Opinion
No. 21-0641
06-30-2023
MCLANE CHAMPIONS, LLC and R. Drayton McLane, Jr., Petitioners, v. HOUSTON BASEBALL PARTNERS LLC, Respondent
Thomas M. Farrell, Houston, Ronald G. Franklin, Charles Bedford Hampton, for Respondent. Dana M. Seshens, Greg D. Andres, Thomas Francis Hetherington, Andrew Kasner, Houston, Brian M. Burnovski, for Petitioner Comcast Corporation and NBC Universal Media, LLC. Geoffrey Alan Berg, Bernard Grover Johnson III, Wayne Fisher, Houston, for Petitioner McLane, Junior, R. Drayton. Charles L. Babcock, Nancy Wells Hamilton, Houston, Harris Huguenard, David J. Beck, Houston, Brett David Kutnick, Dallas, for Petitioner McLane Champions, LLC. Amy Befeld, E. Lee Parsley, for Amicus Curiae Texans for Lawsuit Reform.
Thomas M. Farrell, Houston, Ronald G. Franklin, Charles Bedford Hampton, for Respondent.
Dana M. Seshens, Greg D. Andres, Thomas Francis Hetherington, Andrew Kasner, Houston, Brian M. Burnovski, for Petitioner Comcast Corporation and NBC Universal Media, LLC.
Geoffrey Alan Berg, Bernard Grover Johnson III, Wayne Fisher, Houston, for Petitioner McLane, Junior, R. Drayton.
Charles L. Babcock, Nancy Wells Hamilton, Houston, Harris Huguenard, David J. Beck, Houston, Brett David Kutnick, Dallas, for Petitioner McLane Champions, LLC.
Amy Befeld, E. Lee Parsley, for Amicus Curiae Texans for Lawsuit Reform.
Justice Lehrmann delivered the opinion of the Court, in which Justice Boyd, Justice Devine, Justice Busby, Justice Bland, Justice Huddle, and Justice Young joined. The Texas Citizens Participation Act provides special procedures allowing parties to obtain early dismissal of meritless claims that implicate the exercise of the rights of free speech, association, and petition. The principal issue in this case, which arises out of the 2011 sale of the Houston Astros, is whether the Act applies to this dispute between private parties to a private business transaction that later generated public interest. The court of appeals assumed that the Act applies, but it held that the plaintiff had met its burden to avoid dismissal and affirmed the trial court's denial of the defendants’ motion to dismiss. We hold that the Act does not apply in the first instance. Accordingly, while we express no opinion on the merits of the plaintiff's claims, we affirm the court of appeals’ judgment.
I. Background
In May 2011, Houston Baseball Partners LLC (Partners), led by Jim Crane, entered into an agreement to purchase the Houston Astros from McLane Champions, LLC (Champions). Surprising as it may seem now, the Astros were struggling both competitively and financially at the time. When Partners purchased the club, the Astros were approximately $200 million in debt and continuing to lose money.
Since the sale closed in November 2011, the Astros have become one of the most consistently successful teams in baseball, playing in four World Series in six years and winning two. See, e.g. , Bradford Doolittle, Dynasty! Love ’em or Loathe ’em, the World Series Champion Astros Are an All-time Team , ESPN (Nov. 5, 2022, 11:17pm), https://www.espn.com/mlb/story/_/id/34957834/2022-world-series-houston-astros-mlb-dynasty (discussing team history).
The deal included not only the team, but also the Astros’ interest in a soon-to-be-launched regional sports network. The Astros had formed the Network with the Houston Rockets to broadcast their games and related content to viewers in the Greater Houston area.
In October 2010, a Comcast Corporation affiliate invested $157.5 million to purchase a 22.5% equity interest in the Network, which was scheduled to launch in October 2012. In addition to its substantial financial investment, Comcast agreed to leverage its experience in launching regional sports networks and negotiating with cable and television service providers to help profitably launch the Network. Given the Astros’ financial position, Partners alleges it viewed the club's interest in the Network as the key asset it was acquiring.
The Astros, the Rockets, and Comcast developed a business plan for the Network to project its expected profitability after launch. Affiliate rates—the fees cable and satellite television providers pay a channel for the right to carry it on their cable or satellite service—would primarily drive the Network's revenues. The affiliate rates underlying the business plan divided potential cable and satellite viewers into geographic zones. The plan assumed that cable and satellite providers would pay a higher affiliate rate for viewers living closer to downtown Houston. As a result, the plan's highest rate applied to potential viewers living in the immediate Houston vicinity.
As a starting point, the business plan used the affiliate rates Comcast had agreed to pay as a "market clearing" rate that other providers would also likely pay. Based on these inputs, Partners valued the Network at around $714 million. This meant that the Astros’ interest in the Network was worth around $332 million.
Whether Comcast's affiliate rates were truly market clearing was crucial to the viability of the Network's business plan. Although Comcast had agreed to the rates underpinning the plan, Comcast's agreement also included a "Most Favored Nation" clause. Pursuant to that clause, if the Network signed agreements with other providers at lower affiliate rates, Comcast would be entitled to reduce its own affiliate rates to equal those lower rates. Consequently, less favorable affiliate agreements could have a snowball effect on the Network's revenues, severely undermining the business plan's viability.
Partners focused much of its due diligence on confirming the Network's valuation. Because the affiliate rates formed the foundation for the business plan, Partners asserts that how those rates were calculated—and who proposed them—was critical to assessing the business plan's viability.
Partners alleges that Champions’ investment bank, Allen & Company, informed Partners that Comcast had proposed the input affiliate rates, that Comcast believed those rates were reasonable and achievable, and that Comcast expected the Network would be able to enter into affiliate agreements with other providers at equivalent rates. On April 12, 2011, Partners met with a Comcast executive who purportedly confirmed each of these representations.
Based primarily on its valuation of the Astros’ interest in the Network, Partners agreed to purchase the Astros from Champions for over $615 million. Shortly after signing the Purchase and Sale Agreement in May 2011, Partners assigned all its rights under the agreement to a wholly owned subsidiary—HBP Team Holdings, LLC (Holdings). Champions, Partners, and Holdings also executed an amendment to the purchase agreement defining Holdings as the Purchaser. However, the agreement's indemnity provision identified affiliates, direct owners, and indirect owners of the Purchaser as "Seller Indemnified Parties." Accordingly, Partners remained a Seller Indemnified Party even after the assignment, and Champions agreed to indemnify such parties for breaches of the purchase agreement.
When the Network launched in 2012, it had not signed affiliate agreements with any providers besides Comcast. Those affiliate agreements that Comcast was able to deliver with other providers post-launch contained affiliate rates far below those outlined in the business plan. Accepting those offers would trigger Comcast's Most Favored Nation clause, lowering the affiliate rates it was required to pay. The Network quickly fell into severe financial distress and was unable to pay media-rights fees to the Astros. Comcast filed an involuntary bankruptcy petition against the Network in September 2013.
As the Network collapsed in December 2012, Partners met with Comcast executives to discuss the Network's alarming financial position. At the meeting, a Comcast executive allegedly admitted that Comcast had always known the Network's business plan was unreasonable and had told the Astros as much well before the purchase agreement's closing. In particular, Comcast first revealed its misgivings about the business plan in 2010. Comcast also allegedly revealed that the affiliate rates that formed the foundation for the plan were proposed by the Astros and the Rockets, not Comcast.
In November 2013, Partners sued Comcast, Champions, and Champions’ owner R. Drayton McLane, Jr. for fraud, negligent misrepresentation, and civil conspiracy. Partners also brought breach-of-contract claims against Champions and McLane. Partners’ fraud and misrepresentation claims are primarily based on the alleged December 2012 revelations that the Astros and the Rockets, not Comcast, originally proposed the affiliate rates and that Comcast and the Astros had always known that the Network's business plan was unreasonable. Comcast removed the case to the bankruptcy court where the Network's involuntary bankruptcy was pending. The bankruptcy court determined that the case should be remanded to state court; over five years after that order was appealed, the district court affirmed and remanded the case.
Unless necessary for context, we refer to Champions and McLane collectively as Champions.
Within three weeks of remand, Champions moved to dismiss Partners’ claims under the Texas Citizens Participation Act (TCPA). Comcast joined the motion, which also challenged Partners’ standing to sue on the ground that only Holdings had an interest under the purchase agreement. In response, Holdings intervened and filed counterclaims against Champions and third-party claims against Comcast identical to those Partners asserted. The trial court denied the TCPA motion.
The court of appeals affirmed. 627 S.W.3d 398, 405 (Tex. App.—Houston [14th Dist.] 2021). The court of appeals first held that Partners had standing to sue despite its assignment of rights under the purchase agreement to Holdings. Id. at 412. Assuming without deciding that the TCPA applied to Partners’ claims, the court then held that Partners had made a prima facie showing for each of its claims by clear and specific evidence. Id. We granted Champions’ petition for review.
Comcast and its subsidiary, NBCUniversal Media, LLC, also petitioned for review; however, Partners nonsuited its claims against those parties after oral argument, and we dismissed Comcast's petition.
II. Discussion
In this Court, Champions continues to challenge Partners’ standing, asserts that the TCPA applies to Partners’ claims, and argues that Partners failed to meet its burden to avoid dismissal. We address these issues in turn.
A. Standing
As an initial matter, Champions argues that Partners lacks standing to sue—and the courts thus lack subject matter jurisdiction over Partners’ claims—because Partners assigned all its rights under the purchase agreement to Holdings. Partners responds that Champions is challenging its capacity to sue, not standing in the true constitutional, and jurisdictional, sense of the term.
Lack of constitutional standing deprives the trial court of subject matter jurisdiction. Pike v. Tex. EMC Mgmt., LLC , 610 S.W.3d 763, 773 (Tex. 2020). Because standing is a threshold jurisdictional issue that "is essential to a court's power to decide a case," we address that issue before turning to the substance of the TCPA motion. Bland Indep. Sch. Dist. v. Blue , 34 S.W.3d 547, 553–54 (Tex. 2000) ("The absence of subject-matter jurisdiction may be raised by a plea to the jurisdiction, as well as by other procedural vehicles ...."); see also Buzbee v. Clear Channel Outdoor, LLC , 616 S.W.3d 14, 22 (Tex. App.—Houston [14th Dist.] 2020, no pet.) (addressing standing issue raised in a TCPA motion to dismiss).
To show constitutional standing, a plaintiff must demonstrate that: (1) it suffered a concrete and particularized injury-in-fact; (2) the injury is fairly traceable to the defendant's conduct; and (3) a favorable decision is likely to redress the injury. In re Abbott , 601 S.W.3d 802, 808 (Tex. 2020). Partners easily satisfies these requirements. Partners presented evidence that it transferred over $300 million of its own money—and obligated itself to repay additional bank loans—to fund the purchase of the Astros, a textbook "pocketbook injury." See Collins v. Yellen , ––– U.S. ––––, 141 S. Ct. 1761, 1779, 210 L.Ed.2d 432 (2021). Partners further alleges that it paid a bloated purchase price in reliance on Champions’ material misrepresentations. And Partners seeks to recover money damages to redress its injury.
Champions nevertheless contends that Partners’ assignment of its rights under the purchase agreement to Holdings deprives Partners of standing to sue because all its claims arise out of that purchase. Our recent precedent confirms, however, that such "extra-constitutional restrictions on the right of a particular plaintiff to bring a particular lawsuit" do not implicate standing in the jurisdictional sense. Dyer v. Tex. Comm'n on Env't Quality , 646 S.W.3d 498, 505 n.36 (Tex. 2022) (quoting Tex. Bd. of Chiropractic Exam'rs v. Tex. Med. Ass'n , 616 S.W.3d 558, 567 (Tex. 2021) ). Stated differently, "a plaintiff does not lack standing simply because some other legal principle may prevent it from prevailing on the merits; rather, a plaintiff lacks standing if its claim of injury is too slight for a court to afford redress." Data Foundry, Inc. v. City of Austin , 620 S.W.3d 692, 696 (Tex. 2021) (internal quotation marks omitted); see also Nat'l Health Res. Corp. v. TBF Fin., LLC , 429 S.W.3d 125, 128–29 (Tex. App.—Dallas 2014, no pet.) ("Whether a party is entitled to sue on a contract is not truly a standing issue because it does not affect the jurisdiction of the court; it is, instead, a decision on the merits." (internal quotation marks omitted)).
Here, the legal principle Champions raises that may prevent Partners from recovering is its capacity to sue on the purchase agreement—that is, its "legal authority to act" despite the assignment. Pike , 610 S.W.3d at 775 ("A plaintiff has standing when it is personally aggrieved, regardless of whether it is acting with legal authority; a party has capacity when it has the legal authority to act, regardless of whether it has a justiciable interest in the controversy." (citation omitted)). And the assignment may (or may not) affect Partners’ ability to recover damages from Champions. But it does not affect Partners’ constitutional standing and thus does not call into question the court's subject matter jurisdiction. See id. at 774. At this stage of the litigation, we need not inquire further into the assignment's impact on Partners’ claims. Accordingly, we turn to the applicability of the TCPA to those claims.
We are aware that because the parties dispute the scope of the assignment in the purchase agreement, they at times distinguish between Partners’ tort and contract claims. And while we have said before that "standing must be analyzed claim by claim," Tex. Propane Gas Ass'n v. City of Houston , 622 S.W.3d 791, 800 (Tex. 2021), we need not do so here. The scope of the assignment may affect Partners’ capacity, but it does not change the fact that Partners’ claims all arise from the same pocketbook injury.
B. Applicability of the TCPA
The Legislature enacted the TCPA "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 also Youngkin v. Hines , 546 S.W.3d 675, 679 (Tex. 2018) (explaining that the TCPA protects persons who associate, petition, or speak on matters of public concern from retaliatory lawsuits that seek to intimidate or silence them). The statute provides this protection by authorizing a motion to dismiss early in the covered proceedings, subject to expedited interlocutory review. See TEX. CIV. PRAC. & REM. CODE §§ 27.003, .008. Trial courts review TCPA motions to dismiss in a multi-step analysis. First, the moving party must show by a preponderance of the evidence that the TCPA applies to the legal action against it. Id. §§ 27.003, .005(b). If the moving party satisfies that burden, the burden shifts to the nonmoving party to establish by clear and specific evidence a prima facie case for each essential element of its claim. See id. § 27.005(c). If the nonmoving party cannot satisfy that burden, the trial court must dismiss the suit. Id.
The TCPA was enacted in 2011 and amended in 2013 and 2019. See Act of May 24, 2011, 82d Leg., R.S., ch. 341, 2011 Tex. Gen. Laws 961, 961–64, amended by Act of May 27, 2013, 83d Leg., R.S., ch. 1042, 2013 Tex. Gen. Laws 2499, 2499–2500, and Act of May 20, 2019, 86th Leg., R.S., ch. 378, 2019 Tex. Gen. Laws 684, 684–87. Unless otherwise noted, all references to the statute are to the applicable 2013 version.
Under the operative version of the statute, if the nonmoving party makes the required prima facie showing, the trial court must still dismiss the action if "the moving party 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).
In this case, our analysis begins and ends with the first step: whether the TCPA applies to this action. Under the TCPA, a party may file a motion to dismiss if a legal action is based on, related to, or in response to that party's exercise of the right of free speech, right to petition, or right of association. Id. § 27.003(a). Champions argues that Partners’ lawsuit is based on or in response to Champions’ exercise of both the right of free speech and the right of association. We address each assertion in turn.
In addition to disputing those arguments, Partners argues as alternative grounds for affirmance that (1) the motion to dismiss was untimely and (2) the TCPA does not apply because the action falls within the Act's "commercial speech" exemption. See id. § 27.010(a)(2) (providing that the TCPA does not apply to a legal action "against a person 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"). Because we agree with Partners’ primary argument, we need not address the motion's timeliness or the commercial-speech exemption's applicability.
1. Free Speech Under the TCPA
The TCPA defines "exercise of the right of free speech" as "a communication made in connection with a matter of public concern." Id. § 27.001(3). The operative version of the TCPA defined "matter of public concern" to "include[ ] an issue related to: (A) health or safety; (B) environmental, economic, or community well-being; (C) the government; (D) a public official or public figure; or (E) a good, product, or service in the marketplace." Id. § 27.001(7). The Legislature's 2019 TCPA amendments modified the definition of "matter of public concern"; however, the amendments left the definition of "exercise of the right of free speech" unaltered. See Act of May 20, 2019, 86th Leg., R.S., ch. 378, § 1, 2019 Tex. Gen. Laws 684, 684–85.
The TCPA now defines "matter of public concern" as "a statement or activity regarding: (A) a public official, public figure, or other person who has drawn substantial public attention due to the person's official acts, fame, notoriety or celebrity; (B) a matter of political, social, or other interest to the community; or (C) a subject of concern to the public." Act of May 20, 2019, 86th Leg., R.S., ch. 378, § 1, 2019 Tex. Gen. Laws 684, 684–85 (codified at Tex. Civ. Prac. & Rem. Code § 27.001(7) ).
We have construed the TCPA's overarching phrase "communication made in connection with a matter of public concern" in a broad, but not limitless, manner. Accordingly, we have held that some—but certainly not all—private communications may be made in connection with a matter of public concern and thus subject to a TCPA motion to dismiss.
In Lippincott v. Whisenhunt , for example, we held that the TCPA applied to defamation claims based on a hospital employee's emails discussing a nurse anesthetist's allegedly substandard medical services, even though the statements were not publicly communicated. See 462 S.W.3d 507, 509–10 (Tex. 2015) (noting that the TCPA broadly defines "communication" to include any medium, regardless of whether it takes a public or private form). We explained that the provision of medical services by a health care professional constitutes a matter of public concern—it implicates issues of health and safety, community well-being, and services in the marketplace. Id. at 510. Further, the challenged communications related to the quality of a particular professional's medical services to his patients. Id. Accordingly, the communications fell squarely within the exercise of the right of free speech under the TCPA. See id.
Relying on Lippincott , we similarly held that the TCPA applied to defamation claims brought against a former employer in ExxonMobil Pipeline Co. v. Coleman. See 512 S.W.3d 895, 900 (Tex. 2017). Coleman, the employee, was fired after he purportedly failed to record the fluid volume of various storage tanks as required and then falsely reported that he had complied with the requirement. Id. at 897. Coleman alleged that two of his supervisors made false statements about the incident—including in a formal written report—during the company's internal investigation. Id. Importantly, uncontroverted testimony established the safety and environmental risks posed by failing to follow the applicable protocol as well as the fact that the report was prepared, in part, for use as a learning tool at monthly safety meetings. Id. We thus concluded that the challenged statements, "although private and among [company] employees, related to a ‘matter of public concern’ because they concerned Coleman's alleged failure to [follow a process intended], at least in part, to reduce the potential environmental, health, safety, and economic risks associated with noxious and flammable chemicals overfilling and spilling onto the ground." Id. at 901.
More recently, we elaborated on the limits of the TCPA's broad reach in Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC , in which an oil-and-gas lessee claimed that the lessor falsely told third-party purchasers of production from the lease that the lease had terminated for cessation of production. 591 S.W.3d 127, 130 (Tex. 2019). The lessor moved to dismiss, arguing that its statements to the purchasers were an "exercise of the right of free speech" under the TCPA because they related to "a good, product, or service in the marketplace"—specifically, "the [oil and gas] lease and its products." Id. at 134. We disagreed, clarifying that "not every communication related somehow to one of the broad categories set out in section 27.001(7) always regards a matter of public concern." Id. at 137. Noting that the communications involved "a limited business audience" and concerned a "private contract dispute affecting only the fortunes of the private parties involved," id. at 136–37, we held that the communications were not made in connection with "a ‘matter of public concern’ under any tenable understanding of those words," id. at 137.
With this limitation, we necessarily cabined our statement in Coleman that the TCPA does not "require more than a ‘tangential relationship’ to" the public concerns identified in the statute. 512 S.W.3d at 900.
Taken together, these cases demonstrate that communications that are merely "related somehow to one of the broad categories" set out in the statute but that otherwise have no relevance to a public audience are not "communications made in connection with a matter of public concern." Id. ; see Goldberg v. EMR (USA Holdings) Inc. , 594 S.W.3d 818, 828 (Tex. App.—Dallas 2020, pet. denied) (citing Creative Oil and noting that "the communications themselves must relate to a matter of public concern" (emphasis added)). To be sure, private communications can implicate the right of free speech under the TCPA, but in both Lippincott and Coleman the communications at issue, while made privately, held some relevance to a public audience when they were made. See Lippincott , 462 S.W.3d at 509–10 ; Coleman , 512 S.W.3d at 898.
Construing the TCPA to cover communications that hold some relevance to a public audience when they are made is also more consistent with the ordinary meaning of the phrase "in connection with." The TCPA does not define that phrase. Merriam-Webster, however, defines it as an idiomatic expression meaning "for reasons that relate to (something)." In connection with , MERRIAM-WEBSTER.COM DICTIONARY , https://www.merriam-webster.com/dictionary/in% 20connection% 20with (last visited June 28, 2023). The definition indicates the two connected things are relevant to each other and provides an example that fleshes this idea out: "Police arrested four men in connection with the robbery." Id. The arrest has some relevance to "the robbery," not the crime of robbery in the abstract.
Likewise, under the TCPA, the communication on which the suit is based must have some relevance to a public audience. Absent this limiting principle, grounded in the statute's text, the TCPA would apply to communications made as part of any private business deal involving any industry that impacts economic or community well-being. It does not. Creative Oil , 591 S.W.3d at 136 ; see also TotalGen Servs., LLC v. Thomassen Amcot Int'l, LLC , No. 02-20-00015-CV, 2021 WL 210845, at *4 (Tex. App.—Fort Worth Jan. 21, 2021, no pet.) (holding that the TCPA did not apply to a breach-of-contract claim premised on disclosure of confidential information in conjunction with the sale of power generators because "the communications at issue involved nothing more than an exclusively private, arm's-length transaction between private parties involving confidential and proprietary information about the seller and equipment," and "nothing in the alleged communications addresse[d] a public component or the bigger picture of power generation generally").
Further, the statute's plain terms impose a temporal anchor on the relationship between the communication and the matter of public concern: the "connection" between the communication and the matter of public concern must exist when the communication is made. TEX. CIV. PRAC. & REM. CODE § 27.001(3) (defining "exercise of the right of free speech" as "a communication made in connection with a matter of public concern" (emphasis added)). That is, a communication cannot be made in connection with a matter of public concern unless it had relevance to a public audience at the time it was made, regardless of the happenstance of after-the-fact ramifications. See id.
Importantly, this construction harmonizes the various statutory definitions with the TCPA's express purpose: safeguarding constitutional rights while simultaneously protecting plaintiffs’ rights to file meritorious lawsuits for demonstrable injuries. See id. § 27.002. While we have held that the TCPA is not limited in application to constitutionally guaranteed activities, the purpose still provides context for the statute's definitions. Youngkin , 546 S.W.3d at 681 ; see also Dall. Morning News, Inc. v. Hall , 579 S.W.3d 370, 376 (Tex. 2019) (noting that the TCPA "is a bulwark against retaliatory lawsuits meant to intimidate or silence citizens on matters of public concern"). Giving full effect to the statute's temporal anchor, and to the required relevance to a public audience, ensures that the TCPA is not transformed into a far-reaching procedural mechanism for obtaining early dismissal of cases well beyond the statute's express purpose.
With this, we turn to the specific communications underlying Partners’ suit and their connection to a matter of public concern when made. Partners bases its claims solely on private business negotiations in an arms-length transaction subject to a nondisclosure agreement. In particular, Partners’ suit focuses on Champions’ alleged assertions during the negotiations that Comcast—not the Astros and Rockets—proposed the affiliate rates that formed the foundation for the Network's business plan, that those affiliate rates were market clearing, that Comcast believed that those rates were reasonable, and that the business plan was achievable. Each of these assertions was relevant to the price Partners was willing to pay for the Astros. But the fact that the statements were, broadly speaking, about a network that would carry Astros games, and the fact that the public has a general interest in the Astros, does not mean that the statements were made in connection with a matter of public concern under the TCPA. See Creative Oil , 591 S.W.3d at 137 ; Blue Gold Energy Barstow, LLC v. Precision Frac, LLC , No. 11-19-00238-CV, 2020 WL 1809193, at *7 (Tex. App.—Eastland Apr. 9, 2020, no pet.) (noting that "communications do not become a matter of public concern simply based on the nature of the parties’ business").
The dissent acknowledges that the alleged misrepresentations at issue are "of a type that could occur in the analysis of any asset and its potential," which "happens every day and is usually important only to the parties involved—rarely to the public." Post at 922 (Hecht, C.J., dissenting). Here, however, the dissent finds a "direct" link between the misrepresentations at issue and the community's well-being. Id. at 922. Specifically, the dissent relies on Partners’ allegation that Astros fans have also been injured because
[Champions’] misrepresentations leave [Partners] with an impossible choice: either accept the broken network as is, and deprive thousands of fans the ability to watch Houston Astros games on their televisions, or distribute the games at market rates and take massive losses out of the Houston Astros player payroll—thereby dooming the franchise for years to come.
Id. at 922.
We disagree with the dissent's assessment of Partners’ claim. The allegation is that the misrepresentations left Partners with the consequences of a broken network because they led Partners to purchase the team and its interest in that broken network. And assuming the allegations are true, the "impossible choice" on which the dissent bases its matter-of-public-concern analysis was inevitable. According to Partners, the Network's failure was inevitable and Champions knew it. Either Partners would purchase the team and its interest in the Network, and the Network was doomed to fail under Partners’ ownership, or Champions would remain the owner, and the Network was doomed to fail under Champions’ ownership. The effect on the public writ large—namely, that the local professional sports team would be saddled with a failed regional sports network—was the same. Who would eventually take the financial loss associated with the Network's failure was relevant only to the parties that could end up holding the bag: Champions and Partners.
Again, the core of Partners’ complaint is that the actual value of the asset it purchased was substantially less than Champions represented and that it was induced by those representations to pay an inflated purchase price. Thus, Champions made the alleged misrepresentations to Partners "in connection with" the negotiation of a purchase price; the communications were relevant to Partners’ valuation of the Network and the price Partners was willing to pay to purchase the Astros—a matter of private, not public, concern. By contrast, the communications at issue in Coleman about the employee's failure to follow protocols designed to decrease the environmental and safety risks associated with chemical spills, 512 S.W.3d at 901, and the communications at issue in Lippincott about the substandard quality of a health professional's treatment of patients, 462 S.W.3d at 509–10, had a clear connection to, and were made for reasons that relate to, public health and safety.
As discussed, under the dissent's overly broad view, the TCPA and its accompanying dismissal procedures would apply to any suit involving any communication about any economically important entity. See TEX. CIV. PRAC. & REM. CODE § 27.001(7)(B) (defining "matter of public concern" to include "an issue related to ... environmental, economic or community well-being"). The dissent downplays this ramification, opining that requiring a plaintiff to produce prima facie evidence early in the litigation process is a justifiable hardship and that we have provided for early dismissal of baseless causes of action in some circumstances through our own Rules of Civil Procedure. Post at 925–26 (Hecht, C.J., dissenting); see TEX. R. CIV. P. 91a (providing for dismissal of a cause of action based on the pleadings "on the grounds that it has no basis in law or fact"). Perhaps this is correct as a matter of policy, but judicial policy preferences should play no role in statutory interpretation. See Iliff v. Iliff , 339 S.W.3d 74, 80 (Tex. 2011). The fact that other procedural mechanisms allow for early dismissal of meritless lawsuits has no bearing on whether the TCPA provides such an escape hatch here. In sum, the alleged misrepresentations were made in connection with negotiations to close the purchase and sale of the Astros and its interest in the Network at a favorable price. And the result is a garden-variety fraud and breach-of-contract dispute between a private buyer and a private seller regarding statements made during a private negotiation that have nothing to do with "the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law." TEX. CIV. PRAC. & REM. CODE § 27.002. That the subject of the purchase agreement—a professional sports team—is generally of public interest does not render the specific communications at issue relevant to a public audience when they were made. As a result, we hold that the communications were not "made in connection with a matter of public concern" under the TCPA.
Indeed, following the dissent's view to its logical conclusion produces results bordering on the absurd. Say, for example, a rich and famous woman and her brother buy a vacation home as tenants-in-common. After a few years, they decide to sell. The vacation home's buyer discovers a foundation problem after the sale and sues the previous owner, alleging that the presale disclosures misrepresented the house's structural integrity. Under the dissent's view, the TCPA arguably applies to the buyer's claim against the rich and famous woman but not to the buyer's claim against the brother. See Tex. Civ. Prac. & Rem. Code § 27.001(7)(D) (defining "matter of public concern" to encompass an issue regarding a public figure).
2. Right of Association Under the TCPA
The operative version of the TCPA defined "exercise of the right of association" as "a communication between individuals who join together to collectively express, promote, pursue, or defend common interests." See Act of May 24, 2011, 82d Leg., R.S., ch. 341, § 2, 2011 Tex. Gen. Laws 961, 961. The Legislature substantially amended this definition in 2019, and the TCPA now defines the term as "to join together to collectively express, promote, pursue, or defend common interests relating to a governmental proceeding or a matter of public concern. " Act of May 20, 2019, 86th Leg., R.S., ch. 378, § 1, 2019 Tex. Gen. Laws 684, 684 (codified at TEX. CIV. PRAC. & REM. CODE § 27.001(2) (emphasis of amended language added)).
The courts of appeals are divided on when a communication between individuals impinges on the exercise of the right of association under the pre-2019 version of the TCPA. The split focuses on whether an alleged conspiracy can constitute the "common interest" that individuals join together to express, promote, pursue, or defend, thereby implicating the TCPA. Compare Gaskamp v. WSP USA, Inc. , 596 S.W.3d 457, 475 (Tex. App.—Houston [1st Dist.] 2020, pet. dism'd) (defining "common interest" to require that the object or purpose of the protected conduct relate to a governmental proceeding or a matter of public concern), with Grant v. Pivot Tech. Sols., Ltd. , 556 S.W.3d 865, 878 (Tex. App.—Austin 2018, pet. denied) (holding that the "common interests" element of the exercise of the right of association is satisfied by the private business interests being advanced through alleged tortfeasors’ tortious conduct). The 2019 amendments to the TCPA, which do not apply here, have resolved this split for future cases by redefining the exercise of the right of association to clarify that the common interest parties join together to collectively express, promote, pursue, or defend must relate to a governmental proceeding or a matter of public concern. See Act of May 20, 2019, 86th Leg., R.S., ch. 378, § 1, 2019 Tex. Gen. Laws 684, 684.
See also Dyer v. Medoc Health Servs., LLC , 573 S.W.3d 418, 427 (Tex. App.—Dallas 2019, pet. denied) ; Kawcak v. Antero Res. Corp. , 582 S.W.3d 566, 576 (Tex. App.—Fort Worth 2019, pet. denied).
See also Morgan v. Clements Fluids S. Tex., Ltd. , 589 S.W.3d 177, 185 (Tex. App.—Tyler 2018, no pet.) ; Abatecola v. 2 Savages Concrete Pumping, LLC , No. 14-17-00678-CV, 2018 WL 3118601, at *8 (Tex. App.—Houston [14th Dist.] June 26, 2018, pet. denied).
The word "common" has a variety of meanings. These include: (1) "belonging to, open to, or affecting the whole of a community or the public"; and (2) "shared by, coming from, or done by more than one." Common , NEW OXFORD AMERICAN DICTIONARY (3d ed. 2010). The first definition supports the Gaskamp court's interpretation, see 596 S.W.3d at 475, while the second supports Grant , see 556 S.W.3d at 878.
We conclude that the Gaskamp line of cases is more harmonious with the TCPA as a whole. "Words in a vacuum mean nothing. Only in the context of the remainder of the statute can the true meaning of a single provision be made clear." Bridgestone/Firestone, Inc. v. Glyn-Jones , 878 S.W.2d 132, 133 (Tex. 1994). Again, the express purpose of the TCPA is to protect constitutional rights while simultaneously protecting plaintiffs’ rights to file meritorious lawsuits for demonstrable injuries. See TEX. CIV. PRAC. & REM. CODE § 27.002. And the other two specific rights safeguarded by the TCPA—the right of free speech and the right to petition—have a public component as defined by the statute. See id. § 27.001(3) – (4). Construing "common interest" to include a public component is thus congruent with the statute as a whole. Accordingly, we hold that the "common interest" covered by the pre-2019 TCPA must relate to a matter of public concern.
Here, Champions claims that its conduct satisfies the statutory definition of "exercise of the right of association" because it joined with Comcast to promote their mutual business interests. But those mutual business interests do not qualify as "common interests" under the proper interpretation of the statute. As a result, we hold that Champions’ conduct falls outside the scope of the right of association under the TCPA.
III. Conclusion
In sum, we hold that Partners’ suit against Champions is not based on, related to, or in response to Champions’ exercise of either the right of free speech or the right of association. Accordingly, we hold that the TCPA does not apply to the legal action at issue and need not address whether Partners met its evidentiary burden to survive dismissal under that statute. We further express no opinion on the merits of Partners’ claims. Because we agree with the court of appeals that the trial court properly denied Champions’ motion to dismiss, we affirm the court of appeals’ judgment.
Chief Justice Hecht filed a dissenting opinion, in which Justice Blacklock joined.
Justice Blacklock filed a dissenting opinion.
Chief Justice Hecht, joined by Justice Blacklock, dissenting.
Partners, a sports-savvy group of investors, bought from Champions the Houston Astros baseball club and the club's interest in Network, a proposed regional sports broadcaster for the Astros and Rockets, for some $615 million. The Astros were struggling, drowning in $200 million of debt and still sinking. The new Network was supposed to brighten the team's future by reaching new viewers, but it didn't. In the two years following the sale, the Astros’ already dismal win–loss record worsened, Network collapsed and was put in bankruptcy by co-owner Comcast, and Partners sued Champions and its principal, Drayton McLane, Jr., for fraud and breach of contract. Partners alleged that Defendants had falsely misrepresented that the Astros’ interest in Network, its largest single asset, was worth $332 million when in fact it was worth zero.
Respondent Houston Baseball Partners LLC.
Petitioner McLane Champions, LLC.
Houston Regional Sports Network.
The sale closed November 2011, following the first of three consecutive seasons in which the Astros lost 100 games. But then they improved, winning more than 100 games in four consecutive full seasons beginning in 2017 (play was reduced in 2020 and 2021 due to the pandemic). They played in four World Series in six years—in 2017, 2019, 2021, and 2022—and won in two, the first and last. See MLB Team History—Houston Astros Season Results , ESPN, https://www.espn.com/mlb/history/teams/_/team/Hou (last visited June 25, 2023).
Defendants moved to dismiss the suit, invoking the Texas Citizens Participation Act, which requires dismissal of a "legal action [that] is based on, relates to, or is in response to [a] party's exercise of ... the right of free speech[,] ... to petition[,] or ... of association", unless the plaintiff "establishes by clear and specific evidence a prima facie case for each essential element of the claim in question." Exercise of each right is carefully defined in the Act. " ‘Exercise of the right of free speech’ means a communication made in connection with a matter of public concern." " ‘Matter of public concern’ includes an issue related to ... economic[ ] or community well-being ... [or a] public figure ...." Defendants argue that the Act's free-speech provisions apply to Partners’ claims and that Partners failed to establish the prima facie case required to avoid dismissal. The Court holds that the Act does not apply and therefore does not reach the second issue. I agree with Defendants and therefore respectfully dissent.
Tex. Civ. Prac. & Rem. Code §§ 27.001 -27.011. The Act was passed in 2011 and amended in 2013 and 2019. Act of May 21, 2011, 82d Leg., R.S., ch. 341, 2011 Tex. Gen. Laws 961; Act of May 24, 2013, 83d Leg., R.S., ch. 1042, 2013 Tex. Gen. Laws 2499; Act of May 17, 2019, 86th Leg., R.S., ch. 378, 2019 Tex. Gen. Laws 684.
The version in effect before the 2019 amendments applies to this case, and all citations to the Act are to its provisions.
Id. § 27.001(3). " ‘Communication’ includes the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic." Id. § 27.001(1).
Id. § 27.001(7)(B), (D).
I
Partners’ claims are unquestionably based on, relate to, or are in response to Defendants’ communications—written and oral statements about Network's value—made during the parties’ negotiations. Those negotiations were confidential and part of a private business transaction, but Defendants’ communications need not have been public themselves to be covered by the Act. The Act applies if Defendants’ communications were made in connection with a matter of public concern.
See Lippincott v. Whisenhunt , 462 S.W.3d 507, 509 (Tex. 2015) ("The plain language of the statute imposes no requirement that the form of the communication be public.").
The Astros themselves were a huge public concern in Houston. What would become of them? When would they start winning? Interest in the team was vast, conversations endless. If Defendants’ communications were "made in connection with" the Astros, there could be no doubt whatsoever that the Act applies to Partners’ claims. The public concerns were the economic and community wellbeing of Houston and the future of one of its most prominent public figures, the Astros. None of this matters, the Court reasons, because in its view, the communications were made only in connection with the parties’ very technical, detailed assessment of the Astros’ worth and its interest in Network. If you will, the communications were only about how to count the number of gallons of fuel in the gas tank and not whether it was enough to get the buyer of the car where he wanted to go. One doesn't do the counting out of curiosity. One wants to get somewhere.
I see three problems with the Court's myopia.
A
One is that the Court's view of Partners’ case is not Partners’ view, and Partners’ is the view that matters. Of course, Partners alleges misrepresentations of a type that could occur in the analysis of any asset and its potential, business plan, market response, and future success. That analysis happens every day and is usually important only to the parties involved—rarely to the public. And Partners alleges injury to itself, again of little public interest in the abstract. But Partners also pleaded that its claims involve far more than its own injury:
There are ... many other victims of Defendants’ scheme. Ultimately, fans of the Houston Astros have been injured because Defendants’ misrepresentations leave Plaintiff with an impossible choice: either accept the broken network as is, and deprive thousands of fans the ability to watch Houston Astros games on their televisions, or distribute the games at market rates and take massive losses out of the Houston Astros player payroll—thereby dooming the franchise for years to come.
Partners pleaded a direct, significant connection between Defendants’ communications, on the one hand, and the future of the Astros and Houston's interest in the team, on the other.
Acknowledging that the public would be concerned about the lawsuit and Defendants’ alleged misstatements, Partners’ principal immediately called a public press conference to explain. "I recognize the magnitude of the lawsuit", he said. "Misrepresentations were made about [Network] that may damage the Astros organization ... for the next 20 years.... These misrepresentations have caused an enormous loss and they have hurt our fans and they have hurt our city of Houston." According to Partners itself, its claims are not merely that a private business deal went bad, as the Court would have it. Its claims are that the Astros, a public figure, together with community wellbeing in the team's hometown of Houston, were harmed in the process—clearly matters of public concern. The alleged relevance of Defendants’ communications during negotiations to sell the Astros and Network to public concerns was not attenuated, as the Court thinks; it was strong and direct.
B
Another problem is that the three of our cases the Court cites for support actually contradict its position. In Lippincott v. Whisenhunt , a certified registered nurse anesthetist, Whisenhunt, sued a surgical services provider's administrator, Lippincott, for defamation. The surgical group contracted with Whisenhunt's practice group to be its sole provider of anesthesiology services, but when Lippincott was hired, he immediately began to press for a change. As part of his campaign, he emailed various co-employees that Whisenhunt had lost patients, misrepresented himself to be a physician, sexually harassed nurses, engaged in fraudulent behavior, failed to provide adequate coverage for pediatric cases, administered the wrong narcotic, falsified records, violated sterile protocols, was unavailable for surgeries, and was incompetent. The comments do not appear to have been taken seriously. The medical director of the surgical group, Lippincott's boss, provided an affidavit stating that the group was very happy with the quality of services nurse Whisenhunt and his anesthesia group had provided and describing Whisenhunt himself as being very professional. We held that the communications Whisenhunt complained of were made in connection with a matter of public concern—public health —even though they were not made outside the surgical group, involved only one nurse in one professional setting, and appeared to be simply an administrator's personal vendetta.
Id. at 508-509.
See Whisenhunt v. Lippincott , 416 S.W.3d 689, 692 (Tex. App.—Texarkana 2013), rev'd , 462 S.W.3d 507.
See id.
See id. at 694.
See Lippincott , 462 S.W.3d at 510 ("We have previously acknowledged that the provision of medical services by a health care professional constitutes a matter of public concern.").
Coleman's job at a petroleum products and additives storage facility was to record the volume of fluid in various tanks each night. His supervisor noted in company records—a communication under the Act—that Coleman had reported a volume for a tank he had not actually checked; then he terminated Coleman's employment. Coleman sued for defamation, asserting that he actually had checked the tank. In ExxonMobil Pipeline Co. v. Coleman , we held that the Act applied to Coleman's claim. Tank volumes were measured to prevent overfilling that could result in spills of noxious and flammable fluids, endangering employees and potentially the environment, and negatively impacting ExxonMobil's economic interests. Although none of that had actually happened, and although the reason for terminating Coleman was not made public and did not mention any health, safety, environmental, economic, or other public concern, it was nevertheless a communication made, "at the very least, in connection with an issue related to safety". Further, we added, it had not been explained "why statements related to personnel matters cannot also be in connection with matters of public concern." The Act, we emphasized, "does [not] require more than a ‘tangential relationship’ " between a communication and a public concern to apply.
ExxonMobil Pipeline Co. v. Coleman , 512 S.W.3d 895, 897 (Tex. 2017).
See id.
Id. at 900.
Id. (cleaned up).
Id. at 900-901.
Id. at 900.
In the third of our cases on which the Court today relies, Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC , the lessee and operator of an oil-and-gas well sued the lessor for telling a third party to stop buying production because the lease had terminated. The defendant argued that the communication involved "a good, product, or service in the marketplace"—one description in the Act of a matter of public concern. But we held that the Act did not apply because the statutory phrase means that "the communication must have some relevance to a public audience of potential buyers or sellers." We acknowledged that while private communications could be covered by the Act, as we had held in Coleman and Lippincott , they must involve political, social, or other community concerns, "as opposed to purely private matters." Private conversations about modest production from a single well had no relevance to a public audience and involved no public concern.
591 S.W.3d 127, 130 (Tex. 2019).
See id. at 134 ; Tex. Civ. Prac. & Rem. Code § 27.001(7)(E).
Creative Oil & Gas , 591 S.W.3d at 135.
Id.
Id. at 136.
We added that "not every communication related somehow to one of the broad [public concern] categories set out in [the Act] always regards a matter of public concern." Now the Court says that "[w]ith this limitation, we necessarily cabined our statement in Coleman that the [Act] does not ‘require more than a "tangential relationship" to’ the public concerns identified in the statute." We said nothing in Creative Oil & Gas about cabining Coleman , and the Court's current view no doubt comes as a surprise to the author of the opinion in Creative Oil & Gas , who joins this dissent. Coleman did not characterize the connection between the statement there and public concern as tangential, but it certainly said that if the connection had been no more than that, it would have been enough for the Act to apply. The Court's reliance on Coleman today is hard to square with its simultaneous view that our opinion should not be read to mean what it said. But today's rhetorical gyrations aside, the Court certainly embraces Coleman ’s holding: that the statement there—with far less connection to public concern than Defendants’ communications in the present case—was covered by the Act.
Id. at 137.
Ante at 916 n.9.
See Coleman , 512 S.W.3d at 900.
"Taken together," the Court now says, "these cases demonstrate that communications that are merely ‘related somehow to one of the broad categories’ set out in the [Act] but that otherwise have no relevance to a public audience are not ‘communications made in connection with a matter of public concern.’ " Actually, taken together, the cases demonstrate that a "matter of public concern"—or the Court's substitute standard, "relevance to a public audience"—has a very low threshold. One health-center administrator's vindictive statements about one nurse anesthetist that were disavowed by the center's director were relevant to a public audience, even though the public never knew they were made and could never have been affected by them. Likewise, a record of one employee's failure to measure the volume of one petroleum tank out of the many checked every day for three years was relevant to a public audience, even though the public never knew about it and was never at risk. But not surprisingly, a lessor's statement that its one-well lease has terminated is irrelevant to a public audience.
Ante at 915–16.
It is frankly difficult to fathom how the Court can conclude from the cases it cites that inconsequential statements in a single healthcare or petroleum facility are of public concern, but misrepresentations made in the prominent sale of a national baseball club for $615 million that the buyer itself claims will affect thousands of fans and the City of Houston are of no more public concern than one lessor's opinion about the one well on his lease. Partners firmly pleaded that Defendants’ misrepresentations will injure Astros fans by depriving them of the ability to watch the Astros on TV or because distributing the games at market rates will result in a reduction to the player payroll. It may turn out that these concerns weren't real. (It probably already has now that the Astros are on a long winning streak and, by all appearances, are worth far more than Partners paid for them.) But surely the potential itself is a matter of public concern. If the communications in Lippincott and Coleman were matters of public concern when risks were far less likely, it is difficult to see how the communications here were not far more concerning to the public.
The stakes to the Astros, their fans, and Houston are irrelevant, the Court holds. Defendants’ communications were—to return to the Act's language—"made in connection with" mere business negotiations, never a matter of public concern, no matter the purpose and result. The Court sees this as just "a garden-variety fraud and breach-of-contract dispute between a private buyer and a private seller". Like the sale of a lemonade stand, for example. The seller exaggerates the projected customer base and sales revenues, and the buyer pays more than he should and sues for fraud. Move along, folks. Nothing to see here. Just another garden-variety suit over the sale of a national baseball club involving hundreds of millions of dollars and the City of Houston sitting on the edge of its seat. If that were true, Partners could not have pleaded the public concern it did, and its principal could not have credibly asserted that concern in his press conference.
Id. at 918–19.
C
Which brings us to the third problem with the Court's position. The Court worries that communications covered by the Act "must have some relevance to a public audience"; otherwise, the Act would apply to "any private business deal involving any industry that impacts economic or community well-being." Assuming the Court should worry more about the Act's consequences than its construction, the Court's worries are unfounded in this case. Defendants’ communications easily qualify. Partners itself claims the public is and should be concerned that misrepresentations of the value of the Astros, including Network, implicate—threaten—the viability of the club and the quality of its operations going forward.
Id. at 916.
The Court should worry that it has construed the Act too narrowly. Its position is that communications in the course of negotiations are only "made in connection with" negotiations, which are not a matter of public concern, and never in connection with the result, which is. Of course, many communications made during negotiations may have nothing to do with public concerns, and they should not be covered by the Act. But a seller's misstatements about, say, the effectiveness of a fire extinguisher, are not merely a matter of chemistry or how to negotiate the sale of extinguishers but are made in connection with the concern that product failure will endanger lives, a very public concern. Exclusion of the Act's coverage in such situations is not the liberal construction the Act requires.
Tex. Civ. Prac. & Rem. Code § 27.011(b) ("This chapter shall be construed liberally to effectuate its purpose and intent fully.").
And in any event, the consequence of the Act's coverage is that a plaintiff must produce prima facie evidence of his case sooner in the litigation. If that is a hardship, it is justifiable. Our civil justice system has generally considered that litigation should usually be more expansive than less for the best result. But concerns over the resulting costs and delays demand attention. This Court has provided for the early dismissal of "baseless causes of action" in Rule 91a of the Texas Rules of Civil Procedure. As a matter of policy, the Legislature may also weigh those concerns and conclude, as it has in the Act, that some cases should not proceed if the plaintiff cannot make a prima facie case earlier in the litigation. This was its stated purpose in passing the Act: "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." The Act's application is not limited to assertions of constitutional rights and government participation, as we have noted.
Id. § 27.002.
See Youngkin v. Hines , 546 S.W.3d 675, 681 (Tex. 2018) ("It does not follow from the fact that the [Act] professes to safeguard the exercise of certain First Amendment rights that it should only apply to constitutionally guaranteed activities.").
The Legislature could have decided when first adopting the Act that its purpose was best served by defining the Act's coverage more broadly. In the eight years that followed, many argued that the Act was being construed too broadly and called for amendments. When those amendments came, they exempted particular kinds of cases and clarified some provisions but left most of the Act's definitions and application largely unchanged. With the Legislature's having reiterated its view of the breadth of the Act in response to calls for narrowing, our concern must not be with the Act's breadth but with its text.
D
For these reasons, I would hold that the Act applies to Partners’ action. I now turn briefly to whether it has "establishe[d] by clear and specific evidence a prima facie case for each essential element" of its claims.
II
Given the Court's view that the Act is inapplicable, it need not, and therefore does not, consider Partners’ claims on the merits. Without analyzing those claims in detail, I explain why I think the court of appeals was in error to hold that Partners has made a prima facie case for its fraud-based claims.
627 S.W.3d 398, 412 (Tex. App.—Houston [14th Dist.] 2022).
Partners’ claims of fraud, fraud by nondisclosure, and negligent misrepresentation are based on Defendants’ representation that the Zone 1 rate in Network's business model was proposed by Comcast rather than by the Astros or Rockets and was commercially reasonable and achievable and on their failure to disclose the correct information. Justifiable reliance is an element of each claim, but it "can be negated as a matter of law when circumstances exist under which reliance cannot be justified." One circumstance that negates justifiable reliance is an arm's-length business transaction between sophisticated parties. "Generally, reliance on representations made in a business or commercial transaction is not justified when the representation takes place in an adversarial context." We have explained:
See JPMorgan Chase Bank, N.A. v. Orca Assets G.P. , 546 S.W.3d 648, 653-654 (Tex. 2018) (listing the elements of fraud and negligent misrepresentation); Schlumberger Tech. Corp. v. Swanson , 959 S.W.2d 171, 181 (Tex. 1997) (rejecting the plaintiffs’ argument that reliance is not an element of fraud by nondisclosure and explaining that "[f]raud by non-disclosure is simply a subcategory of fraud").
Orca Assets , 546 S.W.3d at 654 (citing Nat'l Prop. Holdings, L.P. v. Westergren , 453 S.W.3d 419, 424 (Tex. 2015) ).
AKB Hendrick, LP v. Musgrave Enters., Inc. , 380 S.W.3d 221, 232 (Tex. App.—Dallas 2012, no pet.), quoted in Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc. , 590 S.W.3d 471, 499-500 (Tex. 2019).
In determining whether justifiable reliance is negated as a matter of law, courts must consider the nature of the parties’ relationship and the contract. In an arm's-length transaction, the defrauded party must exercise ordinary care for the protection of his own interests. A failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the other party. And when a party fails to exercise such diligence, it is charged with knowledge of all facts that would have been discovered by a reasonably prudent person similarly situated. To this end, that party cannot blindly rely on a representation by a defendant where the plaintiff's knowledge, experience, and background warrant investigation into any representations before the plaintiff acts in reliance upon those representations.
Orca Assets , 546 S.W.3d at 654 (cleaned up).
The court of appeals acknowledged these principles but held that Partners’ burden of proof was met by the declaration of a member of Partners’ due-diligence team explaining why Partners viewed its reliance as reasonable. Yet the explanations essentially amount to: we trusted Comcast because it is an expert in regional sports networks and also had skin in the game.
See 627 S.W.3d at 418.
Consistent with the principles just set out, I would hold that in the context of a $615 million dollar arm's-length transaction among very sophisticated parties for the purchase of a professional sports team, reliance on any representation or omission by the opposing party is not justifiable as a matter of law and that, therefore, Partners cannot establish a prima facie case on any fraud or misrepresentation claim. And because "liability for [civil] conspiracy depends on participation in some underlying tort", that claim should have been dismissed too.
Tilton v. Marshall , 925 S.W.2d 672, 681 (Tex. 1996).
Partners’ claims for breach of contract and declaratory judgment, though based on the Purchase and Sale Agreement, are largely, if not entirely, a repackaging of Partners’ fraud theory. Partners alleges that Champions breached various warranties and covenants in the Agreement that the financial statements attached to it were correct. While I would not hold that Partners has failed to establish a prima facie case on those claims without further argument and consideration, holding that the other claims should be dismissed would simplify further proceedings.
* * * * *
I would reverse the court of appeals’ judgment and address the question whether Partners has met its evidentiary burden under the Act. Because the Court holds otherwise, I respectfully dissent.
Justice Blacklock, dissenting. I agree with the Chief Justice that the TCPA applies, which means that unlike the Court, I would reach the question of whether the claims should be dismissed. They should, and I write separately on that point.
This lawsuit was filed in 2013, not long after a group of investors led by Jim Crane bought the Houston Astros and the team's share of an affiliated TV network from Drayton McLane for approximately $615 million. The suit alleges that Mr. Crane and his investors were injured when they purchased the Astros in 2011.
Anyone who has followed the Astros over the last several years could be forgiven for wondering why the courts are still entertaining the notion that Mr. Crane and his investors are worse off for having bought the team. In 2013, however, the allegation may have sounded plausible. The team was struggling on the field, and the new TV network was in a financial tailspin. Perhaps the team's new owners had a genuine reason, in 2013, to regret the price they paid and to suspect they had been defrauded. So they went to court with the intention of proving that their purchase of the Astros caused them injury. They asked the courts to require the defendants to remedy that injury, which they alleged was the product of the defendants’ fraud.
Lawsuits like this one tend to take a long time. And as time passed, any suggestion that Mr. Crane or his investors were injured when they purchased the Astros rapidly became less and less plausible. The Astros made the playoffs in 2015 for the first time in ten years, and in 2017 they won the franchise's first World Series Championship. They advanced to at least the American League Championship Series in each of the next five years, including three more trips to the World Series and one more World Series Championship.
Today, the Houston Astros are one of the most consistently successful franchises in American sports. Analysts estimate the team's value at $2.25 billion, nearly four times what the plaintiffs paid in 2011. Aside from any profit earned by the team's owners during these banner years, the appreciation in the team's value alone has considerably outpaced even the extraordinary appreciation of the stock market over the same period. From today's perspective, the allegation that Mr. Crane and his investors suffered damages when they purchased the Astros is difficult to take seriously. It may be that Mr. Crane's shrewd ownership decisions deserve some credit for the team's recent success, but that does not change the fact that the decision to buy the team in 2011 for $615 million has turned out to be an enormous success rather than a damaging failure.
See Mike Ozanian & Justin Teitelbaum, Baseball's Most Valuable Teams 2023: Price Tags Are Up 12% Despite Regional TV Woes , Forbes (Mar. 23, 2023), https://www.forbes.com/sites/mikeozanian/2023/03/23/baseballs-most-valuable-teams-2023-price-tags-are-up-12-despite-regional-tv-woes/?sh=65dad6f26501.
The plaintiffs’ briefing in this Court asserts that if not for the alleged false representations by the sellers of the Astros in 2011, Mr. Crane and his investors "would never have entered into" the deal to buy the team. If that is true, then they should be thanking the defendants—not suing them—for inducing them to go down a road that has led to so much success. Fraudulent inducement is never a good thing, but it is only actionable in court when it misleads the plaintiff to his detriment. A party who benefits from having been fraudulently induced into making a deal he otherwise would not have made has suffered no injury.
A conventional judicial remedy for a transaction procured by fraud is rescission of the deal. Fortune Prod. Co. v. Conoco, Inc. , 52 S.W.3d 671, 676–77 (Tex. 2000). Surely Mr. Crane has no interest in unwinding his purchase of the Astros by returning the team to its prior owners in exchange for the $615 million he claims to regret having paid—although I suspect Mr. McLane would gladly take that deal. Instead of the conventional remedy of rescission, the plaintiffs’ theory of the case is that the courts should award them the difference between what they paid for the Astros and what they claim they "should" have paid—whatever that means.
So this lawsuit asks the courts to intervene in a deal that has turned out to be wildly successful for one side in order to make that deal even more wildly successful for that side. But the courts are not—or at least should not be—in the business of making a party's successful business deals even more successful. The courts are in the business of remedying injuries. There is no longer any injury here, assuming there ever was one, and this lawsuit should no longer exist.
The courts have struggled to deal with this case in a timely manner, but judicial dismissal is not the only way a lawsuit can end. A party who may have had some reason to seek redress in 2013 need not continue to press his claims when, over time, a deal that once looked like a grave injury comes to look far more like a great victory.
I respectfully dissent.