishment Bond A writ of garnishment cannot issue until the

applicant has filed a surety bond as required by Rule 658a, conditioned that the plaintiff prosecute his suit to effect and pay to the extent of the penal amount of the bond all damages and costs as may be adjudged against him for wrongfully suing out such writ of garnishment. See TEX. R. CIV. P. 658a. A party in lieu of filing the bond may deposit cash with the clerk of court. See TEX. R. CIV. P. 14c.

e. Writ of Garnishment After the bond has been delivered as required,

the writ of garnishment will be issued. The form of the writ is mandated by rule. See TEX. R. CIV. P. 661. The writ of garnishment commands the garnishee to appear before the court at the time required by Rule 659 and to answer under oath: (1) what, if anything, he is indebted to the defendant, and was when the writ was served; and (2) what other persons, if any, within his knowledge are indebted to the defendant or have effects belonging to him in their possession. See TEX. R. CIV. P. 661.

The writ of garnishment is executed by the sheriff or constable receiving the writ by delivery of a copy of it to the garnishee; the writ may not be executed by a private process server. See TEX. R. CIV. P. 663. Execution of a writ of garnishment on the garnishee impounds the funds held by the garnishee and any additional ones deposited through the date the garnishee is required to answer. See Rome Indus. v. Intsel Sw., 683 S.W.2d 777, 779 (Tex. App.—Houston [14th Dist.] 1984, writ ref’d n.r.e.).

As soon as practicable following the issuance of the writ, the defendant must be served with a copy of the writ of garnishment, the application, accompanying affidavits, and orders of the court. See TEX. R. CIV. P. 663a. In addition to the language required on the writ itself, the copy that is served on the defendant must


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advise the defendant of the right to regain possession by filing a replevy bond and motion to dissolve the writ. See id.

3. Responding to Writ of Garnishment A defendant may respond to a writ of

garnishment in several ways, including by replevying the garnished property, moving to substitute collateral for the garnished property, moving to dissolve the writ, seeking mandamus relief, or bringing a claim for wrongful garnishment.

a. Replevy of Garnished Property If the garnished property has not been

previously claimed or sold, the defendant may replevy the property, or the proceeds from the sale of the property if it has been sold, by giving a surety bond as provided by Rule 664. See TEX. R. CIV. P. 664.

b. Motion to Substitute Collateral On reasonable notice to the opposing party, the

defendant has the right to move for substitution of the property, of equal value as that attached. TEX. R. CIV. P. 664. The court may authorize substitution but must first make findings as to the value of the property to be substituted. See id.

c. Motion to Dissolve Writ of Garnishment A defendant whose property or account has

been attached or any intervening party who claims an interest in such property or account, may by sworn motion, seek to vacate, dissolve, or modify the writ and order directing its issuance, for any grounds or cause. See TEX. R. CIV. P. 664a. Unless the parties agree to an extension of time, the motion must be heard promptly, after reasonable notice to the plaintiff. See id. Following the hearing, the writ must be dissolved unless the plaintiff proves at the hearing the grounds relied on for issuance of the writ. See id.

d. Review of Garnishment Orders granting a writ of garnishment and

orders to dissolve such an order are interlocutory and are not appealable. See Carrisalez v. Benitez, No. 01-14-00414-CV, 2014 Tex. App. LEXIS 11005, at *1 (Tex. App.—Houston [1st Dist.] Oct. 2, 2014, no pet.) (mem. op.). However, mandamus relief may be available where the garnishment order is a clear abuse of discretion for which the relator has no adequate remedy at law. See, e.g., In re Tex. Am. Express, Inc., 190 S.W.3d 720, 724-28 (Tex. App.—Dallas 2005, orig. proceeding) (conditionally granting writ of mandamus

based on trial court’s refusal to dissolve garnishment order on an unliquidated debt).

e. Wrongful Garnishment A party can bring a cause of action for wrongful

garnishment. See Jamison v. Nat’l Loan Investors, L.P., 4 S.W.3d 465, 467 (Tex. App.—Houston [1st Dist.] 1999, pet. denied). A garnishment is wrongful if the facts stated in the affidavit supporting the garnishment are false. Id. at 468. The injured party can recover all actual damages proximately caused by the wrongful garnishment. See Aetna Cas. & Sur. Co. v. Raposa, 560 S.W.2d 106, 110 (Tex. Civ. App.—Fort Worth 1977, writ granted); Peerless Oil & Gas Co. v. Teas, 138 S.W.2d 637, 640-41 (Tex. Civ. App.—San Antonio 1940), aff’d, 158 S.W.2d 758 (Tex. 1942).

4. Garnishee’s Answer The garnishee must file an answer, under oath,

in writing and signed by him that states: (1) what, if anything, he is indebted to the defendant at the time of the answer, and was when the writ was served; and (2) what other persons, if any, within his knowledge are indebted to the defendant or have effects belonging to him in their possession. See TEX. R. CIV. P. 661, 665. The garnishee should also plead for reimbursement of its costs, including reasonable attorney’s fees, incurred in responding to the garnishment. See TEX. R. CIV. P. 677. If the garnishee fails to file an answer to the writ of garnishment, the court may render default judgment against the garnishee. See TEX. R. CIV. P. 667.

If the plaintiff is not satisfied with the garnishee’s answer, the plaintiff may controvert it by filing an affidavit stating that he has good reason to believe, and does believe, that the answer of the garnishee is incorrect, stating in what particular he believes is incorrect. TEX. R. CIV. P. 673. The defendant may also in the same manner controvert the garnishee’s answer. Id.

If the garnishee’s answer is not controverted, the court will enter judgment discharging the garnishee if the garnishee’s answer shows that the garnishee is not indebted to the defendant and was not indebted when the writ of garnishment was served on him and that he does not have in his possession any effects of the defendant and had none when the writ was served on him, and if he has either denied that any other persons within his knowledge are indebted to the defendant or have in their possession effects belonging to the defendant, or else named such person. See TEX. R. CIV. P. 666.


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The court will render judgment for the plaintiff against the garnishee if it appears from the garnishee’s answer or otherwise that the garnishee is indebted to the defendant in any amount or was indebted when the writ was served. See TEX. R. CIV. P. 668.


a. Statutory Requirements Must Be Followed, Even When Seeking a Default or Agreed Judgment Where the statutory requirements were not

followed, appellate courts have granted relief from a default judgment or agreed judgment. See, e.g., Wease v. Bank of Am., No. 05-14-00867-CV, 2015 Tex. App. LEXIS 6865, at *7-*8 (Tex. App.—Dallas, July 2, 2015, no pet.) (mem. op.) (holding that trial court reversibly erred in failing to hold hearing on motion to dissolve writ of garnishment before rendering agreed judgment); U.S. Bank, N.A. v. Pinkerton Consulting & Investigations, No. 05-13-00890-CV, 2014 Tex. App. LEXIS 9366, at *6-*10 (Tex. App.—Dallas Aug. 22, 2014, no pet.) (mem. op.) (holding that sheriff’s return did not state manner of service on garnishee as required by Rule 107, that the service was consequently void, that the court lacked personal jurisdiction over garnishee, and that court erred in entering default judgment); Bechem v. Reliant Energy Retail Servs., LLC, 441 S.W.3d 839, 845 (Tex. App.—Houston [14th Dist.], no pet.) (holding that trial court could not forgo trial on the merits and enter an agreed judgment between the garnishor and garnishee where the garnishee’s answer formed an issue regarding ownership of the account funds).

b. Constructive Service May Be Sufficient Under Rule 663a Although strict compliance with the statutory

requirements for garnishment is required, strict compliance with Rule 663a may not require proof that the defendant debtor actually accepted service. See Jacobs v. Jacobs, 448 S.W.3d 626, 633-35 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (concluding that the garnishor complied with Rule 663a through constructive service where the record supported that the garnishor attempted service of the garnishment proceedings as authorized by Rule 21a but the debtor avoided and refused service). But see In re Tasty Moments, LLC, No. 13-10-00274-CV, 2011 Tex. App. LEXIS 2377, at *16-*20 (Tex. App.—Corpus Christi Mar. 31, 2011, orig. proceeding) (mem. op.) (holding that garnishment was

properly dissolved where debtor was never served because attempts at service through mail and certified mail were unsuccessful).

c. Compensation to the Garnishee One of the frequently contested issues

addressed by Texas appellate courts is the appropriateness of an award of costs and attorney’s fees to the garnishee. See, e.g., Weisbrod Matteis & Copley, PLLC v. Manley Toys, Ltd., No. 3:15-CV-1446-G (BF), 2015 U.S. Dist. LEXIS 162084, at *19-*20 (N.D. Tex. Dec. 3, 2015) (applying Texas law and ruling that the garnishee’s attorney’s fees should be assessed against the intervenor who contested the garnishment suit and did not prevail on its contested motion to dissolve, and absent that contest neither the judgment creditor nor garnishee would have had to pay the garnishee’s attorney’s fees under Rule 677); First State Bank Cent. Tex. v. Lakeway Reg’l Med. Ctr. Dev., LLC, No. 03-13-00058-CV, 2014 Tex. App. LEXIS 1808, at *16-*18 (Tex. App.—Austin, Feb. 20, 2014, pet. denied) (mem. op.) (holding that Rule 677 does not provide for an award of costs to a garnishee when the garnishment proceeding is dismissed for lack of subject-matter jurisdiction, but noting that the trial court could consider on remand whether Rule 13 sanctions were warranted under the circumstances); Spector Gadon & Rosen, P.C. v. Sw. Secs., Inc., 372 S.W.3d 244, 248-51 (Tex. App.—Dallas 2012, no pet.) (holding that trial court did not abuse its discretion in awarding attorney’s fees to garnishee pursuant to Rule 677 upon the plaintiff’s non-suit of the garnishment action); Mohican Oil & Gas, LLC v. Chapco, Inc., No. 13-10-00694-CV, 2011 Tex. App. LEXIS 9435, at *34-*36 (Tex. App.—Corpus Christi Dec. 1, 2011, pet. denied) (mem. op.) (holding that the award of attorney’s fees to the garnishee was improper where there was no evidence in the record regarding the reasonableness of the garnishee’s attorney’s fees).

D. Attachment

1. Overview of Attachment Attachment is a statutory remedy that may be

sought by a party to secure a debt by seizure of property before or after judgment. See In re Argyll Equities, LLC, 227 S.W.3d 268, 271 (Tex. App.—San Antonio 2007, orig. proceeding). Unlike sequestration, attachment may be used when a creditor does not have an ownership or security interest in property. Compare TEX. CIV. PRAC. & REM. CODE § 61.001 with TEX. CIV. PRAC. &


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REM. CODE § 62.001. Attachment is available to a plaintiff if (1) the defendant is justly indebted to the plaintiff; (2) the attachment is not sought for the purpose of injuring or harassing the defendant; (3) the plaintiff will probably lose his debt unless the writ of attachment is issued; and (4) specific statutory grounds for the writ exist. TEX. CIV. PRAC. & REM. CODE § 61.001.

In Texas, attachment is authorized by Chapter 61 of the Texas Civil Practice and Remedies Code, and the procedures for obtaining it are set forth in Texas Rules of Civil Procedure 592 to 609. Attachment may be sought in federal court as well, pursuant to Federal Rule of Civil Procedure 64.

2. Procedure to Obtain Writ of Attachment Attachment is an extraordinary remedy

considered to be oppressive and harsh, and strict compliance with statutory and procedural requirements is required. See S.R.S. World Wheels v. Enlow, 946 S.W.2d 574, 575 (Tex. App.—Fort Worth 1997, orig. proceeding).

a. Grounds for Writ of Attachment In addition to the general grounds for the writ, there are nine specific statutory grounds for the writ, one of which must be met for its issuance: (1) the defendant is not a resident of Texas or is a foreign corporation; (2) the defendant is about to leave permanently from Texas and has refused to pay or secure the debt due to plaintiff; (3) the defendant is hiding so that ordinary process of law cannot be served; (4) the defendant has hidden or is about to hide the property for the purpose of defrauding his creditors; (5) the defendant is about to remove his property from Texas without leaving an amount sufficient to pay his debts; (6) the defendant is about to remove all or part of his property from the county in which the suit is brought with the intent to defraud his creditors; (7) the defendant has disposed of or is about to dispose of all or part of his property with the intent to defraud his creditors; (8) the defendant is about to convert all or part of his property into money for the purpose of placing it beyond the reach of his creditors; or (9) the defendant owes the plaintiff for property obtained by the defendant under false pretenses. TEX. CIV. PRAC. & REM. CODE § 61.002.

b. Property Available for Attachment A writ of attachment may be levied only on

property that is, by law, subject to levy under a writ of execution. TEX. CIV. PRAC. & REM. CODE § 61.041. Unless quashed or vacated, an executed writ of

attachment creates a lien from the date of levy on real property attached, on personal property held by the attaching officer, and on the proceeds of any attached personal property that may have been sold. TEX. CIV. PRAC. & REM. CODE § 61.061. A writ of attachment is generally only available on a claim for a liquated debt. See In re Argyll Equities, LLC, 227 S.W.3d 268, 271 (Tex. App.—San Antonio, orig. proceeding). If personal service on the defendant cannot be effected within the state, however, a writ of attachment may be issued in a suit founded in tort or on an unliquidated demand. See TEX. CIV. PRAC. & REM. CODE § 61.005. Furthermore, a writ of attachment may be issued even though a plaintiff’s debt or demand is not due, but the final judgment may not be rendered against the defendant until the debt or demand becomes due. See TEX. CIV. PRAC. & REM. CODE § 61.004.

c. Application for Writ of Attachment A writ of attachment may be issued at the

initiation of a suit or at any time during the progress of a suit. See TEX. CIV. PRAC. & REM. CODE § 61.003; TEX. R. CIV. P. 592.

The application for writ of attachment must comply with all statutory requirements and state the grounds for issuing the writ and specific facts relied upon by the plaintiff to warrant the required findings by the Court. See TEX. R. CIV. P. 592. The application for writ of attachment must be supported by affidavits of the plaintiff, his agent, his attorney, or other persons having knowledge of relevant facts. See TEX. CIV. PRAC. &

REM. CODE § 61.022; TEX. R. CIV. P. 592. The affidavit must state the general grounds for issuance under section 61.001, the amount of the demand, and the specific grounds for issuance under section 61.002. TEX. CIV. PRAC. & REM. CODE § 61.022(a).

d. Order for Writ of Attachment A writ of attachment may not be issued except upon written order of the court after a hearing, which may be ex parte. TEX. R. CIV. P. 592. The order granting the writ must include (1) specific findings of fact to support the statutory grounds found to exist; (2) the maximum value of the property that may be attached; (3) the amount of bond required of plaintiff, which shall be in an amount which, in the opinion of the court, will adequately compensate defendant in the event plaintiff fails to prosecute his suit to effect, and to pay all damages and costs which may be adjudged against him for wrongfully suing out the writ of


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attachment; (4) a statement commanding that the attached property be kept safe and preserved subject to further orders of the court; and (5) the amount of bond required of defendant to replevy, which shall be in the amount of plaintiff’s claim, one year’s accrual of interest if allowed by law on the claim, and the estimated costs of court. Id.

e. Attachment Bond A writ of attachment cannot issue until the

applicant has filed a surety bond as required by statute and Rule 592a, conditioned that the plaintiff prosecute his suit to effect and pay to the extent of the penal amount of the bond all damages and costs as may be adjudged against him for wrongfully suing out such writ of attachment. See TEX. CIV. PRAC. & REM. CODE § 61.023; TEX. R. CIV. P. 592a. The form of attachment bond is set forth in Rule 592b. A party in lieu of filing the bond may deposit cash with the clerk of court. See Tex. R. Civ. P. 14c.

f. Writ of Attachment After the bond has been delivered as required, the writ of attachment will be issued. The form of the writ is mandated by rule. See TEX. R. CIV. P. 593-94. The writ must be directed to the sheriff or constable and shall command him to take into his possession the property and to keep it subject to further orders of the court, unless it is replevied. See TEX. R. CIV. P. 593. Language to be included in the writ is set forth in Rule 594.

The sheriff or constable receiving the writ must immediately proceed to execute it by levying upon so much of the property subject to the writ, and found within the officer’s county, as may be sufficient to satisfy the command of the writ. See TEX. R. CIV. P. 597.

As soon as practicable following the issuance and levy of the writ, the defendant must be served with a copy of the writ of attachment, the application, accompanying affidavits, and orders of the court. See TEX. R. CIV. P. 598a. In addition to the language required on the writ itself, the copy that is served on the defendant must advise the defendant of the right to regain possession by filing a replevy bond and motion to dissolve the writ. See id.

3. Responding to Writ of Attachment A defendant may respond to a writ of

attachment in several ways, including by replevying the property, moving to dissolve the writ, moving to

substitute property, seeking mandamus relief, or bringing a claim for wrongful attachment.

a. Replevy of Attached Property If the attached property has not been previously

claimed, replevied, or sold, the defendant may replevy the property, or the proceeds from the sale of the property if it has been sold, by giving a surety bond as provided by Rule 599. See TEX. R. CIV. P. 599.

b. Motion to Substitute Property On reasonable notice to the opposing party, the defendant has the right to move for substitution of property of equal value as that attached. See TEX. R. CIV. P. 599. The court may authorize substitution but must first make findings as to the value of the property to be substituted. Id.

c. Motion to Dissolve Writ of Attachment A defendant whose property has been attached

or any intervening party who claims an interest in such property, may by sworn written motion, seek to vacate, dissolve or modify the writ and the order directing its issuance, for any grounds or cause. See TEX. R. CIV. P. 608. Unless the parties agree to an extension of time, the motion must be heard promptly, after reasonable notice to the plaintiff. See id. Following the hearing, the writ must be dissolved unless the plaintiff proves at the hearing the grounds relied on for issuance of the writ. See id.

d. Review of Attachment Orders granting attachment or orders to dissolve

such an order are interlocutory and are not appealable. See McQuade v. E.D. Sys. Corp., 570 S.W.2d 33, 35 (Tex. Civ. App.—Dallas 1978, no writ). However, mandamus relief may be available where the attachment order is a clear abuse of discretion for which the relator has no adequate remedy at law. See, e.g., In re Reveille Res. (Tex.), Inc., 347 S.W.3d 301, 305 (Tex. App.—San Antonio 2011, orig. proceeding) (conditionally granting writ of mandamus where there was no statutorily required finding that defendant was “justly indebted” to plaintiff).

e. Wrongful Attachment A party can bring a cause of action when real or

personal property is wrongfully attached. See Farmers & Merchs. Nat’l Bank v. Williams, 129 S.W.2d 268, 269 (Tex. 1939) (real property); Capitol Barber & Beauty Supply v. Realistic, Inc., 611 S.W.2d 137, 138 (Tex. Civ. App.—Waco 1980, no writ) (personal property). The injured party must show that the wrongful attachment


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disturbed its use, possession, or enjoyment of real or personal property, or that it defeated a pending sale of real property that later depreciated in value. See Farmers & Merchs., 129 S.W.2d at 269-70. A victim of wrongful attachment can sue both the principal and the surety on the attachment bond. Alvarez v. Smith, 417 S.W.2d 292, 295 (Tex. Civ. App.—El Paso 1967, writ ref’d n.r.e.); see also TEX. CIV. PRAC. & REM. CODE § 61.023.

4. Motion to Sell Perishable Property Whenever attached personal property has not

been claimed or replevied, the court may order the property sold, if it appears that the property is in danger of serious and immediate waste and decay, or the keeping of the property until trial will necessarily be attended with such expense or deterioration in value as to greatly lessen the amount likely to be realized. See TEX. R. CIV. P. 600-01. The applicant for the order of sale must file a bond as required by Rule 602, conditioned that the applicant will be responsible to the defendant for such damages as may be sustained if the sale is illegally and unjustly applied for or made. See TEX. R. CIV. P. 602. The officer making the sale at public auction for cash will then pay over the proceeds to the clerk. See TEX. R. CIV. P. 603-04.


a. Order Requiring Funds Be Deposited into the Registry of the Court May Be an Attachment Because strict compliance with the statutes and

rules governing attachment is required, appellate courts have granted mandamus relief where the trial court orders effectively attached property by ordering funds deposited in the registry of the court but the requirements of Chapter 61 of the Civil Practice and Remedies Code were not met. See, e.g., O’Brien v. Baker, No. 05-15-00489-CV, 2015 Tex. App. LEXIS 11562, at *9-*10 (Tex. App.—Dallas Nov. 9, 2015, no pet.) (mem. op.) (holding that the order was not an attachment where it failed to recite that defendant was indebted to plaintiff and did not specify any of the other requirements of sections 61.001 and 61.002 and the court lacked the inherent authority to do so where there was no evidence the funds were in danger of being lost or depleted); Grupo Consejero Mundial, S.A. De C.V. v. Salinas, Nos. 13-11-00471-CV, 13-11-00493-CV, 2012 Tex. App. LEXIS 2547, at *15-*18 (Tex. App.—Corpus Christi, Mar. 29, 2012, no pet.) (mem. op.) (concluding that trial court abused discretion by effectively attaching

property and failing to comply with the statutory requirements of Chapter 61); In re Reveille Res. (Tex.), Inc., 347 S.W.3d 301, 303-05 (Tex. App.—San Antonio 2011, orig. proceeding) (agreeing that order directing deposit into the registry was improper under section 61.001 in light of trial court’s failure to find that defendant was “justly indebted to” plaintiff, which was fatal to plaintiff’s entitlement to a writ of attachment).

E. Sequestration

1. Overview of Sequestration Sequestration is a statutory remedy that may be

sought by parties seeking to foreclose or enforce a mortgage, lien, or other security interest on property or seeking possession or title to property. See TEX. CIV. PRAC. & REM. CODE § 62.001. Although sequestration is commonly sought by secured creditors whose collateral is personal property, it also may be sought by secured creditors whose collateral is fixtures or real property. See id. Parties may seek sequestration where there is immediate danger that the defendant or party in possession of the property will conceal, dispose of, waste, destroy, or remove the property prior to a final judgment being entered. See id.

In Texas, sequestration is authorized by Chapter 62 of the Texas Civil Practice and Remedies Code, and the procedures for obtaining it are set forth in Texas Rules of Civil Procedure 696 to 700a. Sequestration may be sought in federal court as well, pursuant to Federal Rule of Civil Procedure 64. Other jurisdictions refer to the remedy as replevin.

2. Procedure to Obtain Writ of Sequestration Sequestration proceedings are summary in

nature, and strict compliance with the statutory and procedural requirements is necessary. See Am. Mortg. Corp. v. Samuell, 108 S.W.2d 193, 196 (Tex. 1937).

a. Application for Writ of Sequestration A writ of sequestration may be issued at the initiation of a suit or at any time before final judgment. TEX. CIV. PRAC. & REM. CODE § 62.002. An application for writ of sequestration must be under oath and must set forth: (1) the specific facts stating the nature of the plaintiff’s claim; (2) the amount in controversy, if any; and (3) the facts justifying issuance of the writ. TEX. CIV. PRAC & REM. CODE § 62.022. The application must describe the property with such certainty that it may be identified and distinguished from like property, and the value of each article and the county in which each article is located must be stated.


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See TEX. R. CIV. P. 696. The application must be supported by an affidavit of the plaintiff, his agent, his attorney, or other persons having knowledge of the relevant facts. See id.

b. Order for Writ of Sequestration A writ of sequestration may not be issued except upon written order of the court after a hearing, which may be ex parte or by submission. See TEX. R. CIV. P. 696. The order granting the writ of sequestration must be written and must include (1) specific findings of fact to support the statutory grounds found to exist; (2) a description of the property to be sequestered with such certainty that it may be identified and distinguished from property of a like kind, giving the value of each article of the property and the county in which it is located; (3) the amount of bond required of plaintiff, which shall be in an amount which, in the opinion of the court, shall adequately compensate defendant in the event plaintiff fails to prosecute his suit to effect and pay all damages and costs; and (4) the amount of bond required of defendant to replevy, which shall be in an amount equivalent to the value of the property sequestered or to the amount of plaintiff’s claim and one year’s accrual of interest if allowed by law on the claim, whichever is the lesser amount, and the estimated costs of court. Id.

c. Sequestration Bond A writ of sequestration cannot issue until the

party applying for the writ has filed a surety bond as required by Rule 698, conditioned that the plaintiff prosecute his suit to effect and pay to the extent of the penal amount of the bond all damages and costs as may be adjudged against him for wrongfully suing out such writ of sequestration. See TEX. R. CIV. P. 698. A party in lieu of filing the bond may deposit cash with the clerk of court. See Tex. R. Civ. P. 14c.

d. Writ of Sequestration After the bond has been delivered as required, the writ of sequestration will be issued. The form of the writ is mandated by statute and rule. See TEX. CIV. PRAC & REM. CODE § 62.023; TEX. R. CIV. P. 699. The writ must command the sheriff or constable to take into his possession the property and keep it subject to further orders of the court, unless it is replevied. See TEX. R. CIV. P. 699. The writ must advise of the right to regain possession by filing a replevy bond and motion to dissolve the writ. See TEX. CIV. PRAC. & REM. CODE §

62.023; TEX. R. CIV. P. 699.

Once the writ has been issued, the sheriff or constable may levy against the property by serving the writ on the party in immediate possession. See TEX. R. CIV. P. 699.

As soon as practicable following the issuance and levy of the writ, the defendant must be served with a copy of the writ of sequestration, the application, accompanying affidavits, and orders of the court. See TEX. R. CIV. P. 700a. In addition to the language required on the writ itself, the copy that is served on the defendant must advise the defendant of the right to regain possession by filing a replevy bond and motion to dissolve the writ. See id.

Practice Tip: If the sequestration procedure seems burdensome, consider whether pleading for a writ/order of possession is a more efficient remedy to pursue.

3. Responding to Writ of Sequestration A defendant may respond to a writ of sequestration in several ways, including by replevying the property, moving to dissolve the writ, seeking mandamus relief, or bringing a compulsory counterclaim for wrongful sequestration.

a. Replevy of Sequestered Property If the sequestered property has not been

previously claimed, replevied, or sold, the defendant may replevy the property, or the proceeds from the sale of the property if it has been sold, by giving a surety bond as provided by statute. See TEX. R. CIV. P. 701.

b. Motion to Dissolve Writ of Sequestration A defendant whose property has been sequestered or any intervening party who claims an interest in the property may by sworn written motion seek to vacate, dissolve, or modify the writ and the order directing its issuance, for any grounds or cause. See TEX. CIV. PRAC. & REM. CODE § 62.041(a); TEX. R. CIV. P. 712a. Unless the parties agree to an extension of time, the motion must be heard promptly, after reasonable notice to the plaintiff. See TEX. R. CIV. P. 712a. Following the hearing, the writ must be dissolved unless the plaintiff proves at the hearing the specific facts alleged and the grounds relied on for issuance. See TEX. CIV. PRAC. & REM. CODE § 62.043(a); TEX. R. CIV. P. 712a.

c. Review of Sequestration Orders granting writs of sequestration or orders

to dissolve such an order are interlocutory and are not


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appealable. See Rexford v. Holliday, 807 S.W.2d 356, 357 (Tex. App.—Houston [1st Dist.] 1991, no writ). However, mandamus relief may be available where the sequestration order is a clear abuse of discretion for which the relator has no adequate remedy at law. See, e.g., McMakin v. Golden, No. 09-97-289-CV, 1997 Tex. App. LEXIS 6013, at *1-*5 (Tex. App.—Beaumont, Oct. 30, 1997, orig. proceeding) (conditionally granting writ of mandamus where trial court abused discretion in directing sheriff or constable to surrender the property to plaintiff, contrary to the requirements of Texas Rule of Civil Procedure 699).

d. Wrongful Sequestration If the writ is dissolved, the defendant may bring an action for wrongful sequestration as a compulsory counterclaim in the underlying suit. See TEX. CIV. PRAC. & REM. CODE §§ 62.043-.045; Rexford v. Holliday, 807 S.W.2d 356, 358-59 (Tex. App.—Houston [1st Dist.] 1991, no writ). The party alleging wrongful sequestration must prove two elements: (1) the sequestering party did not have reasonable grounds to believe that the counterclaimant would conceal, damage, dispose of, waste, or convert to its own use the property that was sequestered; and (2) the counterclaimant suffered damages. See Multi-Moto Corp. v. ITT Commercial Fin. Corp., 806 S.W.2d 560, 566 (Tex. App.—Dallas 1990, writ denied). In addition to damages, the defendant may recover reasonable attorney’s fees incurred in dissolution of the writ. TEX. CIV. PRAC. & REM. CODE § 62.044.

4. Plaintiff’s Replevy of Sequestered Property If the defendant has not replevied the property

within ten days after the levy of the writ and service of notice on the defendant, the plaintiff may replevy the property by giving a bond as required and conditioned under Rule 708. See TEX. R. CIV. P. 708.

5. Sale of Property Likely to Be Wasted or Destroyed

If after ten days from the levy of a writ, the defendant has not replevied the property, the plaintiff or defendant may make an affidavit in writing that the property levied upon, or any portion thereof, is likely to be wasted, destroyed, or greatly depreciated by keeping, and if the levying officer certifies to the truth of the affidavit, the court must order the sale of the property. See TEX. R. CIV. P. 710-11. The levying officer must then pay over to the clerk the proceeds of the sale. See TEX. R. CIV. P. 711-12.

III. GENERAL PRACTICE TIPS

A. Contract for All Remedies If extraordinary relief such as injunctive relief

or a receivership may be appropriate for a breach or threatened breach of an agreement, have the parties agree that such relief is appropriate if the agreement is breached or if a breach is threatened. Although the statutory or procedural requirements will still need to be met in order to obtain the relief, an agreement as to the necessity of the relief can be persuasive as to the appropriateness of the relief if it is ever sought. This language can also give rise to an additional claim for attorney’s fees if contracted for.

B. Warrant Specifics In contracting for the relief, be specific as to

why the relief is appropriate; for example, for a sequestration, warrant that the type of property on which a lien is being granted is easily damaged if moved or transferred.

C. Do Not Delay in Seeking Expedited Relief If a party must show that imminent harm will

occur in the absence of the relief the party is seeking, any delay in seeking that relief will weigh against the court granting the relief.

D. Assess the Potential Costs and Disruption to Business The litigation expenses for expedited and

extraordinary remedies, particularly temporary restraining orders and temporary injunctions, can be heavily frontloaded in light of the need to develop evidence for a temporary injunction hearing. Also, the need for evidence to support a temporary injunction (or defend one) may necessitate contacting clients or may otherwise impact business. Assess and discuss such issues with clients before pursuing extraordinary relief and in choosing if and how to defend against relief being sought.

E. Determine Bankruptcy Status Before Seeking Relief

To avoid violating a bankruptcy stay by seeking a prejudgment remedy, determine whether a debtor defendant has filed for bankruptcy.

F. Ascertain the Defendant’s Assets Before Seeking Relief

Determine what the defendant’s available assets are and learn whether or not there are any liens on them. If there are preexisting liens, the defendant may not have equity in the assets and any lien created by a judicial


25

remedy will be subordinate to preexisting liens. Also determine if the defendant’s assets are exempt under Texas or federal law.

G. Closely Follow the Statutory and Procedural Requirements

Be cognizant of the relief that is effectively being sought. Courts will look to the characteristics and function of the relief being sought, rather than just its title, and the statutory requirements must be followed for whatever relief is being sought. If the requirements are not strictly met, a party risks a trial court denying it relief or an appellate court reversing the trial court’s decision or granting a writ of mandamus directed to the trial court.

H. Know and Follow the Local Rules and Orders

Although the basic statutory and procedural requirements may not vary, local rules and orders may affect how the relief is sought. For example, local rules may address the timing of the notice given to the party against whom the relief is sought, how ex parte relief is handled, and certifications that may need to be made by counsel.

I. Check with the Clerk About Requirements and Forms

In addition to checking the local rules and orders, also check with the clerk regarding the clerk’s requirements, such as regarding the language of the bond, as well as forms that may be available, such as forms for various writs.

J. Contact Surety Before Filing In order to expedite the process, it may be

prudent to discuss with the surety or sureties the bond application and plaintiff’s financial information before seeking relief.

K. Be Clear About the Relief Sought and Provide Reasons and Evidence Supporting That Relief In the application, clearly identify the specific

relief being sought and the reasons why the relief is being sought and should be granted. Make sure to support the request with sufficient affidavits and evidence as may be required.

L. Draft Proposed Orders that Strictly Comply with the Law and Are Sufficiently Specific or Broad as Needed

Draft proposed orders that meet the statutory and procedural requirements for the relief being sought,

such as making the requisite findings, setting bond, or setting trial on the merits. Not only will such proposed orders withstand judicial scrutiny, they will also bolster counsel’s credibility with the court. Also draft proposed orders with sufficient particularity so that the property affected is readily identifiable and that it is clear what conduct is being prohibited and the reasons for the prohibition. Proposed orders appointing a receiver should be drafted broadly to encompass all of the powers, duties, and authority anticipated to be needed by the receiver so that the receiver has the flexibility to act without needing additional court authorization.

M. Evaluate Whether to Seek Relief Ex Parte Ex parte relief is allowed when seeking

temporary restraining orders, certain receiverships, garnishment, attachment, and sequestration. The ability to obtain ex parte relief and thus making it less likely that a defendant will encumber property in the interim or destroy evidence should be weighed against the fact that courts more heavily scrutinize relief that is requested ex parte. At the very least, a party seeking ex parte relief should be prepared to explain to the court any efforts to give notice and the reasons why notice should not be required.

N. Do Not Forget to Address the Amount of Bond

Be prepared to recommend (and present evidence as to) the appropriate amount of the bond—whether that is the value of property, lost profits, or damages that may flow from a disruption or cessation of business, for example.

O. Assess Whether to Serve Defendant After Property Has Been Seized

To prevent a defendant from directing a garnishee to move funds prior to service of the writ or to prevent a defendant from removing property in the possession of a third party, a plaintiff may want to consider serving a debtor defendant with the writ after the garnishee has been served or after sequestered or attached property in the possession of another is seized.

P. Timely Appeal Interlocutory Receivership Orders and Temporary Injunctions and Do Not Delay in Seeking Mandamus Review If an appeal of an interlocutory receivership order or temporary injunction is not timely perfected, a party loses the right to have appellate review at that stage of the proceeding, and the appellate court will dismiss the appeal for lack of jurisdiction. Similarly, if


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a party delays in seeking mandamus review, that may weigh against the granting of mandamus relief.

tips on expedited and extraordinary relief 6.14 on expedited... · misappropriation of trade...

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