Court of Appeals of Texas, Fifth District, Dallas
RICHARD GOLDBERG, KENNETH GOLDBERG, GEOMET RECYCLING, LLC JOSH APPLEBAUM, ALICIA MCKINNEY, ELOISA MEDINA, LEE WAKSER, SPENCER LIEMAN, MIKEL SHECHT, LAURA MYERS, HENRY JACKSON, AND KELLY COUCH, Appellants
EMR (USA HOLDINGS) INC., EMR GOLD RECYCLING, LLC, GOLD METAL RECYCLERS MANAGEMENT, LLC, GOLD METAL RECYCLERS, LTD., GMY ENTERPRISES, LLC, GMY, LTD., GOLD METAL RECYCLERS-GAINESVILLE, DLLC, GOLD METAL RECYCLERS-FORT WORTH, LLC, GOLD METAL RECYCLERS-OKLAHOMA, LLC, AND GOLDBERG INDUSTRIES, INC., Appellees
Appeal from the 116th Judicial District Court Dallas County,
Texas Trial Court Cause No. DC-17-14064
Justices Myers, Brown, and Whitehill
case concerns the applicability of the Texas Citizens
Participation Act (TCPA) to breach of contract and various
commercial torts, including misappropriation of trade secrets
and breach of fiduciary duty. See Tex. Civ. Prac.
& Rem. Code Ann. §§ 27.001-.011. Appellees
(Plaintiffs) sued appellants (Defendants). Defendants moved
for dismissal of the claims, asserting the "legal
action" was based on, related to, or in response to
their communications that were protected under the TCPA. The
trial court denied Defendants' motion to dismiss.
Defendants bring five issues in this interlocutory appeal
contending the trial court erred by denying their motion to
dismiss because: (1) Plaintiffs' claims are based on,
relate to, or are in response to Defendants' exercise of
their right of association or free speech; (2) Plaintiffs did
not establish that the commercial-speech exemption applied to
their claims; (3) Plaintiffs did not offer prima facie proof
of the elements of each claim to each defendant; (4) the
trial court abused its discretion by failing to exclude
certain evidence Plaintiffs offered; and (5) Plaintiffs
failed to establish that the TCPA violates the constitutional
rights to jury trial, open courts, and due
process. See id. § 51.014(a)(12)
(authorizing interlocutory appeal from denial of motion to
dismiss under TCPA). We affirm the trial court's judgment
in part and reverse in part.
1976 to 2011, Kenneth Goldberg (Goldberg) co-owned and
operated a scrap-metal recycling company called Gold Metal
Recyclers. In 2011, Goldberg sold Gold Metal to EMR Holdings
for over $100 million. After the sale, Goldberg stayed on as
manager of Gold Metal, now part of EMR, and he agreed not to
compete with EMR and its entities (Plaintiffs) for three
years after leaving employment with the company. Goldberg
signed confidentiality agreements promising not to use
Plaintiffs' confidential information for the benefit of
"any person" other than Plaintiffs.
left Gold Metal, and after waiting three years, he opened a
scrap-metal recycling business, Geomet Recycling. To staff
Geomet, he hired some of Plaintiffs' employees.
months after Geomet went into business, Plaintiffs sued
Goldberg, Geomet, and Plaintiffs' former employees who
had gone to work for Geomet for violations of the Texas
Uniform Trade Secrets Act (TUTSA), breach of contract, breach
of fiduciary duty, tortious interference with contract, and
conspiracy. Plaintiffs sought monetary damages and injunctive
moved for dismissal of the suit under the TCPA, asserting
Plaintiffs' lawsuit was based on, related to, or was in
response to Defendants' exercise of the right of
association or free speech. Plaintiffs filed a response to
the motion to dismiss, attaching numerous affidavits and
exhibits purporting to show their claims were not based on
Defendants' exercise of their rights and that the suit
was exempt from the TCPA. Plaintiffs also asserted the
evidence set forth a prima facie case for each element of
their causes of action.
trial court denied Defendants' motion to dismiss without
stating a reason for the denial of the motion and without
making findings of fact and conclusions of law. The trial
court overruled all objections to the evidence submitted in
the proceeding. The trial court also entered a temporary
restraining order prohibiting Defendants Goldberg, Josh
Applebaum, Laura Myers, "and all entities or individuals
acting with them or at their direction . . . from directly or
indirectly using, disclosing, replicating, or otherwise
misappropriating for their own individual or collective use
or benefit . . . any of Plaintiffs' Trade Secrets or
CITIZENS PARTICIPATION ACT
TCPA 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." Civ. Prac. §
27.003(a). The statute's 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.
of a motion to dismiss under the TCPA is a three-step
process. Youngkin v. Hines, 546 S.W.3d 675, 679
(Tex. 2018). In step 1, the movant for dismissal has
the burden of showing by a preponderance of the evidence that
the legal action is based on, relates to, or is in response
to the movant's exercise of one of those rights. Civ.
Prac. § 27.005(b). If the movant does so, then the
procedure moves to step 2, and the burden of proof shifts to
the nonmovant bringing the legal action to "establish
by clear and specific evidence a prima facie case for each
essential element of the claim in question."
Id. § 27.005(c). If the nonmovant meets this
burden, then the procedure moves to step 3, and the burden of
proof shifts back to the movant to "establish by a
preponderance of the evidence each essential element of a
valid defense to the nonmovant's claim."
Id. § 27.005(d). Dismissal of a legal action
under the TCPA is with prejudice to the refiling of the legal
action. See LegacyTexas Bank v. Harlan, No.
05-18-00039-CV, 2018 WL 2926397, at *5 (Tex. App.-Dallas June
7, 2018, no pet.) (mem. op.); Breitling Oil & Gas
Corp. v. Petroleum Newspapers of Alaska, LLC, No.
05-14-00299-CV, 2015 WL 1519667, at *3 (Tex. App.-Dallas Apr.
1, 2015, pet. denied) (mem. op.).
evidence considered by the trial court in determining a
motion to dismiss includes "the pleadings and supporting
and opposing affidavits stating the facts on which the
liability or defense is based." Civ. Prac. §
27.006(a). However, the plaintiff's pleadings are usually
"the best and all-sufficient evidence of the nature of
the action." Hersh v. Tatum, 526 S.W.3d 462,
467 (Tex. 2017) (quoting Stockyards Nat'l Bank v.
Maples, 95 S.W.2d 1300, 1302 (Tex. 1936)).
party appeals the denial of its motion to dismiss under the
TCPA, the appeal stays the commencement of the trial and
"all other proceedings in the trial court pending
resolution of that appeal." Civ. Prac. § 51.014(b).
OF THE TCPA
applying the TCPA to this case, we first consider
Defendants' fifth issue, which contends the trial court
erred to the extent it may have determined the TCPA is
unconstitutional. In their response to Defendants' motion
to dismiss, Plaintiffs asserted the TCPA violated their right
to a jury trial under the Texas Constitution, violated the
Texas Constitution's Open Courts Provision, and violated
the Due Process and Due Course of Law Clauses of the United
States and Texas Constitutions.
to Jury Trial
asserted the TCPA's first and third steps, which require
the trial court instead of a jury to apply the
preponderance-of-the-evidence burden of proof, violate
Plaintiffs' right to a jury trial. In this case, we
conclude there is no violation of the right to a jury trial.
right to a jury trial of civil actions is guaranteed by the
Texas Constitution. See Tex. Const. art. I, §
15; id. art. V, § 10. Article 1, section 15
grants the right to a jury trial for those actions, or
analogous actions, where a jury was available when the Texas
Constitution was adopted in 1876. Barshop v. Medina Cty.
Underground Water Conservation Dist., 925 S.W.2d 618,
636 (Tex. 1996); Roper v. Jolliffe, 493 S.W.3d 624,
631 (Tex. App.-Dallas 2015, pet. denied). Article 5, section
10 provides the right to have a jury resolve fact questions
in "all 'causes' in a Texas district
court." Barshop, 925 S.W.2d at 636;
Roper, 493 S.W.3d at 634.
of the TCPA procedure, determination of whether the
"legal action is based on, relates to, or is in response
to the party's exercise of the right of free speech, the
right to petition, or the right of association," is not
a "cause" nor does the determination of that step
resolve any substantive element of a cause or defense.
Instead, it simply results in the procedural determination of
whether the TCPA analysis proceeds to step 2. The right to
jury trial does not attach to this step of the TCPA
of the TCPA analysis concerns whether the plaintiff
"establishe[d] by clear and specific evidence a prima
facie case for each essential element of the claim in
question." Civ. Prac. § 27.005(c). If the plaintiff
does not make this showing, then the trial court must dismiss
the suit. Id. § 27.005(b), (c). As the supreme
court explained in In re Lipsky, 460 S.W.3d 579
(Tex. 2015) (orig. proceeding), this standard requires the
plaintiff to present "enough detail to show the factual
basis for its claim" and "the minimum quantum of
evidence necessary to support a rational inference that the
allegation of fact is true." Id. at 590-91.
Thus, step 2 of the motion to dismiss under the TCPA has the
same effect as a no-evidence motion for summary judgment
under Rule of Civil Procedure 166a(i). Rule 166a(i) does not
violate a party's right to trial by jury. See
Springer v. Am. Zurich Ins. Co., 115 S.W.3d 582, 585
(Tex. App.-Waco 2003, pet. denied); Lattrell v. Chrysler
Corp., 79 S.W.3d 141, 150 (Tex. App.-Texarkana 2002,
pet. denied). "When a party cannot show a material fact
issue, there is nothing to submit to a jury, and the grant of
summary judgment to the opposing party does not violate the
constitutional right to a jury trial."
Lattrell, 79 S.W.3d at 150. Therefore, the
requirement that the plaintiff meet essentially the same
standard under section 27.005(c) does not violate the right
to jury trial.
the third step, that the trial court must dismiss the legal
action if the movant "establishes by a preponderance of
the evidence each essential element of a valid defense,"
we need not determine whether this provision violates the
constitutional right to a jury trial because Defendants did
not attempt to prove any defenses in their motion to dismiss.
did not establish that the TCPA violates their right to a
jury trial in this case.
Courts and Due Process
Open Courts provision of the Texas Constitution, article 1,
section 13, states, "All courts shall be open, and every
person for an injury done him, in his lands, goods, person or
reputation, shall have remedy by due course of law."
Tex. Const. art. I, § 13. This is a due- process
guarantee that a person bringing a well-established
common-law cause of action will not be denied access to the
courts arbitrarily or unreasonably. Yancy v. United
Surgical Partners Int'l, Inc., 236 S.W.3d 778, 783
(Tex. 2007). Under this provision, "the legislature may
not abrogate the right to assert a well-established common
law cause of action unless the reason for its action
outweighs the litigants' constitutional right of
redress." Tex. Workers' Comp. Comm'n v.
Garcia, 893 S.W.2d 504, 520 (Tex. 1995) (quoting
Trinity River Auth. v. URS Consultants, Inc., 889
S.W.2d 259, 261 (Tex. 1994)). The Due Process Clause of the
United States Constitution and the Due Course Clause of the
Texas Constitution prohibit the government from depriving a
person of life, liberty, or property without due process of
law. See U.S. Const. amend. XIV; Tex. Const. art. I,
§ 19 ("No citizen of this State shall be deprived
of life, liberty, property, privileges or immunities, or in
any manner disfranchised, except by the due course of the law
of the land.").
argue the TCPA violates the Open Courts provision and the Due
Process/Due Course Clauses because it does not permit
cross-examination of affiants in steps 1 and 3 of the
procedure when the movant's burden of proof is by a
preponderance of the evidence. Plaintiffs appear to assert
the TCPA prohibits depositions, which would make
cross-examination impossible. This Court has concluded that
the limited discovery permitted under section 27.006(b)
includes depositions. In re Spex Grp. U.S. LLC, No.
05-18-00208-CV, 2018 WL 1312407, at *4 (Tex. App.-Dallas Mar.
14, 2018, orig. proceeding) (mem. op.); see also Lane v.
Phares, 544 S.W.3d 881, 889 n.1 (Tex. App.-Fort Worth
2018, no pet.) (under section 27.006, court of appeals
reviewing motion to dismiss considered deposition trial court
allowed). We conclude the TCPA does not prohibit
cross-examination as relevant to determination of the motion
also argue the TCPA violates their right to open courts
because it prevents a party from obtaining discovery except
under limited circumstances. Section 27.003(c) states that
after a motion to dismiss is filed, "all discovery in
the legal action is suspended until the court has ruled on
the motion to dismiss." Civ. Prac. § 27.003(c).
That section has an exception permitting discovery "as
provided by Section 27.006(b)," and section 27.006(b)
permits the trial court to "allow specified and limited
discovery relevant to the motion [to dismiss]."
Id. § 27.006(b). Several courts have concluded
this statute does not violate the Open Courts provision.
See Landry's, Inc. v. Animal Legal Defense Fund,
566 S.W.3d 41, 68 (Tex. App.- Houston [14th Dist.] 2018, pet.
filed); Mem'l Hermann Health Sys. v. Khalil, No.
01-16-00515-CV, 2017 WL 3389645, at *16 (Tex. App.-Houston
[1st Dist.] Aug. 8, 2017, pet. denied) (mem. op.);
Abraham v. Greer, 509 S.W.3d 609, 615-16 (Tex.
App.-Amarillo 2016, pet. denied); Combined Law
Enforcement Ass'n of Tex. v. Sheffield, No.
03-13-00105-CV, 2014 WL 411672, at *10 (Tex. App.-Austin Jan.
31, 2014, pet. denied) (mem. op.). We agree with these courts
and conclude that the restrictions on discovery do not
violate the Open Courts provision.
also argue the TCPA violates the Open Courts provision
because it requires the trial court to award a prevailing
movant its costs, attorney's fees, and other expenses;
and the statute also requires the trial court to award
sanctions against the party bringing the legal action,
"sufficient to deter the party who brought the legal
action from bringing similar actions described in this
chapter." Civ. Prac. § 27.009(a). The supreme court
has interpreted this provision as requiring the trial court
to award reasonable attorney's fees to a prevailing
movant. Sullivan v. Abraham, 488 S.W.3d 294, 299
(Tex. 2016); see also Cruz v. Van Sickle, 452 S.W.3d
503, 522 (Tex. App.-Dallas 2014, pet. denied). A statute that
awards a prevailing party reasonable attorney's fees or
sanctions does not violate the Open Courts provision. Such a
statute does not bar access to the courts "because
sanctions are imposed and litigation costs are shifted only
after the claims are resolved." Landry's,
566 S.W.3d at 69.
also argued in the trial court that the TCPA violates the
Open Courts provision because it
interferes with a party's right to seek injunctive relief
pendente lite-as in this case-where immediate relief
is proper to ensure that the party has a meaningful
opportunity to obtain judicial (especially equitable) relief.
. . . [T]he TCPA's process-including the stay provision
applicable to interlocutory appeals-unduly restricts a
party's access to the Courts and impairs the assertion of
See Civ. Prac. § 51.014(b) (interlocutory
appeal from denial of dismissal under TCPA "stays the
commencement of a trial" and "stays all other
proceedings in the trial court pending resolution of that
appeal"). While this appeal was pending, Plaintiffs
filed a motion to lift the stay under section 51.014(b) to
permit them to pursue contempt proceedings in the trial court
against Defendants for violating a temporary restraining
order, and to pursue a temporary injunction. We granted the
motion and lifted the stay to permit the trial court to hold
a hearing on Plaintiffs' motion for temporary injunction
and motion for contempt. The supreme court concluded this
order was an abuse of discretion. In re Geomet Recycling
LLC, No. 18-0443, 2019 WL 2482125, at *1, *6 (Tex. June
14, 2019) (orig. proceeding). The supreme court said the stay
of trial court proceedings under section 51.014(b) did not
leave Plaintiffs without a remedy during the appeal because
Plaintiffs could have sought injunctive relief from this
Court under Rule of Appellate Procedure 29.3. Id. at
*4-5; see also Tex. R. App. P. 29.3. In light of the
supreme court's opinion in In re Geomet, we
conclude Plaintiffs have not shown the TCPA "unduly
restricts a party's access to the courts" or that it
"impairs the assertion of legal claims."
conclude Plaintiffs have not shown the TCPA violates the
Texas or United States Constitutions. The trial court erred
to the extent, if any, that the denial of Defendants'
motion to dismiss was based on Plaintiffs' assertion that
the TCPA is unconstitutional. We sustain Defendants'
Goldberg sold Gold Metal to EMR, the sale agreement contained
a nondisclosure provision stating each "Seller,"
which included Goldberg, agreed "that all customer,
prospect, and marketing lists, sales data, intellectual
property, employee information, proprietary information,
trade secrets and other confidential information" of
Gold Metal before the sale would "be owned exclusively
by EMR" after the closing of the sale. The provision
also stated that each "Seller," including Goldberg,
promised to treat the information as confidential and
promised "not to make use of such information for its
own purposes or for the benefit of any other Person."
the sale, Goldberg went to work for one of the Plaintiffs as
its chief executive officer. His employment agreement
contained a nondisclosure provision stating he agreed that he
would not, even after termination of his employment,
"disclose to or use for the benefit of any person,
corporation or other entity, or for himself, any and all
files, trade secrets or other confidential information
concerning the internal affairs of [Plaintiffs], including,
but not limited to, information pertaining to its clients,
services, products, earnings, finances, operations, methods
or other activities." This nondisclosure provision did
not apply to information that was "of public record or
is generally known, disclosed or available to the general
public or the industry generally." The employment
agreement also included noncompetition provisions in which
Goldberg promised not to own or work for a competing company
for one year after his employment with Plaintiffs ceased.
This noncompetition provision also prohibited Goldberg from
hiring any of Plaintiffs' employees for one year after he
left Plaintiffs. Goldberg was also on EMR's board of
directors and promised not to compete with EMR for three
years after he left the board of directors.
employees, including the other individual Defendants,
received Plaintiffs' employee handbook. The handbook
contained a nondisclosure provision about confidential
During employment at the Company, employees may acquire
confidential information belonging to the Company such as,
but not limited to, customer information, accounts,
prospects, trade secrets, procedures, sales data, supply
sources, contracts, price lists, practices, financial data,
company plans, legal matters, passwords, hard copy documents,
electronic files, and other specific information concerning
the Company, its suppliers, its customers, and its employees.
Employees are responsible for maintaining strict
confidentiality of all company information. Employees should
also avoid disclosure of confidential information about the
Company, its customers, and its suppliers to outside parties
who are not employed and/or do not have authorization to
access confidential information. Employees agree that all
such information is the exclusive property of the Company and
that they will not at any time divulge or disclose to anyone,
except in the responsible exercise of an employee's job,
any such information, whether or not the information has been
designated specifically as confidential. The unauthorized
release or removal of such information will be viewed as
grounds for discipline, up to and including termination of
employment and possible legal action against employee.
handbook also stated that "[p]rograms and information on
computers are to be treated as proprietary and
confidential" and that "[e]mployees may not use
computers to disclose confidential and proprietary
computer system, Trade 2, "contain[ed] a compilation of
information of virtually all of EMR Group's commercial
data, including the operational transactions that take place
within EMR Group (and its related companies), as well as
inventory control and virtually all aspects of the
relationships with customers [suppliers] and consumers
[purchasers]." Many of Plaintiffs' purported trade
secrets were contained within Trade 2. When they worked for
Plaintiffs, all the individual Defendants had at least some
access to parts of Trade 2.
resigned from EMR's board of directors in September 2013,
and he resigned from his CEO position in September 2014. The
noncompete agreements expired by September 17, 2016.
2017, Goldberg formed a new company, Geomet, which would be
competing directly with Plaintiffs.
November 2016 and continuing through 2017, many of
Plaintiffs' employees resigned and ultimately went to
work for Geomet. Many of these employees, when they worked
for Plaintiffs, communicated with scrap-metal suppliers and
purchasers to buy and sell the scrap metal that constituted
Plaintiffs' business. When these employees went to work
for Geomet, they contacted some of those same suppliers and
of the employees, before they resigned from Plaintiffs,
e-mailed to their personal e-mail accounts information from
Plaintiffs' computer database, including seller and
purchaser lists, inventory of some of Plaintiffs'
facilities, environmental reports, and information about
Plaintiffs' employees. Plaintiffs considered all this
information to be trade secrets. Some of the employees took
cell phones, laptop computers, and computer tablets belonging
to Plaintiffs with them when they resigned. Some of these
items were later returned to Plaintiffs but with records of
their use erased. Plaintiffs hired a company to examine these
computers, phones, and tablets. The company determined that
USB storage devices such as external hard drives had been
attached to some of the computers and others had accessed
complain that Goldberg violated his employment agreement by
contacting Plaintiffs' employees and persuading them to
resign and work for Geomet. Plaintiffs also complain that the
individual Defendants breached the nondisclosure provisions
of Plaintiffs' employee handbook by downloading
information and sending it to their personal e-mail accounts
or by using external hard drives and data-storage devices and
websites. Plaintiffs also complain that the individual
Defendants, after they went to work for Geomet, violated
Plaintiffs' employee handbook by contacting scrap-metal
suppliers and purchasers who were also suppliers and
purchasers from Plaintiffs. Plaintiffs complain that the
individual Defendants contacted some of the same people at
the purchasers and suppliers with whom they did business
while employed by Plaintiffs. Some of these contacts resulted
in purchases and sales of scrap metal by Geomet. Plaintiffs
assert that if the purchasers and suppliers had come to them
instead of Geomet, Plaintiffs would have made a profit from
those purchases and sales.
also complain about the Pecan House incident. Pecan House
& Recycling sold scrap metal to Plaintiffs. Pecan House
agreed to send one of the Plaintiffs, Gold Metal Recyclers, a
load of scrap metal, and Gold Metal Recyclers made an advance
payment to Pecan House for the scrap metal. According to
Plaintiffs, before Pecan House delivered the scrap metal,
Defendant Mikel Shecht falsely represented to Pecan House
that Gold Metal Recyclers had shut down and moved its
operations to Geomet. After talking to Shecht, Pecan House
delivered the load of scrap metal to Geomet instead of to
Gold Metal Recyclers. Defendant Henry Jackson signed for the
load when it arrived.
assertions of their damages include the lost value of the
goodwill in the purchase from Goldberg, the lost sales due to
Defendants' contacting the purchasers who did business
with Plaintiffs, and the loss to Plaintiffs' inventory of
scrap metal they would have purchased from the scrap-metal
providers had Defendants not contacted Plaintiffs'
suppliers and purchased it. Plaintiffs assert they would have
made a profit on the scrap-metal Defendants purchased.
Plaintiffs also seek disgorgement of Defendants' profits
from doing business with the suppliers and purchasers.
Plaintiffs also claim as damages the costs of recruiting and
training new employees for the positions previously held by
Plaintiffs' employees who went to work for Geomet.
Plaintiffs also seek injunctive relief to bar Defendants from
using or otherwise misappropriating Plaintiffs' trade
secrets or other confidential information.
their second issue, Defendants contend the trial court erred
to the extent it may have applied the commercial-speech