Nick Brown and Ethan Gibson 2017-11-22 22:35:13
The long reach of the Texas Citizens Participation Act. In 2011, the Texas Legislature unanimously passed the Texas Citizens Participation Act, a law designed to curb so-called Strategic Lawsuits Against Public Participation, or SLAPP suits.1 Though initially applied to defamation claims, the Texas Supreme Court’s potentially groundbreaking decision in ExxonMobil Pipeline Co. v. Coleman opened the door for application of the TCPA in a variety of commercial contexts.2 Whether bringing suit or defending one, the TCPA’s powerful anti-SLAAP remedies require it to be analyzed carefully in every case. Motions to Dismiss Under the TCPA The TCPA allows defendants to file a motion to dismiss within 60 days of being served.3 Discovery is automatically stayed while the motion is pending and can only be opened on a limited basis with permission of the court upon a finding of good cause.4 The motion to dismiss must be granted unless the plaintiff can produce “clear and specific evidence” to support each element of every cause of action asserted in the complaint.5 As a consequence, the plaintiff may face the Catch-22 of having to marshal evidence at the outset of the case without the benefit of having any discovery. Regardless of the outcome, the mere act of filing the motion to dismiss has far-reaching consequences. As a practical matter, the plaintiff may incur substantial legal fees collecting evidence and filing a response at the outset of the case. More importantly, if the motion to dismiss is even partially granted, the TCPA currently requires the court to award reasonable attorneys’ fees and sanctions to the defendant.6 If the motion to dismiss is denied, the defendant has a statutory right to file an interlocutory appeal seeking reversal.7 In 2017 alone, denials of TCPA motions to dismiss were reversed at least 21 times as of this article being written, including multiple reversals by the Texas Supreme Court just this year.8 Notably, the plaintiff does not enjoy a corollary right to an interlocutory appeal when the motion is partially granted and will have to live with whatever attorneys’ fees and sanctions have been awarded pending appeal of a final judgment.9 This puts plaintiffs in a less than ideal situation when it comes to negotiating a favorable settlement. More Than Just a Defamation Statute The TCPA applies to any “legal action” that “is based on, relates to, or is in response to the party’s exercise of: (1) the right of free speech, (2) the right to petition, or (3) the right of association.”10 Each of those terms is defined in the statute. The right of association means “a communication between individuals who join together to collectively express, promote, pursue, or defend common interests.”11 The right of free speech means “a communication made in connection with a matter of public concern.”12 The right to petition includes more than a dozen categories of communications, including those related to judicial proceedings, public meetings, and even those “reasonably likely to enlist public participation” in government proceedings.13 While the courts of appeals had previously split on whether each of the rights listed in the TCPA was further restricted by First Amendment jurisprudence limiting their scope, the Texas Supreme Court in Coleman definitively ruled that constitutional jurisprudence does not restrict the plain language of the statute.14 This was a clear indication by the court in favor of interpreting the TCPA expansively. The Coleman decision has far-reaching implications for commercial claims, especially in light of the TCPA’s expansive definition of “the right of association” to include communications between individuals joining together to pursue common interests.15 This definition appears to encompass virtually all business enterprise. After all, commerce itself is rooted in individuals joining together to pursue success in the marketplace and profit. The 3rd Court of Appeals in Austin recently reached precisely this conclusion in Elite Auto Body LLC v. Autocraft Bodywerks, Inc.16 The court’s opening line perfectly sums up the decision: “This case illustrates that the Texas Citizens Participation Act . . . can potentially be invoked successfully to defend against claims seeking to remedy alleged misappropriation or misuse of a business’s trade secrets or confidential information.”17 The court reasoned that the defendant allegedly communicated the information “in furtherance of the . . . business enterprise relative to [the defendant’s] competitive position.” 18 Such communications fell within the TCPA’s definition of “the right of association,” and therefore required the plaintiff to produce clear and specific evidence with “element-by-element, claim-by-claim exactitude.”19 The plaintiff failed to meet that exacting standard, leading to reversal and remand for an award of fees and sanctions. Other courts have similarly applied the TCPA to everything from claims for trade secret misappropriation, breach of non-disclosure agreements, breach of contract and promissory estoppel, harassment and negligence, falsely filing financing forms to perfect a security interest, fraud and tortious interference, business disparagement, filing a fraudulent lis pendens, abuse of process and wrongful injunction, and of course, defamation. Best Practices on Both Sides of the Bar The message sent by Texas courts is becoming increasingly clear: careful analysis of the TCPA should be undertaken in every type of case. For defendants in commercial litigation, the key takeaway is relatively simple: analyze whether the TCPA applies to the plaintiff’s claims. The TCPA is a relatively recent statute, and many questions about its breadth have only recently been considered. Filing a motion to dismiss under the TCPA is overlooked in far too many cases as a potential avenue to stay discovery, open the door to an early settlement, or even to obtain dismissal of the case. So long as a motion to dismiss under the TCPA is not “frivolous or solely intended to delay,” defendants face little risk in filing such a motion.20 For plaintiffs, managing the risk of a TCPA motion to dismiss is more difficult. Legally speaking, the TCPA does contain a “commercial services exemption” (along with exemptions for most insurance and personal injury claims) that affords plaintiffs some latitude to avoid the TCPA.21 Practically speaking, attorneys should fully disclose the risks of a possible TCPA motion to clients, so they are not blindsided by the expense and delay caused by early motion practice, partial or complete dismissal, a possible intervening interlocutory appeal, and the potential liability for fees and sanctions. Additionally, narrowly framing a petition to ensure that all claims exist outside the TCPA or, if possible, within the TCPA’s exemption, may avoid application of the TCPA altogether. If that is impossible, then all pleaded claims should have prima facie evidence to support them before the time of filing. Because even a partial grant of a TCPA motion to dismiss could result in an award of fees and sanctions, it may be advisable to plead fewer claims, survive the TCPA motion to dismiss, and amend only if discovery reveals additional causes of action for which a prima facie case can be shown before amending. Finally, while several federal courts have applied the TCPA to Texas state law claims, suing in federal court only for violations of federal statutes—such as the recently passed Defend Trade Secrets Act or Computer Fraud and Abuse Act—may avoid application of the TCPA altogether. As one of the most powerful statutes in Texas, the TCPA will certainly play an increasingly large role in commercial litigation moving forward in Texas. Litigators familiar with its provisions will be best positioned to keep their clients fully informed and pursue the best strategies to protect their interests. This article has been edited and reprinted with permission. A lengthier version of this article with additional details and case citations was published in the Houston Law Review’s online journal, HLRe: Off the Record. See Nick Brown & Ethan Gibson, SLAPPed and Sanctioned: The Heavy Hand of the Texas Citizens Participation Act, 8 HLRe 45 (2017). Notes 1) Tex. Civ. Prac. & Rem. Code §§ 27.001-.011. 2) ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895 (Tex. 2017). 3) Tex. Civ. Prac. & Rem. Code § 27.003(a), (b). 4) Id. §§ 27.003(c), 27.006. 5) Id. §§ 27.005, 27.006. 6) Id. § 27.009. 7) Id. § 27.008. 8) For a list of these cases, see Brown & Gibson, 8 HLRe 45, 46-47 n.8 (2017). 9) Schlumberger Ltd. v. Rutherford, 472 S.W.3d 881, 887 (Tex. App.—Houston [1st Dist.] 2015, no pet.). 10) Tex. Civ. Prac. & Rem. Code § 27.005. 11) Id. § 27.001(2) (emphasis added). 12) Id. § 27.001(3). 13) Id. § 27.001(4). 14) Coleman, 512 S.W.3d at 901. 15) Tex. Civ. Prac. & Rem. Code § 27.001(2). 16) Elite Auto Body LLC v. Autocraft Bodywerks, Inc., 520 S.W.3d 191 (Tex. App.—Austin May 5, 2017, no pet. h.). 17) Id. 18) Id. at 204-05. 19) Id. at 206. 20) Tex. Civ. Prac. & Rem. Code § 27.009(b). 21) Id. § 27.010(b), (c), (d). NICK BROWN is an associate of Fulkerson Lotz in Houston, where his practice focuses on commercial and intellectual property litigation. ETHAN GIBSON, a seasoned litigator and trial attorney, is a partner in Fulkerson Lotz.
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