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Craig v. Tejas Promotions, LLC

Court of Appeals of Texas, Third District, Austin

May 3, 2018

Bruce Craig; Tyler Craig; and Tejas Vending, LP, Appellants
v.
Tejas Promotions, LLC, Appellee

          FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT NO. D-1-GN-16-001959, HONORABLE RHONDA HURLEY, JUDGE PRESIDING

          Before Justices Puryear, Pemberton, and Goodwin

          OPINION

          Bob Pemberton, Justice

         This is an appeal from an order denying a motion for relief under the Texas Citizens Participation Act (TCPA), a statute whose features have been analyzed extensively in this Court's prior decisions.[1] One of those prior decisions-Autocraft-squarely requires reversal of the district court's denial of the TCPA motion with respect to a common-law civil-conspiracy claim that had been founded on alleged misuse of trade secrets and confidential information.[2] But another aspect of the appeal presents questions of first impression regarding the use of a TCPA motion to attack claims for declaratory relief under the Uniform Declaratory Judgments Act (UDJA).[3] Under the circumstances here, we hold that the district court did not err in denying the TCPA motion as to the challenged declaratory claims.

         BACKGROUND

         Appellee Tejas Promotions, LLC (which we will term "Promotions" to avoid confusion with its similarly named opponent-a similarity that is also a key point of emphasis in Promotions's claims) is engaged in what it terms the "electronic sweepstakes" industry. As depicted in the pleadings and affidavits, Promotions's business entails distributing to retail establishments, such as bars and pool halls, "sweepstakes promotional software" run on electronic games that patrons in such establishments can play for a fee. Promotions is essentially a middleman-it enters into licensing agreements under which it distributes the "sweepstakes promotions" of various software vendors, and in turn enters into sub-licensing agreements with the retail establishments whereby Promotions places the "promotions" in those locations and is compensated with a share of the net revenues generated by those attractions. Promotions asserts that the identities of both its upstream vendors and its sub-licensees, as well as the terms of the agreements governing their respective relationships, are "extremely valuable and confidential." It claims trade secrets in a "unique and valuable business model" and underlying "market research, marketing techniques, . . . its software inventory, its customer base, and its pricing strategies."

         The genesis of the underlying litigation, according to Promotions, was a series of discussions or negotiations it previously undertook with appellant Bruce Craig regarding Bruce's possible purchase of Promotions's assets, either personally or through an affiliated entity.[4] The transaction ultimately did not go forward, [5] but the discussions had progressed to an extent that Promotions and Bruce had signed a "Mutual Non-Disclosure Agreement" (NDA) that contemplated the parties' sharing of specified "Confidential Information" with each other and restricted use and dissemination of that information. Promotions alleges that it had subsequently shared with Bruce "Confidential Information" that "included trade secret and proprietary data pertaining to [Promotions's] vendors, software, and clients" before discussions concluded. Thereafter, Promotions alleges, Bruce teamed up with his son, Tyler, in forming the deceptively named Tejas Vending, L.P. (Vending); divulged to Tyler and Vending Promotions's trade secrets and other NDA-defined "Confidential Information"; and joined with them in using that information to wrest away from Promotions both a key upstream software vendor and various of Promotions's sub-licensees.

         Based on these factual allegations, Promotions asserted five sets of claims for relief in its original petition, which can be summarized as follows:

(1) Claims for damages and attorney's fees against Bruce for allegedly breaching the NDA.[6]
(2) Claims for damages under Chapter 134A of the Civil Practice and Remedies Code against Bruce, Tyler, and Vending for alleged "misappropriation" of "trade secrets" in violation of that statute.[7]
(3) Claims for temporary and permanent injunctive relief against Bruce, Tyler, and Vending to restrain their use and dissemination of "Confidential Information" and to compel its return.[8] Promotions pleaded that these claims were based on both the NDA (which contained a provision entitling a "Discloser to obtain injunctive relief against the threatened breach of this Agreement or the continuation of any such breach by Recipient") and Chapter 134A (which similarly authorized injunctive relief to remedy "actual or threatened misappropriation" of "trade secrets"[9]), as well as the general authorizations in Chapter 65 of the Civil Practice and Remedies Code[10] and Rule 680 of the Texas Rules of Civil Procedure.[11]
(4) A claim for damages against Bruce, Tyler, and Vending based on a common-law theory of "conspiracy to misappropriate trade secrets."
(5) Several distinct claims for declaratory relief under the UDJA, the details of which we will reserve until they become relevant to the analysis.

         Bruce, Tyler, and Vending joined in a motion under the TCPA seeking dismissal, attorney's fees, and sanctions as to only two of Promotions's five sets of claims-the damages claim based on a common-law conspiracy theory and the declaratory claims. The motion thus did not attack Promotions's claims for damages or injunctive relief that were founded on its alleged causes of action for breach of the NDA or Chapter 134A violations, nor otherwise attack Promotions's claims for injunctive relief. The predicate for appellants' motion-the asserted basis for meeting their "initial burden" of showing the TCPA's "applicability" as to the two sets of challenged claims[12]-was that Promotions's pleading allegations demonstrated that those claims were "based on, relate[d] to, or [were] in response to" appellants' "exercise of the right of association"-namely, Bruce's "communications" (a term the TCPA defines to "include[] the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic"[13]) of the alleged trade secrets and other "Confidential Information" to and among the other appellants in furtherance of the group's alleged joint wrongdoing.[14] Assuming so, appellants further disputed that Promotions could meet its burden to establish "by clear and specific evidence a prima facie case for each essential element of the claim[s] in question, "[15] and that, regardless, the record established defenses to each of those claims.[16] Among these asserted defenses were that Promotions's common-law "conspiracy to misappropriate trade secrets" claim was preempted by Chapter 134A[17] and that the district court "lacked jurisdiction" to award the declaratory relief Promotions had requested.[18]

         After appellants filed their TCPA motion, Promotions amended its petition to nonsuit by omission its common-law conspiracy claim and to amend some of the declaratory claims. Promotions also filed a response to appellants' TCPA motion that joined issue-contesting whether appellants had met their initial burden, presenting affidavits and documentary evidence purporting to establish a "prima-facie case, " and attacking appellants' "defenses"-only with respect to

         Promotions's declaratory claims. It made no such attempt with respect to the now-nonsuited conspiracy claim, perceiving that the claim was "no longer part of this case." However, Promotions viewed appellants' TCPA motion and its response as addressing both the amended versions of its declaratory claims and the prior versions, perceiving the amended versions to be nonsubstantive refinements of the prior ones. Promotions further prayed for the award of attorney's fees and costs that TCPA Section 27.009 authorizes upon a finding that a motion "is frivolous or solely intended to delay."[19]

         Following a hearing at which the parties presented only argument, the district court signed an order denying appellants' TCPA motion but reserving for further hearing Promotions's request for attorney's fees under Section 27.009.[20] Before that hearing was held, however, appellants filed a notice of appeal from the order denying their TCPA motion, [21] triggering an automatic statutory stay of all trial-level proceedings in their then-existing state.[22]

         ANALYSIS

         The three appellants collectively present two issues on appeal. In their first issue, appellants insist that the district court erred in denying their TCPA motion as to Promotions's now-nonsuited common-law conspiracy claim. In the second issue, Tyler Craig and Vending-but not Bruce Craig-challenge the district court's denial of the TCPA motion as to the claims that Promotions has asserted under the UDJA in either their amended or original forms.

         As appellants' issues presume, and Promotions seems to acknowledge on appeal, any nonsuit of claims by Promotions did not entirely moot appellants' TCPA motion challenging those claims-appellants could continue to pursue their requests for attorney's fees incurred in defending those claims prior to their voluntary dismissal, as well as for the sanctions the Act would prescribe.[23]Consequently, appellants can properly complain on appeal of not only the district court's denial of their motion as to Promotions's declaratory claims, but also its denial with respect to Promotions's now-nonsuited conspiracy claim. Conversely, because appellants did not challenge any other claims through timely TCPA motion, they have failed to preserve, and therefore have waived, any potential entitlement to TCPA relief as against Promotions's claims for damages or injunctive relief that were founded on its causes of action for breach of the NDA or for Chapter 134A violations, or any other claims by Promotions for injunctive relief.[24] Both of these aspects of this appeal's procedural posture prove to be significant in our analysis.

         Conspiracy

         In their first issue, appellants urge that the district court erred in denying their TCPA motion as to Promotions's now-nonsuited conspiracy claim. Appellants assert that Promotions's pleading of that claim established as a matter of law that the claim was a "legal action" that was "based on, " or at least was "related to" or "in response to, " their "exercise of the right of association, " in the form of Bruce's alleged "communications" to them of trade secrets or NDA-protected Confidential Information in furtherance of a collective scheme to steal Promotions's business, thereby meeting their initial burden. Appellants further emphasize that Promotions made no attempt to present a "prima facie case" below as to the essential elements of that theory of liability. In any event, appellants add, they established a defense to the conspiracy claim-preemption by Chapter 134A. We are compelled to agree that appellants met their initial burden as a matter of law, and that this alone entitles them to TCPA relief in the posture of this appeal.

         This conclusion, as previously indicated, is dictated by Autocraft. In that case, as here, a business (Autocraft, an auto-repair shop) sued a rival (Precision) seeking injunctive and monetary relief based on alleged misuse of trade secrets and confidential information.[25] Precision countered with a TCPA motion, urging in regard to its initial burden that Autocraft's suit (unquestionably one or more "legal actions"[26]) was "based on, relate[d] to, or in response to" (which Precision assumed to mean in the sense of being predicated upon factually[27]) Precision's "exercise of the right of association" or the "exercise of the right of free speech" under the Act's definitions of that protected expression.[28] We agreed that Autocraft's suit implicated Precision's "exercise of the right of association"-at least as that term is defined in the TCPA-and did not reach the alternative "exercise of the right of free speech" ground.[29]

         The linchpin of our Autocraft analysis was that the Texas Supreme Court's TCPA precedents instructed that we apply a "plain-meaning" construction of the Act's broad terms that, at least with respect to the movant's initial burden, operates largely independently of and extends considerably beyond the constitutional "right of association, " "speech, " or "petition" that might otherwise have informed the meaning of those terms.[30] Consequently, it was enough that Precision had alleged conduct by Autocraft that would fall within this plain-meaning reading of the TCPA's definition of "communication" (which is not explicitly limited to constitutionally protected expression, but "includes the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic"[31]) and, in turn, the "exercise of the right of association" (a "communication, " so defined, "between individuals who join together to collectively express, promote, pursue, or defend common interests"[32]), inasmuch as the individual conspirators had allegedly made the complained-of "communications" between themselves to further Precision's rival business.[33]

         Promotions's conspiracy claim was materially identical to Precision's claims. Promotions's claim rested upon factual allegations that included "communications" (as the TCPA would define that term) between the alleged co-conspirators-"In direct violation of the NDA, [Bruce] disclosed the information regarding [Promotions's] assets and business structure to [Tyler]" and to "an entity he created with a deceptively similar name, [Vending]." These alleged "communications" were also purportedly made incident to the alleged conspirators' joint effort to "promote, pursue, or defend" "common interests"-"a course of action designed to use [Promotions's] Confidential Information to steal [Promotions's'] business." Under Autocraft and the Texas Supreme Court precedents that compelled our analysis there, appellants needed show no more to meet their initial burden through reliance on the "exercise of the right of association." And to the extent that Promotions's conspiracy claim was predicated factually upon acts that would in themselves not be "communications" within the TCPA definition and would thus fall outside of the "exercise of the right of association, " any such components of the claims would nonetheless easily "relate to" or be "in response to" the "communications" constituting the "exercise of the right of association, " similar to the "additional claims" in our more recent Cavin decision.[34]

         Either way, appellants met their initial burden as a matter of law with respect to Promotions's former conspiracy claim. Promotions's entreaties to the contrary resemble those of Autocraft, emphasizing conventional constitutional concepts of the "right to association" and frustrated befuddlement as to how appellants could insist that an "anti-SLAPP" law protects the alleged wrongdoers in a commercial dispute about alleged misuse of trade secrets and confidential information. Others (including some judges) have urged similar views in the past, but the controlling jurisprudence has since taken a different path, as we have seen.[35] Nor does Promotions otherwise present a viable argument to support an alternative conclusion.[36]

         Because appellants met their initial burden as to Promotions's conspiracy claim, we may affirm the district court's order denying TCPA relief only if Promotions presented a "prima facie case" as to each essential element of that theory of liability.[37] Promotions made no attempt to do so before the district court-another feature of the case in common with Autocraft[38]-instead urging at that juncture that the claim was "no longer part of this case." In this posture, the district court had no discretion but to grant appellees' TCPA motion as to Promotions's conspiracy claim. Accordingly, we sustain appellants' first issue without need to reach their preemption argument.[39]

         Declaratory-judgment claims

         In the second issue, presented by Tyler and Vending but not Bruce, those appellants insist that the district court similarly erred in failing to grant their TCPA motion as to Promotions's declaratory claims. As with Promotions's conspiracy claim, the appellants urge that the declaratory claims constitute one or more "legal actions" that are "based on, relate[] to, or in response to" their "exercise of the right of association" through Bruce's alleged transmission of information to them in pursuit of Promotions's vendors and customers. Assuming so, Tyler and Vending further argue that Promotions failed to present a "prima facie case" as to the claims' "essential elements" and bring forward their defenses raised below.

         This Court has not yet had occasion to address whether or under what circumstances an action for declaratory relief brought under the UDJA is or can be a "legal action" that "is based on, relates to, or is in response to" TCPA-protected expression and is, therefore, subject to TCPA challenge.[40] But before turning to the TCPA's provisions that would bear upon the answer, we should first emphasize some key characteristics of the declaratory relief authorized by the UDJA, and of Promotions's particular declaratory claims, which frame the specific question presented here.

         While sometimes termed a "cause of action" colloquially, [41] declaratory relief under the UDJA is more precisely a type of remedy that may be obtained with respect to a cause of action or other substantive right-"[a] court of record within its jurisdiction has power to declare rights, status, and other legal relations, " which "may be either affirmative or negative in form, " and such a "declaration has the force and effect of a final judgment or decree."[42] The permissible subjects of UDJA declarations expressly include "question[s] of construction or validity" and "rights, status, or other legal relations" under contracts such as the NDA and statutes such as Chapter 134A.[43] Aside from an implied limited waiver of sovereign immunity, the UDJA does not expand the trial court's jurisdiction to grant the declaratory remedy it provides, nor alter the underlying substantive rights of any party.[44] Rather, the Act is "remedial; its purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations, "[45] and may be deployed where a justiciable controversy exists regarding those matters that may be resolved with the declaration sought.[46]

         "The [UDJA] was originally 'intended as a speedy and effective remedy' for settling disputes before substantial damages were incurred, " and one that "is simpler and less harsh" than the "coercive" remedies of damages or injunctive relief.[47] In this respect, declaratory relief under the UDJA, as the Texas Supreme Court observed long ago, "is neither legal nor equitable, but sui generis."[48] Yet the mere availability of alternative remedies in a given case (aside from exclusive statutory remedies) does not categorically preclude the UDJA's use also, [49] as the Act explicitly operates "whether or not further relief is or could be claimed."[50] Likewise, the UDJA expressly authorizes construction of a contract "either before or after there has been a breach, "[51] thus contemplating that such declaratory relief may potentially be awarded even where there is a matured cause of action for breach of contract.[52] However, this sort of overlap may preclude recovery of the attorney's fees the UDJA would authorize, [53] especially where the declaratory claim is substantively subsumed within or merely "tacked onto a standard suit based on a matured breach of contract" or other cause of action.[54]

         As for Promotions's specific claims for relief under the UDJA, it seeks the following declarations in the amended, live version of its petition, identified as they appear in that pleading:

a. [That] [t]he "Non-Disclosure and Assignment of Inventions Agreement" ("NDA") is a valid, enforceable agreement.
b. That the names and identities of Plaintiff's software vendors constitute "Confidential Information" under the terms of the NDA.
c. That the information provided by Plaintiff to Bruce Craig via electronic mail on October 14, 2015 constitutes "Confidential Information" under the terms of the NDA.
d. That pursuant to the NDA, Defendant Bruce Craig had an obligation, as Recipient, to prevent the disclosure of and refrain from disclosing "Confidential Information, " including the Plaintiff's trade secrets, outside of the Relationship.
e. That, under the terms of the NDA, the disclosure of "Confidential Information" and/or the failure to prevent the disclosure of "Confidential Information" constitutes a breach of the NDA.
f. That pursuant to the NDA, the Plaintiff, as Discloser, has the right to pursue certain remedies, in the case of a breach of the terms of the NDA, which include the pursuit of monetary damages and injunctive relief.

         Declaratory claims (a), (b), and (c) also appeared in Productions's original petition, while (d), (e), and (f) are collectively revisions or refinements of the following four substantively similar declaratory claims from the original petition:

Former d. That use [of] the information provided by Plaintiff to Bruce Craig via electronic mail on October 14, 2015 is a breach of the NDA.
Former e. That communication of the information provided by Plaintiff to Bruce Craig via electronic mail on October 14, 2015 to Tyler Craig and Tejas ...

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