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Dempsey v. U.S. Money Reserve, Inc.

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

February 23, 2017

JOHN DEMPSEY, Appellant,

         On appeal from the 58th District Court of Jefferson County, Texas.

          Before Chief Justice Valdez and Justices Benavides and Hinojosa


          GINA M. BENAVIDES, Justice

         By one issue, appellant John Dempsey appeals the trial court's order confirming an arbitration award against him totaling $1.65 million and in favor of appellee U.S. Money Reserve, Inc. doing business as United States Rare Coin & Bullion Reserve ("U.S. Money"). We affirm.

         I. Background[1]

         On July 17, 2014, U.S. Money added Dempsey as a defendant to an ongoing lawsuit it had previously filed against numerous defendants who are not party to this appeal.[2]

         In its petition naming Dempsey as a defendant, U.S. Money asserted that Dempsey was its former employee, and that in January 2007, Dempsey entered into a "Confidential Services, Trade Secrets, and Employment Agreement" ("the 2007 agreement") with U.S. Money. The agreement contained, among other things, Dempsey's obligations to U.S. Money and its clients, if Dempsey's employment with U.S. Money terminated. On December 20, 2010, Dempsey entered into a separate employment agreement ("the 2010 agreement") with United States Gold Coin Exchange, L.P. ("United States Gold"), an entity that U.S. Money described in the following manner in its pleadings:

an affiliate of [U.S. Money] to which [U.S. Money] has succeeded in its rights and privileges, which included, inter alia, the same agreements and prohibitions, both as to the customers of United States Gold Coin Exchange, L.P., and as to the customers of [U.S. Money], which are referenced in [the 2010 agreement].

         U.S. Money further alleged that on July 28, 2011, Dempsey entered into a "Separation and Release Agreement" with it and United States Gold, "in which he reaffirmed his obligations under [the 2010 agreement]." U.S. Money asserted in its petition that Dempsey breached its agreements with U.S Money and United States Gold. U.S. Money sought temporary and permanent injunctive relief against Dempsey related to these claims. The trial court enjoined Dempsey, as requested by U.S. Money, from:

(1) directly or indirectly possessing, using, revealing, or distributing confidential information and trade secrets of [U.S. Money], specifically customer lists and customer contact information;
(2) directly or indirectly calling upon, contacting, soliciting, selling, or attempting to call upon, contract, solicit, or sell coins to any current or past customers of [U.S. Money];
(3) directly or indirectly engaging in the business of selling gold coins or bullion within a 200 mile radius of Austin, Texas or Beaumont, Texas;
(4) directly or indirectly disparaging [U.S. Money] to any third person, including but not limited to any comments that [U.S. Money] "lied, " "scammed, " or was trying to "rip off" anyone;
(5) directly or indirectly contacting customers of [U.S. Money] and encouraging them to attempt to return coins or demand refunds from [U.S. Money] for past purchases, and to encourage them to make groundless threats as a means to attempt to obtain said refunds; or
(6) directly or indirectly utilizing any of [U.S. Money's] confidential and proprietary information or trade secrets. . . .

         On April 5, 2015, Dempsey filed a motion for a trial setting in the trial court and requested that the trial court set the case on the court's jury docket. Fifteen days later, Dempsey filed a no-evidence motion for summary judgment, asserting that U.S. Money has no evidence of a valid agreement, as alleged in its petition. That same day, U.S. Money filed a response to Dempsey's motion for a trial setting, asserting that its claims against Dempsey are subject to a valid arbitration agreement, and that such trial setting would be improper without first attending arbitration. Furthermore, U.S. Money asserted in its response that arbitration had already commenced[3], but it lacked Dempsey's participation, attendance, and payment share of arbitration fees. In reply, Dempsey argued that U.S. Money waived any right to arbitration under the agreement because it substantially invoked the litigation process.

         On June 12, 2015, Dempsey filed a motion to stay arbitration and argued that he refused to arbitrate but contended that his refusal was justified in light of U.S. Money's waiver to arbitrate this matter for substantially invoking the litigation process by initiating the lawsuit, noticing oral depositions, and propounding written discovery to the defendants. The trial court subsequently held a hearing on Dempsey's motion to stay and denied it.

         On July 1, 2015, a final hearing was held in arbitration on this case, and Dempsey did not appear. After receiving evidence and argument of counsel participating in the arbitration, the arbitrator made the following relevant findings and conclusions on July 29, 2015:

(1) [U.S. Money], directly or through another entity to which it is currently the successor in interest, has entered into a Confidential Services, Trade Secrets and Employment Agreement dated January 18, 2007 . . . with Dempsey; as well as an Employment Agreement dated December 20, 2010 . . . with Dempsey.
(2) The [2007 agreement] and the [2010 agreement] are valid and enforceable and placed Dempsey on notice of certain obligations that Dempsey assumed and certain acts as to which Dempsey was prohibited.
(3) Dempsey has breached certain provisions of the [2010 agreement], which is the more recent ...

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