SSCP Mgmt. Inc. v. Sutherland/Palumbo, LLC
| Decision Date | 06 August 2020 |
| Docket Number | No. 02-19-00254-CV,02-19-00254-CV |
| Parties | SSCP MANAGEMENT INC., SDHAROD ENTERPRISES, INC., APPLE TEXAS RESTAURANTS, INC., AND TEXAS APPLE, LLC, Appellants v. SUTHERLAND/PALUMBO, LLC, Appellee |
| Court | Texas Court of Appeals |
On Appeal from the 43rd District Court Parker County, Texas
Before Kerr, Womack, and Wallach, JJ.
Appellants SSCP Management, Inc.; Sdharod Enterprises, Inc.; Apple Texas Restaurants, Inc.; and Texas Apple, LLC brought this interlocutory appeal of the trial court's order denying their motion to dismiss under the Texas Citizens Participation Act. See Tex. Civ. Prac. & Rem. Code Ann. §§ 27.003, 51.014(a)(12). Appellee Sutherland/Palumbo, LLC sued Appellants alleging that they had conspired to fraudulently induce Sutherland to purchase real property at an artificially inflated price. Appellants moved to dismiss the claims under the TCPA, the trial court denied the motion and awarded Sutherland attorney's fees, and Appellants brought this appeal. Because we hold that Appellants established their entitlement to dismissal of many of Sutherland's claims and that Sutherland was therefore not entitled to attorney's fees, we affirm in part and reverse in part.
In its petition, Sutherland alleged that on August 1, 2016, Texas Apple, LLC entered into a 25-year lease with Sdharod1 (the 2016 lease) to operate an existingApplebee's restaurant on Sdharod's property in Parker County and that, soon thereafter, Sdharod began marketing the property to sell it. The marketing material for the property described the offering as newly 25-year "absolute NNN leased," with the lease guaranteed by tenant "Apple Texas Group." The materials state that Apple Texas Group operates 69 units and has won the Entrepreneur of the Year award from Ernst & Young, "among many other accolades." The materials described the new lease as featuring ten percent rental increases every five years.2 Sutherland and Sdharod executed a sales agreement for the property on August 30, 2016. The parties closed on October 2016, and Sdharod assigned the 2016 lease to Sutherland.
Sutherland alleged that during negotiations, it had been told that Texas Apple "was current on all lease obligations and financially sound and, thus, had the ability and financial circumstances" to comply with the 2016 lease's terms but that soon after the purchase, Texas Apple began falling behind on its rent and asked that its rental payments be cut by more than sixty percent. Sutherland alleged that Appellants hadconspired to inflate the rental payments, had entered into the 2016 lease in order to inflate the value of the property, and had conspired to induce Sutherland to purchase the property. It further contended that it had been unaware prior to the sale that Sdharod, the property owner, and Texas Apple, the tenant, were related entities. Sutherland sued for breach of contract, fraud, fraud by nondisclosure, fraudulent inducement, fraud in a real estate transaction, negligent misrepresentation, conspiracy, violations of the Deceptive Trade Practices Act, and common law and statutory false advertising. The petition did not set out any specific acts by SSCP Management or Apple Texas Restaurants, but it did contain allegations against "defendants" generally.3
Appellants filed a motion to dismiss under the TCPA, requesting dismissal of all of Sutherland's claims except the breach of contract claim. SSCP Management and Apple Texas Restaurants asserted that they had been sued only "because of [their] association with the other defendants by means of common ownership and/or management." They further asserted that Sutherland's suit was based on communications by Texas Apple and Sdharod that were made in connection with a matter of public concern: economic wellbeing and goods and services in the marketplace. They also argued that the suit complained of their "exercise of their rightof association because all of [Sutherland]'s claims against [Appellants] center on [Appellants]' actions and communications as they express, promote, pursue, or defend common interests—e.g., entering into leases, marketing property for sale, negotiating, conveying property, assigning leases, conducting business, and advertising, among other things."
Sutherland filed, and the trial court granted, a motion to conduct limited discovery. Sutherland then filed a response to Appellants' TCPA motion, arguing that the claims were not based on communications regarding a matter of public concern or communications implicating Appellants' rights of association. It further asserted that the commercial speech exception applied, and it attached evidence to support its claims.
In its TCPA response, as part of its effort to make a prima facie case for its claims, Sutherland provided factual details more fully describing the basis of its suit. See Dallas Morning News, Inc. v. Hall, 579 S.W.3d 370, 377 (Tex. 2019) (). The details included facts about Appellants' alleged financial problems beginning in 2014; their decision to market the property using the 2016 lease—with significantly higher monthly rent than the tenant was currently paying or was capable of paying—to misrepresent the financial strength of the tenant; and their efforts at concealing those financial difficulties during Sutherland's due diligence by failing to disclose requestedinformation that, if disclosed, would have revealed Appellants' previous misrepresentations.
The TCPA motion was overruled by operation of law on June 24, 2019. See Tex. Civ. Prac. & Rem. Code Ann. § 27.008(a). However, on July 5, 2019, the trial court signed an order denying the motion and awarding Sutherland $93,575 in attorney's fees. See id. § 27.009.
In Appellants' first issue, they ask whether the trial court erred by denying their TCPA motion. They argue that they proved by a preponderance of the evidence that Sutherland's claims were based on, related to, or were in response to their exercise of the right of free speech and right of association; that Sutherland did not prove by a preponderance of the evidence the applicability of the TCPA's commercial speech exemption; and that Sutherland did not introduce clear and specific evidence to establish each element of its claims. While we agree that Appellants were entitled to dismissal of many of Sutherland's claims for the reasons discussed later in this opinion, Appellants did not meet their burden to show that all the claims fall within the TCPA.
A defendant seeking dismissal under the TCPA has the initial burden to produce a preponderance of the evidence4 that the legal action is based on, relates to, or is in response to the exercise of the rights to free speech, to petition, or of association. Ray v. Fikes, No. 02-19-00232-CV, 2019 WL 6606170, at *2 (Tex. App.—Fort Worth Dec. 5, 2019, pet. denied) (mem. op.) ). If the defendant meets that burden, the burden shifts to the plaintiff to produce clear and specific evidence of a prima facie case for each element of each claim. See Tex. Civ. Prac. & Rem. Code Ann. § 27.005(c). If the plaintiff does so, the defendant may still have the claims dismissed by establishing each element of a valid defense to the claims. See id. § 27.005(d).
Appellants asserted that the TCPA applies to the claims against them because the claims were based on, related to, or in response to the exercise of the rights of free speech and association. The TCPA defines the exercise of the rights of free speech and association to mean, respectively, "a communication made in connection with a matter of public concern" and a communication between individuals who "join together tocollectively express, promote, pursue, or defend common interests." See Tex. Civ. Prac. & Rem. Code Ann. § 27.001. The TCPA defines a communication as "the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic." Id. This definition does not include a failure to communicate. Ray, 2019 WL 6606170, at *3. Accordingly, if any of Sutherland's claims are based on Appellants' alleged failure to communicate, those claims are not subject to the TCPA's dismissal procedure. Because "[t]he basis of a legal action is not determined by the defendant's admissions or denials but by the plaintiff's allegations," Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017), our first step in determining whether the TCPA applies is to review Sutherland's pleadings.
In pleading its claim for fraud by nondisclosure, Sutherland alleged that "Defendants" concealed and failed to disclose to Sutherland "certain information," "including, but not limited to, the relationship between [Sdharod] and [Texas Apple], that the monthly and annual rental payments due under the Lease were inflated to garner a higher purchase price for the Property, and that [Texas Apple] could not pay the inflated monthly and annual rental payment . . . ." This claim is based on Appellants' failure to communicate, and, accordingly, the TCPA does not apply. See Ray, 2019 WL 6606170, at *3. We overrule Appellants' first issue as to Sutherland's fraud by nondisclosure claim.
1. Failure to disclose
Sutherland pled several violations of the DTPA by Appellants. Most of those violations involved Appellants' alleged misrepresentations to Sutherland. However, Sutherland also pled that Appellants violated the DTPA by failing to disclose "known information at the time of the...
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