Court of Appeals of Texas, Fifth District, Dallas
MARK SMITH, MARK & TAMMY SMITH, LLC, TEE DANIEL, AND DARIN KIDD, Appellants
NERIUM INTERNATIONAL, LLC, Appellee
Appeal from the 134th Judicial District Court Dallas County,
Texas Trial Court Cause No. DC-18-03726
Justices Whitehill, Molberg, and Reichek
an interlocutory appeal from a temporary injunction.
were formerly associated with appellee Nerium International,
LLC, a multilevel marketing. After they left Nerium and
joined a competitor, Nerium sued appellants and obtained a
temporary injunction prohibiting them from recruiting or
soliciting any of Nerium's sales force to join any other
direct sales, multi-level, or network marketing company.
raise six issues on appeal. The case largely concerns the
nature and extent of (i) benefit a multi-level marketing
company provides for its independent contractor sales force
and (ii) such company's interest in protecting its
relationships with its sales force. Based on the record
before us, we conclude that the evidence was sufficient for
the trial court to conclude at this early stage that a
temporary injunction was warranted. Accordingly, we reject
appellants' issues and affirm without opining on the
case's ultimate outcome.
as otherwise noted, we draw the following facts from the
evidence admitted at the temporary injunction hearing.
Nerium and Its Policies and Procedures
International, LLC, is a multi-level marketing company that
sells skin care and wellness anti-aging products. Nerium
started in August 2011 in the United States and now operates
in twelve countries.
relies on independent contractors called "brand
partners" (BPs) to sell its products to customers and to
recruit other BPs. A BP's recruits, and all recruits who
flow from those recruits, make up the BP's
"downline." BPs receive commissions on both their
own sales and their downline's sales.
BP receives a launch kit that includes brochures for
customers and training materials. A new BP also gets a
personalized web site that he or she can use to enroll both
customers and new BPs. Most Nerium product orders come
through the BPs' websites. Nerium BPs may work as much or
as little as they want. They do not have assigned sales
territories and can market anywhere in the world through
social media. BPs also get computer access to "the back
office," which (i) gives them access to marketing
materials and training and (ii) shows them sales performance
data for themselves and everyone on their teams. They also
have access to ongoing training, public relations supports,
promotions, incentives, and other events.
must comply with the terms found in the Nerium policies and
case involves § 11.06 of Nerium's policies and
procedures, which concerns solicitation and competition. The
case particularly focuses on the following non-solicitation
[I]n consideration for all of the rights granted by this
Agreement, including the protection this non-solicitation
provision affords to Brand Partner, for the term of this
Agreement and for two (2) years after termination hereof, for
any reason, Brand Partner agrees not to, directly or
indirectly, recruit or solicit any of Company's other
Brand Partners to join other direct sales, multi-level or
network marketing companies.
Appellants' Relationships with Nerium
Mark Smith joined Nerium in 2011 soon after it launched.
Smith and his wife later formed Mark & Tammy Smith, LLC.
became acquainted with Nerium founder and CEO Jeff Olson when
they were both working with a different multi-level marketing
company called Prepaid Legal Services. When he was preparing
to start Nerium, Olson reached out to Smith and asked him to
testified that he and Olson agreed that Smith and his wife
would each get 5% equity in Nerium, they would receive 15% of
the "back office fees," and they would be
considered "master distributors" entitled to a
percentage of revenue.
succeeded at Nerium, working his way up to the level of
"diamond national marketing director" and
"gold international marketing director." In less
than seven years with the company, he received compensation
of approximately $14 million. Smith was featured in many
Nerium videos and at "huge" Nerium events both in
the United States and abroad.
Darin Kidd became a Nerium BP in 2011 and a Nerium five star
national marketing director.
Tee Daniel's wife, Cassie, started with Nerium in 2012.
Daniel himself became a Nerium BP no later than 2016 and
became a Nerium one star national marketing director.
early 2018, Smith was unhappy at Nerium and was thinking
about leaving. In early March 2018, Smith, Kidd, and others
visited another company called Jeunesse. According to the
parties' briefs, Jeunesse is also a "multi-level
marketing" or "network-marketing" company.
about March 13, 2018, Smith and Kidd "enrolled"
with Jeunesse. Cassie Daniel signed up with Jeunesse in
mid-March, and Tee Daniel engaged in marketing and training
to support Cassie's Jeunesse account.
March 20, 2018, Nerium sued Smith, Mark & Tammy Smith,
LLC, and others. Several days later, Nerium filed an amended
petition that added Kidd and others as defendants.
April 24, 2018, Nerium filed a second amended petition that
added Daniel and others as defendants. That petition included
claims against appellants for contract breach and tortious
interference with contract, and it requested injunctive
relief. That same day, the trial judge signed a temporary
restraining order against appellants.
trial judge held an evidentiary temporary injunction hearing
at which Amber Rourke (Nerium's chief marketing officer)
and appellant Smith testified.
the hearing, the trial judge signed a temporary injunction,
The Injunction Restrained Parties [i.e., appellants and
certain categories of people affiliated with them] are
prohibited from directly or indirectly recruiting or
soliciting any of Nerium's Brand Partners to join any
other direct-sales, multi-level marketing, or
network-marketing company, including but not limited to
Jeunesse Global Holdings, LLC.
interlocutory appeal followed.
Law of Temporary Injunctions and Standard of Review
temporary injunction is an extraordinary remedy granted to
preserve the status quo of the litigation's subject
matter pending a trial on the merits. Butnaru v. Ford
Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). It does not
issue as a matter of right. Id. Rather, the
applicant must plead and prove the following elements: (i) a
cause of action against the defendant, (ii) a probable right
to the relief sought, and (iii) a probable, imminent, and
irreparable injury in the interim. Id.
don't contest the first element, so we start with the
probable right to recovery element. That element does not
require the applicant to show that it will prevail at trial,
nor does it require the trial court to evaluate the
probability that the applicant will prevail at trial.
Austin v. Mitchell, No. 05-18-00052-CV, 2018 WL
2949443, at *3 (Tex. App.-Dallas June 13, 2018, no pet.)
(mem. op.); Intercontinental Terminals Co., LLC v. Vopak
N. Am., Inc., 354 S.W.3d 887, 897 (Tex. App.-Houston
[1st Dist.] 2011, no pet.). Rather, it requires the applicant
to present enough evidence to raise a bona fide issue as to
its right to ultimate relief. Austin, 2018 WL
2949443, at *3. This requires the applicant to produce some
evidence supporting every element of at least one valid legal
theory. Id.; Tex. Health Res. v. Pham, No.
05-15-01283-CV, 2016 WL 4205732, at *3 (Tex. App.-Dallas Aug.
3, 2016, no pet.) (mem. op.).
irreparable injury requirement is sometimes described in
terms of the injured party having an inadequate legal remedy.
See Butnaru, 84 S.W.3d at 211 ("[A] party can
rarely establish an irreparable injury and an inadequate
legal remedy when damages for breach of contract are
available."); see also id. at 204 ("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.").
review a temporary injunction for abuse of discretion.
Id. The trial court abuses its discretion if (i) it
misapplies the law to established facts or (ii) the evidence
does not reasonably support the court's determinations as
to probable right of recovery or probable injury. Loye v.
Travelhost, Inc., 156 S.W.3d 615, 619 (Tex. App.-Dallas
2004, no pet.). In our review, we draw all legitimate
inferences from the evidence in the light most favorable to
the order, and the trial court does not abuse its discretion
if it makes a decision based on conflicting evidence.
Id. We review any legal determinations de novo.
Issue One: Did the trial court abuse its discretion
by failing to conclude that the non-
solicitation clause is unreasonable and therefore
argue that Nerium failed to show a probable right to recover
because the non-solicitation clause is unreasonable, and
therefore unenforceable, for several reasons. But first we
address two procedural issues that Nerium raises.
Is enforceability a relevant issue at the temporary
supplemental letter brief, Nerium suggests that we recently
held that a non-solicitation agreement's
(un)enforceability is not a relevant consideration in
determining whether the applicant has shown a probable right
of recovery. See White v. Impact Floors of Tex., LP,
No. 05-18-00384-CV, 2018 WL 6616973, at *5 (Tex. App.-Dallas
Dec. 18, 2018, no pet.) (mem. op.). Thus, Nerium suggests, we
should decline to consider appellants' arguments that the
non-solicitation agreement in this case is unenforceable.
we conclude for the reasons discussed below that the trial
court could reasonably rule that this non-solicitation clause
is enforceable, we need not decide whether Nerium's
interpretation of White is correct.
Which side bears the burden of proof on § 15.50's
Texas law, the general rule regarding covenants not to
compete is this:
[A] covenant not to compete is enforceable if it is ancillary
to or part of an otherwise enforceable agreement at the time
the agreement is made to the extent that it contains
limitations as to time, geographical area, and scope of
activity to be restrained that are reasonable and do not
impose a greater restraint than is necessary to protect the
goodwill or other business interest of the promisee.
Tex. Bus. & Com. Code § 15.50(a). Which party bears
the burden of proof on these criteria depends on the facts of
If the primary purpose of the agreement to which the covenant
is ancillary is to obligate the promisor to render personal
services, for a term or at will, the promisee has the burden
of establishing that the covenant meets the criteria
specified by Section 15.50 of this code. If the agreement has
a different primary purpose, the promisor has the burden of
establishing that the covenant does not meet those criteria.
Id. § 15.51(b).
argues that (i) § 15.51(b) applies at the temporary
injunction stage of the case, (ii) under § 15.51(b),
appellants bore the burden of proof to negate the §
15.50(a) criteria, and (iii) because the criteria are
defensive matters in this case, the trial court has the
discretion to defer considering them at all at the temporary
injunction stage. Appellants disagree, arguing that Nerium
bore the burden of proof on the § 15.50(a) criteria
because (i) § 15.51(b)'s burden-shifting provisions
do not apply at the temporary injunction stage and (ii) even
if § 15.51(b) applies at the temporary injunction stage,
Nerium still bore the burden of proof.
be seen below, we conclude that Nerium adduced sufficient
evidence of the § 15.50(a) enforceability criteria to
support the temporary injunction. Accordingly, for purposes
of this appeal, we assume without deciding that Nerium bore
the burden of proof on the § 15.50(a) criteria.
The Law Governing Covenants Not to Compete
statute, the general rule is that every contract "in
restraint of trade or commerce" is unlawful.
Id. § 15.05(a). "Trade" is broadly
defined and includes not only the sale of services but also
any economic activity that (i) is undertaken in whole or in
part for financial gain and (ii) involves or relates to goods
or services. Id. § 15.03(5). Nerium does not
dispute that the non-solicitation agreement involved here is
a contract in restraint of trade.
15.50, discussed above, excepts from § 15.05 covenants
not to compete that meet certain criteria. Id.
contend, and Nerium does not dispute, that the
non-solicitation agreement in this case-which forbids
appellants from soliciting Nerium's BPs-are legally
equivalent to covenants not to compete. Although the statute
does not define "covenant not to compete," the
supreme court holds that a covenant restricting former
employees from soliciting their "former employers'
customers and employees" is a restraint of
trade subject to § 15.50. Marsh USA Inc. v.
Cook, 354 S.W.3d 764, ...