Newpark Mats & Integrated Services, LLC and Newpark Resources, Inc. v. Cahoon Enterprises, LLC Austin L. Cahoon And Mark Cahoon ( 2020 )

Opinion issued March 26, 2020.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-19-00409-CV
———————————
NEWPARK MATS & INTEGRATED SERVICES, LLC AND NEWPARK
RESOURCES, INC., Appellants
V.
CAHOON ENTERPRISES, LLC; AUSTIN L. CAHOON; AND MARK
CAHOON, Appellees
On Appeal from the 133rd District Court
Harris County, Texas
Trial Court Case No. 2018-90276
OPINION
Cahoon Enterprises, LLC, Austin L. Cahoon, and Mark Cahoon (collectively,
Cahoon) sued Newpark Mats & Integrated Services, LLC and Newpark Resources,
Inc. (collectively, Newpark) for trade secret misappropriation, violations of the
Texas Theft Liability Act (TTLA),1 breach of contract, tortious interference with an
existing contract, tortious interference with prospective business relations, and
intentional infliction of emotional distress. Newpark filed a motion to dismiss all of
Cahoon’s claims pursuant to the pursuant to the Texas Citizens’ Participation Act
(TCPA).2 The trial court denied the motion with respect to these causes of action.
On appeal, Newpark argues that the trial court erred by denying its motion to dismiss
Cahoon’s lawsuit in its entirety because Newpark demonstrated that the TCPA
applied to all of Cahoon’s claims, Cahoon did not prove that one of the TCPA’s
exemptions applies, Cahoon did not make a prima facie case by clear and specific
evidence, and, even if Cahoon made its prima facie case, the trial court should have
nevertheless dismissed the lawsuit because Newpark established, by a
preponderance of the evidence, each essential element of its affirmative defense of
release. We affirm the trial court’s judgment.
1
See TEX. CIV. PRAC. & REM. CODE §§ 134.002, .003(a).
2
See TEX. CIV. PRAC. & REM. CODE §§ 27.001–27.011. The Texas Legislature
amended certain provisions of the TCPA in 2019. Act of May 17, 2019, 86th Leg.,
R.S., ch. 378, §§ 1–9, § 12, sec. 27.001, 27.003, 27.005–.007, 27.0075, 27.009–.010
(to be codified at TEX. CIV. PRAC. & REM. CODE §§ 27.001, 27.003, 27.005–.007,
27.0075, 27.009–.010). The amendments became effective September 1, 2019. Id.
at § 11. Because suit was filed before the effective date of the amendments, this case
is governed by the statute as it existed before the amendments. See id. All our
citations and analyses are to the TCPA as it existed prior to September 1, 2019,
unless otherwise noted.
2
Background
Cahoon Enterprises is a small family-owned business in North Dakota that
provides various trucking, roustabout, and excavation services for the fracking oil
drilling and production activities in Bakken Formation. The company’s founder,
Mark Cahoon, and his son, Austin Cahoon, oversee the company’s operations. The
roustabout services provided by Cahoon Enterprises include, among other things,
mat installation and removal services for the mats that are installed under the sand
boxes that are hauled into oil fields at fracking sites. Newpark manufactures the type
of heavy duty composite matting systems that Cahoon Enterprises installs.
In May 2017, Newpark hired Cahoon Enterprises as an independent contractor
“to coordinate orders for the rental and installations of [Newport’s] mats for
customers.” The terms of their agreement were memorialized in the Master Service
Agreement executed by the parties. Because Newpark did not have any employees
located in the Bakken Formation at that time, Newpark “relied on Cahoon
Enterprises to essentially manage [Newpark’s] mat rental and installation unit in the
Bakken Formation.”
In October 2017, Newpark acquired Well Service Group, Inc. (WSG), a
business that provides similar mat-related services to those provided by Cahoon
Enterprises. WSG, which was located in Pennsylvania, did not do business in the
Bakken Formation region of North Dakota at that time.
3
In May 2018, one of Cahoon Enterprises’ managers, Jose Reyes, resigned to
form a competing business. According to Cahoon, Reyes contacted Newpark after
he left Cahoon Enterprises “to try to get Newpark’s business from Cahoon
Enterprises and to disparage or otherwise sabotage Cahoon Enterprises in doing so.”
On June 27, 2018, Ken Higley, “a supervisor with WSG in Pennsylvania (now
Newmark),” and another Newpark employee, Robert, visited Cahoon Enterprises’
office in North Dakota “for the stated purpose of taking an inventory of Newpark’s
mats in Cahoon Enterprises’ yard and to audit some of Cahoon Enterprises’ invoices
to Newpark.” The next day, Higley and Robert “showed up to Cahoon Enterprises’
office and told the staff that they needed to list[en up] and that things could be done
the hard way or the easy way. Higley continued and said there were sheriffs and FBI
agents outside of Cahoon Enterprises’ office and [he] was either going to take
[Cahoon Enterprises’] business records, or law enforcement officers would come in
to arrest the staff and seize the paperwork.”
Higley and Robert collected at least two boxes of Cahoon Enterprises’ original
business records, many of which were unrelated to the work Cahoon Enterprises had
done for Newpark, including records for work that Cahoon Enterprises had done for
other customers and Cahoon Enterprises’ employee personnel files. According to
Higley, Newpark had a “team” of auditors at a nearby location “combing through”
the records. Cahoon further contends that as a result of Newpark taking these original
4
records and not returning them for several weeks, Cahoon Enterprises was not able
to bill its other customers for work performed during this period.
While Newpark was reviewing Cahoon Enterprises’ records, Higley
“repeatedly told Austin Cahoon that both he and his father, Mark Cahoon, were
being investigated by the FBI for fraud against Newpark, and that ‘if you play your
cards right’ [Cahoon] would avoid criminal prosecution.” Higley also met with
Cahoon Enterprises’ staff during this same period. During one of those meetings,
Higley “stated (in an audio recording made by one of Cahoon Enterprises’
employees) that he was running the show now; that everything was to go through
him now; and that Mark and Austin Cahoon were both being investigated for fraud
and would no longer be in charge of the matting operations.” Higley then began
scheduling jobs using Cahoon Enterprises’ employees and equipment and visiting
job sites, even though he did not have the required safety certifications and training.
Newpark also began hiring some of Cahoon Enterprises’ competitors to install and
remove its mats from work sites in North Dakota.
At some point during this period, Newpark employees came to Cahoon
Enterprises’ offices to compare Newpark’s billing records with Cahoon Enterprises’
records “to determine if Newpark had billed its clients correctly and to determine
how screwed up their internal records were for the region.” After Newpark’s
personnel had spent hours “going through the paperwork with [Cahoon Enterprises’]
5
secretarial staff, Higley stated, ‘If our [Newpark’s] billing office has billed what this
[referencing a billing spreadsheet] states we billed, we [Newpark] are fucked.’”
Austin Cahoon alleges that, at some point, Higley had told him that “Newpark
was guilty of over-billing Halliburton and Liberty Frac and that Newpark’s plan was
to use Cahoon Enterprises as a scapegoat to whom Newpark could blame the
over-billing and thereby conceal its breaches of its contracts with these customers.”
Higley also told him and others that “while he had initially thought that Cahoon
Enterprises may actually be to blame for some of the client over-billing, he had come
to realize that the blame rested with Newpark’s billing office in Grand Junction,
which had overbilled customers way outside of their contracts.” Higley also
“admitted (including in an audio recording) that it was wrong of Newpark to try to
withhold monies owed to Cahoon Enterprises to cover damages to its mats that had
been caused by the renters/customers, not Cahoon.”
Some of Cahoon Enterprises’ office staff quit during this time and Austin
Cahoon had to promise them pay raises to convince them to return to work.
According to Austin Cahoon, Higley helped him convince these staff members to
return “because [Higley] knew that Cahoon Enterprises needed them working for us
at least until some key projects were completed before Higley and Newpark had their
competing business venture established.”
6
Cahoon alleges that Newpark terminated the MSA soon after it collected
Cahoon Enterprises’ business records and took over management of the company’s
business operations. Newpark then immediately began “directly operating a
competing mat services business for oil drilling activity in the Bakken Formation”
through a company co-owned by Higley which provides the same oilfield roustabout
services as Cahoon Enterprises. Newpark also hired several of Cahoon Enterprises’
employees for the new business.
Cahoon subsequently sued Newpark for trade secret misappropriation,
violations of the TTLA, defamation, breach of contract, tortious interference with an
existing contract, tortious interference with prospective business relations, and
intentional infliction of emotional distress. In its petition, Cahoon alleged that
Newpark misappropriated its trade secrets in violation of TUTSA.3 Specifically,
Cahoon alleged that Newpark accessed “Cahoon Enterprises’ customer data —
including detailed field tickets, invoices, [and] customer bids/quotes,” and that this
confidential and proprietary information was “accessed, stolen and copied with the
intent to use and disclose this information to others within Newpark to create a
competing business, and [that Newpark] did, in fact, use it to create a competing
business providing mat services to drilling operations in the Bakken Formation.”
According to Cahoon, Newpark “misappropriated Cahoon Enterprises’ trade secrets
3
See TEX. CIV. PRAC. & REM. CODE §§ 134A.001–.008.
7
with the intent to benefit from the use or disclosure of such information in order to
gain an unfair competitive advantage in the industry. Defendants have used Cahoon
Enterprises’ trade secrets to undercut Cahoon Enterprises with customers, use
Cahoon Enterprises’ processes and methods to provide products and services , and
save themselves the time, effort, and expense it would have cost them to develop
these methods, processes, products, and services on their own.”
Cahoon further alleged that Newpark violated the TTLA, by “unlawfully
appropriat[ing Cahoon Enterprises’] confidential and proprietary information and
trade secrets without Cahoon Enterprises’ consent, and with the intent to deprive or
take control of this personal property of Cahoon Enterprises.”
Cahoon also alleged that Newpark defamed Cahoon Enterprises, Austin
Cahoon, and Mark Cahoon, “by publishing false, defamatory statements against
them, including, without limitation, accusations that they were unethical and under
criminal investigation by the FBI.”
Cahoon alleged that Newpark violated the MSA by, among other things,
“grossly overreaching their inspection and audit rights by outright taking Cahoon
Enterprises’ business records, and failing to pay Cahoon Enterprises for all invoices
and services rendered.” According to Cahoon, Newpark owes Cahoon Enterprises
over $900,000 in unpaid invoices.
8
With regard to its claim for tortious interference with an existing contract,
Cahoon alleged that “Cahoon Enterprises had valid contracts with clients at the time
[Newpark] stole its business records, defamed [Cahoon], and then started their
competing venture.” According to Cahoon, Newpark “willfully and intentionally
interfered with these contracts, including through misappropriation, reliance and use
of Cahoon Enterprises’ trade secrets and other confidential and proprietary data;
through their defamation of Plaintiffs; and through their breach of [Newpark’s]
contractual duties owed to Cahoon Enterprises.” Cahoon made similar allegations
with respect to its tortious interference with prospective business relations.
Specifically, Cahoon alleged that it “had prospective business relations with existing
and potential clients and others at the time [Newpark] stole Cahoon Enterprises’
business records, defamed [Cahoon], and then started their competing venture.”
Cahoon further contends that Newpark “willfully and intentionally interfered with
these relationships, including through misappropriation, reliance and use of Cahoon
Enterprises’ trade secrets and other confidential and proprietary data; through its
defamation of Plaintiffs; and through its breach of Defendants’ contractual duties
owed to Cahoon Enterprises.” Mark Cahoon and Austin Cahoon also asserted claims
against Newpark for intentional infliction of emotional distress (IIED), which they
later averred were based on the severe emotional distress they suffered as a result of
Newpark’s “destruction” of their family business.
9
Newpark answered and asserted an affirmative defense of release and a
counterclaim for declaratory judgment. Specifically, Newpark alleged that it entered
into a settlement agreement with Universal Funding Corporation, a factoring
company to whom Cahoon Enterprises had assigned all its accounts receivable and
conferred an irrevocable power of attorney to, among other things, settle claims on
Cahoon Enterprises’ behalf with respect to these accounts. Under the terms of its
agreement with Universal, Newpark agreed to pay Cahoon Enterprises $912,158.08
“in full and final settlement of any and all claims by Cahoon Enterprises and/or
[Universal]” and further agreed to “make this payment to [Universal] pursuant to the
Notification Agreement[,] which provides that ‘payments on any and all invoices
that have not been paid and any in the future be made payable to [Universal] . . .’”
Pursuant to the agreement, Universal, for itself and on behalf of Cahoon Enterprises,
executed a general release that Newpark contends released all of Cahoon’s claims
in the current lawsuit.
Newpark filed a motion to dismiss Cahoon’s claims pursuant to the TCPA.
Cahoon responded and attached, among other things, affidavits from Austin Cahoon
and Mark Cahoon. Newpark filed a motion to strike objectionable portions of Austin
Cahoon’s affidavit and exhibits attached to his affidavit. The court sustained most
10
of the objections.4 The trial court also granted Newpark’s motion in part and
dismissed Cahoon’s defamation claims, but denied the motion with respect to the
other causes of action.5 This interlocutory appeal followed.
Motion to Dismiss Pursuant to the TCPA
On appeal, Newpark argues that the trial court erred by denying its motion to
dismiss Cahoon’s lawsuit in its entirety because Newpark demonstrated that the
TCPA applied to all of Cahoon’s claims and Cahoon did not prove that one of the
TCPA’s exemptions applies, or make its prima facie case by clear and specific
evidence. Newpark further contends that even if Cahoon made its prima facie case,
the trial court should have nevertheless dismissed Cahoon’s lawsuit because
Newpark established, by a preponderance of the evidence, each essential element of
its affirmative defense of release.
A. TCPA Statutory Framework
Chapter 27 of the Texas Civil Practice & Remedies Code, also known as the
Texas Citizens Participation Act, “is a bulwark against retaliatory lawsuits meant to
intimidate or silence citizens on matters of public concern.” Dall. Morning News,
4
Because the trial court sustained Newpark’s objections, these statements are not part
of the appellate record and we are not relying upon them for purposes of this appeal.
5
The trial court’s dismissals Cahoon Enterprises’, Austin’s, and Mark’s defamation
claims are not subject to interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE
§ 51.014(a)(12) (permitting interlocutory appeal of order that denies TCPA motion
to dismiss).
11
Inc. v. Hall, 579 S.W.3d 370, 376 (Tex. 2019); see In re Lipsky, 460 S.W.3d 579, 58
(Tex. 2015). The act “is intended to identify and summarily dispose of lawsuits
designed only to chill First Amendment rights, not to dismiss meritorious lawsuits.”
In re Lipsky, 460 S.W.3d at 589.
The purpose of the TCPA, as stated in Civil Practice and Remedies Code
chapter 27, “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.’” ExxonMobil Pipeline
Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017) (per curiam) (quoting TEX. CIV.
PRAC. & REM. CODE § 27.002). The TCPA’s primary vehicle for accomplishing its
stated purpose is a three-step motion-to-dismiss procedure that allows a defendant
who claims that a plaintiff has filed a suit in response to the defendant’s exercise of
a constitutionally protected right to seek dismissal of the underlying action,
attorneys’ fees, and sanctions at an early stage in the litigation. See TEX. CIV. PRAC.
& REM. CODE §§ 27.003(a), .009(a); Creative Oil & Gas, LLC v. Lona Hills Ranch,
LLC, 591 S.W.3d 127, 132 (Tex. 2019); Gaskamp v. WSP USA, Inc., ___ S.W.3d
___, No. 01-18-00079-CV, 2020 WL 826729, at *7–8 (Tex. App.—Houston [1st
Dist.] Feb. 20, 2020, no pet. h.) (en banc).
12
A defendant invoking the TCPA’s protections by filing a motion to dismiss
must show first by a preponderance of the evidence that the TCPA applies. See TEX.
CIV. PRAC. & REM. CODE § 27.005(b). The TCPA applies if the plaintiff’s “legal
action is based on, relates to, or is in response” to the defendant’s exercise of (1) the
right of free speech; (2) the right to petition; or (3) the right of association. Id.; In re
Lipsky, 460 S.W.3d at 586–87. A “legal action” is “a lawsuit, cause of action,
petition, complaint, cross-claim, or counterclaim or any other judicial pleading or
filing that requests legal or equitable relief.” TEX. CIV. PRAC. & REM. CODE
§ 27.001(6).
If the defendant makes this initial showing, the burden shifts to the plaintiff to
establish “by clear and specific evidence a prima facie case for each essential
element” of his claim. TEX. CIV. PRAC. & REM. CODE § 27.005(c); In re Lipsky, 460
S.W.3d at 587. If, however, the plaintiff establishes a prima facie case for its claim,
then the burden shifts back to the movant to establish, by a preponderance of the
evidence, each essential element of a valid defense. TEX. CIV. PRAC. & REM. CODE
§ 27.005(d). A plaintiff can avoid the act’s burden-shifting requirements, however,
by showing that one of the TCPA’s exemptions applies, such as the commercial
speech exemption. See id. § 27.010(b).
If the trial court grants the motion to dismiss, it must award costs, reasonable
attorneys’ fees, and other expenses of defending against the action “as justice and
13
equity may require.” Id. § 27.009(a). The trial court also must sanction the plaintiff
in an amount “sufficient to deter the party who brought the legal action from bringing
similar actions.” Id.6
B. Standard of Review
We review de novo the denial of a TCPA motion to dismiss. Dolcefino v.
Cypress Creek EMS, 540 S.W.3d 194, 199 (Tex. App.—Houston [1st Dist.] 2017,
no pet.); Better Bus. Bureau of Metro. Hous., Inc. v. John Moore Servs., Inc., 441
S.W.3d 345, 353 (Tex. App.—Houston [1st Dist.] 2013, pet. denied). Whether the
TCPA applies to Cahoon’s claims is an issue of statutory interpretation that we also
review de novo. Youngkin v. Hines, 546 S.W.3d 675, 680 (Tex. 2018); Gaskamp,
2020 WL 826729, at *8.
In determining whether to grant or deny a motion to dismiss, the court must
consider the pleadings and supporting and opposing affidavits stating the facts on
which the liability or defense is based.7 TEX. CIV. PRAC. & REM. CODE § 27.006(a).
We view the pleadings and evidence in the light most favorable to the nonmovant.
Dolcefino, 540 S.W.3d at 199; see Schimmel v. McGregor, 438 S.W.3d 847, 856-57
(Tex. App.—Houston [1st Dist.] 2014, pet. denied).
6
This portion of the TCPA was amended, effective September 1, 2019. Under the
amended version of the TCPA, an award of sanctions is optional, not mandatory.
7
The record before us includes only the unstruck portions of the evidence.
14
C. Applicability of the TCPA to Cahoon’s Claims
Newpark argues that the TCPA applies to each of Cahoon’s claims because
each claim is “based on, relates to, or is in response to” Newpark’s exercise of the
right of association and the right of free speech. According to Newpark, all of
Cahoon’s complaints stem from Newpark’s invocation of its contractual audit rights
which “necessarily entailed Newpark engaging in oral and written ‘communications’
. . . that were made ‘in connection with’ Newpark’s investigation of Cahoon’s
fraudulent overbilling.”
1. Right of Association
In it motion to dismiss, Newpark argued that all of Cahoon’s claims were
based on Newpark’s exercise of the right of free association under the TCPA. At the
time the suit was filed, the TCPA defined the “exercise of the right of association”
as “a communication between individuals who join together to collectively express,
promote, pursue, or defend common interests.” TEX. CIV. PRAC. & REM. CODE
§ 27.001(2); see Gaskamp, 2020 WL 826729, at *8.
Here, Newpark asserts that there are two exercises of associational rights at
issue in this case, namely, the joining together of “Newpark’s managers,
employees, and agents . . . as well as with managers, employees and agents of
overbilled customers and whistleblowing managers, employees, and agents of
Cahoon, itself” in a joint effort to express, promote, and pursue the common
15
interests of “investigating Cahoon’s billing practices and rooting out any fraud” and
“form[ing] a competing business.”
Newpark relies on this court’s original opinion in Gaskamp in support of its
argument that “allegations that one conspired to misappropriate trade secrets and
form a competing business implicated a cognizable associational right that triggers
the TCPA’s protections.” While Newpark’s appeal has been pending, however, an
en banc panel of this court withdrew the original opinion in Gaskamp and issued a
new opinion in which it reaches the opposite holding. See Gaskamp, 2020 WL
826729, at *1.
In Gaskamp, the plaintiff sued three former employees for tortious conduct
related to their alleged misappropriation of the plaintiff’s trade secrets and
confidential information. Among other things, the plaintiff alleged that these
employees had used and disclosed its trade secrets and proprietary confidential
information in order to compete with the plaintiff for their own financial gain at a
new company founded by another former employee which offered the same services
provided by the plaintiff. See id. at *3. The plaintiff further alleged that the
employees had used the misappropriated trade secrets to tortiously interfere with its
existing contracts and prospective business relationships. See id. The employees
filed a motion to dismiss pursuant to the TCPA in which they asserted, among other
things, that the plaintiff’s claims were based on, related to, or were in response to
16
their exercise of their right of association. See id. at *4. Specifically, the employees
argued the lawsuit was based on, related to, or were in response their joining together
to collectively express, promote, pursue, or defend a common interest––“their new
business venture.” See id. at *11.
The en banc court in Gaskamp held that “with respect to the pre-amendment
version of the TCPA, the proper definition of ‘common’ in the phrase ‘common
interests’ is ‘of or relating to a community at large: public.’” See id. at *13. Relying
upon this interpretation, this court determined that the employees did not meet their
burden of showing, by a preponderance of the evidence, that the plaintiff’s suit was
based on, related to, or was in response to an exercise of their right of association
because the conduct and communications at issue, which involved misappropriating
plaintiff’s trade secrets and conspiring to commit related torts, “benefitted only the
five alleged tortfeasors” and there were no “allegations that the tortfeasors ‘join[ed]
together to collectively express, promote, pursue, or defend’ any public or
community interests.” Id.
As reflected in the pleadings and evidence before us, Newpark’s association
(internally and externally) to express, promote, and pursue a common interest,
namely, to form a competing business, is not a public or community interest; it is a
private interest that benefits only the private parties involved in the intended business
venture. See id. Similarly, based on the evidence and pleadings before us,
17
“investigating Cahoon’s billing practices and rooting out any fraud” is not a public
or community interest because it is based on Cahoon’s invoicing of Newpark for
services provided pursuant to the MSA and Newpark’s investigation and audit of
Cahoon’s records pursuant to that agreement. The allegations in its case reflect that
Newpark’s audit and investigation was based, at least in part, on the fact that
Newpark had been overbilling its customers and it planned to blame Cahoon for the
“over-billing and thereby conceal its breaches of its contracts with these customers.”
It is a private contract dispute between two private parties and the only party who
would benefit from this investigation is Newpark, and possibly the customers
Newpark had overbilled. Furthermore, there is no indication in the record that the
formation of Newpark’s competing mat-instillation business or the investigation of
Cahoon’s billing practices with respect to the MSA involved any manner of public
or citizen participation. Therefore, we hold that Newpark did not meet its burden of
showing, by a preponderance of the evidence, that Cahoon’s suit was based on,
relates to, or is in response to an exercise of Newpark’s right of association. See TEX.
CIV. PRAC. & REM. CODE § 27.005(b).
2. Right of Free Speech
The TCPA defines the “exercise of the right of free speech” as “a
communication made in connection with a matter of public concern.” TEX. CIV.
PRAC. & REM. CODE § 27.001(3). A “communication” includes “the making or
18
submitting of a statement or document in any form or medium, including oral, visual,
written, audiovisual, or electronic.” Id. § 27.001(1). When this suit was filed, a
“matter of public concern” included “an issue related to: (A) health or safety; (B)
environmental, economic, or community well-being; (C) the government; (D) a
public official or public figure; or (E) a good, product, or service in the marketplace.”
Id. § 27.001(7)8; Coleman, 512 S.W.3d at 899. Newpark argues that all of Cahoon’s
claims are “based on, relate[] to, or [are] in response to” one or more
communications that Newpark made in connection with two matters of public
concern: “economic, or community well-being” and “a good, product, or service in
the marketplace.” Id. § 27.001(7)(B), (E).
The Texas Supreme Court recently explained in Creative Oil & Gas that “not
every communication related somehow to one of the broad categories set out in
section 27.001(7) always regards a matter of public concern.” Creative Oil & Gas,
591 S.W.3d at 137. In that case, the lessor of an oil and gas lease sued the lessee in
a trespass and trespass to try title action, seeking a ruling that the lease was
8
The current version of the TCPA, which became effective on September 1, 2019,
defines a “matter of public concern” as “a statement or activity regarding: (A) a
public official, public figure, or other person who has drawn substantial public
attention due to the person’s official acts, fame, notoriety, or celebrity; (B) a matter
of political, social, or other interest to the community; or (C) a subject of concern to
the public.” TEX. CIV. PRAC. & REM. § 27.001(7). Notably, “environmental,
economic, or community well-being” and “a good, product, or service in the
marketplace” are no longer defined as a “matter of public concern.” See TEX. CIV.
PRAC. & REM. § 27.001(7) (current version).
19
terminated due to cessation of production. Id. at 130. As relevant here, the lessee and
the operator filed counterclaims alleging that the lessor had breached the lease and
had falsely told third-party purchasers of production from the lease that the lease
was expired and that payments on the purchases should stop. Id. The lessor moved
to dismiss the counterclaims pursuant to the TCPA and argued that its statements to
third parties about the lease were an exercise of its right of free speech because these
communications were made in connection with matters of public concern, namely,
economic well-being and a good, product, or service in the marketplace.
The supreme court, however, rejected these arguments, and held that the
lessor’s communications with third parties were not covered by the TCPA because
they were private business communications regarding a private contract dispute. Id.
at 134–37. As the court explained, the terms “economic well-being” and “a good,
product, or service in the marketplace” had to be interpreted considering the
common meaning of a “matter of public concern,” which does not include “purely
private matters.” Id. at 135. Therefore, the court reasoned, a communication
regarding “a good, product, or service in the marketplace” does not constitute a
matter of public concern unless the communication has “some relevance to a public
audience of potential buyers or sellers.” Id.; see also id. at 136 (stating that there was
no indication in record “that the dispute had any relevance to the broader
marketplace or otherwise could reasonably be characterized as involving public
20
concerns”). The court also rejected the argument that the communications at issue
concerned a matter of public concern, namely, economic well-being, because “[a]
private contract dispute affecting only the fortunes of the private parties involved is
simply not a ‘matter of public concern’ under any tenable understanding of those
words.” Id. at 137.
Relying in part on Creative Oil & Gas, this court held in Gaskamp that
communications between former employees that related to the employees’ alleged
conduct of misappropriating, sharing, and using the plaintiff’s trade secrets and
conspiring with one another in furtherance of their tortious actions did not constitute
an exercise of their free-speech rights because these communications “had no
potential impact on the wider community or a public audience of potential buyers or
sellers. In short, the communications had no public relevance beyond the pecuniary
interests of the private parties.” Gaskamp, 2020 WL 826729, at *13; see also
Creative Oil & Gas, 591 S.W.3d at 137 (explaining that private “dispute affecting
only the fortunes of the private parties involved is simply not a ‘matter of public
concern’ under any tenable understanding of those words”). This court also held that
communications made by the plaintiff’s former employees in soliciting and
procuring business from a third party also did not constitute an exercise of the
employees’ free-speech rights because these communications did not have any
“relevance to a public audience of buyers or sellers but instead were limited to ‘the
21
pecuniary interests of the private parties involved.” Gaskamp, 2020 WL 826729, at
*15 (quoting Creative Oil & Gas, 591 S.W.3d at 136).
Newpark contends that its “invocation of its contractual audit rights to
investigate Cahoon’s fraudulent billing practices involved a ‘matter of public
concern’ insofar as it involved: the (1) ‘economic, or community well-being,’ which
is promoted and preserved by the ferreting out of fraud in the marketplace and
community, and (2) ‘a good, product, or service in the marketplace,’ namely,
Cahoon’s mat-installation services.” TEX. CIV. PRAC. & REM. CODE § 27.001(7)(B),
(E). Therefore, Newpark reasons, the TCPA applies to Cahoon’s lawsuit because its
claims are “based on, relate[] to, or [are] in response to” “communications made by
Newpark ‘in connection with’ its investigation and audit.”
Every communication made in connection with economic or community
well-being, or a good, product, or service in the marketplace, however, does not
necessarily implicate a party’s right to free speech because not every communication
regards a matter of public concern. See generally Creative Oil & Gas, 591 S.W.3d
at 137 (“[N]ot every communication related somehow to one of the broad categories
set out in section 27.001(7) always regards a matter of public concern.”). As
explained in Creative Oil & Gas, “The phrase ‘matter of public concern’ commonly
refers to matters ‘of political, social, or other concern to the community,’ as opposed
to purely private matters.” Id. at 135 (citing Brady v. Klentzman, 515 S.W.3d 878,
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884 (Tex. 2017)). Thus, the communication must have some relevance to a broader
public audience, as opposed to only the private parties involved. See Creative Oil &
Gas, 591 S.W.3d at 137 (“A private contract dispute affecting only the fortunes of
the private parties involved is simply not a ‘matter of public concern’ under any
tenable understanding of those words.”). The communications at issue here, as
Newpark acknowledges, are related to Cahoon’s alleged fraudulent billing of
Newpark for services Cahoon had provided to Newpark pursuant to the MSA and
Newpark’s audit and investigation into these specific practices, which Newpark
contends are authorized by the MSA. Thus, whether Newpark was communicating
internally or with Cahoon or its employees regarding the accuracy of Cahoon’s
invoices or matters associated with the investigation and audit, these
communications concerned a private business dispute between Cahoon and
Newpark. Newpark’s communications with its customers regarding these billing
practices are also directly related to and concern Newpark’s contractual relationship
with respect to Cahoon, and to a lesser extent, Newpark’s contractual relationships
with those customers. Similarly, the settlement agreement and Newpark’s
communications with Universal regarding that agreement are related to the billing
dispute between Newpark and Cahoon, including the payment of invoices submitted
pursuant to the MSA. As in Creative Oil & Gas, there is no indication in the record
that the dispute between Newpark and Cahoon “had any relevance to the broader
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marketplace or otherwise could reasonably be characterized as involving public
concerns.” Creative Oil & Gas, 591 S.W.3d at 136. The only parties with an interest
in the outcome were Newpark, Cahoon, Universal (as a result of the settlement
agreement) and possibly the customers that Newpark had overbilled. See generally
id. at 136–37.
Because the communications at issue do not implicate a matter of public
concern, we hold that Newpark did not meet its burden of showing, by a
preponderance of the evidence, that Cahoon’s suit was based on, related to, or was
in response to an exercise of Newpark’s right of free speech. See TEX. CIV. PRAC. &
REM. CODE § 27.005(b).
Conclusion9
We affirm the trial court’s order.
Russell Lloyd
Justice
Panel consists of Justices Keyes, Lloyd, and Hightower.
9
Because we are affirming the trial court’s order denying Newpark’s TCPA motion
to dismiss, we do not need to reach Cahoon’s conditional cross-points. The only
issue addressed in this opinion in whether Newpark is entitled to the dismissal of
Cahoon’s claims under the TCPA. The merits of Cahoon’s claims are for further
consideration in the trial court.
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