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

• Citation: 591 S.W.3d 127
• Decision Date: 20 December 2019
• Docket Number: No. 18-0656,18-0656
• Parties: CREATIVE OIL & GAS, LLC and Creative Oil & Gas Operating, LLC, Petitioners, v. LONA HILLS RANCH, LLC, Respondent
• Court: Supreme Court of Texas

591 S.W.3d 127

CREATIVE OIL & GAS, LLC and Creative Oil & Gas Operating, LLC, Petitioners,

v.LONA HILLS RANCH, LLC, Respondent

No. 18-0656

Supreme Court of Texas.

Argued September 19, 2019

OPINION DELIVERED: December 20, 2019

Justice Blacklock, delivered the opinion of the Court.

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 It requires consideration of statutory text that has been repealed but remains operative, though for a limited time only.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 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).

"Exercise of the right to petition" includes "a communication in or pertaining to" "a judicial proceeding," "an official proceeding, other than a judicial proceeding, to administer the law," and "an executive or other proceeding before a department of the state or federal government or a subdivision of the state or federal government." Id. § 27.001(4)(A)(i)–(iii).

The TCPA mandates that a trial court deciding a motion to dismiss "shall consider the pleadings and supporting and opposing affidavits" filed by the parties. Id. § 27.006(a). The statute requires a three-step decisional process. Under the first step, the trial court must dismiss the action "if the moving party shows by a preponderance of the evidence that the legal action is based on, relates to, or is in response to the party's exercise of ... the right of free speech [or] the right to petition." Id. § 27.005(b). But under the second step, the court may not dismiss the action if the non-moving party "establishes by clear and specific evidence a prima facie case for each essential element of the claim." Id. § 27.005(c). Under the third step, the movant can still win dismissal if he establishes "by a preponderance of the evidence each essential element of a valid defense to the nonmovant's claim." Id. § 27.005(d). If the court orders dismissal, it shall award to the moving party reasonable attorney's fees and other costs and expenses, as well as sanctions. Id. § 27.009(a). The court may also award costs and fees to the non-moving party if it finds that the motion to dismiss was frivolous or solely intended for delay. Id. § 27.009(b). Section 27.009 was also amended in 2019. See supra note 3.

An order denying a TCPA motion to dismiss is subject to interlocutory appeal. Id. § 51.014(a)(12). If, as occurred here, the trial court does not rule on a motion to dismiss within a prescribed time, the motion is deemed overruled as a matter of law and the moving party may thereafter pursue an appeal. Id. § 27.008(a).

The text of the TCPA dictates the outcome of this case. We consider issues of statutory construction de novo . Adams v. Starside Custom Builders, LLC , 547 S.W.3d 890, 894 (Tex. 2018). "In TCPA appeals, we have decided whether communications are matters of public concern under a de novo standard of review, suggesting that the determination is one of law." Id. at 897.

B. The Counterclaims Regarding Communications with Third Parties

Some of the Lessee's and the Operator's counterclaims alleged they were damaged when the Ranch communicated to third parties that the lease expired. Under the first step of the TCPA analysis, the court of appeals concluded that these counterclaims were based on, related to, or in response to the Ranch's exercise of the right of free speech.⁴ Proceeding to the second step, the court of appeals concluded that the counterclaims should be dismissed because the Lessee and the Operator failed to establish by clear and specific evidence a prima facie case for each essential element of the counterclaims. 549 S.W.3d at 847.

The Lessee and the Operator contend that their counterclaims were not based on, related to, or in response to "a communication made in connection with a matter of public...