RealPage, Inc. et al v. Enterprise Risk Control. LLC et al

Filing 96

MEMORANDUM OPINION AND ORDER. ORDERED that Plaintiffs' Application for Preliminary Injunction (Dkt. #10) is hereby GRANTED IN PART. Signed by Judge Amos L. Mazzant, III on 8/3/2017. (daj, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

REALPAGE, INC.; REALPAGE VENDOR
COMPLIANCE LLC
v.
ENTERPRISE RISK CONTROL, LLC;
LONNIE DERDEN

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Civil Action No. 4:16-CV-00737
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiffs’ Application for Preliminary Injunction (Dkt. #10).
After considering the relevant pleadings, exhibits, and argument at the preliminary injunction
hearing, the Court finds Plaintiffs’ motion should be granted in part.
BACKGROUND
Lonnie Derden (“Derden”) has been in the vendor compliance and tenant screening
industry for sixteen years. In 1999, Derden created his own company, Resident Data. Derden
sold Resident Data to Choice Point and became Vice President of the department at Choice
Point. In 2005, Derden created Compliance Depot. Derden created Compliance Depot by using
rules and code he found on the internet, six months of labor, and a $250,000 investment. By
2011, Compliance Depot had annual revenues of $6 million.
In 2011, RealPage Vendor Compliance LLC, a wholly owned subsidiary of RealPage,
Inc. (collectively “RealPage”) purchased Compliance Depot for nearly $24 million. As part of
the Compliance Depot purchase, Derden and RealPage entered into three agreements: (1) the
Asset Purchase Agreement (“APA”); (2) the Significant Owners’ Agreement (“SOA”); and
(3) the Employment Agreement. Each agreement contained non-competition, non-solicitation,
and confidentiality agreements.

Tom Bean (“Bean”) was one of Derden’s long-time friends and colleagues. In early 2012,
Bean left RealPage. Around May 2012, Bean decided to create a software consulting firm, IDC
Software. In April 2012, Bean emailed another former RealPage employee, David Boyle
(“Boyle”) a “wish list” of equipment to support IDC Software’s projects. Also in April 2012,
Bean worked with a third former RealPage employee James Beavers (“Beavers”) to obtain a
quote for Dell computers, using Compliance Depot’s account number. Derden provided the
funding for IDC Software to purchase this equipment and software. On May 17, 2012, Bean
received an employer identification number from the IRS. At this time, IDC Software had two
projects, but focused primarily—if not exclusively—on getting “[Derden’s] core software
business developed.” On May 19, 2012, Bean emailed Richard Wolff (“Wolff”) and copied
Boyle. Bean’s email to Wolff contained several “.sql” files and instructed Wolff to “change table
and column names and layouts so we aren’t just copying what we did the first time.” Derden
agreed to pay Wolff $115,000 for this task. Over the next year, Derden was the sole source of
funds for operating expenses, ultimately investing $160,000 in IDC Software.
In December 2012, Derden created Enterprise Risk Control, LLC (“Enterprise”). In July
2013, Derden purchased IDC Software’s vendor compliance code and hired Bean as an
employee of Enterprise. At that time, Bean uploaded his code onto Enterprise’s servers. Bean
continued to develop Enterprise’s code until April 2017. Enterprise began marketing its product
to potential customers in February 2014, and to its first multi-family customer in August 2015.
In February 2014, RealPage caught wind of Enterprise’s new application and potential
misappropriation of trade secrets. RealPage sent Defendants a cease and desist letter demanding
assurances that Defendants were not soliciting RealPage clients and were not using RealPage
secrets. Defendants responded with assurances that they did mistakenly approach a RealPage

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client, but immediately backed off when they learned of the mistake. Defendants also assured
RealPage that they did not have any trade secret information.
In April 2016, RealPage received more information that Defendants might be using trade
secrets when a disgruntled ex-Enterprise employee, Cheryl Freudiger (“Freudiger”) approached
RealPage claiming that Enterprise gave her various trade secret materials. However, Freudiger
did not produce corroborating evidence to RealPage until August 5, 2016. In early September,
RealPage also received an email from one of its clients, explaining how Enterprise approached
with a new vendor compliance application.
On September 23, 2016, RealPage filed suit against Derden and Enterprise asserting
claims for misappropriation of trade secrets, breach of contract, and breach of fiduciary duty
(Dkt. #1). On December 2, 2016, RealPage served Enterprise and Derden with its first set of
requests for production. In its requests for production, RealPage requested, among other things,
all of Enterprise’s source code. Defendants produced all source code after early July 2013, but
denied having access to any source code from before July 2013. Defendants based their position
on Bean’s declaration because he was the primary developer of code before July 2013. Bean
swore under oath that when he left RealPage, he “did not take any of RealPage’s confidential
information” (Dkt. #21, Exhibit 3 at ¶ 4). On February 17, 2017, RealPage filed a motion to
compel production of documents (Dkt. #40) followed two weeks later by a motion to compel
computer images (Dkt. #49).
RealPage argued that there was an unexplained gap in the development of Enterprise’s
code. RealPage based this argument on several comments, visible in post-July 2013 code, that
were made as early as July 2012. However, despite being able to see these comments, the code
was not accessible. In response to RealPage’s motions to compel, Defendants relied again on

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Bean’s sworn testimony that he did not take any confidential information with him and did not
use any of RealPage’s confidential information during his employment with Enterprise
(Dkt. #44, Exhibit 2 at ¶¶ 6, 9, 11). Further, Bean swore that “[a]fter I transferred the earlier IDC
code onto [Enterprise’s] TFS server, I removed the previous work from the IDC computer I had
been using because it was no longer ‘my’ code or ‘IDC’s’ code – it was [Enterprise’s] code”
(Dkt. #44, Exhibit 2 at ¶ 8). Finally, Bean swore that he looked for remnants of Enterprise’s
source code from the IDC Software computer that he used before July 2013, but did not locate
any (Dkt. #44, Exhibit 2 at ¶ 10).
Seemingly at a stalemate, the Court held that it could not order Defendants to compel
what they did not have. However, finding that RealPage was entitled to verify Bean’s allegations
regarding the code’s destruction, the Court ordered Defendants to produce mirror images of
computers and storage devices used by Tom Bean in July 2013 (Dkt. #62 at p. 5). The Court
limited the examination to determine if the source code was recoverable. If the code was not
recoverable, the Court permitted the neutral forensic examiner to determine the details of any
deletions so that RealPage could adequately cross-examine at trial.
The forensic examination conducted on April 6, 2017, showed that Bean did not delete
the IDC Software code in July 2013 as he previously swore to. Instead, Bean destroyed
thousands of files in September 2016, after RealPage filed this suit. The forensic examination
also showed nearly 1,000 files deleted on April 3, 2017, after the Court ordered a forensic
examination. In all, nearly 100,000 files were deleted from Enterprise’s code since RealPage
filed suit. Although the forensic exam shows which files were deleted, it cannot show any
information about what the deleted code contained.

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After the forensic examination, Defendants withdrew Bean’s two declarations, which
claimed that he did not take any RealPage information and that the Enterprise code was created
without leveraging anything from RealPage. Bean has now admitted that he took a thumb drive
with “everything” from RealPage and took the thumb drive home in April 2012.
In addition to Derden, Enterprise had six former RealPage employees: Bean, Beavers,
Boyle, Linda Jones (“Jones”), Shawn Davis (“Davis”), and Michele Head (“Head”). Shortly after
the forensic examination revealed Bean’s misrepresentations to the Court, Enterprise terminated
his employment. Enterprise spent approximately 9,500 development hours and $3.3 million
creating its current product. Today, Enterprise provides vendor risk-management and
credentialing services to school districts, restaurant chains, construction companies,
homeowners’ association management companies, commercial real estate, and multi-family
properties.
On September 23, 2016, Plaintiffs filed suit against Derden and Enterprise asserting
claims for misappropriation of trade secrets, breach of contract, and breach of fiduciary duty
(Dkt. #1). On October 4, 2016, Plaintiffs filed their Application for Preliminary Injunction
(Dkt. #10). On November 7, 2016, Defendants filed their response (Dkt. #21). On June 23, 2017,
Plaintiffs filed a supplemental brief and exhibits (Dkts. #78–82). On July 3, 2017, Defendants
filed their supplemental brief and exhibits (Dkts. #86–88). On July 12, 2017, Plaintiffs filed a
supplemental reply (Dkt. #90). On July 13, 2017, the parties submitted joint deposition
submissions in lieu of several witnesses’ live testimony (Dkt. #92). On July 16, 2017,
Defendants filed a supplemental surreply (Dkt. #93). On July 17, 2017, the Court held an
evidentiary hearing. After the hearing, the parties submitted an admitted exhibit list (Dkt. #95).1

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The admitted exhibit list follows the same numbering as used throughout the depositions in this case. For ease, the
Court’s references to exhibits refer to those reflected on the admitted exhibit list (Dkt. #95).

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LEGAL STANDARD
A party seeking a preliminary injunction must establish the following elements: (1) a
substantial likelihood of success on the merits; (2) a substantial threat that plaintiffs will suffer
irreparable harm if the injunction is not granted; (3) that the threatened injury outweighs any
damage that the injunction might cause the defendant; and (4) that the injunction will not
disserve the public interest. Nichols v. Alcatel USA, Inc., 532 F.3d 364, 372 (5th Cir. 2008). “A
preliminary injunction is an extraordinary remedy and should only be granted if the plaintiffs
have clearly carried the burden of persuasion on all four requirements.” Id. Nevertheless, a
movant “is not required to prove its case in full at a preliminary injunction hearing.” Fed. Sav. &
Loan Ins. Corp. v. Dixon, 835 F.2d 554, 558 (5th Cir. 1985) (quoting Univ. of Tex. v. Comenisch,
451 U.S. 390, 395 (1981)). The decision whether to grant a preliminary injunction lies within the
sound discretion of the district court. Weinberger v. Romero-Barcelo, 456 U.S. 305, 320 (1982).
ANALYSIS
Before addressing the merits of RealPage’s application for preliminary injunction, the
Court will address Defendants’ assertion of the equitable defense of laches. To establish laches,
Defendants must prove that RealPage (1) delayed in asserting the rights at issue; (2) the delay is
inexcusable; and (3) Defendants have suffered undue prejudice because of the delay. Uptown
Grill, L.L.C. v. Shwartz, 817 F.3d 251, 256 (5th Cir. 2016). In the context of laches, prejudice
means “defendant has done something it otherwise would not have done absent the plaintiff’s
conduct.” Conan Props., Inc. v. Conans Pizza, Inc., 752 F.2d 145, 153 (5th Cir. 1985).
“The period for laches begins when the plaintiff knew or should have known of the
infringement.” Elvis Presley Enters. v. Capece, 141 F.3d 188, 205 (5th Cir. 1998). The Fifth
Circuit has devised a formula of “‘LACHES = DELAY x PREJUDICE,’ a factual calculation of

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the trial court.” Gruma Corp. v. Mexican Rests., Inc., No. 4:09-cv-488-MHS-ALM, 2013 WL
12134147, at *8 (E.D. Tex. Sept. 27, 2013) (citing Armco, Inc. v. Armco Burglar Alarm Co.,
693 F.2d 1155, 1162 (5th Cir. 1982)). “There is no bright-line rule on how long of a delay is
sufficient to establish the defense of laches.” Id.
Defendants argue that RealPage’s claims are barred by laches because RealPage did not
seek legal action for over two years after receiving Defendants’ response to the cease and desist
letter. Defendants argue that based upon RealPage’s lack of action after its cease and desist
letter, Defendants invested significant time and resources, totaling $3.3 million, in developing
their application. RealPage argues that Defendants’ unclean hands prevents them from asserting
the laches defense.2 RealPage also argues that it was justified in its delay until 2016 because
Defendants represented in 2014 that they were not using trade secrets.
The Court finds that Defendants have failed to show a prima facie case of either
unreasonable delay or undue prejudice.3
RealPage did not unreasonably delay in asserting its rights. The clock for laches can be
stopped by a plaintiff’s act showing intent to enforce its rights, such as by sending a cease and
desist letter. Gruma, 2013 WL 12134147, at *8 (citing Elvis Presley Enters., 141 F.3d at 206).
RealPage sent Defendants a cease and desist letter on March 25, 2014, in which it raised
concerns about Defendants soliciting RealPage clients and providing a multi-family real estate
management service (Exhibit 4). RealPage demanded a comprehensive written response
2

Defendants respond that RealPage has never raised unclean hands and therefore waived that defense. The Court
need not reach this issue because the Court finds that Defendants have not established a prima facie case of laches.
3
Defendants’ cited cases do not persuade the Court. Defendants did not have to completely rebuild their
infrastructure, RealPage did not make affirmative representations that they approved of Enterprise’s application, and
RealPage waited only a few months to file suit. See Abraham v. Alpha Chi Omega, 708 F.3d 614, 625 (5th Cir.
2013) (finding undue prejudice when defendant had to rebuild his business infrastructure twice because of fires);
Conan Props., 752 F.2d at 148 (5th Cir. 1985) (finding undue prejudice when plaintiff wished defendant success,
took a photo with defendant, and signed the photo with “best wishes”); H.G. Shopping Ctrs., L.P. v. Birney, No. H99-0622, 2000 WL 33538621, at *5 (S.D. Tex. 2000) (holding twenty-year delay was unreasonable).

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“(i) detailing the specific nature of Enterprise’s services . . ., and (ii) confirming that none of
Enterprise’s services is competitive to RealPage” (Exhibit 4 at p. 2). Defendants responded on
April 1, 2014, unequivocally denying the allegations in the cease and desist letter and describing
the accidental contact with one of RealPage’s (although not Compliance Depot’s) clients
(Exhibit 5). Defendants’ response was satisfactory. Therefore, the clock for laches did not begin.
Further, the clock did not start in April 2016 when Freudiger tipped off RealPage to
potential trade secret violations. RealPage was reasonably skeptical of Freudiger’s initial tip
because she was a disgruntled ex-Enterprise employee (See Exhibit 177). Freudiger did not
substantiate her claims with physical evidence until August 5, 2016. RealPage filed suit on
September 23, 2016, one week after receiving an email from a Compliance Depot client about
Enterprise’s sales pitch. The Court finds that this period does not constitute unreasonable delay
to support laches.
Defendants have not shown that they suffered undue harm due to the delay. Defendants
assert that they expended additional time and resources to develop their application based on
RealPage’s implied acquiescence. However, Defendants do not substantiate this assertion. While
Defendants claim that they expended $3.3 million in total to develop their application, they do
not account for how much of that money was spent during the two years before the cease and
desist letter. Therefore, the $3.3 million is misleading. Without any reference to what was spent
before April 2014, Defendants have failed to meet their burden to show undue prejudice after
their reliance.
For these reasons, Defendants fail to prove their affirmative defense of laches. The Court
will now address the merits of RealPage’s application for injunction.

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A. Likelihood of Success on the Merits
To prevail on their motion for preliminary injunction, Plaintiffs must demonstrate a
substantial likelihood of success on the merits. This requires a movant to present a prima facie
case. Daniels Health Scis., LLC v. Vascular Health Scis., 710 F.3d 579, 582 (5th Cir. 2013)
(citing Janvey v. Alguire, 647 F.3d 585, 595–96 (5th Cir. 2011)). A prima face case does not
mean Plaintiffs must prove they are entitled to summary judgment. Byrum v. Landreth, 566 F.3d
442, 446 (5th Cir. 2009).
1. Breach of Contract
Under Texas law, “[t]he elements of a breach of contract claim are: (1) the existence of a
valid contract between plaintiff and defendant; (2) the plaintiff’s performance or tender of
performance; (3) the defendant’s breach of the contract; and (4) the plaintiff’s damage as a result
of the breach.” In re Staley, 320 S.W.3d 490, 499 (Tex. App.—Dallas 2010, no pet.). RealPage
claims that it can establish each element. Derden argues that the noncompete is invalid because
it is overly broad and that even if the covenant is valid, he did not breach the terms. The Court
will address each argument in turn.
Covenants not to compete are generally disfavored by Texas courts. Marsh U.S., Inc. v.
Cook, 354 S.W.3d 764, 768 (Tex. 2011). However, the Supreme Court of Texas noted that the
Texas Legislature enacted the Covenants Not to Compete Act to restore the well-established rule
in Texas that non-competition clauses “pertaining to employment were not normally considered
to be contrary to public policy.” Marsh, 354 S.W.3d at 733 (alteration omitted). To be
enforceable under Texas law, a covenant not to compete must be: (1) ancillary to or part of an
otherwise enforceable agreement; (2) contain reasonable limitations as to time, geographical
area, and scope of activity to be restrained; and (3) not impose a greater restraint than is

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necessary to protect the goodwill or other business interest of the promisee. Tex. Bus. & Comm.
Code Ann. § 15.50(a). Whether a noncompete is a reasonable restraint of trade is a question of
law for the court. Peat Marwick Main & Co. v. Haass, 818 S.W.2d 381, 388 (Tex.
1991); Martin v. Credit Protection Ass’n, 793 S.W.2d 667, 668–69 (Tex. 1990). Restraints are
unreasonable if they are broader than necessary to protect the legitimate interests of the
employer. DeSantis v. Wakenhut Corp., 793 S.W.2d 670, 681–82 (Tex. 1990); Henshaw v.
Kroenecke, 656 S.W.2d 416, 418 (Tex. 1983). Defendants do not contest the first element.
Therefore, the Court will analyze only the final two elements.
Derden and RealPage entered into three agreements surrounding the purchase of
Compliance Depot and Derden’s subsequent employment with RealPage: The APA, SOA, and
Employment Agreement.
Under the APA, Derden agreed that for a period of sixty months after the closing date,
they would not “engage in the Business” (Exhibit 76 at p. 39). “Business” means “the
Compliance Depot business, which provides vendor screening and compliance services”
(Exhibit 76 at Annex I).
The SOA prohibited each owner from competing for a period of sixty months following
the closing date. Derden promised in the SOA not to “become involved or otherwise engage,
directly or indirectly, in a Competing Business” (Exhibit 77 at pp. 1–2). Derden further promised
not to “directly or indirectly, advise . . . manage, operate, join, control, lend money or render
financial, technical or other assistance . . . any Competing Business” (Exhibit 77 at p. 2).
“Competing Business” means “the business of developing . . . databases and software
applications which are competitive with products or services of [RealPage], are generally

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referred to as ‘single family or multi-tenant real estate management applications’ and are
generally used at apartment communities” (Exhibit 77 at p. 2).
Under the Employment Agreement, Derden agreed not to “use, disclose, reproduce, or
distribute any of [RealPage’s] Confidential Information.” (Exhibit 78. at p. 8).4 “Confidential
Information” does not include information that is “readily accessible to the public” or
information that is “a matter of common knowledge in the company’s business[,] trade[,] or
industry.”
a. Scope
RealPage argues that the definition of Competing Business is intentionally broad to
include all multi-tenant property managers, including any multi-family, mixed-use, or
commercial real estate managers. Derden argues that Competing Business is limited to business
specifically with respect to single family or multi-tenant real estate management applications
and to what is generally used at apartment communities by persons engaged in the operation and
maintenance of apartments. Derden argues the scope must be narrow because Compliance Depot
and RealPage were engaged only in apartments at the time of the acquisition. Thus, Derden
argues that a broad reading would make the noncompete invalid in scope based on RealPage’s
lack of justifiable economic interest. The Court agrees with Derden.
The APA prevents Derden from engaging in the “Business,” while the SOA prohibits
Derden from being involved in a “Competing Business.” Business is defined broadly to mean
“the Compliance Depot business, which provides vendor screening and compliance services”
(Exhibit 76 at Annex I). “Competing Business” has a narrower definition, and thus is the center
of the parties’ dispute.

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The Employment Agreement also contained a three-year covenant not to compete and non-solicitation agreement,
which is not in dispute.

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The definition of Competing Business uses parallel phrases beginning with “are” and
coordinated with the conjunction “and.” Phrases joined by coordinating conjunctions are usually
treated as a single, compound unit. ConocoPhillips Co. v. U.S. E.P.A., 612 F.3d 822, 839
(5th Cir. 2010) (citing Sidney Greenbaum, The Oxford English Grammar 233 (1996)). In a
series of three phrases, “[t]he comma is often omitted on the assumption that it is not necessary,
since the co-ordinator is sufficient to signal the coordination.” Greenbaum, The Oxford English
Grammar 234.
Based on this construction, Competing Business has three elements, each of which must
be met. First, the software application must be “competitive with products or services of
[RealPage].” Second, the software application must be “generally referred to as ‘single family or
multi-tenant real estate management applications.’” Third, the software application must be
“generally used at apartment communities by personnel engaged in the operation . . . of
apartment units.”
The plain language of the SOA limited Competing Business to single family or multitenant apartment applications. The word “generally” does not expand this definition because the
inclusion of “apartment units” at the end of the third element shows that this was limited to
apartments.
The scope of the noncompete is reasonable. RealPage had a protectable economic interest
in preventing competition for a reasonable amount of time from the multi-family, vendor
compliance industry. RealPage had an interest in protecting its $24 million purchase, which
included all of the intellectual property and associated goodwill of Compliance Depot. To
protect this, RealPage could reasonably limit Derden and others associated with Compliance

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Depot from developing a similar application or selling their expertise in such development for a
reasonable period.
RealPage did not have a protectable economic interest in any broader definition. At the
time of the acquisition, Compliance Depot was largely in the multi-family, apartment complex
industry (Jason Lindwall (“Lindwall”) Dep. at 44:12–16). RealPage did not work for school
districts, the sports industry, or manufacturing (Lindwall Dep. at 45:9–21). RealPage’s
involvement in the commercial real estate industry was too small for Lindwall to recount.
RealPage cannot have a protectable interest in industries where it does not sell any products.
Redi-Mix Sols., Ltd. v. Express Shipping, Inc., No. 6:16-cv-298-RWS-KNM, 2016 WL 7634050,
at *8 (E.D. Tex. Dec. 2, 2016) (holding that the covenant prohibiting employee from contacting
customers relating to industries which he did not participate was unreasonable); Weber Aircraft,
L.L.C. v. Krishnamurthy, No. 4:12-cv-666, 2014 WL 12521297, at *8 (E.D. Tex. Jan. 27, 2014)
(holding employer had no protectable interest in geographic area where employer did not sell
any products); Elec. Data Sys. Corp. v. Powell, 524 S.W.2d 393, 398 (Tex. Civ. App.—Dallas
1975, writ ref’d n.r.e.) (holding appropriate remedy is to restrain the employee from working in
the same computer field in which he was associated while employed). Therefore, RealPage’s
noncompete is limited to the multi-family, apartment complex industry.5
b. Breach
RealPage argues that Derden breached the agreements by funding and directing IDC
Software to create a vendor compliance application—before the expiration of the noncompete—
which could be used in the multi-family industry. RealPage also argues that Derden breached his

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For the same reason, the definition of “Business” in the APA would be limited to the multi-family, apartment
complex industry because that is what Compliance Depot was engaged in at the time.

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confidentiality agreement by using RealPage’s confidential information to develop IDC
Software’s competing application.
Derden argues that an employee has a constitutional right to prepare to compete with his
employer before leaving his employer. Derden also argues that he did not solicit any of
RealPage’s customers, let alone multi-family clients of RealPage. Further, Derden argues that
developing an application that could be used, but was not used, in the multi-family industry is
not a violation of the noncompete.
Derden and RealPage agreed to a noncompete that included “developing . . . databases
and software applications which are competitive with products and services of [RealPage].” This
restriction lasted for sixty months. Derden does not object to the noncompete’s time restriction.
While Derden is correct in his claim that “to resign from one’s employment and go into business
in competition with one’s former employer is, under ordinary circumstances, a constitutional
right,” this case is not an ordinary circumstance. See Ledel v. Bill Hames Shows, Inc.,
367 S.W.2d 182, 184 (Tex. Civ. App.—Fort Worth 1963, no writ) (referring to “ordinary
circumstance” as one where the employer did not protect itself “for a reasonable time and within
a reasonable area from such competition in the event the employer-employee relationships
should be discontinued.”).
Here, Derden signed a noncompete agreement that specifically prohibited development of
competitive applications. Derden’s noncompete was not premised on actual loss of customers to
RealPage. Derden became involved directly in a Competing Business by advising, managing,
and lending money or financial assistance to IDC Software, which created a competing
application well before the noncompete expired. During the hearing, Derden admitted that the
IDC Software application was capable of servicing the multi-family industry before the

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noncompete expired. Therefore, Derden developed a competitive application during the
restricted period, in violation of the noncompete.
Derden claims that he should not be held accountable for Bean’s actions because Bean
acted outside the scope of his employment. However, whether Bean took RealPage’s trade
secrets is irrelevant for breach of the noncompete. All that matters is that Derden “engage[d] in
the Business” or “in a Competing Business.” Derden promised not to direct someone to create a
competing application. Nevertheless, Derden admitted that he hired IDC Software to create a
vendor compliance application that could be used for servicing apartment complexes. IDC
Software created that application. Whether Bean used trade secrets to accomplish this task does
not matter. Bean created the type of application that Derden intended for him to create, and that
application competed with RealPage. Therefore, Derden directed Bean to create a competing
application, in violation of Derden’s noncompete.
The only remaining question for the Court is whether Derden could cloak his
“development” of a new application under the guise of a school district application in order to
avoid the noncompete, only to market the same application to the multi-family industry shortly
after the noncompete expired.
The only case cited by either party regarding development of a multi-faceted application
is Marcus v. Baker, 221 S.W.2d 575, 576 (Tex. Civ. App.—El Paso 1949, no writ), cited by
Derden. However, this case is inapposite. In Marcus, the buyer bought a deli located in the City
Market. Id. at 575. As part of the sale, the seller agreed to not open a competitive business for
one year and within one mile of the City Market location. Id. Five months later, the buyer closed
the City Market location and built a supermarket—which included a deli—a mile and a half

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from the City Market. Id. at 575–76. The seller then opened another deli within one mile of the
City Market location. Id. at 576.
The court held that the new deli did not violate the noncompete because the City Market
deli was the only business subject to the restrictive covenant. Id. Once the City Market closed,
no business could be competitive with it. Id. Therefore, although the new deli was within the
restricted area, other terms of the agreement rendered its existence harmless. Id.
Here, the evidence indicates that Defendants were developing an application that could
be used in the multi-family industry immediately on May 5, 2016 (See Exhibits 88, 90). Derden
admitted as much during the hearing. The Court does not need to analyze whether an application
with a collateral use would be a violation of the noncompete because Defendants developed
their application with the multi-family industry in mind. It was not simply an afterthought.
RealPage has shown a likelihood of success on its breach of contract claim against Derden.
2. Misappropriation of Trade Secrets
A claim for misappropriation of trade secrets requires: (1) a trade secret;
(2) misappropriation; and (3) use in interstate commerce. 18 U.S.C. § 1836(b)(1). Texas has
adopted the Uniform Trade Secrets Act, which has similar elements to the federal act. See Tex.
Civ. Prac. & Rem. Code Ann. § 134A.002; Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867,
874 (5th Cir. 2013). Under Texas law, a plaintiff needs to show use without authorization, but
not that it was used in interstate commerce. Wellogix, 716 F.3d at 874.
A “trade secret” may consist of any formula, pattern, device, or compilation of
information used in one’s business, which the owner takes reasonable measures to keep secret,
and which derives economic value from not being generally known by others in competition. Id.
§ 1839(3). The existence of a trade secret is a question of fact. Wellogix, Inc., 716 F.3d at 874.

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“Misappropriation” is satisfied if disclosure of the trade secret is made, without consent, by a
person who acquired the knowledge under circumstances giving rise to a duty to maintain its
secrecy. Id. § 1839(5). “Improper means” includes breach of a duty to maintain secrecy, but does
not include reverse engineering or independent derivation. Id. § 1839(6). Misappropriation and
improper means have the same definitions under the Texas and federal acts. Compare 18 U.S.C.
§ 1839 with Tex. Civ. Prac. & Rem. Code. § 134A.002.
Plaintiffs claim that their source code, database scripts, indexer, and backend application
are its trade secrets. Enterprise disputes each element. The Court will address each in turn.
a. Trade Secret
RealPage contends that its software is a trade secret because it requires passwords to log
in to computer systems, instructs employees to keep information secret, and has employees sign
confidentiality agreements as part of their employment.
Enterprise responds that it used “off-the-shelf” technology to create its application.
Enterprise further argues that RealPage’s system architecture is not a trade secret because the
public can easily derive the structure of its application by simply using the application or
watching a 30-minute YouTube video. Enterprise also argues that RealPage did not act diligently
in protecting its source code because it did not have protocols for investigating possible
breaches.
RealPage has established a prima facie case that various components of its application are
trade secrets. Enterprise’s contention that the code could be created by analyzing RealPage’s
final product and stacking known technology on top of each other, or by watching a 30-minute
YouTube video explaining how to use RealPage’s application, is unavailing. The Fifth Circuit
and Texas courts have repeatedly rejected such a contention. E.g., Tewari De-Ox Sys., Inc. v.

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Mountain States/Rosen, L.L.C., 637 F.3d 604, 613 (5th Cir. 2011) (citing Metallurgical Indus.
Inc. v. Fourtek, Inc., 790 F.2d 1195, 1202 (5th Cir. 1986)); Ventura Mfg. Co. v. Locke,
454 S.W.2d 431, 433 (Tex. Civ. App.—San Antonio 1970, no writ.). Trade secret protection will
be awarded to a trade secret holder against “the disclosure or unauthorized use by those to whom
the secret has been confided under either express or implied restriction of nondisclosure or by
one who has gained knowledge by improper means.” Phillips v. Frey, 20 F.3d 623, 629 (5th Cir.
1994) (citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974)).
Here, RealPage protected its trade secret information through confidentiality agreements,
login credentials, passwords, firewalls, and requiring return of information upon termination.
When RealPage first learned of a possible breach of confidentiality by Derden, it sent a cease
and desist letter to Derden. Derden responded that he was not using trade secret information and
was not competing with RealPage. RealPage relied on this representation until 2016 when more
information became available. When RealPage received substantial evidence of a breach, it acted
diligently to file suit and discover the extent to which Enterprise was using its trade secret
information.
Although Compliance Depot had humble beginnings with only six months of
development and $250,000 invested, the current application has been developed over eight years
and into an asset worth $24 million at the time of its sale in 2011. Now, Compliance Depot
generates $10 million in revenue each year. RealPage has shown sufficient evidence that the
Compliance Depot application is a compilation that gives RealPage a commercial advantage over
competitors who do not know its underlying software.

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b. Acquired Through Breach of Contract or Improper Means
RealPage argues that Enterprise obtained trade secrets by improper means when Bean
distributed Compliance Depot information to various members of Enterprise while he was still at
RealPage (E.g., Exhibits 13, 20, 23, 35, 37). RealPage imputes Bean’s actions onto Enterprise
because Derden was funding IDC Software and because Bean continued to develop Enterprise
code while an Enterprise employee.
Enterprise responds that Derden did not set up IDC Software or otherwise act in concert
with Bean. Enterprise contends that IDC Software is a legitimate, independent entity that still
exists today. Enterprise denies that IDC Software was set up as a conduit for Derden to violate
his noncompete. Finally, Enterprise argues that when Bean did send illicit information to
Enterprise employees, he was promptly reprimanded.
The Court finds a likelihood that Enterprise obtained trade secrets through improper
means. Derden and Bean discussed developing a “core business software” for a new vendor
credentialing service while both were still employed at RealPage (Bean Dep. at 140:22–141:7;
141:22–142:6; 147:3–5). Bean put together a team of former RealPage employees including
Boyle and Beavers (Bean Dep. at 117:4–118:6; 119:19–120:6; 123:4–10; 124:15–125:12;
Exhibit 12–15; 8–10). Bean then created IDC Software, eventually consulting Derden about
when to file the papers to register IDC Software as a limited liability corporation. On May 17,
2012, the same day that Bean resigned from RealPage, and while Derden was still at RealPage,
Derden wrote a check for $30,000 to pay for IDC’s computers, software, and Boyle’s salary
(Exhibit 191). Bean then recruited Wolff, and sent him various RealPage files with instructions
to “change table names and layouts so we aren’t just copying what we did the first time”.
Derden paid Wolff $115,000 to complete this task.

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Over the next year, Derden was the sole source of funds for operating expenses of IDC
Software, ultimately investing $160,000 in IDC Software (Bean Dep. at 101:23–102:23;
164:12–16). Derden also had control over the hiring and compensation of IDC Software
employees (Exhibits 25, 28). During his deposition, Derden claimed that the amounts he paid
were consulting fees owed to IDC Software, despite the fact that the checks are denoted as an
“investment” and that Derden paid IDC Software before any of his commissioned projects
began (See Exhibits 192–94).
Even though Defendants claim that they reprimanded Bean for sending RealPage
documents, Bean continued to work for the people that he supposedly upset, sent many more
RealPage documents, and was a developer of Enterprise’s current code.6 This is sufficient
evidence that Enterprise obtained RealPage information by improper means.
c. Actual Use
RealPage has little evidence of actual use of its source codes or trade secret materials.
RealPage does have evidence, provided by Freudiger, that Enterprise possessed training manuals,
vendor agreements, vendor lists, documents related to compliance verification, and development
materials. Despite having little concrete evidence, RealPage argues that “use” can be implied
from Enterprise’s quick development of code and because Bean destroyed nearly 100,000 files
since RealPage filed this suit.
Defendants argue that Bean acted as a lone wolf; that his code was scrapped shortly after
uploading it to Enterprise’s system because it did not work; and that a side-by-side comparison
of RealPage’s code and Enterprise’s code shows almost no copying.
6

Daniel Millstone (“Millstone”), Enterprise’s Vice President of Engineering, testified that Derden hired him in
August 2013 to develop a new multi-vertical vendor compliance application for Enterprise. Millstone evaluated IDC
Software’s code and determined that it was not acceptable for what he wanted to create. Millstone then scrapped
most of the IDC Software code, but did not start over completely. Bean continued to develop the code along with
other developers. Since RealPage filed this suit, Bean has deleted nearly 100,000 files associated with the code.

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As a general matter, any exploitation of a trade secret that is likely to result in injury to
the trade secret owner or enrichment of the defendant is a “use.” Wellogix, 716 F.3d at 877.
“Use” can be found where the exploitation includes “relying on the trade secret to assist or
accelerate research or development.” GlobeRanger Corp. v. Software AG United States of Am.,
Inc., 836 F.3d 477, 498 (5th Cir. 2016) (citing Sw. Energy Prod. Co. v. Berry-Helfand,
491 S.W.3d 699, 721–22 (Tex. 2016)) (holding that Texas follows “traditional trade secret law”).
“[P]roof of the defendant’s knowledge of the trade secret together with substantial similarities
between the parties’ products or processes may justify an inference of use by the defendant.”
Spear Mktg., Inc. v. BancorpSouth Bank, 791 F.3d 586, 601 (5th Cir. 2015). A factfinder may
find use when “the defendant’s product was quickly developed by someone who had recently
resigned from the plaintiff-company.” Aspen Tech., Inc. v. M3 Tech., Inc., 569 F. App’x 259, 267
(5th Cir. 2014).
In addition to inferences arising from similarities in codes, a court may presume that
destroyed information was unfavorable to the party responsible for its destruction. Fed. R. Civ.
P. 37(e)(2). RealPage requests an adverse inference arising from Bean’s destruction of nearly
100,000 files since the filing of this lawsuit to establish that Enterprise used RealPage’s trade
secrets in creating Enterprise’s application. The party requesting an adverse inference must
establish three elements: (1) the party with control over the evidence had an obligation to
preserve it at the time it was destroyed; (2) the evidence was destroyed with a culpable state of
mind; and (3) the destroyed evidence was “relevant” to the party’s claim or defense such that a
reasonable trier of fact could find that it would support that claim. Rimkus Consulting Grp., Inc.
v. Commarata, 688 F. Supp. 2d 598, 615–16 (S.D. Tex. 2010). Enterprise argues that Bean’s

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wrongful acts should not be imputed on Defendants because they were unaware and because
Derden instructed Bean not to leverage RealPage information.
In order to impute Bean’s acts onto Defendants, RealPage must prove that the acts were:
(1) committed within the scope of Bean’s general authority; (2) in furtherance of Defendants’
business; and (3) for the accomplishment of the objective or purpose for which Bean was hired.
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 757 (Tex. 2007).7 Conduct that is of
the same general nature as that authorized, or that is incidental to the authorized conduct, falls
within the scope of employment even if the act is contrary to express orders. Soto v. El Paso Nat.
Gas Co., 942 S.W.2d 671, 681 (Tex. App.—El Paso 1997, writ denied) (finding fact issue
relating to scope of employment because employee had history of abusing subordinates). An
employee’s intentional or criminal acts may be imputed to the employer when the acts are
foreseeable considering the employee’s duties. Williams v. United States, 71 F.3d 502, 507 &
n.10 (5th Cir. 1995) (holding that it was foreseeable that Congressman would make defamatory
remarks in response to questions by press). Whether the employee was acting within the scope of
his employment and whether he deviated from his duties are questions of fact. Durand v. Moore,
879 S.W.2d 196, 199 (Tex. App.—Houston [14th Dist.] 1994, no writ).
Here, an adverse inference is appropriate and may be imputed on Defendants. Bean was
acting within the scope of his employment for IDC Software when he stole RealPage trade
secrets. The evidence shows that Derden had significant involvement in IDC Software from its
inception in May 2012 and could foresee that Bean would steal RealPage trade secrets. Bean
recruited Boyle to develop a “new” vendor compliance application. Bean sent various RealPage
files to his recruited employees, including RealPage’s scripts to create its databases, indices,
7

The Court finds that Bean was an employee, rather than an independent contractor, at all times relevant to this
litigation. Texas A&M Univ. v. Bishop, 156 S.W.3d 580, 584–85 (Tex. 2005); Limestone Prods. Distrib., Inv. v.
McNamara, 71 S.W.3d 308, 312 (Tex. 2002).

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foreign keys, stored procedures, and functions (E.g., Exhibits 13, 20, 23, 35, 37). Bean instructed
Wolff to “change table names and layouts so we aren’t just copying what we did the first time”
(Exhibit 20). On June 15, 2012, Derden agreed to pay Wolff $115,000 to complete this task
(Exhibit 23). Derden frequently consulted with Bean. Derden was the only source of operating
funds for IDC Software. Bean regularly consulted Derden about financial decisions. The Court
finds sufficient evidence to establish a prima facie case that Bean was acting within the scope of
his employment when he took RealPage’s trade secrets, and that even if Derden instructed him
not to do so, Bean’s contrary acts were foreseeable.
Derden claims that as of June 2012, he had not discussed his idea for Enterprise with
Bean or with Boyle. Derden also claims that IDC Software is an independent business where the
Enterprise application was just one of its projects. The Court does not find this to be credible. On
June 8, 2012, Boyle emailed Bean and stated, “After we get Lonnie’s core business software
developed we need to get him on board with developing a generic Soft Phone product”
(Exhibit 22). On June 15, 2012, Bean emailed Wolff and attached RealPage’s “Database
Scripts.txt,” informing Wolff that Derden is “OK with paying you $115,000” (Exhibit 23). A
month earlier, Bean had sent Wolff “create scripts” for RealPage’s databases, and instructed
Wolff to “change table and column names and layouts so we aren’t just copying what we did the
first time” (Exhibit 20). On August 15, 2012, Bean emailed Derden an IDC Software email
account (Exhibit 25). On August 31, 2012, Derden emailed Gary Hofer, Boyle, and Bean in
order to distribute contact information for the team (Exhibit 26). Substantial evidence suggests
that Derden in fact had significant involvement in the management of IDC Software during the
time that Bean took RealPage’s trade secrets. This is contrary to Derden’s testimony that he was

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“a client” of IDC Software. Therefore, Bean’s acts leading to an adverse inference may be
properly attributed to Defendants, who benefitted from Bean’s acts.
Finally, it is undisputed that Bean deleted nearly 100,000 files relating to the Enterprise
application. A forensic examination showed that Bean’s destruction of evidence began when
RealPage first filed suit. Bean deleted more files after the Court ordered a forensic examination
in March 2017. This destruction was prejudicial to RealPage because RealPage is now inhibited
in showing similarity between early versions of the source code and the code that exists today.
Although Enterprise’s expert conducted a side-by-side comparison of the Enterprise and
RealPage code, RealPage is inhibited in refuting this report because RealPage cannot access the
underlying code that was part of the 100,000 missing files. Without information on the early
versions of code, Enterprise could eliminate all evidence of misappropriation. Therefore, for
purposes of the preliminary injunction, the Court will infer from the destruction of source code
that those 100,000 files were harmful to Defendants’ case. With such an inference, RealPage has
established a prima facie case of misappropriation of trade secrets.
B. Likelihood of Irreparable Harm
Plaintiffs must demonstrate they are “likely to suffer irreparable harm in the absence of
preliminary relief.” Winter v. Nat. Res. Def. Council, 555 U.S. 7, 20 (2008). “[H]arm is
irreparable where there is no adequate remedy at law, such as monetary damages.” Janvey,
647 F.3d at 600. An injunction is appropriate only if the anticipated injury is imminent and not
speculative. Winter, 555 U.S. at 22.
RealPage argues that it has been harmed because the breach of the noncompete and
confidentiality provisions have allowed Enterprise to compete and win business immediately
when the restricted period expired in May 2016. Derden responds that he did not win any

24

business from RealPage’s clients, and therefore RealPage did not suffer any harm. Finally,
Derden argues that even if RealPage has suffered harm due to the breach of noncompete,
RealPage’s delay in seeking injunctive relief shows that any harm is not irreparable.
The Court finds irreparable harm for breach of the noncompete. Defendants have
benefitted from developing a competing application since 2012. The noncompete agreements
did not allow development until after May 5, 2016. Defendants’ acts have thus harmed RealPage
in two ways. First, RealPage has been harmed because a competitor has been able to compete
much sooner than the noncompete allowed. Second, RealPage has been harmed by Defendants’
misappropriation by skipping over the time and expense necessary to develop a competitive
product. Halliburton Energy Servs., Inc. v. Axis Techs., LLC, 444 S.W.3d 251, 260 (Tex. App.—
Dallas 2014, no pet.).
Defendants argue that delay in bringing this suit shows any harm is not immediate or
irreparable. Delay is only a factor in determining irreparable harm. Fashion Week, Inc. v.
Council of Fashion Designers of Am., Inc., No. 16-cv-5076 (JGK), 2016 WL 4367990, at *3
(S.D.N.Y. Aug. 1, 2016) (citing Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964, 968
(2d Cir. 1995)). With respect to delay, the relevant period begins when the plaintiff learned of
the alleged infringing acts. Tough Traveler, 60 F.3d at 968. Here, the Court does not find that
RealPage’s delay in filing suit and obtaining a hearing were such that they negate irreparable
harm.
RealPage first learned of possible violative acts in 2014. It sent Defendants a cease and
desist letter and received an adequate response. This did not start the clock. RealPage then
received a tip from a disgruntled, former Enterprise employee, Cheryl Freudiger, in April 2016.
Freudiger expressed her disdain for Derden and Enterprise in an email to RealPage the next day

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(Exhibit 177). At this point, the Court finds that RealPage would have reasonably waited to file
suit in order to gather more credible evidence of Defendants’ acts. It was not until August 5,
2016, when RealPage first received hard evidence of Defendants using RealPage’s trade secrets
(Exhibit 181). RealPage received an email in September 2016 that proved Defendants were
engaging multi-family clients. RealPage filed suit a week later. The Court finds that the delay
from August 5, 2016, when RealPage received its first piece of credible evidence, until
September 23, 2016 was not unreasonable and does not weigh against a finding of irreparable
harm.
1. Breach of Contract
RealPage’s injury from Derden’s breach of the noncompete is inherently irreparable.
Traders Int’l, Ltd. v. Sheuermann, No. H-06-1632, 2006 WL 2521336, at *9 (S.D. Tex. Aug. 30,
2006) (citing Am. Express Fin. Advisors, Inc. v. Scott, 955 F. Supp. 688, 693 (N.D. Tex. 1996)).
The purpose of a noncompete is to protect the employer’s valuable asset for a reasonable period.
Here, RealPage bargained for a five-year period in which Derden would not begin creating a
competing application. Instead, Defendants began creating a competing application almost
immediately. Derden still had four years left on his noncompete when he began directing,
managing, and funding IDC Software. IDC Software sold its code to Enterprise, who launched
its first application to a client in 2014. By 2016, Enterprise generated annual revenues of
$6 million. As early as April 2016, Defendants began soliciting multi-family clients with plans
to sign them as soon as Derden’s noncompete expired (Exhibits 88, 90).
“The mere fact that economic damages may be available does not always mean that a
remedy at law is ‘adequate.’” Janvey, 647 F.3d at 600. Here, money damages may suffice to

26

repair some damage to RealPage. However, money cannot adequately account for the advantage
Defendants gained by beginning development on a code four years before they agreed to do so.
2. Misappropriation of Trade Secrets
RealPage is being irreparably harmed by Defendants’ misappropriation of trade secrets
because Enterprise can improve on RealPage’s trade secrets without first investing the time,
expense, and labor necessary to produce a duplicate product. Halliburton, 444 S.W.3d at 260.
When RealPage purchased Compliance Depot, it also purchased the intellectual property that
went into creating the application. Although Derden was entitled to use his knowledge gained,
he was not entitled to use the source code that made the application work.
RealPage is being harmed by Defendants’ possession of RealPage’s trade secret, which
has allowed them to create a robust code developed on the back of RealPage. Defendants
advertised to prospective clients that Derden was the founder of Compliance Depot, and
advertised Enterprise’s code as “the most advanced vendor compliance management system in
the industry” (Exhibit 90). Once solicitation of clients began, the harm was done. IDS Fin.
Servs., Inc. v. Smithson, 843 F. Supp. 415, 418 (N.D. Ill. 1994). Prospective clients may have
begun to question the viability of RealPage’s product without Derden. Under ordinary
circumstances, this would be fair competition. However, Derden can only make these claims
because Defendants unlawfully referenced RealPage’s trade secrets. This cannot be undone by
money alone. Any calculation of monetary damages would fail to fully appreciate the harm done
by Defendants developing a robust product by skipping the necessary research and development
undertaken by every other competitor. Halliburton, 444 S.W.3d at 260.

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C. Balance of Hardships
When deciding whether to grant an injunction, “courts must balance the competing
claims of injury and must consider the effect on each party of the granting or withholding of the
requested relief.” Winter, 555 U.S. at 24 (citation omitted). Courts consider several factors in
balancing the equities. Notably, courts consider the threat of disclosure of the trade secrets by
defendants, Cisco Sys., Inc. v. Huwaei Techs., 266 F. Supp. 2d 551, 555–58 (E.D. Tex. 2003),
the size of competing companies and the portions of revenues each party derives from their
respective software, Hooters, Inc. v. City of Texarkana, 897 F. Supp. 946, 949 (E.D. Tex. 1995),
whether the injunction will effectively destroy a party’s business, Anadarko Petroleum Corp. v.
Davis, No. H-06-2849, 2006 WL 3837518, at *24 (S.D. Tex. Dec. 28, 2006), and whether denial
will cause a loss of current market share or simply reduce prospects for expansion, Flywheel
Fitness, LLC v. Flywheel Sports, Inc., No. 4:13-CV-48, 2013 WL 12138593, at *4 (E.D. Tex.
2013). Here, the equities favor an injunction limited to the single family or multi-tenant
industry.
RealPage is a large company with a market capitalization of $2.26 billion. Enterprise is a
small company with fourteen employees. The Compliance Depot application markets to only
single family or multi-tenant real estate managers and accounts for approximately $10 million of
RealPage’s revenue.
RealPage only participates in the single family or multi-tenant industry, with some
participation in the commercial real estate industry. RealPage does not participate in the
restaurant, school district, or sports industries. The Compliance Depot application is a small
percentage of RealPage’s total business. Enterprise generates about $6 million in revenue for its

28

entire application. Enterprise only has its one application. Thus, an injunction over Enterprise’s
entire application will effectively put Enterprise out of business.
Based on the comparative sizes, the portion of revenues each derives from the respective
software, the fact that Enterprise could be put out of business, and the fact that RealPage is not
currently operating in other industry verticals, the Court finds that the equities favor an
injunction that is limited to the single family or multi-tenant real estate management industry.
D. The Public Interest
“In exercising their sound discretion, courts of equity should pay particular regard for the
public consequences in employing the extraordinary remedy of injunction.” Winter, 555 U.S.
at 24 (quoting Weinberger, 465 U.S. at 312). This factor overlaps substantially with the balanceof-hardships requirement. Id.
According to Enterprise, a large number of its customers are school districts and
government entities. If Enterprise is fully enjoined for any period, its customers will be left
without vendor credentialing services. It is against the public interest to leave schools and
government without important services. TechRadium, Inc. v. Blackboard Connect, Inc.,
No. 2-08-CV-00214-TJW, 2009 WL 1152985, at *7 (E.D. Tex. Apr. 29, 2009). For this reason,
in addition to those addressed in the balancing of equities, the Court finds that the public interest
favors an injunction limited to the single family or multi-tenant real estate management industry.
CONCLUSION
It is therefore ORDERED that Plaintiffs’ Application for Preliminary Injunction
(Dkt. #10) is hereby GRANTED IN PART.
It is further ORDERED that Defendants Enterprise Risk Control, LLC and Lonnie
Derden, their officers, agents, servants, consultants, contractors, employees, attorneys, and any

29

person or entity in concert or participation with them, are hereby ENJOINED from offering
Enterprise’s vendor compliance application to any person or entity engaged in the single family
or multi-tenant real estate management business.
It is further ORDERED that Defendants Enterprise Risk Control, LLC and Lonnie
Derden have thirty (30) days for necessary transitions of any single family or multi-tenant real
estate management clients. If Defendants require additional time to conduct necessary
transitions, Defendants shall petition the Court accordingly.
It is further ORDERED that unless terminated earlier, this preliminary injunction shall
expire upon the issuance of a final decision by the Court in this case.
It is further ORDERED that this case be submitted to mediation in accordance with
Section 8.9 of the Asset Purchase Agreement. The parties shall participate in mediation with the
Hon. Karen Gren Scholer, State District Judge (ret.), within the next thirty (30) days. The
mediator’s contact information is as follows:
Carter Scholer Arnett Hamada & Mockler, PLLC
Campbell Centre II
8150 N. Central Expressway
Suite 500
Dallas, Texas 75206
[phone]
[e-mail]
It is further ORDERED that this preliminary injunction shall not be effective unless and
until Plaintiffs file an appropriate bond or cash deposit in lieu thereof in the amount of $10,000.

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SIGNED this 3rd day of August, 2017.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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