Court Opinion

ID: 4416609
Source: CourtListenerOpinion
Date Created: 2019-07-15 08:54:44.037001+00
Date Added: 2024-06-11T14:51:43.303595
License: Public Domain

AFFIRMED and Opinion Filed July 12, 2019

                                          S   In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                       No. 05-18-00874-CV

                     JAMES DAMONTE, Appellant
                               V.
     HALLMARK FINANCIAL SERVICES, INC. AND HEATH XS, LLC, Appellees

                       On Appeal from the 101st Judicial District Court
                                    Dallas County, Texas
                            Trial Court Cause No. DC-18-05976

                              MEMORANDUM OPINION
                         Before Justices Whitehill, Molberg, and Reichek
                                   Opinion by Justice Reichek
       James Damonte appeals the trial court’s denial of his motion to dismiss under the Texas

Citizens Participation Act (“TCPA”). In eight issues, Damonte generally contends the trial court

erred in denying his motion because the lawsuit brought against him by Hallmark Financial

Services, Inc. and Heath XS, LLC (collectively “Hallmark”) is based on, related to, or in response

to his exercise of his rights of free speech and association. Damonte further contends Hallmark

failed to establish by clear and specific evidence a prima facie case for each of the elements of its

claims. Because we conclude Damonte failed to show that the TCPA applies to the claims made

against him by Hallmark in this case, we affirm the trial court’s order.
                                          Background

       Hallmark is a diversified specialty lines property/casualty insurance company licensed to

do business in all fifty states. In 2008, Hallmark acquired Heath, an underwriting company. At

the time of the acquisition, Damonte was executive vice president of Heath working in New Jersey

along with a small team of fellow employees. Damonte moved to Dallas after the acquisition, but

continued as Heath’s executive vice president supervising the same team. He went on to serve

additionally as president of the Casualty, Aviation, and Programs divisions of Hallmark.

       During his employment with Heath, Damonte signed an employment agreement that

included provisions for the protection of confidential and proprietary information. The agreement

contained certain non-competition, non-solicitation, non-disclosure, and confidentiality

restrictions that applied during Damonte’s employment and up to two years after his employment

terminated. For purposes of these restrictions, the company was defined to include Heath’s parent

company, its subsidiaries, and any other entity controlled by or under common control with Heath

or its subsidiaries to the extent Damonte was “actively involved in the business thereof.”

       In 2015, Damonte executed a Confidentiality and Non-Solicitation Agreement with

Hallmark. Similar to his employment agreement with Heath, this agreement provided for the

protection of the company’s confidential and proprietary information.        With respect to the

prohibitions on solicitation, Damonte agreed, among other things, that for a twenty-four month

period following the termination of his employment, he would not “entice, solicit, or induce, or

attempt to entice, solicit, or induce, any employee, consultant, or independent contractor of

Hallmark . . . to terminate his/her/its relationship with Hallmark for any reason whatsoever,

without the prior approval of the company.”

       On April 19, 2018, Damonte submitted his resignation to Hallmark effective May 9.

According to Hallmark, after submitting his resignation, Damonte began to pressure Hallmark

                                               –2–
management to amend his non-compete obligations. This, coupled with “a change in Damonte’s

behaviors prior to his resignation,” prompted Hallmark to begin reviewing employee activity

relating to the download, transmittal, and deletion of electronic data housed on the company’s

servers. Hallmark claims it discovered that two employees who worked closely with Damonte

sent multiple emails to themselves at their private email addresses containing substantial amounts

of Hallmark’s confidential and proprietary information. Hallmark further asserts there was no

business reason to explain this conduct.

       Hallmark brought this suit alleging that, on information and belief, Damonte

misappropriated and wrongfully disclosed Hallmark’s confidential information. Hallmark further

alleged that Damonte actively solicited other employees to collude in a scheme to damage and

compete with Hallmark. Hallmark asserted claims for breach of fiduciary duty, breach of contract,

and violations of the Texas Uniform Trade Secrets Act.

       Nine days after Hallmark filed suit, Damonte filed a motion to dismiss under the TCPA.

In his motion, Damonte argued that “the entire basis of the lawsuit is Hallmark’s unverified

allegation that Mr. Damonte engaged in a scheme with other employees of Hallmark to compete

against Hallmark” and, therefore, “the entire lawsuit is ‘based on, relates to, or is in response to’

Mr. Damonte’s association with Hallmark employees.” Damonte further contended that the

purpose of the suit was to chill his exercise of his rights to free speech and association because his

discussions with other Hallmark employees prior to his resignation concerned their complaints

about mistreatment, poor compensation, and the company’s strategic direction. Finally, Damonte

contended Hallmark could not provide clear and convincing evidence to support each of the

elements of its claims against him.

       In support of his motion, Damonte submitted a declaration in which he stated that,

throughout 2017, Hallmark employees came to him with complaints about the company. He stated

                                                 –3–
he repeatedly spoke with Hallmark executives about the employees’ concerns, but the concerns

were ignored. Damonte asserted that he resigned from Hallmark because the company refused to

respond to its serious morale issues and he believed the organization would ultimately lose key

employees resulting in lower work quality and reputational damage. Damonte denied any

knowledge of employees sending emails from their company accounts to their personal accounts

and stated that any such acts were committed without his authorization or involvement.

       On May 21, 2018, Hallmark filed a motion for expedited discovery under the TCPA

requesting that it be allowed to conduct discovery relevant to Damonte’s motion to dismiss.

Damonte opposed the motion, stating the sole allegation against him was that he “associated with

individuals whom Hallmark believed acted wrongly” and “Hallmark’s petition provides all the

information the court needs” to decide the motion to dismiss. The trial court did not rule on

Hallmark’s motion.

       On June 12, Hallmark filed a declaration by David Miller, the company’s senior vice

president of human resources. In the declaration, Miller discussed the investigation that led to the

discovery that two employees associated with Damonte had emailed confidential information to

their personal email accounts. According to Miller, when Damonte resigned, he stated he did not

have any future employment plans, which raised “red flags.” Within three weeks after Damonte

resigned, eight other employees, who either worked closely with Damonte or were related to him,

also resigned. Seven of the eight employees stated, like Damonte, that they had no future

employment plans.

       Miller stated that Hallmark’s investigation revealed that one employee who worked with

Damonte, Elaine Kelly, sent herself approximately fifty emails containing confidential and

proprietary information in the few weeks prior to Damonte’s resignation and that attempts were

made to permanently delete many of those emails off the company servers. A second employee,

                                                –4–
Korey Bruner, sent herself approximately 150 emails shortly before Damonte resigned. Miller

stated these emails contained “highly proprietary information and trade secrets” including

underwriting guidelines, training documents, forms for underwriting, and customer contact

information. Kelly and Bruner were among the eight employees that left Hallmark shortly after

Damonte resigned and stated they did not have future employment plans.

       Three weeks after Hallmark submitted Miller’s declaration, Damonte filed a supplemental

declaration along with eight additional declarations signed by the Hallmark employees who

resigned shortly after he did. Generally, the declarations stated that Damonte never solicited the

other employees to leave their employment with Hallmark and they all left because of problems

with the company. Damonte further stated he did not collude with anyone to misappropriate

confidential information and did not intend to work with any of the former employees or compete

with Hallmark.

       In its response to Damonte’s motion to dismiss, Hallmark argued that Damonte was

attempting to fit the lawsuit against him within the TCPA framework by suggesting that

Hallmark’s claims were related to his communications with fellow employees about their

workplace complaints and concerns. Hallmark contended its claims had nothing to do with these

communications, if they occurred, but rather were based solely on Damonte’s actions of

misappropriating the company’s confidential information and soliciting employees as a part of a

plan to compete with Hallmark in violation of his contractual and fiduciary obligations.

       Following a hearing, the trial court signed an order stating it had reviewed the motion,

response, declarations, and other documentary evidence along with the arguments of counsel and

determined the motion should be denied. The court further ordered that it would hold a hearing at

a later date to determine if the motion to dismiss was frivolous and filed solely for the purpose of

delay. This appeal followed. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(12).

                                                –5–
                                             Analysis

I. The TCPA

       In his first three issues, Damonte contends the trial court erred in denying his motion to

dismiss because Hallmark’s claims against him were based on, related to, and/or in response to his

exercise of his right to free speech and association with his fellow employees. The TCPA protects

citizens from retaliatory lawsuits that seek to intimidate or silence them. In re Lipsky, 460 S.W.3d
579, 584 (Tex. 2015) (orig. proceeding). The stated 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; see also ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d
895, 898 (Tex. 2017) (per curiam) (Coleman II). We construe the TCPA “liberally to effectuate its

purpose and intent fully.” TEX. CIV. PRAC. & REM. CODE ANN. § 27.011(b); see also State ex rel.

Best v. Harper, 562 S.W.3d 1, 11 (Tex. 2018).

       To effectuate the statute’s purpose, the Legislature has provided a procedure to expedite

the dismissal of claims brought to intimidate or to silence a defendant’s exercise of First

Amendment rights protected by the statute. Coleman II, 512 S.W.3d at 898; see also TEX. CIV.

PRAC. & REM. CODE ANN. §§ 27.003(a), .005(b); Youngkin v. Hines, 546 S.W.3d 675, 679 (Tex.

2018). The movant bears the initial burden of showing by a preponderance of the evidence that the

legal action is based on, related to, or in response to the movant’s exercise of the right of free

speech, the right of association, or the right to petition. TEX. CIV. PRAC. & REM. CODE ANN.

§ 27.005(b); see also S&S Emergency Training Sols., Inc. v. Elliott, 564 S.W.3d 843, 847 (Tex.

2018). If the movant makes this showing, the burden shifts to the non-movant to establish by clear

and specific evidence a prima facie case for each essential element of its claims. TEX. CIV. PRAC.

                                                –6–
& REM. CODE ANN. § 27.005(c); see Elliott, 564 S.W.3d at 847. If the court finds that a motion to

dismiss filed under the TCPA is frivolous or intended to delay, the court may award costs and

reasonable attorney’s fees to the responding party. Id. § 27.009(b).

II. Standard of Review

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

v. Medoc Health Servs., LLC, 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 TEX. CIV. PRAC. & REM. ANN. § 27.006(a).

However, the plaintiffs’ pleadings are generally “the best and all-sufficient evidence of the nature

of the action.” Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017).

III. Freedom of Speech

          As the movant to dismiss under the TCPA, Damonte was required to show by a

preponderance of the evidence that Hallmark’s legal action “is based on, relates to, or is in response

to” his exercise of the right of free speech, right of association, or his right to petition. See TEX.

CIV. PRAC. & REM. CODE ANN. § 27.005(b).1                     Each of these protected rights requires a

“communication” as defined by the TCPA. Id. § 27.001(2)–(4); see also Krasnicki v. Tactical

Entm’t, LLC, No. 05-18-00463-CV, 2019 WL 2136155, at *3 (Tex. App.—Dallas May 16, 2019,

no pet.). For purposes of the exercise of free speech, the communication must be made in

connection with a “matter of public concern.” TEX. CIV. PRAC. & REM. CODE ANN. § 27.001(3).

A “matter of public concern” includes an issue related to health or safety; environmental,

   1
       Damonte does not contend that his right to petition was implicated by Hallmark’s claims.
                                                        –7–
economic, or community well-being; the government, a public official or public figure; or a good,

product, or service in the marketplace. Id. § 27.001(7).

        In his brief on appeal, Damonte contends that Hallmark’s petition demonstrates how its

legal action is based on, related to, or in response to Damonte’s exercise of free speech. Damonte

points to the allegation in the petition that he solicited employees to collude in a scheme to compete

with Hallmark using confidential information and argues that such an alleged scheme between

Damonte and his fellow employees would necessarily have required communications protected by

the TCPA.

        At oral argument, Damonte abandoned this argument in recognition of this Court’s recent

opinion in Dyer v. Medoc. In Dyer, we concluded that discussions among alleged tortfeasors to

misappropriate confidential and proprietary information were not communications made in

connection with a matter of public concern. See Dyer, 573 S.W.3d at 428. Damonte attempts to

distinguish this lawsuit from Dyer by arguing that, in Dyer, one of the defendants admitted there

was a conspiracy to use and disclose the plaintiff’s confidential information for the purposes of

aiding and abetting a competitive business. Id. at 422. In contrast, Damonte asserts that he has

denied any conspiracy occurred in this case and the only conversations he had with his co-workers

concerned their complaints about Hallmark.              Damonte argues these communications about

workplace complaints were made in connection with “a good, product, or service in the

marketplace” and are the actual basis of Hallmark’s claims.2

        To trigger the TCPA’s protection, the legal action brought against the movant must be

factually predicated on alleged conduct that falls within the scope of the TCPA’s definition of the

    2
      In his declarations, Damonte referenced communications with Hallmark executives in which he allegedly
informed them about the complaints being made by other employees. Damonte made clear during oral argument that
he was not contending Hallmark’s lawsuit was based on, related to, or in response to these communications and he
referenced them only to show that Hallmark was aware of the discussions he had with the other employees.
                                                     –8–
exercise of the right of free speech, association, or petition. Id. at 425. We cannot “blindly accept”

attempts by the movant to characterize the claims as implicating protected expression. 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 protected expression. Id. Any activities by Damonte that are not a factual

predicate for Hallmark’s claims are not pertinent to our inquiry regarding whether the TCPA

applies. Id.

       Although Damonte strenuously denies any tortious conduct occurred, nothing in

Hallmark’s lawsuit suggests its claims are predicated on anything other than Damonte’s alleged

involvement in a scheme to misappropriate and use Hallmark’s confidential information. “The

basis of a legal action is not determined by the defendant’s admissions or denials but by the

plaintiff’s allegations.” Hersh, 526 S.W.3d at 467. The allegations against Damonte clearly are

not based on, related to, or in response to conversations Damonte purportedly had with employees

about problems they were having with the company. Because we have already held that claims

based on communications among alleged tortfeasors to misappropriate confidential and

proprietary information are not communications made in connection with a matter of public

concern, we conclude Damonte failed to establish that Hallmark’s claims are based on, related to,

or in response to his exercise of his right to free speech as defined by the TCPA. See Dyer, 573
S.W.3d at 428.

IV. Right of Association

       Damonte also contends Hallmark’s lawsuit is based on, related to, or in response to his

exercise of his right of association. The TCPA broadly defines the “exercise of the right of

association” as “a communication between individuals who join together to collectively express,

promote, pursue, or defend common interests.” Id. at 425. The nature of the communication must

                                                 –9–
involve public or citizen’s participation. Id. at 426. This Court has concluded that applying the

right of association to private communications related to an alleged conspiracy to misappropriate

confidential business information would be “illogical” and lead to an absurd result that would not

further the purpose of the TCPA to curb strategic lawsuits against public participation. Id.

       Damonte again tries to fit this lawsuit within the purview of the TCPA by asserting that

Hallmark’s claims are actually based on his communications with other employees about their

workplace complaints and the business of insurance. Damonte argues Hallmark’s true intent in

bringing this suit was simply to prevent him from associating with his former co-workers. As with

Damonte’s freedom of speech argument, we cannot simply accept Damonte’s attempts to recast

the factual basis of the claims made against him in a manner that implicates a protected right. See

Sloat, 513 S.W.3d at 504. Viewing the pleadings in the light most favorable to Hallmark, as we

must, we conclude the only implicated communications are those related to a scheme to

misappropriate and wrongfully disclose and/or use the company’s confidential information. Such

communications are not protected by the right of association under the TCPA. See Dyer, 573
S.W.3d at 426.

                                           Conclusion

       Based on the foregoing, we resolve Damonte’s first three issues against him. This

resolution makes it unnecessary for us to address Damonte’s remaining issues. We affirm the trial

court’s order.

                                                  /Amanda L. Reichek/
                                                  AMANDA L. REICHEK
                                                  JUSTICE

180874F.P05

                                               –10–
                                         S
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

 JAMES DAMONTE, Appellant                            On Appeal from the 101st Judicial District
                                                     Court, Dallas County, Texas
 No. 05-18-00874-CV          V.                      Trial Court Cause No. DC-18-05976.
                                                     Opinion delivered by Justice Reichek.
 HALLMARK FINANCIAL SERVICES,                        Justices Whitehill and Molberg
 INC. AND HEATH XS, LLC, Appellees                   participating.

     In accordance with this Court’s opinion of this date, the order of the trial court denying
JAMES DAMONTE’s motion to dismiss is AFFIRMED.

    It is ORDERED that appellees HALLMARK FINANCIAL SERVICES, INC. AND
HEATH XS, LLC recover their costs of this appeal from appellant JAMES DAMONTE.

Judgment entered July 12, 2019

                                              –11–