Byron Curtis Cook v. Kevin Kyser and Christopher Cowman

Opinion

Affirmed and Opinion Filed November 12, 2019

In The Court of Appeals Fifth District of Texas at Dallas No. 05-19-00311-CV

BYRON CURTIS COOK, Appellant V. KEVIN KYSER AND CHRISTOPHER COWMAN, Appellee

On Appeal from the 417th Judicial District Court Collin County, Texas Trial Court Cause No. 417-03417-2018

MEMORANDUM OPINION Before Justices Bridges, Molberg, and Partida-Kipness Opinion by Justice Partida-Kipness Appellees Kevin Kyser and Christopher Cowman sued appellant Byron Curtis Cook

alleging securities fraud. The trial court denied Cook’s motion to dismiss under the Texas Citizens

Participation Act. TEX. CIV. PRAC. & REM. CODE §§ 27.001–27.011 (“TCPA”).1 Because

appellees’ legal action is not factually predicated on Cook’s protected activity, we affirm the trial

court’s order.

BACKGROUND

Cook is a Manager of Unity Resources, LLC (“Unity”) and the single largest equity owner

in Unity. Legacy Income Royalty Fund (“LIRF”) is one of several Unity-affiliated companies. In

1 The TCPA was recently amended, effective September 1, 2019. Act of May 17, 2019, 86th Leg., R.S., ch. 378, §§ 1–9, § 12, secs. 27.001, 27.003, 27.005–.007, 27.0075, 27.009–.010 (to be codified at TEX. CIV. PRAC. & REM. CODE §§ 27.001, 27.003, 27.005–.007, 27.0075, 27.009–.010). The foregoing amendments do not apply to this case, which was filed before the effective date of the amendments. 2014, Cowman invested $95,000 into LIRF, and Kyser made an investment of $47,500 into LIRF.

In 2018, Cowman and Kyser brought suit against Cook, LIRF, Legacy Income Properties, L.L.C.

(“Legacy”), and Trade Rare, LLC (“Trade Rare”) alleging claims for fraud, breach of fiduciary

duty, conspiracy, and violations of the Texas Securities Act in connection with their investments.

They alleged that Cook was jointly and severally liable with Legacy and LIRF “because of his

direct control of Legacy or LIRF as the issuer or offeror or because of his material aid to

Defendants Legacy or LIRF with intent to deceive or defraud or with reckless disregard for the

truth or the law.” Appellees’ operative petition added allegations that Cook was the alter ego of

Legacy, LIRF, and Trade Rare.

Cook filed a TCPA motion to dismiss appellees’ claims. He maintained that appellees filed

suit at the behest of and to benefit appellees’ friend Ken Paxton “as part of an intimidation and

disparagement campaign” against Cook, in “retaliation for Cook’s cooperation and participation

in the criminal investigation and prosecution of Paxton for securities fraud.” Texas Attorney

General Paxton had solicited Cook’s investment in Servergy, Inc. (an entity that is not a party to

this case), and the Texas Rangers interviewed Cook in connection with an investigation of Paxton

and Servergy. Paxton was subsequently indicted on charges including securities fraud in

connection with the solicitation, and the Securities and Exchange Commission filed a civil action

against him. Cook argued that by cooperating with law enforcement’s investigation, he was

exercising protected speech rights, and, as such, appellees’ lawsuit “relates to or is in response to”

Cook’s exercise of the right of free speech. He also contended that his statements to law

enforcement “regarding possible criminal activity” were an exercise of his right to petition. Cook

also argued that appellees could not show clear and specific evidence to support their prima facie

case, and regardless, appellees’ claims were barred by limitations.

–2– The trial court permitted limited discovery at the parties’ request. After a hearing, the

TCPA motion was overruled by operation of law and this appeal followed. In three issues, Cook

argues that the TCPA applies, appellees failed to establish a prima facie case on each element of

their claims by clear and specific evidence, and appellees’ claim for securities fraud was barred by

limitations.

STANDARDS OF REVIEW

We review de novo the trial court’s ruling on a motion to dismiss under the TCPA. Dyer

v. Medoc Health Servs., 573 S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet. denied). “In

conducting this review, we consider, in the light most favorable to the non-movant, the pleadings

and any supporting and opposing affidavits stating the facts on which the claim or defense is

based.” Fishman v. C.O.D. Capital Corp., No. 05-16-00581-CV, 2017 WL 3033314, at *5 (Tex.

App.—Dallas July 18, 2017, no pet.) (mem. op.); see also TCPA § 27.006(a). Whether the TCPA

applies to appellees’ claims is an issue of statutory interpretation that we also review de novo.

Dyer, 573 S.W.3d at 424.

DISCUSSION

In Riggs & Ray, P.C. v. State Fair of Texas, this Court explained:

In order 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 right of free speech, petition, or association. If this nexus is missing, then the statute does not apply.

No. 05-17-00973-CV, 2019 WL 4200009, at *4 (Tex. App.—Dallas Sept. 5, 2019, no pet. h.)

(mem. op.) (internal quotations and emphasis omitted). In his first issue, Cook acknowledges that

appellees’ petition says nothing about the criminal investigation:

1. Does the Texas Citizens Participation Act (TCPA) apply to a lawsuit brought in retaliation for a defendant’s cooperation in a criminal investigation and prosecution, even when the plaintiffs’ pleadings do not specifically reference the defendant’s participation in the criminal proceedings, such that the plaintiffs must put forward prima facie evidence to proceed with the suit?

–3– But Cook explained in his motion to dismiss that “this suit seeks to gin up securities fraud claims

so that Paxton can accuse Cook of the same kind of misconduct for which Paxton is being

prosecuted.”

Cook argues that he and Paxton were both managers of and investors in Unity, which,

through several related LLCs, arranged private offerings in LIRF and other oil and gas investment

funds. Cook contends that Paxton would have responsibility equal to his for any liability to

appellees in this suit. Cook avers that appellees would not have sued Cook alone if their “true

aims were to recover over $1,000,000 from solvent defendants.” He concludes that appellees’

failure to join Paxton and other Unity managers in this suit is evidence of appellees’ retaliatory

motive and shows that the suit was brought “in response to” Cook’s participation in the

investigation and prosecution of Paxton. Cook also maintains that appellees’ choice of counsel

shows their retaliatory motive, noting that appellees are represented in this suit by the counsel who

represent Paxton in the SEC suit and represent other Paxton allies who have been recruited to bring

identical suits against Cook. Cook also quotes from an article by “Paxton spin doctor Jon Cassidy,”

in which Cassidy opined that the suits by Paxton’s allies alleging that Cook engaged in securities

fraud—the same conduct alleged against Paxton in the SEC’s suit—weakened Cook’s credibility

in the proceedings against Paxton and put Cook “in a bind.”

In sum, Cook contends appellees’ claims “were part of a retaliatory scheme targeting Cook

as a key witness against Paxton.” He contends that appellees brought the underlying lawsuit “in

response to” his protected speech and his right to petition. See TCPA § 27.003 (party may file

motion to dismiss action that is based on, relates to, or is in response to party’s exercise of right of

free speech, right to petition, or right of association). “‘Exercise of the right of free speech’ means

a communication made in connection with a matter of public concern.” TCPA § 27.001(3). Cook

argues that his statements to the Texas Rangers related to Paxton’s criminal conduct, a matter of

–4– public concern relating to economic or community well-being under TCPA section 27.001(7)(B),

and to a “good, product, or service in the marketplace” under TCPA section 27.001(7)(E). He also

argues that he exercised his right to petition because his communications with the Texas Rangers

were “in or pertaining to” a judicial proceeding or official proceeding as defined in TCPA sections

27.001(4)(A)(i), 27.001(4)(A)(ii), 27.001(4)(B), and 27.001(4)(C).

We first note that Cook did not plead or show the content of any particular

“communication” he alleges he made to the Texas Rangers, nor did appellees’ petition make any

such reference.2 The TCPA’s definitions of the right of free speech and the right to petition both

require a “communication.” See TCPA § 27.001(3), (4). As defined in the TCPA, a

“communication” “includes the making or submitting of a statement or document in any form or

medium, including oral, visual, written, audiovisual, or electronic.” TCPA § 27.001(1). Without

pleading or evidence of the alleged communication’s content, it is difficult to review Cook’s

contention that appellees’ suit is “in response to” the communication, even under the supreme

court’s directive that a communication’s “tangential relationship” to a matter of public concern is

sufficient to establish exercise of the right of free speech. See ExxonMobil Pipeline Co. v.

Coleman, 512 S.W.3d 895, 900 (Tex. 2017) (per curiam). This is especially true because neither

Paxton nor Servergy, the alleged subjects of the communication, is a party to this lawsuit. This

difficulty is compounded in reviewing Cook’s allegation that the communication was “reasonably

likely to encourage consideration or review of any issue by a legislative, executive, judicial, or

2 In an affidavit submitted to the trial court, Cook stated: “During the Spring of 2015, I met with the Texas Rangers at their request to answer questions about Paxton’s solicitation of my investment in a company called Servergy Inc. I understood that I was cooperating and participating in an investigation into potential criminal conduct on Paxton’s part.” He continued, “Subsequently, in July 2015, a Collin County grand jury indicted Paxton on criminal securities fraud charges related in part to Paxton’s solicitation of investments in Servergy.” As appellees pointed out in their response to Cook’s TCPA motion, their pleadings “in no way reference the communications made by Cook to the Texas Rangers” and appellees “do not even know what Cook is alleged to have said or to whom he is alleged to have said it.” Appellees also argued, “it is impossible to say whether Cook’s alleged communications to Texas Rangers involved a ‘matter of public concern’ such that he can base his Motion on the exercise of his right to free speech.” –5– other governmental body or in another governmental or official proceeding” under TCPA section

27.001(4)(C), because Cook does not identify the “issue” that might prompt review.

Although Cook relies on several cases for the proposition that filing a police report

constitutes the exercise of the right to petition for purposes of the TCPA, in each case, the

substance of the report was included in the record. See Robert B. James, DDS, Inc. v. Elkins, 553

S.W.3d 596, 602 (Tex. App.—San Antonio 2018, pet. denied) (defendants made statements to

police department that plaintiff stole money from a dental practice); Ford v. Bland, No. 14-15-

00828-CV, 2016 WL 7323309, at *1 (Tex. App.—Houston [14th Dist.] Dec. 15, 2016, no pet.)

(mem. op.) (plaintiff filed complaint with police alleging that defendant switched stone in his

wife’s wedding ring during refurbishment); Murphy USA, Inc. v. Rose, No. 12-15-00197-CV, 2016

WL 5800263, at *3 (Tex. App.—Tyler Oct. 5, 2016, no pet.) (mem. op.) (gas station manager

reported to police that plaintiff attempted to steal gas). And in each case, in contrast to Cook’s

Texas Rangers interview, the report to law enforcement was about a party to the lawsuit. For the

reasons we discuss below, however, even if we were to conclude that Cook has shown a

“communication” by a preponderance of the evidence, he has not met his burden to show that

appellees’ legal action is “in response to” that communication. See TCPA § 27.005(b).

Cook argues that as long as he shows that appellees’ suit is “in response to” Cook’s exercise

of protected rights, he need not show that it is “based on” or “relates to” that exercise. See TCPA

§ 27.005(b) (court may dismiss legal action if moving party shows the action “is based on, relates

to, or is in response to the party’s exercise of” protected right). In Riggs & Ray, however, we

explained that “[a]ny activities by the movant that are not a factual predicate for the non-movant’s

claims are not pertinent to our inquiry regarding whether the TCPA applies.” Riggs & Ray, 2019

WL 4200009, at *4; see also Stroud v. Clearview Energy, No. 05-18-00729-CV, 2019 WL

–6– 1930176, at *6–8 (Tex. App.—Dallas May 1, 2019, no pet.) (mem. op.) (where plaintiff’s claims

were not in response to matters expressed in defendant’s email, TCPA did not apply).

“We cannot ‘blindly accept’ attempts by the movant to characterize the claims as

implicating protected expression.” Damonte v. Hallmark Fin. Servs., Inc., No. 05-18-00874-CV,

2019 WL 3059884, at *5 (Tex. App.—Dallas July 12, 2019, no pet.) (mem. op.) (quoting Sloat v.

Rathbun, 513 S.W.3d 500, 504 (Tex. App.—Austin 2015, pet. dism’d)). “To the contrary, we

view the pleadings in the light most favorable to the non-movant, favoring the conclusion that its

claims are not predicated on the protected expression.” Id. at *5. Cook relies on the concurrence

opinion in Damonte for the proposition that a legal action could be brought “in response to” a

protected communication “regardless of whether the legal action on its face has anything to do

with the statement’s content, or with the statement at all.” See id. (Whitehill, J., concurring). But

as the concurrence recognizes, the movant’s burden of “[p]roving that the subject communication

prompted the challenged legal action” by a preponderance of the evidence “may be difficult when

the subject pleading does not assert a claim based on the communication’s content.” Id. We

conclude that Cook did not meet that burden. Cook does not dispute that appellees’ pleadings do

not mention Cook’s interview with the Texas Rangers or make any reference to Paxton or

Servergy. Nor is there any evidence that appellees were involved in any way with the Texas

Rangers’s investigation. According to Cook, his interview was about Paxton, not Cowman or

Kyser. Appellees’ allegations are that Cook made misrepresentations in the sale of securities.

“Any activities [by Cook] that are not a factual predicate for [appellees’] claims are not pertinent

to our inquiry regarding whether the TCPA applies.” See Damonte, 2019 WL 3059884, at *5.

We conclude Cook did not meet his burden to establish by a preponderance of the evidence

that appellees’ legal action is based on, relates to, or is in response to Cook’s exercise of the right

–7– of free speech or the right of petition. See TCPA § 27.005(b). Consequently, the TCPA does not

apply. See Riggs & Ray, 2019 WL 4200009, at *6. We decide Cook’s first issue against him.

Cook’s second and third issues are dependent on the TCPA’s application to appellees’

claims and Cook’s limitations defense. See TCPA § 27.005(c), (d) (burden-shifting to establish

prima facie case and essential elements of defense); In re Lipsky, 460 S.W.3d 579, 586–87 (Tex.

2015) (orig. proceeding) (discussing burden-shifting under TCPA). For that reason, we need not

consider them. Riggs & Ray, 2019 WL 4200009, at *6 (not considering remaining issues and

cross-appeal after concluding TCPA did not apply); Sullivan v. Tex. Ethics Comm’n, 551 S.W.3d

848, 856 n.6 (Tex. App.—Austin 2018, pet. denied) (“Because we hold that the TCPA does not

apply, we do not reach the second step in the TCPA analysis of whether [the non-movant] met its

burden to prove a prima facie case.”).

CONCLUSION

We affirm the trial court’s order denying Cook’s motion to dismiss.

/Robbie Partida-Kipness/ ROBBIE PARTIDA-KIPNESS JUSTICE

190311F.P05

–8– Court of Appeals Fifth District of Texas at Dallas JUDGMENT

BYRON CURTIS COOK, Appellant On Appeal from the 417th Judicial District Court, Collin County, Texas No. 05-19-00311-CV V. Trial Court Cause No. 417-03417-2018. Opinion delivered by Justice Partida- KEVIN KYSER AND CHRISTOPHER Kipness. Justices Bridges and Molberg COWMAN, Appellee participating.

In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED.

It is ORDERED that appellee KEVIN KYSER AND CHRISTOPHER COWMAN recover their costs of this appeal from appellant BYRON CURTIS COOK.

Judgment entered this 12th day of November 2019.

–9–