Court Opinion

ID: 5128557
Source: CourtListenerOpinion
Date Created: 2021-11-23 10:14:40.521629+00
Date Added: 2024-06-11T09:02:19.106672
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                      NO. 03-20-00054-CV

                                  SPS Austin, Inc., Appellant

                                                v.

             Chad Wilbourn, Chase Larson, Brunshae Toliver, Austin Ferraro,
                          and Tribe Builders, Inc., Appellees

               FROM THE 345TH DISTRICT COURT OF TRAVIS COUNTY
        NO. D-1-GN-19-002667, THE HONORABLE TIM SULAK, JUDGE PRESIDING

                            MEMORANDUM OPINION

               SPS Austin, Inc. appeals from the trial court’s dismissal of its claims against

appellees Chad Wilbourn, Chase Larson, Brunshae Toliver, Austin Ferraro, and Tribe Builders,

Inc., and the award of attorney’s fees to appellees under the Texas Citizens Participation Act

(TCPA). Tex. Civ. Prac. & Rem. Code §§ 27.001-.011. The individual appellees were employees

of or independent contractors supporting SPS, and one or more of them allegedly became affiliated

with Tribe after they stopped working with SPS. The trial court granted appellees’ TCPA motion

to dismiss SPS’s claims for breach of contract, misappropriation of trade secrets, and tortious

interference with existing and prospective contractual relations.

               By three issues, SPS contends that the TCPA does not apply to its claims, that SPS’s

evidence met the TCPA’s evidentiary threshold for avoiding dismissal of claims, and that the trial

court abused its discretion by denying SPS’s motion for limited discovery under the TCPA. We
will reverse the dismissal of SPS’s claims that Tribe and Wilbourn tortiously interfered with SPS’s

existing and prospective contractual relationships with customers and will accordingly reverse the

award of attorney’s fees. We will affirm the dismissal in all other respects, and remand the cause

for further proceedings on the reversed claims.

                  TCPA FRAMEWORK AND STANDARD OF REVIEW

               The TCPA was designed to protect both a defendant’s rights of speech, petition,

and association and a claimant’s right to pursue valid legal claims for injuries that the defendant

caused. Montelongo v. Abrea, 622 S.W.3d 290, 295 (Tex. 2021); see Tex. Civ. Prac. & Rem. Code

§ 27.002. 1 The TCPA establishes a three-step process to evaluate whether a legal action should

be dismissed for improper infringement of protected rights. Montelongo, 622 S.W.3d at 295-96.

Discovery is suspended until the motion is decided, but the court may allow limited relevant

discovery on a showing of good cause. Tex. Civ. Prac. & Rem. Code §§ 27.003(c), .006(b). In

deciding whether the TCPA applies and whether to dismiss the case, the trial court considers “the

pleadings and supporting and opposing affidavits stating the facts on which the liability or defense

is based.” Former Tex. Civ. Prac. & Rem. Code § 27.006(a).

       1 Although section 27.002 describing the TCPA’s purpose was not amended in 2019, other
portions were extensively amended. See Act of May 21, 2011 82nd Leg., R.S., ch. 341, 2011 Tex.
Gen. Laws 961, amended by Act of May 22, 2013, 83rd Leg., R.S., ch. 1042, 2013 Tex. Gen. Laws
2499 (affecting in relevant part Tex. Civ. Prac. & Rem. Code § 27.004), amended by Act of
May 17, 2019, 86th Leg., R.S., ch. 378, 2019 Tex. Gen. Laws 684, 684-687 (in relevant part
amending Tex. Civ. Prac. & Rem. Code §§ 27.001(2), .003(a), .005(b)(d), .006(a), .009, .010).
       This lawsuit was filed on May 15, 2019, so the version of the TCPA in force before its
2019 amendments applies. See Act of May 17, 2019, 86th Leg., R.S., ch. 378, §§ 11-12, 2019
Tex. Gen. Laws at 687, (amendments to TCPA apply “only to an action filed on or after”
September 1, 2019). We will refer to relevant, applicable provisions of the TCPA that were
amended in 2019 as “former Tex. Civ. Prac. & Rem.. Code § 27. .”

                                                  2
                A party seeking dismissal has the initial burden of showing by a preponderance of

the evidence that the non-movant’s 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. Former Tex. Civ. Prac.

& Rem. Code §§ 27.003(a), .005(b); 2 Montelongo, 622 S.W.3d at 296. If the movant properly

shows that the legal action has the requisite connection to one of the relevant rights, the trial court

must dismiss the action unless the non-movant establishes by clear and specific evidence a prima

facie case for each element of its claim. Former Tex. Civ. Prac. & Rem. Code § 27.005(b), (c);

ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 898 (Tex. 2017); In re Lipsky,

460 S.W.3d 579, 586 (Tex. 2015) (orig. proceeding). If the claimant puts forth a prima facie case,

the trial court must dismiss the action if the movant establishes by a preponderance of the evidence

each essential element of an affirmative defense or other grounds to the nonmovant’s claim.

Former Tex. Civ. Prac. & Rem. Code § 27.005(d); Coleman, 512 S.W.3d at 898.

                The term “clear and specific evidence” describes the quality of evidence required

to establish a prima facie case, while the term “prima facie case” sets the “amount of evidence

required to satisfy the nonmovant’s minimal factual burden.” Serafine v. Blunt, 466 S.W.3d 352,

358 (Tex. App.—Austin 2015, no pet.). A prima facie case will entitle a party to recover if no

contrary evidence is offered. Id. Bare, baseless opinions do not create fact questions and are not

a sufficient substitute for the clear and specific evidence required to establish a prima facie case.

Lipsky, 460 S.W.3d at 592. Conclusory statements are not probative and will not establish a prima

facie case. Serafine, 466 S.W.3d at 358. The trial court may consider pleadings as evidence under

        2 The current version of the TCPA provides that a legal action must be dismissed if the
movant “demonstrates” that the action “is based on or is in response to” the exercise of protected
rights or arises from any act of a party in furtherance of the party’s communication or conduct
described in section 27.010(b). Tex. Civ. Prac. & Rem. Code §§ 27.003(a), .005(b), 010(b).
                                                   3
the TCPA, but the plaintiff must do more than “mere notice pleading”; for pleadings to provide

clear and specific evidence, the plaintiff must provide enough detail to show the factual basis for

its claim. RigUp, Inc. v. Sierra Hamilton, LLC, 613 S.W.3d 177, 190 (Tex. App.—Austin 2020,

no pet.) (citing Lipsky, 460 S.W.3d at 590-91). Allegations alone are often not specific enough to

make a prima facie case; the nonmovant must offer or produce evidence of facts to make the prima

facie case. See Montelongo, 622 S.W.3d at 301; Buzbee v. Clear Channel Outdoor, LLC,

616 S.W.3d 14, 29 (Tex. App.—Houston [14th Dist.] 2020, no pet.). For example, in a defamation

case that implicates the TCPA, pleadings and evidence that establish the facts of when, where, and

what was said, the defamatory nature of the statements, and how they damaged the plaintiff should

be sufficient to resist a TCPA motion to dismiss. Lipsky, 460 S.W.3d at 591.

               We review de novo whether the movant established by a preponderance of the

evidence that the legal action is subject to the TCPA and whether the nonmovant presented clear

and specific evidence establishing a prima facie case for each essential element of its challenged

claims. Serafine, 466 S.W.3d at 357.

               We construe the TCPA liberally to effectuate its intent of safeguarding and

encouraging citizens’ constitutional exercise of rights to free speech, petition, and association

while protecting the right to file a meritorious lawsuit. Coleman, 512 S.W.3d at 898; see Tex. Civ.

Prac. & Rem. Code §§ 27.002, .011(b).

                                        BACKGROUND

               This dispute arises between SPS and the individual appellees—former employees

and independent contractors of Mike Chang Fitness (MCF)—and Tribe, a company where SPS

alleged the individual employees went to work after leaving MCF.

                                                4
               MCF sold what SPS’s President Thomas Harter described as high-quality fitness

products, including fitness courses, nutrition programs, and dietary supplements, primarily through

online and telephonic sales. Harter stated that MCF had domain names, trademarks, service marks,

and proprietary information regarding its customers, potential customers, and vendors. According

to Harter, among MCF’s long-time customers was Lexicon, which provides online health and

wellness services. MCF’s relationship with Lexicon was primarily managed by appellees Ferraro

and Larson.

               Appellees Ferraro, Larson, Toliver, and Wilbourn, as well as their former co-

defendant Johnson Li 3 all worked for or with MCF as employees or independent contractors; in

those capacities, appellees signed agreements with MCF concerning confidential information and

non-competition periods after employment. 4       The MCF agreements concerning confidential

information bar the employee or contractor from directly or indirectly divulging or using any

confidential information outside of the contract with MCF for five years following the termination

of the contract with MCF. 5

               Wilbourn ended his work with SPS in October 2017, and Tribe was formed in

January 2018. Wilbourn is a director at Tribe, which is a company engaged in fitness and dietary

       3  Johnson Li worked at Mike Chang Fitness and is included in allegations relevant here.
Claims against him were nonsuited in the trial court after the trial court granted appellees’ motions
to dismiss under the TCPA.
       4 The record contains such agreements formed in 2016 between MCF and each of Bull
Trading Group, signed by Larson; Alpha Sales Group, Inc., signed by Wilbourn; Ferraro;
and Toliver.
       5   Toliver’s agreement did not set an expiration for the obligation not to disclose
confidential information.

                                                 5
marketing and sales, including phone sales. Larson, Toliver, and Li left MCF on March 11, 2019—

Larson and Toliver assert that they were escorted from the MCF premises at the instructions of

MCF’s chief executive officer Daniel Rose—and Ferraro left a few days later. None was working

for MCF when it and SPS executed the Asset Purchase Agreement (Agreement) in April 2019.

               On or about April 26, 2019, SPS and MCF executed the Agreement that

encompassed MCF’s proprietary information including customer data, sales data, company email

accounts, and Google Drive accounts. The Agreement identifies customer lists, supplier lists, and

agreements among the assets assigned. MCF assigned to SPS agreements with customers and

contractors, as well as those with former and current employees that restrict competition and use

of confidential information.

               On May 15, 2019, SPS filed this suit against Wilbourn, Larson, Toliver, Li, Ferraro,

and Tribe, alleging that the individual appellees breached their contracts with MCF that were

assigned to SPS by soliciting customers, vendors, and/or employees away from MCF/SPS, and by

using MCF/SPS’s confidential information to do so. SPS also contends that the individual

appellees misappropriated trade secrets including the confidential information subject to their

agreements and that the individual appellees were using the confidential information and trade

secrets to the detriment of SPS and the benefit of their new employer, Tribe. SPS further alleged

that Wilbourn and Tribe, along with Li, tortiously interfered with existing contractual relations by

recruiting SPS’s employees to terminate their employment with SPS, disregard their

post-employment obligations, and join Tribe to divert business from SPS to Tribe. Finally, SPS

alleged that appellees used SPS’s confidential information to interfere with prospective business

relations. SPS did not allege tortious interference by Larson, Toliver, or Ferraro.

                                                 6
               Appellees filed motions to dismiss under the TCPA. Appellees urged that the

TCPA applies to this case because SPS’s suit implicates the rights of association and free speech.

They also asserted that SPS cannot establish a prima facie case for each essential element of its

claims by clear and specific evidence.

               SPS filed responses to the motions to dismiss attaching documentary evidence. SPS

also requested that the court compel appellees to reply to discovery and that, before granting the

motions to dismiss, the trial court grant time for limited discovery on any issues on which it

concluded that SPS had not established a prima facie case. Appellees objected to evidence attached

to SPS’s response and original petition.

               The trial court granted appellees’ motions to dismiss under the TCPA, reserving a

decision on attorney’s fees. The trial court did not specify a basis for its grant of the motions

to dismiss.

               Subsequent filings and orders included SPS nonsuiting its claims against Li and

requesting and obtaining orders overruling the objections to its evidence. SPS also requested

reconsideration of the dismissal orders, expanding the scope of its claim of the commercial-speech

exemption to include all claims instead of just the claim for tortious interference with business

relations. The trial court then awarded attorney’s fees to appellees.

                                           ANALYSIS

               SPS contends that the TCPA does not apply to any of its causes of action against

appellees. Alternatively, it contends that it established a prima facie case as to each element of

those causes against each appellee. SPS further contends that the trial court erred by denying its

                                                 7
request for limited discovery on the causes of action on which the trial court concluded that SPS

had not established a prima facie case.

               Under the applicable version of the TCPA, a party seeking dismissal had the initial

burden of showing that the non-movant’s “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.” Former

Tex. Civ. Prac. & Rem. Code §§ 27.003(a), .005(b). The basis of a legal action is determined not

by the defendant’s admissions or denials but by the plaintiff’s allegations. Hersh v. Tatum,

526 S.W.3d 462, 467 (Tex. 2017).

I.     The commercial-speech exemption applies to the tortious interference with
       customers claims.

               SPS contends that its claims are excluded from the TCPA’s scope by the

commercial-speech exemption. Former Tex. Civ. Prac. & Rem. Code § 27.010(b). 6 SPS initially

asserted this exemption on only its tortious-interference claims, but later asserted it concerning all

claims in its motion for reconsideration. Appellees contend that the addition of the other claims

at the reconsideration stage was untimely and waived the exemption. Resolving the preservation

issue is unnecessary because the exemption applies only to the tortious interference claims raised

against Wilbourn and Tribe, for which the motion was undisputedly timely raised.

               Under the commercial-speech exemption, the TCPA does not apply to legal actions

in which (1) the defendant was primarily engaged in the business of selling or leasing goods or

       6This subsection was renumbered without substantive change by the 2019 amendments
from subsection (b) to become subsection (a)(2) of section 27.010 of the Civil Practice and
Remedies Code. See Act of May 17, 2019, 86th Leg., R.S., ch. 378, § 9, 2019 Tex. Gen. Laws
at 686.

                                                  8
services, (2) the defendant made the statement or engaged in the conduct on which the claim is

based on 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 were actual or

potential customers of the defendant for the kind of goods or services the defendant provides.

Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018); see also former Tex. Civ.

Prac. & Rem. Code § 27.010(b). The party asserting the exemption must establish all four

elements. RigUp, 613 S.W.3d at 187. To determine whether a party has met its burden on the

exemption’s elements, we consider the pleadings and record evidence. Rose v. Scientific Mach. &

Welding, Inc., No. 03-18-00721-CV, 2019 WL 2588512, at *4 (Tex. App.—Austin June 25, 2019,

no pet.) (mem. op.). Factual allegations in a plaintiff’s petition alone may be sufficient to meet

the exemption’s elements. Id. Because the exemption concerns whether the TCPA applies, SPS

needs to prove that the exemption applies by a preponderance of the evidence. Hawkins v. Fox

Corp. Hous., LLC, 606 S.W.3d 41, 46 (Tex. App.—Houston [1st Dist.] 2020, no pet.).

               SPS alleged that the individual appellees breached their contracts by taking

information relating to how and to whom MCF and SPS sold its products and services. SPS alleged

that it purchased the assets of MCF, which was in the business of selling high-quality fitness

products, such as fitness courses, nutrition programs, and dietary supplements, primarily through

on-line and telephonic sales. It also purchased proprietary information from MCF, such as

identities and contact information of potential and existing customers, business partners, and

vendors; customers’ requirements, habits, likes and dislikes; and prices charged.           But the

exemption applies to statements arising out of a commercial transaction involving the kind of

goods or services the defendant provides. Any of the improper taking of the sales information to

                                                 9
Tribe as alleged did not arise out of a commercial transaction of selling fitness products and related

services; instead, it arose out of an employment change.

               Further, the alleged misappropriation of confidential and proprietary information

to use at Tribe does not fit within the exemption because there is no showing that SPS’s

information is a good or service that the appellees were selling—unlike, for example, the blueprints

and drawings disclosed or offered for sale in Rose, 2019 WL 2588512, at *6. The information

here allegedly included sales techniques and sales targets used to sell other goods and services.

               There is also no showing that any transmission of the copied information was a

commercial transaction. This contrasts with the situation in Rose, in which Scientific contended

that Rose unlawfully disclosed the trade secrets in his personal capacity as a designer and creator

of blueprints and drawings for the manufacture of specialty machines. Id. Rose allegedly was

selling schematics which were the product that his former employer sold, whereas SPS is

complaining of the misappropriation of methods and phone numbers it developed, compiled, and

used to sell other products.

               Allegations that Wilbourn and Tribe tortiously interfered with contracts by

soliciting SPS employees to join Tribe do not fit the exemption because they do not arise out of a

“commercial transaction” involving goods or services the appellees provide. See Abatecola

v. 2 Savages Concrete Pumping LLC, No. 14-17-00678-CV, 2018 WL 3118601, at *9-10 (Tex.

App.—Houston [14th Dist.] June 26, 2018, pet. denied) (mem. op.). Further, they are not

statements made to an audience who are actual or potential customers of the defendant for the

kind of goods or services the defendant provides. See Lara v. Streamline Ins. Servs., LLC,

No. 03-19-00474-CV, 2020 WL 7776080, at *5 (Tex. App.—Austin Dec. 31, 2020, no pet.)

                                                 10
(mem. op.) (op. on reh’g). These distinctions remove the employment-based claims from the

commercial-speech exemption.

               However, the claims for tortious interference with relationships with customers are

within the commercial-speech exemption. Abatecola, 2018 WL 3118601, at *10 (exemption

applies to defendant competitor’s allegedly tortiously interfering statements it made to plaintiff’s

customers); see also Lara, 2020 WL 7776080, at *5. SPS claims that Wilbourn and Tribe were in

the business of fitness and dietary supplement marketing and that they used SPS’s confidential

information to solicit at least one of SPS’s customers who provides online health and wellness

publishing services. This claim that Tribe and Wilbourn tortiously interfered with SPS’s existing

contractual relationships with customers is within the scope of the commercial-speech exemption

to the TCPA. We sustain issue one in part, concluding that the trial court erred by dismissing these

claims because they are not within the scope of the TCPA.

II.    The Covenants Not to Compete Act does not preempt the TCPA

               SPS asserted that the application of the TCPA to its claims involving covenants not

to compete were preempted by the Covenants Not to Compete Act (CNCA). See Tex. Bus. &

Com. Code §§ 15.50-.52. However, courts have concluded that the TCPA and CNCA govern

different aspects of the litigation process. RigUp, 613 S.W.3d at 186-87; see also Reeves v. Harbor

Am. Cent., Inc., 631 S.W.3d 299, 307 (Tex. App.—Houston [14th Dist.] Apr. 28, 2020, pet.

denied). The TCPA governs early-stage dismissal based on certain statutory and constitutional

criteria, while the CNCA concerns burdens of proof and remedies concerning the merits of a cause

of action. Reeves, 631 S.W.3d at 307. Consistent with the holding in RigUp, we conclude that the

CNCA does not preempt application of the TCPA to claims in this case.

                                                11
III.   Breach of contract claims

               SPS contends that the individual appellees failed to show that the TCPA applies to

its breach-of-contract claims because they did not show that SPS’s claims are solely based on,

related to, or in response to “communications.” SPS does not allege breach of contract by Tribe.

SPS further urges that its claims focus on what appellees did, not what they said.

               The elements of a breach-of-contract claim are (1) the existence of a valid contract

between the plaintiff and defendant; (2) performance by the plaintiff; (3) breach of the contract by

the defendant; and (4) damage to the plaintiff as a result of the breach. Barnett v. Coppell N. Tex.

Ct., Ltd., 123 S.W.3d 804, 815 (Tex. App.—Dallas 2003, pet. denied) (citation omitted).

       A.      The TCPA applies to the breach-of-contract claims.

               SPS alleged that the individual appellees entered valid contracts with MCF, that

SPS is the assignee of those agreements, and that the individual appellees breached these

agreements by soliciting customers, vendors, and/or employees away from SPS and by using SPS’s

confidential information to do so. SPS alleged that the services the individual appellees performed

for Tribe diverted business from SPS and will likely cause unknown damages.

               The individual appellees assert that these allegations are within the TCPA because

they implicate the individual appellees’ exercise of the right of association. The applicable TCPA

provision defined the “exercise of the right of association” as “a communication between

individuals who join together to collectively express, promote, pursue, or defend common

interests.” Former Tex. Civ. Prac. & Rem. Code § 27.001(2); 7 Elite Auto Body LLC v. Autocraft

       7 Current code section 27.001(2) omits “a communication between individuals who” from
the former definition and adds the italicized phrase in following, now defining the association right
as meaning “to join together to collectively express, promote, pursue, or defend common interests
                                                 12
Bodywerks, Inc., 520 S.W.3d 191, 197 (Tex. App—Austin 2017, pet. dism’d). In Grant, this Court

concluded that the TCPA applied to allegations that persons breached a non-compete agreement

by misappropriating confidential information and proprietary information, using that information

to compete directly and unfairly with a plaintiff, soliciting and employing the plaintiff’s

employees, and interfering with and disrupting the relationship between the plaintiff and its

employees and independent contractors. Grant v. Pivot Tech. Sols., Ltd., 556 S.W.3d 865, 880-81

(Tex. App.—Austin 2018, pet. denied). This Court concluded that the claims in Grant were based

on, related to, or in response to the defendants’ exercise of the right of association through

communications between defendants who had joined together to pursue a common interest in

employment with a competitor. Id. at 881; see also Elite, 520 S.W.3d at 879.

               The claims in this case are like those in Grant and are within the reach of the TCPA.

The communications allegedly used to solicit others to switch from SPS to Tribe are an exercise

of the right of association as the makers sought to express, promote, pursue, or defend the common

interest of working and doing business together. See Grant, 556 S.W.3d at 880-81. The sharing

and using of confidential information to facilitate those business relationships are similarly

exercises of the right of association. Elite, 520 S.W.3d at 205; Grant, 556 S.W.3d at 881.

Appellees have sufficiently shown that SPS’s breach-of-contract claims are based on, related to,

or in response to the communications made in furtherance of appellees’ alleged exercises of the

right of association under the applicable definition in joining and pursuing business in competition

with SPS while using allegedly confidential and proprietary information from SPS.

relating to a governmental proceeding or a matter of public concern.” Tex. Civ. Prac. & Rem.
Code § 27.001(2) (emphasis added).
                                                13
               SPS did not allege contract claims that relate solely to non-communications.

Though some of the alleged breaches could involve actions rather than communications, SPS’s

breach claims based on those actions are nevertheless based on, related to, or in response to

communications between individuals who joined together to collectively express, promote, pursue,

or defend the alleged common interest in joining Tribe in its business interests. See former

Tex. Civ. Prac. & Rem. Code § 27.001(2). SPS does not claim, for example, that appellees took

its confidential information in silence and solitude and merely deprived SPS of that information

by hiding or destroying it. SPS’s breach claims rely on the impermissible use of that information

as or in support of communications among the appellees or SPS’s customers to perform services

for Tribe allegedly to divert business from SPS to its detriment. SPS’s allegations go beyond the

action of taking the information and are based on, relate to, or are in response to at least appellees’

exercise of the right of association.

               SPS invites this Court to revisit its holding in Elite based on the 2019 amendments

to the TCPA, arguing that these amendments show that the Legislature’s intended scope of the

TCPA excludes the claims made here. SPS specifically relies on 2019 amendments that exclude

claims based on the CNCA and the Texas Uniform Trade Secrets Act. See Tex. Civ. Prac. & Rem.

Code § 27.010(a)(5)(A), (B).       SPS acknowledges that an amendment to a statute applies

prospectively unless it is expressly made retroactive and acknowledges that this amendment is

expressly inapplicable to cases filed before September 1, 2019. 8 See Act of May 17, 2019, 86th

Leg., R.S., ch. 378, §§ 11-12, 2019 Tex. Gen. Laws 684, 687. We look at the plain language of

the applicable statute and give little weight to amendments in interpreting the prior law. Pruett

       8 See Tex. Gov’t Code § 311.022; State v. Fidelity & Deposit Co. of Md., 223 S.W.3d 309,
312 (Tex. 2007); In re J.J., 276 S.W.3d 171, 176 (Tex. App.—Austin 2008, pet. denied).
                                                  14
v. Harris Cnty. Bail Bond Bd., 249 S.W.3d 447, 454 (Tex. 2008). We are constrained to construe

the statute as it existed, to apply the applicable law as written—not as it would later be written—

absent the Legislature making the law retroactively applicable. Hegar v. American Multi-Cinema,

Inc., 605 S.W.3d 35, 44 (Tex. 2020). We are not presented with and do not find a basis on which

to conclude that the amendments merely clarify the original intention of the language of the TCPA.

               The TCPA applies to the breach-of-contract claims based on the implication of the

right of association.

       B.      SPS did not make a prima facie case for breach of contract.

               SPS alleged that the individual appellees had valid, enforceable agreements with

MCF and that SPS is the assignee of the agreements. These agreements forbade the individual

appellees to disclose SPS’s confidential information or to compete with SPS for a specified time.

SPS alleged that appellees breached their agreements by soliciting customers, vendors, and/or

employees away from SPS and by using SPS’s confidential information to do so. SPS alleged that

the confidential information and trade secrets include financial data, general business strategy,

sales and marketing strategies, sales reports, current and prospective customer lists, as well as

specific development, customer information, status of all active and prospective development

strategies and lists, company innovations, and additional confidential information and trade secrets

that would not have been available to the individual appellees save and except for employment

with MCF and SPS. SPS contends that the individual appellees performed services for Tribe, both

before and after they terminated their SPS employment, that were designed to and did divert

business from SPS. Further, SPS alleged that appellees used its confidential key-personnel contact

information to solicit SPS’s customer Lexicon away from SPS. SPS President Harter swore in his

affidavit that, as a result of these alleged breaches, SPS lost 90% of its monthly gross revenue,

                                                15
including its business relationship with Lexicon due to appellees’ solicitation. SPS contends that

it has suffered and is in danger of suffering immediate and irreparable harm with damages to be

incurred in an unknown amount.

               We will focus on the breach and damages issues. The pleadings alone do not supply

clear and specific evidence to establish a prima facie case on every element of the cause of action.

See Lipsky, 460 S.W.3d at 591.

               While Harter can plainly have personal knowledge of who SPS’s customers are and

are not, his affidavit does not show a basis for his alleged knowledge that appellees solicited

Lexicon and that Lexicon is a customer of Tribe or any other appellee. SPS correctly notes that

the trial court overruled all of appellees’ objections to its evidence. However, the overruling of

the objections does not relieve us of our obligation to examine the adequacy of the evidence

presented to comprise the required prima facie case. “A witness may testify to a matter only if

evidence is introduced sufficient to support a finding that the witness has personal knowledge of

the matter. Evidence to prove personal knowledge may consist of the witness’s own testimony.”

Tex. R. Evid. 602. An affidavit showing no basis for personal knowledge is legally insufficient.

Kerlin v. Arias, 274 S.W.3d 666, 668 (Tex. 2008); cf. Roels v. Valkenaar, No. 03-19-00502-CV,

2020 WL 4930041, at *2 (Tex. App.—Austin Aug. 20, 2020, no pet.) (mem. op.) (citing KBMT

Operating Co., LLC v. Toledo, 492 S.W.3d 710, 715-16 (Tex. 2016) (self-serving, conclusory

hearsay in plaintiff’s affidavit was not “clear and specific evidence” of falsity element of

defamation claim)).

               The chief allegations in Harter’s affidavit concerning the breach are that two

appellees briefly messaged concerning possibly leaving, that there was an unusual amount of

download activity of internal information before they departed in March 2019, that appellees left

                                                16
SPS, and that Lexicon, a customer Ferraro and Larson were primarily responsible for, also left

SPS. In the November 2018 message exchange, Li states that Wilbourn reported that SPS sales

workers were calling him to get a job and that Wilbourn said he did not want to step on SPS’s toes.

Li stated that he told Wilbourn to take anyone who wants to go. Li stated that he was going to tell

MCF’s CEO Rose about the sales workers calling other companies, but Larson told Li not to

mention it. This exchange does not show any breach of contract. Harter’s assertion that an unusual

amount of information about Lexicon was downloaded from MCF’s database before March 2019

does not show that appellees took it away from SPS. Moreover, his affidavit does not show any

basis for a finding that appellees caused SPS’s loss of revenue by working for a competitor, using

confidential information, or taking any customers.

               Even if SPS sufficiently showed that the individuals breached valid contracts that

bar them from working for a competitor, SPS has not shown that such breaches caused SPS’s

damages. Without evidence on this key element of the cause of action, SPS has not carried its

burden to make a prima facie case on this claim and defeat the motion to dismiss its breach-of-

contract claims.

IV.    Misappropriation of trade secrets

               SPS alleged that it owns confidential information such as development, tactics,

business strategies, and profitability information concerning its business that provide it a

competitive advantage. SPS contends that the information provides economic value from being

not generally known, and that SPS has taken reasonable measures to protect the secrecy of the

information. SPS alleged that individual appellees had access to and learned the confidential

information and trade secrets that they would not have gained but for their work for SPS. It further

                                                17
alleged that the individual appellees’ work for Tribe required them to improperly use or disclose

SPS’s trade secrets without SPS’s authorization to the detriment of SPS in several different ways.,

including interference with its business relationships.

               Misappropriation of trade secrets is shown by proof (1) that a trade secret existed;

(2) that the trade secret was acquired through a confidential relationship; (3) that the defendant

used the trade secret without authorization from the plaintiff; and (4) that the owner sustained

damages. Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care Servs., LLC,

404 S.W.3d 737, 744 (Tex. App.—El Paso 2013, no pet.); see also AHS Staffing, LLC v. Quest

Staffing Grp., Inc., 335 F.Supp.3d 856, 862 (E.D. Tex. 2018). A trade secret is any formula,

pattern, device, or compilation of information that is used in one’s business and gives that business

an opportunity to obtain an advantage over competitors who do not know or use it. Avera v. Clark

Moulding, 791 S.W.2d 144, 145 (Tex. App.—Dallas 1990, no writ); see also Tex. Civ. Prac. &

Rem. Code § 134A.002(6).

               Damages in misappropriation cases can take several forms, including the value of

the plaintiff’s lost profits, the defendant’s actual profits from the use of the secret, the value a

reasonably prudent investor would have paid for the trade secret, the development costs the

defendant avoided by the misappropriation, and a reasonable royalty. Southwest Energy Prod. Co.

v. Berry-Helfand, 491 S.W.3d 699, 710-11 (Tex. 2016).

       A.      The TCPA applies to SPS’s misappropriation-of-trade-secrets claim.

               As with its breach-of-contract claim, SPS’s misappropriation claim is based on,

relates to, or is in response to the appellees’ exercise of their rights of association. SPS alleged

damages from appellees’ use and disclosure of the trade secrets in their collective work at Tribe

                                                 18
intended to injure SPS. Disclosure of information inherently requires communication of that

information to the disclosee. SPS’s misappropriation of trade secrets claim is based on, related to,

or in response to communications between individuals who allegedly joined together to

collectively express, promote, pursue, or defend common interests of engaging in business in

competition with SPS. See Grant, 556 S.W.3d at 880-81.

       B.      SPS did not make a prima facie case of misappropriation of trade secrets.

               SPS alleged that the individual appellees had access to, became familiar with, and

gained intimate knowledge of its confidential information and trade secrets that they would not

have gained had they not worked for SPS. SPS alleged that the confidential information and trade

secrets derive their value from not being generally known or ascertainable and that SPS took

reasonable measures to protect and maintain the secrecy of the information. SPS alleged that the

individual appellees have begun working for Tribe, which requires them to improperly use or

disclose SPS’s trade secrets. SPS alleged that this unauthorized use has resulted in and will result

in irreparable injury and damage to SPS and its existing and future business and goodwill.

               The pleadings alone do not supply clear and specific evidence to establish a prima

facie case on every element of the cause of action. See Lipsky, 460 S.W.3d at 591. We will focus

on the third and fourth prongs of the misappropriation claim, which require establishing that the

defendant used the trade secrets without authorization and thereby caused damages.

               SPS cites its President Harter’s affidavit for the following in support of its claim

of misappropriation:

       •    Appellees had access to large amounts of trade secrets.

                                                19
       •   Larson obtained or downloaded reports like Top 10 Customers, Overall Phone Sales
           Gross Revenue, Subs by Source, Product, and Lifetime Subscribers in September 2018
           and SPS’s 2018 and 2019 customer lists in January 2019. Harter described this activity
           as unusual, noting that there were 19,309 external shares of company documents
           housed in Google Drive during the week of March 15-19, 2019; this contrasts with 288
           such shares during all of April 2019. (Larson’s and Toliver’s employment, however,
           allegedly had ended on March 11, 2019.)

       •   The company accounts of Wilbourn and Toliver were deleted when they left MCF; the
           deletion of Wilbourn’s account a year after his departure was unusual.

       •   SPS has not been able to locate equipment assigned to Larson, Toliver, and Ferraro.

       •   SPS lost 90% of its monthly gross revenue, including its business relationship
           with Lexicon.

In its brief, SPS asserts that its losses or revenue and/or the custom of Lexicon were “presumably

to Tribe Builders.”

               This presumption of a critical element is not supported by clear and specific

evidence. SPS must establish by clear and specific evidence a prima facie case that appellees took

and used the trade secrets and that the use of the trade secrets caused damages. Though SPS

alleged and Harter avers that appellees used the trade secrets to solicit Lexicon to Tribe and broadly

diminish SPS’s revenues, there is no basis for Harter’s assertion of personal knowledge of a Tribe

contract with Lexicon or any other existing or former customer of SPS. There is no evidence that

any appellee used any trade secret without authorization from the plaintiff, nor is there evidence

that links an appellee’s use of the trade secrets to the detriment of SPS. Parties must provide clear

and specific evidence to support their claims. The fact that SPS lost revenue after the individual

appellees left SPS does not comprise a prima facie case that appellees caused the losses through

the use of SPS’s trade secrets.

                                                 20
                 We conclude that the trial court did not err by concluding that SPS did not under

the TCPA establish by clear and specific evidence a prima facie case of misappropriation of

trade secrets.

V.      Tortious interference with business relations

                 SPS complains of interference with existing and prospective business relations. The

elements of tortious interference with an existing contract are: (1) an existing contract subject to

interference, (2) a willful and intentional act of interference with the contract, (3) that proximately

caused the plaintiff’s injury, and (4) caused actual damages or loss. Prudential Ins. Co. of Am.

v. Financial Rev. Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000).

                 To prevail on a claim for tortious interference with prospective business relations,

the plaintiff must establish that (1) there was a reasonable probability that the plaintiff would have

entered into a business relationship with a third party; (2) the defendant either acted with a

conscious desire to prevent the relationship from occurring or knew the interference was certain

or substantially certain to occur as a result of the conduct; (3) the defendant’s conduct was

independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury;

and (5) the plaintiff suffered actual damage or loss as a result. Coinmach Corp. v. Aspenwood

Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013); Trowe v. Johnson, No. 03-19-00953-CV,

2021 WL 3624709, at *7 (Tex. App.—Austin Aug. 17, 2021, no pet. h.) (mem. op.). To prevail,

the plaintiff must present evidence that the defendant interfered with a specific contract and that

some obligatory provision of the contract has been breached. RigUp, 613 S.W.3d at 190.

                                                  21
       A.      The TCPA applies to SPS’s tortious-interference claims. 9

               SPS alleged that Wilbourn founded Tribe and approached SPS’s employees on

whom SPS relied to provide its services. SPS alleged that Wilbourn and Tribe encouraged SPS’s

employees to quit SPS, disregard their post-employment obligations, and join Tribe in attempting

to take business away from SPS. SPS alleged that some of the solicited employees left SPS and

joined Tribe, competing with SPS, and damaging SPS. SPS contends that it lost its investment in

employee training and its ability to serve its customers timely because SPS’s employees left

because of Wilbourn’s and Tribe’s solicitations.

               Like the contract and misappropriation claims, these claims are within the TCPA

based on the appellees’ exercise of their right of association. SPS alleged that the appellees

conspired to achieve their objective, which requires communication between individuals to pursue

their common interest. Wilbourn’s and Tribe’s encouragement and solicitation of SPS’s workers

are communications. SPS’s tortious interference claims are based on, related to, or in response to

these communications between individuals who join together to collectively express, promote,

pursue, or defend common interests. Grant, 556 S.W.3d at 880-81.

       B.      SPS’s prima facie case on tortious interference with contractual relationships.

               SPS claimed that various appellees tortiously interfered with its contractual

relationships, both existing and potential. Based on our conclusions that the commercial-speech

exemption excludes SPS’s tortious-interference claims concerning its relations with customers

       9   Because SPS did not claim tortious interference by Larson, Toliver, or Ferrara and
because we earlier concluded that the tortious-interference claim against Wilbourn and Tribe
relating to SPS customers is subject to the commercial-speech exemption, our analysis is limited
to SPS’s claim that Wilbourn and Tribe tortiously interfered with SPS’s contractual relations with
its employees and contractors.
                                               22
from the scope of the TCPA, we will limit our discussion to interference by Wilbourn and Tribe

with contractual relationships with SPS’s employees.

               1.      Existing relationships

               SPS alleged that Wilbourn and Tribe approached SPS’s employees on whom SPS

relied for services and used its confidential information to solicit one of SPS’s primary customers.

SPS alleged further that Wilbourn and Tribe asked and encouraged SPS’s employees to terminate

their employment with SPS, disregard their post-employment obligations, and join Tribe in efforts

to take away SPS’s business. SPS also alleged that Wilbourn and Tribe conspired to raid SPS’s

employees, customers, and vendors by assisting and encouraging the solicitation with knowledge

of the contracts that precluded solicitation and sharing of confidential information. SPS contends

that it was damaged by the loss of employees that it had expended resources to train, that the loss

of employees hampered its ability to provide its customers service, and that Wilbourn and Tribe

benefitted from SPS’s confidential information to SPS’s detriment. The pleadings alone do not

supply clear and specific evidence to establish a prima facie case on every element of the cause of

action. See Lipsky, 460 S.W.3d at 591.

               We will focus on the second element requiring a willful and intentional act of

interference with the contract. In his affidavit, SPS President Harter avers that Larson and Toliver

left SPS because of Wilbourn and Tribe’s interference, and that they persuaded Ferraro and several

other MCF employees to leave SPS. Harter asserted that Wilbourn recruited SPS’s employees.

As discussed above, Harter cited the text of a November 2018 exchange between Li and Larson

on an MCF account in which Li states that Wilbourn reported that SPS sales workers were calling

him to get a job and that Wilbourn said he did not want to step on their toes; Li stated that he told

Wilbourn to take anyone who wants to go. Li stated that he was going to tell MCF’s chief

                                                 23
executive officer Dan Rose about the sales workers calling other companies, but Larson told Li

not to mention it. If anything, this exchange shows Wilbourn (and Tribe) trying to avoid interfering

with SPS’s/MCF’s relations with its employees. 10         Crucially, Harter’s affidavit does not

demonstrate that his role as SPS’s president conferred on him personal knowledge of any recruiting

efforts by Wilbourn, Tribe, or others. An affidavit showing no basis for personal knowledge is

legally insufficient. Kerlin, 274 S.W.3d at 668; Tex. R. Evid. 602. Harter’s affidavit does not

demonstrate a basis for the crucial evidence of the alleged interference with SPS’s

employees’ contracts.

                SPS contends that two statements in Wilbourn and Tribe’s first amended motion to

dismiss under the TCPA that Tribe “hired such [former] employees” of SPS supports a prima facie

case of interference. However, these statements do not allege specific individuals or contracts, nor

do they admit an act of willful and intentional act of interference with a contract with these

unnamed employees.

                The trial court did not err by concluding that SPS did not establish a prima facie

case that appellees tortiously interfered with any of SPS’s existing contractual relationships

with employees. 11

                2.      Potential relationships

                SPS claimed that Wilbourn and Tribe tortiously interfered with prospective

contractual relations concerning only customers, not employees. Because above we decided that

       10   Li and Larson worked for MCF at the time.
       11 Because we conclude that SPS failed to make a prima facie case on this issue, we need
not address appellees’ contentions that SPS had no valid contracts with appellees with which Tribe
and Wilbourn could allegedly interfere.
                                                  24
application of the commercial-speech exemption required reversal of the dismissal concerning

interference with prospective customers, we need not address whether SPS established a prima

facie case on this claim.

VI.    Trial court did not abuse its discretion by declining to allow limited discovery.

               SPS contends that the trial court erred by not allowing SPS to conduct limited

discovery under the TCPA. In its September 12, 2019 response to the motions to dismiss, SPS

requested an order compelling appellees to respond discovery requests SPS propounded

June 24, 2019. The filing of a motion to dismiss under the TCPA automatically suspends all

discovery until the court rules on the motion. Tex. Civ. Prac. & Rem. Code § 27.003(c). However,

the trial court may allow specified and limited discovery relevant to the motion upon a showing of

good cause. Id. § 27.006(b). We review the denial of discovery for an abuse of discretion. Buzbee,

616 S.W.3d at 30. A court abuses its discretion when it acts arbitrarily or unreasonably without

reference to any guiding rules or principles, and when it renders an arbitrary and unreasonable

decision lacking support in the facts or circumstances of the case.         Samlowski v. Wooten,

332 S.W.3d 404, 410 (Tex. 2011).

               The following filings and events in 2019 are relevant to the discovery decision:

       •       May 15       SPS files suit.

       •       June 24      SPS sends requests for production to appellees. 12

       •       July 23      Tribe and Wilbourn file original TCPA motion to dismiss.

       •       July 26      Ferraro, Larson, and Toliver file original TCPA motion to dismiss.

       12  SPS states that it sent discovery requests to “Defendants,” though only requests sent to
Tribe, Ferraro, Li, and Wilbourn are in the clerk’s record attached to SPS’s response to Wilbourn
and Tribe’s motion to dismiss.
                                                 25
       •       July 29    Wilbourn and Tribe file amended TCPA motion to dismiss.

       •       Aug. 9     Wilbourn and Tribe send notice of hearing on their amended TCPA
                          motion to dismiss; hearing set for September 16.

       •       Aug. 30    Ferraro, Larson, and Toliver send notice of hearing on their TCPA
                          motion to dismiss; hearing set for September 16.

       •       Sept. 12   SPS files responses to motions to dismiss, including request for an order
                          compelling appellees to respond to SPS’s discovery requests.

                          SPS alternatively requests that, to the extent the court determines the
                          TCPA applies to any of SPS’s claims and concludes that SPS did not
                          establish a prima facie case on that claim, the court grant SPS the
                          opportunity to conduct limited discovery with respect to any claim in
                          which a prima facie case is lacking.

       •       Oct. 9     Trial court signs orders granting motion to dismiss under the TCPA.
                          Trial court dismisses claims with prejudice, and orders hearing on
                          attorney’s fees and sanctions under the TCPA.

       •       Dec. 10    Appellees send notice of attorney’s fees hearing set for December 18.

       •       Dec. 11    SPS files motion for reconsideration of rulings on motions to dismiss.

       •       Dec. 31    Trial court signs order awarding attorney’s fees to appellees, but
                          assesses no sanctions; orders filed January 8, 2020.

SPS asserts that it requested production of documents and information in appellees’ possession

such as that related to SPS and MCF customers, to appellees’ sales (including identities of

employees, purchasers, and products sold), and to appellees’ communications with SPS’s

employees, contractors, vendors, or customers, as well as production of resumes, letters of

employment and job descriptions for Tribe’s employees, including individual appellees.

               SPS contends that the trial court abused its discretion and was unfair to dismiss all

of SPS’s claims without requiring appellees to respond to the discovery requests. It contends that

the TCPA is intended to safeguard First Amendment rights while protecting the rights of persons

                                                26
to file meritorious lawsuits for demonstrable injury.            See In re IntelliCentrics, Inc.,

No. 02-18-00280-CV, 2018 WL 5289379, at *3 (Tex. App.—Fort Worth Oct. 25, 2018, orig.

proceeding) (mem. op.). SPS argues that the limited discovery could have supplemented its

circumstantial evidence on its claims with additional evidence directly relevant to its claims.

               Appellees first argue that SPS did not preserve the issue for appeal because it did

not obtain a ruling on the issue. See Drew v. Belver, No. 04-20-00483-CV, 2021 WL 3518541, at

*3 (Tex. App.—San Antonio Aug. 11, 2021, no pet. h.) (mem. op.) (party does not preserve for

appeal issue of denial of limited discovery when it neither obtains ruling on motion nor objects to

failure to rule). The trial court never expressly ruled on the request for limited discovery, but an

implicit denial of a motion preserves error for appellate review. See Tex. R. App. P. 33.1(a)(2)(A).

We conclude that, by dismissing the claims without allowing discovery, the trial court implicitly

denied the request for discovery—thereby preserving the issue for appeal.

               Appellees also argue, as the Fourteenth District Court of Appeals has concluded,

that the TCPA “does not authorize the trial court to permit discovery after concluding that the

plaintiff’s evidence falls short.” Buzbee, 616 S.W.3d at 30 (quoting Landry’s, Inc. v. Animal Legal

Def. Fund, 566 S.W.3d 41, 69 (Tex. App.—Houston [14th Dist.] 2018, pet. denied) (rev’d in part

on other grounds)) (emphasis in original). The Buzbee court relies on the TCPA’s directive that a

trial court “shall dismiss” the action if the plaintiff fails to meet the burden to establish a prima

facie case. Id. Though the TCPA does not expressly require immediate dismissal, there is other

support for the Buzbee court’s conclusion in the TCPA provision that, if the court allows discovery

under section 27.006(b), it may extend the period for holding a hearing by up to 60 days beyond

the original 60-day period. Tex. Civ. Prac. & Rem. Code § 27.004. Implicit is that any discovery

must take place before the hearing on the motion. See id. Again, the TCPA does not prohibit trial

                                                 27
courts from, for example, suspending a hearing on the motion to dismiss to permit discovery and

reconvening within the statutorily permissible period. Because we conclude on other grounds that

SPS failed to show an abuse of discretion, we need not decide whether to adopt the Buzbee court’s

conclusion that the TCPA categorically forecloses all trial courts from permitting limited discovery

after concluding that the plaintiff has failed to establish a prima facie case.

               The only basis presented to the trial court to find good cause to permit discovery is

a trial court’s finding on consideration of the motions to dismiss that SPS failed to carry its burden

to establish a prima facie case for each element of its claims. SPS made this motion on

September 12, 2019—several weeks after responses to its discovery requests were due and

appellees filed their motions to dismiss in late July, and four days before the hearing on the motions

to dismiss. SPS did not present an argument as to why it needed an exception to the standard

prohibition of discovery to obtain evidence on that subject matter; instead, SPS relied on the trial

court to find the weaknesses in SPS’s case and specify the scope of discovery. As a result, SPS’s

only argument for good cause to allow discovery is conditioned on a finding that it failed to provide

sufficient evidence to defeat the motion to dismiss. We conclude that the trial court did not abuse

its discretion by implicitly concluding that SPS’s failure to establish a prima facie case did not

constitute good cause to upend the statutory default of suspending discovery.

VII.   Remand of attorney’s fees issue.

               The TCPA requires a trial court to award “reasonable attorney’s fees” to a

successful movant. Former Tex. Civ. Prac. & Rem. Code § 27.009(a)(1); Sullivan v. Abraham,

488 S.W.3d 294, 299 (Tex. 2016).          The determination of reasonableness “rests within the

court’s sound discretion.” Sullivan, 488 S.W.3d at 299; Hawxhurst v. Austin’s Boat Tours,

                                                  28
550 S.W.3d 220, 232 (Tex. App.—Austin 2018, no pet.). Because our review has reversed the

trial court’s order in part and remands the cause, we also reverse the attorney’s fees award to enable

the trial court to revisit the award in light of our ruling and any further proceedings.

                                          CONCLUSION

               Concluding that the trial court erred in part in its order granting appellees’ motions

to dismiss, we reverse the dismissal of SPS’s claims that Tribe and Wilbourn tortiously interfered

with SPS’s existing and potential contractual relationships with customers. We remand those

claims for further proceedings. We vacate and remand the award of attorney’s fees for

reconsideration in light of the results of this appeal as well as any subsequent proceedings. We

affirm the dismissal in all other respects.

                                               __________________________________________

                                               Darlene Byrne, Chief Justice

Before Chief Justice Byrne, Justices Baker and Kelly

Affirmed in Part, Reversed and Remanded in Part, Vacated and Remanded in Part

Filed: November 19, 2021

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