Todd Dyer, PHRK Intervention, Inc., PHRK Intervention, LLC, and Southside Device, LLC v. Medoc Health Services, LLC and Total RX Case, LLC ( 2022 )

REVERSE and RENDER in part; AFFIRM in part; and Opinion Filed
December 14, 2022
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-21-00433-CV
TODD DYER, PHRK INTERVENTION, INC., PHRK INTERVENTION,
LLC, AND SOUTHSIDE DEVICE, LLC, Appellants
V.
MEDOC HEALTH SERVICES, LLC AND TOTAL RX CASE, LLC,
Appellees
On Appeal from the 14th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-18-00822
MEMORANDUM OPINION
Before Justices Partida-Kipness, Reichek, and Goldstein
Opinion by Justice Goldstein
Todd Dyer, PHRK Intervention, Inc., PHRK Intervention, LLC, and
Southside Device, LLC (Dyer) appeal the trial court’s June 4, 2021 final judgment
and order of nonsuit (1) incorporating the trial court’s April 29, 2021 order finding
that Dyer’s underlying motion under the Texas Citizens Participation Act (TCPA)
was frivolous and awarding Medoc Health Services, LLC, and Total RX Case, LLC
(Medoc), $261,632.82 in attorney’s fees pursuant to section 27.009(b) of the civil
practice and remedies code and (2) granting a nonsuit with prejudice of all Medoc’s
claims against Dyer and dismissing this cause with prejudice to Medoc’s refiling of
Medoc’s claims. In two issues, Dyer argues the trial court abused its discretion in
determining that Dyer’s TCPA motion was frivolous and, in the alternative, argues
that there was not legally sufficient evidence to support the trial court’s award of
attorney’s fees if this Court determines that Dyer’s TCPA motion was frivolous. For
the reasons that follow, we reverse the trial court’s award of attorney’s fees to Medoc
and render judgment denying Medoc’s request for attorney’s fees. In all other
respects, we affirm the trial court’s judgment.
This case began in January 2018 when Medoc filed its original petition
asserting claims against Dyer and others alleging loss of business goodwill and the
misappropriation and use of Medoc’s confidential and proprietary information,
intellectual property, and other tangible company property. In February 2018, Dyer
filed a motion to dismiss pursuant to the TCPA alleging, among other things, that
Medoc’s lawsuit was based on and filed in response to text messages intercepted
from the telephone of defendant Nicolas Basiti, and these communications were
protected under the right of association. On April 24, 2018, the trial court denied
Dyer’s motion to dismiss. Dyer appealed.
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On March 8, 2019, a panel of this Court issued an opinion affirming the denial
of Dyer’s motion to dismiss. See Dyer v. Medoc Health Servs., LLC, 573 S.W.3d
418 (Tex. App.—Dallas 2019, pet. denied) (Dyer I).1
BACKGROUND
Medoc is a healthcare management services company that uses a proprietary
software management system that it does not publicly sell, share, or disclose. Id. at
421–22. Basiti, Medoc’s former chief technology officer, helped develop the
proprietary software. Id. at 422. Between July 2017 and October 2017, Basiti and
Dyer, the principal owner and primary manager of the PHRK Intervention entities
and Southside, exchanged over 1,000 text messages discussing how Basiti was
“duplicating every database file folder system” and was “ready to transfer it all.” Id.In the course of their dealings, Dyer purchased two servers, and Basiti “set up” the
servers and said he would “show [Dyer] how to look at the data on them,” but Dyer
was unsuccessful in accessing the information on the servers. Id.After Medoc learned Basiti was attempting to misappropriate their proprietary
software and other confidential information, they conducted an investigation and
discovered the text messages between Basiti and Dyer. Id. Basiti subsequently
signed an acknowledgment stating he had conspired with Dyer to use and disclose
1
As Dyer I provides a more fully-developed discussion of the facts of this case, all of which
are familiar to the parties, we only set forth those facts from Dyer I necessary for our analysis.
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Medoc’s confidential information, proprietary software, and intellectual property for
the purpose of aiding and abetting a competitive business. Id.Medoc sued Dyer, asserting claims for misappropriation of trade secrets,
tortious interference with existing contract and with prospective business relations,
civil conspiracy, and conversion. As a factual basis for their claims, appellees relied
on the text messages, as well as “discussions” and “negotiations,” between Basiti
and Dyer. Id. at 422–23. Dyer filed a motion to dismiss under the TCPA, asserting
(1) the text messages between Basiti and Dyer were communications that constituted
the exercise of the right of free speech, of association, and to petition; (2) Medoc
could not produce clear and specific evidence of each essential element of its claims;
and (3) Medoc could not overcome Dyer’s valid defenses. Id. at 423.
Dyer also stated he learned in April or May of 2017 that a former partner of
Medoc had been contacted by an FBI agent. Id. The agent asked questions about
Medoc, and Dyer’s name “came up” during the questioning. Id. Dyer stated he
“later” learned from Basiti that Basiti had deleted data and communications from
Medoc’s computer system in response to the federal investigation and “upon
information and belief” Basiti used Dyer’s servers to preserve that information. Id.Among other things, our prior opinion addressed Dyer’s argument that Basiti
and Dyer had a right to associate with each other to pursue the “common interest”
of allegedly misappropriating and selling or using Medoc’s proprietary software and
confidential business information. Id. at 425. We concluded that, because the text
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messages between Basiti and Dyer were private communications related to an
alleged conspiracy between the two men and did not involve public or citizen's
participation, it would be “illogical” to apply the TCPA to those communications.
Id. at 426. Further, we determined that construing the statute such that Dyer would
have a “right of association” based solely on Dyer’s and Basiti’s private
communications allegedly pertaining to the misappropriation of Medoc’s
proprietary software and confidential business information is an absurd result that
would not further the purpose of the TCPA to curb strategic lawsuits against public
participation. Id. at 426–27.
In reaching this conclusion, we recognized that other courts of appeals have
concluded the TCPA’s protection of the right of association applies to claims for the
misappropriation of trade secrets, conversion, and tortious interference based on (1)
communications between the alleged tortfeasors and with individuals they were
attempting to hire, and (2) the “common interest” of a competing business enterprise
that was allegedly using the misappropriated confidential information. Id.; see
Morgan v. Clements Fluids S. Tex., LTD., 589 S.W.3d 177, 185 (Tex. App.—Tyler
2018, no pet.) (concluding misappropriation of trade secrets claim was based on,
related to, or in response to, at least in part, appellants’ “communications” among
themselves and others and, consequently, claim was based on, related to, or in
response to exercise of a TCPA right, satisfying burden under first step of TCPA
analysis); Abatecola v. 2 Savages Concrete Pumping, LLC, No. 14-17-00678-CV,
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2018 WL 3118601, at *7–8 (Tex. App.—Houston [14th Dist.] June 26, 2018, pet.
denied) (mem. op.) (concluding tortious interference claims based on hiring
employee and claims of interfering with customers related to exercise of right to free
speech and right of association as broadly defined by TCPA); Elite Auto Body LLC
v. Autocraft Bodywerks Inc., 520 S.W.3d 191, 205 (Tex. App.—Austin 2017, pet.
dism’d) (communications aimed at luring away competitor’s employees in
furtherance of business enterprise showed by a preponderance of the evidence that
competitor’s legal action was based on, related to, or was in response to exercise of
right of association).
Thus, Dyer I acknowledged decisions from our sister courts that applied the
TCPA to facts similar to the facts here but chose not to follow those decisions. Id.
at 427. Our prior opinion did not address the issue of whether Dyer’s motion to
dismiss was frivolous or make any determination on that issue.
On November 20, 2020, Medoc filed a motion requesting attorney’s fees
totaling $261,682.32 “related to the Dyer Defendants’ frivolous TCPA Motion to
Dismiss.” On April 29, 2021, the trial court signed an order granting Medoc’s
motion for attorney’s fees and awarding Medoc $261,682.32. This order was
incorporated into the trial court’s June 4, 2021 final judgment. This appeal followed.
ANALYSIS
In Dyer’s first issue, Dyer argues the trial court abused its discretion in
determining that Dyer’s TCPA motion was frivolous. If the court finds that a motion
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to dismiss filed under the TCPA “is frivolous or solely intended to delay,” the court
may award court costs and reasonable attorney's fees to the responding party. TEX.
CIV. PRAC. & REM. CODE ANN. § 27.009(b). We review the decision to award costs
and attorney’s fees under TCPA section 27.009(b) for abuse of discretion. Pinghua
Lei v. Nat. Polymer Int’l Corp., 578 S.W.3d 706, 712 (Tex. App.—Dallas 2019, no
pet.). We review the amount of fees for legal sufficiency of the evidence. Id.“Frivolous” is not defined in the TCPA, but as we have explained that “the word’s
common understanding contemplates that a claim or motion will be considered
frivolous if it has no basis in law or fact and lacks a legal basis or legal merit.” Id.
at 717 (quoting Sullivan v. Tex. Ethics Comm’n, 551 S.W.3d 848, 857 (Tex. App.—
Austin 2018, pet. denied) (internal quotations and citations omitted).
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. While a
laudable aspiration, its application has been stretched to the ethical limits of lawyers’
creative litigation tactics. The tortured history of TCPA judicial opinions, disparate
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and split among the intermediate appellate courts, reflects that the TCPA occupies a
shifting position in an ever-changing landscape of Texas jurisprudence.2
As noted in Dyer I, other Texas courts have applied the TCPA to claims
strikingly similar to Dyer’s, with a different result. Dyer I, 573 S.W.3d at 427. The
trial court merely noted that Dyer’s TCPA Motion was rejected by this Court and by
the Texas Supreme Court and, based upon unarticulated “facts and arguments
presented,” found the TCPA Motion frivolous.3 Because Dyer’s motion might be,
and has been, argued to technically fit within the TCPA’s broad framework, we
conclude that the trial court abused its discretion on the record before us by impliedly
finding that Dyer’s TCPA motion had “no basis in law or fact and lack[ed] a legal
basis or legal merit” and was therefore frivolous. See Sullivan, 551 S.W.3d at 857;
Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.—Houston [14th Dist.] 2014, pet.
denied) (concluding that determination of whether cause of action has any basis in
law and fact is legal question that courts review de novo). Based upon the split in
authority recognized by Dyer I, we cannot say that, as a matter of law, Dyer’s motion
2
In 2019 the Texas Legislature endeavored through amendments to limit the expansive nature of the
TCPA. Act of May 17, 2019, 86th Leg., R.S., ch. 378, 2019 Tex. Gen. Laws 684. To date, over 900
appellate decisions have addressed challenges under the TCPA and trial courts are still counting, with blogs
and CLE tracking the latest in litigation trends.
3
The trial court expressly found the dismissal motion frivolous, striking the provision that it was solely
intended to delay the proceedings. However, other than its reference to Dyer I, there were no express
findings to substantiate a determination that the motion had no basis in law or fact or lacked legal basis or
legal merit. We decline the opportunity to add to the TCPA morass with a determination or intimation that
appellate affirmation of the denial of a TCPA motion, without more express findings, supports or establishes
frivolity.
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had no basis in law or fact, and we sustain Dyer’s first issue attacking the trial court’s
finding that Dyer’s motion to dismiss was frivolous. See Sullivan, 551 S.W.3d at
857. In the absence of a valid determination that Dyer’s motion was frivolous, the
trial court abused its discretion in awarding attorney’s fees to Medoc pursuant to
section 27.009(b) of the civil practice and remedies code. See TEX. CIV. PRAC. &
REM. CODE ANN. § 27.009(b); Pinghua Lei, 578 S.W.3d at 712. Because of our
disposition of Dyer’s first issue, we need not address Dyer’s second issue.
We reverse the trial court’s award of attorney’s fees to Medoc and render
judgment denying Medoc’s request for attorney’s fees. In all other respects, we
affirm the trial court’s judgment.
/Bonnie Lee Goldstein/
BONNIE LEE GOLDSTEIN
JUSTICE
210433F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
TODD DYER, PHRK On Appeal from the 14th Judicial
INTERVENTION, INC., PHRK District Court, Dallas County, Texas
INTERVENTION, LLC, AND Trial Court Cause No. DC-18-00822.
SOUTHSIDE DEVICE, LLC, Opinion delivered by Justice
Appellants Goldstein. Justices Partida-Kipness
and Reichek participating.
No. 05-21-00433-CV V.
MEDOC HEALTH SERVICES,
LLC AND TOTAL RX CASE, LLC,
Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED in part and REVERSED in part. We REVERSE that portion
of the trial court's judgment awarding Medoc Health Services, LLC, and Total RX
Case, LLC, their attorney's fees, and judgment is RENDERED that:
Medoc Health Services, LLC, and Total RX Case, LLC, take nothing
on their request for attorney's fees.
In all other respects, the trial court's judgment is AFFIRMED.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 14th day of December 2022.
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