In re Elliott

• Decision Date: 07 October 2016
• Docket Number: NO. 03-16-00231-CV,03-16-00231-CV
• Citation: 504 S.W.3d 455
• Parties: IN RE Chris ELLIOTT
• Court: Texas Court of Appeals

504 S.W.3d 455

IN RE Chris ELLIOTT

NO. 03-16-00231-CV

Court of Appeals of Texas, Austin.

Filed: October 7, 2016

Jason M. Hopkins, Rachel Riley, Kendyl Hanks Darby, Jason S. Lewis, for MagneGas Corporation.

Shelly L. Skeen, James D. Blume, for John Doe I and Chris Elliott.

Before Chief Justice Rose, Justices Pemberton and Bourland

OPINION

Cindy Olson Bourland, Justice

Relator Chris Elliott has filed a petition for writ of mandamus challenging the district court's March 11, 2016 order in a proceeding seeking a presuit deposition under Texas Rule of Civil Procedure 202. The order allows real party in interest, MagneGas Corporation, to take a Rule 202 presuit deposition of Elliott to investigate potential claims related to an article about MagneGas by an anonymous author, "The Pump Stopper." See Tex. R. Civ. P. 202.1(b). Elliott raises six issues, contending that the district court abused its discretion by ordering Elliott's Rule 202 deposition. Among his other complaints, Elliott asserts that the district court's order violates the Texas Citizens Participation Act because an interested party, John Doe 1, who admits to having made an anonymous communication about MagneGas and who Elliott asserts is "The Pump Stopper," filed a motion to dismiss that should have stayed all discovery. See generally Tex. Civ. Prac. & Rem. Code §§ 27.001 -.011 (Texas Citizens Participation Act) ("TCPA" or "Act"). Because we conclude that the TCPA mandates that "all discovery in the legal action is suspended until the court has ruled on the motion to dismiss," see id. § 27.003(c), meaning that the district court should not have ordered the Rule 202 deposition to occur before it addressed and ruled on Doe's TCPA motion to dismiss, we will conditionally grant the petition for writ of mandamus and direct the district court to vacate its March 11, 2016 order.

BACKGROUND

"The Pump Stopper" published an article on a website called "Seeking Alpha" on December 21, 2015. The article reported negatively on MagneGas's financial prospects. In its Rule 202 petition filed on January 22, 2016, MagneGas, a Delaware corporation with its principal place of business in Florida, sought to depose Elliott, who it alleges is a resident of Travis County. See Tex. R. Civ. P. 202.2(b)(2) (establishing that petition must be filed where witness resides if no suit is yet anticipated).

MagneGas alleges in its Rule 202 petition that "Elliott is affiliated with the website PumpStopper.com" and that the domain name "PumpStopper.com" is registered to Elliott. MagneGas further alleges that:

That website has created, published, and/or distributed false and misleading information about MagneGas. Specifically, the "PumpStopper" creates anonymous reports baselessly bashing reputable companies such as MagneGas in hopes of driving down the stock price of the targeted companies. On information and belief, the "PumpStopper" shorts the stock of the targeted companies in advance of releasing its reports, hoping to make money from the artificial price deflation caused by its reports.

MagneGas seeks to investigate potential claims against the authors, publishers, and distributors of the false and misleading materials, and MagneGas has reason to believe that Mr. Elliott has knowledge that will facilitate that investigation.

Although MagneGas's Rule 202 petition does not specifically refer to the December 21, 2015 article or to the statements within it that MagneGas alleges are false and misleading, at the hearing at which the district court addressed the Rule 202 petition, MagneGas's counsel stated that this article was the basis for MagneGas's investigation of its potential claims.

Rule 202 allows a person to petition a trial court for an order authorizing the taking of a deposition to investigate a potential claim or suit, see id. R. 202.1(b), and it requires the petitioner to serve the petition and a notice of the hearing on the petition in accordance with Rule 21a at least 15 days in advance of the hearing on all persons the petitioner seeks to depose, see id. R. 202.3(a); id. R. 21a (establishing service requirements). Instead of setting a hearing and serving Elliott with the petition and notice of hearing, MagneGas first served Elliott with a subpoena for a deposition without obtaining an order authorizing Elliott's deposition based on MagneGas's Rule 202 petition. After Elliott refused through counsel to attend the deposition, MagneGas filed a motion to compel his compliance with the subpoena and set it for a fifteen-minute hearing on March 11, 2016.

Elliott filed a response to MagneGas's motion to compel, objections to the motion to compel and to the Rule 202 petition, a motion to quash the motion to compel, and a motion for protective order. Elliott set the motion to quash and the motion for protective order for an hour-and-a-half-long hearing on April 28, 2016. On March 10, John Doe 1, who identifies himself as "an author, publisher, and/or distributor who utilizes PumpStopper.com," filed a TCPA motion to dismiss both MagneGas's Rule 202 petition and its motion to compel Elliott's deposition. See Tex. Civ. Prac. & Rem. Code § 27.003. In his TCPA motion to dismiss, Doe asserts that MagneGas's Rule 202 petition and motion to compel "both are based on, related to, or in response to John Doe 1's exercise of his right of free speech and the rights of free speech of other potential defendants and adverse parties." Doe also filed a notice of joinder in Elliott's motion to quash and motion for protective order. Doe set his motion to dismiss and motions to quash and for protective order for hearing on April 28 at the same time that Elliott's motions were set.

The day after Doe filed his TCPA motion to dismiss, the district court held a short, non-evidentiary hearing on MagneGas's motion to compel. The district court considered MagneGas's Rule 202 petition at the hearing after MagneGas acknowledged it had not yet been given permission to depose Elliott under Rule 202. Elliott's counsel informed the district court of the pending motions to quash and for protective order, as well as Doe's pending TCPA motion to dismiss, and asked the court to wait and consider the merits and all the issues at once during the April 28 hearing, which would be a longer evidentiary hearing. After considering the parties' arguments only on the Rule 202 petition, the district court granted MagneGas's Rule 202 petition and ordered Elliott's deposition "relating only to the attached [December 21, 2015] article by Pumpstopper" to occur on a mutually agreeable date within 30 days.

On April 1, MagneGas filed a motion to compel Elliott's compliance with the Court's March 11 order on its Rule 202 petition and set the motion to compel for hearing on April 8. On April 6, Elliott filed his petition for writ of mandamus with this Court and an emergency motion for temporary relief. This Court granted the emergency motion on April 7, staying all proceedings pending further order of this Court.

ANALYSIS

Elliott challenges the district court's order on MagneGas's Rule 202 petition, raising six issues, five that relate to the Rule 202 petition and one that asserts the order violates the TCPA's discovery stay. We turn to the issue of the TCPA discovery stay because it is dispositive of Elliott's petition for mandamus.

Standard of review

We review the district court's order granting the Rule 202 petition for presuit discovery for an abuse of discretion. In re Hewlett Packard , 212 S.W.3d 356, 360 (Tex. App.–Austin 2006, orig. proceeding [mand. denied] ). To obtain the extraordinary remedy of mandamus relief, a relator must show both that the trial court clearly abused its discretion and that the relator has no adequate appellate remedy. In re Prudential Ins. Co. of Am. , 148 S.W.3d 124, 135–36 (Tex. 2004) (orig. proceeding); Walker v. Packer , 827 S.W.2d 833, 839–40 (Tex. 1992) (orig. proceeding).

An improper order under Rule 202 may be set aside by mandamus. In re Wolfe , 341 S.W.3d 932, 933 (Tex. 2011) (orig. proceeding) (per curiam). When discovery is sought from a potential defendant in a contemplated lawsuit, Rule 202 orders have been considered ancillary to the possible subsequent suit and thus neither final nor appealable.¹ In re Jorden , 249 S.W.3d 416, 419 (Tex. 2008)(orig. proceeding); In re Hewlett Packard , 212 S.W.3d at 360 (holding mandamus was proper method for seeking review of Rule 202 order on petition to investigate claims against potential defendants); see also IFS Sec. Grp. v. American Equity Ins. Co. , 175 S.W.3d 560, 562–65 (Tex. App.–Dallas 2005, no pet.) (interpreting case law under prior civil-procedure rule allowing bill of discovery, which was predecessor to Rule 202.1(b) procedure allowing discovery to investigate potential claim). Here, although MagneGas's petition states that it is investigating a potential claim (as opposed to seeking to perpetuate testimony in an anticipated suit), the petition also states that MagneGas is investigating a potential claim against the authors, publishers, and distributors of the allegedly false and misleading information . Elliott is a potential defendant because MagneGas alleges that the Pumpstopper.com website is registered to him and that the website created, published, or distributed the allegedly false and misleading information. In addition, the petition states that MagneGas would benefit from the knowledge "that bringing a lawsuit against those individuals [affiliated with the Pumpstopper or Pumpstopper.com] is warranted." MagneGas acknowledges in its mandamus response that it seeks "to investigate claims against the deponent. " Therefore, the district court's Rule 202 order is neither final nor appealable, and if Elliott can show a clear abuse of discretion, mandamus relief is proper. See In re Wolfe , 341 S.W.3d at 933 ; In re Jorden , 249 S.W.3d at 419–20.

An abuse of discretion occurs when the trial court's decision is so arbitrary and unreasonable that it amounts to...