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Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC

Supreme Court of Texas

December 20, 2019

Creative Oil & Gas, LLC and Creative Oil & Gas Operating, LLC, Petitioners,
v.
Lona Hills Ranch, LLC, Respondent

          Argued September 19, 2019

          On Petition for Review from the Court of Appeals for the Third District of Texas

          JAMES D. BLACKLOCK JUSTICE.

         The 86th Legislature recently amended the Texas Citizens Participation Act (TCPA). Act of May 17, 2019, 86th Leg., R.S., ch. 378, 2019 Tex. Gen. Laws 684. The prior version of the statute continues, however, to control cases filed before September 1, 2019. Id. §§ 11-12, 2019 Tex. Gen. Laws at 687. This is one such case. It requires consideration of statutory text that has been repealed but remains operative, though for a limited time only. The question is whether the erstwhile version of the TCPA applies to certain counterclaims alleged in a dispute over an oil and gas lease. The answer to that question depends on whether each counterclaim is "based on, relates to, or is in response to" the "exercise of the right of free speech" or the "exercise of the right to petition," as the governing statutory text defines those concepts. Tex. Civ. Prac. & Rem. Code § 27.003(a). As explained below, we conclude that the court of appeals properly dismissed one counterclaim but that the others should have been allowed to proceed. The judgment of the court of appeals is affirmed in part and reversed in part, and the case is remanded to the trial court for further proceedings.

         I. Background

         Respondent Lona Hills Ranch, LLC (Ranch) entered into an oil and gas lease with Petitioner-lessee Creative Oil & Gas, LLC (Lessee). Petitioner Creative Oil & Gas Operating, LLC (Operator) was the operator of the only producing well on the lease.[1] The Ranch sued the Operator in a trespass and trespass to try title action, seeking a ruling that the lease was terminated due to cessation of production. The Lessee intervened, and the Ranch later filed an amended petition dropping its claims against the Operator and instead asserting them against the Lessee. The Lessee and the Operator brought various counterclaims that essentially amounted to two claims. The first claim was that the Ranch falsely told third-party purchasers of production from the lease that the lease was expired and that payments on the purchases should stop. The second claim was that the Ranch breached the lease by filing this suit and by bringing an administrative action in the Railroad Commission seeking a ruling that the lease had terminated.[2] The second claim asserted that these adversarial actions breached section 11 of the lease, which required Lona Hills to give the Lessee notice of a breach and an opportunity to cure prior to commencing litigation.

         The Ranch filed a TCPA motion to dismiss the counterclaims. As to the first claim, it argued its statements to third parties about the lease were an "exercise of the right of free speech," which the TCPA defines as "a communication made in connection with a matter of public concern." Tex. Civ. Prac. & Rem. Code § 27.001(3). As to the second claim, the Ranch argued that the filing of this suit and the Railroad Commission action were both an "exercise of the right to petition," as the TCPA defines it. See id. § 27.001(4).

         The motion was denied by operation of law, and the Ranch appealed. The court of appeals agreed with the Ranch that the communications to third parties were an "exercise of the right of free speech" covered by the TCPA. Lona Hills Ranch, LLC v. Creative Oil & Gas Operating, LLC, 549 S.W.3d 839 (Tex. App.-Austin 2018, pet. granted). The court of appeals construed the appellees' briefing as failing to take direct issue with the Ranch's contention that its communications with third parties involved a "matter of public concern." Id. at 845-46. The court viewed appellees' briefing as focused on the argument that their counterclaims were premised on the breach of the notice and cure provision, not on the communications to third parties. As a result, the court of appeals did not address the matter-of-public-concern questions explored below. The court rejected the appellees' contention that the counterclaims were premised solely on the alleged breach of the lease. The court concluded that the counterclaims related to communications with third parties were premised on the Ranch's "exercise of the right of free speech" under the TCPA. Id. at 846-47. Proceeding to whether the counterclaimants had established a prima facie case under the TCPA, the court of appeals held that the claims failed and should have been dismissed because (1) the Operator was not a party to the lease and could not assert a breach of that contract, and (2) the Lessee failed to identify a provision of the lease that was violated. Id. at 847.

         Regarding the Operator's counterclaim concerning the filing of this suit and the Railroad Commission action, the court of appeals concluded that this claim was in response to the exercise of the right to petition. Id. at 848. After determining the TCPA applied, the court held the Operator could not make out a prima facie breach-of-contract case because it was not a party to the lease containing the notice and cure provision. Id. As to the Lessee, the court of appeals held that this claim did not fall under the TCPA because it was not "factually predicated" on the Ranch's right to petition. Id. According to the court of appeals, the Lessee's claim was not predicated on the right to petition because the Ranch had contractually agreed to limit its right to petition under the notice and cure provision of the lease. Id. Consistent with these rulings, the court of appeals dismissed all the Operator's counterclaims and dismissed the Lessee's counterclaim premised on communications with third parties.

         II. Discussion

         A. The TCPA

         Under the TCPA, [3] a party may file a motion to dismiss a "legal action" that is "based on, relates to, or is in response to a party's exercise of the right of free speech [or the] right to petition." Tex. Civ. Prac. & Rem. Code § 27.003(a). A "legal action" can consist of an entire lawsuit or a subsidiary action such as a counterclaim. Id. § 27.001(6).

         As the TCPA uses it, the phrase "'exercise of the right of free speech' means a communication made in connection with a matter of public concern." Id. § 27.001(3). "'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). Under section 27.001(7),

"Matter of public concern" includes an issue related to:
(A) health or safety;
(B) environmental, economic, or community ...

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