Court Opinion

ID: 9406636
Source: CourtListenerOpinion
Date Created: 2023-07-02 08:11:05.606283+00
Date Added: 2024-06-11T17:20:31.923072
License: Public Domain

Affirmed and Memorandum Opinion filed June 27, 2023.

                                      In The

                    Fourteenth Court of Appeals

                              NO. 14-20-00777-CV

    FLOYD KENNETH BAILEY, JR. AND KENNETH CAMP BAILEY,
                        Appellants
                                        V.
             ADAM PEAVY AND ADAM PEAVY PC, Appellees

                    On Appeal from the 80th District Court
                            Harris County, Texas
                      Trial Court Cause No. 2019-06454

                  MEMORANDUM OPINION

      Appellees Adam Peavy and Adam Peavy PC (together, “Peavy”) sued
appellants Floyd Kenneth Bailey, Jr. and Kenneth Camp Bailey (together, the
“Baileys”), asserting the Baileys failed to pay certain fees owed under the parties’
compensation agreements. The Baileys filed a motion to dismiss under the Texas
Citizens Participation Act (the “TCPA”) and the motion was denied by operation
of law. The Baileys filed this interlocutory appeal. See Tex. Civ. Prac. & Rem.
Code Ann. § 54.014(a)(12). For the reasons below, we affirm the deemed denial
of the Baileys’ TCPA motion to dismiss.

                                     BACKGROUND

       In this TCPA appeal, the factual background rests on the allegations in
Peavy’s original petition.

       Peavy and the Baileys are lawyers that worked together pursuing
pharmaceutical litigation claims. The parties’ relationship began in 2008, when
Peavy was brought in to handle claims alleging injuries caused by the
antidepressant Paxil. According to Peavy, the parties initially agreed that Peavy
would be entitled to a 5% gross recovery payout. After obtaining a “favorable,
multi-million dollar verdict,” Peavy said the parties executed a joint venture
agreement entitling him to an additional 6.66% interest in a small subset of cases
set for trial.

       The first batch of Paxil cases settled and Peavy was made a non-equity
partner in the Baileys’ law firm in 2011. According to Peavy, this change in status
was accompanied by the promise that he would receive 7% of the profits from
subsequent Paxil litigation. In 2013, Peavy was made a named partner in the law
firm and entitled to a 10% equity interest in the firm’s profits. A new entity was
formed in 2015 that included Peavy as a named partner with a 20% equity interest.

       Most of the remaining Paxil cases were settled in 2018. According to Peavy,
the firm was due to receive approximately $46 million in fees and expenses, but
the Baileys “started warning Peavy that there was no money, and that the cases had
not been profitable for the firm.” Peavy alleges that “the Baileys had already
stolen all of the fees and money.”

       Over the remainder of the year, Peavy asserts that he “began learning of

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various ways in which the Baileys had defrauded him,” including (1) taking out a
loan for which the Paxil fees and expenses were pledged; (2) misstating the amount
of fees the firm had earned in Paxil litigation, thereby “depriving [Peavy] of
compensation that he had earned”; and (3) “personally pocket[ing] almost $20
million each in Mesh settlement fees.” Peavy alleged that the Baileys “continued
to string [him] along” with promises that he would receive the fees to which he
was entitled. But, according to Peavy, the Baileys did not fulfill these promises
and instead “cheated him out of the compensation he was owed.”

          Peavy sued the Baileys in January 2019 and asserted claims for breach of
fiduciary duty, aiding and abetting a breach of fiduciary duty, statutory fraud,
fraudulent transfer, breach of contract, conspiracy, and common-law fraud. The
Baileys filed a TCPA motion to dismiss asserting that (1) Peavy’s claims were
based on the Baileys’ exercise of their TCPA-protected rights, and (2) Peavy did
not bring forth evidence sufficient to maintain his claims under the TCPA. The
motion was denied by operation of law 1 and the Baileys filed this interlocutory
                                                  0F

appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 54.014(a)(12).

                                            ANALYSIS

          On appeal, the Baileys challenge the denial of their motion to dismiss and
assert:

          1.    the TCPA applies to Peavy’s claims;
          2.    Peavy failed to bring forth clear and specific evidence sufficient to
                establish a prima facie case for each essential element of his claims;

          1
         In their appellate brief, the Baileys assert that the trial court orally denied the motion to
dismiss at a hearing held on October 23, 2020. A reporter’s record of this hearing was not
included as part of the appellate record. However, as we have previously held, an oral ruling on
a TCPA motion to dismiss will not preclude the motion from subsequently being overruled by
operation of law. See Simmons v. Taylor, 651 S.W.3d 499, 503 (Tex. App.—Houston [14th
Dist.] 2022, no pet.).

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             and
      3.     the case should be remanded to the trial court for an award of
             attorney’s fees and sanctions.

Peavy did not file a responsive appellate brief.

      Because we conclude the TCPA does not apply to Peavy’s claims, we need
not address the Baileys’ second and third issues.

I.    Governing Law and Standard of Review

      We first address which version of the TCPA is applicable to the present
case. The 2019 act amending the TCPA was passed by the legislature on May 17,
2019, and took effect on September 1, 2019; it applies only to an action filed on or
after the effective date of the act. See Act of May 17, 2019, 86th Leg., R.S., ch.
378, §§ 11-12, 2019 Tex. Gen. Laws 684, 687. Because Peavy filed his original
petition on January 28, 2019, we conclude that the September 1, 2019 amendment
to the TCPA is not applicable to the present case and the previous version controls.
See id; see also Youngkin v. Hines, 546 S.W.3d 675, 680 (Tex. 2018).
Accordingly, our analysis is governed by the pre-amendment version of the TCPA.

      The TCPA protects citizens from retaliatory lawsuits that aim to hinder the
exercise of First Amendment freedoms. See Tex. Civ. Prac. & Rem. Code Ann.
§ 27.002; In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015) (orig. proceeding). To
further this end, the TCPA establishes a mechanism for the dismissal of legal
actions that impede a party’s exercise of the right of free speech, the right to
petition, or the right of association. Tex. Civ. Prac. & Rem. Code Ann. § 27.002;
Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 131-32 (Tex.
2019).

      The TCPA prescribes a three-step process.        First, the burden is on the
movant to show by a preponderance of the evidence that the challenged claim “is
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based on, relates to, or is in response to the [movant’s] exercise of: (1) the right of
free speech; (2) the right to petition; or (3) the right of association.” Act of May
21, 2011, 82d Leg., R.S., ch. 341, § 2, sec. 27.005(b), 2011 Tex. Gen. Laws 961,
963 (amended 2019) (current version at Tex. Civ. Prac. & Rem. Code Ann.
§ 27.005(b)). Each of these rights is premised on making a “communication,”
which is defined as “the making or submitting of a statement or document in any
form or medium, including oral, visual, written, audiovisual, or electronic.” Act of
May 21, 2011, 82d Leg., R.S., ch. 341, § 2, sec. 27.001(1), 2011 Tex. Gen. Laws
961, 961 (amended 2019) (current version at Tex. Civ. Prac. & Rem. Code Ann.
§ 27.001(1)).

      If the first step is met, 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.” Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, sec.
27.005(c), 2011 Tex. Gen. Laws 961, 963 (amended 2019). If the nonmovant
satisfies this second step, the trial court nonetheless shall dismiss the challenged
claim if the movant establishes by a preponderance of the evidence each essential
element of a valid defense to the nonmovant’s claim. Id.

      Whether the parties have met their respective burdens is a question of law
we review de novo. Roach v. Ingram, 557 S.W.3d 203, 217 (Tex. App.—Houston
[14th Dist.] 2018, pet. denied). Under this standard, we “make an independent
determination and apply the same standard used by the trial court in the first
instance.” Cox Media Grp., LLC v. Joselevitz, 524 S.W.3d 850, 859 (Tex. App.—
Houston [14th Dist.] 2017, no pet.) (internal quotation omitted). We consider the
relevant pleadings and any supporting or opposing affidavits “stating the facts on
which the liability or defense is based.” Act of May 21, 2011, 82d Leg., R.S., ch.
341, § 2, sec. 27.006(a), 2011 Tex. Gen. Laws 961, 963 (amended 2019) (current

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version at Tex. Civ. Prac. & Rem. Code Ann. § 27.006(a)). We review these
materials in the light most favorable to the nonmovant. Hieber v. Percheron
Holdings, LLC, 591 S.W.3d 208, 211 (Tex. App.—Houston [14th Dist.] 2019, pet.
denied).

II.   Application

      The Baileys assert that Peavy’s claims implicate their right of free speech,
right to petition, and right of association. We consider these arguments separately.

      A.      Right of Free Speech

      An exercise of the right of free speech refers to “a communication made in
connection with a matter of public concern.” Act of May 21, 2011, 82d Leg., R.S.,
ch. 341, § 2, sec. 27.001(3), 2011 Tex. Gen. Laws 961, 961-62 (amended 2019)
(current version at Tex. Civ. Prac. & Rem. Code Ann. § 27.001(3)). The TCPA
defines a “matter of public concern” to include an issue related to (1) health or
safety,    (2) environmental,   economic,       or   community   well-being,   (3) the
government, (4) a public official or public figure, or (5) a good, product, or service
in the marketplace. Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, sec.
27.001(7), 2011 Tex. Gen. Laws 961, 961-62 (amended 2019) (current version at
Tex. Civ. Prac. & Rem. Code Ann. § 27.001(7)).

      To be protected, the TCPA does not require that the communication
“specifically mention[s]” the matter of public concern. ExxonMobil Pipeline Co.
v. Coleman, 512 S.W.3d 895, 900 (Tex. 2017) (per curiam).              However, the
communication must have “public relevance beyond the pecuniary interests of the
private parties involved.” Creative Oil & Gas, LLC, 591 S.W.3d 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

                                            6
v. Klentzman, 515 S.W.3d 878, 884 (Tex. 2017)).

      Here, the Baileys assert that Peavy’s claims implicate their right of free
speech because the claims related to issues of “services in the marketplace” and
“economic well-being.” We disagree.

      The Texas Supreme Court’s opinion in Creative Oil & Gas is instructive
here. See 591 S.W.3d at 129-37. There, an oil and gas lessor sued a lessee and
sought a ruling that the parties’ lease terminated due to cessation of production. Id.
at 130. The lessee counterclaimed, alleging that the lessor had breached the lease
and falsely told third-party purchasers of production that the lease had expired and
payments on the purchases should stop. Id. The lessor moved to dismiss the
counterclaims under the TCPA, asserting that its statements to third parties about
the lease were made in connection with matters of public concern, i.e., a good,
product, or service in the marketplace. Id.

      Rejecting these arguments, the Court held that the lessor’s communications
with third parties were not covered by the TCPA because they were private
business communications concerning a private contract dispute. Id. at 134-37. As
the Court reasoned, the phrase “good, product, or service in the marketplace” had
to be interpreted in light of the common meaning of a “matter of public concern,”
which “commonly refers to matters of ‘political, social, or other concern to the
community’ as opposed to purely private matters.” Id. at 135 (quoting Brady, 515
S.W.3d at 884). Thus, the communication at issue must “have some relevance to a
public audience of potential buyers and sellers” for it to relate to a “matter of
public concern.” Id. Applying this reasoning to the facts of the case, the Court
held that, because the alleged communications had “a limited business audience
concerning a private contract dispute,” they did not relate to a matter of public
concern under the TCPA. Id. at 136.

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      The lessor also argued that its statements to third parties were an exercise of
its right of free speech because they were made in connection with another matter
of public concern: economic well-being. Id. at 137. Rejecting this argument, the
Court held that “[a] private contract dispute 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.

      This court has repeatedly applied Creative Oil & Gas and concluded that
communications made in the context of private disputes do not invoke the TCPA’s
right of free speech. See, e.g., Sampson v. Hill-Wald, LLC, No. 14-22-00327-CV,
2023 WL 107142, at *1, *3-6 (Tex. App.—Houston [14th Dist.] Jan. 5, 2023, no
pet.) (mem. op.) (right of free speech did not include statements to volleyball
club’s potential employee informing him that the club “had been accused of
financial misdealings”); Booster Fuels, Inc. v. Fuel Husky, LLC, No. 14-19-00912-
CV, 2021 WL 5118486, at *1, *3-5 (Tex. App.—Houston [14th Dist.] Nov. 4,
2021, pet. denied) (mem. op.) (right of free speech did not include alleged
communications made in the course of misappropriating trade secrets and
attempting to poach company’s customers); TSA-Tex. Surgical Assocs., L.L.P. v.
Vargas, No. 14-19-00135-CV, 2021 WL 729862, at *2 (Tex. App.—Houston [14th
Dist.] Feb. 25, 2021, no pet.) (mem. op.) (right of free speech did not include
communications “made to a business audience concerning a business dispute
among the partners related to [appellee’s] withdrawal from the partnership”);
Republic Tavern & Music Hall, LLC v. Laurenzo’s Midtown Mgmt., LLC, 618
S.W.3d 118, 123 (Tex. App.—Houston [14th Dist.] 2020, no pet.) (right of free
speech did not include “alleged representations about the restaurant’s funding []
made to a limited business audience concerning a private contract dispute”);
Judwin Props. Inc. v. Lewis, 615 S.W.3d 338, 345 (Tex. App.—Houston [14th

                                         8
Dist.] 2020, no pet.) (right of free speech did not include communications “solely
concerned” with the parties’ “financial interest in the private real property
transaction at issue”); Navidea Biopharmaceuticals, Inc. v. Cap. Royalty Partners
II, L.P., No. 14-18-00740-CV, 2020 WL 5087826, at *5 (Tex. App.—Houston
[14th Dist.] Aug. 28, 2020, pet. denied) (mem. op.) (concluding that publicly
traded company failed to show that amount owed pursuant to a judgment was a
matter of public concern for purposes of the TCPA).

      Here too, the communications at issue center around a private contract
dispute affecting only the pecuniary interests of the parties involved.     In his
original petition, Peavy alleged that the Baileys misrepresented the fees earned by
the parties and misled him with promises that he would receive the compensation
he was owed. But rather than addressing “services in the marketplace,” these
communications are relevant only to “a limited business audience concerning a
private contract dispute.” See Creative Oil & Gas, LLC, 591 S.W.3d at 136.
Similarly, because these communications affected only private pecuniary interests,
they are not made in connection with economic well-being as that phrase is used in
the TCPA. See id. at 137.

      Moreover, the cases the Baileys cite to support their contention that Peavy’s
claims implicate their free-speech rights are distinguishable from the facts
presented here. See Gensetix, Inc. v. Baylor Coll. of Med., 616 S.W.3d 630, 641-
42 (Tex. App.—Houston [14th Dist.] 2020, pet. dism’d) (“[a]t the heart of the
dispute” was medical research, a “subject of general interest and of value and
concern to the public”); TN CPA, P.C. v. Nguyen, No. 14-19-00677-CV, 2020 WL
5415593, at *2-3 (Tex. App.—Houston [14th Dist.] Sept. 10, 2020, no pet.) (mem.
op.) (demand letters accused CPA of engaging in broad fraudulent scheme);
DeAngelis v. Protective Parents Coal., 556 S.W.3d 836, 851-52 (Tex. App.—Fort

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Worth 2018, no pet.) (communications were “publicly available statements about
courts and court-appointed attorneys”); Deaver v. Desai, 483 S.W.3d 668, 673
(Tex. App.—Houston [14th Dist.] 2015, no pet.) (communications were online
statements that called for attorney’s disbarment and asserted that criminal charges
should be brought against the attorney’s daughter); Avila v. Larrea, 394 S.W.3d
646, 655 (Tex. App.—Dallas 2012, pet. denied) (communications made in
television broadcast regarding attorney’s legal services). Notably, most of the
cases cited by the Baileys were decided before Creative Oil & Gas clarified what
can be considered a matter of public concern for purposes of the TCPA. See
Creative Oil & Gas, LLC, 591 S.W.3d at 134-37.

      For these reasons, we reject the Baileys’ argument that Peavy’s claims
implicate their right of free speech under the TCPA.

      B.    Right to Petition

      Asserting that Peavy’s claims implicate their right to petition, the Baileys
advance a two-pronged argument:

      1.    Peavy’s claims are based on, related to, or in response to
            communications made in connection with an issue under
            consideration or review (or likely to encourage consideration or
            review) by a legislative, executive, judicial, or other governmental
            body.
      2.    Peavy’s claims are based on, related to, or in response to
            communications made in or pertaining to judicial proceedings or in
            connection with an issue under consideration or review by a judicial
            body.

See Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, sec. 27.001(4), 2011 Tex.
Gen. Laws 961, 961-62 (amended 2019). We consider these arguments separately.

      The Baileys’ first argument is premised on filings the parties submitted to
the state regarding the governance of their law firms, including a certificate of
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formation, certificate of account management, certificate of account statute, Texas
franchise tax public information, and other financial filings. The Baileys cite
Enterprise Crude GP LLC v. Sealy Partners, LLC, 614 S.W.3d 283, 297-98 (Tex.
App.—Houston [14th Dist.] 2020, no pet.), to support their contention that these
filings demonstrate Peavy’s claims are related to communications made in
connection with an issue under consideration by a governmental body.

      In Enterprise Crude GP LLC, the plaintiffs filed claims alleging that the
defendants harmed the plaintiffs by building above-ground storage tanks that
allegedly prevented the plaintiffs from developing their property. Id. at 292-93.
The defendants filed a TCPA motion to dismiss, asserting that the plaintiffs’ claims
implicated their right to petition since the claims were related to the submission of
applications for the tanks’ building permits.

      Concluding that the TCPA applied, the court reasoned that:

      the applications necessarily go hand in hand with the construction
      process because [the defendants] applied for the construction permits
      from the City of Sealy and could not have constructed the tanks
      without the permits. The nuisance and tortious interference claims are
      predicated on the construction of the additional tanks, and we
      conclude that those claims at least “have a connection with, refer to,
      or concern” [the defendants’] permit applications because those
      communications resulted in the creation of a condition that [plaintiffs]
      contend is a nuisance and tortiously interfered with their prospective
      contractual relationships.

Id. at 297-98.
      But conversely here, the communications at issue in Peavy’s claims were not
predicated on any approval secured from the state or other governmental body.
Unlike the facts in Enterprise Crude GP LLC, the parties’ filings with the state did
not authorize the conduct of which Peavy complains, i.e., the Baileys’ alleged
misrepresentations regarding fees earned and compensation disbursed. Therefore,

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Enterprise Crude GP LLC does not support extending the TCPA’s right of petition
to Peavy’s claims.

      Second, the Baileys assert that Peavy’s claims are premised on alleged
communications made “either in or pertaining to ongoing judicial proceedings or in
connection with an issue under review or consideration by a judicial body.” See
Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, sec. 27.001(4)(C), 2011 Tex.
Gen. Laws 961, 961-62 (amended 2019). We disagree.

      Although the fees at issue were earned through judicial proceedings, Peavy’s
claims are premised on communications that occurred outside of those judicial
proceedings, namely, the Baileys’ representations to Peavy regarding the fees’
receipt and disbursement. This fact distinguishes this appeal from the cases cited
by the Baileys to support their argument that Peavy’s claims implicate their right to
petition. See Brown Sims, P.C. v. L.W. Matteson, Inc., 594 S.W.3d 573, 578 (Tex.
App.—San Antonio 2019, no pet.) (the plaintiffs’ claims alleged that the
defendants “committed legal malpractice by failing to include an affirmative
defense in the answer they filed”); Shopoff Advisors, LP v. Atrium Circle, GP, 596
S.W.3d 894, 905 (Tex. App.—San Antonio 2019, no pet.) (communication at issue
was an email informing the bank that it should not release the escrow funds at issue
because the party planned to challenge the arbitration award in the trial court);
Mustafa v. Pennington, No. 03-18-00081-CV, 2019 WL 1782993, at *3 (Tex.
App.—Austin April 24, 2019, no pet.) (mem. op.) (communications at issue were
“in substance a criticism of [the defense attorney’s] communication during the pre-
trial proceedings, the trial itself, and the post-trial hearings”); Ghrist v. MBH Real
Estate LLC, No. 02-17-00411-CV, 2018 WL 3060331, at *4 (Tex. App.—Fort
Worth June 21, 2018, no pet.) (mem. op.) (communication was a letter “written
about a matter connected with a lawsuit pending in the 17th Judicial District Court

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of Tarrant County”); James v. Calkins, 446 S.W.3d 135, 147-48 (Tex. App.—
Houston [1st Dist.] 2014, pet. denied) (claims were based on allegations that
attorneys “fraudulently claim[ed] that they represent Mary in pleadings filed in
various lawsuits”). Unlike the facts presented here, the communications in these
cited cases are based on a judicial proceeding or an issue that will be reviewed by a
judicial proceeding — not a private arrangement between private parties regarding
divvying up compensation.

      Therefore, we reject the Baileys’ argument that Peavy’s claims implicate
their right to petition under the TCPA.

      C.     Right of Association

      Finally, the Baileys assert that Peavy’s claims implicate their right of
association. An exercise of the right of association includes “a communication
between individuals who join together to collectively express, promote, pursue, or
defend common interests.” See Act of May 21, 2011, 82nd Leg., R.S., ch. 341, §
27.001(2), 2011 Tex. Gen. Laws 961, 961 (amended 2019).

      As we previously have recognized, the TCPA’s use of “common interests”
requires more than communications made as part of a private transaction. See
Huynh v. Francois-Le, No. 14-19-00138-CV, 2021 WL 686291, at *4 (Tex.
App.—Houston [14th Dist.] Feb. 23, 2021, no pet.) (mem. op.) (collecting cases);
see also Booster Fuels, Inc., 2021 WL 5118486, at *7 (“right of association” did
not include “communications related to a private business endeavor”); Republic
Tavern & Music Hall, 618 S.W.3d at 127 (“right of association” did not include
“communications concern[ing] only a private transaction between private parties”).
Accordingly, the word “common” as used in this context means “‘of or relating to
a community at large: public.’” TSA-Tex. Surgical Assocs., L.L.P., 2021 WL
729862, at *3 (quoting Webster’s Third New Int’l Dictionary 458 (2002)).
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       As we discussed above, the communications at issue here are between
private parties regarding a private financial arrangement. These communications
do not relate the community at large but only to the parties’ private pecuniary
interests.   See TSA-Tex. Surgical Assocs., L.L.P., 2021 WL 729862, at *3.
Therefore, Peavy’s claims premised on these communications do not invoke
“common interests” and do not implicate the Baileys’ right of association. See Act
of May 21, 2011, 82nd Leg., R.S., ch. 341, § 2, sec. 27.001(2), 2011 Tex. Gen.
Laws 961, 961 (amended 2019); see also Huynh, 2021 WL 686291, at *4.

       We reject the Baileys’ argument that Peavy’s claims are based on their
exercise of the right of association. Accordingly, we overrule the arguments raised
in the Baileys’ first issue. Because of our disposition of this issue, we need not
reach the Baileys’ second or third issues. See Tex. R. App. P. 47.1.

                                   CONCLUSION

       We affirm the deemed denial of the Baileys’ TCPA motion to dismiss.

                                      /s/     Meagan Hassan
                                              Justice

Panel consists of Justices Wise, Spain, and Hassan.

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