Opinion
NO. 01-19-00494-CV
04-07-2020
DIOGU LAW FIRM PLLC, Appellant v. EXPERIENCE INFUSION CENTERS LLC AND JAMES RUTHERFORD, Appellees
On Appeal from the 127th District Court Harris County, Texas
Trial Court Case No. 2019-36379
MEMORANDUM OPINION
The Diogu Law Firm sued a former client, and the former client counterclaimed. Diogu sought dismissal of the counterclaims under the Texas Citizens Participation Act. Because we conclude the TCPA does not apply to this fee dispute between a law firm and its former client, we affirm the trial court's order denying the motion to dismiss.
See TEX. CIV. PRAC. & REM. CODE § 27.001-.011. This TCPA case is decided under the version of the statute in effect before the September 1, 2019 amendments.
Background
This legal action began as a fee dispute between the Diogu Law Firm PLLC and its former client, Experience Infusion Centers LLC.
EIC sued Aetna Life Insurance Company. Diogu represented EIC. The extent of representation is disputed. After a time, EIC sought a change in representation and hired the Packard Law Firm. The record contains evidence of an agreement between EIC, Diogu, and Packard specifying the percentage of contingency fees Diogu would receive if it continued to participate in the representation (25 percent of the fees) and the percentage it would receive if it did not (10 percent of the fees), with the majority of the fees going to new counsel, Packard. According to Packard, Diogu chose not to further participate.
Some 18 months later, Packard negotiated a settlement between EIC and Aetna in the federal court action. Diogu intervened, asserting a claim for 95 percent of the attorney's fees, with only 5 percent going to Packard. The federal court denied the intervention but placed the disputed attorney's fees into the registry of the court.
Afterward, Diogu sued EIC and its Chief Executive Officer, Jim Rutherford, in district court in Harris County, alleging that they breached Diogu's fee agreement. EIC and Rutherford (collectively, EIC) answered and denied any written fee agreement existed between EIC and Diogu outside the EIC-Diogu-Packard agreement, which Diogu failed to mention in its pleading. In addition to pleading a defense to Diogu's breach-of-contract claim, EIC asserted three counterclaims against Diogu: (1) a request for declaratory judgment regarding the fees owed, (2) a claim for breach of the fiduciary duties Diogu owed EIC, and (3) a claim for defamation based on comments by Diogu's attorney-owner about EIC and Jim Rutherford.
Diogu filed a motion to dismiss EIC's counterclaims under the Texas Citizens Participation Act. The trial court held a hearing and, at the conclusion, announced its ruling to deny Diogu's TCPA motion because the commercial-speech exemption applied. The trial court specifically cited an opinion of this Court in explaining its analysis. That opinion is North Cypress Medical Center Operating Co. GP, LLC v. Norvil, 580 S.W.3d 280 (Tex. App.—Houston [1st Dist] 2019, pet. denied). Diogu appealed.
The Texas Citizens Participation Act
Diogu filed its motion to dismiss EIC's counterclaims under the Texas Citizens Participation Act. See TEX. CIV. PRAC. & REM. CODE § 27.001-.011. The TCPA is found in Chapter 27 of the Civil Practice and Remedies Code, which is titled, "Actions Involving the Exercise of Certain Constitutional Rights." The TCPA's purpose is to protect "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). It does so by creating a "set of procedural mechanisms through which a litigant may require, by motion, a threshold testing of the merits of legal proceedings or filings that are deemed to implicate the expressive interests protected by the statute, with the remedies of expedited dismissal, cost-shifting, and sanctions for any found wanting." Serafine v. Blunt, 466 S.W.3d 352, 369 (Tex. App.-Austin 2015, no pet.) (Pemberton, J., concurring); see TEX. CIV. PRAC. & REM. CODE § 27.003-.009.
A. TCPA's dismissal provision and relevant statutory definitions
Section 27.003 of the TCPA provides that a party may file a motion to dismiss a legal action that "is based on, relates to, or is in response to [that] party's exercise of" one of three rights: free speech, petition, or association. TEX. CIV. PRAC. & REM. CODE § 27.003(a). The Legislature defined "[l]egal action" as "a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal or equitable relief." Id. § 27.001(6). The Legislature also statutorily defined the three sets of rights protected by TCPA summary-dismissal procedures. Id. id. § 27.001(3) (defining "exercise of the right of free speech" as "a communication made in connection with a matter of public concern"); id. § 27.001(4)(A)(i) (defining "exercise of the right to petition" as, among other things, "a communication in or pertaining to . . . a judicial proceeding"); id. § 27.001(2) (defining "exercise of the right of association" "a communication between individuals who join together to collectively express, promote, pursue, or defend common interests").
B. TCPA's shifting burdens
When a movant—here, Diogu—seeks dismissal under the TCPA, the movant has the initial burden to show by a preponderance of the evidence that the nonmovant has asserted a "legal action" based on, related to, or in response to the movant's exercise of one of three rights delineated in the statute. Id. § 27.005(b). If the movant meets that burden, the burden shifts to the nonmovant.
The nonmovant—here, EIC—has the burden to establish by clear and specific evidence a "prima facie case for each essential element of the claim in question." Id. § 27.005(c). This generally "requires only the minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true." In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (orig. proceeding) (internal quotation marks and citation omitted); see, e.g., In re Lipsky, 460 S.W.3d at 590 (explaining that Legislature's use of "prima facie case" in chapter 27 implies minimal factual burden).
The trial court considers the pleadings and any supporting and opposing affidavits to evaluate whether each party has met its burden. TEX. CIV. PRAC. & REM. CODE § 27.006(a); In re Lipsky, 460 S.W.3d at 587. In addition to the pleadings and affidavits, "a trial court may, but is not required to, hear live testimony and receive the submission of documentary evidence" in determining whether to grant or deny a motion to dismiss. Batra v. Covenant Health Sys., 562 S.W.3d 696, 707 (Tex. App.—Amarillo 2018, pet. denied); see TEX. CIV. PRAC. & REM. CODE § 27.006(b). A trial court considers the pleadings and evidence in the light most favorable to the nonmovant. Porter-Garcia v. Travis law Firm, P.C., 564 S.W.3d 75, 84 (Tex. App.—Houston [1st Dist.] 2018, pet. denied).
Dismissal may be required, notwithstanding the nonmovant's evidence proffered to meet its burden, if the movant establishes "by a preponderance of the evidence each essential element of a valid defense to the nonmovant's claim." TEX. CIV. PRAC. & REM. CODE § 27.005(d).
C. Exemptions to applicability of TCPA dismissal procedures
A nonmovant, like EIC, can avoid the TCPA's burden-shifting requirements by showing that one of the TCPA's several exemptions applies. See TEX. CIV. PRAC. & REM. CODE § 27.010. Among them is the commercial-speech exemption, Id. § 27.010(b); see Bejarano v. Dorgan, No. 03-19-00182-CV, 2019 WL 4458798, at *2 (Tex. App.—Austin Sept. 18, 2019, no pet.) (mem. op.) (using term commercial-speech exception). It provides that the TCPA does not apply to a legal action against a defendant-movant who is "primarily engaged in the business of selling or leasing goods or services, if the statement or conduct arises out of the sale or lease of goods, services, or an insurance product, insurance services, or a commercial transaction in which the intended audience is an actual or potential buyer or customer." TEX. CIV. PRAC. & REM. CODE § 27.010(b). The party asserting the commercial-speech exemption has the burden to prove the exemption applies. Schmidt v. Crawford, 584 S.W.3d 640, 653 (Tex. App.—Houston [1st Dist.] 2019, no pet.).
D. Standard of review
We review de novo a trial court's ruling on a TCPA motion to dismiss. Better Bus. Bureau of Metro. Hous., Inc. v. John Moore Servs., Inc., 441 S.W.3d 345, 353 (Tex. App.—Houston [1st Dist.] 2013, pet. denied). To the extent resolution of this appeal turns on construction of the TCPA, we review that de novo as well. Lippincott v. Whisenhunt, 462 S.W.3d 507, 509 (Tex. 2015). When construing the TCPA, as with any other statute, our objective is to give effect to the legislative intent, looking first to the statute's plain language. Id. If that language is unambiguous, "we interpret the statute according to its plain meaning." Id. Additionally, we construe the TCPA "liberally to effectuate its purpose and intent fully." TEX. CIV. PRAC. & REM. CODE § 27.011(b); see State ex rel. Best v. Harper, 562 S.W.3d 1, 11 (Tex. 2018).
The Commercial-Speech Exemption Applies
The commercial-speech exemption, when applicable, prevents a party defending against a legal action from using the summary-dismissal provisions in the TCPA to have the action dismissed. See North Cypress, 580 S.W.3d at 285-86. The Texas Supreme Court has identified four elements to the commercial-speech exemption:
(1) the defendant was primarily engaged in the business of selling or leasing goods or services;Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018) (per curiam); TEX. CIV. PRAC. & REM. CODE § 27.010(b). As applicable here, a defending party cannot invoke the TCPA's protections if the context of the party's alleged exercise of a statutorily recognized right is as a seller of services making a statement or engaging in conduct in that capacity to an intended audience of customers of those services.
(2) the defendant made the statement or engaged in the conduct on which the claim is based in its capacity as a seller or lessor of those goods and services;
(3) the statement or conduct at issue arose out of a commercial transaction involving the kind of goods or services that the defendant provides; and
(4) the intended audience of the statement or conduct were actual or potential customers of the defendant for the kind of goods or services the defendant provides.
Diogu sued EIC to recover fees it claimed were due for legal services rendered. EIC counterclaimed for breach of fiduciary duty and defamation, as well as a request for declaratory judgment on the fees owed. Diogu asserts that EIC's counterclaims arise out of its exercise of the right of free speech and the right to petition, pointing to statements made in the judicial proceeding to collect its fee.
The trial court concluded that this scenario is markedly similar to the one presented in North Cypress, 580 S.W.3d 280, in which this Court held the commercial-speech exemption applied. We agree.
In North Cypress, a medical facility filed a hospital lien on its patient's pending causes of action against an alleged tortfeasor. Id. at 282. The patient, Angeline Norvil, filed a petition for declaratory judgment, seeking a determination of the parties' rights and, specifically, a determination of what qualifies as a reasonable charge for the services the hospital provided. Id. at 283. The hospital filed a TCPA motion, seeking dismissal of Norvil's suit on the argument that her suit was based on the hospital's filing of a lien, which was a communication made in the exercise of the hospital's right of free speech and right to petition. Id. Norvil argued the commercial-speech exemption applied, making the TCPA's summary-dismissal procedures unavailable to the hospital. Id. The hospital responded that the exemption did not apply because its lien was not filed for the purpose of securing sales in goods or services and the intended audience of the lien was not actual or potential buyers or customers, referencing the second and fourth Castleman elements. Id. at 286. The trial court held that the commercial-speech exemption applied, and a panel of this Court affirmed. Id.
This Court rejected the hospital's first argument that its lien was not filed for the purpose of securing sales in services. The hospital filed the lien to recover fees for services it rendered to Norvil. In addition to the lien, the hospital filed counterclaims against Norvil. The hospital's efforts arose out of the commercial transaction between the hospital and Norvil, whereby the hospital provided services in exchange for a fee. The hospital filed the lien to complete that transaction and collect from Norvil the fee it claimed was due. See id. (noting hospital liens against patients' tort recoveries are claims against patients).
This Court rejected the hospital's second argument as well that its intended audience was not its customer. The purpose of filing a hospital lien is to assert a claim against a patient for unpaid fees. See id.. In essence, the hospital was making a demand on Norvil to pay the amount owed. Thus, this Court reasoned, Norvil was a member of the lien's intended audience. Id.
Diogu makes the same two arguments here, and we likewise reject them. Regarding the second Castleman element, Diogu sued EIC for unpaid services. That suit arose out of a commercial transaction through which Diogu purportedly provided legal services for a fee. Diogu's statements and conduct were undertaken to complete that transaction and collect the fee it claimed was due. See id. at 286. Regarding the fourth Castleman element, Diogu's suit demanded payment from EIC for services Diogu claimed to have provided. EIC, therefore, was a member of the statement or conduct's intended audience. See id.
Following North Cypress, we conclude the commercial-speech exemption applies.
Diogu's Remaining Arguments Are Unavailing
Diogu asserts two arguments why, even if the commercial-speech exemption applies, the trial court nonetheless erred in denying his motion. First, he argues the trial court could not rely on the commercial-speech exemption because it was not raised by one of the parties before the trial court considered its applicability. For this proposition, it cites two cases from the Austin Court of Appeals: Rose v. Scientific Machine & Welding, Inc., No. 03-18-00721-CV, 2019 WL 2588512 (Tex. App.—Austin June 25, 2019, no pet.) (mem. op.), and Giri v. Estep, No. 03-17-00759-CV, 2018 WL 2074652 (Tex. App.—Austin May 4, 2018, pet. denied) (mem. op.). Neither supports its argument because neither involves a party's failure to raise an exemption before the trial court relied on it.
Although we did not locate a case directly on point—i.e., that addresses whether a TCPA exemption must first be raised by the party who would benefit from its application—we must conclude that such a requirement is inconsistent with the body of law analyzing the TCPA. For example, the Texas Supreme Court held last year that, when intermediate courts consider TCPA appeals, the courts should not "impose[] too strict a view of error preservation" in deciding whether various arguments are properly before the courts. See Adams v. Starside Custom Builders, LLC, 547 S.W.3d 890, 896 (Tex. 2018). The Court noted it historically had not "cabined" its TCPA analysis to the "precise legal arguments or record references a moving party made to the trial court regarding the TCPA's applicability." Id.; see Redflex Traffic Sys., Inc. v. Watson, No. 02-16-00432-CV, 2017 WL 4413156, *5-6 (Tex. App.—Fort Worth Oct. 5, 2017, no pet.) (considering commercial-speech exemption sua sponte). The Court directed intermediate courts to engage in "a holistic review of the pleadings" to decide whether the TCPA applies. Adams, 547 S.W.3d at 897.
Given that the parties engaged the issue whether the commercial-speech exemption applies during the hearing on Diogu's TCPA motion, both parties briefed the issue on appeal, and our review of the pleadings and evidence support the trial court's conclusion that the commercial-speech exemption applies, we cannot agree with Diogu's position that the chain of events, with the trial court raising the issue at the hearing before EIC did, requires reversal.
Second, Diogu argues that, under the TCPA's burden-shifting provisions, it would have met its burden to establish a defense to EIC's legal action and, therefore, should have been granted dismissal under the TCPA even if the exemption applies. See TEX. CIV. PRAC. & REM. CODE § 27.005(d) (stating that "court shall dismiss a legal action against the moving party if the moving party establishes by a preponderance of the evidence each essential element of a valid defense to the nonmovant's claim").
If a legal action is exempted from the TCPA, then the TCPA does not apply, and a movant cannot invoke the TCPA's protections to obtain dismissal under the statute. State ex rel. Best, 562 S.W.3d at 11; Morrison v. Profanchik, 578 S.W.3d 676, 680 (Tex. App.—Austin 2019, no pet.) ("If an action falls under a TCPA exemption, the TCPA does not apply and may not be used to dismiss the action."); Callison v. C&C Pers., LLC, 09-19-00014-CV, 2019 WL 3022548, at *5 (Tex. App.—Beaumont July 11, 2019, pet. denied) ("If an action is exempt, the TCPA does not apply and cannot be used to dismiss the action."); see also Staff Care, Inc. v. Eskridge Enters., LLC, No. 05-18-00732-CV, 2019 WL 2121116, at *7 (Tex. App.—Dallas May 15, 2019, no pet. h.) (mem. op.) (after concluding the TCPA did not apply, stating that court need not consider whether movant would have met its burden had it shifted).
We have concluded the commercial-speech exemption applies. Thus, the dismissal provisions within the TCPA are unavailable to Diogu. We therefore do not reach the issue whether any party would have met the burden assigned that party under the statute. And the prospect that Diogu may have met its burden had the TCPA applied cannot support a claim of trial court error in denying its motion.
Diogu raises its defensive issues only within the context of arguing the trial court erred in denying its TCPA motion. TEX. CIV. PRAC. & REM. CODE § 27.005(d) (providing for dismissal if, after burden shifts to movant, the movant establishes "by a preponderance of the evidence each essential element of a valid defense to the nonmovant's claim."). Our holding that Diogu's defensive arguments do not support dismissal under the TCPA does not limit Diogu from raising defensive issues through other mechanisms or at other phases of the litigation.
Having rejected Diogu's arguments, we conclude the trial court did not err in denying Diogu's TCPA motion.
Conclusion
We affirm.
Sarah Beth Landau
Justice Panel consists of Justices Lloyd, Landau, and Countiss.