Court Opinion

ID: 6332355
Source: CourtListenerOpinion
Date Created: 2022-04-18 07:16:43.003965+00
Date Added: 2024-06-11T09:23:18.920714
License: Public Domain

Affirmed and Memorandum Opinion filed April 14, 2022.

                                           In The

                        Fourteenth Court of Appeals

                                  NO. 14-20-00413-CV

  AMERICAN INTERNATIONAL HOLDINGS CORPORATION, JACOB
         COHEN, AND EVERETT R. BASSIE, Appellants
                                             V.
                             ROBERT HOLDEN, Appellee

                      On Appeal from the 152nd District Court
                               Harris County, Texas
                         Trial Court Cause No. 2019-75180

                        MEMORANDUM OPINION

      Appellants, American International Holdings Corp. (AMIH), Jacob Cohen,
and Everett R. Bassie, challenge the trial court’s denial of their motions to dismiss
brought pursuant to the Texas Citizens Participation Act (TCPA).1 Appellee Robert
Holden sued appellants for a declaratory judgment, breach of contract, conversion,
and fraud. Concluding that the TCPA does not apply to the claims, we affirm.

      1
          Tex. Civ. Prac. & Rem. Code §§ 27.001–.011.
                                         Background

       In his original petition, Holden named only AMIH as a defendant. AMIH
answered and filed a TCPA motion to dismiss. Holden then added Cohen and
Bassie as defendants in an amended petition, and they answered and filed a notice
of removal to federal court, alleging the case involved a federal question. When the
case was subsequently remanded back to the Texas trial court, Cohen and Bassie
filed their own TCPA motion. Holden also filed objections to the TCPA motions,
primarily complaining that the motions were untimely. The trial court overruled
Holden’s objections and denied both TCPA motions without stating a basis for the
rulings. This interlocutory appeal followed. See Tex. Civ. Prac. & Rem. Code §
51.014(a)(12) (authorizing interlocutory appeal of order denying TCPA motion to
dismiss).

       In his live pleading, the first amended petition, Holden states claims for
conversion, fraud, and a declaratory judgment against all appellants and a claim for
breach of contract against only AMIH. Because appellants’ motions were only
addressed to the declaratory judgment, breach of contract, and conversion claims,
our discussion will likewise be limited to those claims.2

       In his amended petition, Holden alleges that in January and again in April
2018, he was contacted by Daniel Dror, the financier and largest shareholder of
AMIH, and offered positions as chief executive officer, president, and director of
AMIH, which Holden described as a “public shell company.” Holden says that he
was also offered a large share in ownership of the company. In April and May
2018, Holden met with Dror and other members of the company, including Bassie.

       2
          We note, however, that the current version of the TCPA “does not apply to . . . a legal
action based on a common law fraud claim.” Tex. Civ. Prac. & Rem. Code § 27.010(a)(12);
Brann v. Guimaraes, No. 01-19-00439-CV, 2021 WL 2690869, at *8 (Tex. App.—Houston [1st
Dist.] July 1, 2021, pet. denied) (mem. op.).

                                               2
At this meeting, it was decided Holden would serve as CEO and receive 3.8
million shares of AMIH stock and a salary. According to Holden, each member
present at the meeting agreed to the terms. The terms were also recorded in
meeting minutes circulated to all attendees and reported in a Securities and
Exchange Commission (SEC) Form 8-K, which is used to alert shareholders to
events that may have a material effect on a company.

       It was also discussed at the meeting that Holden would file a “doing business
as” certificate with the Harris County Clerk’s office in the name of Digital
Marketing Interactive, Holden’s own company, which effectively placed it under
AMIH’s umbrella. Holden did so, which he says solidified his position as CEO of
AMIH. Holden also stated that he acted to “clean and make current” AMIH’s
operations by, among other things, paying old tax obligations and updating its SEC
filings.

       At another company meeting in May 2018, Holden expressed concern that
the company was undercapitalized. Dror allegedly suggested issuing press releases
to positively impact the company’s stock price, which apparently made some
members uncomfortable “as it mirrored the objectives of a pump and dump
strategy” designed to inflate the stock price for the near term.

       Holden states that in July 2018, he decided on a growth strategy for AMIH
that included acquiring another company in Oklahoma. The AMIH board of
directors agreed with this strategy, and a verbal agreement on sales terms was
reached. However, according to Holden, Dror then “suddenly and unexpectedly”
refused to honor his commitment to fund AMIH operations including overhead and
salaries and threatened to dilute the value of Holden’s stock shares. Holden
resigned as CEO, president, and board member on August 18, 2018.

       According to Holden, his shares are unrestricted and available to trade in the
                                          3
open market under Rule 144 of the Securities and Exchange Act of 1933.3 He
alleges, however, that AMIH continues to block his ability to trade his shares and
has issued millions of additional shares, greatly diluting the value of his shares. He
further asserts that because this threat of dilution is not part of any strategic
business plan and his receipt of the shares was unconditional, the conduct was
unlawful. Additionally, he contends appellants drove up the price of their own
shares before flooding the market with new shares by blocking the unrestricted
trading of shares by other shareholders.

       Regarding AMIH’s SEC filings, Holden asserted that when AMIH originally
reported his appointment and receipt of shares, the Form 8-K stated that he was not
a party to any contract or arrangement, in other words, according to Holden, there
were no specific acts or tenure required of him in those positions to receive the
shares. When AMIH reported that Holden had resigned, the Form 8-K stated that
the resignation was not because of any disagreement and was not related to the
company’s operations, policies, or practices. However, AMIH subsequently
reported that it was seeking recovery of the shares from Holden because of an
unfulfilled contract obligation. Holden contends that this most recent report
contradicted the prior two.

       In his declaratory judgment claim, Holden asserted that as made clear in the
Form 8-K filing on May 31, 2018, he was awarded 3.8 million shares in AMIH in
exchange for becoming president and CEO. As also recorded in the Form 8-K, no
conditions—such as a certain tenure of service—were placed on the award. Holden
therefore sought a declaration of his rights as owner of those shares.

       3
          In his amended petition, Holden erroneously states Rule 144 was promulgated under
either an act of 1934 or 1943. The parties now appear to agree that the proper year of the act was
1933.

                                                4
      In his breach of contract claim against AMIH, Holden asserted a valid
contract existed between himself and AMIH under which he agreed to become
president and CEO of the company. He states that the agreement was memorialized
in a Form 8-K which disclosed the award of 3.8 million shares and the change in
leadership. Holden also notes that the Form 8-K indicated there were no conditions
associated with the appointment. Holden claims that the refusal to recognize his
shares and permit him to freely trade them is a breach of the contract.

      In his conversion claim, Holden asserted appellants deliberately and in
intentional violation of Rule 144 continue to deny him the right to trade his shares
freely. Holden further notes that appellants’ earlier Form 8-K filings reported
Holden received his shares without any commitments on his part while the later
Form 8-K reported Holden made commitments in exchange for the shares. In his
prayer, Holden sought, among other things, actual damages and attorney’s fees.

                                     The TCPA

      The TCPA protects citizens from retaliatory lawsuits that seek to silence or
intimidate them on matters of public concern. In re Lipsky, 460 S.W.3d 579, 586
(Tex. 2015) (orig. proceeding); Booster Fuels, Inc. v. Fuel Husky, LLC, No. 14-19-
00912-CV, 2021 WL 5118486, at *2 (Tex. App.—Houston [14th Dist.] Nov. 4,
2021, no pet. h.) (mem. op.); see generally Tex. Civ. Prac. & Rem. Code §§
27.001–.011. The purpose of the statute is to identify and summarily dispose of
lawsuits that are intended only to chill First Amendment rights, not to dismiss
meritorious lawsuits. See In re Lipsky, 460 S.W.3d at 589; Booster Fuels, 2021
WL 5118486, at *2; see also Tex. Civ. Prac. & Rem. Code § 27.002.

      To effectuate its purpose, the TCPA provides a three-step process for
determining whether a lawsuit or claim should be dismissed. Creative Oil & Gas,
LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 132 (Tex. 2019). Under the first
                                          5
step, the court dismisses the action if the moving party demonstrates by a
preponderance of the evidence that the legal action is based on 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. Tex. Civ. Prac. & Rem. Code § 27.005(b); Creative Oil &
Gas, 591 S.W.3d at 132.4 But under the second step, the court may not dismiss the
action if the non-moving party establishes by clear and specific evidence a prima
facie case for each essential element of the claim. Tex. Civ. Prac. & Rem. Code §
27.005(c); Creative Oil & Gas, 591 S.W.3d at 132. Under the third step, the
movant can still win dismissal if it establishes by a preponderance of the evidence
each essential element of a valid defense to the nonmovant’s claim. Tex. Civ. Prac.
& Rem. Code § 27.005(d); Creative Oil & Gas, 591 S.W.3d at 132.

       Whether the TCPA applies to a particular claim is an issue of statutory
interpretation that we review de novo. See Youngkin v. Hines, 546 S.W.3d 675, 680
(Tex. 2018); Booster Fuels, 2021 WL 5118486, at *2. We view the pleadings and
evidence in the light most favorable to the non-movant. Booster Fuels, 2021 WL
5118486, at *2. When construing a statute, our objective is to determine and give
effect to the legislature’s intent. See Youngkin, 546 S.W.3d at 680. We construe the
TCPA liberally to effectuate its purpose and intent fully. See Adams v. Starside
Custom Builders, LLC, 547 S.W.3d 890, 894 (Tex. 2018).

                                          Analysis

       In their sole issue, appellants assert the trial court erred in denying their
TCPA motions. Under this issue, they argue the trial court properly overruled

       4
         The previous version of section 27.005(b) applied to claims that were based on, related
to, or in response to an exercise of certain rights. The current version applicable in this case
removed the “relates to” language from the provision, making its reach significantly narrower.
See Mireskandari v. Casey, 636 S.W.3d 727, 735 n.8 (Tex. App.—Dallas 2021, pet. filed)
(discussing revision and collecting cases).

                                               6
Holden’s objections to the motions; the TCPA applies to the declaratory judgment,
breach of contract, and conversion claims; and Holden failed to meet his burden
under the TCPA to present evidence establishing a prima facie case for each
contested claim. Because we conclude the TCPA does not apply to the claims in
this case, we need not address appellants’ other arguments.

      Appellants contend that the TCPA applies to certain of Holden’s claims
because the claims are based on or in response to appellants’ exercise of the right
to free speech. See Tex. Civ. Prac. & Rem. Code § 27.005(b)(1)(A). In the context
of the TCPA, an “‘[e]xercise of the right of free speech’ means a communication
made in connection with a matter of public concern.” Id. § 27.001(3).
“Communication,” as used in the statute, “includes the making or submitting of a
statement or document in any form or medium, including oral, visual, written,
audiovisual, or electronic.” Id. § 27.001(1). And, as relevant to appellants’
arguments in this appeal, a “[m]atter of public concern” includes “a statement . . .
regarding . . . a subject of concern to the public.” Id. § 27.001(7)(C).

      Appellants urge that Holden’s references to AMIH’s Form 8-Ks in his
amended petition demonstrate that his claims were based on or in response to
communication regarding a subject of concern to the public because those filings
“implicate publicly traded securities and SEC regulations.” Appellants cite Hersh
v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017), for the proposition that allegations in
a plaintiff’s pleadings alone are sufficient to satisfy a TCPA movant’s burden to
show that a legal action is based on or in response to the exercise of the right of
free speech. Appellants do not rely on any other authority in this section of their
brief or reply brief except the TCPA itself. As stated, we view the pleadings in the
light most favorable to the non-movant. Booster Fuels, 2021 WL 5118486, at *2;
see also Sloat v. Rathbun, 513 S.W.3d 500, 504 (Tex. App.—Austin (Tex. App.

                                           7
2015, pet. dism’d) (“[W]e do not blindly accept attempts by [defendants] to
characterize [the] claims as implicating protected expression. To the contrary, we
view the pleadings in the light most favorable to [plaintiff]; i.e., favoring the
conclusion that her claims are not predicated on protected expression.”).
Appellants also do not cite any other evidence in support of their assertion that
Holden’s claims are based on or in response to their exercise of first amendment
rights.5

       As detailed above, in his breach of contract claim, Holden asserted a valid
contract existed between himself and AMIH under which he was to become CEO,
president, and director of the company, and in exchange, he was to receive 3.8
million shares of stock. He states that AMIH’s ongoing refusal to recognize his
shares and permit him to freely trade them is a breach of that contract. Likewise, in
his declaratory judgment claim, Holden alleges he was awarded the shares in
exchange for becoming president and CEO and requests a declaration of his rights
in those shares. And, in his conversion claim, he complains that appellants
continue to deny him his right to trade the shares freely.

       For each of these claims, Holden references AMIH’s Form 8-Ks as evidence
to support the claim. But the claims are not based on or in response to the SEC
filings. For example, the breach of contract claim relies on an alleged agreement
between Holden and AMIH; he claimed the agreement was “memorialized” in a
Form 8-K, but he does not allege the form itself constituted a contract, and
appellants offer no explanation as to how it could have. The alleged breach was the
refusal to recognize the shares and permit their free trade, and Holden does not rely
on any SEC filing as evidence of that refusal and restraint. The declaratory action

       5
          Holden attached his own comprehensive affidavit and two Form 8-Ks to his amended
petition. Appellants did not present any evidence in support of their motions.

                                            8
likewise rests on the agreement and his entitlement to the shares per the agreement.
Again, he references a Form 8-K reporting the award of shares but not as the
agreement itself. Lastly, the conversion claim is based on appellants’ alleged
refusal to permit Holden to trade his shares freely. Under the claim, Holden notes
that AMIH made inconsistent statements in its Form 8-Ks, but this is offered as
evidence of the conversion claim, not the basis for the claim itself. As the
purported reporting of events that materially affect the company, the Form 8-Ks
will likely be important evidence in the case, but the filings themselves are not the
basis for the claims made. See, e.g., Allied Orion Grp., LLC v. Pitre, No. 14-19-
00681-CV, 2021 WL 2154065, at *4-5 (Tex. App.—Houston [14th Dist.] May 27,
2021, no pet.) (mem. op.) (noting petition did not allege direct harm from verbal
communication but from conduct and holding such conduct did not constitute
communication under the TCPA); Clinical Pathology Labs, Inc. v. Polo, 632
S.W.3d 35, 45 (Tex. App.—El Paso 2020, pet. denied) (explaining that the
communications in question constituted evidence the parties would likely present
at trial but the lawsuit itself was not factually predicated on them); In re
IntelliCentrics, Inc., No. 02-18-00280-CV, 2018 WL 5289379, at *4 (Tex. App.—
Fort Worth Oct. 25, 2018, orig. proceeding) (mem. op.) (recognizing “a distinction
between communications used as evidence to support a claim . . . and a claim that
is ‘based upon, relate[d] to, or . . . in response to’ that communication under the
TCPA.”).6

       Holden’s breach of contract, conversion, and declaratory judgment claims
were not based on or in response to the movant’s exercise of the right of free
speech. See Tex. Civ. Prac. & Rem. Code § 27.005(b)(1)(A). The claims were not

       6
          We note that each of these cases was decided under the prior, broader version of section
27.005(b), which applied to claims that were based on, related to, or in response to an exercise of
certain rights. See supra n.4.

                                                9
simply retaliatory and did not seek to silence or intimidate appellants on matters of
public concern. See In re Lipsky, 460 S.W.3d at 586; Booster Fuels, 2021 WL
5118486, at *2. Likewise, these claims were not aimed at chilling appellant’s First
Amendment rights. The TCPA does not apply to these claims.

      We overrule appellants’ sole issue and affirm the trial court’s order denying
the TCPA motions to dismiss.

                                       /s/    Frances Bourliot
                                              Justice

Panel consists of Justices Wise, Bourliot, and Zimmerer.

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