Bruce Craig Tyler Craig And Tejas Vending, LP v. Tejas Promotions, LLC

Opinion

ACCEPTED 03-16-00611-CV 14405749 THIRD COURT OF APPEALS AUSTIN, TEXAS 12/21/2016 1:58:37 PM JEFFREY D. KYLE CLERK CAUSE NO. 03-16-00611-CV

FILED IN 3rd COURT OF APPEALS IN THE THIRD COURT OF APPEALS AUSTIN, TEXAS AUSTIN, TEXAS 12/21/2016 1:58:37 PM JEFFREY D. KYLE Clerk

BRUCE CRAIG, TYLER CRAIG AND TEJAS VENDING, LP Appellants v. TEJAS PROMOTIONS, LLC Appellee

On Appeal from the 261st Judicial District Court, Travis County, Texas Cause No. D-1-GN-16-001959

APPELLEE’S BRIEF

Matthew R. Beatty Texas State Bar No. 24001169 mbeatty@bbsfirm.com Michael L. Navarre Texas State Bar No. 00792711 mnavarre@bbsfirm.com Brittney K. Mollman Texas State Bar No. 24097302 bmollman@bbsfirm.com BEATTY BANGLE STRAMA, PC 400 West 15th Street, Suite 1450 Austin, Texas, 78701 (512) 879-5050 (512) 879-5040 (FAX)

ATTORNEYS FOR APPELLEE

ORAL ARGUMENT REQUESTED TABLE OF CONTENTS INDEX OF AUTHORITIES................................................................................. iii STATEMENT OF THE CASE ............................................................................. 1

ISSUES PRESENTED.......................................................................................... 2

STATEMENT OF FACTS ................................................................................... 3

SUMMARY OF THE ARGUMENT ................................................................... 9

ARGUMENT AND AUTHORITIES ................................................................... 10

I. The Trial Court Correctly Denied The Motion To Dismiss Because Appellants Failed To Carry Their Burden To Show That This Legal Action Is Based On, Relates To, Or Is In Response To Their Exercise Of The Right Of Association ....................................................... 10

A. It is Appellants’ burden to show, by a preponderance of the evidence, that the claims are based on, relate to or arise from the exercise of the right of association under the TCPA.................. 12

1. Contrary to Appellants’ view, the “right of association” is not all-encompassing .......................................................... 13 2. Appellants failed to introduce any evidence to meet their burden that the communication was in furtherance of a common interest .............................................................. 15

3. Appellants’ argument that the “internal communication” described in Tejas Promotions’ Petition meets its burden to show a common interest misrepresents the Petition and Texas case law ...................... 17

B. The Trial Court Correctly Denied The Motion To Dismiss Because Tejas Promotions Provided Clear And Specific Evidence Of Each Essential Element Of The Challenged Claims ............................................................................................... 21

i 1. Tejas Promotions provided clear and specific evidence of each essential element of its conspiracy claim .................. 22

2. Tejas Promotions provided clear and specific evidence of each essential element of its claim under the Uniform Declaratory Judgments Act ..................................... 24

II. The Trial Court Correctly Denied Appellants’ Motion To Dismiss Because Appellants Failed To Carry Their Burden To Establish Each Element Of A Valid Defense To Tejas’ Promotions Claims ............ 26

PRAYER FOR RELIEF ....................................................................................... 29

CERTIFICATE OF SERVICE ............................................................................. 30

CERTIFICATE OF COMPLIANCE .................................................................... 30 INDEX OF AUTHORITIES

Brooks v. Northglen Ass’n, 141 S.W.3d 158 (Tex. 2004) ...................................................................... 24

Cheniere Energy, Inc. v. Lotfi, 449 S.W.3d 210 (Tex. App. – Houston 2014) ……………11, 15, 16, 17, 18

Chon Tri v. J.T.T., 162 S.W.3d 552 (Tex. 2005) ...................................................................... 22

Combined Law Enforcement Associations of Texas v. Sheffield, 2014 Tex. App. LEXIS 1098, (Tex App. – Austin January 31, 2014, pet. denied) ............................................................... ….20

Culbertson v. Lykos, 790 F.3d 608 (5th Cir. 2015) ....................................................................... 17

Fawcett v. Grosu, 498 S.W.3d 650 (Tex. App.—Houston [14th Dist.] 2016, pet. filed)…27, 28

Herrera v. Stahl, 441 S.W.3d 739 (Tex. App. – San Antonio 2014) ..................................... 19

Hill v. Heritage, 964 S.W.2d 89 (Tex. App. – El Paso 1997, pet. denied)............................ 25

In re Lipsky, 460 S.W.3d 579 (Tex. 2015)…………………………………………..11, 21

Man Engines & Components, Inc. v. Shows, 434 S.W.3d 132 (Tex. 2014) ...................................................................... 27

MBM Fin. Corp. v. Woodlands, Oper. Co., 292 S.W.3d 660 (Tex.2009) ....................................................................... 26

Newspaper Holdings, Inc. v. Crazy Hotel Assisted Living, Ltd., 416 S.W.3d 71 (Tex. App.-Houston [1st Dist.] 2013, pet. denied)......... 13, 18

iii Serafine v. Blunt, 466 S.W.3d 352 (Tex. App.—Austin 2015, no pet.) .............................. 13, 18

Sierra Club v. Andrews County, 418 S.W.3d 711 (Tex. App. – El Paso 2013) rev’d on other grounds, 463 S.W.3d 867 (Tex. 2015)…………………………………………..25, 26

Texas Ass’n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440 (Tex. 1993) ...................................................................... 24

Texas Dep’t of Pub. Safety v. Moore, 985 S.W.2d 149 (Tex. App.—Austin 1998, no pet.) .................................. 24

STATUTES

TEX. CIV. PRAC. & REM. CODE § 27.001(2) ........................................................................................9, 14, 15, 16, 20 § 27.002 ................................................................................................................. 11 § 27.005 ................................................................................................................. 15 § 27.005(b) ............................................................................................................ 12 § 27.005(c) ........................................................................................................ 10, 21 § 27.005(d) ....................................................................................................... 10, 27 § 27.006(a)……………………………………………………………………12, 13 § 27.009(b) ............................................................................................................... 7 § 37.003(a) ............................................................................................................ 24 § 37.004(a) ............................................................................................................ 24

RULES TEX. R. CIV. P. Rule 166(a)(1) .......................................................................................................... 6 Rule 94 .................................................................................................................. 27

iv TEX. R. APP. P.

Rule 9.4(a)(i)(l) ..................................................................................................... 30

v STATEMENT OF THE CASE

Nature of the case: Tejas Promotions, LLC (“Tejas Promotions”) filed suit

against Bruce Craig, Tyler Craig and Tejas Vending, LP because they used

information protected by a non-disclosure agreement to steal Tejas Promotions’

customers. CR 2-13. Tejas Promotions’ claims include breach of contract,

misappropriation of trade secrets, and requests for declaratory relief. Id. In

response, Appellants filed a general denial, special exceptions, and a plea to the

jurisdiction. CR 17-24. Appellants did not assert any affirmative defenses. Id.

Course of Proceedings and Disposition: Appellants filed a Motion to

Dismiss the conspiracy claim (non-suited in the Amended Petition) and the requests

for declaratory relief pursuant to the Texas Citizens Participation Act (“Motion”).

CR 32-51. After hearing argument and considering the evidence, the trial court

denied Appellants’ Motion. CR 170; 179. The court also wrote in by hand that its

order was “[w]ithout prejudice to setting a hearing for the award of attorney’s fees”

to Tejas Promotions. CR 179.

On September 1, 2016, Appellants filed their Notice of Appeal less than

fifteen minutes after the court’s email stating that it was willing to “entertain

attorney’s fees” and asking whether the parties “would like to set a hearing on the

attorney’s fees issue.” CR 168-69; 195.

1 ISSUES PRESENTED 1. The trial court correctly denied Appellants’ Motion to Dismiss because Appellants failed to carry their burden to show that this legal action is based on, relates to, or is in response to their exercise of the right of association.

2. The trial court correctly denied Appellants’ Motion to Dismiss because Tejas Promotions established by clear and specific evidence a prima facie case of its conspiracy claim.

3. The trial court correctly denied Appellants’ Motion to Dismiss because Tejas Promotions established by clear and specific evidence a prima facie case of its claims under the Uniform Declaratory Judgments Act.

4. The trial court correctly denied Appellants’ Motion to Dismiss because Appellants failed to carry their burden to establish each essential element of a valid defense to Tejas Promotions’ claims.

2 STATEMENT OF FACTS

A. Factual Background

Appellant Bruce Craig Executed A NDA To Purchase Assets Owned by

Tejas Promotions: Tejas Promotions distributes sweepstakes promotional

software. CR 77. Tejas Promotions enters into licensing agreements with vendors

or owners of sweepstakes promotional software and then distributes or sub-licenses

these rights to its customers who operate the promotions. Id. Tejas Promotions

earns revenue by charging its customers a percentage of the net revenue. Id.

Tejas Promotions has developed an inventory of software available from

various vendors for distribution to its customers. Id. Tejas Promotions’ unique and

valuable business model is unknown to its competitors and is based on market

research, marketing techniques, the development of its software inventory, its

customer base, and its pricing strategies. CR 78. This information, along with the

names, addresses and identities of Tejas Promotions’ vendors and customers, is

extremely valuable and constitutes valuable trade secrets, which gives Tejas

Promotions a competitive advantage over others in the industry. CR 77-78.

In September 2015, Bruce Craig expressed an interest in purchasing the assets

of Tejas Promotions, including primarily its then-existing customer base. CR 78.

To facilitate Craig’s due diligence and potential purchase of Tejas Promotions, Craig

entered into a written non-disclosure agreement (“NDA”) with Tejas Promotions.

3 CR 78; 83-87. In entering into the NDA, Craig recognized the confidential and

valuable nature of its business assets. CR 78-79; 83-87. As Craig agreed, the

confidential and valuable information includes “[lists]” of [] information relating to,

suppliers and customers.” CR 79; 83.

Tejas Promotions Provided Craig With Its Valuable Information That

Was Protected Under The NDA: In reliance on the NDA, Tejas Promotions

provided Craig with its confidential trade secrets, including its vendors and software.

CR 79. Tejas Promotions also emailed Craig what was identified as Tejas

Promotions’ “asset list” that included the names, addresses and other information

regarding Tejas Promotions customers (“Asset List”). CR 79-80, 89-90. As

provided in the NDA, the Asset List is “Confidential” information and constitutes

some of Tejas Promotions’ valuable trade secrets. CR 83-87, 89-90.

After Tejas Promotions Decided Not To Sell To Craig, Craig Stole Its

Customers: After conducting due diligence, Craig offered to purchase Tejas

Promotions’ assets. CR 80. The purchase of assets centered on those assets that had

been disclosed to Craig – Tejas Promotions’ customer list. Id. Tejas Promotions

rejected Craig’s offer and decided not to sell its assets to Craig.

Subsequently, and in direct violation of the NDA, Craig gave the Asset List

to his son, Appellant Tyler Craig. CR 80. Thereafter, on or about October 12, 2015,

Craig filed a certificate of formation with the state of Texas establishing the very

4 similarly named Tejas Vending, LP. CR 80; 92-93. Tyler Craig then provided the

Asset List to Ms. Theresa Moebus, an employee of the newly created Tejas Vending

LP. CR 102-105. Tyler Craig instructed Ms. Moebus to “copy the contents of the

list and throw it away . . .” Id. He further told Moebus to target Tejas Promotions’

customers on the list. Id.

Craig and his son then contacted Tejas Promotions’ customers on the Asset

List. CR 80. They also sent an “Important Notice” to the customers that were on

the Asset List. CR 80-81; 95; 102-105; 109. Appellants told Tejas Promotions’

customers that a specified software vendor had “designated Tejas Vendors as your

replacement distributor, and we are ready, willing and able to put in new computers

and get you up and running . . .” Id. Appellants went on to say that “I must caution

you not to contact your existing distributor.” Id. (emphasis in original). They

further threatened Tejas Promotions’ customers by explaining that the vendor would

“turn off your games immediately” and that “your customers will be upset that

money on their accounts is gone” if they did not switch and become customers of

Tejas Vendors. Id. As a result, at least five of Tejas Promotions’ customers

terminated their business with Tejas Promotions and Tejas Promotions lost the

associated revenue from these customers. CR 77-81.

5 B. Procedural Background

After Tejas Promotions filed its Original Petition on May 6, 2016, Appellants

filed their answer, which included a General Denial, Special Exceptions, and a Plea

to the Jurisdiction. CR 4-13; 17-24. On June 29, 2016 Appellants filed their Motion

under Chapter 27 of the Civil Practice and Remedies Code, also known as the Texas

Citizens Participation Act (“TCPA”). CR 32-51. The Motion did not seek dismissal

of the entire lawsuit, only the conspiracy and declaratory judgment claims. Id.

Appellants claimed that their misappropriating and disseminating Tejas Promotions’

trade secrets were constitutionally protected activity under the First Amendment of

the United States Constitution. Id. Appellants did not submit any affidavits or other

documentary proof to support their claim. Id. Rather, they treated their Motion to

Dismiss under the TCPA as if it was a no-evidence motion for summary judgment

under Tex. R. Civ. P. 166a(i).

On August 2, 2016, Tejas Promotions filed its Amended Petition. CR 52-63.

The Amended Petition removed the conspiracy claim and re-characterized it under

the Texas Uniform Trade Secrets Act (“TUTSA”), as an additional claim of

“misappropriation” as the term is defined under the statute. The Amended Petition

also removed certain declarations and added new declarations under the Uniform

Declaratory Judgments Act (“UDJA”). Id. Amendments made and reflected in the

Amended Petition were Tejas Promotions’ efforts to, in good faith, address

6 Appellants’ Special Exceptions and Plea to the Jurisdiction. Appellants never set

their Special Exceptions for hearing.

On August 3, 2016, Tejas Promotions filed its Response to Appellants’

Motion to Dismiss and its Response to Appellants’ Plea to the Jurisdiction. CR 64-

114; 121-167. Unlike Appellants, Tejas Promotions included affidavits and other

documentary evidence in its Response. Id. On August 4, 2016, the Honorable Judge

Rhonda Hurley heard argument as to Appellants’ Motion to Dismiss and Plea to the

Jurisdiction. At the hearing, Tejas Promotions asked the Court to deny the Motion

and award attorney’s fees to Tejas Promotions because the Motion was both

frivolous or solely for the purpose of delay. Previously, Tejas Promotions had timely

requested such relief in its Response. CR 64-114.

On August 24, 2016, the Court advised the parties that the Motion was denied

and instructed counsel to “prepare an appropriate order, circulate to opposing

counsel for approval as to form and submit to the court for signature.” CR 170. On

September 1, 2016, without conferring with counsel as instructed by the trial court,

Appellants’ counsel emailed an order to the trial court stating that “we request the

court enter [it] today.” CR 180. Tejas Promotions’ promptly responded by pointing

out that Tex. Civ. Prac. & Code §27.009(b) provides the Court with discretion to

award fees to the non-movant if the court finds that the Motion was frivolous or for

the purpose of delay. CR 182.

7 Shortly thereafter, the trial court denied the Motion with the following

language:

Defendants’ Motion to Dismiss under Chapter 27, Civil Practices & Remedies Code, is DENIED. Without prejudice to setting a hearing for the award of attorney’s fees. CR 179. (underlined text in handwriting in original). Staff Attorney to the trial court

told the parties that the court “is willing to entertain attorney’s fees” and asked “if

you would like to set a hearing on the attorney’s fees issue.” CR 195. Tejas

Promotions attempted to resolve the attorney’s fee issue by stipulating to half of the

fees that Appellees had sought to recover. CR 202. Tejas Promotions informed the

court of its effort to resolve the amount of the fees “without the necessity of a

hearing.” CR 204. Appellants did not respond.

Instead, realizing that the court had necessarily determined that the Motion

was frivolous and/or for the sole purpose of delay, Appellants tried to pull a fast one.

Within minutes of receiving Tejas Promotions’ emails trying to resolve the amount

of attorney’s fees, Appellants filed their Notice of Appeal and Request for Findings

of Fact and Conclusions of Law. CR 168-169; 171-172. This was also less than

forty minutes after Appellants received the court’s email asking about a hearing on

attorney’s fees. Id.

Subsequently, Appellants’ counsel refused to agree to an amount of attorney’s

fees for their frivolous motion, arguing that the trial court did not have any authority

8 because of the automatic stay. CR 206. After Tejas Promotions requested a hearing,

Appellants filed an Emergency Motion to Stay Trial Proceedings pending the

outcome of this appeal. The Court granted Appellants’ motion, and thus, all

proceedings at the trial court level have been stayed pending the outcome of this

appeal. CR 209-210. In its ruling, the Court noted that “we express no opinion at

this juncture as to whether or not Tejas Promotions may continue to pursue its claim

for costs and attorney’s fees … – i.e., pick up where it left off when the stay took

effect – when and in the event we ultimately affirm the district court’s order denying

appellants’ dismissal motion.”

SUMMARY OF THE ARGUMENT

The trial court correctly denied Appellants’ Motion to Dismiss Tejas

Promotions’ conspiracy claims and requests for declaratory relief under the TCPA.

Analysis under the TCPA is a three-step process. Here, Appellant’s Motion fails

under each of the three steps.

First, Appellants failed to meet their burden to establish, by a preponderance

of the evidence, that their actions are constitutionally protected by the First

Amendment of the United States Constitution. In this case, the sole right invoked

by Appellants is the right of association. The right of association is defined as a

communication “between individuals who join together to collectively express,

promote, pursue or defend common interests.” TEX. CIV. PRAC. & REM. CODE ANN.

9 §27.001(2). Appellants failed to submit any affidavits or other evidence to support

their burden. Instead, Appellants failed to carry their burden to show that these

claims are based on a protected right of association.

Second, Tejas Promotions “establishe[d] by clear and specific evidence a

prima facie case for each essential element of the claim[s] in question.” Id. at

§27.005(c). This is the second step in the analysis under the TPCA and is only

reached if the Court determines that Appellants carried their burden to establish that

Tejas Promotions’ claims are based on Appellants’ exercise of the right of

association. Here, Tejas Promotions provided affidavits and other documentary

evidence to establish a prima facie case for each essential element of their claims.

Third, Appellants failed to “establishe[s] by a preponderance of the evidence

each essential element of a valid defense to [Tejas Promotions’] claim[s].” Id. at

§27.005(d). Appellants did not assert a defense to the claims in their Answer. Nor

did Appellants provide evidence to support any defense to the claims.

Therefore, Tejas Promotions respectfully requests that the Court affirm the

trial court’s denial of the Motion and remand this matter back to the trial court for a

determination with regard to attorney’s fees to be awarded to Tejas Promotions.

ARGUMENT AND AUTHORITIES

I. The Trial Court Correctly Denied The Motion To Dismiss Because Appellants Failed To Carry Their Burden To Show That This Legal Action Is Based On, Relates To, Or Is In Response To Their Exercise Of The Right Of Association.

10 Appellants’ Motion To Dismiss is based on the Texas Citizens Participation

Act (“TCPA”). The TCPA is an anti-SLAPP law. “SLAPP” is an acronym for

“Strategic Lawsuits Against Public Participation,” which are suits filed against

politically and socially active individuals not with the goal of prevailing on the

merits but, instead, of chilling those individuals’ First Amendment activities.

Cheniere Energy, Inc. v. Lotfi, 449 S.W.3d 210, 212 (Tex. App. – Houston 2014, no

pet.).

The Texas Legislature expressly stated that the purpose of the anti-SLAPP

statute is to “encourage and safeguard the constitutional rights” of people to

participate in government:

The purpose of this chapter 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. This lawsuit has nothing to do with

the stated purpose of the TCPA. Instead, it concerns Appellants’ theft of trade

secrets and the valid construction of the NDA. Appellants are trying to fit a square

peg in a round hole. And, as the trial court correctly ruled, it does not fit.

As the Texas Supreme Court confirmed, 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).

11 Apparently, Appellants would have this Court believe that the act of communicating

misappropriated confidential information among themselves and others is protected

by the First Amendment’s protection of the “right of association.” However, there

is no authority for such a proposition because this case does not concern the exercise

of Appellants’ constitutional rights; nor is this a retaliatory lawsuit brought against

citizens speaking on matters of public concern. This, standing alone, is reason

enough for the Court to affirm the trial court’s denial of the Motion.

A. It is Appellants’ burden to show, by a preponderance of the evidence, that the claims are based on, relate to or arise from the exercise of the right of association under the TCPA. The first step in the analysis under the TCPA is a determination of whether

the legal action is based on a right protected by the First Amendment of the United

States Constitution. If the action is not based on such a right, the motion to dismiss

should be denied and the Court’s analysis is concluded. Id. at §27.005(b). It is

Appellants’ burden to “show[] by a preponderance of the evidence that the legal

action is based on, relates to, or is in response to the party’s exercise of (1) the right

of free speech; (2) the right to petition; or (3) the right of association.” Id. Here, the

sole basis of Appellants’ Motion is the right of association.

“In determining whether a legal action should be dismissed under this

chapter, the court shall consider the pleadings and supporting and opposing

affidavits stating the facts on which the liability or defense is based.” Id. at

12 §27.006(a). Importantly, the Court considers the “pleadings and evidence in the

light most favorable to [Tejas Promotions], who are both the non-movants and the

prevailing parties below.” Serafine v. Blunt, 466 S.W.3d 352, 369 n.28 (Tex. App.—

Austin 2015, no pet.) (Pemberton, J., concurring); Newspaper Holdings, Inc. v.

Crazy Hotel Assisted Living, Ltd., 416 S.W.3d 71, 80-81 (Tex. App.—Houston [1st

Dist.] 2013, pet. denied).

Based on the statute and subsequent case law, the following is the framework

for the Court’s analysis of the evidence: Appellants have the burden of proof while

the pleadings and evidence must be viewed in the light most favorable to Tejas

Promotions. As discussed, while Appellants failed to submit any evidence to support

their Motion, Tejas Promotions submitted affidavits and other documentary

evidence establishing the factual basis for its claims.

1. Contrary to Appellants’ view, the “right of association” is not all- encompassing. As interpreted by Appellants in their brief, it is hard to imagine a claim that

would not fall under a defendant’s “right of association.” According to Appellants,

all conspiracy claims would be subject to the TPCA because they involve

communications among the conspirators. And certainly, according to Appellants,

all slander and defamation claims would be subject to the TPCA because they

involve communications. Additionally, according to Appellants, all

misrepresentation claims (both negligent and intentional) would be subject to the

13 TPCA because they involve communications. However, contrary to Appellants’

position, the “exercise of the right of association” is limited to “a communication

between individuals who join together to collectively express, promote, pursue, or

defend common interests.” Id. at §27.001(2) (emphasis added).

Appellants’ position with respect to the declaratory judgment claims confirms

the flaws in Appellants’ strained interpretation. Appellants contend that the

following requests for declaratory relief are “based on, relate[] to, or [are] in

response to a party’s exercise of the” right of association:

a. The “Non-Disclosure and Assignment of Inventions Agreement” (“NDA”) is a valid, enforceable agreement. b. That the names and identities of Plaintiff’s software vendors are “Confidential Information” under the terms of the NDA.

Appellants’ Brief at 41-42. Appellants claim that seeking a declaration that a

contract is valid somehow relates to the constitutional “right of association” and is

subject to the TPCA. That cannot be, and is not, the law. Similarly, Appellants

claim that seeking a declaration as to the meaning of a contract also somehow relates

to the constitutional “right of association” and is subject to the TPCA. If the Court

were to accept Appellants’ position, every declaratory judgment action involving the

validity or interpretation of a provision would be subject to the TPCA. Not

surprisingly, Appellants fail to cite any authority for their position.

Instead, the express terms of the statute limit the actions that are subject to the

TPCA. To be subject to the TCPA, Appellants must show, by a preponderance of

14 the evidence, that the claims are in response to a communication by individuals

“joined together” in furtherance of a “common interest.” Id. at §27.001(2). As

discussed below, numerous Texas courts have affirmed the denial of motions to

dismiss because the movants failed to meet their burden to show that the

communication was in furtherance of a common interest. That is also the case here.

2. Appellants failed to introduce any evidence to meet their burden that the communication was in furtherance of a common interest. It is undisputed that Appellants have the burden to “show[] by a

preponderance of the evidence that the legal action is based on, relates to, or is in

response to the party’s exercise of . . . the right of association.” Id. at §27.005.

Contrary to their claim, Appellants did not provide any evidence supporting their

allegation that their conduct is protected by the First Amendment. There is not a

single affidavit. There is not a single document. Nor did Appellants provide any

evidence for their allegation that the communication was in furtherance of a common

interest. Not a single affidavit and not a single document.

Instead, Appellants try to cobble together an argument based on Tejas

Promotions’ petition. In this regard, Cheniere Energy, Inc. v. Lotfi, 449 S.W.3d 210

(Tex. App.–Houston [1st Dist.] 2014, no pet.) is instructive. In Cheniere, as in this

case, the trial court denied the motion to dismiss and the movant failed to offer any

affidavits, relying solely on the petition. Id. at 211-12. Plaintiff sued her previous

employer for wrongful termination and her former coworkers for tortious

15 interference. Id. As in this case, appellants moved to dismiss the tortious

interference claims because it was “brought in response to their exercise of the “right

of association” as defined in the TCPA.” Id. at 212.

On appeal, the Cheniere appellants cited numerous paragraphs in the petition

as the basis for their motion to dismiss. Id. at 214. Appellants Lotfi and Souki were

Cheniere’s CEO and general counsel, respectively. Id. at 212-13. Appellants argued

that the action was based on their attorney-client communications as to whether to

retain the plaintiff and their decision, based on those communications, to fire

plaintiff. Id. at 213-214. Although these were internal communications that resulted

in a common decision – to fire the plaintiff – the appellate court affirmed the denial

of the motion to dismiss because appellants’ failed to meet their burden to show a

common interest:

It may be that Souki and Rayford’s decision was the result of (1) “a communication” (2) “between individuals who join together” (3) for the purpose of expressing, promoting, pursuing, or defending their “common interests.” See TEX. CIV. PRAC. & REM. CODE ANN. §27.001(2). But the record supports alternate conclusions as well. For example, Souki and Rayford may have had divergent interests in seeking Lotfi’s removal from the company: Souki arguably could have had a personal interest in dismissing Lotfi given Lotfi’s allegation that Souki’s son was given confidential company information, whereas Rayford’s interest in having Lotfi dismissed could have been to further the financial interests of Cheniere given that dismissal for cause invalidated Lotfi’s right to merit-based bonus compensation. Without evidence on the matter, the extent to which Souki and Rayford acted in furtherance of a common interest is simply unknown.

16 Id. at 214 (emphasis added). Because, Souki and Rayford could have had divergent

interests when pursuing the same course of action, the appellate court affirmed the

denial of the motion to dismiss because they did not meet their burden under the

TCPA. Id. at 217. As recognized in Cheniere, a common interest will not be

presumed. There must be evidence to support it. Appellants provided no such

evidence in this case.

3. Appellants’ argument that the “internal communication” described in Tejas Promotions’ Petition meets its burden to show a common interest misrepresents the Petition and Texas case law. Because Appellants failed to provide any affidavits or other evidence,

Appellants are left with relying on the statements in Tejas Promotions’ Petition. Of

course, while relying on the allegations against them for their Motion to Dismiss,

Appellants have also denied these same allegations as part of their General Denial.

Because Appellants are precluded from having it both ways, the Court should affirm

the trial court’s denial of the Motion. See Culbertson v. Lykos, 790 F.3d 608 (5th

Cir. 2015).

Appellants claim that “Tejas Promotions’ claim for conspiracy to

misappropriate trade secrets was based on, related to, or in response to the

communication of the ‘Draft Asset List’ between Bruce Craig, Tyler Craig, Tejas

Vending and Teri Moebus.” Brief at 21. Appellants then argue that their common

interest was “the capture of customers on the ‘Draft Asset List’ for Tejas Vending.”

17 Id. However, as in Cheniere, there is no evidence to support their claim. There is

no affidavit from Bruce Craig. No affidavit from Tyler Craig. No affidavit from

Tejas Vending. And the affidavit of Teri Moebus, submitted by Tejas Promotions,

does not support this claim. CR 155-158.

Like the appellants in Cheniere, Appellants could have had, and likely did

have, divergent interests in their misappropriation of Tejas Promotions’ trade

secrets. For example, Appellant Bruce Craig may have misappropriated Tejas

Promotions’ trade secrets to “take Richard down,” as was the testimony of Ms.

Moebus. CR 156 at § 11. Appellant Tyler Craig, on the other hand, could have

misappropriated Tejas Promotions’ trade secrets because he was interested in

pleasing his father. If anything, Ms. Moebus’ affidavit testimony contradicts the

Appellants’ argument in support of a common interest and her interest could simply

have been to keep her job. CR 156. Of course, there could have been a financial

interest as well. But those interests could diverge depending upon the financial

arrangement between father, son and Tejas Vending. Appellants’ surmise and

assumptions as to these individual’s interests do not meet Appellants’ burden of

proof by a preponderance of the evidence, especially given the rule that the pleadings

and evidence are viewed in the light most favorable to Tejas Promotions. Serafine,

466 S.W.3d at 369 n.28; Newspaper Holdings, 416 S.W.3d at 80-81.

18 To obscure their lack of evidence, Appellants claim that “private

communications among members of an organization are protected under the right of

association, regardless of subject matter, because members of an organization have

a common interest.” Brief at 17. However, there is no rule that internal

communications among members of an organization are, by definition or somehow

as a matter of law, communications for a “common interest.” There is no Texas case

standing for such a broad proposition.

In fact, numerous courts have analyzed communications among members of

an organization and determined that there was no common interest. One such case

is Herrera v. Stahl, 441 S.W.3d 739 (Tex. App. – San Antonio 2014, no pet.). In

Herrera, the president of a homeowner’s association was sued for defamation

because, among other statements, he told other association members that appellants

were “crazy” and “had no lives.” Id. at 742. Under Appellants’ broad theory, these

internal communications among members would automatically be subject to the

TCPA as communications for a “common interest.” However, Texas law is not as

Appellants would like this Court to believe. Instead, the appellate court affirmed the

denial of the motion to dismiss because appellant failed to meet his burden to show

the “specific common interests” that he was expressing or promoting. Id. at 743.

Similarly, Appellants in this case have failed to meet their burden of identifying and

proving any alleged common interest.

19 Even the Combined Law Enforcement case that is cited by Appellants on

multiple occasions shows that courts must examine the evidence to determine

whether individuals joined together for a common interest in making the

communication. Combined Law Enforcement Associations of Texas v. Sheffield,

2014 Tex. App. LEXIS 109813 (Tex App.–Austin 2014, pet. denied). In Combined

Law Enforcement, unlike the present case, appellants submitted some evidence of a

“common interest” among members of the organization via affidavit testimony. Id.

at *13. Based on that evidence, the appellate court determined that certain claims

were based on “communications between individuals who joined together in CLEAT

to collectively, express, promote, or defend the common interests of police officers.”

Id. at *13-14. On the other hand, other communications did not constitute the

“exercise of the right of association” because there was no evidence to support a

“common interest.” Id. Those claims were not dismissed.

In the present case, Appellants have offered no evidence of “a communication

between individuals who join together to collectively express, promote, pursue, or

defend common interests.” TEX. CIV. PRAC. & REM. CODE ANN. §27.001(2). At

best, the Court is left with Appellants’ wishful assumptions as to the various

individual’s interests in making the communications. And, given that (1) Appellants

have the burden of proof and (2) the evidence is viewed in the light most favorable

to Tejas Promotions, that is not enough. Therefore, the Court should affirm the trial

20 court’s denial of the Motion to Dismiss because Appellants failed to pass the first

step of the analysis. This also means that the Court need not go to the second and

third steps of analysis under the TCPA.

B. The Trial Court Correctly Denied The Motion To Dismiss Because Tejas Promotions Provided Clear And Specific Evidence Of Each Essential Element Of The Challenged Claims. The second step in the analysis is a determination of whether Tejas

Promotions “establishe[d] by clear and specific evidence a prima facie case for each

essential element of the claim[s] in question.” Id. at §27.005(c). The phrase “clear

and specific evidence” is not defined, nor is it a recognized standard. Lipsky, 460

S.W.3d at 589. There are numerous evidentiary standards: (1) beyond a reasonable

doubt; (2) clear and convincing; and (3) preponderance of the evidence are some.

“Clear and specific” is a lower evidentiary standard than any of these three. Under

the clear and specific standard, a plaintiff merely must “provide enough detail to

show the factual basis for its claim.” Id. at 591. The TCPA “does not impose an

elevated evidentiary standard or categorically reject circumstantial evidence.” Id.

“Prima facie case” does have a traditional legal meaning. “It refers to

evidence sufficient as a matter of law to establish a given fact if it is not rebutted or

contradicted.” Id. at 590 (citation omitted). The Texas Supreme Court has described

it as the “minimum quantum of evidence necessary to support a rational inference

that the allegation of fact is true.” Id. (citations omitted). Given this low standard

21 of proof, the affidavits and documents provided by Tejas Promotions easily

established the elements of its challenged claims.

1. Tejas Promotions provided clear and specific evidence of each essential element of its conspiracy claim. The essential elements of a conspiracy claim are: (1) the defendant(s) were a

member of a combination of two or more persons; (2) the object of the combination

was to accomplish (a) an unlawful purpose or (b) a lawful purpose by unlawful

means; (3) the members had a meeting of the minds on the object or course of action;

(4) one of the members committed an unlawful, overt act to further the object or

course of action; and (5) the plaintiff suffered injury as a result of the wrongful act.

Chon Tri v. J.T.T., 162 S.W.3d 552, 556 (Tex. 2005).

The two affidavits provided in response to the Motion establish ample

evidence of each and every element of Tejas Promotions’ claims. The affidavit from

Tejas Promotions’ President, Richard Schappel, attests to the fact that Bruce and

Tyler Craig formed Tejas Vending, LP and, thereafter, used Tejas Promotions’ trade

secrets to steal its customers. CR 77-81. As a result of these acts, Tejas Promotions’

suffered a loss of revenue. Id. The affidavit testimony of Teri Moebus further

corroborates Schappel’s testimony in furtherance of establishing a prima facie case

for conspiracy. CR 102-05.

Here, Appellants challenge three aspects of Tejas Promotions’ conspiracy

claim: (1) whether the list of customers was a trade secret; (2) proximate cause; and

22 (3) damages. First, Schappel’s affidavit provides clear and specific evidence to

establish a prima facie case that the customer list is a trade secret. CR 77-79 at ¶¶

3-8. Additionally, as part of the NDA, Bruce Craig agreed that the customer list was

both confidential and valuable. CR 83-87. In their Motion, Appellants try to weave

certain statements together to disprove the fact that the customer list is a trade secret.

However, the TCPA does not include a weighing of the evidence and only looks to

whether the non-movant established a prima facie case.

Second, a prima facie case of proximate cause is established by the affidavits

of Schappel and Moebus. These affidavits describe Appellants’ wrongful conduct

in detail and Schappel’s affidavit clearly states that at least five of Tejas Promotions’

customers terminated with Tejas Promotions after they were contacted by Tejas

Vending. CR 77-81; 102-05.

Third, Schappel’s affidavit provides clear and specific evidence of the

damages element. In his affidavit, he described how Tejas Promotions earns revenue

by charging its customers a percentage of the revenue that the customer generates.

CR 77 at § 2. When Tejas Promotions lost at least five customers due to Appellants’

wrongful conduct, it was damaged by losing this revenue. Therefore, Tejas

Promotions provided clear and specific evidence to establish a prima facie case of

conspiracy.

23 2. Tejas Promotions provided clear and specific evidence of each essential element of its claim under the Uniform Declaratory Judgments Act. The UDJA allows a party to petition the court for a declaration regarding his

or her rights under a written instrument. TEX. CIV. PRAC. & REM. CODE ANN.

§37.004(a). The UDJA authorizes a court “to declare rights, status, and other legal

relations” when subject matter jurisdiction is already present. Id. at § 37.003(a);

Texas Ass’n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 444 (Tex. 1993).

There must be a “justiciable controversy as to the rights and status of” the parties,

and the requested declaration “must actually resolve the controversy” for a court to

issue a declaratory judgment. Brooks v. Northglen Ass’n, 141 S.W.3d 158, 163-64

(Tex. 2004). “A justiciable controversy is one in which a real and substantial

controversy exists involving a genuine conflict of tangible interests and not merely

a theoretical dispute.” Texas Dep’t of Pub. Safety v. Moore, 985 S.W.2d 149, 153

(Tex. App.—Austin 1998, no pet.). Because Tejas Promotions provided clear and

specific evidence to establish a prima facie case of a justiciable controversy, the trial

court correctly denied the Motion to Dismiss.

Plainly, there is a controversy over the meaning and application of the NDA.

In fact, Appellants filed a General Denial as to Tejas Promotions’ request for a

declaratory judgment. Furthermore, at no time has any Appellant agreed to any of

Tejas Promotions’ requests for declaratory judgment. Indeed, they allege in this

24 appeal that the Asset List does not constitute “Confidential Information.” Tejas

Promotions requests the following declarations regarding the NDA:

a. The “Non-Disclosure and Assignment of Inventions Agreement” (“NDA”) is a valid, enforceable agreement.

b. That the names and identities of Plaintiff’s software vendors constitute “Confidential Information” under the terms of the NDA.

c. That the information provided by Plaintiff to Bruce Craig via electronic mail on October 14, 2015 constitutes “Confidential Information” under the terms of the NDA.

d. That pursuant to the NDA, Defendant Bruce Craig had an obligation, as Recipient, to prevent the disclosure of and refrain from disclosing “Confidential Information,” including the Plaintiff’s trade secrets, outside of the Relationship. e. That, under the terms of the NDA, the disclosure of “Confidential Information” and/or the failure to prevent the disclosure of “Confidential Information” constitutes a breach of the NDA.

f. That pursuant to the NDA, the Plaintiff, as Discloser, has the right to pursue certain remedies, in the case of a breach of the terms of the NDA, which include the pursuit of monetary damages and injunctive relief.

As before, the two affidavits and attachments, including the NDA, establish ample

evidence of each and every element of their causes of action. CR 77-81; 102-105.

Appellants Tyler Craig and Tejas Vending claim that because they were not a

party to the NDA, there is no justiciable controversy between these two Appellants

and Tejas Promotions. In support, Appellants erroneously cite to Sierra Club v.

Andrews County, 418 S.W.3d 711 (Tex. App.—El Paso 2013), rev’d on other

grounds, 463 S.W.3d 867 (Tex. 2015). However, unlike Sierra Club, all of the

25 declarations requested by Tejas Promotions relate squarely to the NDA and seek to

determine legal matters affecting the relationships of the parties. Of course, the

interpretation of an unambiguous contract term is a question of law for the trial court.

Hill v. Heritage, 964 S.W.2d 89, 135 (Tex. App. – El Paso 1997, pet. denied).

Furthermore, a trial court having jurisdiction to render a declaratory judgment also

has the power to determine issues of fact. Id. at 138. The declarations requested by

Tejas Promotions in both the Original and Amended Petitions directly bear on the

misappropriation claims made against all Appellants, necessarily including Tyler

Craig and Tejas Vending.

Appellants also make the erroneous claim that the requested declarations “are

declarations regarding pure issues of fact.” This claim is simply incorrect. As can

be easily seen, the declarations relate squarely to legal matters or mixed questions

of law and fact. Furthermore, and contrary to the Appellants repeated argument

otherwise, a breach of contract claim does not prohibit relief under the UDJA. MBM

Fin. Corp. v. Woodlands, Oper. Co., 292 S.W.3d 660, 669 (Tex. 2009). Therefore,

the Court should affirm the trial court’s denial of the Motion to Dismiss.

II. The Trial Court Correctly Denied Appellants’ Motion To Dismiss Because Appellants Failed To Carry Their Burden To Establish Each Element Of A Valid Defense To Tejas’ Promotions Claims. If (1) Appellants carry their burden to show that the claims are covered by the

TCPA and (2) Tejas Promotions provides clear and specific evidence of each

26 element of its claims, the Court proceeds with the third step of the analysis. The

third step concerns whether Appellants have met their burden with respect to a

defense to Tejas Promotions’ claims. Pursuant to the TCPA, Appellants have the

burden to “establish by a preponderance of the evidence each essential element of a

valid defense to [Tejas Promotions’] claim[s].” Id. at §27.005(d). There are two

principal reasons why Appellants failed to meet their burden.

First, Appellants failed to plead any defenses in their Answer. CR 17-24.

Appellants’ Answer consists of a General Denial, Special Exceptions, and a Plea to

the Jurisdiction. Appellants failed to plead any defenses. Pursuant to longstanding

Texas law, an affirmative defense is waived if it is not pled. Man Engines &

Components, Inc. v. Shows, 434 S.W.3d 132, 136-37 (Tex. 2014); Tex. R. Civ. P.

94. The TCPA is no exception. Fawcett v. Grosu, 498 S.W.3d 650 (Tex. App.—

Houston [14th Dist.] 2016, pet. filed) (in the context of a motion to dismiss under

the TCPA, appellants waived argument by not pleading defense in answer).

In Fawcett, a member of a Masonic Lodge filed defamation and other claims

arising from a disciplinary proceeding against members of the same Lodge. Id. at

655. The trial court denied the motion to dismiss under the TCPA. On appeal, the

appellants raised the defensive issues of truth and qualified privilege. Id. at 663.

However, as here, appellants had failed to assert any defenses. Id. Instead, as here,

appellants had only filed a general denial. Id. Therefore, the appellate court ruled

27 that “appellants have waived arguments related to truth and qualified privilege on

appeal because these issues address affirmative defenses which they did not plead in

their original answers.” Id. The appellate court repeated the longstanding Texas

law that “[a]ll affirmative defenses are waived when the defendant files only a

general denial.” Id. (citation omitted). Similarly, as in Fawcett, Appellants waived

any argument concerning defenses because they filed only a general denial.

Second, Appellants failed to provide evidence to establish all of the essential

elements of some unpled defense to Tejas promotions’ claims. As discussed above,

Plaintiffs failed to introduce any affidavits or other evidence to support their Motion.

With respect to the declaratory judgment claims, Appellants’ arguments are merely

summary judgment type arguments based on Appellants’ view of the requested

declarations. Brief at 40; 50. With respect to the conspiracy claim, Appellants’

argument that this claim is pre-empted by the Texas Uniform Trade Secrets Act is

akin to special exceptions or tradition motion for summary judgment. Brief at 26-

29. In neither case have Appellants provided evidence to carry their burden of

establishing a defense to these claims. This is because Appellants did not plead a

defense and did not provide evidence. Therefore, the Court should affirm the trial

court’s denial of Appellants’ Motion to Dismiss.

28 PRAYER FOR RELIEF

WHEREFORE, Appellee Tejas Promotions prays that this Court affirm the

trial court’s order denying Appellants’ motion to dismiss, remand this case to the

trial court for further proceedings, and for such other and further relief to which it

may be entitled.

Respectfully submitted,

BEATTY BANGLE STRAMA PC 400 West 15th Street, Suite #1450 Austin, TX 78701 (512) 879-5050 (512) 879-5040 (FAX)

By: /s/ Matthew R. Beatty Matthew R. Beatty Texas State Bar No. 24001169 mbeatty@bbsfirm.com Michael L. Navarre Texas State Bar No. 00792711 mnavarre@bbsfirm.com Brittney K. Mollman Texas State Bar No. 24097302 bmollman@bbsfirm.com COUNSEL FOR APPELLEE

29 CERTIFICATE OF SERVICE

On December 21st, 2016, I electronically filed this brief with the Clerk of the Court using the eFile.txcourts.gov electronic filing system which will send notification of such filing to the following:

Darryl W. Pruett J. Woodfin Jones darryl@weichertlaw.com wjones@adjtlaw.com The Weichert Law Firm Alexander Dubose Jefferson 3821 Juniper Trace, Suite 106 & Townsend, LLP Austin, Texas, 78738 515 Congress Avenue, Suite 2350 Austin, Texas, 78701-3562

/s/ Matthew R. Beatty Matthew R. Beatty

CERTIFICATE OF COMPLIANCE Based on a word count run in Microsoft Word 2013, this brief contains 6,706 words, excluding the portions of the brief exempt from the word count under Texas Rule of Appellate Procedure 9.4(i)(l).