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Cook v. Kyser

Court of Appeals of Texas, Fifth District, Dallas

November 12, 2019


          On Appeal from the 417th Judicial District Court Collin County, Texas Trial Court Cause No. 417-03417-2018

          Before Justices Bridges, Molberg, and Partida-Kipness



         Appellees Kevin Kyser and Christopher Cowman sued appellant Byron Curtis Cook alleging securities fraud. The trial court denied Cook's motion to dismiss under the Texas Citizens Participation Act. Tex. Civ. Prac. & Rem. Code §§ 27.001-27.011 ("TCPA").[1] Because appellees' legal action is not factually predicated on Cook's protected activity, we affirm the trial court's order.


         Cook is a Manager of Unity Resources, LLC ("Unity") and the single largest equity owner in Unity. Legacy Income Royalty Fund ("LIRF") is one of several Unity-affiliated companies. In 2014, Cowman invested $95, 000 into LIRF, and Kyser made an investment of $47, 500 into LIRF. In 2018, Cowman and Kyser brought suit against Cook, LIRF, Legacy Income Properties, L.L.C. ("Legacy"), and Trade Rare, LLC ("Trade Rare") alleging claims for fraud, breach of fiduciary duty, conspiracy, and violations of the Texas Securities Act in connection with their investments. They alleged that Cook was jointly and severally liable with Legacy and LIRF "because of his direct control of Legacy or LIRF as the issuer or offeror or because of his material aid to Defendants Legacy or LIRF with intent to deceive or defraud or with reckless disregard for the truth or the law." Appellees' operative petition added allegations that Cook was the alter ego of Legacy, LIRF, and Trade Rare.

         Cook filed a TCPA motion to dismiss appellees' claims. He maintained that appellees filed suit at the behest of and to benefit appellees' friend Ken Paxton "as part of an intimidation and disparagement campaign" against Cook, in "retaliation for Cook's cooperation and participation in the criminal investigation and prosecution of Paxton for securities fraud." Texas Attorney General Paxton had solicited Cook's investment in Servergy, Inc. (an entity that is not a party to this case), and the Texas Rangers interviewed Cook in connection with an investigation of Paxton and Servergy. Paxton was subsequently indicted on charges including securities fraud in connection with the solicitation, and the Securities and Exchange Commission filed a civil action against him. Cook argued that by cooperating with law enforcement's investigation, he was exercising protected speech rights, and, as such, appellees' lawsuit "relates to or is in response to" Cook's exercise of the right of free speech. He also contended that his statements to law enforcement "regarding possible criminal activity" were an exercise of his right to petition. Cook also argued that appellees could not show clear and specific evidence to support their prima facie case, and regardless, appellees' claims were barred by limitations.

         The trial court permitted limited discovery at the parties' request. After a hearing, the TCPA motion was overruled by operation of law and this appeal followed. In three issues, Cook argues that the TCPA applies, appellees failed to establish a prima facie case on each element of their claims by clear and specific evidence, and appellees' claim for securities fraud was barred by limitations.


         We review de novo the trial court's ruling on a motion to dismiss under the TCPA. Dyer v. Medoc Health Servs., 573 S.W.3d 418, 424 (Tex. App.-Dallas 2019, pet. denied). "In conducting this review, we consider, in the light most favorable to the non-movant, the pleadings and any supporting and opposing affidavits stating the facts on which the claim or defense is based." Fishman v. C.O.D. Capital Corp., No. 05-16-00581-CV, 2017 WL 3033314, at *5 (Tex. App.-Dallas July 18, 2017, no pet.) (mem. op.); see also TCPA § 27.006(a). Whether the TCPA applies to appellees' claims is an issue of statutory interpretation that we also review de novo. Dyer, 573 S.W.3d at 424.


         In Riggs & Ray, P.C. v. State Fair of Texas, this Court explained:

In order to trigger the TCPA's protection, the legal action must be factually predicated on the alleged conduct that falls within the scope of the TCPA's definition of the right of free speech, petition, or association. If this nexus is missing, then the statute does not apply.

         No. 05-17-00973-CV, 2019 WL 4200009, at *4 (Tex. App.-Dallas Sept. 5, 2019, no pet. h.) (mem. op.) (internal quotations and emphasis omitted). In his first issue, Cook acknowledges that ...

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