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Shopoff Advisors, LP v. Atrium Circle, GP

Court of Appeals of Texas, Fourth District, San Antonio

July 10, 2019

SHOPOFF ADVISORS, LP, Appellant
v.
ATRIUM CIRCLE, GP, Atrium Winn, LLC, Atrium Kavoian, LLC, Copperfield Square, Copperfield Winn, LLC, Copperfield Kavoian, LLC, Imperial Airport, Imperial Winn, LLC, Imperial Kavoian, LLC, Crystal Springs Partners, LLC, Commerce Office Park - One LP, and Universal Square, LP, Appellees

          From the 408th Judicial District Court, Bexar County, Texas Trial Court No. 2018-CI-00676 Honorable Antonia Arteaga, Judge Presiding [1]

          Sitting: Patricia O. Alvarez, Justice, Luz Elena D. Chapa, Justice, Liza A. Rodriguez, Justice

          OPINION

          LIZA A. RODRIGUEZ, JUSTICE

         Shopoff Advisors, LP ("Shopoff") appeals from the trial court's interlocutory order denying its motion to dismiss filed pursuant to the Texas Citizens Participation Act ("TCPA"), also known as Texas's anti-SLAPP statute. See Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011. Shopoff contends the trial court erred in denying its motion because the claims brought by appellees (collectively referred to as "Atrium") related to the exercise of Shopoff's right to petition. We affirm in part and reverse in part.

         Background

         The dispute between Shopoff and Atrium is complicated and relates to multiple legal proceedings. It began in February 2016 when Shopoff failed to close on a real estate transaction. Shopoff had agreed to buy six properties from Atrium for $35, 600, 000.00 and had placed $2.5 million into an escrow account at First American Title Co. ("First American"). After Shopoff did not close on the transaction, Atrium argued that Shopoff had breached their agreement and forfeited the escrow money. The next month, March 2016, Shopoff was ready to close and sued Atrium for specific performance, demanding Atrium sell the properties to Shopoff. Shopoff also filed lis pendens[2] on the properties. Atrium counterclaimed, and the case was referred to arbitration.

         On March 29, 2017, a year later, the arbitrators issued their final award, determining that $2, 006, 100.00 of the $2.5 million on deposit with First American would be distributed to Atrium. The rest would be distributed to Shopoff. The arbitrators further ordered the parties to "promptly execute all documents required by First American Title Company to cause the release of such $2.5 million in accordance with this Award (and in no event more than three business days following receipt from the title company of such documents)." Shopoff was also ordered to "release all Notices of Lis Pendens from the real property records where such notices were filed for record within seven (7) calendar days from the date of this Award."

         On April 3, 2017, Atrium's attorney sent a letter via email to the escrow officer at First American demanding $2, 006, 100.00 of the escrow money be released to Atrium. Attached to the email was the arbitrators' final award. On April 4, 2017, Shopoff's counsel sent an email to the escrow officer stating that the "award will be challenged in Stare [sic] District Court." Shopoff's counsel instructed the escrow officer to "not release any funds until you have a final, nonappealable judgment from a court of last resort." The escrow officer then emailed Atrium's attorney the following:

We have been advised by counsel for Shopoff that the arbitration award will be challenged and, as such, we are not in a position to release the funds at this time.

         On April 12, 2017, the trial court signed a final judgment confirming the arbitration award. The final judgment ordered the parties to provide a copy of the judgment to First American within three days. It also ordered the parties to "promptly execute all documents required by First American Title Company to cause the release of such $2.5 million in accordance with the Final Award and this Final Judgment, and to return such documents to First American" within fifteen business days of receiving the documents from First American. With respect to the lis pendens filed by Shopoff, the final judgment ordered that lis pendens "are hereby cancelled, released, and vacated."

         On April 14, 2017, Shopoff filed a "Motion to Approve Deposit in Lieu of Supersedeas Bond," requesting that the trial court set the amount of cash Shopoff needed to deposit to supersede the final judgment. On April 17, 2017, Shopoff filed its notice of appeal, stating that it intended to appeal the trial court's final judgment. Shopoff's appeal of the trial court's final judgment was assigned Appeal No. 04-17-00241-CV in this Court.

         Six months later, on October 5, 2017, Atrium filed a "Motion to Enforce and Collect Judgment, for Turnover Order, Motion for Sanctions, and Motion to Require Supersedeas or Cash Deposit in Lieu of Supersedeas." According to Atrium, Shopoff had never set its motion to approve deposit in lieu of supersedeas bond for a hearing; thus, Shopoff had never superseded the judgment. Atrium also complained that Shopoff had not released the lis pendens on Atrium's properties or executed the documents necessary to release the funds in escrow. Thus, Atrium argued it was entitled to enforcement and collection of the judgment.

         On November 28, 2017, Shopoff filed a "Notice of Filing Deposit in Lieu of Supersedeas Bond," explaining that it had filed a "Net Worth Affidavit." The affidavit affirmed its net worth to be $218, 630.00; thus, pursuant to Texas Rule of Appellate Procedure 24.1(a)(3), Shopoff deposited with the trial court clerk the sum of $109, 315.00, or one-half of its net worth.

         The next day, the trial court heard Atrium's motion to enforce the judgment. After hearing testimony, the trial court took the matter under advisement. On December 22, 2017, the trial court signed an order granting Atrium's motion to the extent it ordered Shopoff to execute a release of each of the lis pendens previously filed. Five days later, Atrium filed a motion for contempt, arguing Shopoff had not complied with the trial court's order. That same day, the trial court issued a show cause order, ordering Shopoff to appear on January 9, 2018.[3]

         On January 2, 2018, Shopoff filed an original mandamus proceeding in this Court (Appeal No. 04-18-00001-CV), seeking a writ of injunction and requesting this Court to determine whether Shopoff's filing of its net worth affidavit and a cash deposit was sufficient to stay execution of the judgment pending determination of the adequacy of the supersedeas deposit.

         The next day, on January 3, 2018, in Appeal No. 04-17-00241-CV (Shopoff's appeal from the trial court's judgment), this Court issued an opinion concluding that $900 of the escrow money on deposit with First American should have been distributed to Shopoff. Thus, this Court modified the trial court's judgment to include $900 that was erroneously not distributed to Shopoff and affirmed the judgment as modified. Pursuant to this modified judgment, Atrium remained entitled to $2, 006, 100.00 of the $2.5 million on deposit with First American. On January 18, 2018, in Appeal No. 04-17-00241-CV (Shopoff's appeal from the trial court's judgment), Shopoff filed a motion for rehearing. On January 22, 2018, this Court denied the motion for rehearing.

         On February 7, 2018, in the mandamus proceeding filed in this court (Appeal No. 04-18-00001-CV), this Court issued an opinion, explaining that Shopoff's cash deposit, even if insufficient, superseded the trial court's judgment. Thus, this Court conditionally granted Shopoff's petition for writ of mandamus. The trial court then vacated its December 22, 2017 order.

         On February 14, 2018, Shopoff's attorney sent a letter to Atrium's attorney and attached a "Tender," along with a proposed Agreed Order directing the trial court clerk to pay Atrium the sum contemplated by this Court's modified judgment in Appeal No. 04-17-00241-CV. On March 5, 2018, Atrium filed in the trial court a "Motion to Reconvene Hearing on Motion to Require Supersedeas, and Motion to Set, Increase, or Modify Supersedeas." In its motion, Atrium complained that Shopoff would not indicate whether it intended to appeal this Court's decision in Appeal No. 04-17-00241-CV to the Supreme Court and argued it was harmed by Shopoff's appeals. In fact, Shopoff did not file a petition for discretionary review with the Texas Supreme Court; thus, the mandate in Appeal No. 04-17-00241-CV issued on April 4, 2018.

         Meanwhile, on January 12, 2018, days after this Court's opinion in Appeal No. 04-17-00241-CV (Shopoff's appeal from the trial court's judgment) was issued, First American filed an interpleader action in the trial court, alleging that it was holding funds in escrow that were in dispute. First American alleged that "[a]s an innocent stakeholder," it was entitled "to interplead those funds into the registry of the court." Naming Shopoff and Atrium as defendants, First American asked the trial court to sign an order (1) accepting the tender of $2.5 million into the registry of the court, (2) discharging First American from all liability to the defendants with regard to the Purchase and Sale Agreement, and (3) dismissing First American from the suit.

         On March 4, 2018, Atrium filed a counter-claim against First American and a cross-claim against Shopoff.[4] Atrium alleged that Shopoff, together with First American, had refused to comply with the trial court's judgment during the period of time it had not been superseded (i.e., from April 3, 2017 to November 28, 2017), which caused substantial damage to Atrium. Atrium further alleged that Shopoff had actually solicited, encouraged, directed, aided and attempted to aid First American to breach its fiduciary duties to Atrium. Atrium also alleged that Shopoff had engaged in a conspiracy with First American to breach First American's fiduciary duties. Alternatively, Atrium alleged that Shopoff was vicariously liable for First American's conduct by aiding and abetting First American.

         In response to the lawsuit, on May 4, 2018, Shopoff filed an "Anti-SLAPP Motion to Dismiss" pursuant to the TCPA. Shopoff argued Atrium's theory of participatory liability was based on an email Shopoff's attorney had sent to First American, informing First American that the arbitration award would be "challenged in Sta[t]e District Court" and directing First American to "not release any funds until you have a final, nonappealable [judgment] from a court of last resort." Thus, Shopoff argued the TCPA applied because Atrium's claims against it related to Shopoff's right to petition. Further, Shopoff argued that Atrium cannot meet its burden of showing a prima facie case on the element of damages because its claims are barred by the economic loss rule.[5] On July 18, 2018, the trial court denied Shopoff's motion to dismiss pursuant to the TCPA. Shopoff then filed this accelerated appeal.

         Motion to Dismiss Under the Texas Citizens Participation Act

         The TCPA's stated 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." Tex. Civ. Prac. & Rem. Code Ann. § 27.002. In an aim to fulfill this purpose, the TCPA provides 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" unless the plaintiff establishes "by clear and specific evidence a prima facie case for each essential element of the claim in question." Id. §§ 27.003(a), 27.005(c). "Legal action" is defined as "a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal or equitable relief." Id. § 27.001(6). "This undeniably broad definition appears to encompass any procedural vehicle for the vindication of a legal claim." State ex rel. Best v. Harper, 562 S.W.3d 1, 8 (Tex. 2018) (citation omitted).

         A party moving for dismissal under the TCPA has the initial burden of showing by a preponderance of the evidence that the legal action "is based on, relates to, or is in response to the party'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. §§ 27.003(a), 27.005(b); see S & S Emergency Training Sols., Inc. v. Elliott, 564 S.W.3d 843, 847 (Tex. 2018). If the movant makes this showing, the burden shifts to the respondent. See S & S, 564 S.W.3d at 847. The respondent's claims against the movant will be dismissed unless the respondent can "establish[] by clear and specific evidence a prima facie case for each essential element of the claim in question." Tex. Civ. Prac. & Rem. Code Ann. § 27.005(c); see S & S, 564 S.W.3d at 847. The supreme court has explained that "a prima facie case is the 'minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.'" S & S, 564 S.W.3d at 847 (quoting In re Lipsky, 460 S.W.3d 579, 590 (Tex. 2015)). "A finding that [the respondent] has met his TCPA burden does not establish that his allegations are true." West v. Quintanilla, No. 17-0454, 2019 WL 1495093, at *4 n.9 (Tex. Apr. 5, 2019).

         If the respondent satisfies his burden, then the burden shifts back to the movant to establish "by a preponderance of the evidence each essential element of a valid defense" to the respondent's claim. Tex. Civ. Prac. & Rem. Code Ann. § 27.005(d). If the movant satisfies this burden, then the trial court must dismiss the legal action. Id.

         In determining whether the parties have met their respective burdens, the trial court does not hear live testimony; the TCPA directs courts to "consider the pleadings and supporting and opposing affidavits stating the facts on which the liability or defense is based." Tex. Civ. Prac. & Rem. Code Ann. § 27.006(a). The supreme court has "recently observed that the pleadings are 'the best and all-sufficient evidence of the nature of the action.'" West, 2019 WL 1495093, at *4 n.8 (quoting Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017)).

         An appellate court reviews issues regarding interpretation of the TCPA de novo. S & S, 564 S.W.3d at 847.

         A. Does the TPCA apply?

         The parties dispute whether the TPCA applies to the underlying claims brought by Atrium against Shopoff. Shopoff emphasizes that pursuant to the TPCA, the legal action need merely to "relate[] to . . . a party's exercise of the . . . right to petition." Tex. Civ. Prac. & Rem. Code Ann. § 27.003(a). And, the TPCA defines the "exercise of the right to petition" to include "a communication in or pertaining to . . . a judicial proceeding." Id. § 27.001(4)(A)(i) (emphasis added). "'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).

         Shopoff points to the allegations in Atrium's cross-claim regarding the email sent by Shopoff's counsel to the escrow officer. Shopoff argues this email is one of the alleged wrongful acts that form the basis of Atrium's lawsuit against Shopoff, and because the email was a communication relating to a judicial proceeding, the TCPA applies to Atrium's claims. In response, Atrium argues the email does not relate to the exercise of Shopoff's right to petition because (1) it was a communication made "to a stranger to the suit"; (2) it was "not a part of taking an appeal or superseding the ...


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