Court Opinion

ID: 4399335
Source: CourtListenerOpinion
Date Created: 2019-05-22 15:47:12.267664+00
Date Added: 2024-06-11T14:52:20.599121
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                      NO. 03-17-00593-CV

              Kenneth W. Morrison; and StoneCoat of Texas, LLC, Appellants

                                                 v.

                                John D. Profanchik Jr., Appellee

     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT
     NO. D-1-GN-17-001379, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING

                                          OPINION

               This is an interlocutory appeal from the district court’s order denying a motion to

dismiss under the Texas Citizens Participation Act (TCPA). Tex. Civ. Prac. & Rem. Code

§ 27.001–.011 (provisions of TCPA); id. § 51.014(a)(12) (authorizing interlocutory appeal from

order denying TCPA motion to dismiss). John D. Profanchik Jr. sued Kenneth W. Morrison and

StoneCoat of Texas, LLC (collectively, “StoneCoat”) for defamation in connection with an allegedly

fake online review by StoneCoat of its competitor, ProCal Stone Design, LLC. Based on our

determination that Profanchik Jr.’s suit against StoneCoat falls under the TCPA’s “commercial

speech” exemption, see id. § 27.010(b), we will affirm the district court’s order.
                                          Background

               ProCal and Appellant StoneCoat are Dallas-area competitors in the business of spray-

on limestone. Appellant Morrison is a principal of StoneCoat. Appellee Profanchik Jr. is the son

of John D. Profanchik Sr., who is a principal of ProCal.

               In December 2016, “Don Henley” of Plano, Texas posted the following review on

the website ripoffreport.com:

       Pro Cal Stone John Profanchik They Are Rip Off Artists Beware of This Man
       and Anyone Associated With Him Including His Son Addison Texas

       Beware of John Profanchik with Pro Cal Stone. He claims to be the inventor of this
       spray on stone product. After Hiring him to redo the front of my house with spay on
       stone John Profanchik quickly began to show his true colors. He kept asking for
       more money and the work they performed was aweful. After some online
       Investigating I discovered that Stone Coat of Addison Tx was the inventor of this
       product. I fired John Profanchik with Pro Cal Stone and Thank God for Stone Coat.
       They did exactly what they said and at a better price plus the work was amazing.
       Beware of John Profanchik with Pro Cal Stone he lies and will try to take your
       money.

(Errors in original.) The ripoffreport.com review and other allegedly fake reviews of ProCal

prompted Profanchik Sr. and ProCal to sue StoneCoat for defamation, business disparagement,

deceptive trade practices, and fraud in Dallas and Collin counties. See Morrison v. ProCal Stone

Design, LLC, No. 05-17-00696-CV, 2018 WL 4090637, at *1 (Tex. App.—Dallas Aug. 28, 2018,

pet. denied) (mem. op.); Morrison v. Profanchik, No. 05-17-00680-CV, 2018 WL 4090635, at *1

(Tex. App.—Dallas Aug. 28, 2018, pet. denied) (mem. op.).1

       1
         StoneCoat also sued ProCal, Profanchik Sr., and others in federal court, alleging various
claims relating to the spray-on limestone business. See StoneCoat of Tex., LLC v. ProCal Stone

                                                2
               The ripoffreport.com review also spawned the underlying defamation case against

StoneCoat, which Profanchik Jr. filed in Travis County district court. Profanchik Jr.’s petition

alleged that StoneCoat published the ripoffreport.com review; the review is false; the review

constitutes libel per se because it tended to injure Profanchik Jr.’s reputation and impeached his

honesty, integrity, and reputation; StoneCoat knew the review was false or acted with reckless

disregard concerning the review’s truth; and Profanchik Jr. was injured by the fake review. See Tex.

Civ. Prac. & Rem. Code § 73.001 (setting forth elements of claim for libel).

               StoneCoat generally denied Profanchik Jr.’s claim and asserted several affirmative

defenses. StoneCoat also filed a motion to dismiss Profanchik Jr.’s suit under the TCPA, arguing

that Profanchik Jr. filed his defamation claim based on or in response to StoneCoat’s exercise of the

right of free speech in the ripoffreport.com review. See id. § 27.003(a) (authorizing a motion to

dismiss an action that “is based on, relates to, or is in response to a party’s exercise of the right of

free speech”). In response, Profanchik Jr. argued that StoneCoat did not establish that his defamation

claim against StoneCoat was based on its exercise of the right of free speech and that, even if it had,

the “commercial speech” exemption applies to Profanchik Jr.’s claim. See id. §§ 27.005(b)

(allowing trial court to dismiss action if movant “shows by a preponderance of the evidence that the

legal action is based on, relates to, or is in response to” the movant’s exercise of certain rights),

.010(b) (“commercial speech” exemption); Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688

(Tex. 2018) (explaining applicability of commercial-speech exemption). Alternatively, Profanchik

Jr. argued that he had established a prima facie case of the elements necessary to recover for

Design, LLC, No. 4:17-CV-00303, 2018 WL 324446 (E.D. Tex. Jan. 8, 2018).

                                                   3
defamation. See id. § 27.005(c). After an evidentiary hearing, the district court denied the motion

to dismiss without explanation. StoneCoat filed this interlocutory appeal. See id. § 51.014(a)(12)

(authoring appeal from interlocutory order that denies TCPA motion to dismiss).

                                                TCPA

                The TCPA establishes a multi-step process for the expedited dismissal of legal actions

that are “based on, relate[] to, or [are] in response to a party’s exercise of the right of free speech,

right to petition, or right of association.” Id. § 27.003(a). First, the party who brings such a motion

to dismiss must show “by a preponderance of the evidence that the legal action is based on, relates

to, or is in response to” the movant’s exercise of the above-enumerated protected rights. Id.

§ 27.005(b). If the movant meets that burden, then under the second step, 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). If the nonmovant fails to satisfy its burden under section

27.005(c) to present a prima facie case, the trial court must dismiss the action within the TCPA’s

expedited time frame. See id. § 27.005(c)–(d); see also id. §§ 27.003(b), .004, .005(a), .007(b), .008

(establishing deadlines). If the nonmovant establishes the required prima-facie case, the movant may

still obtain dismissal by establishing “by a preponderance of the evidence each essential element of

a valid defense to the nonmovant’s claim.” Id. § 27.005(d). In determining whether TCPA motions

to dismiss should be granted, courts are to consider the pleadings and supporting and opposing

affidavits on which the claim or defense is based. Id. § 27.006(a).

                                                   4
               Intertwined with and overlying this multi-step dismissal process is the TCPA

provision exempting certain actions from the TCPA’s application. See id. § 27.010 (establishing

four exemptions). Specifically at issue here, section 27.010 provides that the TCPA—

       does not apply to a legal action brought against a person primarily engaged in the
       business of selling or leasing goods or services, if the statement or conduct arises out
       of the sale or lease of goods, services, or an insurance product, insurance services,
       or a commercial transaction in which the intended audience is an actual or potential
       buyer or customer.

Id. § 27.010(b) (commonly referred to as the “commercial speech” exemption). This and the other

section 27.010 exemptions are “wholly unnecessary unless the TCPA applies” and, as discussed

above, “the TCPA only applies when the claim is based on the defendant’s exercise of the right of

free speech, association, or to petition.” Castleman, 546 S.W.3d at 688 (citing Tex. Civ. Prac. &

Rem. Code §§ 27.001(1)–(4), .003(a)). Thus, when invoked, the trial court must consider an

exemption’s applicability after and in the context of the movant having met its initial burden under

the first step of the dismissal process. See id. (construing “commercial speech” exemption). If an

action falls under a TCPA exemption, the TCPA does not apply and may not be used to dismiss the

action. See Tex. Civ. Prac. & Rem. Code § 27.010; Best v. Harper, 562 S.W.3d 1, 11 (Tex. 2018)

(noting that if TCPA exemption applies, movant cannot invoke TCPA’s protections).

                                              Analysis

               In one issue, StoneCoat asserts on appeal that the district court erred in denying its

TCPA motion to dismiss because Profanchik Jr. failed to meet his TCPA burden of establishing by

clear and specific evidence a prima facie case for each essential element of his defamation

                                                  5
claim—i.e., the second step in the TCPA dismissal process. See Tex. Civ. Prac. & Rem. Code

§ 27.005(c). Before we reach this issue, however, we must first address Profanchik Jr.’s assertions

that denial was proper because (1) StoneCoat did not meet its initial burden of showing by a

preponderance of the evidence that Profanchik Jr.’s legal action is based on or was in response to

StoneCoat’s exercise of the right of free speech, see id. § 27.005(b) (establishing movant’s initial

burden); or (2) if StoneCoat met its initial burden, Profanchik Jr.’s legal action is exempted from the

TCPA under the “commercial speech” exemption, see id. § 27.010(b); see also Castleman, 546
S.W.3d at 688 (discussing steps in TCPA analysis).2

StoneCoat’s initial burden under the TCPA

               With regard to its initial burden under the TCPA, StoneCoat asserted in its motion

to dismiss that, “The statement complained of by [Profanchik Jr.] clearly involve[s] a matter of

public concern because among other things the statement concerns ‘goods, products or services in

       2
          Profanchik Jr. also asserts that the denial was proper because StoneCoat failed to file its
motion to dismiss within the statutory deadline and then failed to establish “good cause” for the late
filing. See Tex. Civ. Prac. & Rem. Code § 27.003(b) (establishing 60-day deadline for filing motion,
but allowing trial court to extend deadline “on a showing of good cause”). But that is a challenge
to the district court’s order granting StoneCoat an extension of time to file a TCPA motion to
dismiss, not a ground for denying the motion to dismiss. And to the extent Profanchik Jr. is asserting
error, we lack jurisdiction over the order granting the extension of time to file because that order is
separate from the order denying the motion to dismiss and, relatedly, because there is no statute
explicitly providing review of an interlocutory order granting an extension of time to file a TCPA
motion to dismiss. See id. § 51.014(a)(12) (granting appeal from interlocutory order that denies
TCPA motion to dismiss); Texas A&M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007)
(“Appellate courts have jurisdiction to consider immediate appeals of interlocutory orders only if a
statute explicitly provides such jurisdiction.”); Bally Total Fitness Corp. v. Jackson, 53 S.W.3d 352,
354 (Tex. 2001) (declining on jurisdictional grounds to consider separate interlocutory orders that
did not fall under section 51.014 authorization).

                                                  6
the marketplace[.]’” StoneCoat makes no other references in its motion to whether Profanchik Jr.’s

suit against it is a legal action that is based on, relates to, or in response to StoneCoat’s exercise of

one of the TCPA’s protected rights. See Tex. Civ. Prac. & Rem. Code § 27.005(b). Nevertheless,

because the phrase “matter of public concern” is part of the TCPA’s definition of “exercise of the

right of free speech” and because StoneCoat is asking for dismissal under the TCPA, we can infer

that StoneCoat is asserting that Profanchik Jr.’s defamation claim is subject to dismissal under the

TCPA because that claim is based on or in response to StoneCoat’s alleged publication of the

ripoffreport.com review of Profancik, Sr.’s services. See id.

                As for whether StoneCoat has “show[n] by a preponderance of the evidence” that the

defamation claim is based on the ripoffreport.com review, Profanchik Jr. is correct in pointing out

that StoneCoat offered no evidence to support its motion to dismiss, only the conclusory assertion

noted above. But in deciding whether a legal action should be dismissed under the TCPA, the trial

court must consider the pleadings and affidavits stating the facts on which the liability is based. See

id. § 27.006(a). And to determine the basis of a legal action for purposes of the first step in the

dismissal procedure, it is necessary to consider the plaintiff’s petition, which is “the ‘best and all-

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

(quoting Stockyards Nat’l Bank v. Maples, 95 S.W.2d 1300, 1302 (Tex. 1936)). “The basis of a legal

action is not determined by the defendant’s admissions or denials, but by the plaintiff’s allegations.”

Id. “When it is clear from the plaintiff’s pleadings that the action is covered by the Act, the

defendant need show no more.” Id.

                                                   7
                Here, Profanchik Jr.’s petition makes it clear that his defamation claim is based on

or in response to the ripoffreport.com review that he attributes to StoneCoat: “Defendants published

and/or have caused to be imminently published false and defamatory statements of fact about

Plaintiff, as set forth in the ripoffreport.com fake review.” Further, Profanchik’s petition asserts that

the ripoffreport.com review is a “fake consumer review” that complains about services provided by

Profanchik Sr.’s business. Thus, by relying on Profanchik Jr.’s pleadings, StoneCoat showed that

Profanchik Jr.’s defamation claim is based on StoneCoat’s exercise of free speech—i.e., its alleged

posting of the ripoffreport.com review of the services offered by Profanchik Sr.’s business—and thus

covered by the Act. See Tex. Civ. Prac. & Rem. Code § 27.001(1) (defining “communication” as

including “the making or submitting of a statement . . . in any form or medium, including . . .

electronic”), (4) (defining “exercise of the right of free speech” as a “communication made in

connection with a matter of public concern”), (7)(E) (defining “matter of public concern” as

including “an issue related to . . . a good, product, or service in the marketplace”); Hersh, 526
S.W.3d at 468. Accordingly, StoneCoat met its initial burden under the TCPA. See Tex. Civ. Prac.

& Rem. Code § 27.005(b).

Commercial-speech exemption

                Having determined that StoneCoat met its initial burden under the TCPA, we turn to

Profancik, Jr.’s argument that the district court properly denied StoneCoat’s motion to dismiss

because Profanchik Jr.’s defamation claim falls under the TCPA’s “commercial speech” exemption:

        [The TCPA] does not apply to a legal action brought against a person primarily
        engaged in the business of selling or leasing goods or services, if the statement or

                                                   8
          conduct arises out of the sale or lease of goods, services, or an insurance product,
          insurance services, or a commercial transaction in which the intended audience is an
          actual or potential buyer or customer.

Id. § 27.010(b). The Texas Supreme Court has interpreted this exemption to apply when (1) the

defendant was primarily engaged in the business of selling or leasing goods or services, (2) the

defendant made the statement or engaged in the conduct on which the claim is based in the

defendant’s capacity as a seller or lessor of those goods or services, (3) the statement or conduct at

issue arose out of a commercial transaction involving the kind of goods or services the defendant

provides, and (4) the intended audience of the statement or conduct was actual or potential customers

of the defendant for the kind of goods or services the defendant provides. Castleman, 546 S.W.3d

at 688.

                 On appeal, StoneCoat—the defendant for purposes of the Castleman analysis—does

not dispute, and the evidence and pleadings establish, that it is primarily engaged in the business of

selling or leasing goods or services—i.e., blown limestone.

                 Regarding the second element, StoneCoat does not dispute that, if it made or was

responsible for the ripoffreport.com review, it did so in its capacity as a seller of the blown

limestone. Instead, StoneCoat challenges whether Profanchik Jr. established that it was StoneCoat

that made (or was responsible for) the ripoffreport.com review. See id. (requiring, among other

elements, that “the defendant made the statement or engaged in the conduct on which the claim is

based in the defendant’s capacity as a seller or lessor of those goods or services”). Specifically,

StoneCoat argues that there is no evidence in the record to establish that StoneCoat made (or was

responsible for) the ripoffreport.com review. But in the context of determining whether this

                                                   9
exemption applies, that is not something that Profanchik Jr. had to establish. As noted above, the

section 27.010 exemptions cannot be considered unless the TCPA applies, and the TCPA applies

only where the claim is based on the defendant’s exercise of the right of free speech, petition, or

association. See id. Thus, to even consider whether the “commercial speech” exemption applies,

we must first determine that Profanchik Jr.’s legal action is based on, relates to, or is in response to

StoneCoat’s exercise of the right of free speech—i.e., the ripoffreport.com review. See id. (“In

context, then, the only reasonable construction of the exemption’s reference to ‘the statement or

conduct’ is as a reference back to ‘the defendant’s’ statement or conduct ‘on which the claim is

based.’”). Stated differently, regardless of whether StoneCoat denies making the statement on which

Profanchik’ Jr.’s claim is based—which StoneCoat is allowed to do, see Hersh, 526 S.W.3d at 467

(holding that movant’s denial of having made communication does not preclude TCPA motion to

dismiss)—we must assume that he did make the statement for purposes of determining whether the

statement is exempted from the TCPA’s application. See Castleman, 546 S.W.3d at 688.

                Regarding the third element, StoneCoat argues that the exemption does not apply

because the ripoffreport.com review does not involve “commercial speech or words.” More

specifically, StoneCoat argues that the “commercial speech” exemption applies only to “paid

commercial advertising.” But nothing in the text of the “commercial speech” exemption, or in the

supreme court’s analysis of this exemption in Castleman, dictates the content of the speech at issue,

much less that the speech involve advertising. See Tex. Civ. Prac. & Rem. Code § 27.010(b);

Castleman, 546 S.W.3d at 688–91. Instead, the exemption requires that the “statement or conduct”

have been made in the defendant’s capacity as a seller or lessor of the goods or services in question

                                                  10
and that the “statement or conduct” was intended for an actual or potential buyer or customer of the

defendant for the kind of goods or services the defendant provides. See Castleman, 546 S.W.3d at

689–90. A defendant’s online review of a competitor’s sale and installation of the same product sold

and installed by the defendant is a statement that meets these requirements.

               StoneCoat also emphasizes with regard to this third element that there was no

commercial transaction between it and Profanchik Jr. See Tex. Civ. Prac. & Rem. Code § 27.010(b)

(requiring that “statement or conduct arises out of the sale or lease of goods, services, . . . or a

commercial transaction in which the intended audience is an actual or potential buyer or customer”);

Castleman, 546 S.W.3d at 688 (interpreting exemption to require, among other elements, that “the

statement or conduct at issue arose out of a commercial transaction involving the kind of goods or

services the defendant provides”). Again, however, nothing in the TCPA or the supreme court’s

analysis of this exemption requires that there have been a commercial transaction between the

plaintiff and defendant. Instead, section 27.010(b) requires only that the statement “arises out of the

sale or lease of goods, services, . . . or a commercial transaction,” Tex. Civ. Prac. & Rem. Code

§ 27.010(b), and the supreme court has construed this as limiting the “commercial speech”

exemption to “certain communications related to a good, product, or service in the marketplace,”

Castleman, 546 S.W.3d at 690. An online review of a company’s sale and installation of blown

limestone is plainly a communication “related to a good, product, or service in the marketplace.”

               Finally, StoneCoat does not dispute that “the intended audience of the statement or

conduct were actual or potential customers of the defendant for the kind of goods or services the

defendant provides.” See id. at 688 (fourth element of exemption). Nevertheless, we note that a

                                                  11
defendant who posts a fake online review of a competitor is plainly seeking to, among other things,

discourage consumers from doing business with the competitor and, as a result, to encourage those

same customers to do business with the defendant. In fact, the ripoffreport.com review here paints

just such a scenario by suggesting that a former customer of ProCal rejected that company in favor

of StoneCoat.

                We agree with Profanchik Jr. that the commercial-speech exemption applies to his

defamation claim against StoneCoat. Having done so, we need not address StoneCoat’s assertion

that Profanchik Jr. failed to meet his burden under the TCPA of establishing by clear and specific

evidence a prima facie case for each essential element of his claim against StoneCoat. See Best, 562
S.W.3d at 11 (noting that if exemption applies, movant cannot invoke TCPA’s protections).

                We overrule StoneCoat’s sole appellate issue.

                                           Conclusion

                Having overruled StoneCoat’s issue on appeal, we affirm the district court’s order

denying StoneCoat’s motion to dismiss under the TCPA.

                                              __________________________________________
                                              Jeff Rose, Chief Justice

Before Chief Justice Rose, Justices Goodwin and Kelly

Affirmed

Filed: May 22, 2019

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