Xenon Anesthesia of Texas PLLC and Mujtaba Ali Khan v. Xenon Health LLC and Haroon Chaudhry ( 2013 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-12-00553-CV
____________________
XENON ANESTHESIA OF TEXAS P.L.L.C. AND MUJTABA ALI KHAN,
Appellants
V.
XENON HEALTH L.L.C. AND HAROON CHAUDHRY, Appellees
_______________________________________________________ ______________
On Appeal from the 284th District Court
Montgomery County, Texas
Trial Cause No. 12-01-00014 CV
________________________________________________________ _____________
MEMORANDUM OPINION
Xenon Health L.L.C. (“Xenon Health”) and Haroon Chaudhry M.D.
(“Chaudhry”) sued Xenon Anesthesia of Texas P.L.L.C. (“Xenon Texas”) and
Mujtaba Ali Khan D.O. (“Khan”) for breach of contract, tortious interference, and
specific performance and obtained a temporary injunction against Xenon Texas
and Khan. In this interlocutory appeal, Xenon Texas and Khan present five
appellate issues challenging the trial court’s imposition of a temporary injunction.
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See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (West Supp. 2012). We
affirm the trial court’s order.
Factual Background
At the temporary injunction hearing, Chaudhry testified that he is the
founder of Xenon Health and a licensed physician, but in that role, does not
practice clinical medicine. Chaudhry explained that Xenon Health is an anesthesia
management organization that obtains contracts to provide anesthesiology services
to facilities throughout the country, recruits and contracts with anesthesia
professionals to service these client facilities, and ensures that those professionals
have the necessary malpractice insurance, supplies, and equipment. He testified
that Xenon Health and its employees, including Chaudhry, do not administer
anesthesia to patients. Chaudhry found two potential clients in Texas who needed
these services immediately. However, Chaudhry testified that a Texas medical
license and a professional corporation are required to perform services in Texas.
Chaudhry began the process of acquiring a Texas license and forming Xenon
Texas. In the interim, the parties entered an agreement whereby Khan agreed to
own Xenon Texas until Chaudhry became licensed to practice medicine in Texas.
Chaudhry testified that, per this agreement, Kahn agreed to sell Xenon Texas to
Chaudhry once Chaudhry became licensed. Chaudhry testified that Xenon Health
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recruited, ordered and maintained supplies and equipment, ensured compliance
with regulations, arranged billing and collections, and advanced funds for the
establishment of Xenon Texas.
In December 2011, Chaudhry received a letter in which Kahn stated that
Chaudhry failed to disclose an arrest and that Khan would be suspending the
parties’ agreement. Chaudhry explained that a former employee had filed a
complaint against him, but the complaint was later dismissed and the records
sealed, and that he had no duty to disclose this information to Khan. According to
Chaudhry, Khan told the Texas clients that he would be assuming the day-to-day
management of Xenon Texas. Although Chaudhry filed a lawsuit, Xenon Health
continued providing services to Xenon Texas.
Chaudhry obtained his administrative medical license in October 2012. He
explained that this type of license does not authorize the physical practice of
clinical medicine, but allows a person to administer the practice of medicine within
Texas. Chaudhry notified Khan that he had received his license, informed Khan of
his desire to execute the purchase and sale agreement, and demanded that Khan
provide Xenon Texas’s net collections. Chaudhry testified that he was willing and
able to pay the purchase price to execute the agreement. Chaudhry received no
response from Khan.
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Chaudhry testified that he values Xenon Health’s “name as a brand in the
field of anesthesia services[]” and that Xenon Health has a good reputation and has
provided good services to its clients. He testified that Xenon Health is still
providing services to Xenon Texas in hopes that the agreement will be executed
and that Xenon Health will obtain control of Xenon Texas. Xenon Health pays for
these services because it has no access to Xenon Texas’s accounts, but Xenon
Texas has reimbursed Xenon Health for some costs. He explained that he had spent
time and resources establishing Xenon Health and its subsidiaries and that it would
be very difficult to start over. Chaudhry was unaware of any instances in which
Khan had transferred interests without Chaudhry’s consent. However, Chaudhry
believed it is possible that Khan would transfer his interests in Xenon Texas to a
third party, remove Xenon Texas’s assets during the pendency of the lawsuit, or
alter existing business contracts and relationships. Chaudhry believed that money
would be an inadequate remedy for the damages that would result.
Irreparable Injury
In issues one and two, appellants contend that the trial court abused its
discretion by granting the temporary injunction because, according to appellants,
appellees failed to present evidence of either irreparable injury or future
insolvency. Appellants argue that the testimony presented at the temporary
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injunction hearing was speculative and did not establish that any funds are in
danger of loss or depletion.
A temporary injunction preserves the status quo pending a trial on the
merits. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). To obtain a
temporary injunction, the applicant 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. Id. The decision to grant or deny a
temporary injunction is within the trial court’s sound discretion. Id. We may not
overrule a trial court’s decision unless the trial court acted unreasonably or in an
arbitrary manner, without reference to guiding rules or principles, and we cannot
substitute our judgment for that of the trial court. Id. at 211. A trial court does not
abuse its discretion if some evidence reasonably supports the trial court’s decision.
Id.
An irreparable injury occurs when the injured party cannot be adequately
compensated in damages or the damages cannot be measured by any pecuniary
standard. Id. at 204. “[G]enerally, a court will not enforce contractual rights by
injunction, because a party can rarely establish an irreparable injury and an
inadequate legal remedy when damages for breach of contract are available.” Id. at
211. Additionally, fear and apprehension of injury cannot support a temporary
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injunction. Frequent Flyer Depot, Inc. v. Am. Airlines, Inc., 281 S.W.3d 215, 227
(Tex. App.—Fort Worth 2009, pet. denied). However, disruption to a business can
constitute irreparable harm. Id. at 228. “[A]ssigning a dollar amount to such
intangibles as a company’s loss of clientele, goodwill, marketing techniques, and
office stability, among others, is not easy.” Id. “Threatened injury to a business’s
reputation and good will [sic] with customers is frequently the basis for temporary
injunctive relief.” Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354
S.W.3d 887, 895 (Tex. App.—Houston [1st Dist.] 2011, no pet.).
In this case, the trial court heard testimony regarding Xenon Health’s good
reputation among its clients and the lengths to which appellees went to ensure
Xenon Texas’s success. The trial court also heard testimony that Khan does not
have the experience that Chaudhry has with regard to an anesthesia management
company. The trial court heard evidence that Khan had suspended an agreement
that gave him limited authority to manage Xenon Texas and prohibited him from
transferring his interests without Chaudhry’s written consent, represented to Texas
clients that he would be assuming the day-to-day management of Xenon Texas,
refused to respond to Chaudhry’s communications, and removed Chaudhry from
Xenon Texas’s accounts.
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Given the evidence discussed above, the trial court could reasonably
conclude that Khan’s actions threatened the business reputation and goodwill of
Xenon Texas and jeopardized Xenon Texas’s relationship with its Texas clients.
See id. Any transfer of interests or assets would certainly harm appellees’ business
and any award of damages would come too late to save appellees’ business. See
TCA Bldg. Co. v. Nw. Res. Co., 890 S.W.2d 175, 179 (Tex. App.—Waco 1994, no
pet.) (A situation in which damages alone are an inadequate remedy arises when
the “damage award may come too late to save the applicant’s business[.]”). Under
these circumstances, we conclude that the trial court did not abuse its discretion by
granting appellees’ request for a temporary injunction to maintain the status quo.
We overrule issues one and two.
Temporary Injunction Provisions
In issue three, appellants argue that the trial court’s temporary injunction
order allows Chaudhry to practice medicine without a medical license and,
therefore, violates the Medical Practices Act. The temporary injunction prohibits
appellants from “[c]ontacting client facilities, staffing companies, billing service
providers, anesthesia providers and other business partners which have existing
business relationships with Xenon Texas for the purpose of terminating or
renegotiating existing agreements.” Appellants contend that “Dr. Chaudhry wants
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Dr. Khan to use his license to get contracts to provide anesthesiology care and staff
for surgical sites in exchange for which Xenon Health, LLC would receive the
profits made through Dr. Khan’s practice of medicine, thereby indirectly allowing
Xenon Health LLC to practice medicine without a license.”
The practice of “administrative medicine” is the “administration or
management utilizing the medical and clinical knowledge, skill, and judgment of a
licensed physician, and capable of affecting the health and safety of the public or
any person.” 22 Tex. Admin. Code § 172.17(b) (2011) (Tex. Med. Bd.). “An
administrative medical license does not include the authority to practice clinical
medicine, prescribe dangerous drugs or controlled substances, or delegate medical
acts or prescriptive authority.” Id. at § 172.17(c). Chaudhry testified that he does
not practice clinical medicine or administer anesthesia and that Xenon Health is an
anesthesia management organization that provides administrative services to its
clients. The record does not indicate that Chaudhry’s practice or the services that
his business provides conflict with the Texas Administrative Code’s definition of
“administrative medicine.” See id. at § 172.17(b). We overrule issue three.
In issue four, appellants challenge a provision that enjoins them from
making any expenditures or incurring any indebtedness or liabilities outside of the
ordinary course of business, unless specifically authorized by the trial court. The
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provision also prohibits Khan from using Xenon Texas funds for any claims by or
against him in the lawsuit. Appellants maintain that because Chaudhry holds an
administrative medical license, he cannot control or manage Xenon Texas.
Individuals licensed as doctors of medicine by the Texas State Board of
Medical Examiners “may jointly form and own a professional association or a
professional limited liability company to perform professional services that fall
within the scope of practice of those practitioners.” Tex. Bus. Orgs. Code Ann. §
301.012(a) (West 2012). Each practitioner’s authority is limited by the scope of his
practice. Id. at § 301.012(a-4).1 “An organizer of the entity must be a physician and
ensure that a physician or physicians control and manage the entity.” Id. A
physician is a “person licensed to practice medicine in this state.” Tex. Occ. Code
Ann. § 151.002(a)(12) (West 2012). A limited license to practice administrative
medicine is a recognized type of limited medical license. See id. § 155.009 (West
2012). Chaudhry is a physician who received a limited medical license to practice
administrative medicine. We perceive no violation of section 301.012(a-4). See
Tex. Bus. Orgs. Code Ann. § 301.012 (a-4). We overrule issue four.
1
In their brief, appellants erroneously cite to section 301.012(a-4) of the
Texas Occupations Code instead of the Business Organizations Code.
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Bond
In issue five, appellants contend that the temporary injunction is void ab
initio for lack of a proper bond. In a temporary injunction order, the trial court shall
fix the amount of security to be given by the applicant. See Tex. R. Civ. P. 684.
Before the injunction issues, the applicant shall execute and file with the clerk a
bond in the amount set by the trial court to the adverse party. See id.
In its temporary injunction order, the trial court set a bond of $5000.
Appellants complain that the bond was not made payable to them and that a cash
bond was filed.2 A party may deposit cash in lieu of filing a surety bond. See Tex.
R. Civ. P. 14c; see also Adobe Oilfield Servs., Ltd. v. Trilogy Operating, Inc., 305
S.W.3d 402, 404 (Tex. App.—Eastland 2010, no pet.). The trial court’s order
granting appellees’ application for a temporary injunction was contingent on the
filing of a bond. A cash deposit constitutes a proper bond and insures that appellees
will abide by the decision in this cause and will pay all sums of money and costs
adjudged against them should the temporary injunction be dissolved. See Adobe,
305 S.W.3d at 405. Because a cash deposit is a proper bond, we overrule issue five
2
In their appendix, appellants attach documents reflecting that appellees
deposited $5000 for the temporary injunction bond. These documents are not in the
record and therefore cannot be considered on appeal. See City of Beaumont v.
Stewart, No. 09-12-00316-CV, 2012 Tex. App. LEXIS 9052, at **7-8 n.1 (Tex.
App.—Beaumont Nov. 1, 2012, no pet.) (mem. op.).
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and affirm the trial court’s order granting appellees’ application for a temporary
injunction.
AFFIRMED.
________________________________
STEVE McKEITHEN
Chief Justice
Submitted on January 29, 2013
Opinion Delivered March 28, 2013
Before McKeithen, C.J., Kreger and Horton, JJ.
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