Opinion
NO. 03-23-00853-CV
03-27-2024
WHINSTONE US INC., Appellant v. RHODIUM 30MW, LLC; Rhodium JV, LLC; Air HPC, LLC; Jordan HPC, LLC; Rhodium Encore, LLC; Rhodium 2.0, LLC; and Rhodium 10MW, LLC, Appellees
William T. Thompson, Austin, Alexis Swartz, for Appellees. Robert T. Slovak, Brandon Marx, Stacy R. Obenhaus, Steven C. Lockhart, Dallas, Jonathan Thomas, for Appellant.
FROM THE 20TH DISTRICT COURT OF MILAM COUNTY, NO. CV41873, THE HONORABLE JOHN YOUNGBLOOD, JUDGE PRESIDING
William T. Thompson, Austin, Alexis Swartz, for Appellees.
Robert T. Slovak, Brandon Marx, Stacy R. Obenhaus, Steven C. Lockhart, Dallas, Jonathan Thomas, for Appellant.
Before Justices Baker, Triana, and Kelly
OPINION
Chari L. Kelly, Justice
Appellant Whinstone US Inc. brings this interlocutory appeal of a temporary injunction. It commands Whinstone "to restore and maintain the status quo regarding its contractual relationships with" appellees Rhodium 30MW LLC, Rhodium JV LLC, Air HPC LLC, Jordan HPC LLC, Rhodium Encore LLC, Rhodium 2.0 LLC, and Rhodium 10MW LLC (collectively, the Rhodium Parties) "from before Whinstone’s purported ‘Notice of Termination’ on November 27, 2023, including with respect to the provision of electricity, access, and other services Whinstone was providing pursuant to the parties’ contracts prior to November 27, 2023." In five appellate issues, some with discrete subparts, Whinstone maintains that the injunction (1) is improper under the applicable arbitration act, (2) does not resolve a necessary threshold issue, (3) violates Rule of Civil Procedure 683, (4) exceeds the permissible scope of injunctive relief, and (5) is not supported by the evidence. We reverse the temporary injunction because it falls short of at least some requirements of Rule 683 and render judgment dissolving it. BACKGROUND
Whinstone leases premises in Milam County, and some Rhodium Parties, under agreements with Whinstone, use the premises to mine Bitcoin. Principals for both sides met in early 2020 and exchanged ideas on how to structure a business to mine Bitcoin. In summer 2020, Whinstone and Rhodium JV, according to affidavit testimony by a Rhodium principal, entered into over a dozen "power agreements, each providing," among other obligations of the parties under the agreements, "for Rhodium JV to receive 5[ megawatts] of electricity from Whinstone … at a fixed price for at least ten years." (Bitcoin-mining is electricity-intensive.) Also in summer 2020, Whinstone and Rhodium 30MW entered into a similar agreement, under which Whinstone would provide 30 megawatts of electricity. Rhodium JV’s rights and obligations under one or more of these summer 2020 agreements may have been assigned to other Rhodium entities.
In December 2020, Whinstone and Rhodium JV entered into a Hosting Agreement that, among other rights and obligations, provided for Whinstone to supply up to 130 megawatts of electricity to Rhodium JV. The same month, Whinstone and Air HPC also entered into a Hosting Agreement, under which Whinstone would supply up to 25 megawatts of electricity. We refer to these two agreements as the "December 2020 Agreements." Whinstone and the Rhodium Parties dispute whether the December 2020 Agreements replace or supersede the prior agreements or whether the prior agreements are still in effect. Then in August 2021, Whinstone, according to the Rhodium Parties’ live pleading, entered into a Water Supply Agreement with Rhodium JV, Rhodium 30MW, Rhodium Encore, Rhodium 2.0, Jordan HPC, and Rhodium 10MW.
In May 2022, Whinstone’s counsel wrote Rhodium JV, Air HPC, Rhodium 30MW, and the Rhodium parent company to notify them that Rhodium entities had breached the December 2020 Agreements. Whinstone demanded over $10 million for Rhodium entities’ alleged failures to pay fees called for by the December 2020 Agreements.. By April 2023, Whinstone had refined its calculation of alleged underpayment of required fees and by letter from its counsel demanded over $13.5 million to remedy the underpayments and other alleged contractually owed amounts. Also in the April 2023 letter, Whinstone’s counsel said that Whinstone would terminate the December 2020 Agreements if the Rhodium Parties did not comply with the demand.
In May 2023, Whinstone filed its original petition in this suit, and in its live pleading, it pleads claims for breach of the December 2020 Agreements and seeks, among other things, a declaration that the December 2020 Agreements replace or supersede the prior agreements. The Rhodium Parties have pleaded affirmative claims of their own. In September 2023, the trial court ordered the parties to arbitrate the claims presented in Whinstone’s live pleading and stayed the suit pending the outcome of the arbitration. (The parties dispute whether and how much the arbitration has gone forward.) On November 27, 2023, Whinstone’s counsel sent a Notice of Termination letter to the Rhodium Parties’ counsel, notifying the Rhodium Parties that the December 2020 Agreements "are terminated effective immediately" because of the failure to pay the amount demanded by the April 2023 letter. The November 2023 letter says that because of the termination, "Whinstone immediately ceases providing power and Hosting Services to Rhodium pursuant to" the December 2020 Agreements. Later on November 27, according to the Rhodium Parties, Whinstone had Rhodium personnel escorted out of the leased premises, "locked the doors, turned off Rhodium’s power, and began the process of dismantling Rhodium’s bitcoin mining infrastructure." Because of the alleged lockout and cessation of electricity and other services, the Rhodium Parties asked the trial court for a temporary injunction "requiring Whinstone to reinstate Rhodium’s access to the [leased premises], restore power, water, and all other utilities at the site, and in all other respects restore the status quo."
In post-submission letters filed with this Court, the parties have notified us that an emergency arbitrator has granted temporary injunctive relief against Whinstone, and the Rhodium Parties have provided us with the emergency arbitrator's order. No party before us argues that the emergency arbitrator’s order affects our jurisdiction in this interlocutory appeal or affects the analysis of the trial court’s temporary injunction that we undertake below. We have reviewed the emergency order and conclude—in line with both sides’ positions—that the emergency arbitrator’s order does not affect our jurisdiction here. We express no view about anything else dealt with by the emergency arbitrator’s order.
A week later, in early December 2023, the trial court conducted an evidentiary hearing on the request for a temporary injunction. After the close of the evidence and argument from both sides, the court announced its intent to grant injunctive relief. The Rhodium Parties gave the court a proposed form for the temporary injunction, and Whinstone’s counsel wrote a letter to the court laying out Whinstone’s objections to the form order. The court soon after held another oral hearing, allowing both sides to present argument about the form of the temporary injunction to be signed. The morning after that hearing, the court signed the temporary injunction that Whinstone now appeals. The injunction commands Whinstone
to restore and maintain the status quo regarding its contractual relationships with [the] Rhodium [Parties] from before Whinstone’s purported "Notice of Termination" on November 27, 2023, including with respect to the provision of electricity, access, and other services Whinstone was providing pursuant to the parties’ contracts prior to November 27, 2023.
Whinstone challenges the injunction by the five appellate issues mentioned above.
RULE OF CIVIL PROCEDURE 683—SPECIFICITY AND REASONABLE DETAIL
[1] Whinstone’s third appellate issue, with its discrete subparts, rests on Rule of Civil Procedure 683. Whinstone maintains that the temporary injunction violates Rule 683’s requirements about specificity, forbidding reference to other documents, and setting forth the reasons for issuance. "A temporary restraining order that does not strictly comply with the mandates of Rule 683 is subject to being declared void and dissolved." In re Luther, 620 S.W.3d 715, 722 (Tex. 2021) (orig. proceeding) (per curiam). We need deal only with the specificity topic. See id.; see also Tex. R. App. P. 47.1.
[2–5] A temporary injunction must "be specific in terms" and "describe in reasonable detail … the act or acts sought to be restrained." Tex. R. Civ. P. 683. A specific description in an injunction "describe[s] the enjoined acts without requiring ‘inferences or conclusions about which persons might well differ and without leaving anything for further hearing.’ " Tarr v. Lantana Sw. Homeowners’ Ass’n, No. 03-14-00714-CV, 2016 WL 7335861, at *11 (Tex. App.—Austin Dec. 16, 2016, no pet.) (mem. op.) (quoting Villalobos v. Holguin, 146 Tex. 474, 208 S.W.2d 871, 875 (1948)). It "must be as definite, clear and precise as possible." In re Krueger, No. 03-12-00838-CV, 2013 WL 2157765, at *5 (Tex. App.—Austin May 16, 2013, orig. proceeding) (mem. op.) (quoting Villalobos, 208 S.W.2d at 875). If "[i]nterpretation of" the injunction’s provisions "rest[s] upon implication or conjecture," then the injunction is not specific enough. See id. (quoting Drew v. Unauthorized Prac. of L. Comm., 970 S.W.2d 152, 156 (Tex. App.—Austin 1998, pet. denied)).
No one argues before us that Texas’s arbitration act, including its provision for injunctive relief in some cases, see Tex. Civ. Prac. & Rem. Code § 171.086(a)(3), conflicts with Rule 683's requirements that injunctions be specific and reasonably detailed. And although both sides argue that the Federal Arbitration Act applies to their dispute, even when that Act applies, we apply Texas procedural rules. Bison Bldg. Materials, Ltd. v. Aldridge, 422 S.W.3d 582, 585 (Tex. 2012).
[6–8] Rule 683’s requirements mean that an injunction "must be ‘in clear, specific and unambiguous terms’ so that the party enjoined can understand the duties or obligations imposed by the injunction and so that the court can determine whether the injunction has been violated." Paul v. Roy F. & JoAnn Cole Mitte Found., No. 03-21-00502-CV, 2023 WL 1806101, at *5 (Tex. App.—Austin Feb. 8, 2023, pet. denied) (mem. op.) (quoting TMRJ Holdings, Inc. v. Inhance Techs., LLC, 540 S.W.3d 202, 212 (Tex. App.—Houston [1st Dist.] 2018, no pet.)). The party enjoined must be able to "readily know" what is required. Tarr, 2016 WL 7335861, at *11 (quoting Drew, 970 S.W.2d at 156). Injunctions that do not tell the enjoined party the "precise conduct prohibited" fall short of Rule 683. See Luther, 620 S.W.3d at 723.
[9, 10] Determining the level of precision needed depends on the parties’ relevant context. See, e.g., Kazi v. Sohail, No. 05-21-00432-CV, 2022 WL 202959, at *3 (Tex. App.—Dallas Jan. 24, 2022, pet. denied) (mem. op.) (reading temporary injunction’s "language … in context, particularly regarding the prohibited behavior," to decide that its "meaning is specific and clear"). For example, a court violated Rule 683’s specificity requirements when it restrained a hair-salon operator "from operating the [salon] business for in-person services … in violation of State of Texas, Dallas County, and City of Dallas emergency regulations related to the COVID-19 pandemic." Luther, 620 S.W.3d at 720, 722–23. That restraint was not specific enough because it did not "describe with specificity which ‘in-person services’ were restrained, such that performing them would cause [the operator] to violate" the order. Id. at 723. The operator "could not know without analyzing a multitude of regulations—state, county, and city emergency orders referenced in the … order, plus the federal guidelines they referenced—what conduct was prohibited at any given time." Id. Thus, an enjoined party’s relevant context requiring the party to "analyz[e] a multitude of" relevant obligations to figure out the "precise conduct prohibited" by the injunction undermines the required specificity. See id.
Similarly, when a permanent injunction commanded a homeowner merely "to desist and refrain from breaching the Declaration of Covenants, Conditions, and Restrictions for" his neighborhood homeowners’ association, the injunction was not specific enough. See Tarr, 2016 WL 7335861, at *11. "[I]t d[id] not even cite the specific provision of the contract not to be violated, let alone specify the acts that would constitute a violation of that provision." Id. "[W]hether certain acts constitute[d] a breach of the Declaration of Covenants would [have] require[d] inferences and conclusions about which persons might disagree and would [have] require[d] further hearing." Id. (citing Villalobos, 208 S.W.2d at 875).
The parties here dispute what the injunction commands Whinstone to do. The Rhodium Parties say that it "simply requires Whinstone to go back to doing what it was doing before it purported to terminate the parties’ contractual relationships." According to the Rhodium Parties, "[t]he injunction thus defines the acts enjoined based on Whinstone’s past conduct." Whinstone’s contrary view is that the injunction commands it "to perform certain contractual obligations without specifying what those obligations are"—without any "detailed list of prohibited or mandated acts." Whinstone adds that it "cannot simultaneously perform all contracts between the parties" because if "both the [December 2020 Agreements] and the prior … agreements were in effect, then the agreements would require Whinstone to supply a total of 310 megawatts of electricity," beyond the 155 megawatts that Whinstone argues is the most that could have been required.
[11] We view the injunction’s command to be broader than the Rhodium Parties say. To begin with, what the injunction means by Whinstone’s "contractual relationships with Rhodium from before … November 27, 2023," is indeterminate in the context of the parties’ dispute. Whinstone has sued certain of the Rhodium Parties for breach of the December 2020 Agreements and seeks a declaration that those agreements replace or supersede prior agreements between the parties. By contrast, the Rhodium Parties have sued Whinstone for breach of the prior agreements, arguing that they all are still in effect. Given this context, the injunction is commanding Whinstone to take actions called for by contracts that the injunction does not specify. See Krueger, 2013 WL 2157765, at *1, *7 (concluding that injunction forbidding company cofounder from "making or initiating any withdrawals or transfers from any of [company’s] bank accounts, including, but not limited to, the Wells Fargo Account as defined in Plaintiffs’ Original Petition" was not specific enough because it "fails to describe in reasonable detail the other accounts that [co-founder] is enjoined from accessing"). More specifically, the Rhodium Parties tell us—and an exhibit admitted into evidence during the temporary-injunction hearing supports—that both sides have disputed the scope of their contractual relationships since at least May 2022, a year before this suit was filed. In this context, the injunction’s use of the term "[Whinstone’s] contractual relationships with Rhodium from before … November 27, 2023," does not specify' whether those relationships are fixed by the December 2020 Agreements alone, by the prior agreements alone, by both the prior agreements and the December 2020 Agreements, or by none of them. And which of these scenarios controls helps determine which side is right about whether the other failed to perform the relevant contracts, whichever they are. We do not and must not decide which of the agreements are in effect, see Brooks v. Expo Chem. Co., 576 S.W.2d 369, 370 (Tex. 1979) ("[T]he merits of the underlying case are not presented for appellate review in an appeal from an order granting or denying a temporary injunction."); we explain all this only to point out how the injunction is not specific enough about what it commands. It "does not … cite the specific provision of the contract[s] not to be violated"—or even which contracts are involved. See Tarr, 2016 WL 7335861, at *11. Thus, "whether certain acts" by Whinstone would "constitute a breach of" the December 2020 Agreements or of the prior agreements or of any of them "would require inferences and conclusions about which persons might disagree and would require further hearing." See id. (citing Villalobos, 208 S.W.2d at 875); see also Ramirez v. Ignite Holdings, Ltd., No. 05-12-01024-CV, 2013 WL 4568365, at *3–4 (Tex. App.—Dallas Aug. 26, 2013, no pet.) (mem. op.) (holding portion of temporary injunction to be not specific enough—it "restrain[ed] appellants from ‘possessing, disclosing to any third party, or using for their own benefit … any of [companies’] Proprietary Information/Trade Secrets (including but not limited to proprietary information, confidential information, training materials, templates, or sales or customer lists)" but did not "define ‘Proprietary Information/Trade Secrets’ with enough specificity to give … adequate notice of the acts" forbidden, meaning that "they must infer whether any particular information or item in their possession constitutes ‘proprietary information’ or ‘confidential information’ ").
It is not enough when responding to these problems to argue, as the Rhodium Parties do, that Whinstone should simply operate as it had before its Notice of Termination. For months before the November 2023 Notice, Whinstone and the Rhodium Parties were disputing the scope of their contractual relationships. Therefore, even before the November 2023 Notice, the contractual relationships might have been as the Rhodium Parties see them or might have been as Whinstone sees them (or might have been something else). The injunction does not merely command Whinstone to perform identically to how it performed one day before November 27, 2023; it commands "restor[ing] and maintain[ing] the status quo regarding [the] contractual relationships … from before Whinstone’s purported ‘Notice of Termination’ on November 27, 2023, including with respect to the provision of electricity, access, and other services Whinstone was providing pursuant to the parties’ contracts prior to November 27, 2023." (Emphasis added.) The contractual relationships before then, whatever they were, required more than merely providing electricity. They required providing electricity at specified power levels to certain Rhodium Parties, as the rights and obligations had been assigned, with the particular power level owed or particular Rhodium Party to be served changing depending on which agreements were or were not in effect. Even though Whinstone had in fact chosen to perform a certain way for certain Rhodium electricity users before the November 2023 Notice, that fact does not prove that Whinstone had chosen correctly—that it had chosen the level of performance that met its obligations under the "contractual relationships …, including with respect to the provision of electricity, access, and other services." But choosing correctly is what the temporary injunction requires—by requiring performance measured by the parties’ pre-November 2023 Notice "contractual relationships."
It is thus much like the Luther order, which fell short of Rule 683 because the party enjoined "could not know without analyzing a multitude of" sources "what conduct was prohibited." See 620 S.W.3d at 723 (emphasis added). Whinstone cannot know, without a similar analysis burden, what conduct exactly is required. The trial court could have written a temporary injunction that commands Whinstone to provide x megawatts of electricity to one Rhodium party, y to another, and z to another. See Krueger, 2013 WL 2157765, at *7 (concluding that first injunction was not specific enough in part by contrasting it with supplemental injunction—supplemental injunction listed account numbers for bank accounts that co-founder was enjoined from accessing, but first injunction failed to list account numbers). We are not saying that this hypothetical injunction necessarily fulfills all that Rule 683 requires, but we are saying that the injunction that the trial court did write is not even as specific as this hypothetical one and thus is not "as definite, clear and precise as possible." See id. at *5 (emphasis added) (quoting Villalobos, 208 S.W.2d at 875); see also Texas Health & Hum. Servs. Comm’n v. Advocates for Patient Access, Inc., 399 S.W.3d 615, 621–22, 628–29 (Tex. App.—Austin 2013, no pet.) (concluding that portions of injunction were not specific enough—injunction forbade state agency from "requiring the use of any particular written authorization form for [medical-transportation program] that was not regularly used before May 3, 2012," and from "requiring any person acting on behalf of a Medicaid-eligible child from having to contact any person, prior to the provision of transportation services, in order to designate an authorized adult"). That specificity gap cannot be filled by resort to the enjoined party’s own knowledge of the context of the dispute. See Krueger, 2013 WL 2157765, at *7 (concluding that injunction against withdrawing or transferring money from off-limits accounts was not specific enough despite argument that enjoined party knew which accounts were at issue and citing as support principle "that lack of specificity in injunction was not cured by any knowledge that enjoined party may have had" (citing Computek Comput. & Off. Supplies, Inc. v. Walton, 156 S.W.3d 217, 222–23 (Tex. App.—Dallas 2005, no pet.))).
Beyond electricity, the temporary injunction also is not specific enough about what water services Whinstone must provide. The Rhodium Parties have pleaded breach of contract against Whinstone for breaching the Water Supply Agreement. They have pleaded that Whinstone "has never provided the ‘water supply services’ called for by the" agreement. Then in their motion for the temporary injunction, they raised the fallout from Whinstone’s alleged breach of the agreement as grounds for injunctive relief—"Rhodium seeks emergency relief requiring Whinstone to … restore power, water, and all other utilities at the site, and in all other respects restore the status quo."
In line with these requests, the temporary injunction commands Whinstone to "restore and maintain the status quo regarding its contractual relationships with Rhodium from before … November 27, 2023, including with respect to the provision of electricity, access, and other services Whinstone was providing pursuant to the parties’ contracts prior to November 27, 2023." The command’s "including" clause does not limit the main clause to addressing only what is listed in the "including" clause—the main clause can still require more. See Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 440–41 (Tex. 2009); Waldrop v. Waldrop, 552 S.W.3d 396, 409–10 (Tex. App.—Fort Worth 2018, no pet.) (en banc). Whinstone thus is left to ask—these water services that we allegedly have never supplied, are they part of our "contractual relationships" as the Rhodium Parties have pleaded and argued for in their temporary-injunction motion and thus required by the injunction to be provided, or are they not part of the "contractual relationships" because they have not been part of our status quo level of performance and thus not required by the injunction to be provided? The injunction is not specific enough in this respect. See Paul, 2023 WL 1806101, at *5 (Rule 683 requires that injunctions "must be ‘in clear, specific and unambiguous terms’ so that the party enjoined can understand the duties or obligations imposed by the injunction and so that the court can determine whether the injunction has been violated" (quoting TMRJ Holdings, 540 S.W.3d at 212)); Ture, 2016 WL 7335861, at *11 (party enjoined must be able to "readily know" what is required (quoting Drew, 970 S.W.2d at 156)).
To crystallize this point, we think it useful to contrast this case with Universal Health Services, Inc. Thompson, 24 S.W.3d 570 (Tex. App.—Austin 2000, no pet.). There, a group of doctors and investors had agreed to run a women's-health hospital, but when the investors decided to close the hospital because of financial losses, the doctors sued for breach of contract and fraud and successfully sought a temporary injunction to keep the hospital open. See id. at 574–76. We concluded that the injunction ordering the investors to keep the hospital open was specific enough to preserve the parties’ status quo. As to their status quo, we said that (a) the "temporary injunction preserves the status quo by ordering that operations continue as they existed prior to the Investors’ attempt to close the hospital" because "[i]t was the Investors’ decision to close the hospital that altered the parties’ relationship" and (b) because the doctors’ and investors' "dispute arises from the attempted closing," "the status quo is the relationship of the Investors and the Doctors as it existed prior to the Investors' decision to close the hospital." Id. at 577. By contrast here, even though the Rhodium Parties sought injunctive relief in response to Whinstone's alleged lockout actions in November 2023, the parties' dispute over their contractual relationships had existed long before those actions. Because in Universal Health Services there was a unity between the parties status quo and what the doctors sought injunctive relief to preserve, the injunction was specific enough because the "Investors are in the business of running hospitals and have been running this [hospital] for almost three years," meaning that the "trial court was not required to examine the specific details associated with running the hospital prior to December 10 in order to spell out what is necessary to maintain the status quo." Id. at 579. But here, the relationships between the Rhodium Parties and Whinstone just before the November 2023 Notice were themselves in dispute. Although Whinstone was providing electricity—and allegedly not providing any water services—both sides disputed whether what Whinstone was then doing constituted the performance required by their agreements. The context of their dispute thus calls for a level of specificity in setting out the status quo to be preserved beyond what was called for in Universal Health Services.
In all, we hold that the temporary injunction must be dissolved because it violates Rule 683’s requirements that all injunctions "be specific in terms" and "describe in reasonable detail … the act or acts sought to be restrained."
CONCLUSION
We reverse the temporary injunction and render judgment dissolving it. All pending motions are dismissed as moot.