Software Development Technol v. Trizetto Corporati , 590 F. App'x 342 ( 2014 )

Case: 13-10829 Document: 00512827380 Page: 1 Date Filed: 11/05/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-10829 United States Court of Appeals
Fifth Circuit
FILED
SOFTWARE DEVELOPMENT TECHNOLOGIES, November 5, 2014
Lyle W. Cayce
Plaintiff - Appellant Clerk
v.
TRIZETTO CORPORATION,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 4:13-CV-423
Before STEWART, Chief Judge, and BENAVIDES and OWEN, Circuit Judges.
PER CURIAM:*
This appeal is from the denial of a motion for preliminary injunction
sought by Plaintiff-Appellant Software Development Technologies (“SDT”)
against Defendant-Appellee TriZetto Corporation (“TriZetto”). SDT provided
software testing services to TriZetto from 2012 to 2013 using its “Software
Testing in the Real World” (“STRW”) methodology and courseware. In the
course of conducting business, disputes arose over the use and licensing of the
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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STRW methodology and courseware, leading to this action in which SDT
brought claims against TriZetto for misappropriation of trade secrets, breach
of contract, and conversion. The case was originally filed in Tarrant County
District Court in Fort Worth, Texas, and removed to the Northern District of
Texas, Fort Worth Division. TriZetto filed a motion to dismiss for improper
venue, motion to transfer, and motion to compel arbitration per the parties’
Master Contractor Services Agreement. SDT filed a motion for preliminary
injunction. Specifically, SDT sought to enjoin TriZetto’s
use of the SDT intellectual property 1 . . . in the TriZetto Testing
Automation Framework [“TAF”] and to prevent TriZetto from
selling, distributing, advertising, marketing, providing or
otherwise releasing or demonstrating to any other person or
company any product, software, business solution or other tangible
item that contains, uses, references, or incorporates the SDT
intellectual property pending trial on the merits of this lawsuit.
Br. Supp. Mot. Prelim. Inj. 1. The parties filed motions to conduct expedited
discovery in connection with the preliminary injunction motion.
On July 2, 2013, the district court called counsel to schedule a telephone
conference for later that day. The motions before the court were the motion to
transfer venue, motion for preliminary injunction, motions from each party for
leave to conduct expedited discovery relating to the preliminary injunction,
and motion to compel arbitration. The conference call included the district
court and both parties’ counsel. Neither party had been told what the
conference call would cover. During the telephone conference, which lasted
eleven minutes, there was no presentation of evidence for the district court’s
consideration. The district court denied the motion to transfer, denied the
motion for preliminary injunction, denied the motions for expedited discovery,
1SDT IP is defined by SDT as “[t]he contents of the STRW disks and associated
methodologies and concepts disclosed in the STRW materials.” Br. Supp. Mot. Prelim. Inj. 2.
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and granted the motion to compel arbitration. That same day, the district court
entered a written order consistent with the telephone conference, without
further elaboration. Arbitration is now ongoing. On appeal from the denial of
a preliminary injunction, SDT argues that the district court did not enter
findings of fact and conclusions of law in compliance with Federal Rule of Civil
Procedure (“FRCP”) 52(a), did not hold an evidentiary hearing in compliance
with FRCP 65, and improperly denied its motion for preliminary injunction.
We agree.
This Court reviews a district court’s denial of a preliminary injunction
for abuse of discretion. PCI Transp., Inc. v. Fort Worth & Western R.R. Co., 418
F.3d 535, 545 (5th Cir. 2005) (citing Lake Charles Diesel, Inc. v. General Motors
Corp., 328 F.3d 192, 195 (5th Cir. 2003)). To obtain a preliminary injunction, a
plaintiff must show that it “is likely to succeed on the merits, that [it] is likely
to suffer irreparable harm in the absence of preliminary relief, that the balance
of equities tips in [its] favor, and that an injunction is in the public interest.”
Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).
FRCP 52(a)(1) states, “In an action tried on the facts without a jury or
with an advisory jury, the court must find the facts specially and state its
conclusions of law separately.” Fed. R. Civ. P. 52(a)(1). We have applied this
rule in the context of preliminary injunctions. See Petrello v. Nath, 350 F. App’x
887, 890-92 (5th Cir. 2009); Sierra Club, Lone Star Chapter v. F.D.I.C., 992
F.2d 545, 551-52 (5th Cir. 1993).
In the instant case, all we have to review of the district court’s decision
is its comments on the matter during the telephone conference:
I can see that there at least would be a fact issue as to whether or
not the contract’s violated, but that’s a different proposition from
concluding that a preliminary injunction should be granted.
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There are a lot of factors to take into account to decide whether or
not, ultimately, there would—a breach of contract would be found
to exist, such as, whether or not there’s a possibility for some relief
besides injunctive relief, such as the recovery of damages.
I haven’t found anything in the papers to indicate to me that the
defendant couldn’t respond to a judgment in damages, if required
to do so.
I don’t—I don’t think a preliminary injunction is necessary or
appropriate in this case, so I’m going to deny that request.
Tr. Telephone Conference 7, July 2, 2013. TriZetto characterizes this portion
of the conference as findings on the record in compliance with FRCP 52, but
this interpretation is flawed. In the second paragraph, the district court begins
as if it is considering factors regarding the likelihood of succeeding on the
merits (i.e., “whether or not, ultimately, there would—a breach of contract
would be found to exist”) but then notes, as an example, the availability of
damages as a remedy, which is not a factor for deciding whether the contract
was likely breached. TriZetto interprets this portion of the conference as
indicating that the district court “ultimately decided nothing in the parties’
briefings supported SDT’s claim that it suffered irreparable harm,” Appellee’s
Br. 17, but the record is unclear. Given that the second paragraph ends with
the district court speaking about the adequacy of damages, it is possible that
the subsequent statement in the third paragraph was a conclusion with respect
to the adequacy of damages—that is, that damages would be an adequate
remedy if SDT received a favorable judgment. Since a failure of any one of the
four requirements for a preliminary injunction would be a sufficient basis to
deny the preliminary injunction, finding damages to be an adequate remedy
would allow the district court to deny the application on the basis that no
irreparable harm would result from a denial of a preliminary injunction.
However, the statement itself seems to relate more to TriZetto’s ability to
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respond to a judgment in damages, which does not relate to whether damages
would be an adequate remedy. See Janvey v. Alguire, 647 F.3d 585, 600 (5th
Cir. 2011) (“[T]he mere fact that economic damages may be available does not
always mean that a remedy at law is ‘adequate.’”). Though the district court
did subsequently memorialize the telephone conference in a written order, it
did not elaborate to include any specific findings. We find that the district court
failed to enter findings of fact and conclusions of law in compliance with FRCP
52(a) in its ruling on the preliminary injunction motion. Thus, we vacate the
judgment denying the preliminary injunction.
Because we must vacate the judgment of the district court on the basis
of its failure to comply with FRCP 52(a), we need not consider whether the
judgment should also be vacated on the basis of FRCP 65. Accordingly, we
VACATE the judgment of the district court denying the request for a
preliminary injunction, and REMAND for further proceedings as may be
necessary. VACATED and REMANDED.
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