Baylor Scott & White v. Project Rose MSO, LLC

• Decision Date: 30 August 2021
• Docket Number: NO. 12-20-00246-CV,12-20-00246-CV
• Parties: BAYLOR SCOTT & WHITE, Appellant v. PROJECT ROSE MSO, LLC, Touchdown Interception, LLC, Individually and Derivatively on Behalf of 62 Roses, LLC, Appellees
• Court: Texas Court of Appeals

633 S.W.3d 263

BAYLOR SCOTT & WHITE, Appellant

v.PROJECT ROSE MSO, LLC, Touchdown Interception, LLC, Individually and Derivatively on Behalf of 62 Roses, LLC, Appellees

NO. 12-20-00246-CV

Court of Appeals of Texas, Tyler.

Opinion delivered August 30, 2021

Wade L. McClure, Brandon W. Maxey, Jennifer P. Ainsworth, Tyler, for Appellee Touchdown Interception, LLC.

Brandon W. Maxey, Wade L. McClure, Jennifer P. Ainsworth, Tyler, Evan Young, Austin, for Appellee Project Rose MSO, LLC.

Benjamin C. Yelverton, Michael L. Scanes, Tyler Talbert, Waco, for Appellant.

Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

OPINION

James T. Worthen, Chief Justice

Baylor Scott & White (BSW) appeals the trial court's denial of its Texas Citizens Participation Act (TCPA) motion to dismiss the counterclaim against it filed by Project Rose MSO, LLC; Touchdown Interception, LLC, Individually and Derivatively on Behalf of 62 Roses, LLC (collectively "Rose" unless otherwise indicated). We affirm in part and reverse and remand in part.

BACKGROUND ¹

In 2015, Texas Spine and Joint Hospital began discussions with former National Football League (NFL) players Earl Campbell and Gary Baxter about a business venture establishing a cutting-edge sports science and medical facility at the Spine and Joint Hospital facility in Tyler, Texas. These discussions continued throughout 2015 and early 2016, leading Campbell and Baxter to form several new entities, including Project Rose and Touchdown Interception. Touchdown Interception and Texas Spine and Joint executed a Company Agreement to form 62 Roses to develop and operate the facility.

The parties entered several contracts in 2017 and 2018, including a Lease Agreement, a License Agreement, and a Consultant Agreement. Under the Consulting Agreement, Project Rose was to provide consulting services to Texas Spine and Joint related to the facility's marketing, construction, and operation. Due to the high-profile nature of the parties and the facility, the venture generated significant public interest from the community and the press.

Rose alleges that it was not compensated for its efforts as promised under the agreements. Rather, according to it, Texas Spine and Joint strung Rose along and encouraged its owners to continue their efforts to market the facility and provide the services they agreed upon. Rose alleges that Texas Spine and Joint represented to it that compensation would be forthcoming after recouping its capital expenditures in developing it, but that it never came.

Shortly prior to the scheduled opening, Baxter and Campbell noticed that the facility's logo changed to include Baylor Scott & White in its title. After further investigation, Rose alleges that it learned that Texas Spine and Joint sold a controlling portion of its interest in the venture to a Baylor Scott & White entity. Rose alleges that BSW is a controlled affiliate of this entity that took part in the purchase, and that the sale violates Texas Spine and Joint's agreements with Rose.

Rose contends that the facility opened and became a successful venture, but Texas Spine and Joint repudiated their agreements. Rose alleges that Texas Spine and Joint and BSW, along with the other third-party defendants, engaged in a fraudulent scheme and conspired to profit from Rose's efforts in bringing the facility to fruition, without ever providing any compensation to it.

According to BSW, Texas Spine and Joint received little assistance from Rose in building the facility, and because it had little to show for its investments, it gave notice of termination of the License Agreement, the Consultant Agreement, and the Lease Agreement in August 2019. In response, Project Rose sent invoices to Texas Spine and Joint for hourly consulting work totaling $4,319,370. Texas Spine and Joint disputed the validity of the invoices, and according to it, Baxter threatened to hold a press conference announcing litigation against it.

Accordingly, Texas Spine and Joint preemptively filed suit against Rose, including claims for breach of the Consultant Agreement, a declaratory judgment that it had not breached the Consultant Agreement, and a request to wind up 62 Roses’ business.

Rose filed a counterclaim against Texas Spine and Joint and added third-party claims against several third-party defendants, including BSW (we refer to this claim, including the third-party claim against BSW, as a "counterclaim" for ease of reference). Specifically, Rose's counterclaim included the following causes of action against BSW: (1) fraudulent inducement and fraud; (2) tortious interference with existing contract; (3) theft of trade secrets and intellectual property under the Texas Theft Liability Act (TTLA) and Texas Uniform Trade Secrets Act (TUTSA); (4) unfair competition; (5) common-law misappropriation; (6) promissory estoppel/detrimental reliance; (7) quantum meruit; (8) unjust enrichment; (9) money had and received; (10) civil conspiracy; (11) aiding and abetting and knowingly participating in Texas Spine and Joint's alleged breaches of fiduciary duties; and (12) a declaratory judgment that the 2017 sale of ownership in the facility is void.²

BSW answered the counterclaim with a general denial and also asserted that it was not a proper party to the suit. BSW moved to dismiss Rose's counterclaim under the TCPA. The trial court denied the TCPA motion to dismiss. Rose amended its petition to join other third-party defendants as parties to the dispute, who similarly filed motions to dismiss under the TCPA. The trial court denied a request for discovery and overruled BSW's TCPA motion. BSW filed this interlocutory appeal challenging the trial court's denial of its motion.³

TCPA ⁴

In BSW's first issue, it contends that the trial court erred in denying its TCPA motion to dismiss Rose's counterclaim because (1) its claims are based on BSW's exercise of its rights of free speech and association and that no exemption applies,⁵ thereby implicating the TCPA; (2) Rose failed to establish by clear and specific evidence a prima facie case of each essential element of its claims against BSW; and (3) in any event, BSW established that it is entitled to judgment as a matter of law because Rose sued the wrong party. In its second issue, BSW contends that the trial court erred by failing to sustain its objections to Rose's evidence.

Standard of Review

We consider de novo the legal question of whether the movant has established by a preponderance of the evidence that the challenged legal action is covered by the TCPA. MediaOne, L.L.C. v. Henderson , 592 S.W.3d 933, 939 (Tex. App.—Tyler 2019, pet. denied) (citing Serafine v. Blunt , 466 S.W.3d 352, 357 (Tex. App.—Austin 2015, no pet.) ). We also review de novo a trial court's determination of whether a nonmovant has presented clear and specific evidence establishing a prima facie case of each essential element of the challenged claims. Id. Similarly, we review questions of statutory construction de novo. Id. (citing Molinet v. Kimbrell , 356 S.W.3d 407, 411 (Tex. 2011) ). We review the pleadings and the evidence in the light most favorable to the nonmovant. Id. (citing Dolcefino v. Cypress Creek EMS , 540 S.W.3d 194, 199 (Tex. App.—Houston [1st Dist.] 2017, no pet.) ).

General TCPA Framework

The stated 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 (West 2020).

To accomplish this objective, the TCPA provides a three-step process for the dismissal of a "legal action" to which it applies. Montelongo v. Abrea , 622 S.W.3d 290, 295–96 (Tex. 2021) (citing Castleman v. Internet Money Ltd. , 546 S.W.3d 684, 686 (Tex. 2018) (per curiam) ). First, the movant must demonstrate that the "legal action" is "based on or is in response to" its exercise of the right of speech, petition, or association. TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.003(a) (West 2020), 27.005(b) (West Supp. 2020). Second, if the movant meets that burden, the nonmovant may avoid dismissal by establishing "by clear and specific evidence a prima facie case for each essential element of the claim in question." Id. § 27.005(c). Finally, if the nonmovant satisfies that burden, the court still must dismiss the "legal action" if the movant "establishes an affirmative defense or other grounds on which the moving party is entitled to judgment as a matter of law." Id. § 27.005(d).

Intertwined with and overlying this multi-step dismissal process is the TCPA provision exempting certain actions from its application.⁶ See id. § 27.010 (West 2020) ; Morrison v. Profanchik , 578 S.W.3d 676, 680 (Tex. App.—Austin 2019, no pet.). When invoked, the trial court must consider an exemption's applicability after and in the context of the movant having met its initial burden under the first step of the dismissal process. See Castleman , 546 S.W.3d at 688 ; Morrison , 578 S.W.3d at 680.

THE TCPA'S APPLICABILITY

BSW contends that the TCPA applies to Rose's counterclaim, because it is based on or in response to BSW's exercise of the right of free speech, or alternatively, its right of association.

Governing Law - Exercise of the Right of Free Speech

In relevant part, a "legal action" means a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal, declaratory, or equitable relief. TEX. CIV. PRAC. & REM. CODE ANN. § 27.001(6) (West 2020). "Based on or in response to" is not defined in the statutory scheme. Prior to the 2019 amendments, the statute provided that a TCPA motion to dismiss could be predicated on a legal action "based on, related to, or in response to a party's exercise of the right of free speech...." See ...