UPDATE: The Texas Legislature approved HB 2730, which reforms and limits the scope of Texas’s anti-SLAPP law. It exempts certain types of claims from anti-SLAPP coverage, including, but not limited to, employment cases involving misappropriation, tortious interference, breach of noncompetition agreements, and fraudulent misrepresentation.
In addition to the types of claims to which the TCPA applies, the bill alters the movant’s burdens of proof in motions to dismiss, removes the 60-day bar for filing the motion to dismiss by allowing extension of the deadline by agreement, and provides a filing framework that is consistent with Texas and local rules for dispositive motion practice. The new law goes into effect on September 1, 2019.
Enacted in 2011, the Texas Citizens Participation Act (TCPA) is a tool for courts to swiftly dismiss unsubstantiated legal claims brought for the purpose of discouraging public speech and association. Such claims – referred to as strategic lawsuits against public participation (or SLAPP suits) – are filed to intimidate individuals and silence the exercise of First Amendment rights to freedom of speech, petition, and/or association.
The TCPA (also referred to as the Texas anti-SLAPP statute) protects the rights of individuals to speak freely on issues of public concern and gather together to promote common interests by providing a procedural mechanism for meritless or retaliatory claims to be disposed of early on in litigation, before any discovery is permitted.
The text of the TCPA and its legislative history suggest that it was intended to apply primarily to lawsuits filed to prevent individuals from exercising their First Amendment rights (i.e. unfounded defamation claims). However, the TCPA’s originally designed protections have been expanded by Texas courts and litigants over the last eight years, and it is now routinely used as a dismissal tool in a wide range of cases, including those involving claims for misappropriation of trade secrets, breach of non-competition agreements, fraudulent misrepresentation, conspiracy, tortious interference, conversion, and discrimination.
As a result of the trend toward broad application, the TCPA is frequently the subject of opinions by the various Texas Courts of Appeal – leading to differing statutory interpretations and application across the state. Recently, some state appellate court have started to push back on the statute’s expansive reach, leading to conflicting results. Below are the most recent Texas Court of Appeals opinions in North Texas that highlight the current split among Texas courts, teeing up this hot-button issue for resolution by the Texas Supreme Court or for the Texas Legislature clarify its intent with pending legislation.
Austin Court of Appeals Allows TCPA Dismissal in Noncompete Case
The Austin Court of Appeals decision in Elite Auto Body LLC v. Autocraft Bodywerks, Inc., 520 S.W.3d 191, 197-98 (Tex. App.—Austin 2017, pet. dism’d), arguably generated widespread use of the TCPA in applications beyond free speech/defamation cases.
In Elite Auto, Autocraft, an auto-repair shop sued Precision, a competing auto-repair business, and former Autocraft employees who went to work for Precision. Autocraft accused an individual defendant and another former employee of providing Precision with Autocraft’s confidential, proprietary and trade secret information, and alleged that Precision and its employees were unlawfully using Autocraft’s proprietary information, including to improperly solicit current Autocraft employees.
In defense, the Precision defendants invoked the TCPA, seeking dismissal because the “legal action” “is based on, relates to, or is in response to” the defendants’ exercise of the right of association and free speech. Autocraft sought to prevent application of the TCPA by arguing that its claims sought to remedy theft and misuse of trade secrets, which was distinguishable from “communications” or “free expression” under the TCPA, and that the First Amendment does not prohibit restrictions on the unauthorized disclosure of confidential information.
In ruling against Autocraft, the Austin Court of Appeals applied the TCPA and held that the basis for Autocraft’s claims – the alleged communications between defendants and Precision employees, and between defendants and Autocraft employees – were “communications” within the meaning of the TCPA. Further, the court found nothing in the text of the TCPA limiting its application to lawsuits based on a party’s exercise of constitutional rights.
Dallas Court of Appeals
TCPA does not protect communications in furtherance of a scheme to misappropriate confidential company information
The Dallas Court of Appeals recently analyzed the scope of the TCPA’s protections in Dyer v. Medoc Health Servs., LLC, 2019 WL 1090733 (Tex. App.—Dallas Mar. 8, 2019, pet. filed). That case involved claims of misappropriation of trade secrets, tortious interference, civil conspiracy, and conversion brought by a healthcare management services company against a competing company and its owner.
The defendants filed a motion to dismiss the claims under the TCPA, arguing that their right to associate with one another to pursue the “common interest” of taking confidential company information to steal business was protected under the TCPA, thus entitling them to dismissal of all claims against them.
While the court acknowledged that other Texas Courts of Appeal have applied the TCPA’s protection of the right of association to communications between alleged tortfeasors made in furtherance of the “common interest” of using misappropriated information for a competing business, the court ultimately denied the defendants’ anti-SLAPP motion. In doing so, it concluded that the text messages were “private communications related to an alleged conspiracy between the two men and did not involve public or citizen’s participation” and thus, it would be “illogical” to apply the TCPA to such communications.
The court supported this narrowed interpretation of the TCPA with the decision below issued by the Fort Worth Court of Appeals just two weeks earlier. A petition for review has been filed in Dyer, so all eyes are on the Texas Supreme Court to weigh in on application of the TCPA in misappropriation cases.
Two more panels of the Dallas Court of Appeals panel upheld the trial court’s denial of a TCPA Motion to Dismiss. In Encore Enterprises, Inc. v. Shettty, 2019 WL 189316 (Tex. App.—Dallas Apr. 29, 2019, no pet. history), the plaintiff claimed he told the company about allegedly illegal aspects of a financial transaction and that his employment was terminated as a result.
Encore filed a separate lawsuit to enjoin Shetty from disclosing confidential information. Shetty claimed that his communications were a matter of public concern. Encore then attempted to get the wrongful termination suit dismissed with a TCPA Motion to Dismiss, which was denied by the trial court. In affirming the trial court’s refusal to dismiss Shetty’s wrongful termination case, the Dallas Court of Appeals noted that the employee’s lawsuit was based on his own communications—not the communications of the party seeking dismissal. The TCPA applies only if a plaintiff’s lawsuit is based on the defendant’s communications regarding a matter of public concern. Accordingly, the Dallas Court of Appeals upheld the trial court ruling that the defendant failed to show that the lawsuit was based on its exercise of the right to free speech or association.
Similarly, in Stroud v. Clearview Energy, 2019 WL 1930176 (Tex. App.—Dallas, May 1, 2019, no pet. history), the Court affirmed the trial court’s order denying a former employee’s motion to dismiss claims for breach of fiduciary duty, conspiracy, and violations of her noncompete agreement. The Court held that the former employee’s communications, and the former employer’s lawsuit against her, were not based on, related to, or in response to any matter of public concern. Accordingly, the trial court’s denial of the motion to dismiss was affirmed.
Most recently, the Dallas Court of Appeals heard oral argument on May 14, 2019 in a case that will be the first time for a Texas court of appeals to consider whether the TCPA preempts the narrower Texas Covenants Not to Compete Act. One of the panelists, Justice Molberg, wrote the opinion in Dyer, and has been critical of broad application of the TCPA beyond First Amendment cases.
Fort Worth Court of Appeals
TCPA’s right of association does not protect communications unless such interest is shared by the public
In Kawcak v. Antero Res. Corp., No. 02-18-00301-CV, 2019 WL 761480 (Tex. App.—Fort Worth Feb. 21, 2019, pet. filed), Antero Resources sued a former employee for breach of fiduciary duty. The employee filed a motion to dismiss the lawsuit under the TCPA, arguing that his communications with his co-conspirator made in pursuit of their common interest of running an alleged illegal kickback scheme were protected under the TCPA’s broad definition of the “exercise of the right of association.”
While acknowledging that the employee’s argument has support in both the text of the TCPA and Texas case law, the court went on to criticize that view, noting that such an interpretation “turns what many believe is a scalpel used to explore whether a lawsuit suppresses the exercise of constitutional rights into a maul that can be wielded against almost any conspiracy claim, theft-of-trade-secrets claim, or tortious interference claim when that claim involves more than one actor producing the interference.”
The court ultimately concluded that the “common interest” referred to in the TCPA’s definition of right of association must be shared by the public or, at minimum, a group of people and not just two individuals conspiring together.
The Texas Courts of Appeal are not united in their application of the TCPA, leading to uncertainty and inconsistency for litigants. Practitioners are watching to see whether this issue will be resolved by new legislation or whether the Texas Supreme Court will clarify the issue by accepting one of the pending Anti-SLAPP appeals in Dyer or Kawcak. For now, litigants in Dallas and Fort Worth should be wary of filing Anti-SLAPP motions to dismiss as a matter of course, as the Courts of Appeals appear ready to slap back at expansive applications of the statute.
For assistance with employment and workplace disputes, contact Clouse Brown PLLC. Our attorneys are available to assist employers and business owners in solving problems dealing with trade secret disputes, covenants not to compete, and breach of fiduciary duty. We also negotiate, draft, litigate, and arbitrate employment contracts for senior-level and C-suite executives.