Opinion
NO. 14-18-00740-CV
08-28-2020
NAVIDEA BIOPHARMACEUTICALS, INC. AND MACROPHAGE THERAPEUTICS, INC., Appellants v. CAPITAL ROYALTY PARTNERS II, L.P.; CAPITAL ROYALTY PARTNERS II - PARALLEL FUND "A", L.P.; PARALLEL INVESTMENT OPPORTUNITIES PARTNERS II, L.P.; CAPITAL ROYALTY PARTNERS II (CAYMAN) L.P.; CR GROUP, L.P.; CRG SERVICING, LLC; AND CAPITAL ROYALTY PARTNERS II - PARALLEL FUND "B" (CAYMAN) L.P., Appellees
On Appeal from the 151st District Court Harris County, Texas
Trial Court Cause No. 2018-24442
MEMORANDUM OPINION
Appellants Navidea Biopharmaceuticals, Inc. and Macrophage Therapeutics, Inc. (together, Navidea) bring this interlocutory appeal challenging the trial court's denial of their motion to dismiss under the Texas Citizens Participation Act (TCPA) seeking dismissal of the declaratory-judgment action filed in April 2018 by appellees Capital Royalty Partners II, L.P.; Capital Royalty Partners II - Parallel Fund "A", L.P.; Parallel Investment Opportunities Partners II, L.P.; Capital Royalty Partners II (Cayman) L.P.; CR Group, L.P.; CRG Servicing, LLC; and Capital Royalty Partners II - Parallel Fund "B" (Cayman) L.P. (together, CRG). See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(12) (interlocutory appeal of denial of TCPA motion to dismiss).
Macrophage Therapeutics, Inc. is a subsidiary of Navidea Biopharmaceuticals, Inc.
All citations to the TCPA in this opinion are to the version in effect before the September 2019 amendments became effective. See Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, 2011 Tex. Gen. Laws 961, 961-64 (current version at Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011), amended by Act of May 24, 2013, 83d Leg., R.S., ch. 1042, §§ 1-3, 5, 2013 Tex. Gen. Laws 2499, 2499-500 (the version at issue in this opinion); see also Act of May 17, 2019, 86th Leg., R.S., ch. 378, §§ 1-12, 2019 Tex. Gen. Laws 684, 684-87 (amending TCPA and providing that suit filed before amendments become effective "is governed by the law in effect immediately before that date").
In three issues, Navidea argues that (1) the trial court erred in holding that Navidea did not meet its burden to show that the TCPA applies to this dispute, (2) the trial court erred in holding that, even if Navidea met its initial burden, CRG met its burden to present clear and specific evidence of a prima facia case, and (3) the trial court abused its discretion in assessing attorney's fees and costs against Navidea on the grounds that Navidea's TCPA motion was frivolous and brought solely for delay. We overrule Navidea's first issue and affirm the trial court's denial of Navidea's TCPA motion on that basis, and accordingly, we do not reach Navidea's second issue. We sustain Navidea's third issue, reverse the trial court's award of attorney's fees and costs, and render judgment denying CRG's request for attorney's fees and costs.
I. BACKGROUND
In 2016, certain CRG entities filed a lawsuit against Navidea in Harris County district court claiming breach of a loan agreement. During proceedings in an Ohio state court concerning the same loan agreement, the parties agreed that Navidea would pay between $47 million and $66 million to settle the dispute, with the final amount to be determined by the resolution of the 2016 Texas lawsuit. As part of the agreement, Navidea agreed to pay a $59 million deposit, and third party Cardinal Health, Inc. agreed to provide a letter of credit in the amount of $7.153 million, which CRG could draw on if Navidea failed to pay the full amount of the trial court's judgment in the 2016 Texas lawsuit within five days of the judgment.
This 2016 Texas lawsuit was assigned to the same trial court that decided the TCPA motion at issue in this appeal.
After trial of the 2016 Texas lawsuit, the trial court rendered a first amended final judgment awarding "$7,000,000 in damages, which is new money, in addition to the $59,000,000.00 previously paid to [CRG] pursuant to the high-low settlement in this case." Navidea did not pay any money within five days of the judgment. What followed was a flurry of letters, as summarized in CRG's pleadings in the declaratory-judgment action at issue here:
Under the TCPA, the court may consider pleadings as proof in determining whether the act applies. See TCPA § 27.006(a). The quotations from the pleadings are taken from CRG's original petition and are repeated in a materially identical fashion under different paragraph numbers in CRG's first amended petition, which was filed after Navidea filed its TCPA motion to dismiss. The first amended petition adds additional allegations and causes of action which Navidea has not challenged and which we do not address here. In assessing our jurisdiction, we note that a motion to dismiss under the TCPA is not mooted by the filing of a subsequent amended petition when the movant requested affirmative relief (here, attorney's fees) in its TCPA motion. See Gaskamp v. WSP USA, Inc., 596 S.W.3d 457, 468-69 (Tex. App.—Houston [1st Dist.] 2020, pet. filed).
25. On January 15, 2018, [Navidea's counsel] sent a letter to Cardinal Health, Inc., and PNC Bank, N.A. Despite the judgment's award of $7 million in "new money" to [CRG], [Navidea] claimed that "Navidea
has already satisfied $4,112,434.17 of the Judgment" and that "only $2,887,565.83 of the Judgment remains outstanding and subject to payment from the Letter of Credit." [Navidea] further claimed that if [CRG] were permitted to draw the full $7,153,000 from the Letter of Credit, then such draw "would be unlawful." [Navidea] threatened that "[i]f such unlawful draw occurs, Navidea will seek repayment of any improperly drawn funds from CRG, Cardinal Health, and/or PNC Bank."
26. On January 16, 2018, [Navidea's counsel] sent another letter to Michael R. Gladman, counsel for Cardinal Health, arguing that "Navidea has already paid $4,112,434.17" of the $7 million awarded under the Judgment. [Navidea] claimed that "[p]ursuant to section 2.3 of the [settlement agreement], CRG is thus not permitted to draw on the letter of credit to the extent of that prior partial payment."
. . . .
28. In [a letter sent to CRG on January 16, 2018], [Navidea] claimed that "Navidea has determined that the amount owed by Navidea to CRG under the parties' Settlement Agreement is $2,887,565.83." [Navidea] claimed that "if CRG were to draw upon the Cardinal Health Letter of Credit, CRG would be in violation of the Judgment and Settlement Agreement and the certifications required under the Cardinal Health Letter of Credit Drawing Certificate." [Navidea] also threatened "that in the event CRG draws on the letter of credit, Navidea intends to take legal action against CRG to recoup all such amounts in excess of the Remaining Payment Amount and to seek any other relief to which it may be entitled under applicable law."
29. Later that day, counsel for [Navidea] followed its letter with an email to [CRG], in which counsel doubled-down in its threats. According to counsel for [Navidea], [CRG's] draw on the Letter of Credit would result in "serious legal ramifications for your firm, CRG as well as the agents of both who have made these fraudulent representations to a national banking institution."
The trial court held a hearing on Navidea's emergency motion to modify the judgment in the 2016 Texas lawsuit and set a supersedeas bond. According to CRG's pleadings, during the hearing the trial court stated that CRG was entitled to the full $7 million in the judgment. Another letter followed:
33. On April 3, 2018, [Navidea's counsel] sent an additional letter to [CRG], . . . again claiming that [CRG was] in breach of contract. [Navidea] acknowledged that "the Texas Trial Court determined that CRG was entitled to a recovery of $7,000,000." Incredibly, despite the Court's explicit rejection of their arguments, [Navidea] continued to claim that "the remaining amount owed by Navidea to CRG under the parties' Settlement Agreement, is $2,887,565.83." [Navidea] also argued that any attempt by [CRG] to draw on the letter of credit in the full amount of $7 million would be "improper and fraudulent." [Navidea] accused [CRG] of violating the [settlement agreement] and "intentionally deceiv[ing] the Texas Trial Court" by claiming that the First Amended Final Judgment awards [CRG] $7 million in "new money."
34. And, [Navidea] continued [its] baseless threats of legal action if [CRG] acted consistent with the Court's explicit rulings:
As I have previously informed you, if CRG were to draw upon the Cardinal Health Letter of Credit, CRG would be in violation of the Settlement Agreement, the Ohio [sic] Judgment relating thereto, and the certifications required under the Cardinal Health Letter of Credit Drawing Certificate.
Please be advised, if CRG draws on the letter of credit, Navidea intends to take legal action against CRG to recoup all such amounts in excess of the Remaining Payment Amount and to seek any other relief to which it may be entitled under applicable law including, but not limited to, CRG's breach of the Settlement Agreement and any fraud committed by CRG relating thereto.
CRG then drew on the letter of credit in the full amount and brought the lawsuit now before this court seeking a declaratory judgment "that [CRG is] not in breach of the [Ohio settlement agreement] as a result of [its] actions in drawing on the Letter of Credit in the full amount of $7,153,000." The trial court denied Navidea's TCPA motion to dismiss and awarded attorney's fees and costs to CRG on the grounds that Navidea's motion was frivolous and brought solely for purposes of delay.
II. ANALYSIS
A. TCPA framework
The TCPA provides a procedure for dismissing meritless lawsuits that are based on the defendant's exercise of the rights of free speech, petition, or association as defined in the statute. See TCPA § 27.003. Under the TCPA, "[i]f a legal action is based on, relates to, or is in response to a party's exercise of the right of free speech, right to petition, or right of association, that party may file a motion to dismiss the legal action." Id. § 27.003(a).
We review the trial court's denial of Navidea's TCPA motion to dismiss de novo. See Rehak Creative Servs. v. Witt, 404 S.W.3d 716, 725 (Tex. App.—Houston [14th Dist.], no pet.), disapproved on other grounds by In re Lipsky, 460 S.W.3d 579 (Tex. 2015). In doing so, we "make[] an independent determination and appl[y] the same standard used by the trial court in the first instance." Id. Application of this standard usually involves a "two-step" analysis in which we determine (1) whether the defendant has shown, by a preponderance of the evidence, that the plaintiff's legal action is based on, relates to, or is in response to the defendant's exercise of the right of free speech, to petition, or of association; and if so (2) whether the plaintiff has shown, by clear and specific evidence, a prima facie case for each essential element of the claim in question. TCPA § 27.005(b), (c); Lipsky, 460 S.W.3d at 586-87.
B. Right to petition
Navidea first argues that CRG's declaratory-judgment action is based on, relates to, or is in response to Navidea's exercise of its right to petition. As relevant here, the right to petition includes "a communication in or pertaining to . . . a judicial proceeding." TCPA § 27.001(4)(A)(i). Our court has held that pre-suit communications do not fall within the scope of a "judicial proceeding" under the TCPA. See QTAT BPO Sols., Inc. v. Lee & Murphy Law Firm, G.P., 524 S.W.3d 770, 778 (Tex. App.—Houston [14th Dist.] 2017, pet. denied) ("pre-suit communication with attorney . . . was not made in or pertaining to a judicial proceeding"); see also Levatino v. Apple Tree Cafe Touring, Inc., 486 S.W.3d 724, 728-29 (Tex. App.—Dallas 2016, pet. denied) ("judicial proceeding" is proceeding that has been "commenced" or "initiated"; demand letters do not fall within TCPA right to petition).
Navidea argues that CRG's declaratory-judgment action is based on, related to, or in response to Navidea's letters, and that those letters, sent in the wake of and discussing the first amended judgment in the 2016 Texas lawsuit, are communications "in or pertaining to . . . a judicial proceeding." See TCPA § 27.001(4)(A)(i). In its first argument in response, CRG does not dispute that the 2016 Texas lawsuit is a "judicial proceeding," but instead argues that the letters are not "in or pertaining to" the 2016 Texas lawsuit or any other existing litigation. Rather, CRG characterizes the letters as threatening future litigation, a topic which falls outside the scope of the TCPA under our decision in QTAT. See 524 S.W.3d at 778.
Our review of the letters, as liberally quoted in CRG's pleadings, indicates that they "pertain" both to ongoing litigation, which constitutes a protected "judicial proceeding," and to Navidea's threats of future litigation, which are unprotected communications. Looking just at the final letter sent by Navidea to CRG, the letter states that "the Texas Trial Court determined that CRG was entitled to a recovery of $7,000,000" but that "the remaining amount owed by Navidea to CRG under the parties' Settlement Agreement, is $2,887,565.83." This statement, among others quoted in CRG's pleadings, "pertains" to the 2016 Texas lawsuit and the construction of the trial court's judgment in that then-ongoing judicial proceeding. The letter continues, "Please be advised, if CRG draws on the letter of credit, Navidea intends to take legal action against CRG to recoup all such amounts in excess of the Remaining Payment Amount . . . ." This statement, among others quoted in CRG's pleadings, does not "pertain" to an existing judicial proceeding but to potential future litigation, and accordingly falls outside of the scope of the TCPA. See QTAT, 524 S.W.3d at 778. We conclude that the letters include both protected and unprotected communications.
At best, then, Navidea's argument that CRG's declaratory-judgment action is based on, related to, or in response to the letters is an argument that the action stems from a mixture of protected and unprotected conduct. While the parties do not address such a scenario, our sister courts have considered this circumstance on several occasions. "When a legal action is in response to both expression protected by the TCPA and other unprotected activity, the legal action is subject to dismissal only to the extent that it is in response to the protected conduct, as opposed to being subject to dismissal in its entirety." Walker v. Hartman, 516 S.W.3d 71, 81 (Tex. App.—Beaumont 2017, pet. denied). However, when the movant does not provide guidance as to how to determine which claims are in response to protected rather than unprotected conduct, and the courts are unable to identify a means to accomplish the task, our sister courts have concluded that the trial court does not err by denying the motion. Beving v. Beadles, 563 S.W.3d 399, 409 (Tex. App.—Fort Worth 2018, pet. denied); see Weller v. MonoCoque Diversified Interests, LLC, No. 03-19-00127-CV, 2020 WL 3582885, at *4 (Tex. App.—Austin July 1, 2020, no pet. h.) (mem. op.) (affirming denial of TCPA motion when non-movant's counterclaims were "based on a mix of protected and unprotected activity" and "the pleadings, evidence, and parties' argument provide no way to parse out which particular counterclaim is based on protected rather than unprotected conduct and to what degree").
Here, we do not see a practicable way to parse out the degree to which CRG seeks a declaration based on protected communications concerning existing litigation or unprotected communications concerning threatened future litigation, and Navidea does not provide us any guidance on the issue. Accordingly, we conclude that the trial court did not err in determining that Navidea did not meet its burden to show that the TCPA's right-to-petition prong applies to CRG's declaratory-judgment action. See Beving, 563 S.W.3d at 409; Weller, 2020 WL 3582885, at *4.
C. Free speech
Navidea next argues that CRG's declaratory-judgment action was based on, related to, or in response to its exercise of its right of free speech. "'Exercise of the right of free speech' means a communication made in connection with a matter of public concern." TCPA § 27.001(3). As relevant here, a "matter of public concern" "includes an issue related to . . . environmental, economic, or community well-being." Id. § 27.001(7)(B).
To be protected, the TCPA does not require that the communication specifically mention the matter of public concern, nor does it require more than a "tangential relationship" to the same. ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 900 (Tex. 2017) (per curiam). However, "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." Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 137 (Tex. 2019). The communication still must have "public relevance beyond the pecuniary interests of the private parties involved." Id. at 136. That is, the communication must refer "to matters 'of political, social, or other concern to the community,' as opposed to purely private matters." Id. at 135 (quoting Brady v. Klentzman, 515 S.W.3d 878, 884 (Tex. 2017)).
Here, Navidea argues that, because it is a public-traded company, statements in the letters "about whether Navidea owes another $7 million or $2.89 million are matters of public concern materially related to economic or community well-being for Navidea's myriad shareholders across the nation." We disagree. Creative Oil disapproved of applying the TCPA's free-speech prong to claims affecting only "the economic interest of the parties and others with an interest" in the transaction. 591 S.W.3d at 137; see also United Dev. Funding, L.P. v. Megatel Homes III, LLC, No. 05-19-00647-CV, 2020 WL 2781801, at *3-4 (Tex. App.—Dallas May 29, 2020, no pet. h.) (mem. op.) (applying Creative Oil and rejecting argument that communications were matter of public concern "because they relate to the economic well-being of [movants] and their investors"). Moreover, Navidea does not provide any contextual evidence to explain why "whether Navidea owes another $7 million or $2.89 million" is of such import to rise to the level of a matter of "political, social, or other concern to the community," particularly given the record shows that Navidea does not dispute that it must pay at least $59 million as a result of its dealings with CRG. Creative Oil, 591 S.W.3d at 137 (quotation omitted). We conclude that Navidea has not shown by a preponderance of the evidence that CRG's declaratory-judgment action related to a "matter of public concern," and accordingly, the action does not fall within the TCPA's free-speech prong. TCPA § 27.001(3), (7).
As we conclude that Navidea did not meet its initial burden under the TCPA, we overrule Navidea's first issue. We do not reach Navidea's second issue, which addresses whether CRG met its burden under the TCPA to prove a prima facie case, and further argues that Navidea would be entitled to an award of attorney's fees in the event this court were to reverse the trial court's order denying Navidea's TCPA motion to dismiss. See Tex. R. App. P. 47.1.
D. Attorney's fees
In its third issue, Navidea argues the trial court abused its discretion in awarding CRG its attorney's fees based on findings that Navidea's TCPA motion was "frivolous and solely intended to delay." See TCPA § 27.009(b) ("If the court finds that a motion to dismiss filed under this chapter is frivolous or solely intended to delay, the court may award court costs and reasonable attorney's fees to the responding party."); see also D Magazine Partners, L.P. v. Rosenthal, 529 S.W.3d 429, 441-42 (Tex. 2017) (addressing merits of attorney's fees issue in appealable interlocutory order from denial of TCPA motion "in the interest of judicial economy"). We review the trial court's decision to award attorney's fees under section 27.009(b) of the TCPA for an abuse of discretion. Sullivan v. Tex. Ethics Comm'n, 551 S.W.3d 848, 857 (Tex. App.—Austin 2018, pet. denied). A trial court abuses its discretion when it acts arbitrarily or unreasonably or without regard to guiding principles. Id.; see Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).
"Frivolous" is not defined in the TCPA. However, "the word's common understanding contemplates that a claim or motion will be considered frivolous if it has 'no basis in law or fact' and 'lacks a legal basis or legal merit.'" Sullivan, 551 S.W.3d at 857 (internal citations omitted). In addressing Navidea's argument that CRG's declaratory-judgment action was based on the right to petition, we concluded that some of the communications at issue arguably constituted protected activity under the TCPA. On this basis alone, we cannot agree that Navidea's TCPA motion has no basis in law or fact. See id. (reversing finding TCPA motion was frivolous when conduct at issue "might be argued to technically fit the [TCPA]'s broad definition"). In addition, we note that in rejecting Navidea's argument that the TCPA's free-speech provision does not apply, we relied heavily on Creative Oil, a decision that had not been issued at the time this appeal was filed. See 591 S.W.3d 127. We conclude the trial court abused its discretion in determining that Navidea's motion was frivolous.
Regarding the trial court's finding that Navidea's TCPA motion was solely intended to delay, CRG argues that the finding is supported by Navidea's setting the hearing on the motion for 56 days after the motion's filing, as well as the frivolousness of Navidea's arguments. We have already addressed the frivolousness argument and reject it again here. Further, we disagree that the timing of the hearing—which was within the 60 days allowed under normal circumstances to hold a hearing on a TCPA motion to dismiss, see TCPA § 27.004(a)—supports the finding that Navidea's motion was filed solely for purposes of delay. See Sullivan, 551 S.W.3d at 857; see also Fawcett v. Grosu, 498 S.W.3d 650, 665 (Tex. App.—Houston [14th Dist.] 2016, pet. denied) ("A party seeking attorney's fees and costs [under TCPA section 27.009(b)] bears the burden to put forth evidence regarding his right to the award[.]").
We conclude the trial court abused its discretion in awarding CRG attorney's fees on the basis that Navidea's motion was frivolous or solely intended for delay. See TCPA § 27.009(b). We sustain Navidea's third issue.
III. CONCLUSION
Having concluded that Navidea did not meet its initial burden under the TCPA, we overrule Navidea's first issue, decline to reach its second, and affirm the trial court's denial of Navidea's TCPA motion to dismiss. See Hous. Tennis Ass'n, Inc. v. Thibodeaux, No. 14-19-00019-CV, 2020 WL 2832130, at *5-6 (Tex. App.—Houston [14th Dist.] May 28, 2020, no pet. h.) (proper disposition when appellant does not show that claims fall within TCPA is to affirm trial court's judgment, not dismiss for want of jurisdiction). We sustain Navidea's third issue, reverse the trial court's award of attorney's fees and costs against Navidea, and render judgment denying CRG's request for attorney's fees and costs. See Stallion Oilfield Servs. Ltd. v. Gravity Oilfield Servs., LLC, 592 S.W.3d 205, 223 (Tex. App.—Eastland 2019, pet. denied) (rendering judgment that non-movant take nothing on its request for attorney's fees under TCPA when trial court abused its discretion in awarding fees under TCPA § 27.009(b)); Sullivan, 551 S.W.3d at 858 (same).
/s/ Charles A. Spain
Justice Panel consists of Justices Christopher, Spain, and Poissant.