Day Trader Paradise, LLC, and John Matthew Cowart v. Vincent Marchi and EGI Ecclesiastes Global Investment Technologies, LLC

• Court: Court of Appeals of Texas
• Decided: April 17, 2023
• Docket: 05-22-01061-CV
• Status: Published

Opinion

AFFIRMED and Opinion Filed April 17, 2023

S In the Court of Appeals Fifth District of Texas at Dallas No. 05-22-01061-CV

DAY TRADER PARADISE, LLC, AND JOHN MATTHEW COWART, Appellants V. VINCENT MARCHI AND EGI ECCLESIASTES GLOBAL INVESTMENT TECHNOLOGIES, LLC, Appellees

On Appeal from the 416th Judicial District Court Collin County, Texas Trial Court Cause No. 416-01803-2022

MEMORANDUM OPINION Before Justices Carlyle, Goldstein, and Kennedy Opinion by Justice Carlyle

Day Trader Paradise, LLC and its founder and principal John Matthew Cowart

(collectively, DTP) appeal the trial court’s order denying their TCPA1 motion to

dismiss a legal action brought against them by EGI Ecclesiastes Global Investment

Technologies, LLC and its founder and principal Vincent Marchi (collectively, EGI).

1 The Texas Citizens Participation Act, TEX. CIV. PRAC. & REM. CODE §§ 27.001–.011 (“Actions Involving the Exercise of Certain Constitutional Rights”). Because we conclude EGI’s legal action is exempt from TCPA coverage, we affirm

in this memorandum opinion. See TEX. R. APP. P. 47.4.

Background

In its live petition, EGI stated it is “in the business of Algorithmic Trading

Software & Educational Services for the futures, forex, crypto, and stocks trading

community.” EGI operates a YouTube channel on which Mr. Marchi, who is not a

licensed professional stock trader or advisor, “demonstrat[es] opportunities for

trades using his algorithmic trading platform” and “offers his thoughts” on trading-

related topics, including “other companies, day traders and YouTubers who claim to

offer alternative trading platforms.” According to the petition, “Mr. Cowart and Day

Trader Paradise, LLC run a competing YouTube channel offering similar trading

related software and educational services as [EGI], and they are in direct competition

for the same customers.”

The petition stated EGI has “third party synergistic partnerships” with

“software platform providers” and “trading brokers for trade execution” including

NinjaTrader and AMP Global Clearing. Those entities have advertised on EGI’s

YouTube channel and EGI “has used them as the official brokers for those who wish

to trade in various trading instruments.” EGI’s relationships with those entities “are

key to the continued operation of [EGI], as without them, no referrals can be made

to their platform and no profit can be made therefrom.”

–2– According to the petition, despite previously having had “many fractious

communications,” DTP and EGI engaged in discussions “concerning Plaintiffs’

business model, licensing, brokers, and their third-party relationships, such as

NinjaTrader and AMP, all with the understanding that such discussions were private

and not meant for public disclosure or disclosure to any third party.” The petition

stated, “Many client relationships and trade secrets were discussed with Mr. Cowart

with the intent that they develop a synergistic business together or so Mr. Marchi

was led to believe.”

The petition alleged that at some point Mr. Cowart “broke off negotiations

abruptly.” Soon after that, Mr. Marchi (1) “received a notice from NinjaTrader that

they had received complaints from unknown clients and or third parties about his

business and personal affairs that therefore [sic], they would cease doing business

with him immediately,” and (2) “received notice from his AMP Broker that

complaints were received by third parties about his business and personal affairs that

were ‘unbecoming’ and that they would immediately cease all business with him and

his company.” The petition stated Mr. Marchi obtained information from AMP

showing the complaints “were alleged to be made by an ‘ADAM W,’ a pseudonym

of misleading affiliation and misdirection,” who allegedly was familiar with Mr.

Marchi’s business and “assert[ed] that [Mr. Marchi] was engaging in illegal trading

conduct, that he was improperly giving investment advice, was an abuser of children

and was a racist, all claims which are patently untrue.” According to the petition,

–3– “many of the claims were based on knowledge from communications [Mr. Marchi]

had solely with [Mr. Cowart] . . . in personal, private communications between the

two of them” concerning “their discussions of the nature of mutual synergistic

business opportunities together” and “could come from no other source.”

The petition stated, “It is clear to Plaintiffs that Defendants are attempting to

threaten and harm the Plaintiffs, to intentionally interfere with their business, with

the intent to drive them from their business, steal their clients and cease broadcasting

on YouTube.” EGI asserted claims for statutory and common law misappropriation

of trade secrets, tortious interference with existing and prospective contracts, and

fraud, all of which incorporated the above-described allegations by reference.

DTP generally denied the allegations and filed a motion to dismiss under the

TCPA and Texas Rule of Civil Procedure 91a. See TEX. CIV. PRAC. & REM. CODE

§ 27.003 (procedure for dismissal of legal action based on or in response to exercise

of right of free speech); TEX. R. CIV. P. 91a (“Dismissal of Baseless Causes of

Action”). DTP asserted that “[b]ecause Plaintiffs’ claims are based exclusively on

‘communication made in connection with a matter of public concern,’—i.e., the

racist and criminal conduct of a YouTube personality and trading software vendor—

Plaintiffs’ own First Amended Petition establishes applicability of the TCPA.” DTP

also contended:

To the extent that Plaintiffs may argue that their fraud and trade secrets claims are exempt from the TCPA, that argument will likewise fail. . . . Plaintiffs’ fraud claim is actually a defamation claim for which

–4– the statute of limitations has run. And Plaintiffs’ trade secret claims are not of the type exempted as they are not “a legal action arising from an officer-director, employee-employer, or independent contractor relationship.”

EGI filed a response asserting, among other things, (1) the TCPA is

inapplicable because “there is no matter of public concern [and] no matter affecting

the Defendants’ right of free speech’”; (2) “[r]ather, the causes of action arise from

the personal and business relationships of the parties, and the Defendants’ improper

use of that information to the detriment of the Plaintiff”; and (3) the petition “does

not state or pursue any matter related to Section 27.010(b) of the Texas Civil Practice

& Remedies Code which would entitle the Defendant to relief under this section.”

Additionally, as to its fraud claim, EGI asserted “Defendants fraudulently entered

into business discussions with Plaintiffs with the intent to learn the business and

trade secrets of the Plaintiffs, and to interfere with their existing and prospective

contracts with vendors and customers for the benefit of Defendants,” and “Plaintiffs

relied on the representations made by the Defendants to their detriment.”

At the hearing on the motion to dismiss, DTP argued EGI’s action was “filed

in retaliation . . . for [DTP] informing Plaintiffs’ trading platform that he was

breaking the rules,” which is “a matter of public concern” and “precisely the speech

the TCPA is meant to protect.” EGI’s counsel contended (1) “[t]his is a meritorious

claim against a person who entered into negotiations with my client deceptively in

order to steal his secrets” and (2) this lawsuit “falls right within” the exemption in

–5– TCPA section 27.010(a)(5) regarding actions seeking recovery for trade secret

misappropriation. Additionally, as to the fraud claim, EGI asserted that its petition

gave fair notice it was contending “[c]ommunications were had between Marchi and

[DTP] to go into business together and that was apparently all the fraud” and “was

entirely to use the information gathered to disrupt his business, disrupt his customer

base, and it was all a way to steal his secrets and harm his company to the advantage

of [DTP].” Following the hearing, the trial court signed a September 19, 2022 order

denying the TCPA motion to dismiss “in its entirety.”2

Analysis

“The TCPA was designed to protect both a defendant’s rights of speech,

petition, and association and a claimant’s right to pursue valid legal claims for

injuries the defendant caused.” Montelongo v. Abrea, 622 S.W.3d 290, 299 (Tex.

2021); see TEX. CIV. PRAC. & REM. CODE § 27.002. Generally, the act provides that

“[i]f a legal action is based on or is in response to a party’s exercise of the right of

free speech, right to petition, or right of association or arises from any act of that

party in furtherance of the party’s communication or conduct described by Section

27.010(b), that party may file a motion to dismiss the legal action,” see TEX. CIV.

PRAC. & REM. CODE § 27.003(a), and the trial court “shall dismiss” it. Id.

2 With regard to Rule 91a, the trial court’s order (1) granted the Rule 91a motion to dismiss as to EGI’s common law misappropriation of trade secrets claim; (2) gave EGI leave to replead its fraud claim but did not dismiss that claim; and (3) otherwise denied the Rule 91a dismissal motion. Those rulings are not at issue in this interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(12). –6– § 27.005(b); see also id. § 27.001(3) (“‘Exercise of the right of free speech’ means

a communication made in connection with a matter of public concern.”). The party

bringing the legal action can avoid dismissal if it “establishes by clear and specific

evidence a prima facie case for each essential element of the claim in question.” Id.

§ 27.005(c). But notwithstanding section 27.005(c), “the court shall dismiss a legal

action against the moving party if the moving party establishes an affirmative

defense or other grounds on which the moving party is entitled to judgment as a

matter of law.” Id. § 27.005(d).

Section 27.010(a) describes types of actions exempt from the TCPA,

including, among other things,

(5) a legal action arising from an officer-director, employee- employer, or independent contractor relationship that: (A) seeks recovery for misappropriation of trade secrets or corporate opportunities; or (B) seeks to enforce a non-disparagement agreement or a covenant not to compete; [or] .... (12) a legal action based on a common law fraud claim.

Id. § 27.010(a). However, notwithstanding those exemptions, section 27.010(b)

provides that the TCPA applies to legal actions against a person (1) arising from an

act related to gathering or processing information “for communication to the public”

for the creation or promotion of a journalistic or artistic work, see id. § 27.010(b)(1),

or (2) “related to the communication, gathering, receiving, posting, or processing of

consumer opinions or commentary, evaluations of consumer complaints, or reviews

–7– or ratings of businesses,” see id. § 27.010(b)(2). The nonmovant bears the burden of

proving a statutory exemption. See Kirkstall Rd. Enters., Inc. v. Jones, 523 S.W.3d

251, 253 (Tex. App.—Dallas 2017, no pet.) (citing Tervita, LLC v. Sutterfield, 482

S.W.3d 280, 282 (Tex. App.—Dallas 2015, pet. denied)).

Whether the TCPA applies to a legal action is an issue of statutory

interpretation we review de novo. Temple v. Cortez Law Firm, PLLC, 657 S.W.3d

337, 341–42 (Tex. App.—Dallas 2022, no pet.); see Creative Oil & Gas, LLC v. Lona

Hills Ranch, LLC, 591 S.W.3d 127, 132 (Tex. 2019). Consistent with general rules

of statutory construction, we ascertain and give effect to the legislature’s intent as

expressed in the statutory language, considering the specific language at issue and

the TCPA as a whole, and 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. Temple, 657 S.W.3d at 342. We

consider, in the light most favorable to the nonmovant, the pleadings, evidence a

court could consider under rule of civil procedure 166a, and supporting and opposing

affidavits stating the facts on which the liability or defense is based. Id.; TEX. CIV.

PRAC. & REM. CODE § 27.006(a). A claimant’s pleadings are usually “the best and

all-sufficient evidence of the nature of the action.” Hersh v. Tatum, 526 S.W.3d 462,

467 (Tex. 2017).

In two issues, DTP contends (1) the trial court erred by denying the TCPA

motion to dismiss because DTP showed its “alleged actions and speech” are

–8– protected by the TCPA and “[EGI] failed to present clear and specific evidence of a

prima facie case” as to any of its claims, and (2) this case should be remanded to the

trial court for consideration of attorney’s fees to DTP “in relation to the dismissal of

[EGI’s] claims under the TCPA.” According to DTP,

Here, [EGI] did not deny that the communications at issue were related to criminal conduct—a matter of public concern. . . . [EGI] replied only to argue that the exception presented in Tex. Prac. & Rem. Code §27.010(a)(5) is applicable here. However, that section excepts from coverage under the TCPA “a legal action arising from an officer- director, employee-employer, or independent contractor relationship”—which is not at issue here whatsoever.

DTP asserts that “to the extent that [EGI] may argue that other exceptions under Tex.

Civ. Prac. & Rem. Code §27.010 may apply,” those arguments “were not raised in

the court below” and thus have been “waived.”

EGI argues the TCPA is inapplicable because, among other reasons, several

of section 27.010(a)’s exemptions apply, including section 27.010(a)(12). EGI

asserts:

[T]he legal action seeks recovery of damages for the fraudulent conduct of the Defendants in seeking to enter into discussions to conduct business under false pretenses, and false statements made to established contracted vendors of the Plaintiff in an attempt to sabotage the established and future contracted relationships with such vendors. This is an exception to the [TCPA], which the trial court properly applied in denying this motion to dismiss.

Additionally, EGI contends both of section 27.010(b)’s exceptions to the act’s

exemptions are inapplicable and DTP has “not proved the relevance of either.”

–9– When a TCPA movant’s burden to show applicability and a nonmovant’s

burden to prove an exemption are both challenged, this Court may consider the

nonmovant’s exemption first if it chooses to do so. Temple, 657 S.W.3d at 346 (citing

TEX. R. APP. P. 47.1). Here, for efficiency purposes, we start with the TCPA’s fraud

exemption. See id.; TEX. CIV. PRAC. & REM. CODE § 27.010(a)(12).

First, we address DTP’s contention that this exemption was “not raised in the

court below” and thus was “waived.” EGI’s petition asserted (1) “[m]any client

relationships and trade secrets were discussed with Mr. Cowart with the intent that

they develop a synergistic business together or so Mr. Marchi was led to believe”

and (2) the business discussions “were private and not meant for public disclosure

or disclosure to any third party” but were later disclosed by DTP for its benefit.

DTP’s motion to dismiss stated “[t]o the extent that Plaintiffs may argue that their

fraud . . . claims are exempt from the TCPA,” that argument lacked merit because

the fraud claim “is actually a defamation claim for which the statute of limitations

has run.” In response to DTP’s motion to dismiss, EGI asserted DTP “fraudulently

entered into business discussions with Plaintiffs with the intent to learn the business

and trade secrets of the Plaintiffs, and to interfere with their existing and prospective

contracts with vendors and customers for the benefit of Defendants,” and “Plaintiffs

relied on the representations made by the Defendants to their detriment.”

Additionally, at the hearing, EGI asserted that its claims were based on DTP entering

into negotiations “deceptively” to steal EGI’s secrets.

–10– On this record, we conclude EGI’s argument regarding the TCPA’s fraud

exemption was preserved for this Court’s review. See Adams v. Starside Custom

Builders, LLC, 547 S.W.3d 890, 896–97 (Tex. 2018) (concluding argument was

preserved for appellate review where party addressed concerns at TCPA hearing);

see also Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 764 n.4 (Tex. 2014) (parties

may construct new arguments on appeal in support of issues raised below).

Next, as described above, section 27.010(a)(12) states the TCPA does not

apply to “a legal action based on a common law fraud claim.” TEX. CIV. PRAC. &

REM. CODE § 27.010(a)(12). EGI asserted repeatedly in the trial court that its claims

were premised on DTP fraudulently entering into business discussions to obtain

information it then used to harm EGI. Thus, the record demonstrates EGI’s lawsuit

is “a legal action based on a common law fraud claim.” See Baylor Scott & White v.

Project Rose MSO, LLC, 633 S.W.3d 263, 285 & n.13 (Tex. App.—Tyler 2021, pet.

denied) (concluding fraud claim and all claims “based on the alleged fraudulent

scheme” were exempt from TCPA under § 27.010(a)(12)). DTP does not challenge

or address EGI’s assertion that section 27.010(b)’s exceptions are inapplicable, nor

does the record show either of those exceptions applies. We conclude EGI met its

burden to show its legal action is exempt from the TCPA pursuant to section

27.010(a)(12). Thus, the trial court did not err by denying the TCPA motion to

dismiss. We need not address DTP’s remaining issue. See TEX. R. APP. P. 47.1.

–11– We affirm the trial court’s order.

/Cory L. Carlyle/ CORY L. CARLYLE JUSTICE

221061F.P05

–12– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

DAY TRADER PARADISE, LLC, On Appeal from the 416th Judicial AND JOHN MATTHEW COWART, District Court, Collin County, Texas Appellants Trial Court Cause No. 416-01803- 2022. No. 05-22-01061-CV V. Opinion delivered by Justice Carlyle. Justices Goldstein and Kennedy VINCENT MARCHI AND EGI participating. ECCLESIASTES GLOBAL INVESTMENT TECHNOLOGIES, LLC, Appellees

In accordance with this Court’s opinion of this date, the trial court’s order denying appellants’ motion to dismiss pursuant to the Texas Citizens Participation Act is AFFIRMED.

It is ORDERED that appellees VINCENT MARCHI AND EGI ECCLESIASTES GLOBAL INVESTMENT TECHNOLOGIES, LLC recover their costs of this appeal from appellants DAY TRADER PARADISE, LLC, AND JOHN MATTHEW COWART.

Judgment entered April 17, 2023

–13–