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TransDesign International, LLC v. Sae Towers, Ltd.

Court of Appeals of Texas, Ninth District, Beaumont

June 27, 2019

TRANSDESIGN INTERNATIONAL, LLC, AMADO LIZARRAGAANDCLAUS SUTOR, Appellants
v.
SAE TOWERS, LTD., Appellee & FALCON STEEL AMERICA, LLC, Appellant
v.
SAE TOWERS, LTD., Appellee

          Submitted on June 22, 2018

          On Appeal from the 284th District Court Montgomery County, Texas Trial Cause No. 17-09-10566-CV

          Before McKeithen, C.J., Kreger and Johnson, JJ.

          MEMORANDUM OPINION

          LEANNE JOHNSON JUSTICE

         This matter involves two interlocutory appeals from rulings in the same underlying suit. See Tex. Civ. Prac. Rem. Code Ann. § 51.014(a)(12) (West Supp. 2018). In appellate cause number 09-18-00080-CV, TransDesign International, LLC (TransDesign International), Amado Lizarraga, Claus Sutor (collectively TransDesign) challenge the trial court's denial of their motion to dismiss the claims filed against them by SAE Towers, Ltd. (SAE or Appellee), under the Texas Citizens Participation Act (the TCPA). See Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011 (West 2015).[1] In appellate cause number 09-18-00081-CV, Falcon Steel America, LLC (Falcon Steel) challenges the trial court's denial of its motion to dismiss SAE's claims pursuant to the TCPA. See id.

         TransDesign and Falcon Steel were sued in the same underlying suit by SAE. SAE contends that the defendants misappropriated trade secrets and illegally used SAE's software to produce drawings and designs. In addition to seeking a temporary and permanent injunction, SAE sued Falcon Steel and TransDesign (collectively the Defendants) [2] for statutory and common law misappropriation of trade secrets and conspiracy to misappropriate, and SAE alleged more than $40, 000, 000 in damages. We conclude in appellate cause number 09-18-00080-CV that the commercial speech exemption to the TCPA applies to SAE's claims against TransDesign, and we affirm the trial court's order denying TransDesign's motion to dismiss. We also conclude in appellate cause number 09-18-00081-CV that the commercial speech exemption applies, and we affirm the trial court's order denying Falcon Steel's motion to dismiss.

         Background

         According to its Fourth Amended Application for Temporary Injunction to Maintain Status Quo, Permanent Injunction, and Petition for Damages (the petition), [3] SAE designs, engineers, fabricates, and installs components and systems for lattice towers and tubular steel poles used for high and ultra-high voltage transmission of electric power. Between 2002 and 2005, a team at ABB Mexico (ABB) and another company developed a group of applications integrated into the AutoCAD program that "allows for the automatization of multiple functions usually required to effectively complete the detailed engineering for electric power transmission towers[]" ("the Software"). SAE alleges that it acquired exclusive rights to the Software in 2007 when it acquired a division of a company that included ABB and that since the Software was developed, the owners have tried to protect its secrecy.

         According to SAE, use of the Software is valuable in that (1) when drawings are generated using the Software with AutoCAD, a bill of materials (including member profile type, size, material grade with corresponding weight) and items needed for construction can be added to the erection drawings; (2) shop drawings can be generated that show each member with its individual piece mark identification (or Piece Mark ID), which uniquely identifies every piece in the structure, listing size, thickness, material grade, length, weight, drawing reference, tower identification, and comments; (3) the fabricator or erector can click on the Piece Mark ID for a specific member and see the specifications and requirements for that member for easier shop fabrication and field erection; (4) digital drawings generated by the Software include alphanumeric data and information which can be input into Computer Numerical Controlled machines for the automated fabrication of each of the members/components of the lattice towers and tubular steel poles; and (5) quality control is enhanced by the Software because it assists with controlling inventory of the members and the status and progress of a project. SAE asserts that trade secret know-how has been incorporated over the years into the Software, this know-how is based on SAE's consistently changing needs in the industry in which it does business, and that the Software saves SAE considerable time and reduces error by 40 to 50 percent. SAE contends that the Software is "proprietary and confidential software containing Trade Secrets which gave ABB Mexico, and, now gives SAE Towers, an economic and trade advantage against the competitors of ABB Mexico, and, now SAE Towers."

         In the petition, SAE alleges that Defendant Amado Lizarraga is a former employee and design engineer for SAE who left and went to work for SAE's competitor and ultimately went into business as a principal or part owner of TransDesign International. SAE alleges Defendant Claus Sutor is a former sales manager for ABB and a former Executive Vice President of SAE. According to SAE, Sutor formed TransDesign International, a small engineering company specializing in the design and engineering of steel lattice transmission towers, when he was still employed by SAE, and Sutor later left TransDesign International and became an Executive Vice President at Falcon Steel.

         In the petition, SAE alleges that the Defendants improperly acquired and knowingly used the Software without SAE's consent and used the software to produce digital drawings, and misappropriated and used the drawings to bid against SAE on projects or for products sold to SAE's competitors, causing losses to SAE. In addition to seeking a temporary and permanent injunction against the Defendants, SAE alleged claims against the Defendants for statutory and common law misappropriation of trade secrets and conspiracy to misappropriate, and SAE seeks more than $40, 000, 000 in damages.

         The Motions to Dismiss Under the TCPA

         In their motions to dismiss and at the trial court's hearing on the motions, the Defendants argued that the TCPA applies, that the commercial speech exemption to the TCPA does not apply, and that SAE has failed to present prima facie evidence of each element of its claims. In its written response to the motions to dismiss and at the hearing, SAE argued that its claims do not concern TCPA-protected "communications" and that, if they do, those communications are subject to the commercial speech exemption under the TCPA. SAE also argued that it presented prima facie evidence of each essential element of its claims.

         The trial court signed orders denying the TCPA motions to dismiss. The trial judge did not explain the basis for her ruling in the orders, nor did she sign findings of fact and conclusions of law, and none were requested from the parties.

         Issues on Appeal

         In cause number 09-18-00080-CV, TransDesign raises two points in support of their contention that the trial court erred in denying their TCPA motion to dismiss. First, they argue the TCPA applies to SAE's claims. Second, they contend SAE has not established clear and specific evidence of a prima facie case for each essential element of SAE's claims against TransDesign. They also argue that the commercial speech exemption does not apply. In cause number 09-18-00081-CV, Falcon Steel raises the same arguments in support of its contention that the trial court erred in denying Falcon Steel's motion to dismiss. For convenience, we will address the issues in both appeals together.

         Dismissal Under the TCPA

         The TCPA is a statutory mechanism that permits a defendant to move for 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, right to petition, or right of association[.]" See Tex. Civ. Prac. & Rem. Code Ann. § 27.003(a). Its purpose "is 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." Id. § 27.002. "To effectuate the statute's purpose, the Legislature has provided a two-step procedure to expedite the dismissal of claims brought to intimidate or to silence a defendant's exercise of these First Amendment rights." ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017); see Tex. Civ. Prac. & Rem. Code Ann. §§ 27.003, 27.005. The two-step procedure provides a burden-shifting framework. In re Lipsky, 460 S.W.3d 579, 586-87 (Tex. 2015).

         Under the first step, the movant of a TCPA motion to dismiss has the burden to "show[] by a preponderance of the evidence that the [nonmovant's] legal action is based on, relates to, or is in response to the [movant's] exercise of (1) the right of free speech; (2) the right to petition; or (3) the right of association." Tex. Civ. Prac. & Rem. Code Ann. § 27.005(b). The statute defines the terms "exercise of the right of free speech," "exercise of the right to petition," and "exercise of the right of association." Id. § 27.001. The TCPA directs that it is to be "construed liberally to effectuate its purpose and intent fully." Id. § 27.011(b).

         Assuming the movant meets its burden under step one to show the TCPA applies, then under step two the burden shifts to the nonmovant to establish "by clear and specific evidence a prima facie case for each essential element of the claim in question." Id. § 27.005(c). A "prima facie case" refers to "evidence sufficient as a matter of law to establish a given fact if it is not rebutted or contradicted." In re Lipsky, 460 S.W.3d at 590. It is the "'minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.'" Id. (citing In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (per curiam)). Clear and specific evidence means that the "plaintiff must provide enough detail to show the factual basis for its claim." Id. at 591.[4]

         In determining whether to grant a TCPA motion to dismiss, the trial court "shall consider the pleadings and supporting and opposing affidavits stating the facts on which the liability or defense is based." Id. § 27.006(a). The court may allow specified and limited discovery relevant to the motion on a showing of good cause. Id. § 27.006(b). All other discovery in the legal action is suspended until the court has ruled on the motion to dismiss. Id. ยงยง 27.003(c), ...


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