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CROSSROADS CATTLE CO., LTD., Appellant v. AGEX TRADING, LLC, Appellee
AGEX Trading, LLC sued Crossroads Cattle Co., Ltd. for tortious interference with a contract and knowing participation in a breach of fiduciary duty arising from Crossroads's alleged unlawful purchase of cattle from a third party. Crossroads filed a motion to dismiss the lawsuit under the Texas Citizen's Participation Act (TCPA). See Tex. Civ. Prac. & Rem. Code § 27.003.1 The trial court denied Crossroads's TCPA motion, and Crossroads appeals. and AGEX appealed the order. For the following reasons, we will affirm.
AGEX sued Crossroads, Escada Cattle, Inc., and Jorge L. Escamilla (the latter two are not parties to this appeal) for breach of fiduciary duties arising from the sale of cattle. In its petition, AGEX alleged that in early 2018 it executed a loan agreement with Escada by which Escada received a revolving credit line to be used exclusively for the acquisition, maintenance, and care of cattle. The loan agreement contained trust provisions making AGEX the beneficiary of a trust managed by Escada as trustee. The corpus of the trust consists of cattle acquired by Escada with funds provided under the line of credit plus all proceeds from the sale of such cattle. In partial consideration for the credit line, Escada promised to sell all cattle it owned on a specified date and all cattle it subsequently acquired with borrowed funds via the AGEX Marketplace, an online auction software platform owned and operated by AGEX.
In late 2018, AGEX became aware of Escada's intent to sell cattle to Crossroads, a cattle trader, in a private transaction to be conducted independently of the AGEX Marketplace and notified both Escada and Crossroads in writing that the contemplated transaction would violate the loan agreement's trust provisions. Escada and Crossroads “nevertheless effectuated the unlawful conveyance of trust property,” according to AGEX, selling “734 head of trust cattle to Crossroads outside of the AGEX Marketplace for $543,281.47.” In its petition, AGEX asserted that Crossroads knowingly induced and participated in Escada's breach of its fiduciary duty as trustee of the trust and loan agreement and willfully and intentionally interfered with the loan agreement.
TCPA dismissal procedure
The TCPA protects citizens from retaliatory lawsuits meant to intimidate or silence them on matters of public concern. Dallas Morning News, Inc. v. Hall, 579 S.W.3d 370, 376 (Tex. 2019); In re Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (orig. proceeding). The stated purpose of the act 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.” Tex. Civ. Prac. & Rem. Code § 27.002; see ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017) (per curiam). To that end, the TCPA provides a procedure to expedite the dismissal of a “legal action” that appears to stifle the nonmovant's exercise of the rights protected by the statute. See Youngkin v. Hines, 546 S.W.3d 675, 679 (Tex. 2018); see Tex. Civ. Prac. & Rem. Code §§ 27.003(a), .005(b).
Under the act, a party may file a motion to dismiss a “legal action” if it is based on, relates to, or is in response to the party's exercise of the right of free speech, right to petition, or right of association. See Tex. Civ. Prac. & Rem. Code § 27.003(a). Courts review TCPA motions using a three-step analysis. Youngkin, 546 S.W.3d at 679. First, the party moving for dismissal must show by a preponderance of the evidence that the TCPA applies to the legal action against it. Tex. Civ. Prac. & Rem. Code § 27.005(b). If the movant meets that burden, the nonmovant must establish by clear and specific evidence a prima facie case for each essential element of its claim. Id. § 27.005(c). If the nonmovant satisfies that requirement, the burden shifts back to the movant to prove each essential element of any valid defenses by a preponderance of the evidence. Id. § 27.005(d). “In determining whether a legal action should be dismissed under [the TCPA], the court shall consider the pleadings and supporting and opposing affidavits stating the facts on which the liability or defense is based.” Id. § 27.006(a). We review de novo whether each party met its respective burden. See Long Canyon Phase II & III Homeowners Ass'n v. Cashion, 517 S.W.3d 212, 218 (Tex. App.—Austin 2017, no pet.).
Does the TCPA apply?
In its TCPA motion, Crossroads contended that both of AGEX's claims against it are “based on, relate[d] to, or [are] in response to” Crossroads's exercise of the rights of association and of free speech. See Tex. Civ. Prac. & Rem. Code § 27.005(b). The applicable version of the TCPA defines the “exercise” of each of those rights as the making or submitting of a “communication”;2 the “exercise of the right of association” as “a communication between individuals who join together to collectively express, promote, pursue, or defend common interests”; and the “exercise of the right of free speech” as “a communication made in connection with a matter of public concern.” Id. § 27.001(1), (2), (3). Thus, to meet its initial burden, Crossroads was required to prove by a preponderance of the evidence that AGEX's claims (a) are based on or related to Crossroads's communications that were either (b) made in connection with a matter of public concern or (c) with another individual with whom Crossroads had joined to collectively promote or pursue common interests. See id. §§ 27.001, .005(b).
In determining whether Crossroads met its initial burden, we focus on AGEX's pleadings, which are the “best and all-sufficient evidence of the nature of the action.” Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017) (“The basis of a legal action is not determined by the defendant's admissions or denials but by the plaintiff's allegations.” (citations omitted)). From AGEX's pleadings we determine whether the factual bases of the challenged claims constitute “expression” within the TCPA's definitions. See Sloat v. Rathbun, 513 S.W.3d 500, 503 (Tex. App.—Austin 2015, pet. dism'd). In determining the factual bases for the challenged claims, we consider the pleadings and other evidence in the light most favorable to the nonmovant and prevailing party below, “favoring the conclusion that [the nonmovant's] claims are not predicated on protected expression.” Id. at 504; see Tex. Civ. Prac. & Rem. Code § 27.006(a).
At the outset, we acknowledge that AGEX's allegations do not reference any communications by Crossroads or Escada, as AGEX argued in its response to the TCPA motion and again in its appellate brief. AGEX contends that its claims are “not factually predicated on any communication of Crossroads” but rather, entirely and only on Crossroads's conduct. Crossroads rejoins that, although AGEX has “artfully pleaded” its claims so as to avoid any reference to “communications,” the TCPA nonetheless applies because the claims “necessarily involve” communications.3 See Abatecola v. 2 Savages Concrete Pumping, LLC, No. 14-17-00678-CV, 2018 WL 3118601, at *7–8 (Tex. App.—Houston [14th Dist.] June 26, 2018, pet. denied) (mem. op.) (determining that defendant company's alleged hiring of competitor's employee and conspiring with him to interfere with his non-compete agreement and with competitor's customer contracts “would necessarily have required communications” because defendant company “could not have hired [the employee] or interfered with customers ․ without communicating with [the employee] and the customers in some way”). However, we need not resolve this conundrum because, assuming that communications were implicit in the challenged transaction under section 27.001(1)'s general definition of a “communication,” the salient question is whether the communications were the covered type—i.e., whether they constituted the exercise of the rights of free speech or association as defined in the TCPA. As explained below, we conclude that they were not.
Exercise of the right of free speech
Crossroads contends that the implied communications were an exercise of its right of free speech. We note that the applicable version of the act defines a “matter of public concern” to include, relevantly, “a good, product, or service in the marketplace.”4 Tex. Civ. Prac. & Rem. Code § 27.001(7)(E). Crossroads submits that because its communications with Escada were about a good (i.e., cattle) in the marketplace, the act applies. However, the supreme court has recently determined that the former statute's reference to goods, products, or services “in the marketplace” suggests that the communication about goods or services “must have some relevance to a wider audience of potential buyers or sellers in the marketplace, as opposed to communications of relevance only to the parties to a particular transaction.” Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 134 (Tex. 2019) (“Given the ‘in the marketplace’ modifier, the TCPA's reference to ‘a good, product, or service’ does not swallow up every contract dispute arising from a communication about the contract.” (referring to former TCPA § 27.001(7)(E))). Therefore, whatever communications must “necessarily” have been involved in Crossroads and Escada's allegedly tortious transaction, we cannot reasonably conclude that those communications had any relevance to a wider audience of potential buyers and sellers beyond Crossroads and Escada and the particular transaction at hand. Accordingly, AGEX's claims are not based on, related to, or in response to Crossroads's exercise of its right of free speech. See id. (concluding that TCPA did not encompass claims of oil and gas lessee and well operator against landowner lessor alleging that lessor falsely told third-party lease-production purchasers that lease had expired and that payments on purchases should stop because challenged communications were merely private business communications that did not involve environmental, health, or safety concerns).
Exercise of the right of association
As far as the alleged communications being an exercise of the right of association, Crossroads contended in its TCPA motion that the “common interest” it was collectively pursuing or promoting with Escada was “conducting business in the feeder cattle industry.” AGEX counters that Crossroads and Escada—as buyer and seller, respectively—were on opposite sides of the transaction and, therefore, did not have a common interest as the applicable version of the TCPA contemplated. See Caliber Oil & Gas, LLC v. Midland Visions 2000, 591 S.W.3d 226, 238 (Tex. App.—Eastland Nov. 27, 2019, no pet.) (holding that parties on opposite sides of business transaction for sale of real property, absent evidence or allegation that parties intended to develop property together or engage in ongoing business enterprise, did not collectively join together to pursue or promote “common interest” under TCPA); Levatino v. Apple Tree Café Touring, Inc., 486 S.W.3d 724, 728 (Tex. App.—Dallas 2016, pet. denied) (concluding that communications “between [legal] adversaries,” including pre-suit demand letter to counsel for opposing party, were “not between persons acting to promote, pursue, or express their common interest”); Cheniere Energy, Inc. v. Lotfi, 449 S.W.3d 210, 214 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (concluding that movant did not meet burden to show that plaintiff's claim was related to communications between individuals acting in furtherance of common interest where record showed merely that defendants “made the decision” to fire employee and “exact revenge” on her but record could have supported alternate conclusion that defendants had “divergent interests” in firing employee).
Informed by these analogous cases, we agree with AGEX and cannot reasonably conclude, on this record, that Escada and Crossroads had “joined together to collectively pursue [or] promote” a “common interest” as contemplated by the TCPA by virtue of communicating about, negotiating, or consummating a cattle sale. See Tex. Civ. Prac. & Rem. Code § 27.001(2). Their mere “conducting business” together as buyer and seller in a particular transaction, without evidence of a specific common interest beyond that transaction, does not meet the statutory definition of exercising the right of association. Although Crossroads cites two cases from this Court to support its contention that its challenged actions fall under the TCPA as an expression of its right to association, we find the facts in those cases to be distinguishable. See Grant v. Pivot Tech. Sols., Ltd., 556 S.W.3d 865 (Tex. App.—Austin 2018, pet. denied); Elite Auto Body, LLC v. AutoCraft Bodywerks, Inc., 520 S.W.3d 191 (Tex. App.—Austin 2017, pet. dism'd).
In Elite Auto, the plaintiff (AutoCraft, an auto-repair shop) alleged that the defendants (former employees of AutoCraft who had formed and joined a new auto-repair business, Precision) had furnished the new repair shop “confidential, proprietary, and trade-secret information.” 520 S.W.3d at 194. The plaintiff further alleged that the defendants were using the information to obtain an unfair competitive advantage in the marketplace and to convince more employees to leave AutoCraft and join Precision. See id. This Court determined that the alleged wrongful communications among the defendants—the very “heart of AutoCraft's case”—were “in furtherance of the Precision business enterprise relative to AutoCraft's competitive position.” Thus, the plaintiff's causes of action were factually predicated on communications and disclosures among individuals who had joined together to collectively promote or pursue common interests (i.e., the competing auto shop). This Court held that the plaintiff's claims, therefore, fell within the TCPA. See id. at 205.
In Grant, this Court relied on Elite Auto to conclude that the challenged communications at issue were protected under the TCPA as an exercise of the right of association. See 556 S.W.3d at 879. The plaintiffs were a technology-related business (Acquisition) that had purchased certain assets, including contracts to perform work for third parties, from a technology-consulting business (GTS). Id. at 870–71. GTS was a certified HUB (Historically Underutilized Business), and the asset-purchase agreement specifically excepted from the sale contracts and assets that related to the operation of a HUB. Id. at 871. As part of the asset-purchase agreement, a shareholder owner of GTS, Ryan Grant, was hired as the president of Acquisition. Id. After relations among the parties deteriorated, the plaintiffs sued GTS, Grant, and several other employees or owners of GTS. Id. As relevant here, the plaintiffs alleged that the defendants, specifically Grant, had used his position at Acquisition to acquire its confidential information and then used it to benefit GTS by misappropriating Acquisition's business and soliciting its employees to leave Acquisition to work for GTS, under the guise of separating the two companies to assist in GTS's HUB recertification process. Id. at 875–76. This Court concluded that the GTS defendants had “joined together to pursue a common interest in employment with GTS and ensuring GTS was able to [continue to] operate as a HUB” through their alleged actions in using the HUB recertification process to convert Acquisition's assets and business. Id. at 879. Thus, the plaintiffs' claims related to communications among the GTS defendants (i.e., disclosing confidential information and soliciting employees and business) were subject to the TCPA. Id. at 878–79. As in Elite Auto, the plaintiffs' claims were factually predicated on the GTS defendants' communications and disclosures. See id. at 880–81.
Considering the factual allegations in AGEX's pleadings—and viewing them in the light most favorable to AGEX—we conclude that Grant and Elite Auto are distinguishable. Unlike the defendants in Grant and Elite Auto, Crossroads and Escada did not allegedly collectively pursue any ongoing or greater enterprise than one mere sale of cattle. The “common interest” alleged here—“conducting business” in the feeder cattle industry—amounts to nothing more than the interest any two or more parties would necessarily share or have in “common” when interacting to do nearly anything, the “interest” in common being desiring the interaction or a particular outcome. While Crossroads and Escada presumably both wanted the transaction to be consummated, we cannot on this record glean their respective individual interests in consummating the sale or, therefore, whether they were the same, and we must view the pleadings in AGEX's favor.
Guided by the supreme court's recent pronouncement in Creative Oil and Gas as to the parameters of the “exercise of the right of free speech”—that the communications at issue “have some relevance to a wider audience of potential buyers or sellers in the marketplace, as opposed to communications of relevance only to the parties to a particular transaction”—we conclude that the exercise of the right of association is similarly not so broad as to encompass nearly every interaction between individuals simply because they each desire the interaction. See Creative Oil & Gas, 591 S.W.3d at 134; see also Gaskamp v. WSP USA, Inc., 596 S.W.3d 457, 475–76 (Tex. App.—Houston [1st Dist.] 2020, pet. filed) (concluding after en banc reconsideration that meaning of “common interest” in former TCPA's definition of right of association contemplates “a public component”—i.e., relating to community at large—to correspond with TCPA's express statutory scheme to protect constitutional rights). As in Caliber Oil & Gas, Levatino, and Cheniere Energy, Escada's and Crossroads's shared interest in consummating this one transaction is insufficient, without more, to conclude that they had “joined together” to “collectively pursue or promote a common interest.” See Caliber Oil & Gas, 591 S.W.3d at 238; Levatino, 486 S.W.3d at 728; Cheniere Energy, 449 S.W.3d at 214. Accordingly, we hold that Crossroads did not meet its burden to prove that AGEX's claims are based on, related to, or in response to Crossroads's exercise of its right of association.
Because Crossroads did not meet its initial burden, we need not address its other issues regarding whether AGEX established a prima facie case for each essential element of its claims, whether Crossroads established a valid defense, or whether the trial court erred in overruling Crossroads's evidentiary objections. See Tex. R. App. P. 47.1, 47.4.
We affirm the trial court's denial of Crossroads's TCPA motion to dismiss.
1. All citations in this opinion to the TCPA are to the version in effect before the September 2019 amendments became effective. See Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, 2011 Tex. Gen. Laws 961, 961–64 (current version at Tex. Civ. Prac. & Rem. Code §§ 27.001–.011), amended by Act of May 24, 2013, 83d Leg., R.S., ch. 1042, §§ 1–3, 5, 2013 Tex. Gen. Laws 2499, 2499–500 (the version at issue in this opinion); see also Act of May 17, 2019, 86th Leg., R.S., ch. 378, §§ 1–12, 2019 Tex. Gen. Laws 684, 687 (amending TCPA and providing that suit filed before amendments become effective “is governed by the law in effect immediately before that date”).
2. The act defines “communication” as “the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic.” Tex. Civ. Prac. & Rem. Code § 27.001(1).
3. Crossroads also points to the affidavit it attached to its TCPA motion of one of its field representatives, Jeff Lacina, who was involved in the negotiation of the transaction at issue. Lacina testified about some text messages and phone conversations between himself and Escada representatives about the transaction.
4. Among other amendments, the 2019 Legislature removed the definition's reference to a “good, product, or service in the marketplace” and revised the definition to mean only statements or activities regarding public officials, public figures, and like persons; matters of political, social, or other interest to the community; and subjects of concern to the public. See Act of May 17, 2019, 86th Leg., R.S., ch. 378, § 1, 2019 Tex. Gen. Laws 684, 684.
Thomas J. Baker, Justice
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Docket No: NO. 03-19-00628-CV
Decided: July 24, 2020
Court: Court of Appeals of Texas, Austin.
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