NexPoint Advisors v. United Dev. Funding IV

• Docket Number: 02-22-00427-CV
• Decision Date: 03 August 2023
• Parties: NexPoint Advisors, L.P., Appellant v. United Development Funding IV and Mike Wilson, Appellees
• Court: Texas Court of Appeals

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NexPoint Advisors, L.P., Appellant
v.
United Development Funding IV and Mike Wilson, Appellees

No. 02-22-00427-CV

Court of Appeals of Texas, Second District, Fort Worth

August 3, 2023

On Appeal from the 48th District Court Tarrant County, Texas Trial Court No. 048-320795-20

Before Sudderth, C.J.; Womack and Wallach, JJ.

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OPINION

Mike Wallach, Justice

This case involves the Texas Citizens Participation Act (TCPA or the Act), Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011. NexPoint Advisors, L.P. (Appellant) sued United Development Fund IV (UDF) and Mike Wilson (Wilson) (collectively, Appellees) for defamation, business disparagement, tortious interference with existing contract, and tortious interference with prospective business relations. Appellant sought correction, clarification, or retraction under Texas Civil Practice and Remedies Code Section 73.055; compensatory damages; exemplary damages; attorney's fees; interest; and court costs. Appellees answered and filed motions to dismiss under the TCPA. Appellant responded to the motions to dismiss. The trial court granted both motions to dismiss. A jury trial ensued to determine the amount of trial and appellate attorney's fees to be awarded to Appellees. The jury was asked to assess attorney's fees for both Appellees jointly, not separately. After the jury returned its verdict on attorney's fees, the trial court rendered judgment that Appellant take nothing on its claims against Appellees and awarded to Appellees the attorney's fees found by the jury. This appeal followed.

Appellant contends that the trial court erred in granting Appellees' motions to dismiss because: (1) Appellees were not entitled to relief under the TCPA because the Act's commercial speech exemption applies to the communications in question; (2) if the Act applies, Appellant established a prima facie case of each of its causes of action; and (3) Appellees did not establish a defense as a matter of law. Regarding

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Wilson, except for the award of attorney's fees which was awarded jointly with UDF, we will affirm the trial court's judgment dismissing Appellant's claims against Wilson as Appellant's Brief failed to comply with Rule 38.1. Tex.R.App.P. 38.1.

As for Appellant's claims against UDF, because we agree that UDF's communications in question are exempted from the TCPA under the Act's commercial speech exemption, we will reverse the judgment of the trial court dismissing Appellant's claims against UDF and remand the case against UDF to the trial court for further proceedings.

Since the trial court submitted the issue of attorney's fees to the jury without segregating Wilson's attorney's fees from UDF's fees, we will reverse and remand Wilson's attorney's fee claim to be submitted to the factfinder in a subsequent proceeding. We will not address Appellant's remaining points as they are not necessary for resolution of the appeal. See Tex R. App. P. 47.1.

I. Background

(a) The parties

UDF is a Maryland real estate investment trust, formed in 2008. According to its investor-relations information, UDF was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate. By September 2015, UDF had distributed approximately $164 million to its investors and repurchased $41 million of its shares. As expressed by UDF president Hollis Greenlaw in his July 22, 2020 letter to Appellant, which is a

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primary basis of Appellant's claims herein, UDF's business plan included a variety of activities designed to produce profit for UDF's investors:

The Board is fully committed to serving the best interests of the Trust [UDF]. The Board has historically welcomed bona fide discussions of transactions that it views as beneficial to the Trust's shareholders. For example, the Trust has benefitted from engaging with others in transactions regarding the sale of Trust securities, securing credit facilities, listing the Trust's shares on Nasdaq (and subsequent inclusion in the Russell 3000 Index) acquiring an interest in a regional homebuilder, obtaining corporate and debt ratings, structuring a secured debt offering and securitizing certain Trust assets. [Emphasis added.]

Additionally, Greenlaw testified that because of damage that allegedly occurred to UDF's share value due to an illegal "short and distort" campaign prior to July 22, 2020, UDF's board considered it a "main priority" in the recovery process to "protect[ ] its investors and restor[e] their investments."

Wilson, according to the allegations in Appellant's petition, is an employee of UDF. In his answer, Wilson did not specifically deny being an employee of UDF. In his motion to dismiss and supporting declaration, Wilson stated he is the president of UMT Holdings, L.P., the parent company of UMTH General Services, L.P., (UMTHGS), which is an advisor to UDF. Through UMTHGS, Wilson said he provides investor-relations support to UDF. However, Wilson did not affirmatively deny that he was employed by UDF.

Appellant is a Delaware limited partnership with its principal place of business in Dallas, Texas. It is an alternative asset manager, specializing in high yield credit, public equities, real estate, structured credit, and private equity and special situations.

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Over a period of two years, NexPoint Diversified Real Estate Trust f/k/a NexPoint Strategic Opportunities Fund (NXDT), a fund managed by Appellant, acquired over 2 million shares of UDF from April 2017 to December 2019 at an aggregate price of over $7.5 million. Cede & Co. acted as the record holder for the shares, but their beneficial owners were funds and accounts advised by Appellant.

(b) The events

On July 8, 2020, Appellant sent a letter to Greenlaw as chairman and CEO of UDF. In that letter, Appellant expressed certain concerns about UDF's management practices and expressed a desire to become involved in UDF's management. Appellant asserted that it was in a unique position to maximize the value of UDF's assets and that any transaction with Appellant would be enthusiastically received by the investment community.

UDF responded with its July 22, 2020 letter, signed by Greenlaw, which acknowledged Appellant's July 8 letter as an expression of Appellant's interest in a "transaction" involving the Trust without stating specific terms. UDF then spent two single-spaced pages explaining its "concerns" about conducting discussions with Appellant arising from the recent "short and distort" campaign, which had allegedly been carried out against it by others, and UDF's belief that Appellant's principals and allies had been complicit in that effort. UDF also explained that its alleged management failures, referenced in Appellant's July 8 letter, were caused by the "short and distort" scheme. However, UDF concluded the July 22 letter by stating,

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if you wish to open a dialogue regarding a specific transaction, please provide responses to the conflict-of-interest-related questions outlined on the attachment to this letter, and detailed information about the "transaction" that you are interested in discussing with the Trust. The Board will review your responses and indicate whether it is comfortable proceeding.

UDF sent the July 22 letter to Appellant and posted the letter to its public website. UDF also distributed the letter to "due diligence contacts, broker dealers[,] and financial advisers regarding United Development Funding IV." Those are broker dealers that "represented or that had UDF IV accounts" according to Greenlaw. On July 24, 2020, a link to the July 22 letter was further distributed in other industry publications by email. The DI Wire email newsletter, one such publication received by Appellant on July 24, 2020, showed the first link in the email, "UDF IV Responds to NexPoint, Expresses 'Serious Concerns' with Connection to Kyle Bass," which linked to an article that repeated the statements UDF had made in the July 22 letter. Other reiterations of these or similar allegedly defamatory statements were made in other press releases, publications, and public filings over the next several weeks by UDF.

The allegations against Wilson specifically were that he "made phone calls to individual clients and potential client advisers of NALP [Appellant] making the same false statements about NALP described above. Mr. Wilson initiated these communications with the specific intent to harm NALP's current and prospective business relationships." Otherwise, Appellant implied that Wilson was involved with the press releases made by UDF referenced above. The only evidence regarding

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Wilson's communications, other than the allegations in the petition, was excerpts from his deposition. From this testimony, Wilson testified that he did not communicate directly with investors, that he is the president of UMT Holdings, L.P. and served as an advisor to UDF, that he was part of the process for reviewing drafts of UDF's allegedly defamatory publications, and that the decision making on the content of the communications in question rested with unnamed senior management of UDF and its lawyers.

II. Standards of Review

We review de novo a trial court's ruling on a TCPA motion. UATP Mgmt., LLC v. Leap of Faith Adventures, LLC, No. 02-19-00122-CV, 2020 WL 6066197, at *2 (Tex. App.-Fort Worth Oct. 15, 2020, pet. denied) (mem. op.). The first step in a TCPA analysis is to determine if the defendant has demonstrated by a preponderance of the evidence that the TCPA applies to the claims against which the TCPA is being asserted. Batra v. Covenant Health Sys., 562 S.W.3d 696, 706 (Tex. App.-Amarillo 2018, pet. denied). In considering whether the TCPA is applicable, the trial court is statutorily required to consider all pleadings, as well as supporting and opposing affidavits stating the facts on which a claim of...