LaCore Enterprises, LLC and Link BioSciences, LLC v. Claire Angles, Micheal Kearl, Michael Smith, the Virtual Formula, LLC ( 2023 )

REVERSE in part; AFFIRM in part; Remand and Opinion Filed March 23,
2023
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-21-00798-CV
LACORE ENTERPRISES, LLC AND LINK BIOSCIENCES, LLC,
Appellants
V.
CLAIRE ANGLES, MICHEAL KEARL, MICHAEL SMITH, THE
VIRTUAL FORMULA, LLC, Appellees
On Appeal from the 380th Judicial District Court
Collin County, Texas
Trial Court Cause No. 380-01127-2021
MEMORANDUM OPINION
Before Justices Molberg, Pedersen, III, and Smith
Opinion by Justice Molberg
Appellants LaCore Enterprises, LLC (LaCore) and Link BioSciences, LLC
(Link) appeal the denial by operation of law of their motion to dismiss appellees’
counterclaims pursuant to the Texas Citizens Participation Act.1 In one issue,
appellants argue the trial court erred by failing to dismiss appellees’ counterclaims.
1
Because the counterclaims at issue here were filed on May 11, 2021, the 2019 TCPA amendments,
which became effective September 1, 2019, apply in this case. See Act of May 17, 2019, 86th Leg., R.S.,
ch. 378, 2019 Tex. Sess. Law Serv. 684 (codified at TEX. CIV. PRAC. & REM. CODE §§ 27.001, .003, .005–
.007, .0075, .009–.010).
Because we conclude some of appellees’ counterclaims are based on or in response
to appellants’ exercise of the right to petition, we reverse in part the denial of
appellants’ motion to dismiss and remand to the trial court. We otherwise affirm.
I. Background
Appellants LaCore and Link filed their first amended petition and application
for a temporary restraining order and for temporary and permanent injunctive relief
on March 16, 2021. In their petition, appellants alleged appellee Michael Smith
became the CEO of appellant Link, an affiliate of appellant LaCore, and Smith
stayed for three years. Upon his departure from Link, Smith signed a separation
agreement that prohibited him from using or disclosing Link’s confidential
information, trade secrets, and other proprietary information without Link’s written
permission. Smith also was barred, for four months, from being employed by,
consulting with, or having any interest in, any ownership interest in, or any activity
involving customized nutrition or specialty blending of nutritional products. The
agreement also prohibited Smith from soliciting or entertaining inquiries from
Link’s vendors or suppliers for twenty-four months.
Appellants alleged Smith began competing against Link shortly after his
departure. Two weeks after executing the Smith release agreement, he reinstated the
corporate status of appellee Virtual Formula, LLC (Virtual). Smith was the co-
founder and president of Virtual, and his wife served as CEO. Virtual held itself out
as a firm in “the field of individualized nutritional supplements and skin care.”
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Appellants alleged that, by February 2021, Virtual had in place over a dozen items
of intellectual property and an executive team, an agreement with a lab processor
and data analytics company, an agreement with a manufacturer, five DNA reports,
software development, a capacity to process DNA, initial individualized formulas,
pre-sales “across multiple channels,” and “strategic sales and supplier partnership
conversations.”
Appellants alleged appellee Michael Kearl was the former chief technology
officer for appellant LaCore, where he learned the “science and technology behind
individualized supplements.” On July 14, 2020, Kearl’s employment was
terminated, and he executed a separation agreement, which prohibited him from
directly or indirectly using or disclosing LaCore’s confidential information, trade
secrets, and other proprietary information without LaCore’s written permission.
LaCore never gave Kearl such permission. Appellee Claire Angles was an
accounting clerk at LaCore, where she executed an agreement to not disclose to third
parties any of LaCore’s trade secrets or confidential information without LaCore’s
written consent. Angles was also Kearl’s “live-in girlfriend.” While Angles was
on administrative leave, Angles was informed on February 18, 2021 she was being
terminated, but would continue to receive salary and benefits for ninety days.
Appellants alleged LaCore made Angles’ termination effective on March 9 after
discovering an incident of intellectual property theft described below. Appellants
alleged LaCore served demand letters on Virtual, Smith, and Kearl on March 4,
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2021, “in connection with their (mis)use of LaCore, Link, and their affiliates’
confidential information for the purposes of competing with LaCore, Link, and their
affiliates.”
The next day, LaCore discovered Angles, who was still receiving salary, had
reset her LastPass password and “had begun copying and/or transferring LaCore’s
trade secrets and/or confidential information from LaCore’s data servers and online
data storage to Angles’ personal Gmail account.” Angles used the LastPass account
to gain “the passwords necessary to freely access LaCore’s confidential and trade
secret information including but not limited to financials, bank accounts, customer
and vendor information, and personal bank account information and emails for the
vast network of independent distributors that are paid by LaCore owned or supported
MLM companies.” Angles did this, appellants alleged, to disclose the confidential
information to Kearl and Virtual, to give them “an economic advantage to compete
with LaCore and its affiliates,” and “to interfere with LaCore’s customers and/or
vendors in an attempt to solicit those customers and/or vendors away from
conducting business with LaCore and its affiliates.”
Appellants alleged Angles then refused to meet with LaCore management to
discuss the transfer of intellectual property to Angles’ personal Gmail account.
LaCore sought and obtained a temporary restraining order enjoining Angles from
“further harming LaCore” and ordering her to return the stolen information.
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LaCore sued Smith, Kearl, and Angles for breach of contract for violating
their separation agreements and for breach of fiduciary duty. It sued Virtual, Smith,
Kearl, and Angles for violations of the Texas Uniform Trade Secrets Act. LaCore
also applied for a temporary restraining order, and temporary and permanent
injunctive relief, to restrain appellees from disclosing or using LaCore’s confidential
information; accessing, transferring, downloading, or using LaCore’s confidential
information; deleting, removing, or modifying any data on LaCore’s computers,
databases, or servers; or taking any action that would impair the value of LaCore’s
assets, intellectual property, or confidential information.
On May 11, 2021, appellees generally denied appellants’ claims, asserted
several affirmative defenses, and alleged counterclaims against appellants. In direct
contrast to appellants, they claimed Kearl and Smith never disclosed any confidential
or proprietary information of LaCore or Link. Appellees alleged that Viome—a
possible investor in Smith’s startup—reached out to Smith, and that Smith was
unaware Viome was also a LaCore customer. When Smith learned Viome had a
connection to LaCore, he told Viome he could not do business with an employee,
vendor, or supplier of Link. Viome indicated it was not an employee, vendor, or
supplier of Link, and Viome “continued communicating with Smith with the desire
that they form a partnership and eventually build a facility and process.” Smith told
Viome that Virtual was fundraising, and Viome requested a confidential information
memorandum (“IM”)—the formal fundraising document Virtual generated for
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potential investors—which Smith sent to the CEO of Viome. Smith attended a
business meeting at Viome “to discuss the company’s future,” where he ran into
LaCore’s owner, Terry LaCore.
Afterwards, appellees alleged Terry texted Smith: “In light of the meeting
legal is wanted [sic] to gear up to start sending you letters and filing in the courts for
breach of your separation agreements. Would be nice if you and I could try to figure
this out before all that time, money, and headaches happen for both of us.” The two
spoke on the phone, and Terry told Smith he had invested over one million dollars
in Viome inventory and had almost $750,000 in inventory remaining, and that he
went to the meeting to possibly invest in Viome. Smith told Terry that he was
unaware of that and that he would have “refused to negotiate with Viome” had he
been aware. Smith told Terry he did not want to compete with LaCore and that he
had an IM if he wanted a copy for purposes of settlement or compromise negotiations
and to demonstrate that Smith’s vision did not compete with LaCore. Terry
requested Smith provide him with the IM to see if they could “resolve their dispute”
“prior to any litigation being filed.” The IM was sent to Terry on February 23, 2021.
According to appellees, the IM stated, among other things, it was “prepared
on a confidential basis solely for the benefit of selected, qualified investors, and is
not to be copied, distributed, or disclosed to third-parties without the prior written
consent of [Virtual].” It stated that “[b]y accepting this information memorandum,
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the recipient acknowledges that this document is proprietary and confidential[.]”
Further, recipients agreed to the following:
Hold and treat this Information Memorandum in the strictest
confidence, and will not directly or indirectly disclose or permit anyone
else to disclose this Information Memorandum to any other person, firm
or entity, provided that recipient may disclose to its directors, executive
officers, employees, counsel or accountants such information as is
necessary for the proper evaluation of this Information Memorandum
if such persons are informed by recipient of the confidential nature of
this Information Memorandum and agree to be bound by the terms
contained herein.
Smith and Terry discussed several other topics, including why Smith was fired by
Link, why Link refused to reimburse Smith for expenses Smith incurred during
employment, and Viome. The call was “cordial and non-threatening.” Smith and
Terry “continued to communicate on friendly terms” until March 2021. On March
10, 2021, a Viome representative e-mailed Smith, asking him to demonstrate that his
contract allowed them to do business together. Smith asked Viome to not contact
him or Virtual again. According to Smith, “Viome and [Virtual] never entered into
any contractual relationship, either written or verbal, and the parties have had no
discussion since.”
Appellees alleged in their counterclaims that appellants violated the
confidentiality agreement “contained in the IM by disclosing the contents of the IM
to the general public by filing the petition,” which allegedly contained “the contents
of the IM.” They alleged five paragraphs of the amended petition “are near word-
for-word copies” or quotations of statements in the IM. Appellees alleged appellants
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did not receive prior written consent to copy, distribute, or disclose the IM’s
contents.
Appellees further alleged Angles, in January 2021, began having problems
with her work laptop. The laptop’s display cracked, making it impossible to use.
The director of IT helped Angles upload particular items from the laptop to a cloud
drive so she could work from another computer. Angles “understood LaCore was
aware of this upload” and approved it.
Appellees alleged that, on January 26, 2021, LaCore’s general counsel, Jenifer
Grace, informed Angles she needed to end her romantic relationship with appellee
Kearl, the former chief technology officer of LaCore. According to Angles, Grace
told her to move out of her shared home with Kearl “as it would, according to Grace,
more than likely ‘go into foreclosure’” because he could not afford the house on his
own.
Angles was placed on temporary administrative leave from LaCore on the
same day. She believed the reason for the leave was her relationship with Kearl.
Angles was told on February 18, 2021, that she was being terminated and would
receive salary and benefits for ninety days. She was told she was terminated because
she was no longer a good fit for LaCore.
Appellees further alleged in their counterclaims that, “[s]ince before February
26, 2021, Angles has not accessed, downloaded, or copied any LaCore-related
material to which Angles had access while she was employed by LaCore.” Angles
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believed her access to e-mail and work files was removed by February 2, 2021. On
March 5, 2021, Angles accessed her LastPass account, which was connected to her
LaCore e-mail address, to recover a password for her bank account to pay her
mortgage. Angles did not believe any of the passwords stored in her LastPass
“vault” were functional at that time. She did not “use any LaCore-related passwords
or credentials to access any documents or information belonging or related to
LaCore”; instead, she exported to her personal computer only the list of her personal
passwords. Angles was not employed by, did not work with, and had no business
dealings with Smith, Kearl, or Virtual, nor did she ever disclose any confidential or
proprietary information to any third parties, including Kearl, Smith, and Virtual.
Though Angles was in a romantic relationship with Kearl and owns a home with
him, she was not privy to any information regarding Kearl’s business dealings with
Smith or Virtual. Appellees alleged Angles could not meet on March 5 because she
had a sick child at home. When she informed LaCore about this circumstance, she
heard nothing further. At no point did anyone at LaCore “attempt to talk to Angles
about an[] alleged ‘data breach’ or any of the allegations made in the petition.”
Appellees also alleged that appellants published defamatory statements in
their petition. They alleged the petition’s statement that Smith left Link to compete
was false. Smith, instead, was replaced as CEO and then fired from Link. After he
failed to secure any other opportunities, he decided to start his own company.
Appellees allege the petition’s statement that Smith reinstated Virtual to compete
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with appellants was false. Instead, he did so to collect commissions from Uforia
Science, an affiliate of LaCore, which he was owed “under the [Virtual] name.”
Grace, LaCore’s general counsel, was “aware of this and understood it was for
commissions and not to compete . . . .” Appellees alleged the petition’s statement
that Angles copied or transferred LaCore’s trade secrets or confidential information
from LaCore’s servers to Angles’ Gmail account was false. They also alleged the
petition’s statement that Angles gained the passwords necessary to freely access
LaCore’s confidential and trade secret information by improperly accessing the
LastPass account was false, and the petition’s statement that Angles accessed
LaCore’s accounts to disclose confidential information to third parties to give them
an advantage was false. Appellees alleged Virtual had not received any money in
revenue from selling DNA custom supplements except for the above-mentioned
commission received from Uforia. Appellees alleged the petition’s statement that
Angles copied or transferred LaCore’s confidential information to interfere with
LaCore’s customers or vendors to solicit them away from LaCore and its affiliates
was false; Angles never contacted any of LaCore’s or its affiliates’ customers or
vendors. Appellees alleged the petition’s statement that Angles refused to meet after
LaCore learned of the data breach was false because LaCore did not request a
meeting to discuss any alleged data breach. Appellees alleged the petition’s
statement that Smith, Kearl, and Virtual used and disclosed appellants’ confidential
information for appellees’ personal and business enrichment was false; appellees
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had not received, disclosed, or used any such confidential information from Angles
or anyone else.
Based on the above, appellees brought counterclaims for business
disparagement, defamation, retaliation, unlawful termination, abuse of process, anti-
trust violations, breach of contract, fraud, TUTSA violations, unfair competition,
tortious interference with contract, tortious interference with business relations, and
several declaratory judgments. Appellees also sought a temporary and permanent
injunction.
In appellees’ business disparagement claim, they asserted “[appellants], by
their petition, have published false and disparaging information about Smith, Kearl,
and [Virtual].” Regarding defamation, they asserted appellants “have published
false statements of facts to third parties with the requisite level of fault.” Third, in
their retaliation claim, appellees asserted, “Angles engaged in a protected activity
while still employed at LaCore,” which took adverse action against Angles based on
that protected activity. In appellees’ unlawful termination claim, appellees asserted
LaCore unlawfully terminated Angles from her employment with LaCore based on
her sex and in retaliation for protected activities. Appellees alleged in their abuse of
process action that appellants “made an illegal, improper, or perverted use of the
process which was a use neither warranted nor authorized by the process.” For their
anti-trust violations claim, appellees asserted appellants violated section 15.05(a) of
the business and commerce code because they “engaged in a combination or
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conspiracy in restraint of trade or commerce which is unlawful.” Further, appellees
alleged appellants violated section “15.05(b) because they have monopolized,
attempted to monopolize, or conspired to monopolize any part of trade or
commerce.” In their breach of contract claim, appellees asserted Virtual and LaCore
“entered into a valid agreement both pertaining to and consisting of the Confidential
Information Memorandum,” and LaCore breached that agreement by “disclosing the
contents of the confidential agreement.” Appellees asserted in their fraud claim that
LaCore knowingly or recklessly made a material representation to Smith and Virtual
that was false to induce them to act upon the representation, Smith and Virtual relied
on the representation and were injured as a result. In their TUTSA violations claim,
appellees asserted the IM was a trade secret of Virtual that appellants obtained
through “improper means and improperly disclosed to third-parties.” In their unfair
competition claim, appellees asserted appellants “unfairly appropriated and used
Smith and [Virtual’s] confidential information memorandum,” which was “a unique
pecuniary interest created by [appellees] through the expenditure of labor, time, skill,
and money.” In their first tortious interference with contract claim, appellees
asserted Virtual had contracts with third parties that were willfully and intentionally
interfered with by appellants. In their tortious interference with business relations
claim, Virtual asserted it had “prospective contractual or business relations with third
parties,” and appellants engaged in conduct that was either “independently tortious
or unlawful which interfered with VF’s prospective contractual and business
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relations.” In Kearl’s declaratory judgment action against LaCore, Kearl sought a
declaration that (a) his separation agreement with LaCore does not prevent him from
working for a competitor of LaCore, (b) his separation agreement with LaCore does
not prevent him from working in the DNA-based custom nutrition supplement
industry, and (c) he is permitted to work for a DNA-based custom nutrition
supplement company as long as he is not disclosing or using LaCore confidential
information. In Smith’s declaratory judgment action against Link, Smith sought a
declaration that (a) his separation agreement with Link does not prevent him from
working for a competitor of Link after a date certain, (b) his separation agreement
with Link does not prevent him from working in the DNA-based custom nutrition
supplement industry, and (c) he is permitted to work for a DNA-based custom
nutrition supplement company as long as he is not disclosing or using Link’s
confidential information. Finally, Virtual sought a declaration that particular items
do not constitute trade secrets owned or licensed by Link or LaCore and therefore
such items cannot be the basis for a trade secret misappropriation claim against
Virtual.
On June 14, 2021, appellants filed a TCPA motion to dismiss appellees’
counterclaims. They sought dismissal of appellees’ counterclaims, arguing they
were based on or in response to appellants’ “protected communications and actions”
in the lawsuit. They sought the dismissal of appellees’ counterclaims for
defamation, business disparagement, breach of contract, abuse of process, TUTSA
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violations, unfair competition, anti-trust violations, and tortious interference with
existing and potential business, as well as their counterclaims for declaratory relief,
and appellee Angles’ counterclaims for retaliation and unlawful termination.
Appellants did not seek dismissal of the fraud counterclaim. Appellants’ motion
was denied by operation of law. See TEX. CIV. PRAC. & REM. CODE § 27.008(a).
II. Discussion
“The [TCPA] protects citizens who petition or speak on matters of public
concern from retaliatory lawsuits that seek to intimidate or silence them.” In re
Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (citing TEX. CIV. PRAC. & REM. CODE §
27.001–.011) (footnote omitted). Its purpose “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 § 27.002.
Under the TCPA, a party may file a motion to dismiss a legal action “based
on” or “in response to a party’s exercise of the right to free speech, right to petition,
or right of association[.]” Id. § 27.003(a). A three-step decisional process follows.
First, the trial court must dismiss the legal action “if the moving party demonstrates
that the legal action is based on or is in response to: (1) the party’s exercise of: (A)
the right of free speech; (B) the right to petition; or (C) the right of association; or
(2) the act of a party described by Section 27.010(b).” Id. § 27.005(c).
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Second, the court “may not dismiss a legal action under this section if the
party bringing the legal action establishes by clear and specific evidence a prima
facie case for each essential element of the claim in question.” Id. § 27.005(c). This
prima facie standard requires the nonmovant to bring forth “only the minimum
quantum of evidence necessary to support a rational inference that the allegation of
fact is true.” In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004)
(internal quotation marks omitted). Prima facie evidence is evidence that will suffice
as proof of a fact in issue; “[i]n other words, a prima facie case is one that will entitle
a party to recover if no evidence to the contrary is offered by the opposite party.”
Serafine v. Blunt, 466 S.W.3d 352, 358 (Tex. App.—Austin 2015, no pet.).
Finally, the court must dismiss the legal action if the movant “establishes an
affirmative defense or other grounds on which the moving party is entitled to
judgment as a matter of law.” TEX. CIV. PRAC. & REM. CODE § 27.005(d).
“Legal action” under the TCPA “means a lawsuit, cause of action, petition,
complaint, cross-claim, or counterclaim or any other judicial pleading or filing that
requests legal, declaratory, or equitable relief.” Id. § 27.001(6). “Exercise of the
right to petition” means, among other things, a communication in or pertaining to a
judicial proceeding. Id. § 27.001(4). “‘Communication’ includes the making or
submitting of a statement or document in any form or medium, including oral, visual,
written, audiovisual, or electronic.” Id. § 27.001(1). Judicial proceeding means an
actual, pending judicial proceeding. Levatino v. Apple Tree Cafe Touring, Inc., 486
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S.W.3d 724, 728 (Tex. App.—Dallas 2016, pet. denied). A communication
“pertaining to” a judicial proceeding does not include anticipated or potential future
judicial proceedings. Id. “To trigger the TCPA’s protection, the ‘legal action’ must
be factually predicated on the alleged conduct that falls within the scope of the
TCPA’s definition of the exercise of the right to petition.” Sorkin v. P.T. Atlas Mfg.,
L.L.C., No. 05-21-00657-CV, 2022 WL 780444, at *3 (Tex. App.—Dallas Mar. 15,
2022, pet. denied) (mem. op.). Exercise of the right of free speech means “a
communication made in connection with a matter of public concern.” TEX. CIV.
PRAC. & REM. CODE § 27.001(3). Matters of public concern include statements or
activities regarding “a matter of political, social, or other interest to the
community[,]” or “a subject of concern to the public.” Id. § 27.001(7). But “[a]
private communication made in connection with a business dispute is not a matter
of public concern under the TCPA.” Erdner v. Highland Park Emergency Ctr., LLC,
580 S.W.3d 269, 276 (Tex. App.—Dallas 2019, pet. denied).
When the text of the TCPA dictates the outcome of a case, we review the trial
court’s ruling de novo. Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591
S.W.3d 127, 132 (Tex. 2019). In our review, we consider “the pleadings, evidence
a court could consider under Rule 166a, Texas Rules of Civil Procedure, and
supporting and opposing affidavits stating the facts on which the liability or defense
is based.” TEX. CIV. PRAC. & REM. CODE § 27.006(a); Dyer v. Medoc Health
Services, LLC, 573 S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet. denied).
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In construing the TCPA, we must determine and give effect to the
Legislature’s intent. See City of San Antonio v. City of Boerne, 111 S.W.3d 22, 25
(Tex. 2003). The best guide to what lawmakers intended is the enacted language of
a statute, “which necessarily includes any enacted statements of policy or purpose.”
Youngkin v. Hines, 546 S.W.3d 675, 680 (Tex. 2018). Moreover, we determine
legislative intent from considering an act as a whole rather than its parts in isolation.
City of San Antonio, 111 S.W.3d at 25. We construe the statute’s words “according
to their plain and common meaning, unless a contrary intention is apparent from the
context, or unless such a construction leads to absurd results.” City of Rockwall v.
Hughes, 246 S.W.3d 621, 625–26 (Tex. 2008) (citations omitted). We “may not
judicially amend a statute by adding words that are not contained in the language of
the statute.” Lippincott v. Whisenhunt, 462 S.W.3d 507, 508 (Tex. 2015).
Exemptions waived
Appellees argue the “commercial speech” exemption under section
27.010(a)(2) applies to its counterclaims, and alternatively, they argue the
“employee-employer” exemption under section 27.010(a)(5) applies. Appellants
respond, in the first place, that appellees failed to raise these arguments in the trial
court and thus failed to preserve them for appeal. We agree with appellants.
The non-movant bears the burden of proving a statutory exemption applies to
its legal action. Kirkstall Rd. Enterprises, Inc. v. Jones, 523 S.W.3d 251, 253 (Tex.
App.—Dallas 2017, no pet.). To preserve a complaint for appellate review, the
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record must show that a party made the complaint to the trial court by a timely
request, objection, or motion that stated the grounds for the ruling that the
complaining party sought from the trial court with sufficient specificity to make the
trial court aware of the complaint. TEX. R. APP. P. 33.1. Accordingly, the non-
movant waives a contention on appeal that one of the statutory exemptions under
section 27.010 applies if the non-movant failed to raise the contention in the trial
court. See Baumgart v. Archer, 581 S.W.3d 819, 826 n.4 (Tex. App.—Houston [1st
Dist.] 2019, pet. denied); Elite Auto Body LLC v. Autocraft Bodywerks, Inc., 520
S.W.3d 191, 206 n.75 (Tex. App.—Austin 2017, pet. dism’d).
Appellees did not raise in the trial court their two arguments relating to the
commercial speech and employee-employer exemptions. Consequently, this issue
is not preserved for our review. See TEX. R. APP. P. 33.1.
Business disparagement and defamation
Step one. Appellants argue that, on their face, appellees’ business
disparagement and defamation counterclaims are based on or in response to
communications made by appellants in a judicial proceeding—specifically,
statements made in their petition. As described above, appellee’s business
disparagement counterclaim alleged appellants, “by their petition, have published
false and disparaging information about Smith, Kearl, and [Virtual].” Under their
defamation counterclaim, appellees stated more generally that appellants “have
published false statements of fact to third parties with the requisite level of fault.”
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Elsewhere in in appellees’ counterclaims, however, appellants described the
allegedly defamatory statements, stating, “Several of the material statements
contained in the petition are false and defamatory and cannot be proven by any
competent and reliable evidence.” Appellees then discussed several statements in
the petition, explaining why they were false. We agree with appellants that, on their
face, these two counterclaims are based on appellants’ petition, which is a
communication made in a judicial proceeding. We conclude appellants have
demonstrated these counterclaims are based on or in response to appellants’ exercise
of their right to petition. See TEX. CIV. PRAC. & REM. CODE § 27.005(b).
Step two. We now consider whether appellees have established by clear and
specific evidence a prima facie case for each element of their business disparagement
and defamation claims. To prevail on a business disparagement claim, a plaintiff
must establish that (1) the defendant published false and disparaging information
about it, (2) with malice, (3) without privilege, (4) that led to special damages to the
plaintiff. Choctaw Constr. Servs. LLC v. Rail-Life R.R. Servs., LLC, 617 S.W.3d
143, 152 (Tex. App.—Houston [1st Dist.] 2020, no pet.). To prevail on a defamation
cause of action, the plaintiff must prove the defendant (1) published a false statement
about the plaintiff (2) that was defamatory (3) while acting with either actual malice,
if the plaintiff was a public official or public figure, or negligence, if the plaintiff
was a private individual, regarding the truth of the statement. Williams v. City of
Dallas, 53 S.W.3d 780, 789 (Tex. App.—Dallas 2001, no pet.). A plaintiff must
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further prove specific damages unless the offending publication is defamatory per
se. In re Lipsky, 460 S.W.3d 579, 596 (Tex. 2015). “Defamation per se refers to
statements that are so obviously harmful that general damages, such as mental
anguish and loss of reputation, are presumed.” Id. Remarks that adversely reflect
on a person’s fitness to conduct his or her business or trade are also deemed
defamatory per se. Id. Here, we do not think the statements Smith alleged can be
implied—that Smith’s separation agreement prevented him from working with
Viome—were defamatory per se. Id. The implied statements were neither
“obviously harmful” nor related to Smith’s “fitness to conduct his business.” Id.Accordingly, appellees were required to prove damages not just for their business
disparagement claim but also their defamation claim.
Appellees point to Smith’s affidavit submitted in response to appellants’
TCPA motion to dismiss as evidence for these two claims. Smith stated Virtual had
not received or solicited any money from selling DNA-custom supplements and he
did not begin fundraising for Virtual until his non-compete obligations under his
separation agreement had been fulfilled. Regardless, Smith stated Link did not sell
products to the public, and that Virtual and Link therefore could not be in the “same
marketing space.” Smith stated he was contacted by Viome on October 19, 2020,
and he notified it he was “still bound by non-compete provisions of the agreement
with Link”—communications ceased. Smith contacted Viome in January 2021,
looking for referrals. He learned Viome “wanted to expand and end the relationship
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between Viome and LaCore.” Before this time, Smith was unaware Viome had a
relationship with LaCore or Link. Smith told Viome he could not do business with
any entity that was an employee, vendor, or supplier of Link. Viome told Smith it
was not an employee, vendor, or supplier of Link, though it confirmed it did business
with LaCore. Viome wished to form a partnership with Virtual or Smith. Smith
declined employment and stock options with Viome, but he informed Viome that
Virtual was fundraising and provided it with Virtual’s information memorandum. A
few days later, Smith received a text message from Terry—LaCore’s owner—stating
that, after meeting with Viome, LaCore’s legal team wanted to go after Smith for
breaching his separation agreement but Terry wanted to “figure this out before all
that.” Terry and Smith then had a conversation about Viome, during which Smith
learned about Terry’s investments with Viome. Smith provided Terry with the
information memorandum to try to show him he did not want to compete with
LaCore directly. Smith explained to Terry the memorandum was confidential, and
Terry agreed not to share it with anyone else. Smith received an email on March 10,
2021, from Viome asking him to prove that his contract allowed Smith and Viome
to do business together. Smith alleged the email “implie[d] that he spoke to Terry
and that Terry told him [Smith] was prohibited from doing business with Viome,
which is false.” Smith requested Viome never to contact Virtual or Smith again.
Smith alleged that, as a result of Terry or LaCore “falsely stating to third parties,
including Viome, that [he] could not do business in the DNA-based nutrition
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supplement industry, Viome and [Virtual] never entered into any contractual
relationship . . . and the parties have had no discussion since.” Smith stated that
Terry’s communications with Viome ultimately resulted in Virtual losing a
$1,250,000 contract. Smith also alleged “disparagement from LaCore’s group of
contacts” included comments to employees, vendors, suppliers, and other LaCore
entities that Smith or Virtual used proprietary information to build Virtual, while
“poaching Uforia customers”—both of which Smith stated are false.
We conclude appellees failed to establish by clear and specific evidence a
prima facie case for each element of their business disparagement and defamation
claims. Specifically, they failed to provide clear and specific evidence that
appellants made false statements about Smith or Virtual and that appellees were
damaged as a result. First, Smith’s affidavit was conclusory and speculative
regarding any defamatory statements made by Terry or LaCore. The best Smith
offers is his suggestion that Viome’s email, asking him to demonstrate he could work
with Viome under his separation agreement, “implie[d] that [Viome] spoke to Terry
and that Terry” told Viome that Smith could not work with them. This fails to meet
the “clear and specific evidence” standard required by the TCPA.2 Otherwise,
Smith’s affidavit assumed LaCore or Terry made false statements, but failed to
provide clear and specific evidence that they did so. Second, appellees failed to
2
“‘Clear’ means ‘free from doubt,’ ‘sure,’ or ‘unambiguous.’” Serafine v. Blunt, 466 S.W.3d 352, 358
(Tex. App.—Austin 2015, no pet.).
–22–
provide clear and specific evidence they suffered damages as a result of any
defamatory statements. Smith’s conclusory statement that Terry’s “communication
with Viome ultimately resulted in [Virtual] losing a $1,250,000 contract” is
contradicted elsewhere in the affidavit. Smith stated that, after Viome asked him to
demonstrate he was free to work with them under his separation agreement, Smith
himself cut off further communications with Viome, telling Viome never to contact
him again. Thus, any loss of business seemingly resulted from Smith ending his
business relationship with Viome.
We conclude appellees failed to establish by clear and specific evidence that
appellants published false statements about Smith or Virtual or that Smith or Virtual
suffered any damages as a result. Accordingly, we conclude the trial court erred by
failing to dismiss appellees’ business disparagement and defamation claims.
Breach of contract, TUTSA violation,
and unfair competition
Step one. In its breach of contract counterclaim against LaCore, appellees
alleged Virtual and LaCore “entered into a valid agreement both pertaining to and
consisting of the confidential information memorandum.” They alleged LaCore
breached the agreement “by disclosing the contents of the confidential agreement.”
Appellees asserted in their TUTSA violations counterclaim that the information
memorandum constituted Virtual’s trade secret and appellants “improperly
disclosed [it] to third-parties.” In their unfair competition counterclaim, appellees
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alleged appellants “unfairly appropriated and used Smith and [Virtual’s] confidential
information memorandum.”
Appellees primarily alleged disclosure of the information memorandum
through appellants’ petition, but they also point to evidence that appellants disclosed
the memorandum to its lawyer in this case, Carlisle Braun, and to its general counsel,
Jenifer Grace. Smith stated in his affidavit attached to appellees’ response to the
TCPA motion that Terry LaCore disclosed the contents of the memorandum to
Braun and Grace, who, he stated, “were not just attorneys for LaCore, but also other
third-party companies such as Uforia[.]” Smith stated that the “fact the Confidential
IM was disclosed to others, including Jenifer Grace, is evidenced by the affidavits
attached to Plaintiffs’ own pleadings . . . .” In Grace’s affidavit, attached to
appellants’ TCPA motion, she stated she received a copy of Virtual’s information
memorandum shortly after January 26, 2021.
As noted above, communications made regarding anticipated or potential
future judicial proceedings are not communications pertaining to judicial
proceedings under the TCPA. See Levatino, 486 S.W.3d at 728. Thus, LaCore’s
disclosure of the information memorandum to his lawyers before the suit was filed
was not a communication made in or pertaining to a judicial proceeding. See QTAT
BPO Sols., Inc. v. Lee & Murphy Law Firm, G.P., 524 S.W.3d 770, 777–78 (Tex.
App.—Houston [14th Dist.] 2017, pet. denied) (following Levatino and concluding
the appellant’s disclosure of confidential information to its lawyers prior to initiation
–24–
of litigation relating to the confidential information was not a communication made
in or pertaining to judicial proceeding). We conclude appellants have not established
the TCPA applies to these communications, and appellants’ motion to dismiss was
properly denied as to these communications.
However, appellants were undoubtedly exercising their right to petition by
making statements and allegations in their petition. Appellees’ counterclaims for
breach of contract, TUTSA violation, and unfair competition were, in part, based on
appellants’ petition insofar as appellees allege disclosure of the information
memorandum in the petition. Accordingly, we conclude appellants have
demonstrated these counterclaims—to the extent appellees seek to recover for
appellants’ statements in the petition—are based on appellants’ exercise of their
right to petition. See TEX. CIV. PRAC. & REM. CODE § 27.005(b); Rose v. Wash, No.
05-22-00289-CV, 2022 WL 17750750, at *3 (Tex. App.—Dallas Dec. 19, 2022, no
pet. h.) (mem. op.) (concluding a legal action was only partly based on or in response
to the movant’s exercise of the right to petition).
Step two. To prevail on a breach of contract claim, a plaintiff must establish
the following elements: (1) a valid contract existed between plaintiff and defendant;
(2) plaintiff tendered performance or was excused from doing so; (3) defendant
breached the terms of the contract; and (4) plaintiff sustained damages as a result.
Atrium Med. Ctr., LP v. Houston Red C LLC, 546 S.W.3d 305, 311 (Tex. App.—
Houston [14th Dist.] 2017), aff’d, 595 S.W.3d 188 (Tex. 2020).
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The elements of the tort of unfair competition by misappropriation are (1) the
creation of plaintiff’s product—the trade secret information—through extensive
time, labor, skill, and money; (2) defendant’s use of that product in competition with
plaintiff, thereby gaining a special advantage in that competition because defendant
is burdened with little or none of the expense incurred by plaintiff; and
(3) commercial damage to plaintiff. Baylor Scott & White v. Project Rose MSO,
LLC, 633 S.W.3d 263, 287 (Tex. App.—Tyler 2021, pet. denied).
“The elements of a claim for violation of TUTSA are (1) ownership of a trade
secret; (2) misappropriation of the trade secret; and (3) an injury to the plaintiff or
unjust enrichment to the defendant.” Morrison v. Profanchik, No. 05-17-01281-CV,
2019 WL 3798182, at *5 (Tex. App.—Dallas Aug. 13, 2019, no pet.) (mem. op.).
Each of these claims requires proof of damages suffered by the plaintiff, or in
the case of the TUTSA violation claim, “an injury to the plaintiff.” Appellees argue
Smith’s statement that the disclosure of Virtual’s confidential information “reduced
the value [of] such information” and that appellees have further suffered “because
of the attorney’s fees that have been incurred” is evidence of damages. We disagree.
Smith’s statement that any disclosure of the memorandum reduced the value of the
information is conclusory and does not meet the clear and specific standard required
by the TCPA. Furthermore, generally attorney’s fees incurred in a lawsuit are not
“actual damages.” See Worldwide Asset Purchasing, L.L.C. v. Rent-A-Ctr. E., Inc.,
290 S.W.3d 554, 572 (Tex. App.—Dallas 2009, no pet.). We conclude the trial court
–26–
erred by failing to dismiss appellees’ breach of contract, TUTSA violation, and
unfair competition claims insofar as they were based on the petition.
Retaliation and unlawful termination
Step one. Appellants argue Angles’ retaliation and unlawful termination
claims against LaCore are “based on or brought in response to LaCore’s
communications in connection with a matter of public concern” in light of the
“circumstances surrounding Angles’ placement on administrative leave and
Defendants’ contention that her termination was part of such leave[.]” Appellants
argue these communications “related to potential sex crimes . . . .”
In its retaliation claim, appellees alleged that “Angles engaged in a protected
activity while still employed at LaCore,” LaCore took adverse employment action
based on that protected activity, and a causal connection existed between the
protected activity and the adverse employment action “because LaCore used the
protected activity as the basis for” terminating Angles. Appellees alleged in their
unlawful termination claim that Angles was unlawfully terminated from LaCore
based on her sex and in retaliation for protected activities. Reviewing the rest of
appellees’ counterclaims, the factual basis for these counterclaims appears to be
Angles’ belief that she was fired for her relationship with Kearl and for not ending
the relationship.
We reject appellants’ contention that these two counterclaims are based on or
in response to appellants’ exercise of its right to free speech on a matter of public
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concern. We fail to see how Angles’ allegation that she was fired for her relationship
with Kearl is based on or in response to appellants’ speech simply because appellants
made communications regarding Kearl’s conduct or character. Of course, appellants
contend Angles was placed on leave and terminated for reasons other than those
alleged by Angles, but we do not determine the nature of appellees’ counterclaims
by looking to appellants’ contentions. Therefore, we conclude appellants have failed
to demonstrate appellees’ retaliation and unlawful termination claims are subject to
the TCPA. See TEX. CIV. PRAC. & REM. CODE § 27.005(b).
Abuse of process
Step one. Appellants argue appellees’ abuse of process counterclaims are “by
their nature based on or brought in response to communications made in a judicial
proceeding.” Appellees alleged in their counterclaims that appellants “made an
illegal, improper, or perverted use of the process[,] which was [ ] neither warranted
nor authorized by the process.” The elements of an abuse of process claim include
(1) an illegal, improper, or perverted use of the process, neither
warranted nor authorized by the process, (2) an ulterior motive or
purpose in exercising such use, and (3) damages as a result of the illegal
act. To constitute an abuse of process, the process must have been used
to accomplish an end which is beyond the purview of the process and
which compels a party to do a collateral thing which he could not be
compelled to do. The critical aspect of this tort is the improper use of
the process after it has been issued. Stated another way, the original
issuance of process is justified, but the process itself is later used for a
purpose for which it was not intended. When the process is used for
the purpose for which it was intended, even though accomplished by an
ulterior motive, no abuse of process has occurred.
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Preston Gate, LP v. Bukaty, 248 S.W.3d 892, 897 (Tex. App.—Dallas 2008, no pet.).
“Process” in this context refers to the range of procedures incident to litigation. See
Warner Bros. Entm’t, Inc. v. Jones, 538 S.W.3d 781, 816 (Tex. App.—Austin 2017)
(finding no cases “where a valid abuse-of-process claim involved something other
than the commencement of the judicial process against the defendant”), aff’d, 611
S.W.3d 1 (Tex. 2020). Given the nature of abuse of process claims, in light of the
allegations in appellees’ counterclaims, we conclude appellants have demonstrated
appellees’ abuse of process counterclaim is based on or in response to appellants’
exercise of their right to petition. See TEX. CIV. PRAC. & REM. CODE § 27.005(b).
Step two. As stated above, the elements of abuse of process are (1) an illegal,
improper, or perverted use of the process, neither warranted nor authorized by the
process, (2) an ulterior motive or purpose in exercising such use, and (3) damages
as a result of the illegal act. Bukaty, 248 S.W.3d at 897. Appellees point to Smith’s
statement in his affidavit that the CEO of Uforia, Kevin Raulston, “stated that
LaCore’s and Uforia’s goal was to make it so that neither [Virtual] nor [Smith]
directly could poach Uforia’s customers for at least the next year.” While this
evidence arguably goes to the second element—“ulterior motive”—appellees have
not put forth any evidence of the first: that appellants made an “illegal, improper, or
perverted use of the process.” Accordingly, we conclude appellees failed to prove
by clear and specific evidence a prima facie case of its abuse of process
counterclaim, and the trial court erred in failing to dismiss the claim.
–29–
Anti-trust violations
Step one. Appellees alleged in their counterclaims in their anti-trust
violations claim that appellants “engaged in a combination or conspiracy in restraint
of trade or commerce which is unlawful” and “monopolized, attempted to
monopolize, or conspired to monopolize any part of trade or commerce.” Appellees
provide no other details in their counterclaims explaining the basis for this claim.
However, the only factual allegations that could plausibly underly these claims are
the allegations that LaCore used its lawsuit, including its application for injunctive
relief, to stop appellees from competing. Appellees argue this counterclaim is not
based on or in response to this lawsuit, “but upon the systematic effort by appellants
to prevent Smith, Kearl, and [Virtual] from engaging in” business or competing.
However, they point to nothing specific beyond the lawsuit as constituting this
systematic effort. Thus, considering the factual allegations made in appellees’
counterclaims, we conclude this claim, too, is based on appellants’ exercise of their
right to petition. See TEX. CIV. PRAC. & REM. CODE § 27.005(b).
Step two. To establish that a defendant contracted, combined, or conspired
in restraint of trade in violation of section 15.05(a), a plaintiff must show that the
alleged contract, combination, or conspiracy is unreasonable and has an adverse
effect on competition in the relevant market. Marlin v. Robertson, 307 S.W.3d 418,
427 (Tex. App.—San Antonio 2009, no pet.); TEX. BUS. & COM. CODE § 15.05(a).
Appellees were thus required to prove (1) a contract, combination, or conspiracy, (2)
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which is unreasonable, and (3) has an adverse effect on competition in the relevant
market. W. Mktg., Inc. v. AEG Petroleum, LLC, 616 S.W.3d 903, 915 (Tex. App.—
Amarillo 2021, pet. denied). For anticompetitive conduct to give rise to liability
under section 15.05(a) of the Texas Antitrust Act, the conduct must arise out of an
agreement, rather than from independent action. AMC Entm’t Holdings, Inc. v. iPic-
Gold Class Entm’t, LLC, 638 S.W.3d 198, 208–09 (Tex. 2022). Because antitrust
law “does not prohibit unreasonable restraints of trade as such—but only restraints
effected by a contract, combination, or conspiracy—it leaves untouched a single
firm’s anticompetitive conduct,” short of threatened monopolization. Id. at 209. To
prove an adverse effect on competition, the plaintiff must bring forth evidence of
“‘demonstrable economic effect,’ not just an inference of possible effect.” Coca-
Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671, 689 (Tex. 2006). “[O]nly those
restraints that actually have an adverse effect on competition in a market, as opposed
to merely hurting a competitor,” are condemned by anti-trust law. Regal Entm’t
Group v. iPic-Gold Class Entm’t, LLC, 507 S.W.3d 337, 348 (Tex. App.—Houston
[1st Dist.] 2016, no pet.).
Appellees argue Smith’s statements that the CEO of Uforia, a LaCore entity,
stated that LaCore wished to “tie up” appellees so they could not lure appellants’
customers away over the course of the next year support their claim for unlawful
restraint of trade. They also point to LaCore and Uforia’s litigation against Smith
and Virtual and Uforia’s trademark lawsuit against Smith and Virtual. Even
–31–
assuming this is evidence of an unreasonable combination, appellees failed to
produce evidence of an adverse effect in the market—an inference of possible effect
is not enough. See Harmar Bottling Co., 218 S.W.3d at 689. Accordingly, we
conclude appellees failed to provide clear and specific evidence establishing their
anti-trust claim, and the trial court therefore erred by failing to dismiss the claim.
Tortious interference
Step one. Under Virtual’s tortious interference counterclaims, appellees
alleged Virtual “had contracts with third parties” and “had prospective contractual
or business relations with third parties” that appellants interfered with. Here, again,
appellees fail to describe in their counterclaims the factual bases for these causes of
action. Appellants argue these counterclaims are based on their lawsuit and issuance
of injunctive relief against appellees, “as [appellees] contend these protected actions
have wrongfully interfered with [Virtual’s] business.” Considering the entirety of
appellees’ factual allegations, we agree. Appellees alleged appellants improperly
disclosed Virtual’s information memorandum through filing their petition, and that
the petition made two defamatory statements regarding Virtual: that it was
reconstituted to compete with LaCore and that Virtual used appellants’ confidential
information. We conclude appellees’ tortious interference counterclaims are in
response to appellants’ exercise of their right to petition. See TEX. CIV. PRAC. &
REM. CODE § 27.005(b).
–32–
Step two. Appellees allege both that appellants tortiously interfered with an
existing contract and tortiously interfered with a prospective contract. The elements
of tortious interference with an existing contract are: (1) an existing contract subject
to interference; (2) a willful and intentional act of interference with the contract; (3)
that proximately caused the plaintiff's injury; and (4) caused actual damages or loss.
Tex. Integrated Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 300
S.W.3d 348, 367 (Tex. App.—Dallas 2009, pet. denied). To prove a cause of action
for tortious interference with a prospective contract, a plaintiff must establish the
following elements: (1) a reasonable probability that the parties would have entered
into a business relationship; (2) an intentional, malicious intervention or an
independently tortious or unlawful act performed by the defendant with a conscious
desire to prevent the relationship from occurring or with knowledge that the
interference was certain or substantially likely to occur as a result of its conduct;
(3) a lack of privilege or justification for the defendant’s actions; and (4) actual harm
or damages suffered by the plaintiff as a result of the defendant’s interference, i.e.,
the defendant’s actions prevented the relationship from occurring. Id.Appellees argue Smith’s affidavit proves a prima facie case for these two
causes of action. However, Smith stated that Virtual and Viome “never entered into
any contractual relationship, either written or verbal . . . .” Thus, appellees cannot
make a case for tortious interference with an existing contract. Further, appellees’
tortious interference with a prospective contract claim suffers the same weakness as
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their business disparagement and defamation claims—whether appellees suffered
damages as a result of any tortious interference. Smith stated in his affidavit that he
himself cut off further communications with Viome after Viome asked him to
demonstrate he was free to work with them under his separation agreement. Given
this, we cannot conclude appellees have provided clear and specific evidence that
appellants’ actions prevented a business relationship between Viome and Virtual
from developing. The trial court erred by failing to dismiss these two claims.
Declaratory judgment claims
Step one. As described above, Kearl sought a declaration of his rights under
his separation agreement with LaCore, that his agreement did not prevent him from
working in the “DNA-based custom nutrition supplement industry,” and that he was
permitted to work for a company in that industry provided he was not disclosing or
using LaCore’s confidential information. Smith sought similar declaratory relief
against Link. He requested a declaration that his separation agreement did not
prevent him from working for one of Link’s competitors after a certain date, that it
did not prevent him from working in the industry, and that he could work for a
company in the industry provided he did not disclose or use Link’s confidential
information. Finally, Virtual sought a declaration against Link and LaCore that
certain items, including particular ideas, machines, and software, did not constitute
trade secrets owned by Link or LaCore and “therefore, [such items] may not be the
basis for a trade secret misappropriation claim against [Virtual].”
–34–
We conclude Kearl’s and Smith’s declaratory judgment actions are not based
on or in response to appellants’ lawsuit or communications in the judicial
proceeding. Their sought-after declarations are not factually predicated on any such
communications. Nor are these actions based on or in response to appellants’ right
of free speech on matters of public concern, as appellants also argue. See Creative
Oil & Gas, LLC, 591 S.W.3d at 137 (“[N]ot every communication related somehow
to one of the broad categories set out in section 27.001(7) always regards a matter
of public concern. A private contract dispute affecting only the fortunes of the
private parties involved is simply not a ‘matter of public concern’ under any tenable
understanding of those words.”); see also Erdner, 580 S.W.3d at 276. Instead, their
requested declarations involve their legal rights under their respective separation
agreements and their right to work in their industry. We conclude the TCPA does
not apply to these actions. See Choudhri v. Lee, No. 01-20-00098-CV, 2020 WL
4689204, at *3 (Tex. App.—Houston [1st Dist.] Aug. 13, 2020, pet. denied) (mem.
op.).
We similarly conclude appellants have failed to demonstrate that Virtual’s
declaratory judgment action against LaCore and Link is based on or in response to
appellants’ exercise of the right of free speech or the right to petition. As to the right
of free speech, appellants fail to point to what communications of theirs the
declaratory judgment claim was based on or in response to. Further, we do not think
whether something is a trade secret owned by LaCore is a “matter of public concern”
–35–
within the meaning of the TCPA. See Creative Oil & Gas, LLC, 591 S.W.3d at 137.
As to the right to petition, it is true that appellants brought a claim against all
appellees, including Virtual, for violations of the Texas Uniform Trade Secrets Act.
However, we cannot agree that Virtual’s declaratory judgment action was factually
predicated upon this claim simply because it sought a declaration regarding the same
or similar issues raised by appellants in their TUTSA claim. Cf. Riggs & Ray, P.C.
v. State Fair of Tex., No. 05-17-00973-CV, 2019 WL 4200009, at *5 (Tex. App.—
Dallas Sept. 5, 2019, pet. denied) (mem. op.) (concluding Riggs & Ray’s lawsuit
was not based on or in response to the State Fair’s exercise of its right to petition
even though Riggs & Ray filed a declaratory judgment action after the State Fair had
non-suited a declaratory action involving the same information). Virtual’s
declaratory relief claim is based upon the business dispute between the parties about
whether certain items are appellants’ trade secrets. Accordingly, we reject
appellants’ contentions regarding the three declaratory judgment actions.
Attorney’s fees
Finally, appellants argue they are entitled to attorney’s fees and sanctions
because appellees’ counterclaims are frivolous or solely intended for delay. Under
section 27.009(a), except as provided by section 27.009(c), if the court dismisses a
legal action under the TCPA, the court “(1) shall award to the moving party court
costs and reasonable attorney’s fees incurred in defending against the legal action”
and “(2) may award to the moving party sanctions against the party who brought the
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legal action as the court determines sufficient to deter the party who brought the
legal action from bringing similar actions described in this chapter.” TEX. CIV.
PRAC. & REM. CODE § 27.009(a). Under section 27.009(c), if the court “orders
dismissal of a compulsory counterclaim under this chapter, the court may award to
the moving party reasonable attorney’s fees incurred in defending against the
counterclaim if the court finds that the counterclaim is frivolous or solely intended
for delay.” Id. § 27.009(c).
Because appellants’ motion to dismiss was denied by operation of law, the
trial court did not reach the question of costs, fees, or sanctions. We remand for the
trial court to, if it so decides in its discretion, award appellants reasonable attorney’s
fees if the trial court finds that appellees’ compulsory counterclaims subject to
dismissal were frivolous or solely intended for delay. See id. § 27.009(c).3 Further,
we remand for the trial court to award appellants court costs, and if the trial court
determines them warranted in these circumstances, sanctions against appellees as
the court determines sufficient to deter appellees from bringing similar actions
described in chapter 27. See id. § 27.009(a).
III. Conclusion
We sustain appellants’ issue on appeal as to appellees’ business
disparagement, defamation, abuse of process, anti-trust violations, and tortious
3
Appellants contended in their TCPA motion to dismiss that attorney’s fees are mandatory. We reject
this contention and agree with appellees that, under section 27.009(c), the trial court has discretion in
awarding fees following dismissal of compulsory counterclaims. See id.
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interference claims, and appellees’ breach of contract, TUTSA, and unfair
competition claims to the extent they were based upon communications made in
appellants’ petition. We reverse the denial of appellants’ motion to dismiss as to
these claims. We remand to the trial court to dismiss these claims, and to address
court costs, attorney’s fees, and sanctions in accordance with this opinion. We
otherwise affirm the trial court’s denial as a matter of law of appellants’ TCPA
motion to dismiss.
/Ken Molberg/
KEN MOLBERG
JUSTICE
210798F.P05
–38–
S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
LACORE ENTERPRISES, LLC On Appeal from the 380th Judicial
AND LINK BIOSCIENCES, LLC, District Court, Collin County, Texas
Appellants Trial Court Cause No. 380-01127-
2021.
No. 05-21-00798-CV V. Opinion delivered by Justice
Molberg. Justices Pedersen, III and
CLAIRE ANGLES, MICHEAL Smith participating.
KEARL, MICHAEL SMITH, THE
VIRTUAL FORMULA, LLC,
Appellees
In accordance with this Court’s opinion of this date, the denial by operation
of law of appellants’ motion to dismiss is AFFIRMED in part and REVERSED in
part. We REVERSE that portion of the denial that denied appellants’ motion to
dismiss as to appellees’ business disparagement, defamation, abuse of process, anti-
trust violations, and tortious interference claims, and appellees’ breach of contract,
TUTSA, and unfair competition claims to the extent they were based upon
communications made in appellants’ petition. We REMAND this cause to the trial
court to dismiss these claims and for consideration of court costs, attorney’s fees,
and sanctions in accordance with this opinion. We otherwise AFFIRM the denial
by operation of law of appellants’ motion to dismiss.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered March 23, 2023.
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