Felix Sorkin, Individually, General Technologies, Inc., and Precision-Hayes International, Inc. v. P.T. Atlas Manufacturing, L.L.C.

• Court: Court of Appeals of Texas
• Decided: March 15, 2022
• Docket: 05-21-00657-CV
• Status: Published

Opinion

AFFIRMED and Opinion Filed March 15, 2022

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-21-00657-CV

FELIX SORKIN, INDIVIDUALLY, GENERAL TECHNOLOGIES, INC., AND PRECISION-HAYES INTERNATIONAL, INC., Appellants V. P.T. ATLAS MANUFACTURING, L.L.C., Appellee

On Appeal from the 298th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-20-17416

MEMORANDUM OPINION Before Justices Partida-Kipness, Reichek, and Goldstein Opinion by Justice Reichek Felix Sorkin, General Technologies, Inc. (“GTI”), and Precision-Hayes

International, Inc. (“PHI”) appeal the denial by operation of law of their motion to

dismiss pursuant to the Texas Citizens Participation Act (TCPA). See TEX. CIV.

PRAC. & REM. CODE ANN. §§ 27.001–.011. The dispositive issue here is whether

this lawsuit, filed by P.T. Atlas Manufacturing, L.L.C. and predicated on allegations

of discovery misconduct by appellants in a separate lawsuit, is based on or in

response to appellants’ exercise of the right to petition. For reasons set out below,

we conclude it is not and, therefore, affirm the denial of appellants’ motion. BACKGROUND

The facts are taken from the pleadings and evidence. Sorkin is the owner of

a holding company that owns both GTI and PHI; the parties all are, or have been, in

the concrete reinforcement industry. P.T. Atlas is a competitor of appellants in that

industry.

In September 2019, PHI sued Thomas Mathews, its former vice president of

sales and marketing and director of business development, product management, and

engineering, in state district court in Harris County (the “Harris County Lawsuit”)

to enforce post-employment restrictive covenants. Mathews had worked for PHI for

fourteen years and, during that time had access to and was involved in the

development of PHI’s trade secrets, proprietary information, and confidential

information. In the Harris County Lawsuit, PHI sought declarations regarding the

scope of Mathews’s contractual, common law, and statutory duties and, in particular,

wanted a declaration that Mathews could not work or contract with any entity that

would result in a breach of his duties. At some point after the Harris County Lawsuit

was filed, Mathews became an employee of P.T. Atlas and the lawsuit was amended

to allege that Mathews used PHI’s information to “ramp up” P.T. Atlas as a

competitor.

In response to the Harris County Lawsuit, Mathews filed a plea to the

jurisdiction, which the trial court heard in January 2020 but did not deny until

2 October 2020, and appellants assert that Mathews “stymied” discovery during the

pendency of the motion and afterwards.

Meanwhile, in April 2020, appellants sued P.T. Atlas in federal district court

in Dallas, alleging claims of patent infringement (the “Federal Lawsuit”). Sorkin

and PHI owned patents, which they licensed to GTI. They alleged that P.T. Atlas

was infringing on those patents. In the course of the Federal Lawsuit, appellants

sought discovery of P.T. Atlas’s confidential business contacts, which P.T. Atlas

produced under an agreed protective order and confidentiality agreement. The

produced documents identified P.T. Atlas’s customers, suppliers, and vendors of its

products. After the information was disclosed, the parties reached a settlement

agreement, and the Federal Lawsuit was dismissed in October, six months after it

was filed.

Shortly after dismissal of the Federal Lawsuit, in November 2020, PHI began

sending discovery requests in the Harris County Lawsuit to P.T. Atlas’s customers

and one of its vendors. At the time, P.T. Atlas was not a party to the Harris County

lawsuit. Four days later, P.T. Atlas brought this lawsuit against appellants in district

court in Dallas County, alleging several claims predicated on allegations of

3 discovery abuse to harass and intimidate P.T. Atlas’s customers and destroy its

business.1

In particular, P.T. Atlas alleged that appellants used the Federal Lawsuit to

obtain confidential information about P.T. Atlas’s products and operation and, once

the federal case was dismissed, almost immediately “launched a discovery

offensive” in the Harris County lawsuit, sending new discovery requests to Mathews

and also mounting a “discovery campaign” against P.T Atlas’s suppliers, vendors,

business contractors, employees, and customers, all of whom are third parties. P.T.

Atlas alleged that the “broad and sweeping discovery requests” evidenced

appellants’ intent to use the Federal Lawsuit to gather information, including

obtaining P.T. Atlas’s confidential business contacts, to be used in the Harris County

lawsuit.

In its petition, P.T. Atlas identified three examples of the alleged discovery

misconduct in the Harris County Lawsuit:

(1) On November 6, 2020, PHI sent a request for production to Mathews (the only defendant in the lawsuit and, by this time, P.T. Atlas’s employee) seeking “All Communications with ________.” The request then names fifty-nine people and businesses, most of which are P.T. Atlas’s customers, employees, suppliers and vendors.

(2) On November 13, 2020, PHI sent “what purports to be a document request to Builders Post-Tension, Inc., a P.T. Atlas customer, seeking “[a]ll documents relating to or compromising [sic]

1 PHI named P.T. Atlas as a co-defendant in the Harris County Lawsuit three months after P.T. Atlas brought the suit at issue here. 4 Communications with _________” and listed P.T. Atlas and four of its employees.

(3) PHI sent a request for production to QFC Plastic, Inc., which is a contracting company of P.T. Atlas and has manufactured and built products for sale by P.T. Atlas. PHI requested all communications with P.T Atlas or its employees related to “products manufactured by or for Atlas and products sold by Atlas.”

P.T. Atlas alleged that in addition to the examples provided, appellants have

sent similar requests and threats of subpoenas to many more of its customers,

vendors, employees, and contractors, seeking confidential information about its

sales, product manufacturing, and business operations. The petition alleges the

discovery is “a clear fishing expedition designed to harass, bully and intimidate”

with the goal of “scar[ing] customers and vendors” to “stop them from doing

business” with P.T. Atlas. P.T. Atlas contends the actions of PHI in the Harris

County Lawsuit is part of a conspiracy between all the defendants to inflict damage

on P.T. Atlas.

P.T. Atlas alleged claims for breach of contract, misrepresentation and/or

negligent misrepresentation, declaratory judgment, tortious interference with

existing and/or potential business relations, civil conspiracy, fraud, fraud in the

inducement, joint enterprise, aiding and abetting/assisting or encouraging, alter ego,

abuse of process, and promissory estoppel.

In response to the suit, appellants filed a motion to transfer venue and original

answer, a plea in abatement, and a motion to dismiss under the TCPA. With regards

5 to the latter motion, appellants asserted P.T. Atlas filed the lawsuit in response to a

communications made in the Harris County Lawsuit or the Federal Lawsuit; P.T.

Atlas could not prove each element of the claims covered by the TCPA; and, if

necessary, appellants could show one or more defenses or affirmative defenses bar

any recovery by P.T. Atlas on those claims. P.T. Atlas responded to the motion.

Both sides supplemented their motion and response and filed evidence.

A hearing on the TCPA motion was conducted over two days. When the trial

court did not rule by the 30th day, the motion was denied by operation of law. See

TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.005, 27.008(a). Appellants then brought

this interlocutory appeal. See id. § 27.008(a).

ANALYSIS

The purpose of the TCPA “is to encourage and safeguard the constitutional

rights of persons to petition, speak freely, associate freely, and otherwise participate

in government to the maximum extent permitted by law and, at the same time,

protect the rights of a person to file meritorious lawsuits for demonstrable injury.”

TEX. CIV. PRAC. & REM. CODE ANN. § 27.002. To effectuate this purpose, the

Legislature has provided a two-step procedure to expedite the dismissal of claims

brought to intimidate or silence a defendant’s exercise of these First Amendment

rights. ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017) (per

curiam).

6 Specifically, “[i]f a legal action is based on or in response to a party’s exercise

of the right of free speech, right of petition, or right of association,” the TCPA

provides that such party “may file a motion to dismiss the legal action.” TEX. CIV.

PRAC. & REM. CODE ANN. § 27.003. The movant bears the initial burden of

demonstrating the legal action is based on or in response to the party’s exercise of a

protected right, such as the “right to petition,” and, thus, the statute applies. Id. § at

27.005(b)(1)(B).

In their first issue, appellants argue the denial of their motion to dismiss was

error because they “showed their right to petition is being challenged through a

number of causes of action in [P.T. Atlas’s] underlying petition.”

They contend that the third-party discovery requests are communications made in a

judicial proceeding and therefore the TCPA applies.2

Pursuant to the TCPA, the “exercise of the right to petition” means “a

communication in or pertaining to,” among other things, “a judicial proceeding.” Id.

§ 27.001(4)(a)(i). In turn, a “communication” includes the “making or submitting

of a statement or document in any form or medium, including oral, visual, written,

audiovisual, or electronic.”

2 Appellants claim that all of P.T. Atlas’s claims fall under the TCPA except for the fraud claims, which are statutorily exempt. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.010(12). 7 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. See Riggs & Ray v. State Fair of Tex., No.

05-17-00973-CV, 2019 WL 4200009, at *4 (Tex. App.—Dallas Sept. 5, 2019, pet.

denied). If this nexus is missing, the statute does not apply. Id. Further, we consider

the pleadings and any supporting and opposing affidavits in the light most favorable

to the nonmovant, favoring the conclusion that the nonmovant’s claims are not

predicated on protected expression. Id.

In this case, the focus of P.T. Atlas’s petition is appellants’ conduct in

engaging in allegedly abusive discovery practice and how that conduct is impacting

P.T. Atlas’s business and business associations. This Court has examined

allegations of discovery abuse in the context of the TCPA previously, albeit in a

different procedural posture. See Misko v. Johns, 575 S.W.3d 872, 874 (Tex. App.—

Dallas 2019, pet. denied).

In Misko, the defendant/counterclaimant, Karen Misko, argued the trial court

erred by denying her TCPA motion to dismiss a motion for sanctions filed by Tracy

Johns based on Misko’s alleged discovery misconduct during the course of the

litigation. Id. Johns alleged that Misko had induced a fact witness to sign a false

affidavit and then used that affidavit to defeat Johns’ motion to dismiss; fraudulently

designated two individuals as expert witnesses; and “duped” the trial court into

8 making rulings based on the assumption the designated individuals had relevant

records. Id. at 875. The sanctions motion sought to dismiss all of Misko’s

counterclaims. In response, Misko filed a motion to dismiss under the TCPA,

arguing the sanctions motion was filed in response to her exercise of her right to

petition. The trial court denied Misko’s motion, and she appealed.

On appeal, we focused on the meaning of “legal action” to resolve the case.

We concluded the TCPA’s definition of the term did not encompass a motion for

sanctions based solely on Misko’s alleged discovery misconduct during the course

of the litigation. Id. at 877. In doing so, we relied on the rationale of Dow Jones &

Co. v. Highland Capital Mgmt., LP., 564 S.W.3d 852, 854 (Tex. App.—Dallas 2018,

pet. history), where we concluded that a subpoena seeking discovery from a third

party is not a legal action under the TCPA. See id. In Dow Jones, we reasoned “the

proliferation of motions to dismiss attacking discovery requests, as opposed to the

underlying lawsuits and substantive claims that are the TCPA’s core focus, would

result in an application of the TCPA that strays from . . . its manifest purpose to

secure quick and inexpensive dismissals of meritless ‘legal actions’ that threaten

expressive freedoms.” Dow Jones & Co., 564 S.W.3d at 858. Applying that

reasoning in Misko, we determined that the Legislature had not intended that a

motion based on conduct within litigation that is ancillary to the substantive claims

9 in the case should fall within the statute’s “catch-all provision” of “other judicial

proceeding or filing.” Misko, 575 S.W.3d at 877.

Moreover, we also considered the result if we concluded that the motion for

sanctions was a legal action. We explained that Misko, as the party seeking

dismissal, would still need to show that the sanctions motion was “based on, related

to, or in response to” Misko’s “exercise of a right protected by statute.” Misko, 575

S.W.3d 878 n.5. The motion for sanctions was based on alleged discovery abuse by

Misko during the litigation, and, as we said, “[d]iscovery abuse is not a right

protected by the TCPA.” Id. (citing TEX. CIV. PRAC. & REM. CODE ANN. § 27.003(a)

(legal action must be based on party’s exercise of right of free speech, right to

petition, or right of association)). We have since relied on that statement in Riggs &

Ray, where we concluded that the plaintiff’s claims were not factually predicated on

a previous declaratory judgment action filed by the defendant and thus the TCPA

did not apply. Riggs & Ray, 2019 WL 4200009, at *4.

The matter before us is in a procedurally different posture than Misko in that

P.T. Atlas did not bring his complaints predicated on discovery abuse in the Harris

County Lawsuit where the discovery was being conducted. P.T. Atlas was not a

party to that litigation when the alleged discovery abuse occurred and thus it filed

this separate lawsuit to challenge appellants’ conduct in directing third-party

discovery to P.T. Atlas’s business associates to gain information on P.T. Atlas. Had

10 P.T. Atlas instead filed a petition in intervention in the Harris County Lawsuit to

challenge the alleged discovery abuse, our Misko opinion would support the denial

of a TCPA motion to dismiss and would be consistent with the rationale in both

Misko and Dow Jones. Likewise, here, while the reason for this lawsuit––abusive

discovery–– arose in the context of the Harris County Lawsuit, this suit itself does

not attack any of the substantive claims in the Harris County Lawsuit nor is the suit

based on, or in response to, any of the substantive allegations in that suit. In sum,

we follow our previous determination that discovery abuse is not a right protected

by the TCPA and conclude this outcome is not dependent upon the procedural

vehicle through which the alleged abuse is challenged.

In three sentences, appellants also assert that the settlement agreement in the

Federal Lawsuit is a communication within the ambit of the TCPA and that P.T.

Atlas’s claims are based on “communications among Sorkin, GTI, and PHI and their

attorneys” in the Federal Lawsuit. But appellants do not identify any particular

communication between appellants and their attorneys, and as P.T. Atlas asserts in

its brief, its pleadings make no claim based on attorney/client communications. We

overrule the first issue. Because we conclude that P.T. Atlas’s lawsuit does not fall

within the ambit of the TCPA, we need not address appellants’ second and third

issues.

11 We affirm the denial of the motion to dismiss.

/Amanda L. Reichek/ AMANDA L. REICHEK JUSTICE

210657F.P05

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

FELIX SORKIN, INDIVIDUALLY, On Appeal from the 298th Judicial GENERAL TECHNOLOGIES, District Court, Dallas County, Texas INC., AND PRECISION-HAYES Trial Court Cause No. DC-20-17416. INTERNATIONAL, INC., Opinion delivered by Justice Appellants Reichek; Justices Partida-Kipness and Goldstein participating. No. 05-21-00657-CV V.

P.T. ATLAS MANUFACTURING, L.L.C., Appellee

In accordance with this Court’s opinion of this date, we AFFIRM the denial by operation of law appellants’ TCPA motion to dismiss.

It is ORDERED that appellee P.T. ATLAS MANUFACTURING, L.L.C. recover its costs of this appeal from appellants FELIX SORKIN, INDIVIDUALLY, GENERAL TECHNOLOGIES, INC., AND PRECISION- HAYES INTERNATIONAL, INC.

Judgment entered this 15th day of March 2022.