Felix Sorkin, Individually, General Technologies, Inc., and Precision-Hayes International, Inc. v. P.T. Atlas Manufacturing, L.L.C. ( 2022 )

AFFIRMED and Opinion Filed March 15, 2022
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-21-00657-CV
FELIX SORKIN, INDIVIDUALLY, GENERAL TECHNOLOGIES, INC.,
AND PRECISION-HAYES INTERNATIONAL, INC., Appellants
V.
P.T. ATLAS MANUFACTURING, L.L.C., Appellee
On Appeal from the 298th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-20-17416
MEMORANDUM OPINION
Before Justices Partida-Kipness, Reichek, and Goldstein
Opinion by Justice Reichek
Felix Sorkin, General Technologies, Inc. (“GTI”), and Precision-Hayes
International, Inc. (“PHI”) appeal the denial by operation of law of their motion to
dismiss pursuant to the Texas Citizens Participation Act (TCPA). See TEX. CIV.
PRAC. & REM. CODE ANN. §§ 27.001–.011. The dispositive issue here is whether
this lawsuit, filed by P.T. Atlas Manufacturing, L.L.C. and predicated on allegations
of discovery misconduct by appellants in a separate lawsuit, is based on or in
response to appellants’ exercise of the right to petition. For reasons set out below,
we conclude it is not and, therefore, affirm the denial of appellants’ motion.
BACKGROUND
The facts are taken from the pleadings and evidence. Sorkin is the owner of
a holding company that owns both GTI and PHI; the parties all are, or have been, in
the concrete reinforcement industry. P.T. Atlas is a competitor of appellants in that
industry.
In September 2019, PHI sued Thomas Mathews, its former vice president of
sales and marketing and director of business development, product management, and
engineering, in state district court in Harris County (the “Harris County Lawsuit”)
to enforce post-employment restrictive covenants. Mathews had worked for PHI for
fourteen years and, during that time had access to and was involved in the
development of PHI’s trade secrets, proprietary information, and confidential
information. In the Harris County Lawsuit, PHI sought declarations regarding the
scope of Mathews’s contractual, common law, and statutory duties and, in particular,
wanted a declaration that Mathews could not work or contract with any entity that
would result in a breach of his duties. At some point after the Harris County Lawsuit
was filed, Mathews became an employee of P.T. Atlas and the lawsuit was amended
to allege that Mathews used PHI’s information to “ramp up” P.T. Atlas as a
competitor.
In response to the Harris County Lawsuit, Mathews filed a plea to the
jurisdiction, which the trial court heard in January 2020 but did not deny until
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October 2020, and appellants assert that Mathews “stymied” discovery during the
pendency of the motion and afterwards.
Meanwhile, in April 2020, appellants sued P.T. Atlas in federal district court
in Dallas, alleging claims of patent infringement (the “Federal Lawsuit”). Sorkin
and PHI owned patents, which they licensed to GTI. They alleged that P.T. Atlas
was infringing on those patents. In the course of the Federal Lawsuit, appellants
sought discovery of P.T. Atlas’s confidential business contacts, which P.T. Atlas
produced under an agreed protective order and confidentiality agreement. The
produced documents identified P.T. Atlas’s customers, suppliers, and vendors of its
products. After the information was disclosed, the parties reached a settlement
agreement, and the Federal Lawsuit was dismissed in October, six months after it
was filed.
Shortly after dismissal of the Federal Lawsuit, in November 2020, PHI began
sending discovery requests in the Harris County Lawsuit to P.T. Atlas’s customers
and one of its vendors. At the time, P.T. Atlas was not a party to the Harris County
lawsuit. Four days later, P.T. Atlas brought this lawsuit against appellants in district
court in Dallas County, alleging several claims predicated on allegations of
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discovery abuse to harass and intimidate P.T. Atlas’s customers and destroy its
business.1
In particular, P.T. Atlas alleged that appellants used the Federal Lawsuit to
obtain confidential information about P.T. Atlas’s products and operation and, once
the federal case was dismissed, almost immediately “launched a discovery
offensive” in the Harris County lawsuit, sending new discovery requests to Mathews
and also mounting a “discovery campaign” against P.T Atlas’s suppliers, vendors,
business contractors, employees, and customers, all of whom are third parties. P.T.
Atlas alleged that the “broad and sweeping discovery requests” evidenced
appellants’ intent to use the Federal Lawsuit to gather information, including
obtaining P.T. Atlas’s confidential business contacts, to be used in the Harris County
lawsuit.
In its petition, P.T. Atlas identified three examples of the alleged discovery
misconduct in the Harris County Lawsuit:
(1) On November 6, 2020, PHI sent a request for production to
Mathews (the only defendant in the lawsuit and, by this time, P.T.
Atlas’s employee) seeking “All Communications with ________.” The
request then names fifty-nine people and businesses, most of which are
P.T. Atlas’s customers, employees, suppliers and vendors.
(2) On November 13, 2020, PHI sent “what purports to be a
document request to Builders Post-Tension, Inc., a P.T. Atlas customer,
seeking “[a]ll documents relating to or compromising [sic]
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PHI named P.T. Atlas as a co-defendant in the Harris County Lawsuit three months after P.T. Atlas
brought the suit at issue here.
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Communications with _________” and listed P.T. Atlas and four of its
employees.
(3) PHI sent a request for production to QFC Plastic, Inc., which
is a contracting company of P.T. Atlas and has manufactured and built
products for sale by P.T. Atlas. PHI requested all communications with
P.T Atlas or its employees related to “products manufactured by or for
Atlas and products sold by Atlas.”
P.T. Atlas alleged that in addition to the examples provided, appellants have
sent similar requests and threats of subpoenas to many more of its customers,
vendors, employees, and contractors, seeking confidential information about its
sales, product manufacturing, and business operations. The petition alleges the
discovery is “a clear fishing expedition designed to harass, bully and intimidate”
with the goal of “scar[ing] customers and vendors” to “stop them from doing
business” with P.T. Atlas. P.T. Atlas contends the actions of PHI in the Harris
County Lawsuit is part of a conspiracy between all the defendants to inflict damage
on P.T. Atlas.
P.T. Atlas alleged claims for breach of contract, misrepresentation and/or
negligent misrepresentation, declaratory judgment, tortious interference with
existing and/or potential business relations, civil conspiracy, fraud, fraud in the
inducement, joint enterprise, aiding and abetting/assisting or encouraging, alter ego,
abuse of process, and promissory estoppel.
In response to the suit, appellants filed a motion to transfer venue and original
answer, a plea in abatement, and a motion to dismiss under the TCPA. With regards
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to the latter motion, appellants asserted P.T. Atlas filed the lawsuit in response to a
communications made in the Harris County Lawsuit or the Federal Lawsuit; P.T.
Atlas could not prove each element of the claims covered by the TCPA; and, if
necessary, appellants could show one or more defenses or affirmative defenses bar
any recovery by P.T. Atlas on those claims. P.T. Atlas responded to the motion.
Both sides supplemented their motion and response and filed evidence.
A hearing on the TCPA motion was conducted over two days. When the trial
court did not rule by the 30th day, the motion was denied by operation of law. See
TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.005, 27.008(a). Appellants then brought
this interlocutory appeal. See id. § 27.008(a).
ANALYSIS
The purpose of the TCPA “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.”
TEX. CIV. PRAC. & REM. CODE ANN. § 27.002. To effectuate this purpose, the
Legislature has provided a two-step procedure to expedite the dismissal of claims
brought to intimidate or silence a defendant’s exercise of these First Amendment
rights. ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017) (per
curiam).
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Specifically, “[i]f a legal action is based on or in response to a party’s exercise
of the right of free speech, right of petition, or right of association,” the TCPA
provides that such party “may file a motion to dismiss the legal action.” TEX. CIV.
PRAC. & REM. CODE ANN. § 27.003. The movant bears the initial burden of
demonstrating the legal action is based on or in response to the party’s exercise of a
protected right, such as the “right to petition,” and, thus, the statute applies. Id. § at
27.005(b)(1)(B).
In their first issue, appellants argue the denial of their motion to dismiss was
error because they “showed their right to petition is being challenged through a
number of causes of action in [P.T. Atlas’s] underlying petition.”
They contend that the third-party discovery requests are communications made in a
judicial proceeding and therefore the TCPA applies.2
Pursuant to the TCPA, the “exercise of the right to petition” means “a
communication in or pertaining to,” among other things, “a judicial proceeding.” Id.
§ 27.001(4)(a)(i). In turn, a “communication” includes the “making or submitting
of a statement or document in any form or medium, including oral, visual, written,
audiovisual, or electronic.”
2
Appellants claim that all of P.T. Atlas’s claims fall under the TCPA except for the fraud claims, which
are statutorily exempt. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.010(12).
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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 exercise of the right to petition. See Riggs & Ray v. State Fair of Tex., No.
05-17-00973-CV, 2019 WL 4200009, at *4 (Tex. App.—Dallas Sept. 5, 2019, pet.
denied). If this nexus is missing, the statute does not apply. Id. Further, we consider
the pleadings and any supporting and opposing affidavits in the light most favorable
to the nonmovant, favoring the conclusion that the nonmovant’s claims are not
predicated on protected expression. Id.In this case, the focus of P.T. Atlas’s petition is appellants’ conduct in
engaging in allegedly abusive discovery practice and how that conduct is impacting
P.T. Atlas’s business and business associations. This Court has examined
allegations of discovery abuse in the context of the TCPA previously, albeit in a
different procedural posture. See Misko v. Johns, 575 S.W.3d 872, 874 (Tex. App.—
Dallas 2019, pet. denied).
In Misko, the defendant/counterclaimant, Karen Misko, argued the trial court
erred by denying her TCPA motion to dismiss a motion for sanctions filed by Tracy
Johns based on Misko’s alleged discovery misconduct during the course of the
litigation. Id. Johns alleged that Misko had induced a fact witness to sign a false
affidavit and then used that affidavit to defeat Johns’ motion to dismiss; fraudulently
designated two individuals as expert witnesses; and “duped” the trial court into
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making rulings based on the assumption the designated individuals had relevant
records. Id. at 875. The sanctions motion sought to dismiss all of Misko’s
counterclaims. In response, Misko filed a motion to dismiss under the TCPA,
arguing the sanctions motion was filed in response to her exercise of her right to
petition. The trial court denied Misko’s motion, and she appealed.
On appeal, we focused on the meaning of “legal action” to resolve the case.
We concluded the TCPA’s definition of the term did not encompass a motion for
sanctions based solely on Misko’s alleged discovery misconduct during the course
of the litigation. Id. at 877. In doing so, we relied on the rationale of Dow Jones &
Co. v. Highland Capital Mgmt., LP., 564 S.W.3d 852, 854 (Tex. App.—Dallas 2018,
pet. history), where we concluded that a subpoena seeking discovery from a third
party is not a legal action under the TCPA. See id. In Dow Jones, we reasoned “the
proliferation of motions to dismiss attacking discovery requests, as opposed to the
underlying lawsuits and substantive claims that are the TCPA’s core focus, would
result in an application of the TCPA that strays from . . . its manifest purpose to
secure quick and inexpensive dismissals of meritless ‘legal actions’ that threaten
expressive freedoms.” Dow Jones & Co., 564 S.W.3d at 858. Applying that
reasoning in Misko, we determined that the Legislature had not intended that a
motion based on conduct within litigation that is ancillary to the substantive claims
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in the case should fall within the statute’s “catch-all provision” of “other judicial
proceeding or filing.” Misko, 575 S.W.3d at 877.
Moreover, we also considered the result if we concluded that the motion for
sanctions was a legal action. We explained that Misko, as the party seeking
dismissal, would still need to show that the sanctions motion was “based on, related
to, or in response to” Misko’s “exercise of a right protected by statute.” Misko, 575
S.W.3d 878 n.5. The motion for sanctions was based on alleged discovery abuse by
Misko during the litigation, and, as we said, “[d]iscovery abuse is not a right
protected by the TCPA.” Id. (citing TEX. CIV. PRAC. & REM. CODE ANN. § 27.003(a)
(legal action must be based on party’s exercise of right of free speech, right to
petition, or right of association)). We have since relied on that statement in Riggs &
Ray, where we concluded that the plaintiff’s claims were not factually predicated on
a previous declaratory judgment action filed by the defendant and thus the TCPA
did not apply. Riggs & Ray, 2019 WL 4200009, at *4.
The matter before us is in a procedurally different posture than Misko in that
P.T. Atlas did not bring his complaints predicated on discovery abuse in the Harris
County Lawsuit where the discovery was being conducted. P.T. Atlas was not a
party to that litigation when the alleged discovery abuse occurred and thus it filed
this separate lawsuit to challenge appellants’ conduct in directing third-party
discovery to P.T. Atlas’s business associates to gain information on P.T. Atlas. Had
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P.T. Atlas instead filed a petition in intervention in the Harris County Lawsuit to
challenge the alleged discovery abuse, our Misko opinion would support the denial
of a TCPA motion to dismiss and would be consistent with the rationale in both
Misko and Dow Jones. Likewise, here, while the reason for this lawsuit––abusive
discovery–– arose in the context of the Harris County Lawsuit, this suit itself does
not attack any of the substantive claims in the Harris County Lawsuit nor is the suit
based on, or in response to, any of the substantive allegations in that suit. In sum,
we follow our previous determination that discovery abuse is not a right protected
by the TCPA and conclude this outcome is not dependent upon the procedural
vehicle through which the alleged abuse is challenged.
In three sentences, appellants also assert that the settlement agreement in the
Federal Lawsuit is a communication within the ambit of the TCPA and that P.T.
Atlas’s claims are based on “communications among Sorkin, GTI, and PHI and their
attorneys” in the Federal Lawsuit. But appellants do not identify any particular
communication between appellants and their attorneys, and as P.T. Atlas asserts in
its brief, its pleadings make no claim based on attorney/client communications. We
overrule the first issue. Because we conclude that P.T. Atlas’s lawsuit does not fall
within the ambit of the TCPA, we need not address appellants’ second and third
issues.
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We affirm the denial of the motion to dismiss.
/Amanda L. Reichek/
AMANDA L. REICHEK
JUSTICE
210657F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
FELIX SORKIN, INDIVIDUALLY, On Appeal from the 298th Judicial
GENERAL TECHNOLOGIES, District Court, Dallas County, Texas
INC., AND PRECISION-HAYES Trial Court Cause No. DC-20-17416.
INTERNATIONAL, INC., Opinion delivered by Justice
Appellants Reichek; Justices Partida-Kipness
and Goldstein participating.
No. 05-21-00657-CV V.
P.T. ATLAS MANUFACTURING,
L.L.C., Appellee
In accordance with this Court’s opinion of this date, we AFFIRM the denial
by operation of law appellants’ TCPA motion to dismiss.
It is ORDERED that appellee P.T. ATLAS MANUFACTURING, L.L.C.
recover its costs of this appeal from appellants FELIX SORKIN,
INDIVIDUALLY, GENERAL TECHNOLOGIES, INC., AND PRECISION-
HAYES INTERNATIONAL, INC.
Judgment entered this 15th day of March 2022.
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