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Fishman v. C.O.D. Capital Corp.

Court of Appeals of Texas, Fifth District, Dallas

July 18, 2017

MARTIN FISHMAN AND ROBERT BRODY AS TRUSTEE, INDIVIDUALLY AND DERIVATIVELY, APPELLANTS
v.
C.O.D. CAPITAL CORP. D/B/A C.O.D. FRIENDLY AND LOWELL BURK, APPELLEES

         On Appeal from the 191st Judicial District Court Dallas County, Texas Trial Court Cause No. 13-12916

          Before Justices Bridges, Lang-Miers, and Evans

          MEMORANDUM OPINION

          ELIZABETH LANG-MIERS JUSTICE.

         This appeal arises from a dispute between Lowell Burk and Martin Fishman over C.O.D. Capital Corp. d/b/a C.O.D. Friendly ("COD"), a company they owned along with two others. The parties asserted various claims against each other over a period of two years, but relevant to the appeal are Fishman's claims against Burk for defamation, malicious prosecution, and intentional infliction of emotional distress, and COD's claims against Fishman and Robert Brody, as trustee for the Martin Fishman Family Trust (the Trust), for breach of contract and declaratory judgment.[1]

         Burk moved to dismiss the claims against him pursuant to the Texas Citizens Participation Act (TCPA), [2] and COD moved for summary judgment on its claims against Fishman and Brody. The trial court granted Burk's motion and signed a final judgment granting COD's second motion for summary judgment.[3] This appeal challenges both by separate issues.[4]We affirm.

         BACKGROUND [5]

         COD is a closely held corporation founded in 2006 to provide certain financing services to manufacturers, wholesalers, and other shippers of merchandise. It is the brainchild of Fishman, who worked twenty-eight years as a distributor in the women's apparel industry.

         In 2010, at Fishman's request, Burk joined Fishman, Fishman's son Darren, and Andy Lavigne as an investor in COD. At the time, COD had not reported a profit. Like the others, Burk invested $82, 500 and was issued 25, 000 shares of stock pursuant to a shareholder agreement.

         About a year later, Burk became COD's chief executive officer.[6] Burk projected significant growth for COD, but COD's performance did not improve. In the spring of 2013, in hopes of "building up COD's equity value, " Fishman became COD's "asset retention credit manager." However, six months later, on October 29, 2013, Burk fired Fishman following a dispute over COD. Asserting Fishman threatened to shoot him and would not leave COD's office, Burk also reported Fishman to the police and building security. On October 31, 2013, Burk, along with COD, sued Fishman. A year or so into the lawsuit, Burk nonsuited his claims and COD added Brody as a defendant.

         COD's Claims Against Fishman and Brody

         COD's breach of contract and declaratory judgment claims against Fishman and Brody claimed that a transfer by Fishman of his shares of stock to Brody, as trustee of the Trust, violated the shareholder agreement and was void. To ensure the shares issued under the agreement remained closely held, the agreement allowed for the transfer of shares only under certain conditions. If a transfer occurred in breach of the agreement, the agreement provided that the transfer was void and constituted an offer by the breaching shareholder to sell his shares to COD at a specific price.

         Among the transfers allowed by the shareholder agreement was a transfer by gift to the trustee of an inter vivos trust for the sole benefit of the shareholder's immediate family. The agreement permitted such transfer conditioned upon COD receiving notice in writing of the exact name of the trust, the trust's federal tax identification number, and the trustee's and beneficiaries' name, address, federal tax identification number or social security number, and relationship to the shareholder.[7] The notice was required to be given to each shareholder at least thirty days before the proposed transfer. [8]

         Fishman created the Trust in February 2012 for the benefit of his grandchildren and for the sole purpose of transferring his shares. Fishman claimed he intended the transfer to be a gift as contemplated under the shareholder agreement and gave Burk verbal and written notice of his intentions prior to the transfer. However, at the time of the transfer, Fishman "was in the midst of resolving disputes with various creditors." He stated that, to avoid the transfer being considered fraudulent, Fishman accepted a $15, 000 promissory note from the Trust in exchange for the transfer of stock.

         Under the shareholder agreement, a "transfer for consideration" required COD be given an "Offer Notice" detailing the proposed sale and an opportunity to purchase the shares being offered for sale. COD alleged, in its claims against Fishman and Brody, that Fishman failed to give the required notice and was in breach of the agreement. COD sought specific performance of the agreement and a declaration that the transfer of Fishman's shares to Brody and the Trust was void, that COD had the option to purchase those shares, and that the shares were to be transferred to COD at a price as set in the agreement.

         Following discovery, COD moved for traditional summary judgment. Relying in part on the shareholder agreement, the Trust papers, and Fishman's deposition testimony, COD argued that it was entitled to judgment as a matter of law on both of its claims because no genuine issue of material fact existed that Fishman did not comply with the transfer requirements of the shareholder agreement and that a void transfer gave COD the option to purchase Fishman's shares at a price as set in the agreement.

         Fishman responded to COD's contentions claiming, in relevant part, that a fact issue existed as to the nature of the transfer, whether he substantially complied with the notice provisions of the agreement, and whether his failure to provide the required notice was a material breach of the shareholder agreement. As to the nature of the transfer, Fishman claimed the transfer was not a "transfer for consideration" but was a gift. He acknowledged he transferred the stock in exchange for a $15, 000 promissory note, but argued that the term "gift" as used in the agreement did not prohibit him from receiving consideration. Fishman further argued his transfer "met the definition of a conventional gift" because the value of the promissory note was "nominal" compared to the value of the shares. Additionally, relying on affidavit testimony, Fishman noted the Trust had no means of paying the note as its only asset was the stock, Trust had made no payments on the note, and he later cancelled the note.

         As to substantial compliance and material breach, Fishman relied on a copy of the written notice he claimed he gave Burk. He alleged that the notice consisted of a note he had written by hand following a "general meeting" in January 2012 and stated "Lowell, You said you need notice of my intent to move my stock to the family trust. This is the follow up to my notice to you at the meeting. Thanks, Marty." Fishman argued that by informing Burk that the transfer was to a family trust, he informed COD the transfer was not to "an outsider or competitor" and there was no threat to COD's "stability and continuity." Further, he claimed that any failure to include "technical and unimportant issues and details" did not frustrate the notice provisions in the agreement and did not violate the standards of good faith and fair dealing. Finally, he argued the deficiencies in the notice could have been cured had COD "simply ask[ed]" for the required information.

         Fishman's Claims Against Burk

         Fishman's claims against Burk stemmed from Burk's actions after firing Fishman. Fishman asserted Burk's calling the police and building security claiming Fishman threatened to shoot him defamed him and amounted to malicious prosecution. Although no charges were filed against Fishman, Fishman was banned from the building, a building in which he had worked for over twenty years, and "full-size color pictures" of him "were posted in the loading dock area" frequented by merchants. In an amended petition filed in August 2015, Fishman claimed that, because of Burk's actions, his reputation was irreparably injured, he incurred thousands of dollars in legal fees, and lost his business. Fishman also claimed that Burk's actions and the filing of the lawsuit caused him to suffer severe emotional distress.

         Burk filed an answer and a motion to dismiss pursuant to the TCPA. Burk contended dismissal was mandatory because (1) the statements forming the basis of Fishman's claims were "protected speech that touch and concern health and safety, " the "well-being of the community, " freedom of petition, and freedom of association, "which includes the right to oppose [the perception of a] threat to [one's] welfare and to that of [others];" (2) the defamation and malicious prosecution claims were barred "as a matter of law" by the one year statute of limitations; (3) the malicious prosecution claim failed because Fishman was not prosecuted; (4) the intentional infliction of emotional distress claim failed because it was essentially the same as the defamation claim; and, (5) the statements relating to or in litigation were protected pursuant to the litigation privilege.

         Fishman responded by arguing first that his claims related to a private matter, not a matter concerning the public's health and safety. Second, he asserted that even if his claims related to a matter of public concern, his evidence in support of the defamation and malicious prosecution claims was sufficient to establish a prima facie case for each element of those claims. Third, he argued the defamation and malicious prosecution claims were not barred by limitations because the acts "giving rise" to these claims "relate[d] to, and [were] based upon the same facts, circumstances, transactions, and events upon which this litigation was commenced." Finally, he argued Burk's assertion that the intentional infliction of emotion distress claim was essentially the same as the defamation claim was "not the proper subject" of the motion to dismiss.

         The Trial Court's Rulings

         As stated, the trial court granted Burk's motion and signed a final judgment granting COD's second summary judgment motion. In granting the summary judgment, the trial court declared, pursuant to the Texas Uniform Declaratory Judgments Act, [9] that

the purported transfer of Voting Stock by Defendant Fishman to Robert Brody, Trustee of the Martin Fishman Family Trust, is void; that COD has the option to purchase the Voting Stock as provided in Article 12, paragraph 12.2; that such Voting Stock be transferred to COD, at a price set per and paid per the Shareholder Agreement as provided in Article 12, paragraph 12.2., and paragraphs 8.1 and 8.2.

         CHAPTER 27 MOTION TO DISMISS

         Fishman challenges the trial court's order granting Burk's motion to dismiss in his first issue. In arguing this issue, he contends (a) Burk failed to meet his burden of showing the claims against him arose from his exercise of a constitutionally protected right because the allegations forming the bases for the claims against him did not relate to a matter of public concern; (b) even if Burk met his burden, Fishman established by clear and specific evidence a prima facie case for each claim; and (c) Burk's motion amounted to an improper summary judgment motion.

         Applicable Law

         The TCPA

         The TCPA was enacted "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 (West 2015). To effectuate its purpose, the TCPA provides a burden-shifting procedure for the summary disposition of meritless claims filed in response to a proper exercise of a protected right. See ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898-99 (Tex. 2017) (per curiam); Levatino v. Apple Tree Cafe Touring, Inc., 486 S.W.3d 724');">486 S.W.3d 724, 727 (Tex. App.-Dallas 2016, pet. denied).

         The procedure begins with the filing of a motion to dismiss and places the initial burden on the movant to show by a preponderance of the evidence, that the claim against him "is based on, relates to, or is in response to [his] exercise of (1) the right of free speech; (2) the right to petition; or (3) the right of association." ExxonMobil Pipeline, 512 S.W.3d at 898 (quoting Tex. Civ. Prac. Rem. Code Ann. § 27.005(b); In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015) (orig. proceeding)). If the movant satisfies this 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." See Tex. Civ. Prac. Rem. Code Ann. § 27.005(c); Lipsky, 460 S.W.3d at 587. "Clear and specific evidence" means that the complaining party "must provide enough detail to show the factual basis for [his] claim." Lipsky, 460 S.W.3d at 591. A "prima face case" is "evidence sufficient as a matter of law to establish a given fact if it is not rebutted or contradicted." Id. at 590.

         If the non-movant does not satisfy his burden, the claim must be dismissed. Tex. Civ. Prac. Rem. Code Ann. § 27.005(b), (c). If the non-movant satisfies the burden, the movant then bears the burden to "establish[] by a preponderance of the evidence each essential element of a valid defense to the non-movant's claim." See id. § 27.005(d). If the movant satisfies this burden, the claim must be dismissed. Tex. Civ. Prac. Rem. Code Ann. § 27.005(d).

         As is relevant here, the "exercise of the right of free speech means a communication made in connection with a matter of public concern." Id. § 27.001(3). The TCPA defines "communication" to "include[] 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). A "matter of public concern" includes issues related to health, safety, and environmental, economic, or community well-being. See id. § 27.001(7).

         Defamation

         Defamation is "the invasion of a person's interest in her reputation and good name." Hancock v. Variyam, 400 S.W.3d 59, 63 (Tex. 2013). The essential elements of defamation when, as here, the party complaining of defamation is a private individual, are a false statement of fact (1) that was published to a third party; (2) defamed the complaining party; (3) was made with negligence; and (4) caused damages. Lipsky, 460 S.W.3d at 593. If the statement is defamatory per se, general damages such as loss of reputation and mental anguish are presumed. Id. Statements that "injure[] a person in [his] office, profession, or occupation" or charge the person with the commission of a crime are generally classified as defamatory per se. Hancock, 400 S.W.3d at 64; Tex. Disposal Sys. Landfill, Inc. v. Waste Mgmt. Holdings, Inc., 219 S.W.3d 563, 581 (Tex. App.-Austin 2007, pet. denied).

         Malicious ...


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