Opinion
NO. 01-19-00253-CV
09-22-2020
INFINITY SYSTEMS, INC., Appellant v. GRAY MECHANICAL CONTRACTORS, LLC, Appellee
On Appeal from the 295th District Court Harris County, Texas
Trial Court Case No. 2018-59464
MEMORANDUM OPINION
This appeal arises out of a trial court's denial of a motion to dismiss under the Texas Citizens Participation Act ("TCPA"). Gray Mechanical Contractors, Inc. sued its competitor, Infinity Systems, Inc., and its former employees, Kyle Self and Anthony Harrison, for conduct related to an alleged scheme to misappropriate, wrongfully disclose, and use Gray's confidential information. The trial court denied the motion. Infinity filed this interlocutory appeal, raising four issues challenging the trial court's denial: (1) whether the trial court erred in denying Infinity's TCPA motion to dismiss; (2) whether the trial court erred in making findings of fact and conclusions of law without legally or factually sufficient evidence; (3) whether the trial court abused its discretion in entering and considering a spoliation presumption in denying Infinity's TCPA motion to dismiss; and (4) whether the trial court abused its discretion in overruling Infinity's objections to Gray's evidence responsive to Infinity's TCPA motion. We only reach Infinity's first issue because it resolves the appeal. See TEX. R. APP. P. 47.1. Because the TCPA does not apply, we affirm.
See TEX. CIV. PRAC. & REM. CODE §§ 27.001-.011. This suit involved the pre-September 1, 2019 version of the TCPA.
Background
Gray sells mechanical contracting, HVAC construction, and maintenance services in Texas and Louisiana. Gray serves the healthcare, commercial office, government, retail, education, and industrial sectors. Like Gray, Infinity also sells mechanical contracting, HVAC construction, and maintenance services. Since 2008, Infinity and Gray have competed for bids in the same market.
In 2015, Gray hired Harrison as its Project Manager. His duties included compiling project estimations, responding to bids, projecting project-level revenue and labor needs, and interacting with clients, among other tasks. He had unfettered access to Gray's proposal letter templates and bid documents describing how the company prices construction work. Gray stored this information in a shared network drive accessible only to employees with a legitimate business need for project estimations, like Harrison. Gray limited access to this network drive "to prevent the proprietary data stored on the drive from leaking to the public or competing entities."
Self worked in the construction and engineering industry for about 11 years before Gray hired him as Vice President-Industrial in early 2018. Self was responsible for updating Gray's "proprietary calculation methodology" by updating the "labor and burden rates . . . to reflect the rates used by Gray." Self remained in this position for four months until Gray fired him on July 2, 2018, for allegedly misusing the company credit card for personal expenses. About a week later, Infinity hired Self as its Vice President of Business Development. In this role, Self was responsible for "[e]stimating, sales, [and] client relationships."
In the first half of 2018, Gray developed its relationship with Brookstone Construction ("Brookstone") to become a preferred Brookstone vendor. As a result of its efforts, Gray won two Brookstone bids. Gray projected $5,500,000 in additional sales by the end of 2018.
At 1:53 p.m. on June 11, 2018, Gray submitted a bid of $1,006,000 to Brookstone for HVAC construction services at the San Jacinto College Campus- Cosmetology Center Addendum 2 Project (the "SJCC Project"). About 30 minutes later, Infinity submitted its bid for the SJCC project for $1,003,000. The SJCC Project bid process was a blind submission. All bid information from competitors remained private until Brookstone received all bids.
Clint James May, Gray's Chief Operating Officer, "suspected foul play" when he learned that there was a marginal difference between Gray's bid and Infinity's bid for the SJCC Project. Because Harrison was responsible for submitting the bids, May reviewed Harrison's telephone records to determine how Infinity's bid "was approximately 0.3% less than" Gray's bid. Telephone records revealed that Harrison had exchanged over 200 text messages with Self between 8:29 a.m. and 7:03 p.m. on that day. Harrison used a cell phone issued by Gray to text Self, while Self used his own personal cell phone. May suspected that Harrison shared Gray's confidential proprietary information with Self (and Infinity) right before Gray submitted its bid on the SJCC Project.
The next day, May confronted Harrison about his concerns. Harrison admitted that he sent Gray's confidential bid information to Self "for the purpose of arming Self and Infinity with sufficient information to underbid Gray [] by a minimal amount." He told May that Self and Infinity requested Gray's confidential documents. At 10:54 a.m. on July 11, 2018, Harrison sent Self an email entitled "Estimate" and attached five separate files that outlined Gray's estimation process for its bids on construction projects. And Harrison admitted that he provided Self with Gray's final bid value for the SJCC Project, the linear footage of pipe Gray included in its SJCC Project bid, and the number of work hours in its SJCC Project estimate. According to May, Harrison lacked any authority to disclose this information to Self or Infinity. May immediately terminated Harrison, and soon, Infinity hired Harrison as its Construction Manager.
The five files attached to the Harrison's e-mail to Infinity include: a Microsoft Word document containing Gray's project proposal template; and four Microsoft Excel spreadsheets entitled Controls Estimating 7.2.14, Recap Master V3.0, Short Recap Master V1.0, and Start-up and Air Balance Estimate Sheet.
Four days later, Self emailed Brookstone to withdraw Infinity's bid for the SJCC Project:
I need to pull my quote on this one. Apparently my previous employer was involved as well and don't want to cause any issues. I appreciate the invite and I will continue to bid [for] future work but unfortunately [I] cannot honor this quote although I doubt I was low.
About two days after Self emailed Brookstone, May met with Stephen Dishman, Brookstone's President and CEO, and informed him about the bid-collusion incident involving Self, Harrison, and Infinity. May withdrew Gray's bid from consideration. This decision was necessary because "the SJCC Project involved public funds" and "any bids must be free of any taint of imp ropriety." Gray lost $106,000 in expected profits from the SJCC Project. And despite Gray's efforts to become a preferred Brookstone vendor, Brookstone awarded no additional projects to Gray, even though Gray submitted at least 18 bids for construction projects after this meeting.
Based on these factual allegations, Gray sued Self, Infinity, and Harrison for breach of the duty of loyalty and fiduciary duty, trade secret misappropriation under the Texas Uniform Trade Secrets Act ("TUTSA"), tortious interference, and civil conspiracy. Gray claimed that Harrison breached the duty of loyalty and fiduciary duty owed to Gray "by sending Self, individually and acting in the course and scope of his employment with Infinity, information related to and detailing [Gray's] bid on the [SJCC] Project and their bidding proposals in general."
See TEX. CIV. PRAC. & REM. CODE § 134A.001-.008.
Gray maintained that Harrison, Self, and Infinity violated TUTSA by using and disclosing Gray's SJCC Project bid information, which constituted trade secret information. In explaining the reasonable measures it had taken to keep the bid information a secret, Gray explained that, in its "regular business practice," it "safeguard[s] its estimating and man hour calculations during competitive project bidding." And because the bidding process was a "blind submission," Gray alleged that its "linear pipe footage, man hour calculations, and final proposal for the [SJCC] Project" were "proprietary and confidential." Gray also alleged that the bid information had "actual and independent economic value" to Infinity because "it armed Infinity with the information necessary to underbid Gray by a slim margin." As for tortious interference with business relations, Gray alleged that Self and Harrison were "well aware" of the "prospective contracts and business relationship" between Gray and Brookstone, yet took overt steps to "engage in unlawful restraint on trade" by "improperly compet[ing] with Gray." Gray alleged that four incidents constituted tortious interference with Gray's business relations:
(1) Self, individually and as an employee and representative of Infinity, conspired with Harrison for Harrison to breach his duty of loyalty and fiduciary duty owed to Gray [] to facilitate an opportunity for Infinity to underbid Gray [] on the [SJCC] Project, (2) Self, individually and as an employee and representative of Infinity, conspired with Harrison to misappropriate [Gray's] confidential bid information for the [SJCC] Project, (3) Self, individually and as an employee and representative of Infinity, and Infinity used the improperly obtained information to submit a lower bid than Gray [] for the [SJCC] Project, and (4) when confronted by Gray [], Infinity refused to take corrective action.
Finally, Gray alleged that Self, Harrison, and Infinity engaged in a civil conspiracy to (1) "misappropriate" Gray's "trade secrets," (2) "commit a breach of duty of loyalty and fiduciary duty," and (3) "tortiously interfere with Gray's prospective contracts and business relation." Gray also alleged that there was an "understanding" among Self, Harrison, and Infinity "regarding the object" of the bid collusion conspiracy and "how it was to be carried out." Infinity requested actual and exemplary damages, attorneys' fees, court costs, and interest.
While the suit was pending, Gray conducted limited discovery and sought production of the "communications" from Self relating to Gray and Brookstone. But Self did not produce the text messages from his personal cell phone because he could not retrieve and transfer his contacts and text messages after he bought a new phone.
Meanwhile, Infinity answered the suit and later filed an amended TCPA motion to dismiss Gray's claims as targeting its First Amendment rights, namely, its right of free speech and right of association. According to the amended TCPA motion, Gray's lawsuit was a "vengeful attempt to retaliate against Infinity . . . for freely communicating in connection with issues related to goods and services in the marketplace" and for Infinity, Self, and Harrison "associating among themselves to pursue common interests in employment with and operations of a competing construction business." Thus, Infinity denied all allegations made by Gray. Infinity's position was that it did not engage in any tortious conduct because its bid in the SJCC Project was $1,021,000, which was $15,000 higher than Gray's bid. Infinity posited that it did not cause Gray to lose the bid on the SJCC Project because it "immediately withdrew its bid on July 16, 2018," when it found out that Gray had also submitted a bid for the same project. Gray responded to the amended TCPA Motion and attached evidence, including May and Dishman's affidavits and Self's deposition testimony. Infinity objected to portions of May and Dishman's affidavits.
Before the trial court ruled on Infinity's amended TCPA motion, Gray filed a motion for spoliation presumption, arguing that it was entitled to a spoliation presumption over Self's failure to preserve the text messages from his cell phone, despite knowing that they were at issue in Gray's suit.
After the hearing on the motions, the trial court ruled on Infinity's evidentiary objections and denied the amended TCPA motion. The trial court also granted Gray's motion for spoliation presumption, finding that Self, individually and as Infinity's agent, "destroyed or failed to preserve his text messages" with Harrison between July 2018 and August 2018. The trial court entered its findings of fact and conclusions of law on Infinity's amended TCPA motion. Infinity appealed.
The trial court sustained in part and overruled in part Infinity's objections to portions of May and Dishman's testimony.
The only parties to this appeal are Appellant Infinity and Appellee Gray. Self and Harrison did not appeal.
The TCPA
A. Applicable law
"[T]he . . . TCPA protects citizens from retaliatory lawsuits that seek to intimidate or silence them on matters of public concern." In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015). 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 § 27.002. A party may move to dismiss a legal action that "is based on, relates to, or is in response to [that] party's exercise of" any of three First Amendment rights: the right of free speech, the right to petition, or the right of association. Id. § 27.003(a).
Infinity's TCPA motion raised two First Amendment rights, the right of association and the right of free speech. First, the TCPA defines "exercise of the right of association" as a "communication between individuals who join together to collectively express, promote, pursue, or defend common interests." Id. § 27.001(2). "Communication" is defined under the TCPA as including "the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic." Id. § 27.001(1); Adams v. Starside Custom Builders, LLC, 547 S.W.3d 890, 894 (Tex. 2018). Second, the TCPA defines "exercise of the right of free speech" as a "communication made in connection with a matter of public concern." Id. § 27.001(3). A "matter of public concern" includes an issue related to "a good, product, or service in the marketplace." Id. § 27.001(7)(E).
The TCPA movant bears the initial burden of showing by a preponderance of evidence that the legal action is based on, relates to, or is in response to the movant's exercise of one of the three rights listed in the TCPA statute. Id. § 27.005(b). If the TCPA movant meets this burden, then the burden shifts to the nonmovant to establish "by clear and specific evidence a prima facie case for each essential element of the claim in question." Id. § 27.005(c). To make a showing of a prima facie case, the nonmovant must provide "the 'minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.'" Lipsky, 460 S.W.3d at 590 (quoting In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (per curiam)). "Prima facie proof is not subject to rebuttal, cross-examination, impeachment[,] or even disproof." Ruiz v. Conoco, Inc., 868 S.W.2d 752, 757 (Tex. 1993).
Dismissal of the case is required if the nonmovant fails to meet its burden or if the movant "establishes by a preponderance of the evidence each essential element of a valid defense to the nonmovant's claim." Id. § 27.005(d). When determining whether to dismiss the legal action, the trial court considers "the pleadings and supporting and opposing affidavits stating the facts on which the liability or defense is based." Id. § 27.006(a). "The basis of a legal action is not determined by the defendant's admissions or denials but by the plaintiff's allegations" and "[w]hen it is clear from the plaintiff's pleadings that the action is covered by the [TCPA], the defendant need show no more." Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017).
B. Appellate jurisdiction and standard of review
We have jurisdiction to review an interlocutory order that denies a party's TCPA motion to dismiss. TEX. CIV. PRAC. & REM. CODE § 51.014(a)(12). We review de novo the denial of a TCPA motion to dismiss and consider the pleadings and the evidence in a light favorable to the nonmovant. See Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 132 (Tex. 2019); Dolcefino v. Cypress Creek EMS, 540 S.W.3d 194, 199 (Tex. App.—Houston [1st Dist.] 2017, no pet.). We interpret the TCPA in accordance with its express statutory language. See Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). And finally, we construe the TCPA "liberally to effectuate its purpose and intent fully." TEX. CIV. PRAC. & REM. CODE § 27.011(b); see State ex rel. Best v. Harper, 562 S.W.3d 1, 11 (Tex. 2018).
C. The right of association
We first address Infinity's exercise of its right of association. Infinity contends that all of Gray's claims are based on, relate to, or are in response to "alleged communications" between Infinity, Harrison, and Self "in which they joined together to collectively express, promote, or pursue their common interests in employment with Infinity and the business operations of Infinity." In response, Gray argues that it filed the lawsuit not because Infinity hired Self and Harrison, but because Harrison, Self, and Infinity "participated in a conspiracy to steal and use" Gray's "confidential and proprietary information so that Infinity might win . . . [the] SJCC Project." The issue here is whether Infinity carried its burden of establishing the "common interests" prong.
Gray's factual allegations are much like those in Gaskamp v. WSP USA, Inc., 596 S.W.3d 457 (Tex. App.—Houston [1st Dist.] 2020, pet. filed) (en banc). In Gaskamp, a company and its affiliates sued former employees for tortious conduct related to misappropriating trade secrets and confidential information. Id. at 462. The en banc court analyzed the meaning and legislative intent of the term "common interests." Id. at 471-76. The Court construed the term "'common' in the phrase 'common interests'" to mean 'of or relating to a community at large: public.'" Id. at 476.
The Court then shifted its focus to reviewing the TCPA record. Id. According to the former employees, their common interest was their new business venture. Id. The Court held that the former employees did not meet their burden of showing, by a preponderance of evidence, that the legal action was based on, relates to, or is in response to an exercise of their right of association. Id. The Court explained that allegations involving misappropriation of trade secrets and conspiring to commit related torts "only benefit[] the tortfeasors" and fall outside the definition of "common interests." Id.
We apply Gaskamp here. Infinity asserts that the "common interest" that it allegedly "join[ed] together to collectively express, promote, pursue, or defend" was its business operations and employing Harrison and Self. We must determine the basis of Gray's lawsuit by reviewing its allegations in the amended petition. Hersh, 526 S.W.3d at 467. According to Gray's amended petition, Infinity's conduct and communications through Self and with Harrison involved misappropriating Infinity's trade secrets and conspiring to commit three separate torts, which benefitted only Infinity, Harrison, and Self, and not the community at large. See Gaskamp, 596 S.W.3d at 476; see also Quiroga v. Am. Lamprecht Transp., Inc., No. 01-19-00992-CV, 2020 WL 2608152, at *3 (Tex. App.—Houston [1st Dist.] May 22, 2020, no pet. h.) (mem. op.) (determining "common interests" element not met because allegations of associating to divert business to competitors "are private not public because they do not relate to the community at large"). For these reasons, we hold that Infinity did not meet its burden of showing, by a preponderance of the evidence, that Gray's lawsuit was based on, relates to, or is in response to an exercise of its right of association. See id.; see also TEX. CIV. PRAC. & REM. CODE § 27.005(b)(3).
D. The right of free speech
Infinity asserts that Gray's claims are based on, relate to, or are in response to protected communications between Infinity, Harrison, and Self because they involve employment opportunities for Harrison and Self and Infinity's business operations. Specifically, Infinity asserts that the protected statements and conduct include "Self's communications with Infinity about employment opportunities for Harrison," solicitation of "professional connections from Gray to Infinity," and use and disclosure of "tools and non-confidential information," such as the documents Harrison emailed to Self when the SJCC Project bids were due. The question is whether Infinity's communications, as alleged by Gray, were in connection with a matter of public concern. We hold that they were not.
In Creative Oil & Gas, the lessor of an oil and gas lease sued the lessee in a trespass and trespass to try title action, "seeking a ruling that the lease was terminated due to cessation of production." 591 S.W.3d at 130. The lessee and the operator asserted counterclaims against the lessor alleging that the lessor had breached the lease and had falsely told third-party purchasers of production from the lease that the lease was expired and that payments on the purchases should stop. Id. The lessor filed a TCPA motion to dismiss the counterclaims, arguing that its statements to third parties about the lease were an exercise of its right of free speech because these communications were made in connection with matters of public concern: economic well-being and a good, product, or service in the marketplace. Id. at 134.
The Texas Supreme Court rejected a sweeping application of the statutory phrase "matter of public concern" to certain statements and activities. Id. at 137 (observing that "not every communication related somehow to one of the broad categories set out in section 27.001(7) always regards a matter of public concern"). In construing the common meaning of the term "in the marketplace" within the statutory definition of "matter of public concern," the court excluded "purely private matters" from TCPA protection. Id. at 135. The court reasoned that private disputes "affecting only the fortunes of the private parties involved is simply not a 'matter of public concern' under any tenable understanding of those words." Id. at 137; see Gaskamp, 596 S.W.3d at 477 (holding private communications among alleged tortfeasors "had no potential impact on the wider community or a public audience of potential buyers or sellers" considering that those "communications had no public relevance beyond the pecuniary interests of the private parties"); Newpark Mats & Integrated Servs., LLC v. Cahoon Enters., LLC, — S.W.3d —, No. 01-19-00409-CV, 2020 WL 1467005, at *8-9 (Tex. App.—Houston [1st Dist.] Mar. 26, 2020, no pet.) (applying Creative Oil & Gas and holding that internal communications about fraudulent billing practices were not made in connection with a matter of public concern because the interests in the outcome of the "private business dispute" had no "relevance to the broader marketplace or otherwise could reasonably be characterized as involving public concerns").
After reviewing Gray's amended petition, we do not find that any claims by Gray against Infinity involve allegations of breach of non-compete, non-solicitation, or non-disclosure agreements. Instead, Gray's amended petition suggests that its claims turn on Infinity, Harrison, and Self's alleged involvement in a scheme to misappropriate and use Infinity's trade secrets and confidential information. Claims based on communications between alleged tortfeasors to misappropriate confidential and proprietary information are not communications made in connection with a matter of public concern. Compare Creative Oil & Gas, 591 S.W.3d at 137 (private tortious business communications about a single well's production were not made in connection with a matter of public concern), with Lippincott v. Whisenhunt, 462 S.W.3d 507, 509-10 (Tex. 2015) (per curiam) (private communications about whether a nurse anesthetist properly provided medical care to patients were made in connection with a matter of public concern).
That Infinity's communications with Harrison and Self tangentially relate to a publicly-funded construction project does not change our view on the matter-of-public-concern element. The suit's narrow focus is the subset of allegedly tortious statements among the tortfeasors. Infinity, Self, and Harrison's communications were limited to the trio's potential pecuniary interests in the SJCC Project. See, e.g., Creative Oil & Gas, 591 S.W.3d at 134 (communications involving an expired oil lease and lease payments were relevant only to the parties to the particular transaction); Gaskamp, 596 S.W.3d at 477 ("[T]he communications had no public relevance beyond the pecuniary interests of the private parties"); Quiroga, 2020 WL 2608152, at *3 (communications about allegedly tortious conduct were not made in connection with a matter of public concern because the communications between the tortfeasors were "meant to affect their private fortunes").
Because Infinity did not demonstrate that its private communications through Self and with Harrison were "made in connection with a matter of public concern," we conclude Infinity failed to show, by a preponderance of the evidence, that Gray's lawsuit was based on, relates to, or was in response to an exercise of its right of free speech under the TCPA. See Creative Oil & Gas, 591 S.W.3d at 136-37; see also TEX. CIV. PRAC. & REM. CODE § 27.005(b)(1).
Conclusion
We hold that the trial court did not err in denying Infinity's TCPA motion to dismiss because the TCPA does not apply. We affirm.
Sarah Beth Landau
Justice Panel consists of Justices Keyes, Kelly, and Landau.