Court Opinion

ID: 4880560
Source: CourtListenerOpinion
Date Created: 2021-09-01 05:29:29.651271+00
Date Added: 2024-06-11T08:02:38.297416
License: Public Domain

Affirmed and Opinion Filed August 24, 2021

                                    S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                               No. 05-20-01097-CV

TROY GOOD, STAN STARNES, AND NOBILIS GROUP, INC., Appellants
                           V.
ACCELA CAPITAL SERVICES, INC., DERIVATIVELY ON BEHALF OF
                 DENT ZONE, INC., Appellee

                On Appeal from the 44th Judicial District Court
                            Dallas County, Texas
                     Trial Court Cause No. DC-20-12092

                        MEMORANDUM OPINION
                Before Justices Myers, Partida-Kipness, and Garcia
                        Opinion by Justice Partida-Kipness
      In this interlocutory appeal, appellants contend the trial court erred in denying

their motion to dismiss under the Texas Citizens Participation Act (TCPA). Appellee

brought a shareholder derivative action against appellants alleging breach of

fiduciary duties arising from alleged self-dealing by officers of Dent Zone, Inc.

Appellants moved to dismiss the claims by asserting that the transactions were

protected under the TCPA as an exercise of the right of association. The trial court

denied the motion. We affirm the trial court’s order.
                                           BACKGROUND

        The entity at the center of this case, Dent Zone, Inc., was formed as a closely

held Texas corporation in 2007. Dent Zone provides paintless automotive dent repair

and operates as a “property and casualty” or “service agreement” company in

multiple states. Shortly after Dent Zone was incorporated, appellee Accela Capital

Services, Inc. (Accela) became the controlling shareholder and appointed its director

and president Tom Keffer as board chair. Keffer was removed from the board in

2015 and replaced by another Accela director, Ann Jensvold, and Troy Good and

Greg Hultgren. The new board appointed Good as CEO, Hultgren as CFO, Jensvold

as CIO, and Stan Starnes as COO. Jensvold was removed as CIO later in 2015 and

removed from the board in 2016. Starnes replaced Jensvold on the board. Hultgren

died in 2016, leaving Good and Starnes as the only Dent Zone directors.

        As the basis for its lawsuit, Accela identifies a number of actions taken by

Good and Starnes that allegedly breached their fiduciary duties while they controlled

the Dent Zone board.1 These actions begin with the formation of Dent Zone’s Florida

subsidiary DZAF, Inc. Keffer and Good formed DZAF in 2013 to address a

regulatory concern in Florida. According to the parties, Florida law prevented Dent

Zone from operating in Florida as a Motor Vehicle Service Agreement Company

without providing certain disclosures. To avoid this requirement, Keffer and Good

    1
      We do not recite all of the events Accela alleges as the basis for its lawsuit but only certain events to
provide context for our analysis. Furthermore, our recitation of facts and our characterization of the record
is not meant to express any opinion on the merits of any claim or defense in this case.
                                                    –2–
formed DZAF to administer service contracts in Florida. DZAF paid a $500,000

bond to obtain regulatory approval as a “service agreement company.” The parties

disagree on the facts surrounding the funding of this bond and ownership of DZAF.

According to appellants, Keffer and Good each executed a $250,000 promissory

note to Dent Zone to fund the bond. Accela contends, however, that Dent Zone

loaned Good the money for the bond and later canceled the debt. Appellants also

contend that Keffer and Good each owned 50% of DZAF’s stock. Accela does not

contest the initial stock distribution but contends that Keffer and Good were merely

“nominal” owners of a shell company because Dent Zone provided all of the

personnel to DZAF for the work it allegedly performed and stripped all profit from

DZAF.

      By 2016, all of Keffer’s DZAF stock had been transferred to Good. Good then

exchanged his DZAF shares for Dent Zone shares, thus making Dent Zone the sole

owner of DZAF. According to appellants, Florida insurance regulations required

Dent Zone, as DZAF’s owner, to report background information on all shareholders

with at least a 10% interest in the company. Accela was one such shareholder. To

reduce Accela’s interest and avoid the reporting requirement, Accela sold 500,000

shares of Dent Zone stock to Good, and Dent Zone issued 500,000 “restricted” shares

to other shareholders. The Florida Office of Insurance Regulation approved Dent

Zone’s ownership of DZAF.

                                        –3–
      The “restricted” shares were subject to forfeiture on January 5, 2019, and

forfeiture would leave Accela again owning more than 10% of Dent Zone and

subject to the reporting requirement. As the forfeiture date approached, Accela did

not provide the required background information, and Dent Zone issued additional

“restricted” shares to maintain Accela’s diluted interest. When the new “restricted”

shares expired a short time later, Accela still had not provided the required

background information. To maintain regulatory compliance, the board reversed

Dent Zone’s purchase of DZAF by transferring all DZAF stock back to Good. The

Florida Office of Insurance Regulation approved of the ownership change. Although

appellants contend these transactions were necessary to meet Florida’s insurance

regulations, Accela contends they were unnecessary and served only to transfer

ownership of DZAF back to Good, who did nothing to return it to Dent Zone.

      Also in 2016, Starnes formed Nobilis Group, Inc. with the Good Family

Living Trust and two other investors. Each investor contributed their Dent Zone

stock to Nobilis, thus making Nobilis the owner of approximately 80% of Dent

Zone’s stock. According to appellants, Nobilis provides “administration services” in

states where Dent Zone could not, due to “contractual liability insurance policy”

restrictions. Accela contends that appellants enriched Nobilis at Dent Zone’s

expense. Specifically, Accela contends appellants moved Dent Zone employees to

Nobilis and required Dent Zone to lease them back at a higher rate; extended Nobilis

an $8 million line of credit with below-market terms and an unreasonable $15,000

                                        –4–
cap on attorney’s fees; and transferred Dent Zone’s assets to Nobilis for inadequate

consideration. Appellants contend, however, that Dent Zone outsourced its

employees to Nobilis to reduce Dent Zone’s expenses and employee liabilities; the

line of credit is current and not in default; and the transferred assets were

underperforming for Dent Zone.

      Accela also contends that appellants used money loaned by Dent Zone to buy

additional stock from Dent Zone shareholders and further consolidate their

ownership of Dent Zone through Nobilis. According to Accela, these loans

contained unreasonable terms, such as extended payment schedules and below-

market interest rates, and the stock purchases usurped Dent Zone’s opportunity to

repurchase its stock. In one such transaction, Accela alleges that Dent Zone bought

shares from Hultgren for $2,600,000, paying $1,000,000 in cash and issuing a note

for the remainder. Accela alleges that Dent Zone then assigned the stock to Good in

exchange for a promissory note under which Good would pay $400,000 per year for

six and a half years. Appellants contend, however, the purchases were made to dilute

Accela’s interest in Dent Zone and keep Dent Zone and DZAF compliant with state

insurance reporting requirements. Moreover, appellants contend the board approved

the promissory notes.

      Based on these, and other events, Accela filed its original petition asserting

that Good and Starnes had breached their fiduciary duties to Dent Zone through

improper self-dealing and abuse of Dent Zone and its shareholders. Accela further

                                        –5–
alleged that Good and Starnes unjustly enriched themselves at Dent Zone’s expense.

Accela also asserted that Nobilis conspired with Good and Starnes in their fiduciary

breaches. Appellants answered and filed a motion to dismiss the claims under the

TCPA. According to appellants’ motion, Accela’s claims are based on or in response

to the exercise of appellants’ right of association. Accela filed a reply and amended

petition seven days before the hearing on appellants’ motion. The trial court heard

and denied the motion, and this appeal followed.

                                   STANDARD OF REVIEW

        The TCPA “protects citizens who petition or speak on matters of public

concern from retaliatory lawsuits that seek to intimidate or silence them.” In re

Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (orig. proceeding).2 Its stated purpose is

“to encourage and safeguard the constitutional rights of persons to petition, speak

freely, associate freely, and otherwise participate in government to the maximum

extent permitted by law and, at the same time, protect the rights of a person to file

meritorious lawsuits for demonstrable injury.” TEX. CIV. PRAC. & REM. CODE §

27.002.

        As a matter of statutory construction, we review de novo a trial court’s ruling

on a TCPA motion to dismiss. Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC,

    2
     The Texas Legislature amended the TCPA effective September 1, 2019. Those amendments apply to
“an action filed on or after” that date. Act of May 17, 2019, 86th Leg., R.S., ch. 378, § 11, 2019 Tex. Sess.
Law. Serv. 684, 687. This lawsuit was filed on August 28, 2020. Thus, the current version of the law with
2019 amendments applies to this action. All citations to the TCPA are to the current version unless
otherwise indicated.
                                                    –6–
591 S.W.3d 127, 132 (Tex. 2019); Goldberg v. EMR (USA Holdings) Inc., 594

S.W.3d 818, 827 (Tex. App.—Dallas 2020, pet. denied) (op. on reh’g) (citing

Youngkin v. Hines, 546 S.W.3d 675, 680 (Tex. 2018)). In conducting that review,

we consider, in the light most favorable to the nonmovant, the pleadings, evidence a

court could consider under civil procedure rule 166a, and any supporting and

opposing affidavits stating the facts on which the liability or defense is based. See

TEX. CIV. PRAC. & REM. CODE § 27.006(a); Dyer v. Medoc Health Servs., LLC, 573

S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet. denied) (citing, in part, the prior

version of § 27.006(a)).

      We also ascertain and give effect to the legislature’s intent as expressed in the

language of the statute, considering the specific statutory language at issue and the

TCPA as a whole, and we construe the statute’s words “according to their plain and

common meaning, unless a contrary intention is apparent from the context or unless

such a construction leads to absurd results.” Youngkin, 546 S.W.3d at 680 (quoting

City of Rockwall v. Hughes, 246 S.W.3d 621, 625–26 (Tex. 2008)); see Dyer, 573

S.W.3d at 424–25.

      We may not judicially amend the TCPA by adding words that are not

contained in the statute’s language. In re Panchakarla, 602 S.W.3d 536, 540–41

(Tex. 2020). We also will not “blindly accept attempts by [a TCPA movant] to

characterize [a TCPA nonmovant’s] claims as implicating protected expression” but

will “view the pleadings in the light most favorable to [the nonmovant]; i.e., favoring

                                         –7–
the conclusion that [its] claims are not predicated on protected expression.” Sloat v.

Rathbun, 513 S.W.3d 500, 504 (Tex. App.—Austin 2015, pet. dism’d); see also

Damonte v. Hallmark Fin. Servs., Inc., No. 05-18-00874-CV, 2019 WL 3059884, at

*5 (Tex. App.—Dallas July 12, 2019, no pet.) (mem. op.) (same).

                                       ANALYSIS

       In four issues, appellants contend the trial court erred in denying their motion

to dismiss because (1) Accela’s legal claims are based on or in response to the

exercise of their right of association; (2) Accela failed to prove a TCPA exemption

applies to its claims; (3) Accela failed to prove a prima facie case by clear and

convincing evidence; and (4) appellants established one or more affirmative

defenses to Accela’s claims.

       Our review of a TCPA ruling generally involves three steps. First, the TCPA

movant has the burden to demonstrate the legal action is based on or is in response

to its exercise of the right of association, right of free speech, or the right to petition.

TEX. CIV. PRAC. & REM. CODE § 27.005(b); Creative Oil, 591 S.W.3d at 132 (citing

prior version of section 27.005(b)). If the movant does so, the burden of proof shifts

to the nonmovant to establish 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, 591 S.W.3d at 132 (citing prior version of section 27.005(c)). If the

nonmovant satisfies its burden at step two, the burden of proof shifts back to the

movant to establish an affirmative defense or other grounds on which it is entitled to

                                           –8–
judgment as a matter of law. TEX. CIV. PRAC. & REM. CODE § 27.005(d); Creative

Oil, 591 S.W.3d at 132 (citing prior version of section 27.005(d)).

        As the movants, appellants were required to demonstrate that Accela’s legal

action was based on or in response to appellants’ exercise of the right of association.

TEX. CIV. PRAC. & REM. CODE § 27.005(b). The exercise of the right of association

is the joining together “to collectively express, promote, pursue, or defend common

interests relating to a governmental proceeding or a matter of public concern.” Id. §

27.001(2). Appellants contend that their exercise of the right of association related

to a matter of public concern, specifically that it involved “a subject of concern to

the public.” See id. § 27.001(7)(C).3

        Appellants assert that they met the burden to demonstrate that the TCPA

applied by showing that the acts in question were taken to ensure Dent Zone’s

compliance with Florida insurance laws. Appellants explain that the transactions at

issue were meant only to dilute Accela’s interest in Dent Zone and ensure

compliance with Florida insurance regulations. According to appellants, these

efforts taken to ensure regulatory compliance constituted an exercise of their right

of association because Florida law considers the “source and amount of funds or

other consideration” used in acquiring an interest in a regulated company a matter

    3
      A matter of public concern is “a statement or activity regarding: (A) a public official, public figure,
or other person who has drawn substantial public attention due to the person’s official acts, fame, notoriety,
or celebrity; (B) a matter of political, social, or other interest to the community; or (C) a subject of concern
to the public.” TEX. CIV. PRAC. & REM. CODE § 27.001(7).
                                                     –9–
of public concern. Accela asserts, however, that its claims are not based on actions

taken to ensure compliance with Florida law, but appellants’ alleged self-dealing

business transactions, which involved only the “internal affairs of a closely-held

corporation.” We agree with Accela.

      According to appellants, their attempt to dilute Accela’s interest in Dent Zone

to remain compliant with Florida law is a subject of public concern. Appellants

repeatedly conclude in their brief on appeal that information concerning 10%

shareholders is of public concern because Florida law requires reporting such

information for obtaining a license as a “service agreement company.” Even

assuming, without deciding, that Florida law requires such reporting, appellants have

cited no authority establishing that actions taken to avoid such reporting would be a

matter of public concern.

      Additionally, for a claim to be based on or in response to an allegedly

protected act, the claim must rely on the act itself. See Hersh v. Tatum, 526 S.W.3d

462, 468 (Tex. 2017) (“By relying on the language used in the [plaintiffs’] pleadings,

[defendant] showed that the [plaintiffs’] action is based on her alleged exercise of

free speech and thus covered by the Act.”); CVK Enters., L.L.C. v. Pullen, No. 13-

20-00047-CV, 2020 WL 6602153, at *5 (Tex. App.—Corpus Christi-Edinburg Nov.

12, 2020, no pet.) (mem. op.) (concluding plaintiff’s claim for breach of real property

covenant prohibiting multi-family development was in response to defendant’s

application for multi-family rezoning); River Plantation Cmty. Improvement Ass’n

                                        –10–
v. River Plantation Props., LLC, No. 09-17-00451-CV, 2018 WL 4120252, at *4

(Tex. App.—Beaumont Aug. 30, 2018, no pet.) (mem. op.) (allegation that a party

tortiously interfered with a contract by filing a declaratory judgment action stated a

claim “in response to” the party’s exercise of the right to petition). Assuming,

without deciding, that Dent Zone’s ownership reporting to Florida regulatory

authorities—as demonstrated by regulatory consent decrees cited and offered into

evidence by appellants—constituted a matter of public concern, there is no

indication that Accela’s claims are based on or in response to that reporting. Rather,

Accela complains that appellants “unjustly enriched themselves at the expense of

Dent Zone” by “improper self-dealing” and “abuse of Dent Zone (and its

shareholders).” Indeed, Accela makes no mention of Dent Zone’s regulatory filings

in its original petition. Moreover, appellants have cited no authority establishing that

merely operating a company within regulatory bounds insulates its officers under

the TCPA from a shareholder derivative action, and we are not aware of any such

authority.

        The court in Martin v. Hutchison, however, did address a motion to dismiss a

shareholder derivative action under the TCPA on facts similar to those at issue here.

See Martin v. Hutchison, No. 06-19-00093-CV, 2020 WL 6788243, at *3 (Tex.

App.—Texarkana Nov. 19, 2020, pet. denied) (mem. op.).4 Martin concerned a

    4
      Although Martin applied the prior version of the TCPA, the court analyzed both the prior and current
versions in reaching its conclusion. Id., at *10–15. Thus, we find its holding helpful to our analysis.
                                                 –11–
dispute among shareholders of a closely held, Texas telecommunications company.

Id., at *1–2. The dispute between groups of majority and minority shareholders

concerned asset transfers and an executive bonus payment. Id., at *2–3. The minority

shareholders sued the majority shareholders for civil theft, conversion, breach of

fiduciary duty, fraud, and money had and received. Id., at *3. The majority

shareholders moved to dismiss the claims under the TCPA, contending the claims

involved the exercise of their rights of free speech and association. Id. According to

the majority shareholders, the communications at issue concerned public matters of

economic well-being and provision of telecommunication services. Id. The trial

court agreed that the TCPA applied and concluded the minority shareholders failed

to make a prima facie case, thus the trial court dismissed the claims. Id., at *4.

         The appellate court, however, determined that the TCPA did not apply to the

minority shareholders’ claims. Id., at *15. The court noted the ambiguous scope of

the prior version of the TCPA, which defined the right of association as “a

communication between individuals who join together to collectively express,

promote, pursue, or defend common interests.”5 Id., at *10–11. Because both the

prior and current versions of the TCPA include the term “common interests” in the

definition, the court analyzed both versions of the TCPA to determine the right’s

proper scope. Id., at 13–15. After determining that the term referred to “a community

   5
       See Act of June 17, 2011, 82nd Leg., R.S., ch. 341, § 2, 2011 Tex. Sess. Law Serv. 961, 961.

                                                  –12–
at large: public,” the Martin court concluded that the communications at issue were

not protected unless they related to the “common interests of a community or public

at large.” Id., at *15. Because the minority shareholders’ claims arose from

communications regarding the transfer of company assets and an executive bonus

payment, they concerned “private financial or private business interests” and were

not matters of public concern. Id., at *15. Accordingly, the court reversed the trial

court’s judgment dismissing the minority shareholders’ claims and remanded the

case. Id.

       Like the minority shareholders in Martin, Accela contends that Good and

Starnes breached their fiduciary duties to Dent Zone and its other shareholders in

self-dealing and mismanagement of company assets. Appellants here, like the

majority shareholders in Martin, sought dismissal under the TCPA, claiming the acts

alleged were an exercise of their right of association. Both groups asserted that their

acts related to a subject of public concern, namely, the operation of their business.

Specifically, the majority shareholders in Martin cited their provision of

telecommunications services, and appellants here cite their efforts at regulatory

compliance. However, we conclude, as did the Martin court, that the claims at issue

do not arise from any such effort on appellants’ part but transactions concerning

appellants’ “private financial or private business interests.” Specifically, Accela’s

claims arise from appellants’ alleged self-dealing via loans, stock exchanges, and

Nobilis transactions unfavorable to Dent Zone. Thus, just as the tortious acts alleged

                                        –13–
in Martin did not constitute an exercise of the right of association, the self-dealing

and breach of fiduciary duties alleged here do not constitute an exercise of the right

of association. Accordingly, Accela’s claims are not based on or in response to

appellants’ exercise of the right of association, therefore we overrule appellants’ first

issue.6 See TEX. CIV. PRAC. & REM. CODE § 27.005(b).

        The remaining steps of the TCPA analysis are predicated on a finding that the

TCPA applies to the claims at issue. See Creative Oil, 591 S.W.3d at 132. Having

concluded the TCPA does not apply, we need not address appellants’ remaining

issues, which concern the remaining steps in the TCPA analysis.

                                           CONCLUSION

        Appellants failed to satisfy their initial burden to demonstrate that Accela’s

claims are based on or in response to the exercise of their right of association.

    6
       Appellants assert in a “collateral issue” to their first issue that the trial court should not have
considered Accela’s late-filed amended petition when ruling on appellants’ motion to dismiss. According
to appellants, the amended petition “de-emphasized Appellants’ activities that are related to a public
concern (property and casualty insurance).” Appellants, however, do not explain this conclusion. See TEX.
R. APP. P. 38.1(i) (requiring briefs to contain “a clear and concise argument for the contentions made, with
appropriate citations to authorities and to the record”). Having concluded that appellants failed to
demonstrate that Accela’s claims fall under the TCPA, we need not address this “collateral issue.”
Regardless, appellants cite no evidence in the record indicating that the trial court considered the amended
petition. Moreover, any error in doing so was harmless because the record reflects that Accela’s amended
petition alleged the same facts and claims as its original petition, merely adding factual allegations. See
TEX. R. APP. P. 44.1(a)(1). Additionally, Accela’s response to appellants’ motion generally recited these
same allegations, with supporting evidence.
                                                  –14–
      Accordingly, we affirm the trial court’s denial of appellants’ motion to

dismiss.

                                       /Robbie Partida-Kipness/
                                       ROBBIE PARTIDA-KIPNESS
                                       JUSTICE

201097F.P05

                                    –15–
                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

TROY GOOD, STAN STARNES,                       On Appeal from the 44th Judicial
AND NOBILIS GROUP, INC.,                       District Court, Dallas County, Texas
Appellants                                     Trial Court Cause No. DC-20-12092.
                                               Opinion delivered by Justice Partida-
No. 05-20-01097-CV           V.                Kipness. Justices Myers and Garcia
                                               participating.
ACCELA CAPITAL SERVICES,
INC., DERIVATIVELY ON
BEHALF OF DENT ZONE, INC.,
Appellee

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

      It is ORDERED that appellee ACCELA CAPITAL SERVICES, INC.,
DERIVATIVELY ON BEHALF OF DENT ZONE, INC. recover its costs of this
appeal from appellant TROY GOOD, STAN STARNES, AND NOBILIS GROUP,
INC..

Judgment entered August 24, 2021

                                        –16–