Summary
noting that Rule 202 petitions seek an equitable remedy and holding they, therefore, meet the TCPA definition of "legal action"
Summary of this case from Tex. Equal Access Fund v. MaxwellOpinion
No. 07-19-00182-CV
01-02-2020
IN RE: Petition of KRAUSE LANDSCAPE CONTRACTORS, INC.
OPINION
After appellee, Krause Landscape Contractors, Inc., filed a "petition requesting depositions to investigate potential claim or suit," see TEX. R. CIV. P. 202, appellants, Pasqual Perez and Shannon Hughes, moved to dismiss the petition under the Texas Citizens Participation Act (TCPA). See TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.001 - .011 (West 2015). The trial court denied the motion to dismiss and authorized Krause's pre-suit depositions. Perez and Hughes filed this interlocutory appeal. See id. § 51.014(a)(12) (West Supp. 2018) (authorizing interlocutory appeal of denial of TCPA motion to dismiss). Concluding that pre-suit depositions under Rule 202 are legal actions within the scope of the TCPA and that Krause failed to establish its prima facie case by clear and convincing evidence, we reverse the judgment of the trial court and remand for further proceedings.
Factual and Procedural Background
Perez and Hughes are both former employees of Krause. In early 2019, Perez, a maintenance foreman, and Hughes, Director of Human Resources, called in sick to work. On that same day, Krause was informed by an existing customer that Perez had approached him about acquiring his landscaping services from Perez's newly formed landscaping company. After learning of this information, Krause contacted other customers, many of whom indicated that they had been approached by Perez about moving their business from Krause to Perez's new company. Krause attempted to contact Perez but was unsuccessful.
Upon discovering that Perez had started his own landscaping company, Krause sent employees to recover the work vehicle assigned to Perez. When Krause's employees arrived at Perez's residence and acquired the truck, they found that it was emptied of tools and personal property belonging to Krause. Upon this discovery, Krause employed an attorney to send a letter to Perez demanding the return of Krause's property. After receiving the letter, Perez returned a portion of the property. However, Krause contends that its records reflect that Perez maintains possession of certain equipment and items purchased by Perez using his Krause company credit card.
Hughes went multiple consecutive days without attending her job with Krause at the same time that Perez left his. She did not return any of Krause's numerous attempts to contact her. As a result, Krause determined that Hughes had abandoned her job. After discovering that certain information was missing from Hughes's computer, Krause had her computer analyzed to determine whether Hughes had deleted any information from her company computer before abandoning her position. The analysis revealed that Hughes had deleted numerous files and other data from her work computer in the days leading up to the abandonment of her job.
On April 4, 2019, Krause filed its petition requesting depositions of Perez and Hughes to investigate potential claims or suit. Appellants responded by filing a motion to dismiss under the TCPA. After holding a hearing, the trial court denied appellants' motion to dismiss and granted Krause's petition to depose Perez and Hughes. It is from this order that appellants timely filed their interlocutory appeal.
Perez and Hughes present three issues by their appeal. In their first issue, appellants contend that the trial court committed reversible error by concluding that Krause's Rule 202 petition is not a "petition" under the TCPA. By their second issue, appellants contend that the trial court committed reversible error by failing to apply the TCPA's procedures to Krause's Rule 202 petition. By their third issue, appellants contend that, even if the TCPA does not apply, the trial court erred in granting Krause's petition under the standards of Rule 202.
Law and Analysis
Does the TCPA Apply to Krause's Rule 202 Petition?
By their first issue, appellants argue that the trial court committed reversible error when it concluded that Krause's Rule 202 petition is not a "petition" under the TCPA. This is an issue of first impression in this Court.
The TCPA is "sometimes referred to as an anti-SLAPP law—the acronym standing for strategic lawsuit against public participation." Hughes v. Giammanco , 579 S.W.3d 672, 676-77 (Tex. App.—Houston [1st Dist.] 2019), reh'g granted and appeal dism'd as moot by , No. 01-18-00771-CV, 2019 WL 3331124, 2019 Tex. App. LEXIS 6395 (Tex. App.—Houston [1st Dist.] July 25, 2019) (quoting KBMT Operating Co. v. Toledo , 492 S.W.3d 710, 713 n.6 (Tex. 2016) ). The TCPA was designed "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 ANN. § 27.002 ; see In re Lipsky , 460 S.W.3d 579, 586-87 (Tex. 2015). To effectuate this purpose, the Act establishes a procedure that enables a party to seek an expeditious dismissal of frivolous claims and recover attorney's fees and sanctions. TEX. CIV. PRAC. & REM. CODE ANN. § 27.003 ; Dow Jones & Co. v. Highland Capital Mgmt., L.P. , 564 S.W.3d 852, 855 (Tex. App.—Dallas 2018, pet. denied).
The process established by the TCPA involves a shifting burden. The first step requires the party moving for dismissal to show, by a preponderance of the evidence, that the non-movant's " ‘legal action’ is ‘based on, relates to, or is in response to [the movant's] exercise of the right of free speech, right to petition, or right of association,’ as those rights are statutorily defined." Hughes , 579 S.W.3d at 677 (citing TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.001(2) - (4), .003(a), .005(b) ). If the movant meets this initial burden, the burden shifts to the non-movant to establish "by clear and specific evidence a prima facie case for each essential element of the claim in question." TEX. CIV. PRAC. & REM. CODE ANN. § 27.005(c) ; DeAngelis v. Protective Parents Coal. , 556 S.W.3d 836, 848 (Tex. App.—Fort Worth 2018, no pet.). When assessing a motion to dismiss under the TCPA, the court must consider pleadings, evidence, and supporting and opposing affidavits that state the facts upon which the liability or defense is based. TEX. CIV. PRAC. & REM. CODE ANN. § 27.006(a). If the court dismisses the legal action, it is required to award court costs and reasonable attorney's fees to the movant and may award sanctions against the party who filed the legal action. Id. § 27.009(a); DeAngelis , 556 S.W.3d at 848. In the present case, the threshold inquiry is whether a Rule 202 petition is a "legal action" subject to the TCPA. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.005(b). In making this determination, we must construe the statute. We review issues of statutory construction de novo. Hughes , 579 S.W.3d at 677 ; In re Elliott , 504 S.W.3d 455, 463 (Tex. App.—Austin 2016, orig. proceeding). As a reviewing court, we must enforce the statute "as written" and "refrain from rewriting text that lawmakers chose." Dow Jones & Co. , 564 S.W.3d at 854 (quoting Entergy Gulf States, Inc. v. Summers , 282 S.W.3d 433, 443 (Tex. 2009) ). The plain meaning of the text used in a statute is the best expression of legislative intent, unless a different meaning is provided by legislative definition or is apparent from the context, or the plain meaning would lead to an absurd result. Hughes , 579 S.W.3d at 677 ; In re Elliott , 504 S.W.3d at 463. The TCPA itself instructs courts to construe the Act "liberally to effectuate its purpose and intent fully." TEX. CIV. PRAC. & REM. CODE ANN. § 27.011(b).
Under the TCPA, a "legal action" includes 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) (emphasis added). Texas Rule of Civil Procedure 202.1 states, "A person may petition the court for an order authorizing the taking of a deposition...." TEX. R. CIV. P. 202.1 (emphasis added). Thus, on its face, a Rule 202 petition falls within the description of a "legal action" covered by the TCPA. In re Elliott , 504 S.W.3d at 463. A petition for pre-suit discovery filed under Rule 202 is a petition or other judicial pleading or filing that requests legal or equitable relief and, as such, falls into the definition of a "legal action" under the TCPA. DeAngelis , 556 S.W.3d at 849 ; In re Elliott , 504 S.W.3d at 464-65. Consequently, we conclude that Krause's Rule 202 petition is a legal action that is subject to the dismissal procedure under the TCPA.
Appellants point out that the Legislature has amended the TCPA in a manner that appears to exclude Krause's Rule 202 petition from the definition of a legal action covered by the TCPA. Act of June 2, 2019, 86th Leg., R.S., ch. 378, § 1, 2019 Tex. Gen. Laws 378. However, this amendment did not take effect until September 1, 2019. Id. The amendment of this provision of the TCPA does not affect the operation of the prior version of the statute. TEX. GOV'T CODE ANN. § 311.031(a)(1) (West 2013). This intent is made especially clear when the Legislature expressly states that the amendment "applies only to an action filed on or after the effective date" of the amendment. Act of June 2, 2019, 86th Leg., R.S., ch. 378, §§ 11, 12, 2019 Tex. Gen. Laws 378. Consequently, we are not called upon in this appeal to construe the effect of the definition of "legal action" under the amended version of the statute. Rather, this appeal requires us to construe the definition of "legal action" as it was defined in the pre-amended version of the statute and we conclude that, under that definition, a Rule 202 petition falls within the class of legal actions covered by the Act.
Krause contends that a Rule 202 petition is not a legal action, in spite of it being initiated by a petition, because it seeks depositions and not legal remedies. While a Rule 202 petition does not seek legal remedies in the traditional sense, it does seek an equitable remedy that falls within the ambit of a TCPA legal action. In re Elliott , 504 S.W.3d at 464-65.
In relation to its first issue, Krause contends that appellants have not met their initial burden to show that the claims which underlie Krause's Rule 202 petition are based on, relate to, or are in response to appellants' exercise of the right of free speech, petition, or association. Specifically, Krause contends that appellants have not shown how Krause's claims of conversion and theft are based on, related to, or in response to appellants' exercise of their constitutional rights. Krause also contends that the legislative amendment to the TCPA referenced above expressly excludes actions arising from employer-employee relationships that seek recovery for misappropriation of trade secrets or corporate opportunities. Act of June 2, 2019, 86th Leg., R.S., ch. 378, § 9, 2019 Tex. Gen. Laws 378. While we acknowledge these contentions as being valid, we reiterate that the 2019 amendments to the TCPA did not take effect until September 1, 2019, long after this case accrued and was filed. See TEX. GOV'T CODE ANN. § 311.031(a)(1) (amendment of statute does not affect operation of prior version). Since a Rule 202 petition seeks a deposition that will address all of the potential claims that might be brought by the petitioner, we conclude that a Rule 202 petition is covered by the TCPA if any of the potential claims underlying the request are based on or relates to the opposing party's exercise of the enumerated constitutional rights. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.003(a). We conclude that Krause's Rule 202 petition seeks the depositions of Perez and Hughes based on or related to their exercise of their free speech, concerning their discussions with current Krause clients, and association, concerning their association with current Krause clients and employees, rights.
Because we conclude that a Rule 202 petition is a legal action under the TCPA, we conclude a Rule 202 petition is subject to the TCPA's dismissal process. As such, we sustain appellants' first issue.
Did Krause Prove its Prima Facie Case by Clear and Specific Evidence?
Because we have concluded that Krause's Rule 202 petition is a legal action covered by the TCPA and that Krause's claims relate to appellants' exercise of their free speech and association rights, we must now consider whether the trial court erred in concluding that Krause met its burden to show by clear and specific evidence a prima facie case for "each essential element of the claim in question." Id. § 27.005(c).
As stated above, when the TCPA applies to a claim, the nonmovant may avoid dismissal by providing clear and specific evidence that establishes a prima facie case for each element of the claim in question. Id. ; DeAngelis , 556 S.W.3d at 853. In making this determination, we must determine what are the essential elements of a Rule 202 petition. Rule 202 permits a person to petition the court for authorization to take a deposition before filing a suit to perpetuate or obtain the person's testimony or that of another for use in an anticipated suit or to investigate a potential claim or suit. TEX. R. CIV. P. 202.1. Rule 202 does not require a petitioner to plead a specific cause of action; rather, it requires only that the petitioner state the subject matter of the anticipated action, if any, and the petitioner's interest therein. DeAngelis , 556 S.W.3d at 853. Ultimately, we agree with our sister court's analysis in DeAngelis that,
Rule 202's purpose and words compel us, in the context of a TCPA challenge to a request for Rule 202 pre-suit discovery, to hold that the applicant must establish by clear and specific evidence a prima facie case for the elements of obtaining a pre-suit deposition, namely that:
(1) allowing the petitioner to take the requested deposition may prevent a failure or delay of justice in an anticipated suit[;] or
(2) the likely benefit of allowing the petitioner to take the requested deposition
to investigate a potential claim outweighs the burden or expense of the procedure.
Id. at 854 (citing TEX. R. CIV. P. 202.4(a), and In re Jorden , 249 S.W.3d 416, 423 (Tex. 2008) (orig. proceeding)).
Having concluded what essential elements are involved with a Rule 202 petition, we must now determine whether Krause established, by clear and specific evidence, the prima facie elements that entitle it to pre-suit discovery under Rule 202. TEX. CIV. PRAC. & REM. CODE ANN. § 27.005(c). A prima facie case is established by "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. In other words, a prima facie case is established by the minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true. Grant v. Pivot Tech. Solutions, Inc. , 556 S.W.3d 865, 882 (Tex. App.—Austin 2018, pet. filed). The TCPA requires that a prima facie case be established by "evidence which is ‘clear and specific’—‘clear’ meaning ‘unambiguous,’ ‘sure or free from doubt,’ and ‘specific’ meaning ‘explicit’ or ‘referring to a particular named thing.’ " Id. Taken together, these elements require that a party "provide enough detail to show the factual basis for its claim, and thus effectively abrogate the utility of mere notice pleading as evidence to that end. Id. (internal quotation marks omitted).
Courts are directed to strictly limit pre-suit discovery under Rule 202 to prevent abuse. In re Wolfe , 341 S.W.3d 932, 933 (Tex. 2011) (orig. proceeding) (per curiam). Such cases may not be used as a license for forced interrogations or to circumvent discovery limitations that would apply in the anticipated suit. Id.
In the present case, Krause indicated in its petition that it wanted to depose Perez and Hughes to "determine whether to file suit against either or both deponents," and "to discover certain facts forming the basis of any potential suit...." Nothing in Krause's petition or evidence indicates that Krause needs to take appellants' depositions to prevent a failure or delay of justice in its potential suit. Thus, to overcome appellants' motion to dismiss, Krause must establish, by clear and specific evidence, that the likely benefit of allowing Krause to take the depositions to investigate its potential claims outweighs the burden or expense of the procedure. DeAngelis , 556 S.W.3d at 854. A Rule 202 petitioner cannot generally rely on its verified pleadings to prove the facts asserted in its petition. Id. at 855.
Krause's petition alleges that the depositions are needed to determine whether a suit should be filed against appellants. Its response to appellants' motion to dismiss alleges that it satisfied its burden by meeting the pleading requirements of Rule 202 and that its attached evidence gives rise to the possibility that Krause could possess claims of conversion, theft of property, theft of trade secrets, and other potential claims against appellants. However, the allegations contained in the petition and the response, as well as the evidence provided, does not clearly and specifically demonstrate the need for Krause to obtain the pre-suit discovery.
Krause's petition and response merely indicate that it desires to investigate potential claims and that the "burden and expense of sitting for depositions is small and inconsequential as compared to the cost of litigation." Such conclusory statements merely reflect the language of Rule 202, which, without including any explanatory facts, is insufficient to meet the burden to establish a prima facie case by clear and specific evidence. Id. at 856 ; In re East , 476 S.W.3d 61, 69 (Tex. App.—Corpus Christi 2014, orig. proceeding). Of most importance, other than simply concluding that it would be true, Krause fails to clearly and specifically identify how the benefit of the pre-suit depositions would outweigh their costs. Without more, this is insufficient to meet Krause's burden under the TCPA dismissal procedure. DeAngelis , 556 S.W.3d at 856-58. This was the conclusion in DeAngelis even though the petitioner in that case agreed to bear the financial costs of the deposition. Id. at 842. Here, Krause did not agree to bear this burden. Further, the record reflects that Krause has amassed significant evidence that it possesses claims against appellants, which leaves the impression that Krause is attempting to use the Rule 202 pre-suit deposition process as a license for forced interrogation of Perez and Hughes. Id. at 855 (citing In re Wolfe , 341 S.W.3d at 933 ). On the other hand, the burden of pre-suit depositions is high because discovery demands are made on individuals or entities before the issues have been identified. In re Cauley , 437 S.W.3d 650, 657 (Tex. App.—Tyler 2014, orig. proceeding) (mem. op.).
Because we have concluded that the TCPA applies to a Rule 202 petition and as Krause failed to discharge its burden to establish a prima facie case for its Rule 202 petition by clear and specific evidence, we conclude that the trial court erred in denying appellants' motion to dismiss. We sustain appellants' second issue.
Did Trial Court Err in Granting Petition Under Rule 202?
Because we have concluded that the trial court erred in denying appellants' motion to dismiss under the TCPA, we need not address appellants' conditional third issue. See TEX. R. APP. P. 47.1.
Conclusion
Having sustained appellants' first two issues, we reverse the trial court's order denying appellants' motion to dismiss and authorizing pre-suit depositions and remand to the trial court with direction that the trial court enter an order granting appellants' motion to dismiss and conduct further proceedings consistent with this opinion.
Pirtle, J., dissenting.
DISSENTING OPINION
Patrick A. Pirtle Justice
The majority concludes that Appellee, Krause Landscape Contractors, Inc., failed to clearly and specifically identify how the benefit of its proposed pre-suit depositions pursuant to Rule 202 of the Texas Rules of Civil Procedure would outweigh the costs associated with the taking of those depositions. Finding that Krause failed to satisfy its burden for relief on the merits, the majority reverses the judgment of the trial court and dismisses this proceeding pursuant to the provisions of the Texas Citizens Participation Act. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.001 - .011 (West 2015 & Pamph. Supp. 2019). Because I find Krause appropriately raised a meritorious claim for relief, I would affirm the judgment of the trial court denying the Motion to Dismiss filed by Appellants, Pasqual Perez and Shannon Hughes. Accordingly, I respectfully dissent.
As more fully discussed in the majority opinion, the TCPA was amended by the 86th Legislature. See Act of June 2, 2019, 86th Leg., R.S., ch. 378, §§ 1-9, 2019 Tex. Gen. Laws 378. Because the Legislature specifically provided that chapter 27 of the Act "applies only to an action filed on or after the effective date" of September 1, 2019, the amendments do not apply to the underlying litigation. See id. at § 11.
BACKGROUND
After Krause filed a "petition requesting depositions to investigate potential claim or suit," Perez and Hughes moved to dismiss the petition under the Texas Citizens Participation Act (TCPA). See id. at § 27.003 (providing a dismissal mechanism in suits that are "based on, relate[d] to, or [are] in response to a party's exercise of the right of free speech ..."). After hearing arguments from counsel for both sides, the trial court denied the motion to dismiss and authorized Krause's pre-suit depositions. Perez and Hughes filed this interlocutory appeal. See id. at § 51.014(a)(12) (West Supp. 2019) (authorizing interlocutory appeal of denial of TCPA motion to dismiss).
Perez and Hughes are both former employees of Krause, who are now believed to be in business in competition with Krause. Due to the loss of certain computer files, missing equipment, and the actual notice of certain customers transferring their business from Krause to Perez, Krause suspects Perez and Hughes of misappropriating certain corporate assets and potentially breaching non-compete agreements. Before locking horns in litigation, Krause seeks to discover, through Rule 202 depositions, facts relevant to any decision to pursue further litigation. During a hearing on the Motion to Dismiss , counsel for Krause represented to the court that "the likely benefit of allowing the deposition to investigate a potential claim outweighs the burden and expense of the procedure." At the conclusion of the hearing, the trial court denied the motion to dismiss filed by Perez and Hughes and granted Krause's petition to depose. It is from this order that Perez and Hughes filed their interlocutory appeal.
Perez and Hughes present three issues. In their first issue, they contend the trial court committed error by concluding that Krause's Rule 202 petition is not a "petition" under the TCPA and by their second issue, they contend that such error was reversible because the trial court failed to apply the TCPA's dismissal procedures to Krause's petition. By their third issue, Perez and Hughes contend that, even if the TCPA does not apply, the trial court erred in granting Krause's petition under the standards of Rule 202.
STANDARD OF REVIEW
We review a trial court's decision to grant or deny a motion to dismiss under an abuse of discretion standard. The test for abuse of discretion is whether the trial court acted without reference to any guiding rules and principles, or, alternatively, whether the trial court's actions were arbitrary and unreasonable based on the circumstances of the individual case. Downer v. Aquamarine Operators, Inc. , 701 S.W.2d 238, 241-42 (Tex. 1985). When reviewing matters committed to the trial court's discretion, a court of appeals may not substitute its judgment for that of the trial court. Bowie Memorial Hospital v. Wright , 79 S.W.3d 48, 52 (Tex. 2002) (citation omitted).
ANALYSIS
The majority opinion concludes Krause's Rule 202 petition is a legal action subject to the TCPA's dismissal process—a conclusion with which I concur. See DeAngelis v. Protective Parents Coal. , 556 S.W.3d 836, 847-48 (Tex. App.—Fort Worth 2018, no pet.). Where I part with the majority is in its further conclusion that the trial court erred in denying the motion to dismiss filed pursuant to the provisions of the TCPA.
The majority concludes that the trial court should have granted Perez and Hughes' motion to dismiss because Krause failed to establish "by clear and specific evidence, the prima facie elements that entitle it to pre-suit discovery under Rule 202." As stated by the majority, a prima facie case is established by the minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true. Grant v. Pivot Tech. Solutions, Inc. , 556 S.W.3d 865, 882 (Tex. App.—Austin 2018, pet. filed). The majority further concludes that under the TCPA, a prima facie case must be established by evidence that is both "clear and specific." Applying appropriate definitions of "clear" and "specific," the majority opines that a Rule 202 petitioner must "provide enough detail to show the factual basis for its claim, and thus effectively abrogate the utility of mere notice pleading as evidence to that end."
Specifically, by applying those standards, the majority concludes Krause failed to establish, by clear and specific evidence, that the benefit of allowing pre-suit discovery outweighed the likely burden or expense of that procedure. The majority places great emphasis on the conclusory nature of the statements of Krause's counsel and the trial court's generalized knowledge that "the burden of pre-suit depositions is high because discovery demands are made on individuals or entities before the issues have been identified." What the majority fails to consider is the discretionary nature of the trial court's decision and its generalized knowledge regarding the benefits of dispute resolution prior to full-blown litigation.
Without the formality of witnesses subject to direct and cross-examination, counsel for both parties outlined what the probable undisputed testimony would be. From that synopsis, the trial court clearly understood that Krause suspected Perez and Hughes of several potential causes of action, including, but not limited to, misappropriation of confidential information, breach of employment covenants, and theft of property—all claims arising out of a prior employment relationship between Krause and Perez and Hughes. In that regard, the undisputed facts underlying the controversy are both clear and specific.
Based upon the standards applicable to a Rule 202 petition, the issues before the trial court, the statements of counsel, the pleadings, and our standard of review, I would defer to the decision of the trial court to deny Perez and Hughes' motion to dismiss. The decision of the majority does nothing more than substitute its decision for that of the trial court. Accordingly, I respectfully dissent.