Winstead PC v. Moore

Decision Date20 August 2021
Docket NumberNo. 05-20-00050-CV,05-20-00050-CV
Citation633 S.W.3d 200
Parties WINSTEAD PC, Appellant v. Dewey M. MOORE, Jr., Appellee
CourtTexas Court of Appeals

633 S.W.3d 200

WINSTEAD PC, Appellant
v.
Dewey M. MOORE, Jr., Appellee

No. 05-20-00050-CV

Court of Appeals of Texas, Dallas.

Opinion Filed August 20, 2021


Paul M. Koning, Eve L. Henson, Dallas, for Appellant.

Stephen A. Kennedy, Dallas, for Appellee.

Before Justices Schenck, Smith, and Garcia

OPINION

Opinion by Justice Garcia

In this accelerated interlocutory appeal, Winstead PC appeals the trial court's order denying its motion to dismiss appellee Dewey M. Moore, Jr.’s claims pursuant to the Texas Citizens Participation Act (TCPA). See TEX. CIV. PRAC. & REM. CODE §§ 27.001 –.011. In three issues, Winstead argues that (i) the trial court erred by ruling that the TCPA does not apply to Moore's claims, (ii) Moore failed to establish a prima facie case for each element of his causes of action, and (iii) Winstead established the affirmative defense of attorney immunity.

We reverse the trial court's order in part and affirm in part, holding that the TCPA applies to Moore's legal-malpractice and equitable-indemnification claims but does not apply to Moore's negligent-misrepresentation claim. Because the trial court did not reach steps two and three of the TCPA analysis regarding the first two claims, we remand so that the trial court may do so in the first instance.

I. Background

A. Factual Allegations

We draw the following factual allegations and quotations from Moore's live pleading, his second amended petition.

Moore is the former Chairman, CEO, and President of the Institute for Wealth Holdings, Inc. (IWH) and the former President and Chief Compliance Officer for two IWH subsidiaries (IWA and IWC). In general, IWH, its subsidiaries, and their employees provide investment advisory services.

Winstead was engaged to prepare two sets of securities offering statements for IWH. In October 2017, Winstead completed preparation of a Private Placement Memorandum (PPM) for Series D Convertible Preferred Stock for IWH pursuant to Regulation D of the Securities Act of 1933 (2017 Reg D Offering). In January 2018, Christopher D. Williams of Winstead issued an Opinion Letter to IWH that included a statement "consent[ing] to the use of this opinion as an exhibit to the Offering Statement." In February 2018, Winstead completed the Offering Circular for the Series D Convertible Preferred Stock and Common Stock pursuant to

633 S.W.3d 203

Regulation A of the Securities Act (2018 Reg A Offering).

In August 2018, the SEC issued an Examination Letter in which the SEC found, under the heading "Participation in Fraudulent Private Offerings," that the 2017 Reg D Offering Memorandum and the 2018 Reg A Offering Memorandum "contained material misstatements with respect to IWH, the Advisers [IWM, IWA, and IWC], and their leadership, including exaggerated, inaccurate, and misleading statements to the potential investors to whom these materials were provided."

As a direct result of Winstead's "various failures and malpractice," Moore was required to resign his employment positions and as a director of IWH. He obtained employment with a different company but later lost that position because IWA filed "an Amended U5" based on the SEC Examination Letter and the Amended U5 contained negative statements about Moore.

B. Procedural History

On September 27, 2019, Moore sued Winstead. In his live pleading, he alleges that Winstead failed to competently perform the due diligence and other legal work necessary to ensure the 2017 Reg D Offering, the 2018 Reg A Offering, and the Opinion Letter were in compliance with applicable laws and regulations. He asserts claims for legal malpractice, negligent misrepresentation, and equitable indemnification.

Winstead answered and later moved to dismiss Moore's claims under the TCPA, asserting that Moore's claims were based on or in response to Winstead's exercise of the right to petition.

After a hearing, the trial judge signed an order denying Winstead's motion to dismiss because "the alleged failure to perform due diligence is not a protected communication under the TCPA." The order further stated, "As the Court has ruled on the applicability of the TCPA, it does not reach ... the second step of the TCPA analysis." Winstead moved for reconsideration, and the trial court denied that motion after a second hearing.

Winstead perfected this interlocutory appeal. See CIV. PRAC. & REM. CODE § 51.014(a)(12).

II. Applicable Law and Standard of Review

The TCPA authorizes a defendant in a civil case to move to dismiss an opponent's "legal action" under certain circumstances. See id. § 27.003(a). That motion triggers a three-step process. See id. § 27.005(b), (c), (d).

At step one, the movant must demonstrate that the legal action is based on or in response to the movant's exercise of a statutorily defined right or certain other statutorily defined conduct. Id. § 27.005(b). The plaintiff's petition is the best and all-sufficient evidence of the nature of the action. Hersh v. Tatum , 526 S.W.3d 462, 467 (Tex. 2017). "When it is clear from the plaintiff's pleadings that the action is covered by the Act, the defendant need show no more." Id. Step one requires a claim-by-claim analysis. See Better Bus. Bureau of Metro. Dallas, Inc. v. Ward , 401 S.W.3d 440, 443 (Tex. App.—Dallas 2013, pet. denied) ("The definition of ‘legal action’ in the statute is broad and evidences a legislative intent to treat any claim by any party on an individual and separate basis.").

If the movant carries its initial burden, the burden shifts to the claimant to establish by clear and specific evidence a prima facie case for each essential element of the claim in question. CIV. PRAC. & REM. CODE § 27.005(c). If the claimant does not carry

633 S.W.3d 204

its burden, the trial court dismisses the claim. See id. § 27.005(b), (c). And even if the claimant carries its step-two burden, the trial court must dismiss the legal action at step three if the movant establishes an affirmative defense as a matter of law. Id. § 27.005(d).

We review a trial court's ruling on a TCPA motion de novo. Vaughn-Riley v. Patterson , No. 05-20-00236-CV, 2020 WL 7053651, at *2 (Tex. App.—Dallas Dec. 2, 2020, no pet.) (mem. op.) (applying de novo standard to ruling on TCPA motion governed by the 2019 amendments).

III. Analysis

A. Issue One: Whether Winstead carried its step-one burden under the TCPA.

Winstead argues that the trial court erred by concluding that Winstead did not carry its step-one burden under the TCPA. Specifically, Winstead argues that Moore's claims are based on Winstead's exercise of its TCPA right to petition as that right is defined in § 27.001(4)(B) and (C). As discussed below, we agree with the trial court as to Moore's negligent-misrepresentation claim, but not as to Moore's legal-malpractice and equitable-indemnification claims.

1. Negligent-Misrepresentation Claim

On appeal, Winstead argues that all of Moore's claims are based on the three securities documents that Winstead prepared and that those documents were exercises of Winstead's right to petition because they were (i) communications "in connection with an issue under consideration or review by a ... governmental body" and (ii) communications that were "reasonably likely to encourage consideration or review of an issue by a ... governmental body." CIV. PRAC. & REM. CODE § 27.001(4)(B), (C). We conclude that Winstead's argument fails as to Moore's negligent-misrepresentation claim because that claim is not based on the three securities documents—it is based on alleged misrepresentations that Winstead made to Moore about the quality of its work on those documents.

In his negligent-misrepresentation claim, Moore alleges that Winstead misrepresented to him that Winstead "had met its legal standard of care in preparing" the three securities documents at issue in this case, namely the 2017 Reg D Offering, the 2018 Reg A Offering, and the Opinion Letter. He adds that those representations "supplied false information" for his guidance in business transactions and that Winstead's negligent misrepresentations caused him damages.

In our view, Winstead's alleged statements to Moore that it "had met its legal standard of care in preparing" the securities documents are too remote from the SEC's review of those documents to constitute "communication[s] in connection with an issue under consideration or review by a ... governmental body." See id. § 27.001(4)(B). Although the alleged misrepresentations were about the quality of Winstead's work that went into the securities documents, we cannot say that they were made, in any meaningful sense, "in connection with" the issue under consideration by the SEC. Nothing in the record suggests that Winstead's representations to Moore were ever forwarded to the SEC, became part of the SEC proceedings, or were received by anyone except Moore. Winstead's legal standard of care was not under consideration or review by the SEC. Reading "in connection with" so broadly as to cover Winstead's comments to Moore about the quality of its work on the securities documents—and treating such comments as an "exercise of the right to petition"—would be adding to the types of

633 S.W.3d 205

communications subject to TCPA protection under § 27.001(4)(B). A court may not amend a statute by adding words that are not contained in the language of the statute as written. Lippincott v. Whisenhunt , 462 S.W.3d 507, 508 (Tex. 2015) (per curiam).

Nor does anything in the record show that Winstead's alleged misrepresentations to Moore about the quality of Winstead's legal work were reasonably likely to encourage SEC consideration or review of an issue. See CIV. PRAC. & REM. CODE § 27.001(4)(C).

We conclude that Winstead failed to demonstrate that Moore's negligent-misrepresentation claim is based on Winstead's exercise of its right to petition. Accordingly, we overrule issue one with respect to Moore's negligent-misrepresentation claim.

2. Legal-Malpractice Claim

Next we consider Winstead's argument that Moore's legal-malpractice claim is...

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