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Le-Vel Brands LLC v. Bland

United States District Court, N.D. Texas, Dallas Division

September 30, 2019

LE-VEL BRANDS, LLC, Plaintiff,
v.
DUSTIN BLAND, Defendant.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         Before the court is Plaintiff Le-Vel Brands, LLC’s Motion for Preliminary Injunction (Doc. 14), filed February 9, 2019. The court determined that a hearing was necessary to assist in the resolution of this matter, and on February 26-27, 2019, the court held a hearing on the motion. After careful consideration of the motion, response, reply, evidence, record, testimony, arguments at the hearing, and applicable law, the court grants in part and denies in part Plaintiff’s Motion for Preliminary Injunction (Doc. 14).

         I. Factual and Procedural Background

         On January 1, 2019, Le-Vel (“Plaintiff” or “Le-Vel”) filed its Original Petition and Verified Application for Temporary Restraining Order, Temporary Injunction, and Permanent Injunction (Doc. 1-3) (“Petition”) in the 68th Judicial District Court of Dallas County, Texas. In its Petition, it alleges several causes of action against Defendant Dustin Bland (“Defendant” or “Mr. Bland”): (1) breach of contract; (2) business disparagement; (3) defamation; (4) tortious interference with existing contracts; and (5) tortious interference with prospective business relations. These claims stem from Defendant’s alleged violation of the restrictive covenants provided in an agreement between the parties, referred to as the Promoter Agreement[1] (“Agreement”). On January 11, 2019, Associate Judge Monica Purdy granted Plaintiff’s Application for a TRO, which expired on January 28, 2019.

         On January 18, 2019, Defendant removed the action based on diversity jurisdiction. On January 23, 2019, Plaintiff asked the court to extend the TRO (Doc. 4), but the court denied its request (Doc. 10). On February 9, 2019, Plaintiff filed a Motion for Preliminary Injunction (Doc. 14). In its motion, Plaintiff contends that Defendant became a promoter in April 2017 “by affirmatively agreeing to the terms of the Promoter Agreement.”[2] Section 3.19 of the Agreement (“Non-Solicitation Provision”) states:

During the term hereof and for a period of twelve (12) months after the termination or expiration of the relationship between a Promoter and Le-Vel, for any reason whatsoever, the Promoter shall not on his/her own behalf or on behalf of any other person, partnership, association, corporation or other entity, directly or indirectly:
a) Attempt to obtain the withdrawal from Le-Vel or its affiliates of any of their respective employees, independent contractors or Promoters[;]
b) Hire any employee, independent contractor or Promoter of Le-Vel or its affiliates[;]
c) Approach or solicit any customer/client, potential customer/client, maturing business opportunity, manufacturer or supplier of Le-Vel or any of its affiliates, in order to attempt to direct any of the same away from Le-Vel or its affiliates;
d) Induce or persuade any customer/client, potential customer/client, maturing business opportunity, manufacturer or supplier of Le-Vel or any of its affiliates, agent or other person under contract or otherwise associated or doing business with Le-Vel or its affiliates to reduce or alter any such association or business with Le-Vel or its affiliates; e) Solicit or divert any business away from Le-Vel or its affiliates; or
f) Otherwise interfere or attempt to interfere with any of the contractual business or economic relationships of Le-Vel or its affiliates with other parties.

         It is agreed that this provision shall survive the termination or expiration of the Agreement.[3]

         Additionally, by agreeing to the Policies and Procedures and, thus, assenting to section 1.2, a Promoter agrees that “under no circumstance [will he or she] disparage or infringe upon the LeVel name, image or reputation in connection with the promotion of Le-Vel products or misappropriate any confidential or proprietary information or trade secrets (including Customer and Promoter names and address lists) for use by the Promoters or others.”

         On December 28, 2018, at 12:49 p.m., Le-Vel sent Mr. Bland an e-mail, informing him that it “received complaints from the field that [he had] gone (or [was] planning to go) to another direct sales company (Isagenix), ” and asked him to provide information related to these allegations so the company could investigate the claims. Approximately three hours later, Le-Vel sent Mr. Bland a second e-mail, titled “Termination/Cease and Desist – Violation of Le-Vel’s Non-Solicitation Agreement, ” stating that the company believed “with reasonable certainty, that [he was] engaging in blatant violations of the Non-Solicitation Agreement by contacting Le-Vel Promoters in [an] attempt to direct them away from Le-Vel and over to Isagenix [a competing health and wellness company] via Zoom Video Conference[4] meetings and other written and verbal communications.” Further, Le-Vel warned Mr. Bland that failure to cease and desist his conduct would result in legal action, but, despite this warning, Plaintiff contends that he continued to solicit its Promoters and customers.

         On February 21, 2019, Defendant filed his Motion to Dismiss Complaint (Doc. 22), asserting that Plaintiff’s Petition should be dismissed pursuant to the following: (1) Federal Rule of Civil Procedure 12(b)(2) for a lack of personal jurisdiction; (2) Federal Rule of Civil Procedure 12(b)(3) for improper venue; (3) Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim as it relates to all alleged counts asserted in Plaintiff’s Petition; and (4) the Texas Anti-Slapp Act as it relates to Counts Two through Five of Plaintiff’s Petition.[5] On February 26-27, 2019, the court held a hearing regarding Plaintiff’s request for a preliminary injunction. During this two-day hearing, the court heard testimony from Le-Vel corporate representatives, Promoters, and Mr. Bland.

         Le-Vel contends that it received communications from other Promoters, including text messages and social media posts, supporting its allegation that Defendant violated the Non-Solicitation Provision. During the preliminary injunction hearing, Defendant testified that he has thousands of followers on social media and uses these platforms to expand his downline team. Prelim. Inj. Hr’g Tr. 242:31-243:13 (Feb. 26, 2019) (Doc. 33). He also admits to using Zoom as a method for recruiting individuals for his downline team. Specifically, Mr. Bland testified that he did not solicit anyone to join Isagenix before his termination from Le-Vel. Instead, on December 26, 2018, “he talked to two girls” in his Le-Vel downline team via Zoom to discuss the benefits and compensation at Isagenix. Prelim. Inj. Hr’g Tr. 4:28-5:9 (Feb. 27, 2019) (Doc. 32). At the time, he had not joined the Isagenix team. Although one of the individuals did not join Isagenix, he testified that he was trying to convince her to make the move. On December 30, 2018, Mr. Bland joined Isagenix and testified that within three days of joining, 150 of his downline team members at Le-Vel joined his team at Isagenix.

         After his termination from Le-Vel, Mr. Bland admits he created Facebook posts to encourage Le-Vel Promoters to reach out about his role at Isagenix but asserts there was no need to solicit them, as these individuals sought him out for more information. On June 3, 2019, a few months after the hearing, he posted a Facebook video discussing his termination from Le-Vel and transition to Isagenix in detail, allegedly attempting to clear the air regarding rumors surrounding his departure from Le-Vel and his current business status.

         II. Legal Standard for Preliminary Injunction

         There are four prerequisites for the extraordinary relief of a preliminary injunction. A court may grant a preliminary injunction only when the movant establishes that:

(1) there is a substantial likelihood that the movant will prevail on the merits; (2) there is a substantial threat that irreparable harm will result if the injunction is not granted; (3) the threatened injury [to the movant] outweighs the threatened harm to the defendant; and (4) the granting of the preliminary injunction will not disserve the public interest.

Clark v. Prichard, 812 F.2d 991, 993 (5th Cir. 1987) (citing Canal Auth. of the State of Florida v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974) (en banc)). The party seeking such relief must satisfy a cumulative burden of proving each of the four elements enumerated before a preliminary injunction can be granted. Mississippi Power & Light Co. v. United Gas Pipeline, 760 F.2d 618, 621 (5th Cir. 1985); Clark, 812 F.2d at 993. Otherwise stated, if a party fails to meet any of the four requirements, the court cannot grant the preliminary injunction.

         III. Discussion

         Le-Vel primarily seeks to enforce the Non-Solicitation Provision outlined in section 3.19 of the Agreement. Pl.’s Br. ¶ 2. Specifically, it requests that the court enjoin Mr. Bland from breaching the Non-Solicitation Provision of the Agreement and order him to cease any solicitation of its Promoters and customers for the twelve-month period established in the Agreement.[6] Id. at 1-2. Additionally, Le-Vel requests that the court enjoin Mr. Bland from making any statements, written or verbal, that “defame, disparage, or in any way criticize Le-Vel . . . .” Id. at 2.

         A. Substantial Likelihood of Success on the Merits

         In analyzing Le-Vel’s substantial likelihood of success on the merits, the court must first determine which law applies to the Non-Solicitation Provision. As the court noted in its September 27, 2019 memorandum opinion and order (Doc. 60), Indiana law applies in determining whether a contract existed between the parties, given Mr. Bland’s dispute about the existence of a contract. Upon careful consideration, the court determined that there was an agreement between Le-Vel and Mr. Bland by way of his agent, Chris Casey, and, accordingly, Mr. Bland was bound by the terms of the Agreement. The Agreement, however, contains a choice-of-law provision, which provides that Texas law should govern “without regard to choice of law or conflicts of law principles.” Defendant challenges the choice-of-law provision and asserts that Indiana law, not Texas, should govern the parties’ dispute. Thus, the court must determine which applicable state law applies before addressing Plaintiff’s request for injunctive relief.

         1. Choice-of-Law Analysis

         Because the court is exercising diversity jurisdiction, the applicable law of the forum state, which, in this case, is Texas, governs the choice-of-law analysis. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Texas law, parties have the autonomy to agree that contractual disputes shall be governed by the law of another state. Cardoni v. Prosperity Bank, 805 F.3d 573, 580 (5th Cir. 2015) (citing Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319, 324 (Tex. 2014)). Texas courts tend to permit choice-of-law agreements and the position that they are enforceable; however, “it is not uncommon for a party to overcome them.” Cardoni, 805 F.3d at 581 (citations omitted).

         To render a choice-of-law provision unenforceable, a party must satisfy the standards outlined in Section 187(2) of the Restatement (Second) of Conflict of Laws, which provides that:

(2) The law of the state chosen by the parties to govern their contractual rights and duties will be ...

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