Opinion
NO. 09-19-00290-CV
11-30-2020
PUSH START INDUSTRIES, LLC AND ORGAN MOUNTAIN ENERGY, LLC, Appellants v. HOUSTON GULF ENERGY CORPORATION, JACK TOMPKINS, PAUL BORNSTEIN, AND JOHN EHRMAN, Appellees
On Appeal from the 284th District Court Montgomery County, Texas
Trial Cause No. 19-03-04392-CV
MEMORANDUM OPINION
Appellants Push Start Industries, LLC (PSI) and Organ Mountain Energy, LLC (OME) sued Appellees Houston Gulf Energy Corporation (HGEC), Jack Tompkins, Paul Bornstein, and John Ehrman. The trial court signed an Order on Defendants' CPRC § 27 Motions to Dismiss granting Appellees' motion under the Texas Citizens Participation Act (TCPA) and an Amended Order granting the movants' TCPA Chapter 27 attorney's fees and costs. See generally Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011. Appellants appealed, raising three issues. See id. § 27.008. We reverse and remand.
The other named defendants, Andrew Levy and Phil Tuttle, are not parties to this appeal. Appellants nonsuited Levy. According to Appellants, Tuttle filed a separate TCPA motion to dismiss and they do not appeal from the trial court's grant of that motion.
The Legislature amended the TCPA, effective September 1, 2019. See Act of May 17, 2019, 86th Leg., R.S., ch. 378, §§ 11, 12, 2019 Tex. Gen. Laws 684, 687. The amendment only applies to suits filed after its effective date. See id. This suit was filed before September 1, 2019, and therefore the prior version applies to this case.
Background
According to Appellants' Original Petition (hereinafter "the petition"), the Appellants assist companies and individuals with specialized financing, raising capital, and consulting, and HGEC approached PSI for assistance in finding financing and investors for HGEC's oil and gas operations. PSI alleged that in 2015 PSI entered into a Finder's Fee Agreement with HGEC and HGEC agreed to pay PSI a referral fee of eight percent for goods or services provided to HGEC. The Finder's Fee Agreement (hereinafter "the First Agreement") was executed by Dennis Rogers (as President of PSI) and John Thibeaux (as CEO of HGEC). According to the petition, Thibeaux sent the executed version of the First Agreement to Rogers via his john@hgecorp.com email address. Appellants allege that PSI then introduced a private equity group based in Ireland, Incartus Investments, to HGEC, and Incartus pledged about $100 million of equity funding to HGEC for investments in oil and gas properties in Texas.
PSI alleged that PSI and HGEC renegotiated the First Agreement and entered into a second Finder's Fee Agreement (hereinafter "the Second Agreement") with the same finder's fee, but with the caveat that the fee would be reduced to six percent if the invested funds were in the form of a bank loan. PSI alleged that the Second Agreement was signed by Rogers and purportedly signed by Thibeaux as HGEC's CEO and authorized representative and by Paul Bornstein, as HGEC's Director. According to the petition, the signed Second Agreement was sent to Rogers from the same john@hgecorp.com email account. The petition asserted that sometime between the First Agreement and the Second Agreement, Thibeaux left his position at HGEC, but that Rogers was not informed of that fact and Rogers continued to communicate with Thibeaux via the same email address "with no notification that the person behind the account was different." The petition alleged that later Rogers discovered that he had been communicating with John Ehrman, who had been impersonating John Thibeaux, and that "[i]t is now believed that the person who signed the Second Agreement as the Chief Executive Officer was John Ehrman and not John Thibeaux." According to the petition, by the time Rogers discovered that Ehrman was impersonating Thibeaux, Ehrman had already served time for criminal fraud and was under federal indictment for an unrelated criminal fraud. PSI alleged that PSI continued to do business with HGEC after the HGEC Board gave assurances that Ehrman did not control HGEC and after HGEC agreed it would provide Rogers's company, OME, with a six percent equity interest in a joint venture between Incartus and HGEC. PSI also alleged that HGEC's Board adopted a Board Resolution signed by every member of the Board (including Tompkins, Levy, Tuttle, and Bornstein), the Board Resolution referenced numerous past acquisitions, and the resolution also provided that OME would receive a six percent equity interest in the joint venture with Incartus. PSI further alleged that PSI did not receive the full amount of referral fees it was due under the Second Agreement, and HGEC never paid OME for its six percent interest in the joint venture as promised in the Board resolution.
In the petition, PSI asserted claims against HGEC for breach of contract, negligent hiring and retention, and negligent misrepresentation, and PSI sued all defendants for promissory estoppel, common law fraud related to the Second Agreement, common law fraud and fraudulent inducement related to the Board Resolution and the assignment of equity interest to OME, and conspiracy to commit fraud.
In the Plaintiffs' response to the TCPA motion to dismiss and in their Reply Brief on appeal, they refer to their claim against Appellees HGEC, Bornstein, and Ehrman as it relates to the Second Agreement as a claim for fraudulent inducement and not a claim for common law fraud. In footnote 2 in Appellants' Reply Brief, Appellants state that "Appellees' Brief appears to have misnamed this section 'Count 5, Common Law Fraud,' but this section relates to the Appellants' fraudulent inducement cause of action with respect to the Second [] Agreement." The stated claim in the original petition and amended petition was for common law fraud and that was the claim dismissed by the trial court's dismissal order. Therefore, we also reference the claim as stated in the pleadings.
The defendants filed a TCPA motion to dismiss alleging that the TCPA applies to the lawsuit because Plaintiffs' claims relate to:
[] Communications between Defendants and third parties concerning Mr. Ehrman working for HGEC to help provide goods and services to HGEC's customers; and/orThe Plaintiffs then filed their First Amended Petition, alleging essentially the same facts as contained in the Original Petition, but adding quantum meruit claims against HGEC. Plaintiffs filed a notice of nonsuit as to their promissory estoppel claims. The Plaintiffs also filed a response to the TCPA motions.
[] Communications between Defendants and third parties concerning business "deals" that involve them joining together to collectively promote, pursue, and defend common interests in providing goods and services to customers.
After a hearing on the TCPA motions, the trial court signed an order dismissing all of the Plaintiffs' causes of action upon which Appellees moved for dismissal except for the breach of contract claims, an Order on TCPA Chapter 27 Attorney's Fees, and an Amended Order on TCPA Chapter 27 Attorney's Fees. Appellants then filed a notice of nonsuit on the breach of contract claim and the trial court signed an order dismissing the breach of contract claim without prejudice. Appellants filed a timely notice of appeal pertaining to the trial court's orders regarding the TCPA.
Appellees did not move to dismiss Appellants' quantum meruit claims brought in their First Amended Petition, but Appellants non-suited those claims after the trial court's order granting Appellee's TCPA motion to dismiss.
Issues on Appeal
Appellants raise three issues in this appeal. First, Appellants argue that Appellees did not show by a preponderance of the evidence that Appellants' lawsuit was based on, related to, or in response to the Appellees' exercise of the right to free speech, the right to petition, or the right of association as required to shift the burden to Appellants under section 27.005(b). Second, Appellants argue that, even if Appellees met their initial burden as to each claim, Appellants established by clear and convincing evidence a prima facie case for each essential element of the claims. Third, Appellants argue the trial court erred in dismissing Appellants' promissory estoppel causes of action after Appellants had nonsuited those actions in accordance with Rule 91a of the Texas Rules of Civil Procedure.
Standard of Review
We review the trial court's denial of a TCPA motion to dismiss de novo. See Smith v. Crestview NuV, LLC, 565 S.W.3d 793, 796 (Tex. App.—Fort Worth 2018, pet. denied); Walker v. Hartman, 516 S.W.3d 71, 79-80 (Tex. App.—Beaumont 2017, pet denied); see also Adams v. Starside Custom Builders, LLC, 547 S.W.3d 890, 897 (Tex. 2018). "In conducting this review, we consider, in the light most favorable to the non-movant, the pleadings and any supporting and opposing affidavits stating the facts on which the claim or defense is based." Dyer v. Medoc Health Servs., LLC, 573 S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet. denied); see also Tex. Civ. Prac. & Rem. Code Ann. § 27.006(a).
Dismissal under the TCPA
The TCPA "protects citizens who petition or speak on matters of public concern from retaliatory lawsuits that seek to intimidate or silence them." In re Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (orig. proceeding). The TCPA is a statutory mechanism that permits a party to move for dismissal of a "legal action" that is "based on, relates to, or is in response to a party's exercise of the right of free speech, right to petition, or right of association[.]" See Tex. Civ. Prac. & Rem. Code Ann. § 27.003(a). Its purpose "is to encourage and safeguard the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of a person to file meritorious lawsuits for demonstrable injury." Id. § 27.002. "To effectuate the statute's purpose, the Legislature has provided a [multi-step] procedure to expedite the dismissal of claims brought to intimidate or to silence a defendant's exercise of these First Amendment rights." ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017); see Tex. Civ. Prac. & Rem. Code Ann. §§ 27.003, 27.005. The multi-step procedure provides a burden-shifting framework. In re Lipsky, 460 S.W.3d at 586-87.
Under the first step, the movant of a TCPA motion to dismiss has the burden to "show[] by a preponderance of the evidence that the legal action is based on, relates to, or is in response to the exercise of [] (1) the right of free speech; (2) the right to petition; or (3) the right of association." Tex. Civ. Prac. & Rem. Code Ann. § 27.005(b); see also Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 132 (Tex. 2019). The TCPA directs that it is to be "construed liberally to effectuate its purpose and intent fully." Tex. Civ. Prac. & Rem. Code Ann. § 27.011(b).
It is undisputed that Appellants' lawsuit against Appellees is a "legal action," a term that the TCPA defines to include "a lawsuit, cause of action, petition . . . or any other judicial pleading or filing that requests legal or equitable relief." See Tex. Civ. Prac. & Rem. Code Ann. § 27.001(6).
Exercising one's right of free speech includes any "communication made in connection with a matter of public concern." Id. § 27.001(3); Adams, 547 S.W.3d at 894. "Matter[s] of public concern" include issues pertaining to "health or safety, environmental, economic, or community well-being, the government, a public official or public figure, or a good, product or service in the marketplace." See Adams, 547 S.W.3d at 894; see also Tex. Civ. Prac. & Rem. Code Ann. § 27.001(7).
The statute also defines the "[e]xercise of the right of association" to include a communication between individuals "who join together to collectively express, promote, pursue, or defend common interests." Id. § 27.001(2). Under the TCPA, a "'[c]ommunication' includes the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic." Id. § 27.001(1). As recognized by the Texas Supreme Court, the plain language of this definition extends the application of the TCPA to "[a]lmost every imaginable form of communication, in any medium[.]" Adams, 547 S.W.3d at 894. Assuming the movant meets his burden under step one to show by a preponderance of the evidence that the TCPA applies, then under step two the burden shifts to the nonmovant to establish "by clear and specific evidence a prima facie case for each essential element of the claim in question." Id. § 27.005(c). A "prima facie case" refers to "evidence sufficient as a matter of law to establish a given fact if it is not rebutted or contradicted." In re Lipsky, 460 S.W.3d at 590. It is the "'minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.'" Id. (quoting In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (per curiam)). Clear and specific evidence means that the "plaintiff must provide enough detail to show the factual basis for its claim." Id. at 591.
Even if the plaintiff satisfies plaintiff's burden in the second step, the court may still dismiss the action if the defendant "establishes by a preponderance of the evidence each essential element of a valid defense to the nonmovant's claim." Tex. Civ. Prac. & Rem. Code Ann. § 27.005(d).
Initial Burden on Appellees
In Appellants' first issue, they argue Appellees' TCPA motion did not show by a preponderance of the evidence that Appellants' lawsuit was based on, related to, or in response to the Appellees' exercise of the right to free speech, the right to petition, or the right of associations as required to shift the burden to Appellants under section 27.005(b). Appellants argue that Appellees attempted to satisfy their initial burden in their TCPA motion to dismiss by relying on "one single insufficient conclusory statement, and their citations to Appellants' discovery requests." Appellees' argued in their TCPA Motion that:
On their face, the allegations in Plaintiffs' Original Petition show that the TCPA applies to this suit. All of the individual defendants are present or former directors, officers or employees of Defendant HGEC, and the claims arise out of their alleged communications and association with one another and other third parties with whom HGEC has "done deals."Appellants contend that this conclusory statement does not delineate between Appellees or show how any of the cited statements implicate each specific Appellee's protected rights or which protected rights were implicated. Appellants acknowledge that Appellees included citations to Appellants' petition after the statement, but Appellees argue that the statement and citations show only that Ehrman and the individual defendants knew each other, that Ehrman communicated with others, and that Ehrman was intimately involved in HGEC. Appellants also argue that under section 27.006(a), Appellees cannot rely on discovery requests as evidence for TCPA purposes and that courts cannot "blindly accept" a defendant's characterization of a plaintiff's claims but must view the pleadings in the light most favorable to the plaintiff. According to Appellants, "Appellees do not provide a 'preponderance of the evidence' or 'hook' as to how Appellants' lawsuit is 'based on,' 'related to,' or 'in response to' any of the specific Appellees' individual protected rights." Appellants further argue that the TCPA dismissal was improper to the extent it dismissed their claims of fraud, fraudulent inducement, and conspiracy to commit fraud because those claims are unprotected activities to which the TCPA does not apply.
Appellees alleged in their motion to dismiss that the TCPA applies to the case because "[i]t is clear from [Appellants'] own Petition and discovery requests that their claims are related to communications in connection with 'an issue concerning a good, product, or service in the marketplace' or between individuals 'who join together to collectively express, promote, pursue, or defend common interests' [which are] exercises of the rights of free speech and association as broadly defined" by section 27.001. According to Appellees, Appellants' claims relate to communications between the defendants and third parties concerning Ehrman working for HGEC to help provide goods and services to HGEC's customers or communications between the defendants and third parties concerning business "deals" that involve them joining together to collectively promote, pursue, and defend common interests in providing goods and services to customers.
The Supreme Court of Texas has recognized that "the unique language of the TCPA directs courts to decide its applicability based on a holistic review of the pleadings." Adams, 547 S.W.3d at 897. "When it is clear from the plaintiff's pleadings that the action is covered by the [TCPA], the defendant need show no more." Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017). Appellees alleged in their TCPA motion to dismiss that the Appellants' pleadings show that the individual Appellees are former directors, officers, or employees of HGEC, and that the claims arise out of alleged communications and associations with one another and third parties with whom HGEC has "done deals" and pertain to the exercise of their first amendment rights to free speech and association. We agree "that private communications are sometimes covered by the TCPA." See Creative Oil & Gas, 591 S.W.3d at 136 (citing ExxonMobil Pipeline Co., 512 S.W.3d at 901; Lippincott v. Whisenhunt, 462 S.W.3d 507, 509-10 (Tex. 2015)). But, we know from the Court's discussion in Creative Oil & Gas that in the prior cases where the TCPA applied to private communications, the communications "involved environmental, health, or safety concerns that had public relevance beyond the pecuniary interests of the private parties involved." See id. (citing to ExxonMobil Pipeline Co., 512 S.W.3d at 898, 901 (concluding that private statements by movants concerning plaintiff's alleged failure to gauge a storage tank related to a matter of public concern due to "serious safety and environmental risks"); Lippincott, 462 S.W.3d at 509-10 (concluding that alleged improper provision of medical services by a health care professional are matters of public concern). And under the statute, communications may be governed by the TCPA if they concern a product, good, or service "in the marketplace." 591 S.W.3d at 134-35.
The Court determined that the communications at issue in Creative Oil & Gas were not covered by the TCPA as they were made to "a limited business audience concerning a private contract dispute[]" and did not relate to a matter of public concern. See id. at 136. The record was "devoid of allegations or evidence that the dispute had any relevance to the broader marketplace or otherwise could reasonably be characterized as involving public concerns." See id. "A private contract dispute affecting only the fortunes of the private parties involved is simply not a 'matter of public concern' under any tenable understanding of those words." Id. at 137; see also Keane Frac, LP v. SP Silica Sales, LLC, No. 01-19-00847-CV, 2020 Tex. App. LEXIS 6299, at **32-35 (Tex. App.—Houston [1st Dist.] Aug. 11, 2020, no pet.) (citing Newpark Mats & Integrated Servs, LLC v. Cahoon Enters., LLC, 605 S.W.3d 671, 682 (Tex. App.—Houston [1st Dist.] 2020, no pet.); Goldberg v. EMR (USA Holdings) Inc., 594 S.W.3d 818, 829-30 (Tex. App.—Dallas 2020, pet. denied)).
Appellees argue that Plaintiffs' claims are based on and relate to communications governed by the TCPA because their communications were between the Defendants and third parties about Ehrman working for HGEC and were connected to goods and services that HGEC supplied to its customers and communications between the individual Defendants as well as third parties concerning business "deals" that involved them joining together to collectively promote, pursue, and defend common interests in providing goods and services to customers. But the record does not support their argument that Plaintiffs' claims are based on or relate to such communications or that such communications involve goods or products "in the marketplace."
Rather, the record shows that Appellants' claims relate to a private business dispute between private parties about whether Appellees failed to pay Appellants a finder's fee under an agreement, failed to follow through with an assignment of interest in a joint venture agreement, or engaged in fraudulent or tortious conduct in relation thereto. As in Creative Oil & Gas, the TCPA does not apply to the communications at issue because they were to "a limited business audience concerning a private contract dispute," and the record is "devoid of allegations or evidence that the dispute had any relevance to the broader marketplace or otherwise could reasonably be characterized as involving public concerns." 591 S.W.3d at 137; see also Nobles v. U. S. Precious Metals, L.L.C., No. 09-19-00335-CV, 2020 Tex. App. LEXIS 2553, at **8-14 (Tex. App.—Beaumont Mar. 26, 2020, pet. denied) (mem. op.) (suit for damages based on buyout agreement and anti-disparagement clause was not matter of public concern despite the fact the company provided goods or services to customers because movant failed to satisfy his initial burden that claims were based on, related to, or in response to the exercise of the right of free speech). The Appellees failed to satisfy their initial burden to show that the claims were based on, related to, or were in response to the exercise of the right of free speech.
Next, we examine the Appellees' claim that the communications pertain to the exercise of their right of association. The applicable version of the TCPA defines the right to associate as "to join together to collectively express, promote, pursue, or defend common interests[.]" Tex. Civ. Prac. & Rem. Code Ann. § 27.001(2) (emphasis added). Appellees' petition complains of statements Ehrman allegedly made to PSI representatives, and the failure of the defendant to disclose that John Ehrman was posing as John Thibeaux, and then communications of the Board to PSI to induce PSI to continue working. The alleged promises and communications between PSI and the defendants about Ehrman, or the finder's fee, or the percentage promised on the joint venture, do not show a joint purpose between persons acting to promote or pursue their common interests.
Based on the record before us, we conclude that the Appellees failed to meet their burden of establishing by a preponderance of the evidence that the communications at issue related to a good, product or service in the marketplace. And, Appellees failed to satisfy their burden to show by a preponderance of the evidence that Appellants' claims were based on, related to, or in response to their exercise of the right of free speech or the right of association, and therefore did not trigger the TCPA's applicability. See Lipsky, 460 S.W.3d at 586-87 (quoting Tex. Civ. Prac. & Rem. Code Ann. § 27.005(b)). We sustain issue one.
The burden never shifted to Appellants to establish a prima facie case for their claims. See id. (explaining the burden shifting framework of the TCPA); Tervita, LLC v. Sutterfield, 482 S.W.3d 280, 287 (Tex. App.—Dallas 2015, pet. denied) (reasoning that where a movant failed to meet its burden of showing the TCPA's applicability, the court need not address the other prongs of TCPA analysis). Based on our resolution of Appellants' first issue, we need not address issues two and three. See Tex. R. App. P. 47.1. Having determined that Appellees failed to meet their burden to establish by a preponderance of the evidence that the TCPA applies, we conclude the trial court erred in granting Appellees' TCPA motion to dismiss and in granting Appellees' motion for attorney's fees and costs.
We reverse the trial court's Order on Defendants' CPRC § 27 Motions to Dismiss and the Amended Order on TCPA Chapter 27 Attorney's Fees and remand the cause to the trial court for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
/s/_________
LEANNE JOHNSON
Justice Submitted on November 14, 2019
Opinion Delivered November 30, 2020 Before Kreger, Horton and Johnson, JJ.