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Garrison Investment Group LP v. Lloyd Jones Capital, LLC

Court of Appeals of Texas, Second District, Fort Worth

November 14, 2019

Garrison Investment Group LP, Andy Kwon, and Tyler Brown, Appellants
v.
Lloyd Jones Capital, LLC, Appellee

          On Appeal from the 211th District Court Denton County, Texas Trial Court No. 18-7063-211

          Before Gabriel, Birdwell, and Womack, JJ.

          MEMORANDUM OPINION

          Lee Gabriel, Justice

         Appellants Garrison Investment Group LP, Andy Kwon, and Tyler Brown (collectively, Garrison)[1] appeal from the trial court's order denying their motion to dismiss appellee Lloyd Jones Capital, LLC's (LJC) claims against them under the Texas Citizens Participation Act (TCPA). LJC's claims arose from a commercial business dispute that does not implicate the TCPA. Accordingly, we affirm the trial court's order.

         I. BACKGROUND

         In 2016, Overlook at Prestonwood, LP (Overlook) built a 183-unit, active-senior apartment complex-Atlas Point-and partially funded the construction through a mortgage-insurance program provided by the Department of Housing and Urban Development (HUD). See 12 U.S.C.A. § 1715l (West 2014).[2] Under this program, the owner of a property encumbered by a mortgage insured by HUD cannot sell the property unless HUD approves of the proposed buyer. See id. § 1709(b)(1) (West 2014).

         LJC invests in, develops, and manages multifamily and senior housing with the ultimate goal of selling the property for a profit. In November 2017 while Atlas Point was still under construction, LJC determined, based on "extensive research," that Atlas Point was "a key off-market investment, [3] acquisition, and management real property target." On December 19, 2017, LJC signed a letter of intent (LOI) to buy Atlas Point from Overlook.[4] The LOI recognized that the sale was subject to LJC's ability to assume Overlook's $26.3 million HUD-insured mortgage, requiring LJC to seek HUD's approval. Overlook signed, and thereby accepted, the LOI the next day.[5]On January 10, 2018, LJC provided Overlook with a draft purchase and sale agreement (PSA).

         LJC was interested in forming a limited partnership or joint venture with an equity investor to buy Atlas Point. In February, LJC and Garrison, a provider of equity-investment services in commercial real-estate transactions, discussed forming such a joint venture with Garrison being the primary equity investor.[6] Garrison was aware that any sale of Atlas Point would be subject to HUD's approval. On March 9 and 12, Garrison proposed materially different terms for the joint venture; LJC asserts these terms "were below market rate and industry standards, and not equivalent to the standard promote fee structure the parties had previously based their discussions on."

         LJC, wanting to avoid losing the time and resources it had expended to conduct its due diligence regarding the draft PSA with Overlook, began looking for another equity partner. On March 14, LJC informed Garrison that it was considering buying Atlas Point with a different equity partner. On March 19, LJC signed a PSA with Overlook, using a different equity partner-Sefira Capital. The PSA provided that LJC would apply for HUD approval and that Overlook was required to actively lease vacant units pending the sale. Soon thereafter, LJC discovered that Overlook had not been leasing vacant units, leading LJC to terminate the PSA on April 16.

         LJC and Garrison again began negotiating a joint venture to acquire Atlas Point. This time, LJC would provide no equity for the acquisition, and Garrison would engage LJC to manage Atlas Point. Overlook informed Garrison that Garrison would have to rely on LJC's prior due diligence from the terminated March 19 PSA "to determine if [Garrison] wanted to buy the property."

         LJC later learned that during this time, Garrison had been negotiating with Overlook to buy Atlas Point without LJC's involvement. In any event, LJC and Garrison signed a "non-binding" term sheet on May 3, memorializing their joint interest in pursuing "a fee agreement or property management agreement." LJC contends that it then provided Garrison with its "highly valuable due diligence materials." Garrison asserts that after much nagging, LJC disclosed "almost no due diligence at all." Garrison eventually hired its own construction consultant and real-estate services company to help with its due diligence regarding its proposed Atlas Point acquisition.

         On May 14, Garrison signed an LOI with Overlook; both signed a PSA on June 1. In late June, Garrison applied for HUD approval to acquire Atlas Point under the terms of its PSA with Overlook.

         On August 10, LJC sued Garrison for breach of a joint-venture agreement; tortious interference with prospective business relations; unjust enrichment/quantum meruit; fraud/fraudulent inducement/fraud by nondisclosure; promissory estoppel/detrimental reliance; and civil conspiracy.[7] On October 19, Garrison filed a motion to dismiss LJC's claims under the TCPA, arguing that LJC's suit involved the exercise of protected constitutional rights. See Act of May 21, 2011, 82nd Leg., R.S., ch. 341, § 2, 2011 Tex. Sess. Law Serv. 960, 962 (amended 2019) (current version at Tex. Civ. Prac. & Rem. Code Ann. § 27.003(a)).[8] At approximately this same time, Garrison apparently received HUD's approval to assume Overlook's mortgage and closed the deal with Overlook, becoming Atlas Point's sole owner. Shortly before the sale closed, Garrison hired Capstone Real Estate Services, Inc.-not LJC-to manage Atlas Point.

         After holding a nonevidentiary hearing on February 13, 2019, the trial court denied Garrison's motion to dismiss on March 8. See Act of May 21, 2011, 82nd Leg., R.S., ch. 341, § 2, 2011 Tex. Sess. Law Serv. 960, 962 (amended 2019) (current version at Tex. Civ. Prac. & Rem. Code Ann. § 27.005(b)). Garrison appeals and, in seven issues, argues that the trial court erred by denying its motion to dismiss.[9] See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(12).

         II. TCPA FRAMEWORK

         As has been recognized many times before, the TCPA has dual purposes: protecting First Amendment rights to the full extent of the law while also protecting the right to file meritorious lawsuits. See id. § 27.002; In re Lipsky,460 S.W.3d 579, 589 (Tex. 2015) (orig. proceeding); Smith v. Crestview NuV, LLC, 565 S.W.3d 793, 797 (Tex. App.-Fort Worth 2018, pet. denied). Even though we must construe the TCPA liberally, ...


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