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Toth v. Sears Home Improvement Products, Inc.

Court of Appeals of Texas, Fourteenth District

May 10, 2018

JOHN TOTH, INDIVIDUALLY AND D/B/A ARTISTIC FLOORING, Appellant
v.
SEARS HOME IMPROVEMENT PRODUCTS, INC., Appellee

          On Appeal from the 212th District Court Galveston County, Texas Trial Court Cause No. 15-CV-0079

          Panel consists of Justices Christopher, Donovan, and Jewell.

          OPINION

          KEVIN JEWELL JUSTICE

         Appellant John Toth brings this interlocutory appeal of the trial court's order denying his motion to dismiss under the Texas Citizens Participation Act ("TCPA").[1] Toth is a former flooring independent contractor for appellee Sears Home Improvement Products, Inc. Sears sued Toth, alleging that Toth breached certain contract terms by engaging in communications with a Sears flooring customer. Contending that Sears's claims are based on or relate to Toth's free speech rights, Toth filed a motion to dismiss under the TCPA. Sears opposed the motion on grounds that: (1) the TCPA does not apply; (2) Sears's claims are exempted from the act under section 27.010(b)'s "commercial speech" exemption; and (3) clear and specific prima facie evidence supports each essential element of its breach of contract claim. The trial court denied Toth's motion to dismiss.

         We conclude that the TCPA applies to Sears's lawsuit. Further, we agree with Toth that the "commercial speech" exemption is not established on this record. Finally, Sears did not present clear and specific prima facie evidence to support each essential element of its breach of contract claim. We accordingly reverse the order denying Toth's motion to dismiss and remand for proceedings consistent with this opinion, including a determination of attorney's fees and other costs.

         Background

         Sears sold various flooring home improvement products until approximately April 2014, when it discontinued its flooring business. Toth provides flooring services through his company, Artistic Flooring. In 2013, Toth and Sears entered into an "Independent Contractor Agreement, " under which Toth agreed to provide flooring services and/or to install flooring merchandise on Sears's behalf.

         Sears sold wood flooring to Winifred Langham. Sometime after Sears installed the flooring, Langham complained to Sears that moisture was rising through the floor and damaging the wood. Pursuant to its contract with Toth, Sears assigned Toth to inspect Langham's floor, determine the cause of the problem, and recommend a solution to Sears.[2] Toth conducted an initial visual inspection and later performed certain diagnostic testing. Toth recommended that Langham's floor be re-installed. Toth also recommended to Sears that the re-installation process include the product Bostik, a membrane sealant designed to reduce moisture vapor emissions. Toth believed that Bostik would create a barrier underneath Langham's wood flooring and prevent the moisture problem from reoccurring.

         The above described events occurred between December 2012 and approximately May 2014. Sears withdrew from the flooring business in or about April 2014. Toth provided Sears a termination notice under the contract on April 27, 2014, and the contract expired by its terms thirty days later on May 27, 2014.

         Sears ultimately decided not to replace Langham's floor. Instead, Sears offered to fully reimburse Langham's initial purchase price. Langham rejected Sears's offer and filed suit against Sears in January 2015.

         Langham deposed Toth in August 2015 as part of her suit against Sears. During his testimony, Toth described his involvement in Sears's attempt to resolve Langham's flooring complaint. Over one year after Toth's deposition, Langham hired Toth to replace her floor. Subsequently, Sears joined Toth as a third-party defendant in Langham's suit. Sears alleged that Toth's communications with Langham violated the following confidentiality provisions of the agreement between Toth and Sears:

         18. Confidential Business Information

(a) 'Confidential Business Information' means any information, whether disclosed in oral, written, visual, electronic or other form, which Sears discloses or Contractor observes in connection with Contractor's performance of its obligations under this Agreement. Confidential Business Information includes, but is not limited to, work product; Sears business plans, strategies, forecasts and analyses; Sears financial information; Sears employee and vendor information; Sears software (including all documentation and code); hardware and system designs, architectures and protocols; Sears product and service specifications; Sears purchasing, logistics, sales, marketing and other business processes; and the terms and existence of the Agreement.
(b) Contractor shall use Confidential Business Information only as necessary to perform its obligations under this Agreement. Contractor shall restrict disclosure of Confidential Business Information to its employees, agents or authorized subcontractors who have a need to know such information to perform its obligations hereunder and who have first agreed to be bound by the terms of this Section 18. . . .
19. Confidential Personal Information
(a) Contractor agrees that all information about Sears Customers provided by Sears to Contractor, including but not limited to names, addresses, telephone numbers, account numbers, customer lists, and demographic, financial and transaction information ("Confidential Personal Information"), shall be deemed confidential.
(b) Contractor shall use Confidential Personal Information only as necessary to perform its obligations under the Agreement. Contractor shall not duplicate or incorporate the Confidential Personal Information into its own records or databases. Contractor shall restrict disclosure of Confidential Personal Information to its employees, agents or authorized subcontractors who have a need to know such information to perform its obligations hereunder and who have first agreed to be bound by the terms of this Section 19. . . .
(f) Contractor shall notify Sears promptly upon the discovery of the loss, unauthorized disclosure or unauthorized use of the Confidential Personal Information . . . .
21. Sears Customers
All Customers and all leads and prospects resulting from Sears work belongs to Sears and the Contractor agrees to notify Sears of all such prospective jobs or Customers. All leads and prospects resulting from Contractor's non-Sears work remain the property of the Contractor. Furthermore, Contractor acknowledges and agrees that it shall be deemed a material breach of this Agreement for Contractor to solicit, recommend or sell a non-authorized Sears product or a non-authorized Sears service to a Customer.

         In its Fourth Amended Third Party Petition, Sears alleged that Toth breached the contract when he: (1) used Sears's confidential business information to communicate with Langham without Sears's permission and authority; (2) used Sears's confidential business information to enter into a business relationship with Langham; (3) solicited a non-authorized product, Bostik, to Langham; and (4) failed to notify Sears of a disclosure of confidential information.

         After Langham and Sears signed a settlement agreement, Langham dismissed her claims against Sears, leaving only Sears's breach of contract claim against Toth at issue.

         Toth filed a motion to dismiss Sears's claim pursuant to the TCPA. Toth argued that Sears's claim is based on, relates to, or was brought in response to Toth's communications with Langham concerning flooring goods or flooring services. Toth urged that he established the TCPA applied and therefore Sears was required to present clear and specific prima facie evidence of each essential element of its breach of contract claim. According to Toth, Sears could not meet its burden as to two required elements of Sears's claim: breach and injury. Thus, Toth sought dismissal of Sears's claim under the TCPA and requested attorney's fees and "sanctions as appropriate."

         In response, Sears argued that: (1) Toth failed to show by a preponderance of the evidence that the TCPA applied; (2) Sears's action against Toth was exempted from the TCPA under section 27.010(b), the "commercial speech" exemption; and (3) Sears presented clear and specific prima facie evidence on all elements of its breach of contract claim. As to Sears's prima facie case, Sears argued that Toth's breaches of the contract affected Sears's ability to resolve Langham's claims, causing Sears damage.

         After a hearing, the trial court denied Toth's motion. Toth appeals.[3]

         Analysis

         In three issues (Toth's first, second, and fourth issues on appeal), Toth argues that the trial court erred in denying his motion to dismiss because (1) he satisfied his initial burden to show that the TCPA applied to Sears's lawsuit, and (2) Sears did not present clear and specific prima facie evidence supporting each element of its breach of contract claim. In his third issue, Toth contends that Sears failed to establish that the "commercial speech" exemption removed Sears's claim from the TCPA's purview.

         A. Standard of Review and Governing Law

         We consider whether the trial court properly refused to dismiss Sears's suit under the TCPA, which is codified in Chapter 27 of the Texas Civil Practice and Remedies Code. Tex. Civ. Prac. & Rem. Code §§ 27.001-.011. The TCPA is an anti-SLAPP law; "SLAPP" is an acronym for "Strategic Lawsuits Against Public Participation." Fawcett v. Grosu, 498 S.W.3d 650, 654 (Tex. App.-Houston [14th Dist.] 2016, pet. denied) (op. on reh'g) (citing Jardin v. Marklund, 431 S.W.3d 765, 769 (Tex. App.-Houston [14th Dist.] 2014, no pet.)). The TCPA is intended "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; Cox Media Grp., LLC v. Joselevitz, 524 S.W.3d 850, 859 (Tex. App.- Houston [14th Dist.] 2017, no pet.). It "protects citizens from retaliatory lawsuits that seek to intimidate or silence them" from exercising their First Amendment freedoms and provides a procedure for the "expedited dismissal of such suits." In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015). We construe the TCPA liberally to effectuate its ...


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