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Court of Appeals of Texas, Dallas.

AMANDA LYNN POSEY-GLYNN, Appellant

v.

CAMDEN DEVELOPMENT, INC., Appellee

No. 05-19-01454-CV

|

Filed December 10, 2020

On Appeal from the 471st Judicial District Court

Collin County, Texas

Trial Court Cause No. 471-05542-2018

Before Justices Whitehill, Pedersen, III, and Reichek

Opinion by Justice Reichek

MEMORANDUM OPINION

AMANDA L. REICHEK JUSTICE

*1 AFFIRMED and Opinion Filed December 10, 2020

Amanda Lynn Posey-Glynn appeals the trial court’s no-evidence summary judgment dismissing her claims for workplace discrimination and retaliation. Bringing four issues, Posey-Glynn generally contends the trial court erred in granting Camden Development, Inc.’s motion because she presented sufficient evidence to establish a prima facie case for each of her causes of action. Because we conclude Posey-Glynn failed to meet her summary judgment burden, we affirm the trial court’s judgment.

Background

Posey-Glynn began working for Camden at the Camden Panther Creek apartment complex in Frisco, Texas, on November 9, 2016. Posey-Glynn was employed as a Make Ready Technician and her responsibilities included various maintenance tasks and preparing vacant apartments for new tenants.

On April 14, 2017, Posey-Glynn was injured as she and a co-worker were moving a washing machine up a flight of stairs. According to Posey-Glynn, the washing machine slipped off a dolly and she caught it, hurting her left side. She did not fall, however, and they completed moving the washer. Posey-Glynn then continued working her shift, but left work one hour early. Posey-Glynn informed Camden that she had been injured the next day.

When Posey-Glynn informed her supervisor about the accident, she was instructed to see a doctor. A physician at CareNow diagnosed her with cervical neck strain and spasms of the back and neck. An X-ray of Posey-Glynn’s spine was considered normal for her age. She was given medication and released to return to work the same day with restrictions on kneeling, squatting, and lifting expected to last one week.

Camden’s work-related injury policy states the following:

Camden has a Return to Work program that facilitates the earliest possible return of workers injured on the job to the workplace for the purpose of performing meaningful, productive work within realms of their physical capabilities. The Return to Work Policy offers a transitional return to work and is intended to be time-limited and temporary. The maximum time allowed for transitional duty is six months.

Under the policy, an injured employee may participate in the Return to Work program if the employee was not “taken off work” by her treating physician and Camden could accommodate the employee’s work restrictions. Camille Churchill, Camden’s workers’ compensation manager, confirmed with the community manager that Posey-Glynn’s medical restrictions could be accommodated when she returned.

Posey-Glynn visited CareNow several times over the course of the following week complaining of continued pain and an allergic reaction to the medication she was given. Although she was released to light duty work, Posey-Glynn was placed on medical leave by Camden beginning on April 20.

Posey-Glynn returned to work on May 12 with restrictions on bending, stooping, kneeling, squatting, and overhead reaching. She was further limited to lifting no more than ten pounds and working no more than four hours a day. These restrictions were expected to last through May 25.

*2 On May 16, Sue Evans, a nurse assigned to manage Posey-Glynn’s claim by Camden’s workers’ compensation insurance carrier, sent an email to Churchill stating that MRI reports for Posey-Glynn showed no significant spinal cord problems and “her diagnosis remains cervical and lumbar strain.” Evans further stated that Posey-Glynn was being referred to a therapy facility in Frisco and she would be choosing a new treating provider from a list Evans had sent her.

Shortly after receiving this email, Churchill sent an email to others working at the insurance company stating she had concerns with the manner in which Evans was handing Posey-Glynn’s claim. Churchill referenced earlier discussions about Camden’s displeasure with how Evans had handled another claim and she requested that a new nurse be assigned to Posey-Glynn. Later emails indicate Linda Sanchez was assigned as Posey-Glynn’s new claim manager.

On June 12, Posey-Glynn was reassessed at CareNow and was again released to light duty work. Her restriction on lifting was modified to up to twenty pounds. She was additionally restricted from doing any pushing, pulling or overhead reaching, and her maximum work hours per day were reduced to two. An MRI was ordered to be done of Posey-Glynn’s left shoulder.

The next day, Churchill emailed Sanchez stating she had contacted Posey-Glynn’s manager, Randi Teube, to see if the new restrictions, including working only two hours per day, could be accommodated. Churchill stated she was concerned that Posey-Glynn was not improving and there was a possibility she would need to be taken off work again. Teube responded to Churchill stating, “I don’t see how this can work for us. We are heading into our busy season and we just received a 2 week notice from our maintenance tech, so we are already short staffed.” Churchill replied, “Hopefully we will know more once she has the MRI performed.” Three days later, Churchill confirmed with Camden’s district manager that Posey-Glynn was working only two hours per day and her restrictions were being accommodated.

On June 20, the MRI of Posey-Glynn’s left shoulder was performed. The scan showed no tears and only mild tendinosis and bursitis. Posey-Glynn’s work restrictions were again modified to prohibit any reaching, overhead reaching, or lifting with her left arm. The restrictions were expected to last one week.

On June 22, Sanchez emailed Churchill stating that she had received a call from Posey-Glynn complaining that her restrictions were not being accommodated. Posey-Glynn told Sanchez that her supervisor told her to wash windows, which required her to reach over her head. She stated her shoulder pain worsened overnight and she was unable to go to work the next day. Sanchez asked Churchill to let her know if Posey-Glynn’s restrictions could not be accommodated going forward.

On July 5, Posey-Glynn was again evaluated at CareNow. The medical notes state that Posey-Glynn was upset that her job was “not honoring restrictions.” In addition to her normal medications, Posey-Glynn was given a shoulder sling for her left arm.1 The restrictions on reaching, overhead reaching, and lifting with her left arm were continued and her maximum hours per day of work were limited to four until July 26.

*3 On July 6, Teube emailed Churchill saying that she and a co-worker had spoken with Posey-Glynn and informed her that, since her arm was now in a sling, they could no longer accommodate her restrictions. Teube further stated in the email that they understood Posey-Glynn was scheduled to be re-evaluated on 7/26/17 and “it is our hope that she will be released 100% so she is able to come back to work.”

Camden’s benefits administrator, Becky Martinez, sent Posey-Glynn a letter stating that, due to the physical demands of the Make Ready Technician position, Camden could no longer accommodate the doctor’s restrictions on her ability to work. Martinez told Posey-Glynn she was eligible for a Non-Family Medical Leave Act leave of absence beginning on July 7. Martinez further stated that her leave of absence did not guarantee Posey-Glynn’s job would be restored at the end of the leave period and her job could be eliminated or filled by another person during that time. In the event her job was eliminated or filled, Posey-Glynn could apply for a comparable position within the company. The maximum amount of leave time for which Posey-Glynn was eligible was four weeks based on her tenure with Camden. The leave period could be extended by her manager, however, until a doctor released Posey-Glynn to return to work.

On July 20, Teube emailed Churchill to discuss posting Posey-Glynn’s position as available if she was not released back to work without restrictions following a scheduled doctor’s visit on July 26. Churchill responded that, although the company could not accommodate the work restrictions Posey-Glynn was given at her last appointment, “this does not mean that we will not accommodate any restrictions” and it was not necessary that Posey-Glynn be released to full-duty work.

Following her July 26 appointment, Posey-Glynn’s work restrictions were increased rather than decreased. The restrictions now included no pushing, pulling, grasping, or squeezing with her left arm in addition to no reaching, overhead reaching, or lifting. In addition, Posey-Glynn was instructed to wear a “splint/cast” and her work hours continued to be limited to four per day.

In response to the increased restrictions, Rosa Cameron, Camden’s director of benefits, emailed several employees including Churchill, Teube, and Martinez regarding Posey-Glynn’s position. Cameron stated that “[s]ince we are unable to accommodate her restrictions, Amanda will remain on leave status.” Cameron further stated that Posey-Glynn would exhaust her leave time on August 4, but because her next doctor’s appointment was scheduled for August 10, the company was extending her leave until then with the “hope that her restrictions change enough for her to return to work.” Cameron concluded by stating she understood they were extremely busy and short staffed at the community and, because Posey-Glynn was not eligible for a Family Medical Leave Act leave of absence, they could begin looking for someone to replace her.

On August 9, Churchill emailed Teube confirming Posey-Glynn’s appointment to be re-evaluated by her doctor on the 10th. Churchill stated that “if she is released with restrictions you are able to accommodate, then she will return to work. If she is released with restrictions you are not able to accommodate, then her status will change from LOA to Terminated.”

Posey-Glynn’s medical records show that, following her August 10 evaluation, Posey-Glynn’s doctor continued restrictions on her use of her left arm including reaching, overhead reaching, and any lifting or carrying. Posey-Glynn was further restricted to working only six hours per day.

*4 Churchill called Posey-Glynn the next day and, according to Posey-Glynn, told her she was being terminated “because [she] did not get well quickly enough.” A follow-up letter stated that based on her current medical restrictions, she was “unable to perform the physical demands of [her] position as a Make Ready Technician.” The letter further stated that Camden could not accommodate her restrictions “due to the business needs of the community.” The letter informed Posey-Glynn that because she had exhausted her leave, she would be terminated unless she (1) qualified under the Americans with Disabilities Act and applicable state laws and (2) notified Camden of her desire to return to work with reasonable accommodations that would not impose an undue hardship on Camden’s business operations. The record contains no response to this letter from Posey-Glynn.

Posey-Glynn filed this lawsuit against Camden in April 2018, asserting claims under chapter 21 and section 451.001 of the Texas Labor Code. In her petition, Posey-Glynn asserted she was disabled and Camden discriminated against her “in the terms, conditions, and privileges of her employment,” and by retaliating against her and terminating her employment. Posey-Glynn further asserted she was discharged because she filed a workers’ compensation claim in good faith.

Camden filed a combined traditional and no-evidence motion for summary judgment contending Posey-Glynn was terminated solely because she exhausted all her paid and unpaid leave of absence time and, at the time of her termination, she had work restrictions that Camden could not accommodate. Camden argued Posey-Glynn had no evidence to show she was disabled, that she was qualified for her position as a Make Ready Technician, or that she was retaliated against for engaging in a protected activity.

Posey-Glynn responded that she met the burden of showing she has a disability because she had a shoulder strain and cervical strain. She further contended she had “a record of a disability and she may also be perceived as being disabled.” She stated her job qualifications were demonstrated by the fact that she had worked in the position of Make Ready Technician before her injury. With respect to her retaliation claim, Posey-Glynn argued Camden’s proffered reason for her termination was false and evidence of a retaliatory motive was shown by Camden’s knowledge of her workers’ compensation claim, the company’s negative attitude towards her injured condition, and its failure to adhere to established company policies. She further asserted that Camden failed to accommodate her disability after she complained about being forced to work outside her medical limitations.

Posey-Glynn attached over 130 pages of exhibits to her response, including her declaration, her medical records, emails and letters from Camden employees, and Camden’s Return to Work policy. Nowhere in her response, however, does Posey-Glynn refer to any of the evidence she attached or explain how the exhibits support her claims or create an issue of fact. In its reply, Camden noted that Posey-Glynn failed to support any of her arguments with references to evidence. Camden further noted that, although Posey-Glynn argued that Camden refused to accommodate her alleged disability, she had not asserted a claim for failure to accommodate in her petition.

On October 24, 2019, the trial court granted Camden’s motion for summary judgment. In its order, the court stated that “[a]fter reviewing the Motion, the response – which did not identify, cite to, or explain any of the unlabeled documents attached thereto – and reply, as well as the pleadings on file with the Court, it is the Court’s opinion that the No-Evidence Motion should be GRANTED.” The court dismissed Posey-Glynn’s claims in their entirety and assessed all costs of the action against her. Posey-Glynn then brought this appeal.

Analysis

*5 In four issues, Posey-Glynn contends the trial court erred in granting the no-evidence summary judgment because she established a prima facie case for each of her claims. To defeat a no-evidence motion for summary judgment, the non-movant must produce evidence raising a genuine issue of material fact on each element of the claim or defense challenged by the movant. S.W. Elec. Power Co. v. Grant, 73 SW.3d 211, 215 (Tex. 2002). In determining whether the non-movant has successfully carried their burden, neither the trial court nor the appellate court is required to wade through a voluminous record in search of evidence to support the respondent’s argument that a fact issue exists. Bich Ngoc Nguyen v. Allstate Ins. Co., 404 S.W.3d 770, 776 (Tex. App.—Dallas 2013, pet. denied). The respondent must specifically identify the supporting proof on file that it seeks to have the trial court consider. Id. A trial court does not abuse its discretion by not considering evidence to which the respondent does not specifically direct the court’s attention or for which the respondent fails to provide guidance on how the evidence supports her claim. See id. at 777 & n.4.

Posey-Glynn’s response to Camden’s motion for summary judgment failed to identify or analyze any of the evidence she was relying upon to support the challenged elements of her claims. On appeal, Posey-Glynn argues discussion of her evidence was unnecessary because the 130 pages of exhibits were “laid out simply and chronologically” and her medical records were “self-explanatory.” Although Posey-Glynn may view her case as being self-evident, the trial court was not required to determine on its own exactly how Posey-Glynn viewed her evidence as supporting her claims or which exhibits she believed created a fact issue on the elements challenged by Camden. See Levine v. Unique Beverage Co., No. 05-11-01467-CV, 2013 WL 1281896, at *3 (Tex. App.—Dallas Mar. 19, 2013, pet. denied) (mem. op.) (trial court not required to search through 98 pages of exhibits when non-movant has burden of pointing out what evidence supports responsive issues); In re A.J.L., No. 14-16-00834-CV, 2017 WL 4844479, at *4–5 (Tex. App.—Houston [14th Dist.] Oct. 26, 2017, no pet.) (mem. op.) (trial court not required to search through 114 pages of exhibits attached to response for evidence raising fact issue without guidance from non-movant).

Even on appeal, Posey-Glynn does not point to any evidence that, at the time her employment was terminated, she was qualified for the position of Make Ready Technician – one of the elements Camden challenged. To establish a prima facie case of disability discrimination under chapter 21 of the labor code, a plaintiff must show that (1) she has a disability, (2) she is qualified for the job, and (3) she suffered an adverse employment decision because of her disability. Donaldson v. Tex. Dept. of Aging & Disability Servs., 495 S.W.3d 421, 436 (Tex. App.—Houston [1st Dist.] 2016, pet. denied). To raise a fact issue on her qualifications, Posey-Glynn was required to present evidence showing either (1) she could perform all the essential job functions of a Make Ready Technician with or without modifications or accommodations or (2) that some reasonable accommodation by Camden would enable her to perform those job functions. Id. at 437.

In response to Camden’s motion for summary judgment, Posey-Glynn argued simply that she was “clearly qualified for her job, she had worked for Camden for many months before her injury.” But Posey-Glynn failed to provide evidence and did not address, either in the trial court or on appeal, her ability to perform the essential functions of a Make Ready Technician after her injury and at the time she was terminated. Nor has she addressed or provided evidence to show what reasonable modifications or accommodations Camden could have provided that would have allowed her to perform all the essential functions of the job. Although Camden allowed Posey-Glynn to work within her medical restrictions during the transitional duty period provided for in the company’s Return to Work Policy, this transitional period was, by definition, temporary and not intended as a permanent accommodation of Posey-Glynn’s restrictions. Posey-Glynn provided no evidence that she performed all the essential functions of her job during the transitional period. Indeed, the evidence she provided indicated that she did not, and could not, perform all aspects of her job during that time.

*6 Posey-Glynn asserts that she pleaded a failure to accommodate claim because she “pled a case of disability discrimination, thereby necessarily including accommodation by definition.” Although the elements of a disability discrimination claim and a failure-to-accommodate claim overlap to some extent, the latter is not subsumed within the former. See id. at 439. Even assuming Posey-Glynn’s petition could be read to assert a failure-to-accommodate claim, she was still required to provide summary judgment evidence sufficient to create a fact issue on whether she was qualified to do the job at the time she was terminated. See id. The elements of an accommodation claim are (1) the plaintiff has disability, (2) the employer had notice of the disability, (3) the plaintiff was qualified for the position with reasonable accommodations, and (4) the employer refused to make such accommodations. Id. It was Posey-Glynn’s burden to show that an accommodation of her alleged disability existed and that such an accommodation was reasonable. Hagood v. Cty. of El Paso, 408 S.W.3d 515, 525 (Tex. App.—El Paso 2013, no pet.). Again, Posey-Glynn failed to present any evidence of what reasonable accommodations Camden could have provided that would have allowed her to perform all the essential functions of a Make Ready Technician at the time her employment was terminated. The termination letter sent to Posey-Glynn specifically informed her that if she wished to return to work with a reasonable accommodation that would not impose an undue hardship on Camden’s business operations, she needed to notify Camden. Posey-Glynn provided no evidence that she ever responded to the letter. According to Posey-Glynn’s own declaration, the only accommodation she requested from Camden was that she not be required to perform any job tasks that conflicted with her medical restrictions. We conclude the trial court properly granted Camden’s motion for no evidence summary judgment on Posey-Glynn’s disability discrimination claims.

Posey-Glynn’s claims of retaliation similarly fail for lack of evidence. Although unclear from her petition, Posey-Glynn contended in her response to Camden’s motion for summary judgment that she had asserted a claim for retaliation under chapter 21 of the labor code. Posey-Glynn stated this claim was based on Camden’s action of placing her on a leave of absence after she complained to her workers’ compensation claim supervisor that Camden was requiring her to perform job duties that did not fall within her medical restrictions. Actionable retaliation exists when an employer makes an adverse employment decision against an employee who voices opposition to a discriminatory practice made unlawful under chapter 21. Chandler v. CSC Applied Techs., LLC, 376 S.W.3d 802, 823 (Tex. App.—Houston [1st Dist.] 2012, pet. denied). Posey-Glynn cites no authority, and provides no argument, that the conduct about which she complained to her claim supervisor was a discriminatory practice under chapter 21 or that her complaint would have put Camden on notice of any unlawful discrimination. See Alamo Heights Ind. Sch. Dist. v. Clark, 544 S.W.3d 755, 786 (Tex. 2018) (employee’s complaint must, at minimum, alert employer that unlawful discrimination is at issue). Nor does she cite any authority or provide any argument for the proposition that being placed on a leave of absence because she could not fully perform the job duties of a Make Ready Technician constituted an adverse employment decision. Although Camden’s Return to Work program allowed employees to temporarily work within their medical restrictions following a job-related injury when their restrictions could be accommodated, Camden was not required to provide such work, particularly if business demands made transitional work impractical. See Donaldson, 495 S.W.3d at 443 (failure to allow employee to work within medical restrictions when employee could not perform essential duties of job was not adverse employment decision). As discussed above, it was Posey-Glynn’s burden to produce evidence that she could fully perform the duties of a Make Ready Technician, with or without reasonable accommodations, and she failed to do so.

Posey-Glynn also failed to present evidence to support her claim for retaliatory discharge under section 451.001 of the labor code. Section 451.001 states that a person may not discharge or in any other manner discriminate against an employee because the employee has filed a workers’ compensation claim in good faith. TEX. LAB. CODE ANN. § 451.001. To support her claim that her discharge was retaliatory, Posey-Glynn had the burden of demonstrating a causal link between the termination of her employment and her filing of the claim. Benners v. Blanks Color Imaging, Inc., 133 S.W.3d 364, 369 (Tex. App.—Dallas 2004, no pet.). Circumstantial evidence sufficient to establish a causal connection includes: (1) knowledge of the compensation claim by the person terminating the employee; (2) expression of a negative attitude toward the employee’s injured condition; (3) failure to adhere to established company policies; (4) discriminatory treatment in comparison to similarly situated employees; and (5) evidence that the reason for the discharge was false. Vallance v. Irving C.A.R.E.S., Inc., 14 S.W.3d 833, 837 (Tex. App.—Dallas 2000, no pet.); Love v. Geo Group, Inc., No. 04-12-00231-CV, 2013 WL 1223870, at *3 (Tex. App.—San Antonio Mar. 27, 2013, no pet.) (mem. op.).

*7 In this case, it is undisputed that Churchill, whom Posey-Glynn characterizes as the decision-maker, had knowledge of Posey-Glynn’s worker’s compensation claim. This fact standing alone, however, is insufficient to raise a fact issue on retaliation. Vallance, 14 S.W.3d at 837. Knowledge of the claim is simply a factor to consider along with the remaining evidence. Id. Where a plaintiff fails to produce any probative evidence in the remaining categories, a no-evidence summary judgment is appropriate. Love, 2013 WL 1223870, at *3.

In support of her assertion that there was a negative attitude towards her injured condition, Posey-Glynn points to her immediate supervisor, Teube, asking her to perform tasks outside her medical restrictions. To be probative of retaliation, however, the negative attitude must be expressed by an individual with authority over the employment decision at issue. Id. at *4. Posey-Glynn identified Churchill as the person who terminated her employment and she did not argue or point to any evidence that Teube was involved in the decision. Accordingly, Teube’s actions are not probative of any retaliatory motive in the termination decision. See id. (supervisors’ negative attitude towards medical restrictions was not evidence of retaliatory motive where supervisors were not involved in termination decision).

As for Churchill, the evidence provided by Posey-Glynn showed that Churchill consistently attempted to ensure that Posey-Glynn’s medical restrictions were accommodated to the extent possible during the transitional Return to Work period. When the business needs of the community during its “busy season” required her to work beyond her physical capabilities, Posey-Glynn was placed on a leave of absence.

Posey-Glynn states that Churchill’s negative attitude was demonstrated by her request that a new workers’ compensation claim manager be assigned to handle Posey-Glynn’s claim. Posey-Glynn suggests Churchill made this request because the original claim manager, Evans, was helping Posey-Glynn find a new physician. Although an email exchange between Evans and Churchill shows that Evans provided Posey-Glynn with a list of possible new treating physicians, nothing in the record suggests that this was because Posey-Glynn had requested a new doctor or that Evans’s assistance in finding Posey-Glynn a new medical provider was the basis of Churchill’s request for a new claim manager. Posey-Glynn’s declaration states that she saw “varying doctors” during her course of treatment. She cites no evidence that she expressed dissatisfaction with any of them.

In an email to the insurance carrier, Churchill stated she had concerns with the way Evans was handling Posey-Glynn’s claim, but she gave no indication of the nature of those concerns. In the same email, Churchill referenced that she had concerns with how Evans managed another claim, indicating her issues were with Evans, not Posey-Glynn. Accordingly, Posey-Glynn’s evidence fails to demonstrate Churchill had a negative attitude towards Posey-Glynn’s injury or her compensation claim.2

*8 Posey-Glynn next contends that Camden failed to follow its own Return to Work Policy because she was not allowed the full six months of transitional work provided by the program. The policy states that the “maximum time allowed for transitional duty is six months.” The policy does not, however, provide a minimum amount of time that must be provided for transitional work. Nor does the policy require that an injured employee be provided any transitional work if the employee’s work restrictions cannot be accommodated. Because the policy does not mandate that injured employees be given six months of transitional work, Posey-Glynn did not provide any evidence that Camden failed to follow its own policies.

Finally, Posey-Glynn provided no evidence regarding how Camden treated its other employees, let alone employees who were similarly situated to her. Nor did she provide any evidence to show that the reason given for her termination – that she was unable to meet the physical demands of her position – was false. An employer is permitted to terminate an employee who sustains a job-related injury if it ultimately appears that, due to the nature of the injury, the employee can no longer perform the essential functions of the position. See Garcia v. Allen, 28 S.W.3d 587, 601 (Tex. App.—Corpus Christi–Edinburg 2000, pet. denied). Posey-Glynn provided no evidence she could perform the essential functions of her position at the time her employment was terminated.

Based on the foregoing, we conclude the trial court properly granted Camden’s motion for no-evidence summary judgment on Posey-Glynn’s retaliation claims.

We affirm the trial court’s judgment.

Footnotes

1

Although wearing the sling was not made a work restriction until July 26, Posey-Glynn’s medical records indicate she was given a sling for her left shoulder at her July 5 examination.

2

Posey-Glynn additionally references an email from Teube to Churchill sent two weeks after Posey-Glynn’s employment was terminated stating that Posey-Glynn had “verbally committed to move out of her apartment on 8/31/2017.” Posey-Glynn suggests this email shows Churchill’s negative attitude because she was “forcing Posey-Glynn to move out of her apartment.” We disagree. This email does not state that Posey-Glynn was being “forced” to move out of her apartment by Churchill or anyone else. To the extent it could be read that way, the email also does not suggest that Posey-Glynn’s moving out was anything other than a consequence of her no longer working as a maintenance technician for the apartment complex. Reading this evidence in the light most favorable to Posey-Glynn, the email, standing alone, is not sufficient to create a fact issue on her claim for retaliatory discharge.

Court of Appeals of Texas, Dallas.

KBIDC INVESTMENTS, LLC, Appellant

v.

ZURU TOYS INC., ZURU INC., AND ZURU LTD., TINNUS ENTERPRISES, LLC AND JOSH MALONE, Appellees

No. 05-19-00159-CV

|

Opinion Filed October 9, 2020

On Appeal from the 219th Judicial District Court

Collin County, Texas

Trial Court Cause No. 219-05584-2017

Before Justices Myers, Whitehill, and Pedersen, III

Opinion by Justice Myers

MEMORANDUM OPINION ON MOTION FOR REHEARING

LANA MYERS JUSTICE

Affirm in part, reverse in part, and remand; Opinion Filed October 9, 2020

We deny appellant’s motion for rehearing. On our own motion, we withdraw the opinion issued June 26, 2020. The following is now the opinion of this Court.

This case concerns a dispute between two inventors of systems for filling and sealing recreational water balloons. KBIDC Investments, LLC claims that its predecessor in interest, Kendall Harter, was the original inventor of the system used by appellees. Appellant brought suit alleging Josh Malone and his company, Tinnus Enterprises, LLC, misappropriated Harter’s trade secrets, used them to create Bunch O’ Balloons, took the product to market with the help of manufacturers Zuru Inc., Zuru Ltd., and Zuru Toys Inc. (collectively, “Zuru”), and made millions of dollars. The trial court rendered summary judgment that appellant take nothing on its claims. A jury found that Malone and Tinnus’s attorney’s fees through trial on appellant’s claim under the Texas Theft Liability Act were $194,970.

Appellant brings four issues on appeal contending (1) this Court lacks jurisdiction over this appeal because the trial court’s judgment is not final; (2) the trial erred by granting appellees’ motion for summary judgment because appellant presented some evidence of misappropriation; (3) the trial court erred by granting appellees’ motion for summary judgment because appellant was denied the opportunity to conduct necessary and appropriate discovery; and (4) the trial court erred by awarding Malone and Tinnus their attorney’s fees. We reverse the trial court’s judgment that appellant take nothing from Zuru Toys Inc., and we reverse the award of appellate attorney’s fees to Malone and Tinnus. In all other respects, we affirm the trial court’s judgment.

BACKGROUND

Appellant’s predecessor in interest, Kendall Harter, was an inventor and entrepreneur, and he was the owner of Blue Matrix Labs. In 2010, Harter saw there were ways that the recreational activity of playing with water balloons could be improved, including by filling multiple balloons at a time and by having the balloons seal themselves when they were full. He spent a few years developing a system. He eventually settled on using a manifold with multiple tubes on which the necks of the balloons would fit. The manifold was connected to a water source.

During the development process, Harter, who lived in Austin, worked with an engineering company in Farmers Branch, ARCO Ideas, Inc., to help develop his ideas. Those ideas included creating a water balloon filler–launcher. In March 2013, Harter created a drawing of the balloon filler–launcher and a partial prototype:

In developing the balloon filler–launcher, ARCO and Harter decided it needed a flow meter so that each balloon would be filled to a consistent level. ARCO contacted several companies, including Capstone Metering, to design a flow meter to fill multiple balloons simultaneously.

In 2013, Malone worked for a company, Realtime Group, and while working as Realtime’s employee, Malone did some consulting work for Capstone. Some of Malone’s work with Capstone was from his home office, and some was at Capstone’s office. Malone finished his work with Capstone by January 2014.

Meanwhile, starting in 2010, Malone had been experimenting using O-rings on water balloons.1 Malone testified that in January 2014, he had his “light bulb moment” and conceived of his system for filling and sealing many water balloons at once. The system, which he called Bunch O’ Balloons, consisted of multiple narrow, straw-like tubes, with a balloon fitted over the end of the tube and an O-ring on the outside of the neck of the balloon holding the balloon on the tube. The other end of each tube fit into a cup-like device. The cup had thirty or more of these balloon-fitted tubes.

When the cup was attached to a water source, such as a garden hose, the water flowed through the tubes, filling the balloons simultaneously. As the balloons filled with water, they fell off the tubes and the O-rings sealed them.

Malone filed for a patent for the system on February 7, 2014. In July 2014, he launched a Kickstarter campaign for Bunch O’ Balloons. See https://www.kickstarter.com/projects/bunchoballoons/bunch-o-balloons-100-water-balloons-in-less-than-1 (Kickstarter video) (last visited Oct. 8, 2020).2 Malone advertised that Bunch O’ Balloons would fill and seal over 100 water balloons in one minute. The Kickstarter campaign was a success, and Malone quickly met and then exceeded his goal.

In August 2014, Harter demonstrated in a YouTube video his version of a self-sealing, water-balloon-filling system he called the Zorbz Replicator.3

This system did not seal the balloons by an O-ring on the exterior but by having adhesives on the inside of the neck of the balloon and a small ball inside the balloon held in place by the specially designed neck of the balloon acting as a check valve blocking the water from escaping through the neck of the balloon.

In China, the Zuru companies, which manufacture and distribute toys, took notice of Harter’s and Malone’s products and began negotiations with them to manufacture and distribute the products. Harter told Zuru that Bunch O’ Balloons was a design stolen from him. Zuru reached an agreement with Malone for the right to manufacture and distribute Bunch O’ Balloons, but Harter refused to have Zuru sell his products. Zuru sold millions of Malone’s Bunch O’ Balloons products worldwide.

The success of Bunch O’ Balloons led to imitation, and Malone went to court to stop other companies, including Telebrands Corp., that were copying his product, infringing his patents, and seeking to have his patents invalidated. In 2015, Harter gave a deposition and provided an affidavit in Telebrands’ litigation against Malone and his company, Tinnus Enterprises.

Harter’s Zorbz Replicator was less successful than Bunch O’ Balloons, and Harter’s company, Blue Matrix Labs, filed for bankruptcy protection. Appellant purchased the company in late 2016.

In 2017, appellant filed suit against Malone, Tinnus, and Zuru alleging Malone and Tinnus misappropriated Harter’s trade secrets to develop Bunch O’ Balloons and that Zuru was aware of Malone’s misappropriation when it manufactured and distributed Bunch O’ Balloons. Malone and Tinnus, and Zuru Inc. and Zuru Ltd., moved for summary judgment, asserting appellant had no evidence to support its allegations. The trial court granted their no-evidence motions for summary judgment.

One of appellant’s causes of action was that appellees were liable under the Texas Theft Liability Act (TTLA). That statute states that the trial court shall award the prevailing party “costs and reasonable attorney’s fees.” TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b). Malone and Tinnus pleaded for attorney’s fees under the statute. Appellant demanded a jury trial on the amount and reasonableness of the attorney’s fees. The jury determined Malone and Tinnus’s reasonable attorney’s fees through the summary judgment on the causes of action and the trial on attorney’s fees were $194,970, and the jury awarded additional amounts in the event of an appeal. The trial court signed a final judgment incorporating the summary judgments and the jury’s verdict.

JURISDICTION

In its first issue, appellant contends this Court lacks jurisdiction over this appeal because the judgment is not final. Appellant asserts the judgment does not dispose of one of the parties, Zuru Toys Inc. We conclude the judgment is final and this Court has jurisdiction.

The supreme court discussed the problem of determining judgment finality in Lehmann v. Har-Con Corp., 39 S.W.3d 191 (Tex. 2001):

[T]he general rule, with a few mostly statutory exceptions, is that an appeal may be taken only from a final judgment. A judgment is final for purposes of appeal if it disposes of all pending parties and claims in the record, except as necessary to carry out the decree.”

....

[T]he language of an order or judgment can make it final, even though it should have been interlocutory, if that language expressly disposes of all claims and all parties. It is not enough, of course, that the order or judgment merely use the word “final”. The intent to finally dispose of the case must be unequivocally expressed in the words of the order itself. But if that intent is clear from the order, then the order is final and appealable, even though the record does not provide an adequate basis for rendition of judgment.

....

[A]n order that grants a motion for partial summary judgment is final if in fact it disposes of the only remaining issue and party in the case, even if the order does not say that it is final, indeed, even if it says it is not final.... Also, an order can be final and appealable when it should not be. For example, an order granting a motion for summary judgment that addressed all of the plaintiff’s claims when it was filed but did not address claims timely added by amendment after the motion was filed may state unequivocally that final judgment is rendered that the plaintiff take nothing by his suit. Granting more relief than the movant is entitled to makes the order reversible, but not interlocutory.

....

A statement like, “This judgment finally disposes of all parties and all claims and is appealable”, would leave no doubt about the court’s intention.

Id. at 195, 200, 204, 206 (Tex. 2001).

In this case, Zuru Inc. and Zuru Ltd. moved for summary judgment. The trial court signed an interlocutory order granting their motion. In the “Final Judgment,” the trial court ordered that appellant’s claims against “ZURU Toys, Inc., ZURU, Inc., and ZURU, Ltd., ... are hereby dismissed with prejudice as to re-filing the same and that Plaintiff shall take nothing.” The judgment also stated, “This is a Final Judgment that disposes of all parties and all claims and is appealable.”

The “Final Judgment” disposes of appellant’s claims against Zuru Toys Inc. by stating the claims against Zuru Toys Inc. “are hereby dismissed with prejudice ... and that Plaintiff shall take nothing.” The trial court expressed its intent that the judgment be final by stating, “This is a Final Judgment that disposes of all parties and all claims and is appealable.” See id. at 206.

We conclude the judgment is final and that this Court has jurisdiction over this appeal. We overrule appellant’s first issue.

SUMMARY JUDGMENT

In the second issue, appellant contends the trial court erred by granting appellees’ no-evidence motions for summary judgment on appellant’s claims.

Rule 166a(i) provides that after an adequate time for discovery, a party “may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial.” TEX. R. CIV. P. 166a(i). We review a no-evidence summary judgment under the same legal sufficiency standard used to review a directed verdict. See Flood v. Katz, 294 S.W.3d 756, 762 (Tex. App.—Dallas 2009, pet. denied). Thus, we must determine whether the nonmovant produced more than a scintilla of probative evidence to raise a fact issue on the material questions presented. See id. at 762. When analyzing a no-evidence summary judgment, “we ‘examine the entire record in the light most favorable to the nonmovant, indulging every reasonable inference and resolving any doubts against the motion.’ ” Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006) (quoting City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005)). A no-evidence summary judgment is improperly granted if the nonmovant presented more than a scintilla of probative evidence to raise a genuine issue of material fact. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003). “More than a scintilla of evidence exists when the evidence ‘rises to a level that would enable reasonable, fair-minded persons to differ in their conclusions.’ ” Id. (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)). “Less than a scintilla of evidence exists when the evidence is ‘so weak as to do no more than create a mere surmise or suspicion’ of a fact.” Id. (quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)).

Plaintiffs often must prove trade secret misappropriation through circumstantial evidence. Sw. Energy Prod. Co. v. Berry-Helfand, 411 S.W.3d 581, 598 (Tex. App.—Tyler 2013) (citing SI Handling Sys., Inc. v. Heisley, 753 F.2d 1244, 1261 (3rd. Cir. 1985)), rev’d on other grounds, 491 S.W.3d 699 (Tex. 2016). “A fact issue is raised by circumstantial evidence if a reasonable person would conclude from the evidence that the existence of the fact is more reasonable than its nonexistence.” Guthrie v. Suiter, 934 S.W.2d 820, 831 (Tex. App.—Houston [1st Dist.] 1996, no writ). “All that is required is that the circumstances point to ultimate facts sought to be established with such a degree of certainty as to make the conclusion reasonably probable.” Id. “No fact issue is raised where the evidence is so indefinite and uncertain as to preclude a finding.” Id. at 831–32.

In deciding whether a disputed material fact issue exists precluding summary judgment, evidence favorable to the nonmovant will be taken as true. In re Estate of Berry, 280 S.W.3d 478, 480 (Tex. App.—Dallas 2009, no pet.). Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005). We review a summary judgment de novo to determine whether a party’s right to prevail is established as a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex. App.—Dallas 2000, pet. denied).

MISAPPROPRIATION BY MALONE

Appellees moved for summary judgment on the ground that appellant had no evidence they had misappropriated appellant’s trade secrets or other property. Appellant sued appellees for statutory and common-law misappropriation of trade secrets, violation of the TTLA, and for unfair competition by misappropriation. Misappropriation, or unlawful appropriation, is an element of each these causes of action. See TEX. CIV. PRAC. & REM. CODE ANN. § 134.002(2) (under TTLA, “ ‘Theft’ means unlawfully appropriating property ....”); id. § 134A.003, .004 (under Texas Uniform Trade Secrets Act, party may receive injunctive relief and damages for misappropriation of trade secrets); BP Automotive, L.P. v. RML Waxahachie Dodge, L.L.C., 448 S.W.3d 562, 572 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (elements of unfair competition by misappropriation include the defendant used the plaintiff’s product in competition with the plaintiff);4 Twister B.V. v. Newton Research Partners, LP, 364 S.W.3d 428, 437 (Tex. App.—Dallas 2012, no pet.) (elements of common-law misappropriation of trade secrets include “the trade secret was acquired through breach of a confidential relationship or was discovered by improper means” and “the defendant used the trade secret without authorization”).

For Malone to have misappropriated Harter’s trade secrets concerning filling multiple balloons with a manifold and using O-rings to make balloons self-sealing, he must have had some access to Harter’s trade secrets and knowledge of them. See RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 40, cmt. c (“proof of the defendant’s knowledge of the trade secret together with substantial similarities between the parties’ products or processes may justify an inference of use by the defendant”).5 We must determine whether appellant presented any evidence that Malone had access to Harter’s ideas for him to acquire knowledge of them and misappropriate them.

Malone’s Work at Realtime Group

Appellant asserts Malone could have learned of Harter’s ideas about filling multiple balloons with a manifold and using O-rings for self-sealing balloons from Harter’s consultant, ARCO. From 2012 to 2014, Harter worked with ARCO to develop his ideas. Besides the balloon filler–launcher, Harter also disclosed to ARCO his ideas for self-sealing balloons and for simultaneously filling multiple balloons.

When Harter was working with ARCO, Malone worked as a product-design consultant for The Realtime Group. One of Realtime’s clients was Capstone Metering, and Malone worked some at Capstone’s premises. ARCO hired Capstone to design a flowmeter for Harter’s balloon filler–launcher.

Thus, Harter’s evidence is that ARCO had Harter’s filler–launcher design, ARCO hired Capstone to design a flowmeter for it, and Malone may have been working at Capstone’s premises at that time. The record contains no evidence that ARCO sent Harter’s designs to Capstone or, even if it did send the design, that Malone had access to the design. Malone testified in his deposition that he was “involved” with “water meter” at Realtime and Capstone, but there is no evidence that Malone worked on the flowmeter for Harter’s balloon filler–launcher. ARCO was required by its agreements with Harter to obtain nondisclosure agreements from anyone who would see Harter’s designs, and there is no evidence that it did not do so. Nor is there any evidence that Malone signed a nondisclosure agreement concerning Harter’s designs.

This evidence does not make it reasonably probable that Malone had access to Harter’s design. Instead it is too indefinite and uncertain to show Malone had access to Harter’s design to constitute circumstantial evidence of Malone’s misappropriation of the design. See Guthrie, 934 S.W.2d at 831.

The Initials “JM” on ARCO’s Drawings

Appellant also asserts Malone worked at ARCO and was exposed to Harter’s designs while working there. Harter disclosed various ideas to ARCO, including a “Provisional Patent Application” stating that water balloons could be sealed with “[s]mall rubber bands/o-rings that are applied to the neck of the balloon after it is filled that acts as a closure to restrict the flow of liquid or gas out of the balloon opening.”6 The document also described a system of filling the balloons similar to both Harter’s and Malone’s systems: “This method involves a manifold distribution system that disseminates water throughout various fill nozzles, thereby distributing liquid to multiple water balloons simultaneously.” Harter testified in his affidavit that in 2012, he made drawings for filling multiple water balloons at one time:

Although the similarity of this drawing to Bunch O’ Balloons is apparent, similarity of design is not evidence of misappropriation without evidence Malone knew of Harter’s design. See RESTATEMENT § 40 cmt c.

Appellant’s evidence for his assertion that Malone worked for ARCO and was exposed to Harter’s ideas at ARCO is that the initials “JM” appear on drawings ARCO prepared for other products designed by Harter, including drawings for a sandwich maker and a water-balloon gun.7 Appellant also points to Malone’s Linkedin.com profile, which states that his technical skills include “CAD,” computer-aided design. Appellant asserts, without citing any evidence other than Harter’s affidavit, that Malone’s house was “within a 30-minute drive of ARCO’s offices” in Farmer’s Branch. Appellant also states that ARCO had no employees with the initials “JM” at that time.

Appellant’s argument that “JM” stands for Josh Malone is speculation. Appellant provides no evidence to support its theory that Malone is the only person with the initials “JM” who is skilled in CAD and lives within a thirty-minute drive of ARCO’s offices.

This evidence is too indefinite and uncertain to show Malone had access to Harter’s designs. It does not constitute circumstantial evidence that Malone worked at ARCO, that he had access to Harter’s provisional patent application or drawings, or that he misappropriated Harter’s trade secrets. Furthermore, the fact that no one with the initials “JM” worked at ARCO at that time is not evidence that Malone worked for ARCO or prepared the water-balloon gun or sandwich-maker drawings for ARCO.

Malone’s E-mail with Zuru

Appellant argues that statements by Malone in an e-mail to Zuru are evidence that Malone had access to one of Harter’s patent applications before it was public.

On August 15, 2014, Malone and Zuru exchanged e-mails negotiating the terms of the licensing agreement for Bunch O’ Balloons. One of Zuru’s concerns was the possibility of litigation with Harter’s companies concerning Harter’s Zorbz balloon products. Zuru proposed that half of Malone’s commission be withheld and used by Zuru for any litigation concerning Zorbz. Malone wrote back stating:

Agree to all except Zorbz indemnification. A few comments regarding that:

– I understand your concern, and will help address it however I can

– we are not prepared to accept this category of risk (aggressive or frivolous legal actions)

– several statements in the warranties section address this issue, and I am happy for you to add language there

I urge you to compare the patent application documents to assess any risk of infringement

I do not know and have never spoken to anyone who developed Zorbz IP

– I have not been a party to any NDA or contract in this field

Hypothetically if Zorbz consultants gave away IP, that does not create any liabilities for us under U.S. law

(Italicization added.) Appellant asserts that the three italicized statements constitute evidence that Malone had access to Harter’s trade secrets.

Concerning Malone’s statement urging Zuru “to compare the patent application documents to assess any risk of infringement,” appellant argues Zuru could not have compared the patent applications without Malone having access to Harter’s trade secrets and confidential information because one of Harter’s patent applications was not published until February 26, 2015, six months after the August 15, 2014 e-mail.

In support of this assertion, appellant cites to Harter’s patent application publication for “Self-Sealing Balloons and Related Components and Methods of Manufacturing.” However, it is not clear what “patent application documents” Malone was referring to in his e-mail with Zuru. Harter’s self-sealing-balloons patent application discusses making water balloons self-sealing in two ways: (1) by inserting a small sphere into the balloon that would act as a check valve by blocking the neck of the balloon after it was filled with water and by having the neck of the balloon operate as an elastic band to hold the check-valve ball in place, and (2) by making the neck of the balloon adhesive in the presence of water. The patent application also discussed methods for manufacturing the water balloons and check valves. The patent application did not discuss any matters resembling Bunch O’ Balloons, which worked by fitting balloons onto narrow tubes with the balloons self-sealing through the use of O-rings on the outside of the necks of the balloons, not adhesives inside the balloons or check valves held in place by the design of the neck of the balloon.

Harter testified in his deposition that he had “multiple” patents related to the Zorbz Replicator. If Malone was referring to the self-sealing balloon patent application, it is no evidence he had access to Harter’s trade secrets concerning either filling multiple balloons at one time or making them self-sealing with O-rings because that patent application does not discuss either of those matters. If Malone was referring to a different patent application, then there is no evidence whether that patent application was unpublished on August 15, 2014.

We conclude Malone’s statement to Zuru to “compare the patent applications” was too indefinite and uncertain to constitute circumstantial evidence that Malone had access to Harter’s relevant designs for filling multiple water balloons with a manifold and using O-rings to make them self-sealing or that Malone misappropriated Harter’s designs.

Appellant argues in its reply brief that the second italicized statement, “I do not know and have never spoken to anyone who developed Zorbz IP,” calls Malone’s credibility into question. Appellant points to evidence that Malone and Harter had exchanged e-mails about Zorbz only a month before Malone’s e-mail with Zuru. Appellant did not point to this statement in either its response to the motion for summary judgment or in its appellant’s brief. However, even considering the statement, it is, at most, evidence that Malone lied to Zuru. It is no evidence that Malone had access to Harter’s trade secrets on self-sealing water balloons with O-rings or filling multiple water balloons with a manifold. Appellant had the burden of producing some evidence that Malone misappropriated Harter’s trade secrets, and the second italicized statement is not circumstantial evidence of that.

Appellant argues that the third italicized statement in the e-mail, “[h]ypothetically, if Zorbz consultants gave away IP, that does not create any liabilities for us under U.S. law,” shows Malone had access to and misappropriated Harter’s trade secrets. Appellant stated in the response to the motion for summary judgment: “That Mr. Malone would suggest the exact method by which he misappropriated the confidential trade secrets of Mr. Harter and Blue Matrix is telling.” Appellant states in its brief on appeal that Malone’s “telling choice of language at the time strongly suggests the precise method by which he misappropriated the confidential information and trade secrets ....” We disagree. Appellant provided no evidence of who this hypothetical consultant was, what secrets were disclosed by or misappropriated from the consultant, or how Malone had access to the consultant or the consultant’s information. We conclude Malone’s statement is too indefinite and uncertain to constitute circumstantial evidence that he had access to and misappropriated any of Harter’s trade secrets about self-sealing water balloons using O-rings or for filling multiple water balloons using a manifold device.

“It’s some evidence.”

Appellant also points to a comment by the trial court at a hearing on the parties’ motions to compel discovery and for special exceptions. Appellant argues the trial court concluded that Zuru’s statement in the August 15, 2014 e-mails about wanting indemnity for potential suits by Harter was “some evidence” of Malone’s misappropriation of Harter’s trade secrets.

At the hearing, appellant’s lawyer told the trial court that Zuru wanted an indemnification provision in the licensing agreement because Harter had told Zuru that the Bunch O’ Balloons concept was “picked up from our engineers in the Dallas/Fort Worth area and was essentially a stolen idea based on the replicator concept we were working on.” The following discussion then occurred:

The Court: And it’s Kendall Harter who told them it was stolen.

[Appellant’s Attorney]: Yes, Your Honor, that’s what it is saying.

The Court: Because Kendall Harter thinks it was stolen.

[Appellant’s Attorney]: Yes, Your Honor. And he’s telling the—

The Court: It wasn’t that they got the thief to admit it, the purported victim claims it was stolen.

[Appellant’s Attorney]: Yes, Your Honor. And he says, I’ve been working on the—

The Court: How is that evidence? That’s just a claim?

[Appellant’s Attorney]: Well, no, Your Honor, it’s telling him that I was working on this. I have my designs. I have my other things. I was doing this exact same thing and that this was—

The Court: I guess I should take that back. It’s some evidence.

[Appellant’s Attorney]: Yes, Your Honor.

The Court: It’s not dispositive, if the accusers’ own claims were evidence of their truthfulness, then nobody would need any other evidence. They would just say you took that from me.

[Appellant’s Attorney]: Absolutely, Your, Honor, and they will have a chance at trial to rebut that; but like you said, it is some evidence. That’s all we need, it’s some evidence to show—

The Court: But you need something more than something purely self-serving.

[Appellant’s Attorney]: You don’t actually, no, Your Honor, they don’t have anything to rebut it, you wouldn’t. It’s just—again, if it’s some evidence, that’s all you need.

(Emphasis added.) In context, it appears what the trial court said was “some evidence” was Harter’s statement that Malone and Zuru stole his Zorbz Replicator trade secrets.

Even if the trial court meant that the e-mail about indemnification from a potential lawsuit from Harter was “some evidence,” that evidence “does not point to ultimate facts with such a degree of certainty as to make the conclusion [i.e., that Malone had access to and misappropriated Harter’s designs] reasonably probable.” Guthrie, 934 S.W.2d at 831. Therefore, it was not circumstantial evidence that Malone had access to and misappropriated Harter’s trade secrets concerning making balloons self-sealing using O-rings or filling multiple balloons using a manifold.

March 2015 Luncheon

In March 2015, Malone asked Harter to meet with him. Malone testified he was concerned that Harter may have been siding with Telebrands in that company’s attempt to have Malone’s patent for Bunch O’ Balloons set aside.

During the luncheon meeting, Malone told Harter that Harter’s patent application for self-sealing balloons (discussed above) had the wrong illustrations. Most of the illustrations in the patent application were for a sandwich maker, which had nothing to do with the text in the application. Appellant argues Malone “should not have had any knowledge, information, or even idea about the sandwich maker unless he improperly received information through ARCO—in violation of the non-disclosure agreement.”

The patent application was published on February 26, 2015, and it was public information at the time of the March 2015 luncheon. Therefore, Malone’s knowledge of the patent application at the luncheon is not evidence of his having access to Harter’s confidential information.

Most of the illustrations on the patent application are clearly for a sandwich maker. The illustrations include a drawing of what appears to be machine with a slice of bread and a substance labeled “Creamy Peanut Butter” in an envelope next to the bread. The illustrations also included charts stating: “Place Bread,” “Start Machine,” “Dispense Foodstuff,” “Spread on Bread,” “Present Sandwich,” “Extract Sandwich,” “Eat Sandwich.” Malone did not need access to confidential information to discern that most of the illustrations in the patent application concerned a sandwich maker. Only four of the nineteen illustrations in the patent application appear to concern the Zorbz self-sealing balloon, which used an internal check valve with the specially designed neck of the balloon and internal adhesives to seal the balloon, not an external O-ring.

Harter also testified in his affidavit that as they were leaving the restaurant, Malone told him, “I’m going to tell your investors!” Harter testified that the identity of his company’s investors “was not public and there is no way that Malone could have found out the [identity] of the investors because Blue Matrix was not a public company.” Harter stated that one of the key investors received a letter signed by Malone. Malone testified in his deposition that Harter told him at the luncheon that one of his investors “was a famous third baseman for the Yankees or something. And so I think I Googled it, and then I think I further confirmed it from public records.” Malone was then asked, “What public records?” And he answered, “I don’t remember. It could have been registration with the Secretary of State, but I don’t remember for sure.” A moment later, he said, “Now I can answer the last question. He was the assignee of record in the patent office.”

Appellant argues it was factually false that the investor was the assignee for the pending patent application for self-sealing balloons. That published patent application shows the assignee is Harter’s company, Blue Matrix Labs. However, Malone did not say the investor was the assignee of the patent application for self-sealing balloons; Malone said the investor “was the assignee of record in the patent office.” Harter testified he had multiple patents for Zorbz water balloons; appellant did not present evidence that the investor was not “the assignee of record in the patent office” for one of Harter’s other patents. Malone did not specify what the investor had been assigned, and appellant did not ask Malone what the investor had been assigned.

Even if Malone came by knowledge of the investor’s identity by inappropriate means, it is too indefinite and uncertain to show that Malone came into contact with Harter’s ideas for filling multiple balloons with a manifold or for making balloons self-sealing using O-rings.

Use of Zorbz Balloons

Appellant also argues the evidence shows Malone had access to Harter’s prototype self-sealing balloons later marketed under the brand name Zorbz. In the Kickstarter video, Malone shows how many Zorbz and other brands of water balloons he could fill in one minute, and he compares that to the number of Bunch O’ Balloons he could fill in a minute. In the video, the Zorbz balloons are white. Appellant’s summary judgment evidence included a written draft of a script for the Kickstarter video that Malone e-mailed to someone on June 25, 2014.

Appellant does not explain the link between Malone’s alleged use of Zorbz prototype balloons and his alleged misappropriation of Harter’s trade secrets. We will presume the argument is that if Malone had access to Harter’s prototype balloons, then Malone had access to Harter’s trade-secret designs.

Appellant first argues that the Zorbz balloons in the video were the prototype balloons because Zorbz balloons were not available to the public when Malone made the video. The record does not show the date on which Malone made the video. However, the Kickstarter campaign began July 22, 2014, so the video was made sometime between June 25 when Malone was working on the script and July 22, 2014. Harter testified that Zorbz balloons were sold between April and September 2014. Therefore, the fact that Malone used the balloons in June and July 2014 is not evidence they were Harter’s nonpublic prototype balloons.

Appellant also argues the balloons in the video must be the prototype balloons because the balloons Malone identified as Zorbz balloons in the video were white and Harter used white balloons for his prototype. Appellant’s summary judgment evidence included Malone’s receipt for a package of Zorbz balloons he ordered, and the receipt included a picture of the balloon package. The picture showed the package included white balloons as well as blue, red, and yellow balloons. Therefore, the fact that the Zorbz balloons in the video were white is not evidence they were Harter’s nonpublic prototype balloons.

Appellant also argues Malone had access to Harter’s prototype balloons because the drafts of the script call for a voiceover stating, “We made as many water balloons as we could in 1 minute using 4 different methods. Using the old fashioned way we were able to make 6 balloons. Using a Tie-Knot, it was 8 balloons. With Zorbs [sic], we made 30.” Therefore, appellant argues, Malone must have had Zorbz balloons on or before June 25 to make those claims in the script. Yet Malone’s receipt for the balloons shows he ordered them on June 24 for delivery between June 26 and July 1. This evidence shows the script was written before Malone received the balloons.

Appellant’s evidence included Malone’s deposition. Malone testified that an initial script was provided to him, he revised it, and he sent back the script that is in the record. The e-mails show the script was sent to him on June 23, and he returned the revised script on June 25. In both scripts, the voiceover says tests of Zorbz balloons showed thirty of them could be filled in one minute. Malone testified in his deposition that he timed filling Zorbz water balloons, but he did not testify when he did the testing other than that it was before the filming of the video. He also testified that the scripts’ statements that he filled thirty Zorbz balloons in one minute were not accurate. In the actual Kickstarter video, the voiceover, which is Malone’s voice, said he filled ten Zorbz balloons in one minute.

This evidence does not show Malone had access to Zorbz prototype balloons or that Malone tested any Zorbz balloons before he received those he ordered. Instead, the evidence shows Malone received and edited scripts for the Kickstarter video that stated a voiceover would say how many Zorbz balloons Malone could fill in a minute. The scripts stated thirty balloons per minute, but by the time the video was filmed and produced, which was after Malone received and could have tested the balloons, that number changed to ten. This evidence does not show that Malone had access to and misappropriated Harter’s trade secrets.

Moreover, the Zorbz balloons used a different sealing system from Malone’s system using O-rings, and the package of Zorbz balloons did not come with a Zorbz Replicator, which was the device for filling multiple balloons at one time. So even if Malone had received Zorbz prototype balloons, it does not tend to show that he had access to Harter’s concepts for self-sealing balloons using O-rings or for filling multiple balloons using a manifold.

“Do or Die”

Appellant also points to Malone’s comments in an interview published in D Magazine. In the interview, Malone said that before Bunch O’ Balloons, his inventing “wasn’t quite working out,” he was “really, really discouraged,” and believed this was his “last chance. It was do or die.”8 Malone also stated in his deposition that he came up with the idea for Bunch O’ Balloons in a few weeks. Appellant argues: “The evidence shows that Mr. Malone’s alleged creation of Bunch O’ Balloons is nothing more than recasting misappropriated products he gained from KBIDC.” Appellant then points to Malone’s LinkedIn profile where he describes his business entity, Tinnus: “TINNUS stands for There Is Nothing New under the Sun. This describes my approach which is to find the best products, technologies, or methods and use them, improve them, or replace them.” However, neither Malone’s melancholy and anxiety about possibly having to give up inventing nor the name and philosophy of his company is any evidence that Malone had access to and misappropriated Harter’s trade secrets concerning sealing water balloons with O-rings or filling multiple balloons with a manifold.

We conclude that none of the evidence appellant cites, whether viewed separately or collectively, constitutes evidence that Malone misappropriated trade secrets belonging to Harter and later to appellant to create Bunch O’ Balloons. Therefore, the trial court did not err by granting Tinnus and Malone’s motion for summary judgment.

MISAPPROPRIATION BY ZURU INC. AND ZURU LTD.

Zuru Inc. and Zuru Ltd. moved for summary judgment on the ground that appellant had no evidence they unlawfully used, disclosed, appropriated, secured, or stole Harter’s trade secrets or other property. To prevail, appellant had to present some evidence that the Zuru entities knew or had reason to know they derived their knowledge of Harter’s trade secrets through a person who used improper means to acquire the trade secrets. See CIV. PRAC. § 134A.002(3)(B)(ii)(a).

Appellant’s legal theory is that the Zuru entities received Harter’s trade secrets from Malone, who had misappropriated them from Harter. To support this theory, appellant had to present some evidence that Malone misappropriated Harter’s trade secrets. As discussed above, appellants failed to present any such evidence. Therefore, appellant presented no evidence that the Zuru entities unlawfully used, disclosed, appropriated, secured, or stole Harter’s or appellant’s trade secrets or other property.

We conclude the trial court did not err by granting Zuru Inc. and Zuru Ltd.’s motion for summary judgment.

We overrule appellant’s second issue.

SUMMARY JUDGMENT FOR ZURU TOYS INC.

Appellant also contends the trial court erred by rendering judgment for Zuru Toys Inc. Zuru Toys Inc. did not move for summary judgment with Zuru Inc. and Zuru Ltd. Instead, Zuru Inc. and Zuru Ltd.’s motion for summary judgment identified the movants as “ZURU Ltd. and ZURU Inc. (collectively ‘ZURU’), incorrectly named as ZURU Toys Inc.....” Even though Zuru Toys Inc. did not move for summary judgment, the final judgment states that appellant’s “affirmative claims for relief asserted against Defendants ... ZURU Toys, Inc.... are hereby dismissed with prejudice as to re-filing the same and that Plaintiff shall take nothing.” As this Court has stated, “An order that grants summary judgment to a party who did not move for summary judgment is erroneous and must be reversed.” Mitchell v. Baylor Univ. Med. Ctr., 109 S.W.3d 838, 844 (Tex. App.—Dallas 2003, no pet.).

Zuru Toys Inc. filed a motion for summary judgment on the day the court signed the final judgment. A motion for summary judgment must be filed at least twenty-one days before the summary judgment hearing. TEX. R. CIV. P. 166a(c). Zuru Toys Inc.’s motion filed the day of the final judgment did not follow this requirement. Nothing in the record shows the trial court considered or ruled on that motion for summary judgment. We conclude the trial court erred by rendering judgment that appellant take nothing from Zuru Toys Inc.

DISCOVERY AND CONTINUANCE

In his third issue, appellant contends the trial court erred by denying its motion to compel discovery and its motion to continue the summary judgment hearing.

Motions to Compel Discovery

Appellant filed motions to compel discovery responses against Zuru and against Malone and Tinnus on August 11, 2017, and January 25, 2018. The trial court denied the motions. “In general, a party may obtain discovery regarding any matter that is not privileged and is relevant to the subject matter of the pending action.” TEX. R. CIV. P. 192.3(a).

We review a trial court’s denial of a motion to compel discovery for an abuse of discretion. Carbonara v. Tex. Stadium Corp., 244 S.W.3d 651, 658 (Tex. App.—Dallas 2008, no pet.). A trial court abuses its discretion when it acts “without reference to any guiding rules and principles”; in other words, if it acts arbitrarily or unreasonably. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). Even where a party shows an abuse of discretion in a discovery ruling, the complaining party must still show harm to obtain a reversal. See TEX. R. APP. P. 44.1(a); see also Ford Motor Co. v. Castillo, 279 S.W.3d 656, 667 (Tex. 2009). Harmful error is error that “probably caused the rendition of an improper judgment” or “probably prevented the appellant from properly presenting the case to the court of appeals.” TEX. R. APP. P. 44.1(a).

On appeal, appellant complains about appellees’ failure to comply with its request that appellees provide copies of all communications between them. Zuru’s “COO” testified in her deposition that there were hundreds of e-mails between Zuru and Malone. However, appellant states Malone produced “a handful” of e-mails with Zuru, but Zuru produced no e-mails between it and Malone. Appellant also asserts on appeal that the trial court erred by denying its motion to compel discovery concerning marketing, sales, and use of Bunch O’ Balloons.

Appellant provides no argument explaining how these discovery requests were relevant to the only issue in the motion for summary judgment, whether Malone misappropriated Harter’s trade secrets concerning self-sealing water balloons with O-rings and filling multiple balloons with a manifold system. Malone patented Bunch O’ Balloons in February 2014. Therefore, any misappropriation of Harter’s trade secrets had to have occurred before then. Appellant provides no explanation of how communications between Malone and Zuru, which began in August 2014, could be relevant to events allegedly occurring no later than February 2014.

Likewise, appellant provides no explanation of how “information related to marketing/sales/use of Bunch O’ Balloons” was relevant. Appellant states in its brief that the “marketing/sales/use” information “goes directly to one of the elements ZURU raised in its summary judgment motion.” Appellant does not identify which element or provide a citation to the record. Appellant may be referring to Zuru’s motion for summary judgment on appellant’s unfair competition cause of action asserting, “KBIDC has not and cannot bring forth any summary judgment evidence that ZURU used KBIDC’s trade secrets in competition with KBIDC.” To meet this no-evidence challenge, appellant would have to show Bunch O’ Balloons incorporated appellant’s trade secrets and that Zuru used those trade secrets in competition with appellant. The only way appellant could show Bunch O’ Balloons incorporated its trade secret was to present some evidence that Malone misappropriated Harter’s trade secrets and used them to design Bunch O’ Balloons. The marketing, sales, and use information by Zuru would be relevant to show whether Bunch O’ Balloons was sold in competition with appellant’s Zorbz products, but we fail to see how that information could be relevant to showing Bunch O’ Balloons was a result of Malone misappropriating Harter’s trade secrets.

We conclude appellant has failed to show how the trial court’s denial of the motion to compel discovery constituted harmful error.

Motion for Continuance

Appellant moved for a continuance of the summary judgment hearing set for May 17, 2018, because it had not had an adequate opportunity for discovery before appellees filed their motions for summary judgment.

A party may move for no-evidence summary judgment “after adequate time for discovery.” TEX. R. CIV. P. 166a(i). This rule does not require that discovery has been completed. Specialty Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 145 (Tex. App.—Houston [14th Dist.] 2000, pet. denied). To determine whether adequate time for discovery has passed, we examine such factors as: (1) the nature of the case; (2) the nature of evidence necessary to controvert the no-evidence motion; (3) the length of time the case was active; (4) the amount of time the no-evidence motion was on file; (5) whether the movant had requested stricter deadlines for discovery; (6) the amount of discovery already taken place; and (7) whether the discovery deadlines in place were specific or vague. Robertson v. Sw. Bell Yellow Pages, Inc., 190 S.W.3d 899, 902 (Tex. App.—Dallas 2006, no pet.). A party claiming a continuance is necessary in order to conduct discovery must establish “the materiality and purpose of the discovery sought, and whether the party seeking the continuance has exercised due diligence to obtain the discovery sought.” Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 161 (Tex. 2004).

In this case, appellant filed the suit in Travis County on January 24, 2017. The summary judgment hearing was May 17, 2018, one year, four months, and twenty-three days after appellant filed suit. Malone and Tinnus moved for summary judgment on January 19, 2018, almost five months before the summary judgment hearing. Zuru moved for summary judgment on April 16, 2018, about one month before the summary judgment hearing. The only evidentiary issues in the motions for summary judgment were (1) whether appellant could present some evidence that Malone misappropriated Harter’s trade secrets for self-sealing water balloons with O-rings and for filling multiple balloons at one time with a manifold; and (2) whether appellant could present some evidence that Zuru knew or should have known of Malone’s misappropriation.

Appellant asserts discovery was delayed six months while venue was transferred from Travis County to Collin County. However, appellant cites no authority for the assertion that discovery could not occur while the case’s transfer was pending. Also, the record shows some discovery occurred during this time. Appellant has not shown discovery could not have taken place while the transfer-of-venue proceedings were pending.

Appellant also sought a continuance of the summary judgment hearing to take the depositions of four individuals: Alex Stegall, Jim Williamson, Laura Jensen, and Allison Malone. However, appellant did not explain how the depositions of these four individuals were material to the issues in the motions for summary judgment. Appellant stated in its motion for continuance:

Each of these persons has important information related to the issues raised in Defendants’ motion for summary judgment. For example, Alex Stegall was the primary contact for Mr. Malone concerning his [K]ickstarter campaign, press releases, and other media publications related to Bunch O’ Balloons. It is expected that Ms. Stegall will be able to verify the statements Mr. Malone made in these many media reports as well as the timeline for when certain testing, marketing, and other development of Bunch O’ Balloons occurred. Likewise, Mr. Williamson was involved in the production of certain components of the Bunch O’ Balloons product in late January/early February 2014 and had communications and contacts with Mr. Malone during the relevant period concerning Bunch O’ Balloons. Further, Laura Jensen participated in Mr. Malone’s [K]ickstarter video, would have tested the product, and Mr. Malone has already admitted that his [K]ickstarter video falsely stated that Ms. Jensen was a neighbor. In addition, Allison Malone was listed as a person with relevant knowledge on Defendants Tinnus and Malone’s disclosures, would have knowledge of the testing and development of the Bunch O’ Balloons product, and was a regular participant in videos and other efforts on behalf of Mr. Malone. Her testimony will be important to show the development and testing of Bunch O’ Balloons.

KBIDC believes that documents and testimony from these and other persons are necessary for the case and particularly as it relates to the element of misappropriation, which has been challenged by Defendants’ motions for summary judgment. Some or all of this testimony will likely further establish evidence supporting the misappropriation of Plaintiff’s trade secrets and property.

Although appellant states the witnesses’ testimony “will likely further establish evidence supporting ... misappropriation,” the motion provides no explanation of how their testimony would do so. Except for Williamson, none of the witnesses appear to have been involved with appellees before Malone patented Bunch O’ Balloons. Appellant’s explanation to the trial court regarding the need to depose Williamson was that during January to February 2014, Williamson was “involved in the production of certain components” for Bunch O’ Balloons and that he had “communications” with Malone. Although other parts of the record show this time period was immediately before Malone applied for the patent for Bunch O’ Balloons, appellant did not explain in the motion the potential relevance of that time period. Appellant also did not explain how Williamson or any of the other potential deponents would have had knowledge that Malone misappropriated the design for Bunch O’ Balloons from Harter. During the hearing on the motion for continuance, appellant did not mention Williamson. Appellant also provided no explanation for its failure to depose these witnesses during the preceding sixteen months other than “Defendants’ refusal to produce key documents, discovery disputes, scheduling issues for all the parties.” Appellant did not explain how these matters prevented their deposing these witnesses.

As for the factors concerning discovery deadlines, there were no strict deadlines. Appellant asserts the trial court erred by not signing a discovery control plan in this case. Rule 190.1, headed “Discovery Control Plan Required,” states, “Every case must be governed by a discovery control plan ....” TEX. R. CIV. P. 190.1 Appellant states the discovery control plan often is used as a guide to determine whether there has been an adequate time for discovery. Although appellant mentioned the lack of a discovery control plan in its motion for continuance and response to the motion for summary judgment, it did not move for the court to sign a discovery control plan. To preserve error for appellate review, a party must have made known its complaint by a request, objection, or motion that stated the grounds for the ruling the party sought, and the party must have obtained a ruling on the request, objection, or motion. TEX. R. APP. P. 33.1(a)(1). In this case, the record does not show that appellant requested or moved for the court to sign a discovery control plan. Nor does the record show appellant objected to the lack of a discovery control plan. Even if appellant’s statements about the lack of a discovery control plan constituted a request, objection, or motion, the record does not show the trial court ruled on it. Therefore, appellant failed to preserve error from the lack of a discovery control plan. Id.

We conclude appellant has not shown the trial court abused its discretion by denying appellant’s motion for continuance.

We overrule appellant’s third issue.

ATTORNEY’S FEES

In its fourth issue, appellant contends the trial court erred by awarding Malone and Tinnus their attorney’s fees. Appellant contends the trial court erred by not requiring Malone and Tinnus to segregate the fees for defending the cause of action under the TTLA from the fees related to the other causes of action. Appellant also contends the trial court erred by not submitting its requested jury instruction on segregation of attorney’s fees. Appellant also contends the requested fees were excessive and not supported by legally or factually sufficient evidence. Finally, appellant contends the trial court erred by awarding Tinnus and Malone their attorney’s fees incurred in the litigation over their recovery of attorney’s fees.

The evidence shows Malone and Tinnus’s attorneys billed them $133,310 for fees through the trial court’s order granting partial summary judgment, $51,660 following the granting of the motion for summary judgment through the end of the month before the jury trial, and their attorney testified he expected the billing for the month including the trial to be $10,000.

Segregation of Attorney’s Fees

Appellant argues Malone and Tinnus were required to segregate the fees incurred for the one cause of action where fees were recoverable by statute, the TTLA claim, from the three causes of action where fees were not recoverable, namely, violation of the Texas Uniform Trade Secrets Act,9 common-law misappropriation of trade secrets, and unfair competition. Appellant asserts that because Malone and Tinnus did not do so, the question of attorney’s fees must be remanded to the trial court. Malone and Tinnus argue that appellant’s allegations in the four causes of action are practically identical, so all the work performed on the case necessarily applied to all four causes of action, and no work on the case did not apply to the TTLA claim.

Texas follows the American Rule, which provides that litigants must pay their own costs of litigation, and the costs of litigation may be shifted to another party only if specifically provided for by statute or contract. See Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 483–84, 487 (Tex. 2019); Epps v. Fowler, 351 S.W.3d 862, 865 (Tex. 2011). Appellant had no contract with Malone and Tinnus. The only statute authorizing shifting attorney’s fees in this case is section 134.005(b) of the Civil Practice & Remedies Code, which provides, “Each person who prevails in a suit under this chapter [the TTLA] shall be awarded court costs and reasonable and necessary attorney’s fees.” CIV. PRAC. § 134.005(b). Both appellant and Malone and Tinnus pleaded for attorney’s fees under this provision. Malone and Tinnus, however, were the prevailing parties; therefore, they are entitled to recover all their “court costs and reasonable and necessary attorney’s fees” concerning the TTLA claim.

Because Malone and Tinnus are allowed to recover only the attorney’s fees that were reasonable and necessary for the TTLA claim, they had to segregate those fees from the fees for work that did not apply to the TTLA claim. “To the extent such services would have been incurred on a recoverable claim alone, they are not disallowed simply because they do double service” by applying to Malone and Tinnus’s defense of the other three claims. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313 (Tex. 2006). Merely because the facts concerning the different claims are intertwined does not mean the party seeking fees does not have to segregate the fees for the recoverable claims from the unrecoverable claims. “[I]t is only when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined that they need not be segregated.” Id. at 313–14. Thus, under Tony Gullo, the question is whether all the fees Malone and Tinnus incurred concerned the TTLA claim or whether some of the fees were unrelated to the TTLA claim. If all the fees related to the TTLA claim, segregation was unnecessary, even if those fees also related to the other claims.

Appellant appears to argue that in 2017, eleven years after Tony Gullo, the supreme court overruled that part of Tony Gullo by holding segregation on a claim-by-claim basis is required in all cases, citing Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017). In that case, Horizon sued its former employees who had gone to work for Acadia, Horizon’s competitor, taking with them Horizon’s confidential information. Id. at 857. Horizon brought claims for breach of contract and violation of the TTLA as well as numerous torts. Id. The breach of contract claim was based on the defendants’ breaches of non-compete agreements. The TTLA claim was based on the defendants’ misappropriating Horizon’s trade secrets and other property. Id. at 883. Horizon sought to recover its attorney’s fees for breach of contract and TTLA. Horizon prevailed in a jury trial on many of its claims, including TTLA and breach of contract. The jury awarded Horizon substantial damages and attorney’s fees. Id. at 858. The supreme court concluded that no evidence supported the claim for breach of contract, but it affirmed the judgment on the TTLA claim. Id. at 883. Therefore, the only claim Horizon had for recovering attorney’s fees was the TTLA claim. Id. The supreme court stated:

When Horizon’s expert testified about Horizon’s attorney’s fees, he segregated the fees unrelated to Horizon’s breach of contract and TTLA claims, but he did not specifically delineate the fees on a claim-by-claim basis. Thus, we have no way to know the amount of attorney’s fees relating solely to the TTLA violations. In this instance, vacating the attorney’s fees award and remanding for a new trial on the issue is proper.

Id. at 884. Nothing in this paragraph is inconsistent with Tony Gullo. The breach of contract and TTLA claims were not related and did not involve the same facts; they were distinct causes of action. Therefore, Horizon had to segregate its fees relating to the breach of contract claim from the fees related to the TTLA claim. Because Horizon did not do so, the attorney’s fees issue was remanded to the trial court. Id. The principle in Tony Gullo that segregation is not necessary “when discrete legal services advance both a recoverable and unrecoverable claim” is unaffected by Horizon Health Corp. See Tony Gullo, 212 S.W.3d at 313–14.

Appellant also cites Transverse, L.L.C. v. Iowa Wireless Services, LLC, No. A-10-CV-517-LY, 2020 WL 614590 (W.D. Tex. Feb. 7, 2020) (report and recommendation of United States Magistrate Judge). In that case, Transverse sued Iowa Wireless Services (IWS) over a non-disclosure agreement and supply contract, asserting claims for breach of contract, TTLA, and numerous other causes of action. Id. at *1. IWS prevailed, and it was entitled to its attorney’s fees under the TTLA. Id. at *2. The magistrate ordered IWS to segregate the fees for the recoverable TTLA claim from the fees relating to the other claims. IWS refused to segregate, arguing it did not have to segregate and that it was entitled to the fees for all the claims because the claims arose out of the same facts. Id. at *2, *3. The magistrate disagreed and cited numerous places where there were fees for tasks separate from the TTLA claim that IWS could have segregated. Id. at *4 n.2. The magistrate stated, “segregation was not an impossible task factually, as there were many approaches IWS could have taken to meet its burden.” Id. at *4. In this case, however, appellant has not pointed out any fees that do not apply to the TTLA claim.

Malone and Tinnus’s argument is that all of their attorney’s fees were reasonable and necessary to their prevailing on appellant’s TTLA claim. Their attorney testified to that fact. He also testified that the attorney’s fees would have been the same if the TTLA claim had been the only claim. Appellant does not identify any invoice entry that did not apply to the TTLA claim.

We conclude appellant has not shown the trial court erred by awarding Malone and Tinnus their attorney’s fees without requiring segregation of the fees among the different claims.

Jury Instruction

Appellant argues the trial court erred by refusing to submit appellant’s proposed instructions pertaining to the jury question on attorney’s fees. The jury question asked the jury, “What is a reasonable fee ... for the reasonable and necessary services of Defendants’ attorneys in the defense of Plaintiff’s claim under the Texas Theft Liability Act?” The question instructed the jury to consider the Arthur Andersen factors. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). Appellant asked that the jury also be instructed as follows:

1. The party seeking an attorney’s fees award bears the burden of proving that legal work relating to claims for which fees may be recovered has been properly segregated from legal work relating to claims for which fees are not recoverable.

2. Segregation must be on a claim-by-claim basis.

3. No matter how nominal, an unrecoverable fee that does not advance a recoverable claim must be segregated from the request for attorney’s fees.

4. You may not award any amount for work relating to claims for which fees are not recoverable.

(Footnotes and internal quotation marks omitted.) The trial court refused to submit these instructions.

Rule of Civil Procedure 277 requires the trial court to “submit such instructions and definitions as shall be proper to enable the jury to render a verdict.” TEX. R. CIV. P. 277. “This rule ... affords the trial court considerable discretion in deciding what instructions are necessary and proper in submitting issues to the jury.” State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 451 (Tex. 1997). We review the trial court’s refusal of a requested jury instruction for abuse of discretion. Costilla v. Crown Equip. Co., 148 S.W.3d 736, 741 (Tex. App.—Dallas 2004, no pet.). “A trial court should submit explanatory instructions when in its sole discretion, it determines that the instructions will help the jury to understand the meaning and effect of the applicable law and presumptions.” Depriter v. Tom Thumb Stores, Inc., 931 S.W.2d 627, 629 (Tex. App.—Dallas 1996, writ denied). Trial courts should refuse to submit unnecessary instructions, even if the instructions are legally correct statements. Id. at 630.

Appellant discusses in its brief why the instructions are legally correct statements and how it preserved its argument. However, appellant does not explain why the trial court’s decision not to submit the instructions was arbitrary or unreasonable or without reference to any guiding rules or principles. See id. at 628–29 (defining abuse of discretion when court refuses to submit requested jury instructions). Nor does appellant explain why these instructions were necessary. Appellant cites no authority requiring trial courts to submit these instructions. We conclude appellant has not shown the trial court abused its discretion by refusing to submit the instructions.

“Fees for Fees”

Appellant also contends the trial court erred by awarding Malone and Tinnus their attorney’s fees incurred after the court granted their motion for summary judgment because those fees were related solely to the litigation concerning the award of attorney’s fees.

Appellant observes that the Supreme Court has stated, “In our legal system, no attorneys, regardless of whether they practice in bankruptcy, are entitled to receive fees for fee-defense litigation absent express statutory authorization.” Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121, 133–34 (2015). We agree that shifting the cost of litigating anything, including the recovery of attorney’s fees, requires statutory or contractual authorization. But the recovery of attorney’s fees for litigating attorney’s fees is not per se prohibited. See, e.g., Comm’r, Immigration & Naturalization Serv. v. Jean, 496 U.S. 154, 162–65 (1990) (under Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A), party prevailing against United States entitled to attorney’s fees for preparing attorney’s fees application and for litigation about attorney’s fees); Saldivar v. Rodela, 894 F. Supp. 2d 916, 939 (W.D. Tex. 2012) (under International Child Abduction Remedies Act, 22 U.S.C. § 9007(b)(3), petitioner entitled to legal fees for work preparing attorney’s fees application and litigation over fees).

The TTLA provides, “Each person who prevails in a suit under this chapter shall be awarded court costs and reasonable and necessary attorney’s fees.” CIV. PRAC. § 134.005(b). Unlike the language before the Supreme Court in Baker Botts,10 this statute contains few limitations. The only limitation is that the fees be “reasonable and necessary.” Unlike some statutes, section 134.005 contains no limitation that the award of attorney’s fees be limited to fees incurred in the defense or prosecution of the statutory claim. Cf., e.g., TEX. AGRIC. CODE ANN. § 251.004(b) (“attorney’s fees incurred in the defense”); TEX. ALCO. BEV. CODE ANN. § 108.80(b) (“reasonable attorney’s fees incurred in the defense or prosecution of the action”); CIV. PRAC. § 62.044(b) (“reasonable attorney’s fees incurred in dissolution of the writ”). Instead, the fees must be reasonable and necessary to the party “prevailing.” Prevailing, under the TTLA, includes the award of attorney’s fees because the award of attorney’s fees is mandatory. See CIV. PRAC. § 134.005(b) (“Each person who prevails ... shall be awarded ... attorney’s fees.”). Thus, the attorney’s fees incurred to obtain the attorney’s fees award may be part of the reasonable and necessary fees for a “party who prevails in a suit under this chapter.” Id.

In support of its argument that Malone and Tinnus may not recover their attorney’s fees incurred as they pursued their right to attorney’s fees, appellant cites Austin ISD v. Manbeck, 338 S.W.3d 147 (Tex. App.—Austin 2011), rev’d in part on other grounds, 381 S.W.3d 528 (Tex. 2012). In that case, the Austin Court of Appeals concluded that section 408.221(c) of the Labor Code did not permit a workers’ compensation claimant seeking attorney’s fees to recover the fees incurred for seeking the fees.11 Id. at 154–55. Section 408.221(c) allows a workers’ compensation claimant to recover attorney’s fees from an insurance carrier when the insurance carrier seeks judicial review of certain final decisions by the administrative appeals panel. See TEX. LAB. CODE ANN. § 408.221(c). However, the statute limits the claimant’s recovery of attorney’s fees to fees “incurred by the claimant as a result of the insurance carrier’s appeal” and “only for the issues [appealed from the appeals panel] on which the claimant prevails” in the judicial review. Id. In Manbeck, the claimant prevailed before the appeals panel, and the insurance carrier sought judicial review. Manbeck, 338 S.W.3d 149. The claimant filed a counterclaim for attorney’s fees under section 408.221(c). After two-and-a-half years of litigation in the trial court, the insurance carrier nonsuited its claim for judicial review. Id. at 150. The claimant’s counterclaim for attorney’s fees was tried to a jury, which determined the amount of the claimant’s attorney’s fees both before and after the insurance carrier’s nonsuit. The court of appeals determined that the post-nonsuit fees, i.e., those incurred in seeking the claimant’s attorney’s fees, were not recoverable under section 408.221(c) because they were not incurred in prevailing on the issues on which the insurance carrier sought judicial review. Id. at 156. Section 134.005(b) contains no such limitation.

Appellant also argues that allowing a prevailing party to recover its attorney’s fees in seeking attorney’s fees “would be designed merely to spawn more satellite litigation in search for an ever expanding universe of fees for fees ... [and] are a fertile ground for mischief and misuse of the litigation process.” These concerns are dealt with by the requirement that the fees be “reasonable and necessary.” If the factfinder determines that the prevailing party’s attorney’s fees for obtaining the fees were unnecessary or unreasonable, the factfinder may reduce the award of fees appropriately. Likewise, if the nonprevailing party uses the litigation process to increase the prevailing party’s attorney’s fees in seeking to be awarded its rightful attorney’s fees, the factfinder may determine those additional fees were reasonable and necessary, and the trial court may award them. See Comm’r, INS, 496 U.S. 162–66.

We conclude the trial court did not err by awarding Malone and Tinnus their attorney’s fees incurred in seeking to recover their attorney’s fees under section 134.005(b).

Appellant also argues the trial court abused its discretion by refusing to submit a jury instruction that the jury may not award attorney’s fees for time spent seeking an award of attorney’s fees. Because we have concluded section 134.005(b) permits such an award, the requested instruction was an incorrect statement of the law, and the trial court did not abuse its discretion by not submitting the instruction.

Sufficiency of the Evidence

Appellant argues the trial court erred by awarding Malone and Tinnus the attorney’s fees found by the jury because the fees awarded were “grossly excessive and not supported by factually or legally sufficient evidence.” The reasonableness and necessity of attorney’s fees “are questions of fact to be determined by the fact finder and act as limits on the amount of fees that a prevailing party can shift to the non-prevailing party.” Rohrmoos, 578 S.W.3d at 489.

When reviewing the legal sufficiency of the evidence, we consider all the evidence before the jury, crediting evidence in support of the verdict if reasonable jurors could, and disregarding evidence contrary to the verdict unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 823, 827 (Tex. 2005); Morris v. Wells Fargo Bank, N.A., 334 S.W.3d 838, 842 (Tex. App.—Dallas 2011, no pet.). If there is more than a scintilla of evidence to support the finding, the evidence is legally sufficient. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998). When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). If the evidence furnishes a reasonable basis for differing conclusions by reasonable minds as to the existence of a vital fact, then there is legally sufficient evidence, more than a scintilla, to support the fact. Id.

When reviewing the factual sufficiency of the evidence, we examine all the evidence and set aside a finding only if it is so contrary to the evidence as to be clearly wrong and unjust. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998); Cameron v. Cameron, 158 S.W.3d 680, 683 (Tex. App.—Dallas 2005, pet. denied). In conducting our review of both the legal and factual sufficiency of the evidence, we are mindful that the jury, as fact finder, was the sole judge of the credibility of the witnesses and the weight to be given their testimony. City of Keller, 168 S.W.3d at 819; Hinkle v. Hinkle, 223 S.W.3d 773, 782 (Tex. App.—Dallas 2007, no pet.). We may not substitute our judgment for the fact finder’s, even if we would reach a different answer on the evidence. See Maritime Overseas Corp., 971 S.W.2d at 407; Hinkle, 223 S.W.3d at 782. A challenge to attorney’s fees as being excessive is a factual sufficiency challenge to the award. Lerma v. Border Demolition & Envtl., Inc., 459 S.W.3d 695, 705 (Tex. App.—El Paso 2015, pet. denied) (citing Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406 (Tex. 1998) (“The standard of review for an excessive damages complaint is factual sufficiency of the evidence.”)).

“[A] claimant seeking an award of attorney’s fees must prove the attorney’s reasonable hours worked and reasonable rate by presenting sufficient evidence to support the fee award sought.” Rohrmoos, 578 S.W.3d at 501–02. Sufficient evidence to support an award of attorney’s fees includes, at a minimum, the following evidence: (1) the particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services. Id. at 502. The evidence must include details about the work performed. Id. at 505. This calculation, when supported by sufficient evidence, creates a presumption of the reasonable and necessary attorney’s fees that can be shifted to the other party. Id. at 499.

Malone and Tinnus’s lead counsel testified as their expert witness on attorney’s fees. He testified to the experience of each lawyer and legal assistant working on the case, the rates charged for their work, and the reasonableness of the rates. He testified about the average rates in different parts of the state. He also testified that he and the firm’s intellectual property lawyer (who had the primary relationship with Malone and Tinnus) reviewed the invoices before they were sent to “determine if the time was reasonable and necessary. Sometimes we might decide that an entry was too steep for the services that were rendered, too much time, maybe it’s inefficient. Sometimes we might decide that we’re just going to give the client a break for business reasons.” He also testified, “We believe in our hearts and our minds that what we’ve written down is reasonable and fair and it’s properly recorded and billed.”

Malone and Tinnus offered into evidence their attorneys’ redacted invoices. They also presented charts showing the division of the fees by the procedures they concerned.

Appellant argues the fees were unreasonable because Malone and Tinnus were not entitled to an award of attorney’s fees for work occurring after the trial court granted their motion for summary judgment. As discussed above, Malone and Tinnus were allowed to recover attorney’s fees for their attorneys’ services in obtaining judgment for their attorney’s fees under section 134.005(b).

Appellant also argues the fees were unreasonable because the attorneys failed to exercise billing judgment. See El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 762 (Tex. 2012). Appellant points out that only one billing entry mentions the TTLA. However, as discussed above, all of the attorneys’ work on all of the claims applied to the TTLA because the claims were essentially the same: whether Malone misappropriated Harter’s trade secrets and used those trade secrets without Harter’s or appellant’s permission to design Bunch O’ Balloons, making him millions of dollars. Thus, the fact that only one entry specifically mentions the TTLA does not show lack of billing judgment.

Appellant also asserts “there was ample evidence of overstaffing, excessive redaction that precludes a meaningful evaluation of the tasks for which Appellees’ counsel seeks to be paid, duplicative or unnecessary work on which Malone/Tinnus did not pursue or prevail, and billing for administrative tasks.” Appellant cites to several pages of the invoices. However, whether these were “duplicative or unnecessary or ... [were] billing for administrative tasks” concern whether the billings were reasonable and necessary, which was a fact question for the jury. Malone and Tinnus’s expert witness testified he had inspected each of the invoices and determined that the tasks performed and the amounts billed were reasonable and necessary, so some evidence supports the jury’s determination.

Concerning the argument of excessive redaction, attorney invoices are routinely redacted when offered into evidence to protect attorney–client and work-product privileges. See In re Nat’l Lloyds Ins. Co., No. 13-15-00219-CV, 2015 WL 4380929, at *5 (Tex. App.—Corpus Christi–Edinburg July 14, 2015, orig. proceeding) (mem. op.), mand. granted, 532 S.W.3d 794 (Tex. 2017); see also, e.g., Harris Cty. App. Dist. v. Am. Multi-Cinema, Inc., No. 01-18-00786-CV, 2020 WL 930834, at *3 (Tex. App.—Houston [1st Dist.] Feb. 27, 2020, no pet.) (mem. op.); In re T.R.H., No. 04-18-00834-CV, 2019 WL 6887143, at *1 (Tex. App.—San Antonio Dec. 18, 2019, no pet.) (mem. op.); Tex. Mut. Ins. Co. v. DeJaynes, 590 S.W.3d 654, 660 (Tex. App.—El Paso 2019, pet. denied). Malone and Tinnus’s lead attorney testified the redactions were due to work-product and attorney–client privileges. The billing entries listed the attorney who performed the task, the date, the attorney’s billing rate, the length of time to complete the task, and a description of the task except that any privileged material was redacted. The redacted material mostly consisted of the topic of the attorney’s conversations with the client or with co-counsel or the topic of certain research. Appellant does not assert that any of the material redacted was not privileged.

The supreme court has not required that parties waive their attorney–client and work-product privileges when seeking to recover attorney’s fees from opposing parties. We decline to do so. Malone and Tinnus’s attorneys provided a great deal of information about the fees, and their lead counsel testified and was cross-examined by opposing counsel about the invoices. We conclude that the redactions in the attorney’s-fees invoices did not render the evidence insufficient to support the jury’s verdict.

We conclude appellant has not shown the evidence is insufficient to support the jury’s finding on attorney’s fees through trial.

Appellant also argues Malone and Tinnus failed to present sufficient evidence to support the award of attorney’s fees for appeal. This Court has held that when “parties were entitled to attorney’s fees under section 38.001 of the Texas Civil Practice and Remedies Code for work performed at the trial court level, the trial court abused its discretion in failing to award conditional appellate attorney’s fees when presented with a request for and evidence of those fees.” Scott Pelley P.C. v. Wynne, 578 S.W.3d 694, 702 (Tex. App.—Dallas 2019, no pet.). We see no reason why that same interpretation should not apply to section 134.005(b).

To recover fees for contingent appellate services, a party must “provide opinion testimony about the services it reasonably believes will be necessary to defend the appeal and a reasonable hourly rate for those services.” Yowell v. Granite Operating Co., No. 18-0841, 2020 WL 2502141, at *13 (Tex. May 15, 2020). Malone and Tinnus’s expert witness did not meet this standard. He testified as follows concerning appellate attorney’s fees:

In the event that one of the parties is unhappy with what happens here, then the judgment, which happens, somebody may seek to appeal this decision to the Court of Appeals. In the event that happens, based upon my experience with appellate law, in the State of Texas in particular, and with the Fifth Court of Appeals in Dallas in particular, it’s my opinion that a reasonable fee for handling an appeal to the Dallas Court of Appeals is $30,000.

After the Dallas Court of Appeals, if it’s presented in this case, and if it then turns around and enters its judgment, the parties have the right to ask our Supreme Court of Texas to review the appellate court’s opinion. The Supreme Court of Texas is not required to do so in most cases. It’s their discretion to do so. So you file a petition asking them to review it, and you provide information about the case. They decide whether they will hear it or not. They may reject that petition. They may grant that petition. If they grant it, that just means they’re going to let you file a formal brief and perhaps come make argument to them and then they will make a decision. If they reject it, then you’re back with the decision from the Court of Appeals.

It’s my opinion that a reasonable fee for preparation of the—or responding to a petition for a request to the Supreme Court to review an appellate court decision from the Court of Appeals would be $10,000. And if the Supreme Court of Texas were to say, yes, we will we’ll hear your case, and we were to then brief it and present our arguments before the Supreme Court of Texas, down in Austin, then I believe that an additional fee of $25,000 for that exercise is reasonable and appropriate.

Actually—I’m sorry. Yes, $25,000. And so that their total fees—and these others, these fees, it’s my opinion that these appellate fees will be appropriate. Those that may or may not happen, but we need to establish that now so that if it does happen, you’ve had a chance to make a decision on what those fees will be.

This testimony does not provide the reasonable hourly rate for any of the reasonable and necessary services for the appeals process. Also, concerning the appeal to the court of appeals, it does not “provide opinion testimony about the services it reasonably believes will be necessary to defend the appeal.” Id. Accordingly, Malone and Tinnus’s evidence of appellate attorney’s fees is insufficient.

We sustain appellant’s fourth issue as to the award of attorney’s fees for appeal, and we otherwise overrule appellant’s fourth issue.

CONCLUSION

We reverse the trial court’s judgment that appellant take nothing from Zuru Toys Inc., and we reverse the award of appellate attorney’s fees to Malone and Tinnus. In all other respects, we affirm the trial court’s judgment. We remand the case to the trial court for further proceedings.

Footnotes

1 In his deposition in this case on May 2, 2018, Malone testified that between 2010 and 2012 he did experimentation with putting O-rings on water balloons. In his deposition on August 8, 2017, in a suit against Telebrands Corp. before the Patent Trial and Appeal Board, Malone testified he did not remember whether, between 2010 and 2012, he tried sealing balloons with “rubber bands” but that he might have.
2 During preparation of this opinion, the website address for the Kickstarter video changed. However, the website under the new address appears substantially similar to that under the previous address, and the video on the website appears to be the same as that at the former website address.
3 The website address for this video is part of the summary judgment evidence. However, the video is no longer present at that address, and we were unable to find this video.
4 The elements of the tort of unfair competition by misappropriation, also called “common-law misappropriation,” are “(1) the creation of plaintiff’s product (i.e., the trade secret information) through extensive time, labor, skill, and money; (2) the defendant’s use of that product in competition with the plaintiff, thereby gaining a special advantage in that competition (i.e., a ‘free ride’) because defendant is burdened with little or none of the expense incurred by the plaintiff; and (3) commercial damage to the plaintiff.” BP Automotive, L.P. v. RML Waxahachie Dodge, L.L.C., 448 S.W.3d 562, 572 (Tex. App.—Houston [1st Dist.] 2014, no pet.). Unfair competition by misappropriation differs from common-law trade secret misappropriation in two areas: (1) trade-secret misappropriation requires the existence of a trade secret, while unfair competition by misappropriation does not require secrecy; and (2) unfair competition by misappropriation requires the misappropriated item be used in competition with its creator, while trade-secret misappropriation makes any use of the improperly acquired trade secret subject to liability. See James E. Hudson, A Survey of the Texas Unfair-Competition Tort of Common-Law Misappropriation, 50 BAYLOR L. REV. 921, 930 (1998). Compare B.P. Automotive, 448 S.W.3d at 572 (unfair competition by misappropriation) with CIV. PRAC. § 134A.002(3) (definition of “Misappropriation” in Texas Uniform Trade Secrets Act) and Twister B.V., 364 S.W.3d at 437 (common-law misappropriation of trade secrets).

Appellant asserts that the tort of “unfair competition” he pleaded does not include misappropriation as an element. We disagree. The use of the product in unauthorized competition with the plaintiff who created the product is the misappropriation. See Hudson, 50 BAYLOR L. REV. at 930 (“common-law misappropriation requires the use of the misappropriated item in competition with its creator”); see also Appropriate MERRIAM-WEBSTER.COM DICTIONARY, Merriam-Webster, https://www.merriam-webster.com/dictionary/appropriate (last visited Oct. 8, 2020) (“to take or make use of without authority or right”); Misappropriate, MERRIAM-WEBSTER.COM DICTIONARY, Merriam-Webster, https://www.merriam-webster.com/dictionary/misappropriate (last visited Oct. 8, 2020) (“to appropriate wrongly (as by theft or embezzlement)”). Unlawful competition by misappropriation is one of multiple torts in the unfair-competition category. The tort called “unfair competition” consisting of “conduct that is contrary to honest practice in industrial or commercial matters” is a derivative tort requiring “a viable underlying tort or other illegal conduct for liability to exist.” Greenville Automatic Gas Co. v. Automatic Propane Gas & Supply, LLC, 465 S.W.3d 778, 788 (Tex. App.—Dallas 2015, no pet.). The parties have not addressed whether the tort of unfair competition by misappropriation is also a derivative tort, and we need not address that matter in this case.

5 “Although it is unclear whether Texas expressly follows the Restatement (Third) of Unfair Competition, the Texas Supreme Court has acknowledged section 40 and other sections of this Restatement as defining trade secrets and remedies available for their protection.” Twister B.V. v. Newton Research Partners, LP, 364 S.W.3d 428, 438 (Tex. App.—Dallas 2012, no pet.). In Southwest Energy Production Co. v. Berry-Helfand, 491 S.W.3d 699, 722 (Tex. 2016), the supreme court cited a case from the Fifth Circuit, General Universal Systems, Inc. v. HAL, Inc., 500 F.3d 444, 450–51 (5th Cir. 2007), and observed that the case cited comment c of section 40.
6 This description is different from Bunch O’ Balloons, in which the O-rings are applied to the necks of the balloons before they are filled to hold the balloons on the filler tubes.
7 This water-balloon gun appears to be a different device from the water balloon filler–launcher discussed above. Nothing in the drawing of the water-balloon gun with the initials “JM” shows the product involved self-sealing balloons of any type or that it would fill multiple water balloons at one time.
8 Here are the relevant statements from Malone’s D Magazine interview:

[Q] How many times did your wife tell you to stop fooling around with the dumb water balloon thing and get back to your old consulting job?

[A] She’s been supportive. This was a really tough time. I’d spend half my time consulting, half of it inventing. It wasn’t quite working out. I updated my resume and my LinkedIn, but the job openings were horrible. I couldn’t imagine having to go back to the corporate world. I was just really, really discouraged. This was my last chance. It was do or die.

9 A prevailing defendant may recover attorney’s fees under the Texas Uniform Trade Secrets Act if “a claim of misappropriation is made in bad faith.” CIV. PRAC. § 134A.005(1). Malone and Tinnus did not seek attorney’s fees under this provision.
10 Baker Botts concerned compensation of the attorneys representing a debtor-in-possession in bankruptcy. The statute provided that the attorneys were to be awarded “reasonable compensation for services rendered” but were not to receive compensation for “services that were not—(I) reasonably likely to benefit the debtor’s estate; or (II) necessary to the administration of the estate.” 11 U.S.C. § 330(a)(1)(A), (a)(4)(A)(ii). The attorneys represented ASARCO throughout the four years of bankruptcy proceedings. Baker Botts, 576 U.S. at 125. At the conclusion, Baker Botts prepared its fee application (for which it was entitled to compensation under 11 U.S.C. § 330(a)(6)), and the bankruptcy court awarded it $120 million for its work in the bankruptcy proceedings, and an additional $5 million for time spent litigating in defense of their fee applications. Id. The Supreme Court observed that the statute “allows ‘reasonable compensation’ only for ‘actual, necessary services rendered.’ ” Id. at 128. Given this language, the Supreme Court “concluded that the phrase ‘reasonable compensation for services rendered’ necessarily implies loyal and disinterested service in the interest of a client.” Id. at 129 (internal punctuation omitted). “Time spent litigating a fee application against the administrator of a bankruptcy estate cannot be fairly described as ‘labor performed for’—let alone ‘disinterested service to’—that administrator.” Id. Section 134.005 of the Civil Practice & Remedies Code does not contain the fee limitations present in 11 U.S.C. § 330.
11 This Court and the San Antonio Court of Appeals came to the same conclusion. Discovery Prop. & Cas. Co. v. Tate, 298 S.W.3d 249, 260 (Tex. App.—San Antonio 2009, pet. denied); Twin-City Fire Ins. Co. v. Vega-Garcia, 223 S.W.3d 762, 769–70 (Tex. App.—Dallas 2007, pet. denied). The Houston (14th District) Court of Appeals concluded that a workers’ compensation claimant could recover attorney’s fees incurred in preparing for and attending the hearing on attorney’s fees under Labor Code section 408.221(c), but the supreme court reversed the court of appeals’ decision on the ground that the insurer was entitled to a jury trial on attorney’s fees under section 408.221(c). The supreme court did not address whether the claimant was entitled to recover the attorney’s fees incurred in litigating the fees. Transcontinental Ins. Co. v. Crump, 274 S.W.3d 86, 103–04 (Tex. App.—Houston [14th Dist.] 2008), rev’d on other grounds, 330 S.W.3d 211 (Tex. 2010).

Court of Appeals of Texas, Dallas.

TEXAS MUTUAL INSURANCE COMPANY, Appellant

v.

CORBY W. STEVENSON, Appellee

No. 05-18-00978-CV

|

Opinion Filed October 2, 2020

On Appeal from the 354th Judicial District Court

Hunt County, Texas

Trial Court Cause No. 82551

Before Chief Justice Burns, Justice Whitehill, and Justice Nowell

Opinion by Chief Justice Burns

MEMORANDUM OPINION

ROBERT D. BURNS, III CHIEF JUSTICE

REVERSE and REMAND and Opinion Filed October 2, 2020

Texas Mutual Insurance Company appeals the trial court’s summary judgment in favor of Corby W. Stevenson. In a single issue, Texas Mutual argues the trial court erred in granting a summary judgment that dismissed its claims for subrogation against Stevenson. We reverse the trial court’s judgment and remand this case for further proceedings consistent with this opinion.

In July 2013, Stevenson ruptured his Achilles tendon in the course of his employment with FSTI, Inc. Texas Mutual, the worker’s compensation carrier for FSTI, paid worker’s compensation benefits to and on behalf of Stevenson for his injuries. Because of alleged mistreatment by his health care providers, Stevenson underwent multiple surgeries to address his injuries. In January 2015, Stevenson filed a lawsuit against his health care providers alleging negligence causes of action.

In February 2018, Texas Mutual filed its original petition in intervention to recover its “subrogation lien for medical and indemnity benefits of $318,551.33 paid to and on behalf of” Stevenson. In May 2018, Stevenson filed a traditional motion for summary judgment against Texas Mutual arguing the applicable workers’ compensation policy contained a waiver of all rights to seek subrogation otherwise allowed under the Texas Workers’ Compensation Act. The waiver provided the following:

TEXAS WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT

This endorsement applies to the insurance provided by the Policy because Texas is shown in Item 3.A. of the Information Page.

We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization named in the Schedule, but this waiver applies only with respect to bodily injury arising out of the operations described in the Schedule where you are required by a written contract to obtain this waiver from us.

This endorsement shall not operate directly or indirectly to benefit anyone not named in the Schedule.

The premium for this endorsement is shown in the Schedule.

Schedule

1. ( ) Specific Waiver

Name of person or organization

(X) Blanket Waiver

Any person or organization for whom the Named Insured has agreed by written contract to furnish this waiver.

2. Operations: ALL TEXAS OPERATIONS

3. Premium

The premium charge for this endorsement shall be 2. 00 percent of the premium developed on payroll in connection with work performed for the above person(s) or organization(s) arising out of the operations described.

Based on this waiver, Stevenson argued Texas Mutual had “waived any right to subrogation, reimbursement, or for future credits.” In making this argument, Stevenson relied on Wausau Underwriters Insurance Company v. Wedel, 557 S.W.3d 554 (Tex. 2018), which Stevenson claimed involved “identical waiver-of-subrogation endorsements as approved by the Texas Department of Insurance.” In July 2018, the trial court signed an order granting Stevenson’s motion for summary judgment and dismissing Texas Mutual’s claims, “including requests for subrogation, reimbursement, and for future credits.” This appeal followed.

In its first issue, Texas Mutual argues the trial court erred in granting summary judgment in favor of Stevenson. Specifically, Texas Mutual argues the endorsement in Texas Mutual’s workers’ compensation policy waived Texas Mutual’s subrogation rights only if a contract between the employer insured and a third party required such a waiver, and Stevenson provided no evidence of such a contract. In response, Stevenson argues (1) Texas Mutual “waived any issues as grounds for reversal” by failing to file a response to Stevenson’s motion for summary judgment and (2) the trial court ruled correctly in granting Stevenson’s motion for summary judgment.

The standard for reviewing a traditional summary judgment is well known. See Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985); McAfee, Inc. v. Agilysys, Inc., 316 S.W.3d 820, 825 (Tex. App.—Dallas 2010, no pet.). The movants have the burden of showing that no genuine issue of material fact exists and that they are entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). In deciding whether a disputed material fact issue exists precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Nixon, 690 S.W.2d at 549; In re Estate of Berry, 280 S.W.3d 478, 480 (Tex. App.—Dallas 2009, no pet.). Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in his favor. City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005). We review a summary judgment de novo to determine whether a party’s right to prevail is established as a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex. App.—Dallas 2000, pet. denied).

A motion for summary judgment must stand on its own merits. M.D. Anderson Hosp. and Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000); James M. Clifton, Inc. v. Premillenium, Ltd., 229 S.W.3d 857, 859 (Tex. App.—Dallas 2007, no pet.). Thus, a nonmovant has no burden to respond to a summary judgment motion unless the movant conclusively establishes its cause of action or defense. Willrich, 28 S.W.3d at 23–24 (Tex. 2000); Premillenium, 229 S.W.3d at 859. Thus, Stevenson’s argument that Texas Mutual’s failure to file a response waives all issues as grounds for reversal lacks merit.

On the issue of whether the trial court erred in granting Stevenson’s motion for summary judgment, the case Stevenson relied on involved a contract between an employer and a third party requiring that the employer’s workers’ compensation policy contain a waiver of subrogation rights. Wedel, 557 S.W.3d at 555. Here, Stevenson conceded at oral argument that the record in this case does not contain a written contract requiring a waiver of subrogation. The waiver in this case applied only to any “person or organization for whom the Named Insured has agreed by written contract to furnish this waiver.” Without such a contract, there was no evidence to show Texas Mutual waived its subrogation rights. Accordingly, the trial court erred in granting summary judgment in favor of Stevenson. See Nixon, 690 S.W.2d at 549; City of Keller, 168 S.W.3d at 824. We sustain Texas Mutual’s sole issue.

We reverse the trial court’s order granting summary judgment and remand this cause for further proceedings consistent with this opinion.

Court of Appeals of Texas, Dallas.

MARBLE RIDGE CAPITAL LP and MARBLE RIDGE MASTER FUND LP, Appellants

v.

NEIMAN MARCUS GROUP, INC., MARIPOSA INTERMEDIATE HOLDINGS LLC, NEIMAN MARCUS GROUP LTD LLC, THE NEIMAN MARCUS GROUP LLC, AND NMG INTERNATIONAL LLC, Appellees

No. 05-19-00443-CV

|

Opinion Filed September 30, 2020

On Appeal from the 116th Judicial District Court

Dallas County, Texas

Trial Court Cause No. DC-18-18371

On Appeal from the 116th Judicial District Court, Dallas County, Texas Trial Court Cause No. DC-18-18371. Opinion delivered by Justice Molberg. Justice Partida-Kipness participating.

Before Justices Molberg and Partida-Kipness1

Opinion by Justice Molberg

OPINION

KEN MOLBERG JUSTICE

*1 Affirm

Marble Ridge2 appeals the denial of its amended motion to dismiss Neiman Marcus’s counterclaims under the Texas Citizens Participation Act (TCPA), TEX. CIV. PRAC. & REM. CODE §§ 27.001–.011.3 We affirm for the reasons that follow.

Marble Ridge asks us to reverse the trial court’s denial of its TCPA motion based on two disputed issues. After noting that the issue of TCPA coverage is undisputed,4 Marble Ridge argues that under section 27.005(c), Neiman Marcus failed to establish a prima facie showing of three essential elements of its defamation and business-disparagement counterclaims. See TEX. CIV. PRAC. & REM. CODE § 27.005(c). Marble Ridge also argues it satisfied its burden under section 27.005(d) by establishing the judicial-proceedings privilege as a valid defense to those counterclaims. See id. § 27.005(d).

We disagree on both issues. Based on the record before us, reversal is not justified because Neiman Marcus met its burden under § 27.005(c) and Marble Ridge failed to meet its burden under § 27.005(d). See id. § 27.005(c), (d).

BACKGROUND

Parties and Procedural History

Marble Ridge Capital, LP, a hedge fund, specializes in “distressed debt investing and other strategic event-driven investment opportunities” and serves as a registered investment adviser5 to Marble Ridge Master Fund, LP, a Cayman Islands limited partnership. Marble Ridge was founded by Daniel Kamensky, its managing partner.

The Neiman Marcus Group is a luxury retailer headquartered in Dallas, Texas. It offers apparel, handbags, shoes, cosmetics, jewelry and other items through various brands to customers around the world. Appellees Neiman Marcus Group, Inc., Mariposa Intermediate Holdings LLC, Neiman Marcus Group LTD LLC, The Neiman Marcus Group LLC, and Neiman Marcus Group International LLC are members of the Neiman Marcus Group.

*2 Neiman Marcus has roughly $4.7 billion of publicly traded debt, which is governed by two credit agreements (one, a term loan; the other, revolving credit) and various unsecured senior notes and debentures that were issued pursuant to three indentures (collectively, the “debt documents”). These debt documents contain covenants limiting some Neiman Marcus subsidiaries from taking certain actions, such as paying dividends, making investments, or disposing of assets.

Unrestricted subsidiaries, however, are generally not subject to the covenants, and various exceptions to the covenants exist. These covenant exceptions are called “baskets.” Neiman Marcus can use these baskets to designate subsidiaries as unrestricted or to make transactions that otherwise would be prohibited by the covenants.

On December 10, 2018, Marble Ridge sued Neiman Marcus regarding certain designations and transactions it made under the debt documents, alleging, generally, that Neiman Marcus’s actions constituted fraudulent transfers of assets. In its original petition, Marble Ridge included four separate claims: (1) intentional fraudulent transfer, (2) constructive fraudulent transfer, (3) fraudulent transfer, and (4) for appointment of a receiver.

On December 14, 2018, Neiman Marcus filed an answer with general, specific, and verified denials. In that pleading, Neiman Marcus also asserted counterclaims for defamation and business disparagement, seeking relief for alleged harms caused by three allegedly defamatory communications Marble Ridge issued and released to the press: a press release on September 21, 2018; a September 18, 2018 letter that accompanied that release; and a September 25, 2018 letter sent to Neiman Marcus and to the press.

Also on December 14, 2018, Neiman Marcus filed a plea to the jurisdiction and, alternatively, special exceptions that challenged Marble Ridge’s standing to proceed with its claims. Marble Ridge filed a response to the plea and an amended petition on January 28, 2019. In its amended petition, Marble Ridge added a new claim for declaratory judgment and repeated the same claims and many of the same facts as in its original pleading. Marble Ridge’s amended pleading did not include an answer to or any defenses against Neiman Marcus’s counterclaims.

The parties filed an additional response and reply regarding Neiman Marcus’s plea to the jurisdiction, and on March 19, 2019, the trial court granted the plea and entered an order dismissing Marble Ridge’s amended petition for lack of subject matter jurisdiction.

In the meantime, on January 2, 2019, Marble Ridge filed a TCPA motion to dismiss Neiman Marcus’s counterclaims and an amended motion twenty days later. Neiman Marcus filed a response in opposition on March 18, 2019. The trial court heard Marble Ridge’s amended motion on March 21, 2019, and denied it on April 9, 2019. The order does not provide any reasons for the court’s ruling. Marble Ridge timely appealed.

Marble Ridge’s Allegedly Defamatory Communications

Neiman Marcus’s counterclaims relate to Marble Ridge’s communications on September 18, 21, and 25, 2018, all of which were shared with the press. Neiman Marcus alleges that as a result of these communications, it has been harmed in various ways, such as through downgraded credit ratings, lost business opportunities, lost profits and value, tarnish to its valuable brand, and harm to its relationships with customers and business partners.

Neiman Marcus’s counterclaims are based on Marble Ridge’s statements about certain designations and transactions made under the debt documents, some of which involved the designation of certain “MyTheresa” subsidiaries6 as unrestricted subsidiaries and Neiman Marcus’s actions regarding certain real estate (the latter of which is referred to as the “PropCo Transaction”).7

*3 Specifically, Neiman Marcus alleges the following seven statements by Marble Ridge are defamatory:

1. “[B]ased on our review of all relevant public information, the Transactions appear to have violated the Indentures and, accordingly, [Neiman Marcus] may now be in default thereunder” (original emphasis omitted);

2. The Transactions “may trigger defaults under the Indentures”;

3. Marble Ridge has “concerns that the Transactions do not comply with the Indentures”;

4. What Marble Ridge knows about the Designation and PropCo Transaction “led us to believe that [Neiman Marcus] may be in default under its Indentures”;

5. The Designation and PropCo Transaction “may have caused a default under the Indentures”;

6. There was a “theft of assets by” Neiman Marcus’s private equity sponsors; and

7. In its September 25, 2018 letter, Marble Ridge again referenced “serious questions” about Neiman Marcus’s “potential defaults.”

Other Context Regarding Marble Ridge’s Communications

On September 21, 2018, Marble Ridge issued a four-page press release through PR Newswire concerning Neiman Marcus and certain designations and transactions under the debt documents. The press release was entitled, “Marble Ridge Capital LP Sends Letter to Neiman Marcus Board Challenging the Validity of Self-Interested Asset Transfers and Asserting Company Is in Default under Bond Indentures.” The first paragraph stated that “Marble Ridge is a holder of Neiman Marcus 8.75% Senior Notes and Term Loans” and had sent a letter “expressing concern that [Neiman Marcus] may be in default under its Indentures.”

The press release included a copy of Marble Ridge’s September 18, 2018 letter to Neiman Marcus and its counsel, quoted certain portions of the letter, and stated that the letter “highlight[ed] the recent transfer of the MyTheresa business without any consideration to Neiman Marcus Group, Inc.” as having been “[a]mong several improper transactions.” The press release also stated that the letter “asked [Neiman Marcus] to provide information in order to assess whether the transactions complied with the Indentures as well as [its] rationale for entering into the transactions.” The press release quoted Kamensky as stating:

It is clear that [Neiman Marcus Group, Inc.’s private equity sponsors] are looking to line their own pockets at the expense of [Neiman Marcus’s] other stakeholders and employees. With management serving at their behest, these recent actions threaten the viability of a storied franchise that includes marquee brands such as Neiman Marcus and Bergdorf Goodman. Rather than allowing the theft of assets by [Neiman Marcus Group, Inc. private equity sponsors], we believe a more responsible Board, given its fiduciary obligations, would have engaged in a strategic review to maximize value for the benefit of all of [Neiman Marcus’s] stakeholders. The potential sale of MyTheresa and the premier real estate owned by Neiman Marcus would generate billions of dollars in proceeds that could be used to substantially reduce [its] indebtedness and put [it] on more solid financial footing, enabling it to invest in and grow its core business.

*4 Marble Ridge’s four-page, September 18, 2018 letter is printed on Marble Ridge Capital LP’s letterhead and signed by Kamensky on behalf of “Marble Ridge Capital.” The letter begins with general references to the debt documents and to changes in the corporate structure disclosed on March 14, 2017, and September 18, 2018. The letter also refers to the designation of MyTheresa and other entities as unrestricted subsidiaries under the debt documents and states that while “[n]ot all the facts concerning the Redesignation are known to Marble Ridge .... what we do know led us to believe that [Neiman Marcus] may be in default under its Indentures.” The letter includes additional statements about the MyTheresa transactions, several statements that were later quoted in the press release, and statements regarding the debt documents and certain requirements regarding a “minimum Interest Coverage Ratio.”8 The letter states, “[B]ased on our review of all relevant public information, the Transactions appear to have violated the Indentures and, accordingly, [Neiman Marcus] may now be in default thereunder.” Finally, the letter requests Neiman Marcus to provide certain information “[t]o facilitate a meaningful dialogue,” states the transactions “could be voidable and the directors of [Neiman Marcus] could face liability,” and concludes by stating:

Given the potential that the foregoing may lead to litigation, we hereby request that [Neiman Marcus] and its current and past board members [and other entities] retain all documents and communications relating to the Transactions, whether held electronically or in hard copy, notwithstanding any document-retention policies to the contrary. Please confirm in response to this letter that each of the foregoing have complied with this request.

Issues on Appeal

In its first issue on appeal, Marble Ridge argues Neiman Marcus failed to establish three necessary elements of its counterclaims—namely, that Marble Ridge made false assertions of fact with actual malice. Next, it argues it established the judicial-proceedings privilege as a valid defense to Neiman Marcus’s counterclaims.

STANDARD OF REVIEW

The TCPA is meant “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. The TCPA “protects citizens ... from retaliatory lawsuits that seek to intimidate or silence them.” In re Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (orig. proceeding).

Section 27.005(b) of the TCPA provides:

Except as provided by Subsection (c), on the motion of a party under Section 27.003, a court shall dismiss a legal action against the moving party if the moving party shows by a preponderance of the evidence that the legal action is based on, relates to, or is in response to the party’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). Thus, the TCPA permits a defendant to move for dismissal of a legal action that 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.” See id. § 27.003(a).

As a matter of statutory construction, we review de novo a trial court’s ruling on a TCPA motion to dismiss. See Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127, 132 (Tex. 2019); Goldberg v. EMR (USA Holdings) Inc., 594 S.W.3d 818, 833 (Tex. App.—Dallas 2020, pet. denied) (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 and any supporting and opposing affidavits stating the facts on which the claim or defense is based.9 Dyer v. Medoc Health Servs., LLC, 573 S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet. denied).

*5 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. Id. at 424–25.

Our review of a TCPA ruling generally involves three steps. Creative Oil, 591 S.W.3d at 132; Youngkin, 546 S.W.3d at 679–80; Goldberg, 594 S.W.3d at 824. At step one, the party moving for dismissal has the burden to show by a preponderance of the evidence that the legal action is based on, relates to, or is in response to the party’s exercise of the right of association, right of free speech, or the right to petition. See Creative Oil, 591 S.W.3d at 132 (citing TEX. CIV. PRAC. & REM. CODE § 27.005(b)); Youngkin, 546 S.W.3d at 679; Goldberg, 594 S.W.3d at 824.

If the movant does so, the analysis proceeds to step two, where 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. See Creative Oil, 591 S.W.3d at 132 (citing TEX. CIV. PRAC. & REM. CODE § 27.005(c)); Youngkin, 546 S.W.3d at 679; Goldberg, 594 S.W.3d at 824.

A “prima face case” refers to “the ‘minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.’ ” Lipsky, 460 S.W.3d at 590 (quoting In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (per curiam) (orig. proceeding)). “Clear and specific” evidence is “unambiguous,” “free from doubt,” and “explicit” or “referring to a particular named thing.” Id. (quoting KTRK Television v. Robinson, 409 S.W.3d 682, 689 (Tex. App.—Houston [1st Dist.] 2013, pet. denied)). Thus, the term “clear and specific” pertains to the quality of evidence required to establish a prima facie case, and the term “prima facie case” pertains to the amount of evidence necessary for a plaintiff to carry its minimal factual burden to support a rational inference establishing each essential element of a claim. Grant v. Pivot Tech. Sols., Ltd., 556 S.W.3d 865, 882 (Tex. App.—Austin 2018, pet. denied).

In Lipsky, the Texas Supreme Court explained how this evidentiary standard should be applied, stating, “[M]ere notice pleading—that is, general allegations that merely recite the elements of a cause of action—will not suffice. Instead, a plaintiff must provide enough detail to show the factual basis for its claim.” Lipsky, 460 S.W.3d at 590–91 (internal citations omitted). The plaintiff (or, in this case, the TCPA nonmovant, Neiman Marcus) may rely on circumstantial evidence that creates an inference establishing a central fact unless the “connection between the fact and the inference is too weak to be of help in deciding the case.” Dallas Morning News, Inc. v. Hall, 579 S.W.3d 370, 377 (Tex. 2019) (quoting Lipsky, 460 S.W.3d at 589); see also Lipsky, 460 S.W.3d at 591 (holding that the TCPA “does not impose a higher burden of proof than that required of the plaintiff at trial” and does not “require direct evidence of each essential element of the underlying claim to avoid dismissal”).

If the nonmovant satisfies its burden at step two, the analysis proceeds to step three, where the burden of proof shifts back to the movant to establish by a preponderance of the evidence each essential element of a valid defense to the nonmovant’s claim, resulting in dismissal under the statute if the movant does so. Creative Oil, 591 S.W.3d at 132 (citing TEX. CIV. PRAC. & REM. CODE § 27.005(d)); Youngkin, 546 S.W.3d at 679–80; Goldberg, 594 S.W.3d at 824.

*6 If a TCPA motion is granted at the third step, one might question whether section 27.005(d) operates as an unconstitutional deprivation of a claimant’s right to trial by jury. See TEX. CONST. art. V, § 10 (right to have a jury resolve fact questions); Bass v. United Dev. Funding, L.P., No. 05-18-00752-CV, 2019 WL 3940976, at *16 n.19 (Tex. App.—Dallas Aug. 21, 2019, pet. denied) (mem. op.). We are not presented with that issue, however, because the third step here—the application of the judicial-proceedings privilege—involves only a pure question of law. Reagan v. Guardian Life Ins. Co., 166 S.W.2d 909, 912 (Tex. 1942) (concluding that jury’s finding that an instrument was not privileged was on a pure question of law and, thus, was of no effect). Thus, while a constitutional question may loom in some cases under section 27.005(d), we need not decide that question here.10

ANALYSIS

Step One: TCPA Application

As the movant, Marble Ridge had the initial burden under the TCPA to show by a preponderance of the evidence that the legal action is based on, relates to, or is in response to its exercise of the right of association, right of free speech, or the right to petition. See Creative Oil, 591 S.W.3d at 132 (citing TEX. CIV. PRAC. & REM. CODE § 27.005(b)); Youngkin, 546 S.W.3d at 679; Goldberg, 594 S.W.3d at 824.

Marble Ridge argues it met that burden by showing that Neiman Marcus’s counterclaims target Marble Ridge’s exercise of its right of free speech. Neiman Marcus does not dispute this, and as a result, we will proceed directly to step two. See D Magazine Partners, Inc. v. Rosenthal, 529 S.W.3d 429, 434 (Tex. 2017) (doing the same).

Step Two: Prima Facie Case on Neiman Marcus’s Counterclaims

Once TCPA coverage applies, to defeat Marble Ridge’s motion to dismiss, Neiman Marcus had to establish by clear and specific evidence a prima facie case for each essential element of its defamation and business-disparagement counterclaims challenged by Marble Ridge. TEX. CIV. PRAC. & REM. CODE § 27.005(c). “[M]ere notice pleading—that is, general allegations that merely recite the elements of a cause of action—will not suffice. Instead, [Neiman Marcus] must provide enough detail to show the factual basis for its claim.” Lipsky, 460 S.W.3d at 590–91 (internal citations omitted). Generally, on defamation claims, when pleadings and evidence establish the facts of “when, where, and what was said, the defamatory nature of the statements, and how they damaged the plaintiff,” the evidence “should be sufficient” to defeat a TCPA motion to dismiss. Id. at 591.

*7 Marble Ridge argues Neiman Marcus failed to present by clear and specific evidence a prima facie case of three common and essential elements for its defamation and business-disparagement counterclaims: (1) publication of a statement of fact, (2) falsity of the statement, and (3) actual malice.11 In accordance with Lipsky, we review the record to determine whether Neiman Marcus provided, for each of these elements, the “minimum quantum” of “unambiguous,” “explicit” evidence “necessary to support a rational inference that [its] allegation of fact is true.” Id. at 590. We conclude that Neiman Marcus met this burden.

A. Publication of a Statement of Fact

Defamation requires “the publication of a false statement of fact to a third party.” Dallas Morning News, Inc. v. Tatum, 554 S.W.3d 614, 623 (Tex. 2018) (citing Exxon Mobil Corp. v. Rincones, 520 S.W.3d 572, 579 (Tex. 2017)). Statements that are not verifiable as false are not defamatory. Milkovich v. Lorain Journal Co., 497 U.S. 1, 21–22 (1990). “[S]tatements that cannot be verified, as well as statements that cannot be understood to convey a verifiable fact, are opinions. Whether a statement is an opinion is a question of law.” Tatum, 554 S.W.3d at 639 (citing Bentley v. Bunton, 94 S.W.3d 561, 580 (Tex. 2002)). We must “focus not only ‘on a statement’s verifiability,’ but also on ‘the entire context in which it was made.’ ” Id. (quoting Bentley, 94 S.W.3d at 581). Additionally, we must remain mindful of the type of writing at issue. Id. (“The type of writing at issue, though not dispositive, must never cease to inform the reviewing court’s analysis.”).

Marble Ridge argues that its seven allegedly defamatory statements are statements of opinion, not fact, and that its sixth statement was also non-actionable rhetorical hyperbole.12 Neiman Marcus disputes these arguments.

With its TCPA response, Neiman Marcus presented in its exhibits 8, 10, and 13 the full text of Marble Ridge’s statements on September 18, 21, and 25, 2018, which allows us to consider them in their full context. Considering the source, subject matter, matter communicated, and expressed purpose of the communications, we conclude that a reasonable person of ordinary intelligence could conclude from Marble Ridge’s statements that Marble Ridge, a sophisticated hedge fund claiming in its communications to hold certain Neiman Marcus interests, had reviewed information from which it had concluded that Neiman Marcus was in default of its Indentures.

*8 Whether or not Neiman Marcus was in default of its Indentures is verifiable; thus, Marble Ridge’s statements are statements of fact, not opinion. See Tatum, 554 S.W.3d at 634 (party cannot avoid liability for defamatory implications simply by couching them within subjective opinion) (citing Milkovich, 497 U.S. at 19); D Magazine Partners, L.P., 529 S.W.3d at 437–38 (when viewing communications as a whole, reasonable person could perceive communications as accusing claimant of providing false information to agency in order to obtain benefits to which she was not entitled); Bentley, 94 S.W.3d at 569–71 (reasonable listener could interpret radio host’s comments as defamatory).

In arguing its position, Marble Ridge primarily relies on Paulsen v. Yarrell, 537 S.W.3d 224 (Tex. App.—Houston [1st Dist.] 2017, pet. denied), which is distinguishable. There, the court concluded a lawyer’s letter to a law school about a law professor’s potential breach of ethics was a statement of opinion based on the context in that case, which included communications that were much less definitive than those involved here. See id. at 236–37.

We reject Marble Ridge’s argument that its sixth statement regarding “theft of assets” was rhetorical hyperbole or mere opinion masquerading as fact. In Moldovan v. Polito, No. 05-15-01052-CV, 2016 WL 4131890, at *8 (Tex. App.—Dallas Aug. 2, 2016 pet. denied) (mem. op.), we determined that although a customer’s statement that wedding photographs were “being held hostage” could not be taken literally, the statement did not amount to rhetorical hyperbole, as a reasonable person would understand the statement to mean that the photographer was wrongfully refusing to release the photos that the couple had paid for and were entitled to receive. Similarly, we conclude that under the circumstances here, a reasonable person would understand Marble Ridge’s sixth statement to mean that entities with a rightful claim to the assets were being harmed by the designations and transactions about which Marble Ridge complained.

We also distinguish another case that, although not cited by the parties, was recently issued by our Court. In California Commercial Investment Group, Inc. v. Herrington, we stated, “[I]n distinguishing between fact (verifiable as false) and opinion, we focus on a statement’s verifiability,” and even if it is verifiable as false, we “consider the entire context of the statement which may disclose that it is merely an opinion masquerading as fact.” No. 05-19-00805-CV, 2020 WL 3820907, at *7 (Tex. App.—Dallas July 8, 2020, no pet.) (mem. op.) (quoting Scripps NP Operating LLC v. Carter, 573 S.W.3d 781, 795 (Tex. 2019)). There, we stated that an apartment manager’s statements to police during a criminal investigation of an alleged burglary were statements of opinion. Id. at *7–8. In her second interview with the police, the manager stated she “kn[e]w[ ] very well that [Herrington, the TCPA nonmovant] staged the burglary so that he could steal property and sell it,” and she listed six reasons why she doubted Herrington’s story to the police about the alleged burglary at the location where she and Herrington both worked. Id. at *1, 8.

Herrington is distinguishable because of the vastly different context and content of the statements at issue. The statements in this record are far less speculative, and far more definitive, than those at issue in Herrington, and they were made at Marble Ridge’s own direction and discretion, not in response to questioning during a police investigation. Moreover, unlike Herrington, Neiman Marcus has presented other evidence of falsity, as we discuss in the next section. See id. at *7–8 (noting that manager’s statements were the only proof of falsity Herrington relied on in trying to satisfy his prima facie case under a step-two TCPA analysis).

*9 We conclude that Neiman Marcus presented sufficient prima facie proof that Marble Ridge’s allegedly defamatory statements were verifiable statements of fact and therefore conclude Neiman Marcus satisfied its step-two burden on this element.

B. Falsity of the Statements

Marble Ridge also argues Neiman Marcus failed to establish a prima facie case that Marble Ridge’s statements were false, which Neiman Marcus disputes. We agree with Neiman Marcus.

In its pleading and in the evidence submitted with its TCPA response, Neiman Marcus presented a detailed account of the events and transactions leading up to the current dispute, including those regarding the MyTheresa designation, the PropCo transaction, and the Marble Ridge communications at issue.

These materials included an affidavit and related attachments from Eric Artho,13 the person responsible for assessing Neiman Marcus’s compliance with the debt documents and for calculating relevant financial ratios and basket capacity thereunder. Artho attached to his affidavit the debt documents, including Neiman Marcus’s term loan agreement, its revolving credit agreement, and its three Indentures. Taken together, these showed that Neiman Marcus was in compliance with the debt documents with regard to the interest-coverage ratio, the only specific grounds for default that Marble Ridge asserted. Thus, Neiman Marcus’s pleadings and evidence explained how and why Neiman Marcus was in compliance with and was not in default under those debt documents regarding those events.

Marble Ridge cites no cases to support its argument that Neiman Marcus failed to satisfy its step-two burden on this particular element. Instead, Marble Ridge argues that certain information—specifically, a January 2017 officer’s certificate—could be considered in calculating the interest-coverage ratio and that Neiman Marcus failed to “establish a prima facie case that the Indentures precluded use of [that information] in calculating the [interest-coverage ratio].” Marble Ridge also faults Neiman Marcus for failing to answer or address various questions Marble Ridge asked in its challenged communications.

As Neiman Marcus argues, Marble Ridge’s response on this issue appears to be an attempt to simply rebut the information Neiman Marcus has provided in its response rather than to show that Neiman Marcus’s information fails to satisfy its own TCPA burden. We “only consider the pleadings and evidence in favor of the plaintiff’s case when determining whether it established the requisite prima facie proof.” Bass, 2019 WL 3940976, at *18 (citations omitted). When considering that information here, we conclude that Neiman Marcus presented the necessary prima facie proof of falsity of Marble Ridge’s allegedly defamatory statements.

C. Actual Malice

Marble Ridge also argues Neiman Marcus failed to provide sufficient prima facie proof of actual malice.

To establish this element, Neiman Marcus must show that a defamatory statement was published either with knowledge of its falsity or with reckless disregard as to its truth. See Hearst Corp. v. Skeen, 159 S.W.3d 633, 637 (Tex. 2005) (per curiam). Recklessness, which Neiman Marcus relies upon here, is a subjective standard focusing on the defendant’s conduct and state of mind and requires evidence that the defendant “entertained serious doubts as to the truth” when the information was published and had a “high degree of awareness” of the probable falsity of the statements. Bentley, 94 S.W.3d at 591 (quoting Harte-Hanks Commc’ns, Inc. v. Connaughton, 491 U.S. 657, 688 (1989)). Recklessness can be found when there are obvious reasons to doubt the speaker’s veracity or accuracy. See id. Neiman Marcus argues actual malice is demonstrated in several ways, including by Marble Ridge’s “rush” to publish its accusations—which were designed to “pressure” Neiman Marcus and were sent despite Marble Ridge’s own questions and its access to the truth—and by Marble Ridge’s repetition of its accusations of default in its September 25, 2018 letter, after Neiman Marcus told Marble Ridge that it was not in default.

*10 Neiman Marcus’s pleadings do not include any specific allegations regarding actual malice except through allegations made on information and belief. The affidavits Neiman Marcus presented do not specifically mention “actual malice,” but the parties presented evidence pertinent to this issue, including Artho’s and Kamensky’s affidavits and their respective attachments. According to Artho, Neiman Marcus’s necessary interest-coverage ratio under the Indentures “was at least 2.0x” and “this requirement ... was met in March 2017 [the month of the Designation under the Indentures], as the interest-coverage ratio was approximately 2.07x,” “using Neiman Marcus financial information for the four quarters ending on October 29, 2016.” Kamensky testified about that financial information as follows:

[Questioning by Neiman Marcus’s counsel; answers by Kamensky]

Q: Mr. Kamensky, I hand you a document marked Exhibit 9 which was produced by Marble Ridge. Do you recognize this document?

A: I do.

Q: Is this a financial officer’s certificate for Q1 2017?

A: Yes.

Q: Did you review this document before you produced it to Neiman Marcus?

A: I did.

Q: Is this one of the documents that you and your team of Marble Ridge folks analyzed in the exhaustive process you described in your affidavit to determine whether Neiman Marcus was in default?

A: Yes. As I said, there was a lot of, we spent a lot of time analyzing the company’s covenants, we looked at the external research reports, relied on external experts. The documents here is [sic] the officer’s certificate under the term loan agreement from, I believe, October 29, 2016....

....

Q: And it’s your position that you can’t determine the [interest-coverage ratio] that would have been in place, that would have been applicable as of the time of the transactions from this document, is that correct?

A: I believe that the [interest-coverage ratio] can be calculated from this document even though there are different definitions. I don’t have that calculation in front of me.... I believe what this shows you is the calculation of the leverage ratio ....

Kamensky’s affidavit reflects that “on September 14, 2018, [he] relayed [Marble Ridge’s] concerns that the Redesignation may have caused a default under the Indentures ... to provide [Neiman Marcus] with an opportunity to assuage those concerns.” His affidavit also confirms that Marble Ridge made and sent the letter on September 18, 2018, the press release on September 21, 2018, and the additional letter on September 25, 2018.

Kamensky’s affidavit also confirms Marble Ridge received Neiman Marcus’s September 21, 2018 response informing Marble Ridge that “the allegations [Marble Ridge has] raised in its [September 18] letter are inaccurate, both legally and factually.” The letter made additional statements regarding the designation and transactions in question, confirming that they were “permitted” and “allowed under the terms of [Neiman Marcus’s] applicable debt documents” and also “complied with the law in all respects.” Neiman Marcus indicated that its “ability to do these two transactions under the debt documents has been widely reported” and referred Marble Ridge to three specific media reports from various dates in 2017 and 2018.

Based on this record, we conclude Neiman Marcus met its burden under the TCPA to point to clear and specific evidence establishing that Marble Ridge’s allegedly defamatory statements were made with actual malice, as Marble Ridge’s actions under these circumstances amount to at least the minimum quantum of evidence necessary to establish a rational inference of reckless disregard of the truth. See Bentley, 94 S.W.3d at 591 (recklessness can be found when there are obvious reasons to doubt the accuracy of the informant’s reports); Bass, 2019 WL 3940976, at *21–24 (concluding that actual malice had been established for TCPA purposes under circumstances analogous to those here).

*11 Because Neiman Marcus satisfied its step-two burden on each of the challenged elements on its counterclaims, we overrule Marble Ridge’s issue regarding section 27.005(c). See TEX. CIV. PRAC. & REM. CODE § 27.005(c).

Step Three: Marble Ridge’s Establishment of a Valid Defense

In its final issue, Marble Ridge argues it established a valid defense to Neiman Marcus’s counterclaims, namely, the judicial-proceedings privilege. See TEX. CIV. PRAC. & REM. CODE § 27.005(d). In 1889, the Texas Supreme Court described the general concepts and policies behind the judicial-proceedings privilege, stating, “[F]or any defamatory matter in a pleading in a court of civil jurisdiction no action for libel may be maintained” and “proceedings in civil courts are absolutely privileged. Citizens ought to have the unqualified right to appeal to the civil courts for redress, without the fear of being called to answer for damages in libel.” Runge v. Franklin, 10 S.W. 721, 724 (Tex. 1889). Since then, other “well-settled rules of law” have developed on the privilege, which may extend in certain cases to communications that are preliminary to—and not simply made in—a judicial proceeding. See Reagan, 166 S.W.2d at 912 (discussing various “well-settled rules of law” on the privilege); Shell Oil Co. v. Writt, 464 S.W.3d 650, 654–55 (Tex. 2015) (describing elements needed when communications are preliminary to a judicial proceeding). In Shell Oil, the court stated:

The test for whether a communication is absolutely privileged when it occurs before judicial proceedings have begun entails both subjective and objective components. See RESTATEMENT (SECOND) OF TORTS § 588 cmt. e (1977) (“As to communications preliminary to a proposed judicial proceeding the rule ... applies only when the communication has some relation to a proceeding that is actually contemplated in good faith and under serious consideration by the witness or a possible party to the proceeding.”) (emphasis added). The fact that a formal proceeding does not eventually occur will not cause a communication to lose its absolutely privileged status; however, it remains that the possibility of a proceeding must have been a serious consideration at the time the communication was made. See id. (“The bare possibility that the proceeding might be instituted is not to be used as a cloak to provide immunity for defamation when the possibility is not seriously considered.”); see also United States v. Baggot, 463 U.S. 476, 484 (1983) [ (Burger, J., dissenting) ] (“The words preliminary to” necessarily refer to judicial proceedings not yet in existence, where, for example, a claim is under study.”).

Shell Oil, 464 S.W.3d at 655 (emphases on “actually contemplated” and “preliminary to” in original; other emphases added).14 Marble Ridge argues the privilege applies to its allegedly defamatory statements. Neiman Marcus disputes this. In arguing their respective positions, the parties cite many cases, including Shell Oil and another Texas Supreme Court case,15 various cases from our Court,16 and several cases from our sister courts and the Fifth Circuit.17 Of these cases, only Landry’s involved review of the judicial-proceedings privilege in the TCPA context. See Landry’s, 566 S.W.3d at 57–61.18 We have also considered two TCPA cases from our Court involving the privilege, which the parties do not cite. See Watson v. Hardman, 497 S.W.3d 601, 608–09 (Tex. App.—Dallas 2016, no pet.); Tervita, LLC v. Sutterfield, 482 S.W.3d 280, 284–85 (Tex. App.—Dallas 2015, pet. denied).19 Based on the applicable law and the record before us and for the reasons we explain below, we conclude the privilege does not apply.

A. Pleading Status and Procedural Posture

*12 Like other affirmative defenses, parties are generally required to plead the judicial-proceedings privilege because it is a defense meant to avoid or affirmatively defend against certain claims, including defamation and business disparagement claims. See TEX. R. CIV. P. 94 (“In a pleading to a preceding pleading, a party shall set forth affirmatively ... any other matter constituting an avoidance or affirmative defense.”); Landry’s, 566 S.W.2d at 80 (Jewell, J., concurring and dissenting) (describing judicial-proceedings privilege as an affirmative defense); Watson, 497 S.W.3d at 608 (noting movant pleaded judicial-proceedings privilege in his answer as an affirmative defense); Jenevein, 114 S.W.3d at 745 (describing it as an affirmative defense); Wilkinson v. USAA Fed. Sav. Bank Tr. Servs., No. 14-13-00111-CV, 2014 WL 3002400, at *6 n.8 (Tex. App.—Houston [14th Dist.] July 1, 2014, pet. denied) (mem. op.) (same); Clark v. Jenkins, 248 S.W.3d 418, 433 (Tex. App.—Amarillo 2008, pet. denied) (the “privilege ‘is an affirmative defense to be proved and is in the nature of confession and avoidance.’ ”) (quoting IBP, Inc. v. Klumpe, 101 S.W.3d 461, 471 (Tex. App.—Amarillo 2001, pet. denied)).20

Generally, an affirmative defense must be pleaded or it is waived. TEX. R. CIV. P. 94; Shoemake v. Fogel, Ltd., 826 S.W.2d 933, 937 (Tex. 1992). The requirement is not absolute, however, and in some cases, no waiver has been found when a defense is apparent on the face of the claimant’s pleading and is established as a matter of law. See Shoemake, 826 S.W.2d at 937 (parental immunity not waived).

Pleadings are petitions and answers, not motions. See TEX. R. CIV. P. 45 (pleadings shall “be by petition and answer” and “consist of a statement in plain and concise language of the plaintiff’s cause of action or the defendant’s ground of defense”); Rupert v. McCurdy, 141 S.W.3d 334, 339 (Tex. App.—Dallas 2004, no pet.) (“[M]otions are not the functional equivalents of pleadings because insufficient similarities exist between a motion and a pleading to allow them to carry the same legal significance.”) (multiple citations omitted).

Marble Ridge included the judicial-proceedings privilege only in its TCPA motion but not in any pleading, and at the time of the TCPA hearing, Marble Ridge had no live pleading before the court.21 Under these circumstances, one might reasonably question whether Marble Ridge asserted a “valid defense” under section 27.005(d) and whether an order granting Marble Ridge’s motion on that basis would have resulted in a judgment not conforming to the pleadings.22 However, because neither party has presented such questions for our review, we do not address them.23 Instead, we assume, but do not decide, that the trial court could have granted Marble Ridge’s TCPA motion based on a defense it never pleaded, and we turn to the question of whether Marble Ridge satisfied its burden under section 27.005(d).24

B. Substantive Analysis: Third-Step Burden Not Satisfied

*13 Even assuming the trial court could have granted Marble Ridge’s TCPA motion based on a defense it never pleaded, we conclude Marble Ridge failed to satisfy its third-step burden under section 27.005(d) regarding the judicial-proceedings privilege because, according to the record before us, Marble Ridge was not actually contemplating and seriously considering a judicial proceeding when it made the communications forming the basis for Neiman Marcus’s counterclaims. See Shell Oil, 464 S.W.3d at 654–55.

In explaining the judicial-communications privilege, Shell Oil cites the Restatement (Second) of Torts section 588, which, by its heading, applies to witnesses in judicial proceedings. See RESTATEMENT (SECOND) OF TORTS § 588 (1977). Similar provisions exist for attorney and party communications under sections 586 and 587, the latter of which applies here. See id. §§ 586–87.25

When communications are preliminary to (and thus not included within) judicial proceedings, the absolute privilege applies only “when the communication has some relation to a proceeding that is contemplated in good faith and under serious consideration,” and “[t]he bare possibility that the proceeding might be instituted is not to be used as a cloak to provide immunity for defamation when the possibility is not seriously considered.” See id. § 587 cmt. e. The Restatement contains similar provisions for communications by attorneys and witnesses. Id. at §§ 586, 588 cmt. e. We examine these factors by considering the communications as of the time they were made. See Shell Oil, 464 S.W.3d at 654–55.

1) Landry’s and BancPass

In their arguments to the trial court, the parties primarily relied on two cases to support their positions, with Marble Ridge relying on Landry’s, and Neiman Marcus relying on BancPass. See Landry’s, 566 S.W.3d at 57–61 (concluding privilege applied); BancPass, 863 F.3d at 401–03 (concluding it did not). Both sides continue to rely on these cases on appeal, so we begin there.

In Landry’s, the allegedly defamatory statements were made by an animal-rights group and its attorneys in a mandatory pre-suit notice letter under the Endangered Species Act and in related press releases, all of which communicated an intent to sue Landry’s over its care and housing of tigers in an exhibit at one of the restaurants Landry’s operated. Landry’s, 566 S.W.3d at 49. After Landry’s sued in response to those communications, the animal-rights group and its attorneys moved for dismissal under the TCPA, arguing Landry’s claims related to their exercise of their rights of free speech, association, and petition. Id. at 52. The trial court granted the motion, and Landry’s appealed. Id. On appeal, the court explained that, when the judicial-proceedings communications privilege involves statements made before judicial proceedings begin, the privilege requires both objective and subjective components, stating:

If the statement was made before judicial proceedings were instituted, the statement is privileged only if it meets both an objective and a subjective component. Objectively, the statement must be related to the proposed litigation; subjectively, the proceeding must have been actually contemplated in good faith and under serious consideration when the statement was made.

*14 Id. at 58. The court then examined the record and concluded the communications at issue were objectively related to a contemplated legal proceeding, where they described the allegations the group and its lawyers intended to make against Landry’s; cited federal statutes, regulations, case law, scholarly articles, and other items; and made an offer to forgo litigation in exchange for an agreement to re-house the tigers. The court stated that the communications reflected that, at the time the challenged statements were made, “a lawsuit under the Endangered Species Act was not a mere possibility” and that the group was “taking affirmative steps toward litigation.” Id. at 59. As to the subjective component, Landry’s argued the privilege did not apply because litigation was not seriously considered at the time, when the group had not sued Landry’s before the case was being argued on appeal, but the court rejected that argument, noting that Landry’s had sued first, on the fifty-ninth day after receiving the mandatory sixty-day pre-suit notice letter. Id. at 60. Under those circumstances, the court stated: “That [the group] refrained from suing Landry’s in federal court while simultaneously defending themselves in state court does not give rise to an inference that they had not been seriously contemplating a federal suit before Landry’s sued them.” Id. Based on that record, the court affirmed the dismissal of Landry’s claims. Id. at 50, 61, 73–74.

In BancPass, the case Neiman Marcus primarily relies on, the court concluded that the privilege did not apply, mainly because of a disconnect between the purpose of the communications at issue and the litigation that followed. See BancPass, 863 F.3d at 401–03. BancPass involved litigation between two competing toll service companies. Id. at 395. The allegedly defamatory statements at issue were made by HTA, a company that contracted with certain rental-car companies to set up various processes that, in essence, enabled easier tollway use and payment of tolls by rental-car customers. Id. HTA’s statements were communicated in letters to the Texas Department of Transportation (TxDOT), Apple, and Google and accused a competitor, BancPass, of illegal activity in connection with BancPass’s product, an application that rental-car drivers could add to their cell phones to accomplish a similar purpose without incurring the fees charged by HTA and similar toll-servicing companies. Id. at 395–96.

HTA’s letter to TxDOT expressed concern about the app and BancPass’s alleged intentional interference with contracts between rental-car companies and the rental-car companies’ customers; informed TxDOT that HTA would work with counsel to take any and all legal actions necessary to protect its rights and comply with Texas law and its own agreements with TxDOT; and indicated HTA would hold BancPass or rental-car customers responsible for “any such actions involving the rental agency vehicles.” Id. at 395. HTA’s letters to Apple and Google referred to BancPass’s app as “illegal,” demanded that Apple and Google remove it from their app stores for alleged violations of their internal policies, and stated that the app allowed users to engage in unlawful activities, including a felony HTA alleged users would “unwittingly commit” by misrepresenting to state authorities various details about vehicle registration. Id. at 395–96. Initially, BancPass had no knowledge of HTA’s statements to TxDOT, Apple, or Google. However, after HTA threatened BancPass with legal action if it did not stop marketing the app to rental car customers, BancPass sued HTA for a declaratory judgment that BancPass was not tortiously interfering with HTA’s contracts. During discovery, BancPass received HTA’s letters to TxDOT, Apple, and Google and pleaded a claim for defamation thereafter. Id. at 396. HTA moved for summary judgment on BancPass’s defamation claim and argued its communications were absolutely privileged under the judicial-proceedings privilege. Id. at 396, 401. The trial court denied summary judgment, and the court of appeals affirmed. Id. at 394, 406. In doing so, the court discussed the origins of the rule, analyzed various cases, and made an Erie26 guess predicting how the Texas Supreme Court would resolve the issue if presented with the same case. Id. at 401–03. Based on its survey of Texas law, the court noted, “Texas caselaw is clear that our analysis must focus on the connection between the communications and the specific legal action HTA now claims that it was contemplating, rather than legal action more broadly.” Id. at 402. The court concluded that the privilege did not apply, agreeing with the district court that the law’s “limits”27 preclude application of the privilege, “most significantly because of the disconnect between the purpose of the communications and HTA’s later tortious interference litigation.” Id. at 403.

2) Texas Supreme Court Cases: James and Shell Oil

*15 Next, we discuss the only binding cases the parties cite, James and Shell Oil.

James involved psychiatrists’ communications about a party’s mental-health condition to a probate judge in an involuntary-commitment proceeding under the mental health code. James, 637 S.W.2d at 916. Following her release, James sued the psychiatrists for libel and other claims in connection with those communications. Id. The trial court granted summary judgment for the psychiatrists, and the court of appeals affirmed in part and reversed in part. Id. James appealed, and the supreme court concluded that the psychiatrists’ communications to the probate judge and to a lawyer were absolutely privileged and that the trial court’s summary judgment regarding those communications was therefore proper. Id. at 917.

In Shell Oil, a former Shell employee sued Shell for defamation in connection with statements Shell made in a report provided to the United States Department of Justice (DOJ) relating to a criminal investigation by the DOJ of possible violations of the Foreign Corrupt Practices Act (FCPA) by one of Shell’s contractors. Shell Oil, 464 S.W.2d at 651. Those communications occurred after DOJ sent an inquiry letter to Shell regarding its investigation and after a meeting between DOJ and Shell personnel in which Shell agreed to conduct an internal investigation and report its findings to the DOJ. Id. at 651–52. As a result of that internal investigation, Shell terminated the employment of Writt, one of the employees named in the investigation report. Id. at 652. Shell also provided the investigation report to the DOJ as agreed. Id. Writt then sued Shell for defamation and wrongful termination, and the trial court granted Shell’s summary judgment motion, concluding that Shell’s communications to the DOJ were absolutely privileged. Id. at 653. Writt appealed, and the court of appeals reversed, determining that the summary judgment evidence did not conclusively prove that at the time Shell provided its report to the DOJ, a criminal judicial proceeding against Shell or Writt was ongoing, actually contemplated, or under serious consideration by the DOJ or Shell, and that the communications were not absolutely privileged. Id. Shell appealed, arguing the DOJ solicited the information Shell provided as a result of an ongoing DOJ investigation and that the communications were absolutely privileged as preliminary to a proposed judicial or quasi-judicial proceeding. Id.

In deciding the appeal, the supreme court noted that it did not need to address whether the question of absolute privilege must be disproved as part of the plaintiff’s case once it is raised or whether the privilege is an affirmative defense, because to obtain summary judgment, Shell had to present conclusive proof. Id. at 654. After discussing the judicial-communications privilege and various cases interpreting it, see id. at 654–58, the court determined that Shell had provided conclusive proof that, when Shell provided the report to the DOJ, Shell was a target of the DOJ’s investigation, the report related to the DOJ’s inquiry, and Shell seriously contemplated the possibility that it might be prosecuted at the time it provided the report.28 Id. at 658–59. As a result, the court ruled Shell’s communication was absolutely privileged, reversed the judgment of the court of appeals, and reinstated the trial court’s judgment. Id. at 659–60.

3) Various Cases by Our Court

*16 Next, we discuss several of our own cases involving the privilege, three cited by the parties that were not in the TCPA context (Russell, Finlan, and Odeneal), and two others that were (Tervita and Watson). We applied the privilege in each of those cases, but those cases are distinguishable, as the communications in those cases were more closely connected to or were made in judicial proceedings.

In Russell, we considered whether the privilege applied to a letter written by Clark, an attorney, and sent to certain corporate investors following the supreme court’s remand of earlier litigation between the corporation and the attorney’s clients. Russell, 620 S.W.2d at 866. The earlier litigation involved a title dispute over two oil and gas leases, and in that earlier litigation, Russell and Gulf States—the two plaintiffs who later sued Clark for libel—claimed title to those leases. Id.

In his letter to the corporate investors, Clark made various statements regarding Royal and Gulf States and developments in the earlier litigation, suggested those investors might also be victims of “dubious promotional techniques” by Russell and Gulf States, and requested information from those investors that, presumably because of the remand, might have yielded certain evidence. Id. at 866–68, 870. Russell and Gulf States then sued Clark for libel. Id. at 868. Clark claimed, in part, that his letter was absolutely privileged. Id. The trial court granted summary judgment for Clark, and Russell and Gulf States appealed. We affirmed. Id. at 869.

In doing so, we adopted the Restatement rule requiring some relationship between an attorney’s allegedly defamatory communication and existing or proposed litigation29 and concluded that Clark’s letter was absolutely privileged under the circumstances there. Id. at 868–69. While we noted that the court must consider the entire communication in context and must extend the privilege to any statement bearing “some relation to an existing or proposed judicial proceeding,” see id. at 870, we also warned that “the absolute privilege must not be extended to an attorney carte blanche. The act to which the privilege applies must bear some relationship to a judicial proceeding in which the attorney is employed, and must be in furtherance of that representation.” Id. at 868.30

In Finlan, we considered whether the privilege applied to a lawyer’s statements in an out-of-court press release following the filing of a petition in a case with a history of multiple lawsuits between multiple litigants. Finlan, 27 S.W.3d at 225, 237–38. We concluded the privilege applied because the press release had some relationship to the lawsuit and to other litigation between the same parties, and we affirmed summary judgment in DISD’s favor on the claimants’ defamation claims. Finlan, 27 S.W.3d at 239–40, 245.

*17 In Odeneal, the plaintiffs sued an attorney for defamation in statements made to a State Bar of Texas Grievance Committee following a grievance regarding the attorney’s conduct in connection with his representation of other parties in other litigation in which the grievants had been involved. Odeneal, 668 S.W.2d at 819. In reviewing the trial court’s summary judgment in the attorney’s favor, we affirmed in a two-page opinion, concluding that the attorney’s statements “bore enough of a ‘relation’ to the proceeding to be afforded absolute privilege.” Id. at 819–20.

In Tervita, a TCPA case, we considered a trial court’s denial of an employer’s TCPA motion in response to various claims brought by an injured employee, including claims for conspiracy and labor code violations for allegedly false statements made about the employee during testimony in the employee’s worker’s compensation benefit proceedings. Tervita, 482 S.W.2d at 285.

We concluded that the testimony in question, “given in a quasi-judicial proceeding before a governmental entity with the power to investigate and decide the issue, was an absolutely privileged communication.” Id. (citations omitted). Thus, we determined that the company established a valid defense under section 27.005(d) as to those claims, see TEX. CIV. PRAC. & REM. CODE § 27.005(d), and we sustained the employer’s issues regarding the portion of those claims relating to the false statements made in the worker’s compensation benefit proceedings. Tervita, 482 S.W.2d at 285, 287.

In Watson, another TCPA case, we considered the privilege in connection with allegedly defamatory communications in a rule 202 petition filed against two persons who had collected and administered funds from a GoFundMe account following the death of a husband and wife in a serious car accident. See TEX. R. CIV. P. 202; Watson, 497 S.W.3d at 603–04. In that case, Watson, the person filing the rule 202 petition, claimed that the Hardmans, who had collected and administered the funds, had misappropriated those funds for their own use. Watson, 497 S.W.3d at 604. The Hardmans then brought a separate action for defamation and other claims, and in their amended petition they claimed Watson’s statements in his rule 202 petition were “but one example” of communications accusing them of malfeasance and theft. Id. Watson then filed a TCPA motion, which the trial court denied. Id. We reversed, concluding that Watson’s statements in his rule 202 petition were absolutely privileged under section 27.005(d) and that the trial court erred in denying his motion as to that part of the Hardmans’s claims. Id. at 608–09.

4) Other Cases

The parties also cite other cases to support their respective positions, but because of the obvious dissimilarity of most of them to the facts before us, we do not discuss them at length here.31

5) Application

*18 Marble Ridge argues the privilege applies because its allegedly defamatory statements bear some relation to a judicial proceeding (objective requirement) that was contemplated in good faith and was being seriously considered at the time the statements were made (subjective requirement). Neiman Marcus disputes this.

We assume, without deciding, that Marble Ridge established the objective requirement for the judicial-proceedings privilege,32 though we question it on these facts, where the pre-suit communications were largely focused on Neiman Marcus’s potential breach of its Indentures, a claim not raised below.

However, as to the subjective requirement, we conclude Marble Ridge failed to establish that at the time it made the September 18, September 21, and September 25 communications, Marble Ridge was contemplating in good faith and seriously considering a judicial proceeding.

First, in his June 19, 2019 affidavit, Kamensky stated Marble Ridge’s September 18, 2018 letter “sets out the purposes and concerns of [Marble Ridge] that prompted its writing” and that it “accurately reflects [its] views and intentions ... at the time it was written.” Although Kamensky states Marble Ridge “was seriously contemplating bringing a suit against [Neiman Marcus]” when it sent the September 18, 2018 letter, that letter and its later communications reflect other purposes and intentions. The letter indicates Marble Ridge sought additional information from Neiman Marcus “[t]o facilitate a meaningful dialogue.” In its press release, Marble Ridge explained it “asked [Neiman Marcus] to provide information in order to assess whether the transactions complied with the Indentures as well as [Neiman Marcus’s] rationale for entering into the transactions.” In its September 25, 2018 letter (sent just a week after the September 18 letter), Marble Ridge stated, “In our September 18, 2018 letter ... we requested information necessary to further understand the Transactions with the hope of opening a constructive dialogue.” Marble Ridge concludes its September 25, 2018 letter by stating:

The potential sale of MyTheresa and the premier real estate owned by Neiman Marcus would generate billions of dollars in proceeds that could be used to substantially reduce [Neiman Marcus’s] indebtedness and put [Neiman Marcus] on more solid financial footing, enabling it to invest in and grow its core business.

We believe a transaction along these lines would result in (1) immediate deleveraging of [Neiman Marcus] from over 10x to approximately 6x; (2) immediate reduction of interest expense; and (3) increased cash flows to [Neiman Marcus]. Moreover, we believe this approach would likely result in an extended runway for [Neiman Marcus] to meet its long-term potential while avoiding potentially significant tax consequences.

We are prepared to provide financial support for this approach and are available to discuss the details of our proposal with you and [Neiman Marcus’s] various stakeholders. We are confident a recapitalization along these lines is superior to any alternative proposal supported by [Neiman Marcus’s] out-of-the-money Sponsors.

*19 We look forward to receiving your response to our proposal.

Similarly, Kamensky’s deposition testimony also reflects there was no serious consideration of a judicial proceeding at the time the statements were made. Ten days after signing his affidavit, Kamensky was deposed and testified as follows:

Q: So the only purpose of this [September 18, 2018] letter is to get facts from the company concerning the redesignation, correct?

A: A hundred percent, yes.

....

A: ... I’m sorry, apologies. Can I go back and add something to the answer I gave two back about this letter and the purpose of it? ....

Q: Yes, you said it was [a] hundred percent.

A: So let me just clarify that answer.

Q: Okay.

A: At the time that we wrote this letter my hope was that we were going to get answers from the company, but that [was] because we had been stonewalled the entire time, I held very little – the hope that I had had been severely diminished because we had been stonewalled so much. And so by the time we wrote this letter, my view was that this was likely going to be litigation.

And so by the time that we wrote this letter, my view was that we were giving them an opportunity to answer to questions, but given their course of conduct up to that point, we were likely going to have to sue to enforce our rights.

....

Q: .... Sitting here today you don’t recall what you did with the letter after September 18th on September 21st?

A: I think what you’re referring to is the fact that we released the letter publicly, right?

Q: Right.

A: .... In my mind the only way that the company was going to have any reaction is if there was some pressure put on them, if there was some third party, right? They weren’t answering our questions, and that’s when the letter was released to the press.

Q: So your testimony is that you released the letter to the press to put pressure on the company?

A: My testimony is that we released the letter to the press to make the market aware of our concerns. That is my testimony.

Based on this record, we conclude Marble Ridge did not satisfy its burden under section 27.005(d) regarding the judicial-communications privilege because Marble Ridge was not actually contemplating and giving serious consideration to a judicial proceeding when making its September 18, September 21, and September 25, 2018 communications. See TEX. CIV. PRAC. & REM. CODE § 27.005(d); Shell Oil, 464 S.W.3d at 655; RESTATEMENT (SECOND) OF TORTS § 587 cmt. e (“bare possibility that the proceeding might be instituted is not to be used as a cloak to provide immunity for defamation when the possibility is not seriously considered”).

Though none of the cited cases involve the precise situation we face here, this case is more similar to BancPass and McCrary, which we find analogous, than to Landry’s, Krishnan, Bell, Crain, or Russell, which we find distinguishable. Compare BancPass, 863 F.3d at 401–03 (privilege did not apply to pre-suit communications by business entity and its lawyers where disconnect existed between purpose of communications and entity’s litigation that followed), and McCrary, 513 S.W.3d at 7 (privilege did not apply to allegedly defamatory, pre-suit communications by individual wealth management advisor and third party where pleadings did not affirmatively establish nexus to lawsuit under serious consideration), with Landry’s, 566 S.W.3d at 57–61 (mandatory pre-suit notice letter cited federal statutes, regulations, case law, scholarly articles, and other items and made offer to forgo litigation in exchange for certain agreements), Krishnan, 83 S.W.3d at 302 (privilege applied to attorney’s mandatory pre-suit notice letter to physician regarding potential medical negligence claim), Bell, 49 S.W.3d at 11–12 (privilege applied to attorney’s pre-suit demand letter regarding potential defamation claim), Crain, 22 S.W.3d at 60 (privilege applied to attorney’s communications to chair of state bar’s unauthorized practice of law committee and to lawyer for third party), and Russell, 620 S.W.2d at 866 (privilege applied to attorney’s letter referring to other pending litigation). Unlike the communications in Landry’s, Krishnan, Bell, Crain, and Russell, the communications here bore only a tangential connection to a judicial proceeding, and they do not support an inference that Marble Ridge was taking affirmative steps toward litigation.

*20 On this record, we agree with Neiman Marcus that applying the privilege to Marble Ridge’s communications would be an unprecedented expansion of the privilege—one we find both unwarranted and not in furtherance of the privilege’s underlying goals. Because we conclude Marble Ridge failed to satisfy its burden regarding the judicial-communications privilege on this record, we overrule Marble Ridge’s issue regarding section 27.005(d). See TEX. CIV. PRAC. & REM. CODE § 27.005(d) ; Shell Oil, 464 S.W.3d at 655; RESTATEMENT (SECOND) OF TORTS § 587 cmt. e.

CONCLUSION

We affirm the trial court’s April 9, 2019 order denying Marble Ridge’s amended motion to dismiss Neiman Marcus’s counterclaims.

190443f.p05

JUDGMENT

In accordance with this Court’s opinion of this date, the trial court’s April 9, 2019 order denying appellants’ amended motion to dismiss appellees’ counterclaims is AFFIRMED.

It is ORDERED that appellee NEIMAN MARCUS GROUP, INC., MARIPOSA INTERMEDIATE HOLDINGS LLC, NEIMAN MARCUS GROUP LTD LLC, THE NEIMAN MARCUS GROUP LLC, and NMG INTERNATIONAL LLC recover their costs of this appeal from appellants MARBLE RIDGE CAPITAL LP and MARBLE RIDGE MASTER FUND LP.

Judgment entered this 30th day of September, 2020.

Footnotes

1 The Honorable David Bridges, Justice, participated in the submission of this case. However, he did not participate in the issuance of this opinion due to his death on July 25, 2020.
2 We refer to all appellants as “Marble Ridge” and to all appellees as “Neiman Marcus.”
3 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. Because the underlying lawsuit was filed before September 1, 2019, the law in effect before September 1, 2019, applies. See Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, 2011 Tex. Gen. Laws 961–64, amended by Act of May 24, 2013, 83d Leg., R.S., ch. 1042, 2013 Tex. Gen. Laws 2499–2500. All citations to the TCPA are to the version before the 2019 amendments took effect.
4 In the trial court and in its briefing here, Marble Ridge argues the TCPA applies to Neiman Marcus’s counterclaims because the claims target its exercise of its right to free speech. While Neiman Marcus does not dispute this, the undisputed issue of TCPA coverage under section 27.005(b) does not alter the outcome in light of our conclusions regarding sections 27.005(c) and (d). See TEX. CIV. PRAC. & REM. CODE § 27.005(b), (c), (d).
5 Marble Ridge Capital, LP is an investment adviser registered by the United States Securities and Exchange Commission (SEC).
6 MyTheresa is “a retail entity that appeals to younger luxury customers primarily in Europe, Asia and the Middle East.” Neiman Marcus’s pleading explains, “[I]n late 2014 and early 2017, Neiman Marcus LTD designated the entities that operated [the MyTheresa subsidiaries] as unrestricted subsidiaries under the Debt Documents (the ‘Designation’)” and that “in September 2018, NMG International distributed its equity and debt interests in the MyTheresa [s]ubsidiaries to Neiman Marcus Inc. (the ‘Distribution’ and, with the Designation and PropCo Transaction, the ‘Transactions’).”
7 Neiman Marcus’s pleading states, “[I]n March 2017, Neiman Marcus LTD designated a separate entity, Nancy Holdings LLC, as an unrestricted subsidiary. Neiman Marcus LLC invested three real properties into Nancy Holdings, and Nancy Holdings then leased the properties back to Neiman Marcus LLC (the ‘PropCo Transaction’).”
8 According to the affidavits in the record (specifically, Eric Artho’s affidavit), an “interest coverage ratio” is “a contractually defined metric that compares earnings to interest expense.”
9 In deciding a TCPA motion to dismiss, the trial court may consider “ ‘the pleadings and supporting and opposing affidavits stating the facts on which the liability or defense is based.’ ” Goldberg, 594 S.W.3d at 824 (quoting TEX. CIV. PRAC. & REM. CODE § 27.006(a)). “However, the plaintiff’s pleadings are usually ‘the best and all-sufficient evidence of the nature of the action.’ ” Id. (quoting Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex. 2017)).
10 In considering whether a valid defense has been established under the third step, at least two of our sister courts have applied a standard of review essentially equivalent to a motion for summary judgment on an affirmative defense. See Batra v. Covenant Health Sys., 562 S.W.3d 696, 708 (Tex. App.—Amarillo 2018, pet. denied) (explaining this and stating, “[I]n order to defeat the [nonmovant’s] establishment of a prima facie claim, the [movant] must establish, as a matter of law, each essential element of at least one valid defense as to each of the [nonmovant’s] claims.”); Rosales v. Comm’n for Lawyer Discipline, No. 03-18-00725-CV, 2020 WL 1934815, at *4 (Tex. App.—Austin Apr. 22, 2020, no pet.) (mem. op.) (“The standard of review employed in considering whether a movant established a valid defense so as to be entitled to dismissal is ‘essentially equivalent to a motion for summary judgment on an affirmative defense,’ meaning we should consider the pleadings and evidence in favor of the nonmovant, taking evidence favorable to the nonmovant as true and indulging reasonable inferences and resolving doubts in favor of the nonmovant.”) (quoting Batra, 562 S.W.3d at 708).
11 Actual malice is not always required, but the parties agree the standard applies to Neiman Marcus. Defamation elements include “(1) the publication of a false statement of fact to a third party, (2) that was defamatory concerning the plaintiff, (3) with the requisite degree of fault, and (4) damages, in some cases.” See Lipsky, 460 S.W.3d at 593. Business-disparagement claims require a showing that “(1) the defendant published false and disparaging information about [plaintiff], (2) with malice, (3) without privilege, (4) that resulted in special damages to the plaintiff.” Forbes, Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 170 (Tex. 2003). The two claims have both similarities and differences, and “[d]epending on the circumstances ... a plaintiff may have a claim for defamation, or for business disparagement, or for both.” Lipsky, 460 S.W.3d at 591.
12 In Greenbelt Co-operative Publishing Association, Inc. v. Bresler, 398 U.S. 6, 14 (1970), the Supreme Court used “rhetorical hyperbole” to describe a speaker’s use of the word “blackmail” in a news article and described rhetorical hyperbole as “a vigorous epithet used by those who considered [the subject’s] negotiating position extremely unreasonable.” We have described rhetorical hyperbole as “extravagant exaggeration [that is] employed for rhetorical effect.” Backes v. Misko, 486 S.W.3d 7, 26 (Tex. App.—Dallas 2015, pet. denied).
13 Artho’s affidavit indicates he serves as Vice President, Corporate Finance and Treasurer for Neiman Marcus Group LTC LLC and The Neiman Marcus Group LLC.
14 In addition to section 587, which contains this comment as it pertains to statements by witnesses, the Restatement also contains similar comments in sections 586 and 587, which pertain to statements by lawyers or by parties. See RESTATEMENT (SECOND) OF TORTS § 586 cmt. e (for lawyers); id. § 587 cmt. e (for parties).
15 See James v. Brown, 637 S.W.2d 914 (Tex. 1982) (per curiam).
16 See Dallas Indep. Sch. Dist. v. Finlan, 27 S.W.3d 220 (Tex. App.—Dallas 2000, pet. denied) (op. on reh’g); Odeneal v. Wofford, 668 S.W.2d 819 (Tex. App.—Dallas 1984, writ ref’d n.r.e.); Russell v. Clark, 620 S.W.2d 865 (Tex. App.—Dallas 1981, writ ref’d n.r.e.). We follow our own precedent and may not overrule a prior panel decision of this Court absent an intervening change in the law by the legislature, a higher court, or this Court sitting en banc. Dyer, 573 S.W.3d at 427; MobileVision Imaging Servs., L.L.C. v. LifeCare Hosp. of N. Texas, L.P., 260 S.W.3d 561, 566 (Tex. App.—Dallas 2008, no pet.).
17 See BancPass, Inc. v. Highway Toll Admin., LLC, 863 F.3d 391 (5th Cir. 2017); Landry’s, Inc. v. Animal Legal Def. Fund, 566 S.W.3d 41 (Tex. App.—Houston [14th Dist.] 2018, pet. denied) (motion for rehearing on the petition for review was filed July 15, 2020, and is currently pending); McCrary v. Hightower, 513 S.W.3d 1 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (substitute opinion); Krishnan v. Law Offices of Preston Henrichson, P.C., 83 S.W.3d 295 (Tex. App.—Corpus Christi–Edinburg 2002, pet. denied); Bell v. Lee, 49 S.W.3d 8 (Tex. App.—San Antonio 2001, no pet.); Crain v. Smith, 22 S.W.3d 58 (Tex. App.—Corpus Christi–Edinburg 2000, no pet.).
18 McCrary also mentioned the TCPA, but only in the context of the procedural history of the case. See McCrary, 513 S.W.3d at 4–5 (affirming in part and reversing in part trial court’s grants of summary judgment to various defendants claiming judicial-proceedings privilege).
19 Watson and Tervita involved allegedly defamatory statements made during, not preliminary to, judicial or quasi-judicial proceedings. See Watson, 497 S.W.3d at 608 (allegedly defamatory statements made in a rule 202 petition); Tervita, 482 S.W.3d at 283 (allegedly defamatory statements made during workers’ compensation benefits hearing). We also considered the privilege, but not in the TCPA context, in Jenevein v. Friedman, 114 S.W.3d 743, 745 (Tex. App.—Dallas 2015, no pet.).
20 See also TEX. R. CIV. P. 81 (“When the defendant sets up a counter claim, the plaintiff may plead thereto under rules prescribed for pleadings of defensive matter by the defendant, so far as applicable.”).
21 Marble Ridge’s first amended petition, its last pleading, was dismissed with prejudice on March 19, 2019, two days before the TCPA hearing.
22 See TEX. CIV. PRAC. & REM. CODE § 27.005(d) (“court shall dismiss a legal action against the moving party if the moving party establishes by a preponderance of the evidence each essential element of a valid defense to the nonmovant’s claim”); TEX. R. CIV. P. 301 (“judgment of the court shall conform to the pleadings”).
23 A failure to raise pleading defects waives the issue for appellate review. See TEX. R. CIV. P. 90.
24 See also Dyke v. Hall, No. 03-18-00457-CV, 2019 WL 5251139, at *12 (Tex. App.—Fort Worth, Oct. 17, 2019, no pet.) (mem. op.) (court assumed party pleaded valid defense and did not reach pleading issue where court determined TCPA movant had not satisfied elements of an argued defense).
25 Here, the communications at issue were made by Kamensky, Marble Ridge’s managing partner, a non-practicing lawyer. Because Kamensky’s communications were made on Marble Ridge’s behalf and in the apparent capacity as its managing partner, not as its lawyer, we conclude section 587 applies here. See RESTATEMENT (SECOND) OF TORTS §§ 586–87 (Section 586 applies to attorney communications “in a judicial proceeding in which [the attorney] participates as counsel”).
26 See Erie R. Co. v. Tompkins, 304 U.S. 64 (1938).
27 The court noted that despite the privilege’s broad protection, the Restatement “recognizes limits on the reach of the privilege, particularly when the communications are made outside of judicial proceedings.” BancPass, 863 F.3d at 402.
28 After Shell provided the report, but during the pendency of Writt’s lawsuit, the DOJ filed an information charging Shell with conspiracy to violate the FCPA and aiding and abetting the making of false books and records, which was soon followed by the DOJ’s and Shell’s execution of a Deferred Prosecution Agreement, a type of agreement used by the DOJ when a company cooperates with an FCPA investigation. Shell Oil, 464 S.W.2d at 652.
29 See RESTATEMENT (SECOND) OF TORTS § 586.
30 Immediately after stating these principles, we stated, “All doubt should be resolved in favor of the relevancy.” Id. at 870. “Relevancy” in this context refers to the relation between the allegedly privileged communication and the judicial proceeding to which it allegedly relates. See Senior Care Res., Inc. v. OAC Senior Living, LLC, 442 S.W.3d 504, 513 (Tex. App.—Dallas 2014, no pet.) (“All doubt should be resolved in favor of the communication’s relation to the proceeding.”) (citing Russell, 620 S.W.2d at 870).
31 See, e.g., Krishnan, 83 S.W.3d at 302 (in dissimilar case, privilege applied to attorney’s mandatory pre-suit notice letter to physician regarding potential medical negligence claim); Bell, 49 S.W.3d at 11–12 (in dissimilar case, privilege applied to attorney’s pre-suit demand letter regarding potential defamation claim); Crain, 22 S.W.3d at 60 (in dissimilar case, privilege applied to attorney’s communications to chair of state bar’s unauthorized practice of law committee and to lawyer for third party). The parties also cite McCrary, a case involving facts similar to those before us. 513 S.W.3d at 7 (court concluded privilege did not apply to pre-suit communications by wealth management advisor and third party where there was little to no nexus between statements and resulting lawsuit).
32 See Russell, 620 S.W.2d at 868–69; Finlan, 27 S.W.3d at 239–40, 245; RESTATEMENT (SECOND) OF TORTS § 588 cmt c. (“It is not necessary that the defamatory matter be relevant or material to any issue before the court. It is enough that it have some reference to the subject of the inquiry.”)

Court of Appeals of Texas, Dallas.

ACE AMERICAN INSURANCE COMPANY, Appellant

v.

Clayton D. ELMER, Appellee

No. 05-19-00386-CV

|

Opinion Filed September 15, 2020

On Appeal from the 14th Judicial District Court, Dallas County, Texas, Trial Court Cause No. DC-17-06888

Attorneys and Law Firms

Kay E. Goggin, for Appellee.

Darryl J. Silvera, Jace Powell, for Appellant.

Before Chief Justice Burns, Justice Molberg, and Justice Carlyle

MEMORANDUM OPINION

Opinion by Justice Molberg

*1 Ace American Insurance Company (Ace) appeals the judgment for Clayton D. Elmer in its suit for judicial review of a Decision and Order (Decision) issued in favor of Elmer by the Texas Department of Insurance, Division of Workers’ Compensation Division (Division), after a contested case hearing regarding injuries sustained by Elmer while working as a truck driver for Heartland Express.1 Following a bench trial, the trial court entered judgment in favor of Elmer and awarded attorney’s fees.

Ace raises four issues on appeal: (1) the trial court erred by finding Elmer’s work injury extends to and includes depression, anxiety disorder, and chronic pain syndrome; (2) the trial court erred by finding Elmer’s date of maximum improvement is June 21, 2016, with an impairment rating of forty-five percent; (3) the trial court erred by awarding attorney’s fees because Elmer should not have prevailed at trial, or, alternatively, Elmer waived his fees by presenting no supporting evidence; and (4) the trial court entered an invalid judgment because it neither conformed with the evidence at trial nor complied with Texas Labor Code section 410.258. TEX. LAB. CODE § 410.258. Elmer did not file a response brief.

We affirm the trial court’s judgment.

BACKGROUND

On June 16, 2014, Elmer injured himself at work when his foot slipped while stepping out of a tractor-trailer (the work injury). He reported the incident approximately an hour-and-a-half later when he checked in with his dispatcher regarding his route to Waco. Elmer stopped several times along his route to get ice to relieve pain in his shoulder and knee. After finishing his route and dropping off the truck, his wife took him to the emergency room. Elmer eventually required surgeries on his left knee and left shoulder.

Due to post-injury pain, Elmer was able to engage only in limited physical activity. In February 2016, the parties agreed Elmer’s defined compensable injury included a left-knee medial meniscus tear, a left-knee lateral meniscus tear, a left-shoulder rotator cuff tear (original and recurrent), and left-shoulder bicipital tenosynovitis. At that time, Elmer did not claim he suffered chronic pain, anxiety, or depression related to the work injury.

On January 30, 2017, the Division held a contested case hearing. Elmer was the only witness, but he presented multiple reports from workers’ compensation doctors and medical care providers who had examined him and determined he suffered from chronic pain syndrome, depression, and anxiety as a direct result of the effects of the compensable injury. Elmer was treated for chronic pain syndrome, depression, and anxiety by several medical providers. Experts who opined in favor of Elmer included Dr. Maggie Perish, Dr. Tommy Overman, Dr. Robert Panzarella, and Marce Hufnagel, M.Ed., LPC.

*2 Dr. Panzarella—the Division-appointed designated doctor—opined that Elmer’s compensable injury extended to and included chronic pain syndrome, depression, and anxiety, which arose from and were directly related to the work injury. According to Dr. Panzarella, Elmer reached maximum medical improvement (MMI) on June 21, 2016, with a whole person impairment rating of forty-five percent. The insurance carrier’s expert witness, Dr. Andrew Brylowski, who had examined and talked with Elmer for approximately three hours, determined Elmer reached MMI on June 2, 2016, with a whole person impairment rating of eleven percent.

Finding in favor of Elmer, the Division’s Decision noted Elmer “presented multiple reports from multiple care providers who have determined that [Elmer] is experiencing chronic pain syndrome, depression, and anxiety as a direct result of the effects of the compensable injury.” Dr. Brylowski, the “carrier-selected post-designated doctor,” was the “only doctor who did not believe that [Elmer] sustained the disputed conditions,” i.e., chronic pain syndrome, depression, and anxiety (emphasis added). According to the Division, Dr. Brylowski’s “analysis of the results of his testing was contradictory.” The Decision observed:

On the one hand, [Dr. Brylowski] stated that his testing showed that [Elmer] was not overreporting his symptoms and that the tests reflected a technical validity of the results. Then, in the same report, he maintained that the testing was consistent with overreporting that allegedly invalidated a mental and behavioral impairment rating. Yet Dr. Brylowski also stated that people with some of the test results he obtained tended to experience anxiety, depression, and withdrawal from every day activities.

The Decision further stated that “Dr. Brylowski’s opinion was, at best, much less persuasive than the rest of the medical record” and was “contrary to [Elmer’s] testimony and all of the other medical evidence in the record.”

The Division concluded Elmer’s chronic pain syndrome, anxiety disorder, and depression were caused or aggravated by, and did arise out of or naturally flow from, the work injury. It further concluded the MMI date was June 21, 2016, with an impairment rating of forty-five percent. Ace was ordered to pay benefits in accordance with the Division’s Decision. After exhausting its administrative remedies, Ace appealed the adverse determination in district court.

The only evidence presented during the bench trial was Elmer’s live testimony and Dr. Brylowski’s expert report and deposition testimony. At trial, Elmer testified that prior to the work injury, he was not being treated for depression, anxiety, or chronic pain; and his chronic pain developed after the injury and “limited his ability to do physical activities.” Elmer told the trial court he received both medical and psychological treatment as a result of the work injury. Over Ace’s objection, Elmer testified he was “first diagnosed with depression or anxiety” in “[m]id 2015” by Dr. Perish, who gave him “psychological testing” and treatment; “[Dr. Perish’s] records were in evidence at the Contested Case Hearing”; other counselors also treated Elmer and “[a]s part of the Workers’ Comp process [he was] requested or ordered to go to examinations by [three] doctors other than [his] treating doctors”; and he received treatment with counselors for anxiety, depression, and chronic pain. The trial court overruled Ace’s hearsay objection on the grounds that statements made for the purpose of medical treatment are an exception to the hearsay rule. See TEX. R. EVID. 803(4). Elmer testified that for and during the course of his medical treatment:

*3 Things we spoke about was my love to work, my love of family and how it’s diminished of where I don’t see my family hardly any more; the difficulties of just daily living and self-care; and just empty and worthless feeling; not being able to be a provider.

The trial court found in favor of Elmer and entered findings of fact and conclusions of law. In its Final Judgment, the trial court stated:

Defendant Clayton Elmer credibly testified as to his treatment of chronic pain, depression and anxiety as part of his workers’ compensation injury, and of examples of pain interfering with acts of daily living, as well as difficulties with his left shoulder and left knew. He testified he was diagnosed and treated for these conditions after his 2014 compensable injury by his workers compensation doctors, and before a subsequent injury in 2015 at physical therapy.

ANALYSIS

Sufficiency of the Evidence

Ace’s first and second issues and the first part of his fourth issue challenge the sufficiency of the evidence to support the trial court’s judgment. In its first issue, Ace argues, “[t]he trial court erred in finding Elmer’s work injury extends to and includes depression, anxiety disorder, and chronic pain syndrome, as the only expert evidence offered at trial found those conditions were not related, the trial court relied on information not admitted during trial, and the trial court held ACE to the incorrect burden of proof.” Ace’s second issue contends “[t]he trial court erred in finding Elmer’s date of maximum medical improvement is June 21, 2016 with an impairment rating of 45% as it failed to adopt the only valid impairment rating submitted into evidence....” And the first part of Ace’s fourth issue argues the trial court’s judgment was not valid because it “fail[ed] to conform to the evidence presented at trial.”2

Standard of Review

We apply a “modified de novo review” standard to a judicial review of a Texas Workers’ Compensation Commission Appeals Panel’s final decision. Tex. Workers’ Comp. Comm’n v. Garcia, 893 S.W.2d 504, 530 (Tex. 1995). Under this standard, a trial court may review “only those issues finally decided by the Division’s Appeals Panel.” Tex. Dept. of Ins., Workers’ Comp. Div. v. De Los Santos, 446 S.W.3d 800, 806 (Tex. App.—San Antonio 2014, no pet.). The party seeking judicial review of an appeals panel decision bears the burden of proof by a preponderance of the evidence. Id.; TEX. LAB. CODE § 410.303. In a bench trial, the trial court “shall consider the decision of the appeals panel” in rendering its judgment.3 TEX. LAB. CODE § 410.304(b) (emphasis added); see also De Los Santos, 446 S.W.3d at 806 (“When a court is the trier of fact, it is to consider the decision of the Division’s Appeals Panel.”); Tex. Workers’ Comp. Ins. Fund v. Simon, 980 S.W.2d 730, 737 at n.4 (Tex. App.—San Antonio 1998, no pet.).

*4 Following a bench trial, a trial court’s findings are reviewed according to the legal sufficiency standards by which jury findings are measured. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). In determining whether the evidence is legally sufficient to support a finding, we consider the evidence in the light most favorable to the judgment and indulge every reasonable inference that would support it. See City of Keller v. Wilson, 168 S.W.3d 802, 826–27 (Tex. 2005). We credit favorable evidence if a reasonable fact finder could and disregard contrary evidence unless a reasonable fact finder could not. Id. at 827. When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is less than a scintilla and, in legal effect, is no evidence. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004) (citing Kindred v. Con/Chem., Inc., 650 S.W.2d 61, 63 (Tex. 1983)). More than a scintilla of evidence exists if the evidence rises to a level that would enable reasonable and fair-minded people to differ in their conclusions. Ford Motor Co., 135 S.W.3d at 601 (citing Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)). The fact finder is the sole judge of the credibility of the witnesses and the weight give their testimony. City of Keller, 168 S.W.3d at 819. It is the province of the fact finder to resolve any conflicts in the evidence. Id. at 820. So long as the evidence falls within a zone of reasonable disagreement, we may not substitute our judgment for that of the fact finder. Id. at 822.

Section 410.258’s Notice Requirement Does Not Apply To The Trial Court’s Judgment In This Case

We first address Ace’s argument in the second part of its fourth issue that the trial court’s failure to file any proposed judgment with the Division not later than the thirtieth day before the date on which the court is scheduled to enter the judgment renders the judgment void. We disagree with Ace. Section 410.258 would have required Ace—as the party initiating the proceeding—to give the Division advance notice of a “proposed default judgment” or “proposed agreed judgment.” TEX. LAB. CODE § 410.258(a). Here, the trial court’s judgment followed a contested trial. Thus, section 410.258’s notice requirement did not apply to the trial court’s judgment. Clewis v. Safeco Ins. Co. of America, 287 S.W.3d 197, 202–203 (Tex. App.—Fort Worth 2009, no pet.) (concluding section 410.258(a)’s notice requirement only applies to “judgments entered apart from completed adversarial proceedings” and not judgments following a contested trial); see also Tex. Prop. & Cas. Ins. Guar. Ass’n for Petrosurance Cas. Co. v. Brooks, 269 S.W.3d 645, 649–50 (Tex. App.—Austin 2008, no pet.) (concluding section 410.258(a) does not apply to judgments “entered by the trial court that were not submitted or proposed to the court by agreement of the parties or the result of a default by the defendant”). We resolve the second part of Ace’s fourth issue against it.

Ace Failed to Provide A Complete Record On Appeal

It is the appellant’s burden to supply an appellate court with a complete record demonstrating why the trial court reversibly erred. Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990). Ace did not do so in this case.

The trial transcript reflects that during his direct examination of Elmer, Ace’s counsel directed Elmer and the trial court to the records and transcript of the case hearings before the administrative agency.

The Court: Identify the records for [Elmer’s attorney], please.

[Ace’s attorney]: Prior sworn testimony.

The Court: In what matter, please?

[Ace’s attorney]: In this matter before the administrative agency.

The Court: Okay.

[Ace’s attorney]: Page 34

....

[Elmer’s attorney]: There were three different contested case hearings in this case on different issues.

The Court: Will you identify—

....

[Ace’s attorney]: Transcript January 30th of 2017.

Ace’s counsel proceeded to question Elmer, without objection, about his testimony in the January 30, 2017, administrative agency hearing. Because the parties and the trial court treated the hearing transcript—which was raised and discussed by Ace’s counsel at trial—as if it had been admitted into evidence, we conclude it was “for all practical purposes, admitted.” Schott Pelley P.C. v. Wynne, 578 S.W.3d 694, 703 (Tex. App.—Dallas 2019, pet. denied) (quoting Travelers Indem. Co. of R.I. v. Starkey, 157 S.W.3d 899, 904 (Tex. App.—Dallas 2005, pet. denied)). Ace, however, did not include the transcript or record from that hearing in the record on appeal.

*5 Because the burden was on Ace to ensure the record on appeal is complete, it is presumed that the omissions support the trial court’s judgment. On that basis alone, we must affirm the trial court’s judgment. See Starkey, 157 S.W.3d at 904–05; Sandoval v. Comm’n for Lawyer Discipline, 25 S.W.3d 720, 722 (Tex. App.—Houston [14th Dist.] 2000, pet. denied).

The Evidence Was Sufficient To Support The Judgment

Even if Ace had not failed to provide a complete record on appeal, the trial court still did not err because the evidence was sufficient to support the judgment. In a workers’ compensation case, the party seeking judicial review of an appeals panel decision has the burden of proof by a preponderance of the evidence. TEX. LAB. CODE § 410.303. While Ace concedes that—as the party appealing the administrative findings—it had the burden of proof in the trial court, it argues that after it presented Dr. Brylowski’s expert report and deposition testimony, the burden shifted back to Elmer to present expert testimony to contradict Dr. Brylowski and establish a positive connection between the work injury and Elmer’s depression, anxiety disorder, and chronic pain syndrome. According to Ace, because Elmer did not present contradictory expert testimony, its expert witness conclusively established the lack of causation. We disagree.

Under a sufficiency analysis, Ace’s expert testimony “must be examined in the context of asking whether” a reasonable fact finder could have “disregarded it or reached a contrary result” or whether a reasonable fact finder could have “believed the evidence favorable to” Elmer. See State Office of Risk Management v. Ribble, No. 03-12-00084-CV, 2014 WL 4058936, at *2 (Tex. App.—Austin Aug. 13, 2014, no pet.) (mem. op.). “The final test for legal sufficiency must always be whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review.” City of Keller, 168 S.W.3d at 827.

We reject Ace’s argument the trial court erred by considering the Decision in reaching its judgment. To the contrary, the trial court properly considered the Decision, which was attached to Elmer’s trial brief on judicial review of the Decision, and part of the trial court’s record. TEX. LAB. CODE § 410.304(b); Simon, 980 S.W.2d at 737 n.4 (“A trial court must consider the Appeals Panel decision in reaching a judgment.”).

The circumstances in this case are remarkably similar to those in Liberty Mutual Insurance Co. v. Burk, 295 S.W.3d 771 (Tex. App.—Fort Worth 2009, no pet.). In Burk, Liberty Mutual had attached the appeals panel decision to its original petition, but the decision was not admitted into evidence at trial. Only Roy Burk (the injured worker) and Dr. Leonard Hershkowitz (Liberty Mutual’s retained expert witness) testified at trial. Liberty Mutual argued—as Ace does here—that:

(1) because the appeals panel decision was not admitted into evidence, it was “not evidence that can support the trial court’s judgment,”

(2) because “Dr. Hershkowitz’s testimony was uncontroverted [it was] therefore conclusive,”

(3) “there [was] no evidence to support the trial court’s judgment because Burk did not offer testimony from a medical expert at trial ... [and] expert medical testimony is required where the injury or condition is beyond the scope of common knowledge and experience of the fact finder,” and

*6 (4) the evidence therefore was insufficient to support the trial court’s finding that Burk’s work-related injury caused his polyneuropathy and foot ulcerations.

Rejecting Liberty Mutual’s arguments and concluding the evidence was legally sufficient to support the trial court’s finding that Burk’s work-related injury caused his polyneuropathy and foot ulceration, the Forth Worth court of appeals stated:

“It is well recognized that a trial court may take judicial notice of its own records in a cause involving the same subject matter between the same, or practically the same, parties.” Sierad v. Barnett, 164 S.W.3d 471, 481 (Tex. App.—Dallas 2005, no pet.).... Once the trial court took judicial notice of the appeals panel decision, it was evidence in the case that could potentially support the trial court’s judgment....

Burk, 295 S.W.3d at 779.

The Burk court also rejected the exact argument made by Ace in this case—that because Dr. Hershkowitz’s testimony was uncontroverted by opposing expert testimony, it was conclusive:

As the party appealing the appeals panel decision, Liberty Mutual had the burden to prove by a preponderance of the evidence that Burk’s work-related injury did not cause his polyneuropathy and foot ulceration. Despite Liberty Mutual’s burden of proof, Liberty Mutual argues there is no evidence to support the trial court’s judgment because Burk did not offer testimony from a medical expert at trial. In doing so, Liberty Mutual cites cases for the proposition that expert medical testimony is required where the injury or condition is beyond the scope of common knowledge and experience of the fact finder. While the legal proposition is facially correct, Liberty Mutual appears to ask us to apply the proposition against Burk, who did not have the burden of proof at trial, and hold that Burk presented no evidence that his work-related injury caused his polyneuropathy and foot ulceration. This we cannot do. Instead, our inquiry must focus on whether there is any evidence in the record to support the trial court’s finding that Burk’s work-related injury caused his polyneuropathy and foot ulceration.

Id. at 778 (emphasis added). See also Hunter v. Ford Motor Co., Inc., 305 S.W.3d 202, 207 (Tex. App.—Waco 2009, no pet.) (“In this case Ford did not have the burden of proof; it was not required to prove there was no defect.”). Observing that “an expert’s testimony may be contradicted by the testimony of other witnesses or by cross-examination of the expert witness,” the Burk court concluded, “Dr. Hershkowitz’s testimony was internally inconsistent” and therefore not conclusive. Burk, 295 S.W.3d at 779–80.

In this case, at the beginning of trial, the parties and the trial court explicitly acknowledged “the important thing in this case and what this trial is over is a judicial review of a Workers’ Compensation decision.” The Decision was the result of the three administrative hearings raised by Ace’s counsel during trial. Section 410.304 of the labor code required the trial court to consider the Decision. TEX. LAB. CODE § 410.304(b). And, the Decision was part of the trial court’s record.4 The trial court thus properly considered the Decision before rendering its judgment.

*7 Ace also argues that Dr. Brylowski’s expert report was uncontroverted and therefore conclusive. However, Elmer did not have the burden of proof, and our review must focus on whether there is any evidence in the record to support the trial court’s judgment. Burk, 295 S.W.3d at 778. Moreover, Dr. Brylowski’s expert reports admitted into evidence in the trial court refer to and/or discuss the reports and/or findings by Dr. Perish, Dr. Overman, Dr. Pazarella, and/or Ms. Hufnagel, placing their findings in favor of Elmer squarely before the trial court.5 Dr. Brylowski’s expert report states:

• “There is a neuropsychological diagnostic interview by Tommy Overman. He opined there is a pain disorder associated with psychological factors and a general medical condition....”

• “There is a reference to recommendation for psychiatric referral because Tommy Overman agrees that his depression is caused by his injury related issues (PDF page 56/96). However, review of systems states ‘no anxiety and no depression’. Examiner comment: Inconsistency not explained. Nonetheless, there is psychiatry referral.”

• “There is an LPC evaluation that is reviewed. Chronic pain, depression, and anxiety are opined on Axis I.”

• “There is reference to being referred to pain management because of ongoing pain complaints by Dr. Zavala.... Pain again is rated at 9/10 by the physical therapist.”

• “After the designated doctor examination, physician at Concentra shows blood pressure at 152/110. There is reference to major depressive disorder, status post rotator cuff surgery. There is reference to awaiting impairment rating and psych referral.”

• “The claimant reports he is up and down all night. He reports he wakes up sweating. He reports he typically wakes with stabbing pain in both shoulders. He reports he does snore and his wife wakes him up. He reports it is not often, primarily when he is restless. He reports his weight has increased. He is gaining weight. He eats more when he is depressed an anxious. He reports that riding his bike helped him but he cannot do that now without his pain medicines. He reports that biking helps still his mind.”

Dr. Brylowski’s expert report noted the “DESIGNATED DOCTOR EXAMINER DEFINED INJURY; CONDITIONS; DIAGNOSES” included “Anxiety disorder[,] Chronic Pain syndrome[, and] Depression.”

In fact, Ace’s counsel himself raised Dr. Panzarella’s findings at trial. For example, Ace’s attorney stated during trial:

• “The DWC appointed a doctor, he assigned an impairment rating which was disputed, which is why we’re here in court.”

• “[Elmer] had a knee surgery and shoulder surgery and then went in January 2015 to a designated doctor from the Division to get a certified Maximum Medical Improvement and an impairment rating signed.”

Moreover—as was the case in Burk—Dr. Brylowski’s expert report was internally inconsistent. While his expert report stated that his testing showed Elmer was not overreporting his symptoms and some people with similar testing results tended to experience anxiety, depression, and withdrawal from every day activities, it also stated his testing was consistent with overreporting by Elmer which therefore invalidated a mental and behavioral impairment rating. Dr. Brylowski’s expert report conceded his testing results on depression and anxiety were “consistent with multiple possibilities.” It also stated that Elmer’s clinical syndromes “included anxiety,” “posttraumatic stress,” “thought disorder and major depression,” and observed:

*8 The F, FB, and FP scores were 102, 107, 64 respectively. In general, F-scale scores over 65 are seen in people with emotional turmoil including anxiety and depression, feelings of sadness and hopelessness and a self-perception of being unable to cope with the stresses and strains of life.”

Dr. Brylowski’s opinion that although Elmer “has significant degenerative changes in his knee and bilateral shoulders,” which are “painful conditions,” he has a zero percent mental and behavioral impairment was contrary to other experts’ findings as described in Dr. Brylowski’s expert report and to Elmer’s trial testimony. To the extent the trial court was presented with conflicting evidence, it was free to believe one witness and disbelieve others and resolve conflicts in testimony of any witness. See McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986).

In its second issue, Ace argues the trial court erred in finding Elmer’s date of MMI is June 21, 2016, with an impairment rating of forty-five percent because the trial court failed to adopt the only valid impairment rating submitted into evidence as mandated by the labor code. In a judicial review case, the court or jury must adopt the specific impairment rating of one of the physicians in the underlying administrative case. See TEX. LAB. CODE § 410.306(c); Ballard v. Arch Ins. Co., 478 S.W.3d 950, 959 (Tex. App.—Houston [14th Dist.] 2015, no pet.); Bell v. Zurich Am. Ins. Co., 311 S.W.3d 507, 511 (Tex. App.—Dallas 2009, pet. denied). In other words, the requirement that the impairment rating match one of the physicians’ findings is part of the substantive statutory scheme. Bell, 311 S.W.3d at 511. Thus, the fact finder must adopt the specific rating of one of the physicians in the case. TEX. LAB. CODE § 410.306(c). Evidence of extent of impairment is limited to that presented to the Division, unless the court makes a threshold finding that the claimant’s condition has changed substantially, in which case new evidence may be introduced. Ballard, 478 S.W.3d at 959. Here, the trial court adopted the impairment rating and opinions of Dr. Panzarella, as expressed in the Decision. For the reasons stated above, the evidence supports the trial court’s conclusion that the date of MMI is June 21, 2016, and the impairment rating certified for the entire injury is forty-five percent.

In the first part of its fourth issue, Ace argues the trial court did not enter a valid judgment because it was based on facts not in evidence and with “no clear rationale or justification.” For the reasons stated above, we conclude the trial court’s judgment was based on facts in evidence and with clear rationale and justification, and therefore the judgment was valid.

Viewing the evidence in the light most favorable to the trial court’s verdict, we conclude there was more than a scintilla of evidence supporting the trial court’s findings. See City of Keller, 168 S.W.3d at 826–27. We resolve Ace’s first and second issues, and the first part of Ace’s fourth issue, against it.

Attorney’s Fees

In its third issue, Ace challenges the trial court’s award of attorney’s fees because Elmer should not have prevailed at trial. Because we affirm the trial court’s judgment, we need not address this argument. Alternatively, Ace contends Elmer waived attorney’s fees by not presenting any evidence of fees at trial, by requesting fees in a post-judgment motion, and by failing to designate an expert on attorney’s fees during the discovery period; and the trial court erred by awarding attorney’s fees without holding a hearing and by failing to give Ace notice of the order awarding attorney’s fees.

Analysis

*9 The Texas Labor Code makes the insurer liable for the claimant’s attorney’s fees when the insurer seeks judicial review of compensability or eligibility issues and the claimant prevails. TEX. LAB. CODE § 408.221(c) (“an insurance carrier that seeks judicial review ... of a final decision of the appeals panel regarding compensability or eligibility for, or the amount of, income or death benefits is liable for reasonable and necessary attorney’s fees ... incurred by the claimant ... if the claimant prevails on an issue on which judicial review is sought by the insurance carrier”) (emphasis added); see also Commerce & Indus. Ins. Co. v. Ferguson-Stewart, 339 S.W.3d 744, 747 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (“Under section 408.221(c) of the Labor Code, an insurance carrier that seeks judicial review of an appeals panel decision is liable for a claimant’s reasonable and necessary attorneys’ fees as a result of the appeal if the claimant prevails on an issue on which the carrier seeks judicial review.”). In awarding attorney’s fees, the trial court must consider:

(1) the time and labor required;

(2) the novelty and difficulty of the questions involved;

(3) the skill required to perform the legal services properly;

(4) the fee customarily charged in the locality for similar legal services;

(5) the amount in controversy;

(6) the benefits to the claimant that the attorney is responsible for securing; and

(7) the experience and ability of the attorney performing the services.

TEX. LAB. CODE § 408.221(d).

In his “Original Answer Counter-Claim and Request for Disclosures,” Elmer pleaded for attorney’s fees, costs of court, and expenses through trial and appeal. Elmer did not, however, designate Kay Goggin, his attorney, as an expert witness. In his trial brief, filed in the trial court on December 17, 2018, Elmer asserted Ace was liable for his attorney’s fees should he prevail in this case, stating, “If the claimant prevails in this case, liability for payment of fees is shifted to the Insurance Carrier. Claimant filed a Counter-Claim for such action.”

The trial court’s January 3, 2019 judgment awarded Elmer unspecified attorney’s fees and costs of court and stated, “Attorney fees are due and payable to attorney Kay E. Goggin within 30 days of the finality of this judgment.” On January 11, 2019, Goggin filed an affidavit in the form of a verified motion for statutory attorney’s fees which:

• swore that the facts stated in the application for attorney’s fees were correct;

• described reason for and amount of expenses incurred;

• stated she expended 58 hours from June 26, 2017, through January 11, 2019, on Elmer’s case;

• described with specificity the tasks she performed for Elmer’s case, and addressed the novelty and difficulty of the questions involved, the skill required to perform the legal services, and her qualifications to handle the issues in this case;

• stated her hourly rate is $350, described the fee customarily charge in Texas for similar legal services, explained with specificity why her hourly rate was a reasonable fee in Texas and in Dallas County, described her experience and abilities, and attached a curriculum vitae; and

• addressed the amount involved in the controversy and the benefits to Elmer that she secured.

Goggin’s application requested an attorney’s fee award in the amount of $20,400; an additional $7,500 in the event Ace unsuccessfully appealed this matter to this Court; and an additional $7,500 for an appeal to the Texas Supreme Court with an additional $7,000 for oral argument and “for whatever else” she and Elmer were “justly entitled.”

Despite that the trial court’s judgment ordered Ace to pay attorney’s fees to Goggin, Ace did not file response to Goggin’s verified motion for attorney’s fees, a motion for continuance, or a motion to exclude Goggin on the grounds of surprise, prejudice or failure to provide underlying data as to attorney’s fees. Nor did Ace request findings on the amount of fees. On January 15, 2019, before expiration of its plenary power,6 the trial court awarded Goggin the attorney’s fees requested in her verified motion “[a]fter consideration of the written evidence of time and expenses, with support of the factors under Texas Labor Code § 408.221.” On February 14, 2019, Ace filed a motion to modify the order on attorney’s fees, which was overruled by operation of law.

*10 Goggin submitted evidence on the issue of statutory attorney’s fees by filing an affidavit in the form of a verified motion.7 See Bullet Concrete Materials, Inc. v. TexogaTechs. Corp., No. 09–11–00162–CV, 2012 WL 586676, at *3 (Tex. App.—Beaumont, Feb. 23, 2012, no pet.) (quoting Cochran v. Wool Growers Cent. Storage Co., 166 S.W.2d 904, 908 (Tex. 1942)) (generally, “[W]here the testimony of an interested witness is not contradicted by any other witness, or attendant circumstances, and the same is clear, direct, and positive, and free from contradiction, inaccuracies, and circumstances tending to cast suspicion thereon, it is taken as true, as a matter of law.”). We conclude Ace’s complaint that Elmer did not submit evidence or expert witness testimony on the issue of attorney’s fees fails.

Ace also complains Goggin was not designated as an expert witness prior to trial. In this case, the trial court’s consideration of Goggin’s affidavit did not result in unfair surprise or prejudice to Ace because section 408.221(c) of the labor code makes the insurer liable for the claimant’s attorney’s fees when the insurer seeks judicial review of compensability or eligibility issues and the claimant prevails; Elmer’s pleadings included a request for attorney’s fees from the lawsuit’s inception; the trial court’s judgment ordered Ace to pay attorney’s fees to Goggin in an unspecified amount “within 30 days of the finality of this judgment”; Ace did not object to the trial court’s attorney’s fees award in the judgment or file a motion for continuance; and Ace did not file a motion to exclude Goggin’s affidavit on attorney’s fees. See Beard Family P’ship v. Commercial Indem. Ins. Co. 116 S.W.3d 839, 850 (Tex. App.—Austin 2003, no pet.). We conclude Ace waived this issue for review.

The final judgment was entered on January 3, 2019. Ace did not object to or otherwise complain about the inclusion of the fee in the judgment. On January 11, 2019, Goggin’s filed her verified motion for attorney’s fees. Even after the trial court entered its order on Elmer’s attorney’s fees on January 15, 2019, Ace did not respond until February 14, 2019. In its motion to modify order on attorney’s fees, Ace did not complain the fees awarded were not necessary or unreasonable. The record on appeal does not show Ace presented any evidence rebutting the reasonableness of the fees. We conclude that under the circumstances of this case, the trial court did not abuse its discretion by considering Goggin’s affidavit and ordering Ace to pay attorney’s fees directly to Goggin. See Holland v. Fidelity & Dep. Co. of Md., 623 S.W.2d 469, 471 (Tex. App.—Corpus Christi 1981, no pet.). We resolve Ace’s third issue against it.

We affirm the trial court’s judgment.

Footnotes

1

Elmer was not represented by counsel at the Division proceedings. Instead, he utilized the free ombudsman assistance provided for pro se claimants in administrative disputes.

2

The second part of Ace’s fourth issue contends “the Texas Department of Insurance was not informed of the proposed judgment 30 days prior the entry [sic] of a final order as required by the Texas Labor Code § 410.258.”

3

The fact finder, however, is not required to accord the decision any special weight. See Bruno v. Trinity Univ. Ins. Co. of Kan., No. 13-03-038-CV, 2004 WL 2904308, at *1 (Tex. App.—Corpus Christi, Dec. 16, 2004, no pet.) (mem. op.).

4

“A trial court may take judicial notice of the records in its own court filed in the same case, with or without the request of a party.” In re K.F., 402 S.W.3d 497, 505 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). Here, we may presume the trial court took judicial notice of the Decision, which was part of the record in this case. Id.

5

Dr. Perish, Dr. Overman, Dr. Pazarella, and Ms. Hufnagel are referenced in the “SUMMARY OF RECORDS” section of Dr. Brylowski’s expert report.

6

See TEX. R. CIV. P. 329b.

7

Because this was a bench trial and not a jury trial, Ace was not entitled to have the attorney’s fees issue determined by a jury.

Court of Appeals of Texas, Dallas.

B.C., Appellant

v.

STEAK N SHAKE OPERATIONS, INC., Appellee

No. 05-14-00649-CV

|

Opinion Filed August 3, 2020

Attorneys & Firms

Christopher L. Kurzner, James F. Parker III, Matthew R. McCarley, Dallas, Warren K. Paxton Jr., Austin, for Appellee.

Matthew J. Kita, Dallas, for Appellant.

Before Justices Reichek,1 Nowell,2 and Evans

MEMORANDUM OPINION ON REMAND

Opinion by Justice Evans

*1 B.C.’s assault claim3 against Steak N Shake Operations, Inc. (SNS) is before us for the third time on its second remand from the supreme court. B.C. appeals an adverse traditional and no-evidence summary judgment enumerating her issues as: (1a) whether there is a genuine issue of material fact that SNS is directly liable for Jose Tomas Ventura’s assault on B.C. because he was a vice-principal of SNS and, therefore, B.C.’s assault claim fits into a traditional exception to the Texas Workers’ Compensation Act (TWCA); (1b) whether B.C.’s common law assault claim was preempted by the Texas Commission on Human Rights Act (TCHRA); and (2) whether there is a genuine issue of material fact on each element of B.C.’s assault claim and whether B.C. has any evidence to support her alternative pleading that SNS is vicariously liable for Ventura’s alleged assault under the common law doctrine of respondeat superior.4 As explained below, B.C.’s issue 1b has been finally resolved; we agree with B.C.’s issue 1a and the first-half of her issue 2 that there is summary judgment evidence that Ventura was SNS’s vice-principal when he assaulted B.C.; but we disagree with B.C. regarding SNS’s respondeat superior liability. So, we affirm in part and reverse in part and remand to the trial court for further proceedings.

PROCEDURAL POSTURE

Issue 1b—First Opinions

This Court’s original opinion resolved against B.C. her issue 1b. B.C., 461 S.W.3d at 930. The supreme court reversed, distinguishing B.C.’s claim for a single assault from its TCHRA preemption analysis in Waffle House, Inc. v. Williams, 313 S.W.3d 796 (Tex. 2010) on the basis that the gravamen of B.C.’s claim is not workplace harassment but assault in part because B.C. alleges her claim directly against SNS as an assault committed by Ventura as a vice-principal of SNS. B.C., 512 S.W.3d at 281–83. The supreme court remanded to us to decide B.C.’s remaining issues. Id. at 285. So, B.C.’s issue 1b is conclusively resolved in her favor.

Issues 1a & 2

Opinion after First Remand—B.C.’s Summary Judgment Response not Considered

In a divided opinion after the first remand, the majority resolved B.C.’s issues 1a and 2 by deciding B.C.’s summary judgment response was filed late and nothing in the record indicated the trial court had granted leave for late filing or otherwise considered it. B.C. v. Steak N Shake Operations, Inc., 532 S.W.3d 547, 550 (Tex. App.—Dallas 2017), rev’d, 598 S.W.3d 256 (Tex. 2020). On the merits, the majority concluded that without her summary judgment response, B.C. had failed to raise a genuine issue of material fact and affirmed the trial court. 532 S.W.3d at 552, 562. In a supplemental panel opinion on motion for rehearing en banc, the panel majority decided B.C. waived her new argument—that a supplemental record demonstrated B.C. had timely filed her summary judgment response5—because she first asserted it after this Court had issued two different majority opinions and the supreme court had issued a per curium opinion. Id. at 561–62.

Second Supreme Court Opinion—All Summary Judgment Evidence Should be Considered

*2 The supreme court reversed for a second time but without reaching the merits of B.C.’s issues 1a and 2. B.C. v. Steak N Shake Operations, Inc., 598 S.W.3d 256 (Tex. 2020). First, the supreme court decided this Court’s supplemental opinion correctly decided B.C. had waived her argument on motion for rehearing en banc that her late-filed summary judgment response related back in time to her first attempted filing as shown by the electronic receipt in a supplemental record after remand. Id. Then, the supreme court considered the recital in the summary judgment order that the trial court considered the “evidence and arguments of counsel,” without any limitation. Id. at 261. The court noted, “B.C. contends that the trial court’s recital is sufficient—as it demonstrates that the trial court considered all the evidence.” B.C., 598 S.W.3d at 260 (emphasis added). The supreme court agreed with B.C.’s argument stating “we have no basis to conclude the trial court did not consider all summary-judgment evidence on file at the time the motion was heard.” Id. at 262 (emphasis added). “We ... conclude that the trial court’s recital that it considered the ‘evidence and arguments of counsel,’ without any limitation, is an ‘affirmative indication’ that the trial court considered B.C.’s response and the evidence attached to it.” Id. at 261. The supreme court remanded to this Court to consider all the summary judgment evidence including B.C.’s response. Id. at 262. We, therefore, now reconsider B.C.’s issues 1a and 2 considering all the summary judgment evidence.

BACKGROUND FOR DECISION ON THE MERITS

SNS’s motion for summary judgment presented the following summary facts regarding Ventura’s assault on B.C.:

After lighting their cigarettes and smoking them silently while staring at each other for a minute or two, Plaintiff testified that Ventura moved toward her and attempted to kiss her, pushing her up against the sink.... When she refused, Ventura attempted to remove her pants and apron and lift his hand up her shirt until she pushed him away.... Plaintiff also testified that Ventura then exposed himself and tried to force her head toward his crotch, apparently in an effort to induce Plaintiff to perform oral sex on him, but that she pushed him to the ground and walked out the door.... According to Plaintiff, the encounter lasted 15 to 20 minutes.

(Footnotes omitted citing B.C.’s deposition testimony). This presented B.C.’s version of the facts of the assault: Ventura attempted to sexually impose himself on B.C., attempted to remove her clothes and fondle her under her clothes, exposed himself to her, attempted further sexual assault of oral sex, and B.C. succeeded in resisting Ventura’s assault then left the restroom. In its first opinion, the supreme court explained the basis on which B.C. alleges SNS was directly responsible for the assault is because Ventura was a vice principal so it was the same as alleging SNS assaulted her:

Here, B.C. claims that Steak N Shake is liable because one of its alleged vice principals committed an assault. Essentially, B.C. alleges that Steak N Shake steps into the shoes of the assailant and is, therefore, directly liable for her injury.

B.C., 512 S.W.3d at 281.6

SNS moved for traditional and no-evidence summary judgment. As relevant here, SNS sought traditional summary judgment on B.C.’s claim SNS was directly liable for its vice-principal’s conduct. SNS sought to affirmatively prove as a matter of law Ventura was not a vice-principal. In its no-evidence ground, SNS challenged B.C. to produce more than a scintilla of evidence that the assault occurred. In addition, SNS challenged the absence of any evidence supporting B.C.’s claim SNS had respondeat superior liability for the assault. SNS sought dismissal of the case if it prevailed on either ground.

ANALYSIS

Summary Judgment Standards

We review de novo a trial court’s grant of a motion for summary judgment. Buck v. Palmer, 381 S.W.3d 525, 527 (Tex. 2012). We must affirm a summary judgment when a trial court does not specify the grounds for its ruling if any of the grounds in the motion are meritorious. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013).

To review a no-evidence ground for summary judgment, we consider the evidence in the light most favorable to the nonmovant, crediting evidence a reasonable jury could credit and disregarding contrary evidence and inferences unless a reasonable jury could not. See City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005). We will affirm when

*3 “(a) there is a complete absence of evidence of a vital fact, (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (c) the evidence offered to prove a vital fact is no more than a mere scintilla, or (d) the evidence conclusively establishes the opposite of the vital fact.”

King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)).

We review a traditional ground for summary judgment to determine whether the movant established that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). As with no-evidence grounds, we affirm a summary judgment if any of the theories presented to the court and preserved for review are meritorious. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004).

The record on which the trial court makes its summary judgment decision and on which we review the summary judgment is created by the movant and non-movant filing the evidence on which they rely as attachments to their respective motion or response, or by reference to appendices they file. See TEX. R. CIV. P. 166a(a) (attachment by movant), (b) (attachment by non-movant), (d) (appendices filed and referred to by either movant or non-movant). Where the summary judgment order contains a recital that the trial court considered the “evidence and arguments of counsel” without any limitation, “we have no basis to conclude the trial court did not consider all summary-judgment evidence on file at the time the motion was heard.” B.C., 598 S.W.3d at 262 (emphasis added). So, we must consider “all the summary-judgment evidence on file” when we conduct our appellate review. Id.

Where, as here, a trial court grants a summary judgment on traditional and no-evidence grounds, we usually review the evidence using the no-evidence standard first, although we are not bound to do so. See id. at 260-61.

No-Evidence Grounds: Assault and SNS’s Respondeat Superior Liability

In B.C.’s issue 2, she contends there was evidence of the assault in the summary judgment record. We agree.

In its motion for no-evidence summary judgment, SNS challenged these elements of B.C.’s assault claim asserting:

To prove a cause of action for assault by infliction of bodily injury, Plaintiff must prove (1) the defendant acted intentionally, knowingly, or recklessly; (2) the defendant made contact with the plaintiff’s person; and (3) the defendant’s contact caused bodily injury to the plaintiff. ... As to any claim against SNS for direct liability for assault/sexual assault, there is no evidence of any of these elements.

(Authorities in footnote and text omitted). So we begin by noting, SNS did not challenge that Ventura knew or reasonably should have believed that B.C. would regard the contact as offensive or provocative. See Umana v. Kroger Tex., L.P., 239 S.W.3d 434, 436 (Tex. App.—Dallas 2007, no pet.) (“A person commits an assault if he intentionally or knowingly causes physical contact with another when the person knows or should reasonably believe that the other will regard the contact as offensive or provocative.”).

We described above SNS provided B.C.’s testimony about Ventura assaulting her in the restaurant bathroom. In her response, B.C., also, pointed out to the trial court the same evidence as she summarized in her response:

*4 Ventura requested that Plaintiff go into the employee restroom at SNS with him during her shift under the pretense of offering her an opportunity to smoke.... When she was in the employee restroom with Ventura, Plaintiff has testified that Ventura trapped her in the restroom behind the closed door. While she struggled to get away from Ventura and refused his requests, he attempted to kiss her multiple times by grabbing the back of her head and pulling it toward his face, while pushing her against the sink.... During this episode, Ventura tugged at Plaintiffs pants and apron, tried to lift his hand up her shirt, unbuckled his pants and pulled his genitals out, and pushed her head toward her [sic] genitals.

(Record references omitted). Each statement that SNS and B.C. provided to the trial court was supported by evidentiary references to the evidence each supplied to the trial court. Each of their summaries accurately describe the evidence referenced.

B.C.’s testimony was competent summary-judgment evidence that Ventura had contact with B.C. and did so intentionally in his touching, attempting to fondle and disrobe her, and attempting to force B.C. to perform oral sex. In addition in her response, B.C. cited to and summarized her testimony that she experienced mental and physical pain, and embarrassment due to Ventura’s conduct and that she is not required to prove a physical injury. See Foye v. Montes, 9 S.W.3d 436, 441 (Tex. App.—Houston [14th Dist.] 1999, pet. denied) (actual injury is not required, “rather than physical injury, offensive contact is the gravamen of the action; consequently, the defendant is liable not only for contacts which cause actual physical harm, but also for those which are offensive and provocative.”). We agree with B.C. there was summary-judgment evidence brought to the attention of the trial court on each challenged element of her assault claim.

In its no-evidence motion, SNS did not challenge its direct liability based on Ventura’s status as a vice-principal. Instead, SNS challenged its common law vicarious liability for Ventura’s conduct. B.C. pleaded SNS was vicariously liable for Ventura’s assault under the common law doctrine of respondeat superior. But in her brief, B.C. fails to argue any basis for SNS’s respondeat superior liability for Ventura’s conduct.7 Instead, B.C. addresses the unchallenged ground of vice-principal liability by incorporating her appellate arguments as to the traditional grounds for summary judgment which we will analyze in the next section. So, as regards vicarious liability, B.C.’s brief presents nothing for us to review. The trial court, therefore, did not err in granting no-evidence summary judgment that SNS does not have vicarious, respondeat superior liability for Ventura’s assault on B.C.

Traditional Ground: SNS’s Direct Liability for Ventura’s Assault

*5 SNS argued for summary judgment and argues here B.C.’s assault claim was an on the job injury within the exclusive remedy of the TWCA. See TEX. LAB. CODE ANN. § 408.001(a) (“Recovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage or a legal beneficiary against the employer or an agent or employee of the employer for the death of or a work-related injury sustained by the employee.”). B.C. pleaded and argued in response to summary judgment that she was assaulted by her supervisor, Ventura, and that because he was a vice-principal SNS was directly liable. B.C. further argued that because her assault claim was directly against SNS, her claim is removed from the ambit of the TWCA. See Medina v. Herrera, 927 S.W.2d 597, 600 (Tex. 1996) (“Middleton and its progeny clearly remove from the [TWCA]’s coverage intentional torts attributable directly to an employer, such as where a partner of a partnership-employer personally assaults an employee.”) (citing Middleton v. Texas Power & Light Co., 185 S.W. 556 (Tex. 1916) and Jones v. Jeffreys, 244 S.W.2d 924, 926 (Tex. Civ. App.—Dallas 1951, writ ref’d)).

We begin by examining the law regarding who in a corporation is a vice-principal, because central to SNS’s argument is its contention the supreme court changed the standard for determining which corporate agents are vice-principals. SNS urges we should add to the traditional vice-principal requirements that the person must be a controlling equity owner or alter ego of the corporation. SNS relies on the discussion in Medina of Professor Larson’s view that “the intentional tort exception, which is generally recognized in other jurisdictions, should apply to corporate employers only where the ‘assailant is, by virtue of control or ownership, in effect the alter ego of the corporation,’ or where the corporate employer specifically authorizes the assault.” Medina, 927 S.W.2d at 601 (citing 2A LARSON, THE LAW OF WORKMEN’S COMPENSATION, § 68.00, 68.21 (1990)). But the supreme court in Medina expressly declined to decide that issue stating, “While this issue is important, we decline to resolve it today....” Id. (emphasis added). Instead, the supreme court resolved Medina based on the worker’s acceptance of compensation benefits resulting in preclusion of his suit against his employer for a claim that would exclude TWCA benefits. Id. So Medina is not authority for SNS’s argument.

In a footnote in its first opinion, the supreme court stated the parties’ dispute about Ventura’s vice-principal status would be resolved on remand quoting GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 618 (Tex. 1999): “When actions are taken by a vice-principal of a corporation, those acts may be deemed to be the acts of the corporation itself.” B.C., 512 S.W.3d at 281 n.3. This quotation is taken from the paragraph in GTE Southwest where the supreme court stated:

Moreover, regardless of whether Shields acted within the scope of his employment, his status as a vice-principal of the corporation is sufficient to impute liability to GTE with regard to his actions taken in the workplace. Cf. Hammerly Oaks, Inc. v. Edwards, 958 S.W.2d 387, 391–92 (Tex. 1997) (corporations may be liable for punitive damages for torts committed by vice-principals). Corporations can act only through their agents. Id. at 391; Fort Worth Elevators Co. v. Russell, 123 Tex. 128, 70 S.W.2d 397, 402 (1934), disapproved in part on other grounds by Wright v. Gifford–Hill & Co., 725 S.W.2d 712, 714 (Tex. 1987). When actions are taken by a vice-principal of a corporation, those acts may be deemed to be the acts of the corporation itself. Fort Worth Elevators, 70 S.W.2d at 406. A vice-principal represents the corporation in its corporate capacity, and includes persons who have authority to employ, direct, and discharge servants of the master, and those to whom a master has confided the management of the whole or a department or division of his business. See Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 922 (Tex. 1998).

*6 Id. (emphasis added). In both Mobil Oil and Fort Worth Elevators—both of which are cited by GTE Southwest—the supreme court enumerated those who are a corporation’s vice-principal as:

“Vice principal” encompasses: (a) corporate officers; (b) those who have authority to employ, direct, and discharge servants of the master; (c) those engaged in the performance of nondelegable or absolute duties of the master; and (d) those to whom the master has confided the management of the whole or a department or a division of the business.

Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 922 (Tex. 1998); Fort Worth Elevators Co. v. Russell, 70 S.W.2d 397, 403 (1934), disapproved in part on other grounds by Wright v. Gifford-Hill & Co., 725 S.W.2d 712, 714 (Tex. 1987). SNS has not cited a more recent supreme court authority overruling the supreme court’s line of opinions that have used the same test at least since 1934 for classes of corporate agents who are vice-principals. Therefore, we reject SNS’s argument that we should change the vice-principal test by adding the requirement of equity ownership or sufficient identity with the corporation to constitute alter ego.8

We take note of the types of job positions, functions and authority which courts have found constitute a vice-principal:

Highest ranking management person stationed at a facility who has authority to employ, direct, and discharge employees: In GTE Southwest, the supreme court affirmed a jury award of exemplary damages based on the jury’s finding that the corporate employee “was the highest ranking management person stationed at the Nash facility, and that [he] had authority to employ, direct, and discharge employees.” GTE Sw., 998 S.W.2d at 618.

Car dealership’s general manager, comptroller, and used car sales manager: Citing GTE Southwest and the same two tests on which B.C. relies, the supreme court did not disturb a finding that a car dealership’s general manager, comptroller, and used car sales manager were vice-principals whose maliciously defamatory statements were the statements of the business for which they worked. Chrysler Ins. Co. v. Greenspoint Dodge of Houston, Inc., 297 S.W.3d 248, 253 (Tex. 2009).

Manager of a bar-restaurant: Following the same factors, this Court decided the acting manager of a bar-restaurant who verbally encouraged patrons to physically attack another bar patron was a vice-principal whose conduct was that of the business entity. Then West, Inc./Bait House, Inc. v. Sorrells, No. 05-01-01874-CV, 2002 WL 1397477, at *6 (Tex. App.—Dallas June 28, 2002, no pet.) (not designated for publication).

*7Person “who writes checks and hires and fires employees”: The Corpus Christi court of appeals determined that a person “who writes checks and hires and fires employees” is a vice-principal whose statements are those of her employer. Fontenot Petro-Chem & Marine Servs., Inc. v. LaBono, 993 S.W.2d 455, 460 (Tex. App.—Corpus Christi 1999, pet. denied).

Trucking terminal manager: The Texarkana court of appeals concluded a trucking company’s “terminal manager with the right to direct and discharge” employees was a vice-principal. Rainbow Exp., Inc. v. Unkenholz, 780 S.W.2d 427, 431 (Tex. App.—Texarkana 1989, writ denied).

Head of store security: This Court concluded the head of store security was a vice-principal because as the head of security he was entrusted with the management of the security department or division with wide discretion under the store’s directive. Treasure City v. Strange, 620 S.W.2d 811, 814 (Tex. Civ. App.—Dallas 1981, no writ).

In contrast to these jobs and positions, an hourly wage employee of Wal-Mart with no authority to speak on behalf of Wal-Mart was not a vice-principal and her defamatory statements were not the statements of Wal-Mart. Wal-Mart Stores, Inc. v. Lane, 31 S.W.3d 282, 289 (Tex. App.—Corpus Christi 2000, pet. denied).

B.C. argues Ventura was a vice-principal because (1) Ventura had authority to employ, direct, and discharge employees of SNS and (2) Ventura was the manager of a department or division of SNS, namely, the restaurant at which B.C. worked. SNS informed the trial court in its motion for summary judgment that it rehired Ventura as a restaurant manager in November 2010 at the McKinney SNS. A month before the incident, Ventura was transferred to the Frisco store where he was a restaurant manager and reported to a general manager. SNS provided the testimony of its human relations manager, Stephanie Chiles-Beauvais, regarding whether Ventura was able to hire and fire associates. In her testimony, Chiles-Beauvais read into the record from a document SNS had Ventura sign that described his position as restaurant manager with these attributes: “Has the authority to terminate associates in accordance with Steak ‘n Shake policies,” “Participates in the recruiting, interviewing, hiring and training of hourly associates,” and “Recommends associates for promotion or other changes in job status.” Chiles-Beauvais explained the document was for compliance with the Fair Labor Standards Act including the “key categories that make the management position salary exempt from overtime.” Notwithstanding the documentary evidence, Chiles-Beauvais flatly denied Ventura had the authority to fire an associate. SNS also pointed out to the trial court that B.C. testified that, on the night of the assault, Ventura was the sole onsite manager at the restaurant and provided that testimony to the trial court in an appendix. In her summary judgment response and appellate brief, B.C. primarily relies on Chiles-Beauvais’s testimony about the documentary evidence of Ventura’s authority and that he was the manager of the SNS on the night he assaulted B.C.

We agree with B.C. the evidence in the summary judgment record amounts to more than a scintilla of evidence that Ventura had the authority to fire associates and participate in the hiring and promotion of associates as documented in SNS’s records for government labor law compliance. He was the sole manager onsite and while managing the restaurant, according to B.C., he assaulted her in the employee restroom. This is more than a scintilla of evidence that Ventura was a vice-principal of SNS. See GTE Sw., 998 S.W.2d at 618 (highest ranking management person stationed at facility that had authority to employ, direct, and discharge employees was vice-principal); Then W., 2002 WL 1397477, at *6 (acting manager of a bar-restaurant was vice-principal); Rainbow Exp., 780 S.W.2d at 431 (trucking company’s “terminal manager with the right to direct and discharge” employees was vice-principal); Treasure City, 620 S.W.2d at 814 (head of store security was vice-principal). We recognize Chiles-Beauvais provided SNS testimony that contradicted the documentary evidence, but “we take as true all evidence favorable to the nonmovant, resolve all conflicts in the evidence in the nonmovant’s favor, and indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.” Katy Venture, Ltd. v. Cremona Bistro Corp., 469 S.W.3d 160, 163 (Tex. 2015). This evidence raises a genuine issue of material fact regarding SNS’s traditional evidence grounds for summary judgment entitling B.C. to have a jury determine this factual issue. Accordingly, we agree with B.C. that the trial court erred in granting summary judgment on the basis that Ventura was not a vice-principal and that B.C.’s common law assault claim was a workers’ compensation claim.

CONCLUSION

*8 We conclude the trial court did not err in granting no-evidence summary judgment on B.C.’s pleaded vicarious liability theory of respondeat superior. But we conclude there are genuine issues of material fact regarding (1) whether SNS is directly liable for Jose Tomas Ventura’s assault on B.C. because he was a vice-principal of SNS and, therefore, B.C.’s assault claim fits into a traditional exception to the TWCA, and (2) each element of B.C.’s assault claim. Further, the supreme court previously decided B.C.’s assault claim is not preempted by TCHRA. Accordingly, we affirm the trial court’s summary judgment on B.C.’s theory of respondeat superior, we reverse the remainder of the trial court’s summary judgment, and remand for further proceedings consistent with this opinion.

Footnotes

1

The Honorable Justice Amanda Reichek succeeded the Honorable Molly Francis, a member of the original panel. Justice Reichek has reviewed the briefs and the record before the Court.

2

The Honorable Justice Erin Nowell succeeded the Honorable Craig Stoddart, a member of the original panel. Justice Nowell has reviewed the briefs and the record before the Court.

3

B.C. and SNS do not differentiate between her assault, sexual assault, and battery causes of action and discuss them together. As we did in our prior opinions, we will discuss these causes of action together and will refer to them collectively as her assault claim. B.C. v. Steak N Shake Operations, Inc., 461 S.W.3d 928, 929 n.2 (Tex. App.—Dallas 2015) (mem. op.), rev’d 512 S.W.3d 276 (Tex. 2017).

4

B.C. non-suited Ventura and did not appeal the adverse summary judgment dismissing her other causes of action which were negligence and premises liability; negligent hiring, retention, supervision, and training; and intentional infliction of emotional distress. “Accordingly, claims other than assault are not before us, and we express no opinion about them.” B.C., 461 S.W.3d at 929.

5

The clerk’s rejection notice indicated B.C.’s electronically filed response had been rejected, “because one of the exhibits was not formatted for optical character recognition.” 598 S.W.3d at 258.

6

The supreme court summarized the facts of this case at length in its first opinion. See B.C., 512 S.W.3d 277–79.

7

SNS’s no-evidence motion fails to identify any particular element of any of the theories of vicarious liability it challenges: (1) actual authority, (2) apparent authority, (3) respondeat superior, (4) ratification, (5) nondelegable duty, and (6) piercing the corporate veil. We have searched B.C.’s response to the summary judgment and her briefs on appeal and do not find a challenge to the legal sufficiency of SNS’s no-evidence grounds for failing to challenge specific elements. See TEX. R. CIV. P. 166a(i); Jose Fuentes Co., Inc. v. Alfaro, 418 S.W.3d 280, 283 (Tex. App.—Dallas 2013, pet. denied) (en banc) (no-evidence motion for summary judgment is legally insufficient if it fails to specifically state which elements of nonmovant’s claims lack supporting evidence). As we discuss in the next section, B.C. must establish SNS’s direct liability through Ventura’s vice-principal status for her assault claim to exist outside of the TWCA, which may be her reason for not challenging summary judgment as to SNS’s respondeat superior liability.

8

It would be inappropriate for this Court to change the vice-principal standard based on the implication from dicta in an opinion that was decided on another basis because doing so is the prerogative of the supreme court. See In re Fort Apache Energy, Inc., 482 S.W.3d 667, 669 (Tex. App.—Dallas 2015) (orig. proceeding) (“It is the prerogative of the supreme court to overrule its own decisions if it determines the reasons have been rejected by another line of decisions.” (citing Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989); Owens Corning v. Carter, 997 S.W.2d 560, 571 (Tex. 1999))).

Court of Appeals of Texas, Dallas.

In the INTEREST OF K.M.B. and P.J.B., Minor Children

No. 05-19-00591-CV

|

Opinion Filed July 20, 2020

Attorneys & Firms

Neil Lee Durrance, Law Office of Neil L. Durrance, 1108 N Locust Street, Denton, TX 76201-2958, for Appellant Erich Barnhill.

Elizabeth Mary Johnson, Calabrese Budner, LLP, 5944 Luther Lane, Ste. 875, Dallas, TX 75225, Georganna L. Simpson, Georganna L. Simpson, P.C., 1349 Empire Central Drive, Woodview Tower, Suite 600, Dallas, TX 75247-4042, Jeremy C. Martin, Martin Appeals PLLC, 2101 Cedar Springs Rd., Ste. 1540, Dallas, TX 75201, Susan Vrana, Susan Vrana Family Law, 900 Jackson St., #260, Dallas, TX 75202, for Appellee Jennifer Entzminger.

Deterrean Gamble, John B. Worley, Attorney General Office, Child Support Division, P.O. Box 12017 (MC 038-1), Austin, TX 78711-2017, Matthew Garcia, Dallas County Domestic Relations Office, CS Unit 421, 600 Commerce St., Ste. 128, Dallas, TX 75202-6606, for Appellee Attorney General of Texas.

John Creuzot, Dallas County District Attorney, Frank Crowley Courts Building, 133 N. Riverfront Blvd., LB19, Dallas, TX 75207, for Appellee State of Texas.

Before Justices Bridges, Molberg, and Carlyle

OPINION

Opinion by Justice Molberg

*1 E.W.B. (Father) appeals the trial court’s order increasing his child support obligation to his two minor children, K.M.B. and P.J.B., paid monthly to J.L.E., the children’s mother (Mother). In three issues, Father argues the trial court improperly included his military allowances in its calculation of net resources for purposes of assessing his child support obligation; abused its discretion by finding a material and substantial change in circumstances justifying a modification in his child support obligation; and abused its discretion by awarding Mother attorney’s fees in the amount of $4,000. We affirm the trial court’s judgment.

BACKGROUND

Father is an active duty serviceman in the United States Army Reserve. The trial court signed a final decree of divorce between Mother and Father on December 19, 2011. Mother was awarded custody of K.M.B. and P.J.B. The divorce decree ordered Father to pay child support in the amount of $673 per month and retroactive child support—that should have been previously paid to Mother but was not—in the amount of $3,000, to be paid in specified installments. The trial court further ordered that Father’s monthly child support obligation be automatically deducted from his pay and forwarded to Mother.

In April 2018, a negotiated conference was held and Father agreed to increase his monthly child support obligation to $906. The trial court entered a child support review order reflecting the support modification agreement on May 7, 2018. The May 2018 child support review order acknowledged the order was made pursuant to the parties’ agreement and found “there has been a material and substantial change in the circumstances of the children or parties, or it has been three years since the order was rendered or last modified and the monthly amount of the child support award under the order differs by either 20 percent or $100 from the amount that would be awarded in accordance with the child support guidelines....”

Within thirty days of entry of the May 2018 child support review order, Mother moved for a new trial. On July 2, 2018, the trial court granted Mother’s motion for new trial and vacated the May 2018 child support review order. The record on appeal reflects Father did not appeal, but rather agreed to, the trial court’s July 2018 order.1

According to Mother, the calculation of Father’s net resources that served as the basis of the April 2018 agreement and the May 2018 order was incorrect. Specifically, Mother contended Father’s military allowances for housing and subsistence, paid to him monthly, were not—but should have been—included as resources for purposes of Father’s child support assessment under the statutory guidelines. Father, however, protested that military allowances are not a resource under the child support guidelines.

Several proceedings ensued. Ultimately, after conducting a hearing on March 5, 2019, the trial court entered the child support review order that is the subject of this appeal on May 9, 2019 (May 2019 order). The May 2019 order found Father’s monthly net resources, including his monthly paid military allowances for housing and subsistence, are $6,599.20; raised Father’s monthly child support obligation from $673 to $1,659.80; and ordered Father to pay Mother attorney’s fees in the amount of $4,000.

*2 On March 8, 2019, Father filed a request for the trial court to enter findings pursuant to section 154.130 of the family code. See TEX. FAM. CODE § 154.130. In its May 2019 order, the trial court made the following findings:

The Court finds, since the date of the rendition of the order entitled, Final Decree of Divorce, signed on December 19, 2011, the circumstances of the parties and/or children have materially and substantially changed, or have become inappropriate or unworkable under existing circumstances, regarding child support and medical support for the children. The Court further finds that modification of the prior order regarding child support and medical support is appropriate and is in the best interest of the children. The Court finds that modification of the prior order is appropriate, and is in the best interest of the children.

The trial court made the following child support guideline findings:

A. The Court finds, pursuant to § 154.130, Tex. Fam. Code Ann.:

a. the monthly net resources of the Obligor per month are $6,599.20;

b. Obligor is obligated to provide support for the following:

(1). The number of children before the Court is 2.

(2). The number of minor children not before the Court residing in the same household with the Obligor is 0.

(3). The number of children not before the Court for who Obligor is obligated by a court order to provide child support, and who are not counted under paragraph (1) or (2) is 0.

c. The percentage applied to the Obligor’s net resources for child support is 25%.

On these findings, the trial court ordered Father to pay statutory child support for K.M.B. and P.J.B. in the amount of $1,649.80 per month. Father filed a motion for new trial on May 29, 2019, which was denied by operation of law.

STANDARD OF REVIEW

The trial court has broad discretion to set or modify child support. In re A.M.W., 313 S.W.3d 887, 890 (Tex. App.—Dallas 2010, no pet.). We will not disturb a trial court’s ruling on a support order absent a clear abuse of discretion. Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990). The trial court abuses its discretion if it acts in an arbitrary and unreasonable manner or without reference to any guiding principles. Id.; Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex. 1985). Under this standard, the legal and factual sufficiency of the evidence are relevant factors but are not considered as independent grounds of error. In re M.C.M., No. 04-15-00565-CV, 2016 WL 3181574, at *2 (Tex. App.—San Antonio June 8, 2016, no pet.) (mem. op.). We review the evidence in the light most favorable to, and indulge every legal presumption in favor of, the trial court’s ruling. Id. If some evidence of a substantial and probative character supports the trial court’s decision, there is no abuse of discretion. In re S.E.K., 294 S.W.3d 926, 930 (Tex. App.—Dallas 2009, pet. denied).

We review a trial court’s statutory interpretation of the proper method to calculate child support de novo. In re P.C.S., 320 S.W.3d 525, 532 (Tex. App.—Dallas 2010, pet. denied). Our primary task in construing a statute is to ascertain and give effect to the legislature’s intent by first looking at the express language of the statute according to its plain and ordinary meaning, unless doing so would cause an absurd result or a contrary intention is evident from the context. Id.

APPLICABLE LAW

*3 The starting point for assessing child support liability under the Texas Family Code is to calculate the child support obligor’s monthly “net resources” and apply statutory guidelines to that amount. TEX. FAM. CODE §§ 154.061(a), 154.062, 154.125. Section 154.062 of the family code provides an all-inclusive definition of “net resources” and then specifies certain sums which are not considered “resources” as well as certain sums the court must deduct from its calculation of net resources. Id. § 154.062. The amount of child support assessed under the guidelines is presumed reasonable, in the best interest of the child, and appropriate. Id. § 154.122. “Resources” includes:

(1) 100 percent of all wage and salary income and other compensation for personal services (including commissions, overtime pay, tips, and bonuses);

(2) interest, dividends, and royalty income;

(3) self-employment income;

(4) net rental income ...; and

(5) all other income actually being received, including severance pay, retirement benefits, pensions, trust income, annuities, capital gains, social security benefits other than supplemental security income, unemployment benefits, disability and workers’ compensation benefits, interest income from notes regardless of the source, gifts and prizes, spousal maintenance, and alimony.

Id. § 154.062(b). “Resources” does not include:

(1) return of principal or capital;

(2) accounts receivable;

(3) benefits paid in accordance with the Temporary Assistance for Needy Families program; or

(4) payments for foster care of a child.

Id. § 154.062(c). The language of section 154.062(b)(5) indicates the legislature intended that “all receipts of money that are not specifically excluded by the statute (section 154.062(c)), whether nonrecurring or periodic, whether derived from the obligor’s capital or labor or from that of others, must be included in the definition of ‘resources.’ ” In re P.C.S., 320 S.W.3d at 537.

ANALYSIS

The Trial Court Made The Necessary Findings Under Section 154.130

Although not presented as an independent issue, we begin by addressing Father’s complaint the trial court failed to make findings under section 154.130.2 See TEX. FAM. CODE § 154.130. If either a party makes a timely written request or an oral request in open court at the hearing, or if the trial court’s child support award varies from statutory guidelines, the court is required to make the findings specified in subsection (b).3 Id. If applicable, subsection (b) requires the trial court to:

[S]tate whether the application of the guidelines would be unjust or inappropriate and shall state the following in the child support order:

“(1) the net resources of the obligor per month are $__________;

“(2) the net resources of the obligee per month are $__________;

“(3) the percentage applied to the obligor’s net resources for child support is __________%; and

“(4) if applicable, the specific reasons that the amount of child support per month ordered by the court varies from the amount computed by applying the percentage guidelines under Section 154.125 or 154.129, as applicable.”4

TEX. FAM. CODE § 154.130(b). A trial court’s failure to make section 154.130 findings upon proper request is presumed reversible error unless the record affirmatively shows the requesting party suffered no harm. In re S.V., No. 05-18-00037-CV, 2019 WL 516730, at *3 (Tex. App.—Dallas Feb. 11, 2019, no pet.) (mem. op.); R.H. v. Smith, 339 S.W.3d 756, 766 (Tex. App.—Dallas 2011, no pet.) (citing Willms v. Americas Tire Co., Inc., 190 S.W.3d 796, 801 (Tex. App.—Dallas 2006, pet. denied)). Generally, a complainant has been harmed if the trial court’s failure to make findings causes him to have to guess at the reason the trial court ruled against him or prevents him from properly presenting his case to the appellate court. In re S.V., 2019 WL 516730, at *3.

*4 Here, as discussed below, the trial court did not vary from the child support guidelines; and it made the necessary findings required by section 154.130 in the May 2019 child support review order. The court’s May 2019 order found modification of the December 2011 support order was appropriate and further found “pursuant to § 154.130” that Father’s monthly net resources are $6,599.205; Father is obligated to provide support for his two minor children; and the “percentage applied to [Father’s] net resources for child support is 25%.” No other findings were necessary, because no evidence of Mother’s monthly net resources was offered, id. § 154.130(c), and as discussed below, the trial court did not deviate from the statutory percentage guidelines. Id. § 154.130(b)(4); see also Champenoy v. Champenoy, No. 01-12-00668-CV, 2013 WL 3327328, at *5 (Tex. App.—Houston [1st Dist.] June 27, 2013, no pet.) (mem. op.).

The Trial Court Properly Included Military Allowances As A Resource In Assessing Child Support

We next address the issue of whether the trial court correctly included Father’s military allowances for housing and subsistence in his monthly net resources for the purpose of calculating his child support obligation to his two minor children.

In addition to a soldier’s base pay, Congress has provided certain allowances, including an allowance to supplement off-base housing expenses (BAH) and a basic allowance for subsistence (BAS). The payments are intended to assist with a service member’s housing and food expenses, but there are no legal requirements governing—and no accounting for—how the allowances are spent.

According to Father, since BAH and BAS are not subject to federal income taxes, they should not be considered income. It is true that the United States Internal Revenue Code excludes qualified military benefits, including military allowances, from gross income. However, the definition of “income” for tax purposes is not interchangeable with the definition of “income” for calculating child support. The purposes of those calculations are different. That the federal tax code excludes qualified military benefits from gross income is of little weight in evaluating whether BAH and BAS should be included as a resource in assessing child support. The Internal Revenue Code addresses the calculation of taxable income. Chapter 154 of the family code, on the other hand, is concerned with ascertaining the obligor’s income in order to protect the child’s best interest and to maintain an adequate standard of living for the child. In re A.R.W., No. 05-18-00201-CV, 2019 WL 6317870, at *9 (Tex. App.—Dallas Nov. 26, 2019, no pet.) (mem. op.); see also Ochsner v. Ochsner, 517 S.W.3d 717, 724 (Tex. 2016) (courts must consider whether court-approved child support agreements “serve the child’s best interests—a recognition of the key tenet that child support is a duty owed by a parent to a child, not a debt owed to the other parent”). If the Texas Legislature intended the definition of income for child support purposes to parallel the calculation of income for federal income taxes, the language of the statute could reflect that.

Father also argues that since military allowances are not specifically listed as a source of income in section 154.062 of the family code, they should not be considered income for purposes of calculating child support. Section 154.062(b) provides that “Resources include” certain enumerated sources or categories of income—wages, salaries, interest, dividends, royalties, self-employment income, rental income, and “all other income actually being received.” TEX. FAM. CODE § 154.062(b)(5) (emphasis added). Under general rules of code construction, the word “include” is a word of enlargement and not of limitation, and use of that word does not create a presumption that items not expressed are excluded. See TEX. GOV’T CODE §§ 311.005, 311.005(13); In re P.C.S., 320 S.W.3d at 537. It is not necessary or even plausible for the legislature to list every source of a parent’s potential financial resources. Instead, the statute specifies sums which are not considered resources for purposes of child support assessment and sums which are deducted from the calculation of net resources. The wording of section 154.062(b) is broad and nonrestrictive to encompass any compensation, regardless of what it is called, and nothing in the section indicates the list of resources is exclusive. Use of the word “include” in section 154.062(b) and the phrase “all other income actually being received” in section 154.062(b)(5) suggest a legislative intent to encompass additional, unlisted sources of “resources.”

*5 The duty to pay child support, thus, is not limited to an obligor’s ability to pay from earnings but also includes the obligor’s ability to pay from any and all available sources. See Johnson v. Johnson, No. 05-99-01155-CV, 2001 WL 371839, at *2 (Tex. App.—Dallas Apr. 15, 2001, no pet.); see also In re I.Z.K., No. 04-16-00830-CV, 2018 WL 1176646, at *3 (Tex. App.—San Antonio Mar. 7, 2018, no pet.) (mem. op.); Finley v. Finley, No. 02-11-00045-CV, 2015 WL 294012, at *5 (Tex. App.—Fort Worth Jan. 22, 2015, no pet.) (mem. op.). Father’s BAH and BAS contribute a significant amount of income towards his ability to provide for his own needs as well as the needs of K.M.B. and P.J.B. These military allowances are paid to him in his paychecks and are available to him as discretionary spending. There is no reason they should not be considered resources for purposes of determining his support obligation to K.M.B. and P.J.B.6 Because military allowances are not specifically excluded by section 154.062 as a resource to be included in the determination of net resources for purposes of child support assessment, and because BAH and BAS are in-kind benefits which increase Father’s income, they must be included in the definition of resources and the calculation of his child support obligation to his minor children.7 See In re P.C.S., 320 S.W.3d at 537.

In its order, the trial court found Father has monthly net resources of $6,599.20. Father disputes that amount only to the extent it includes his BAH and BAS, and Mother does not dispute that amount. Because Father has two children entitled to support, the statute requires that we multiply his monthly net resources of $6,599.20 by twenty-five percent, which yields a monthly child support obligation of $1,649.80, the amount awarded by the trial court. See TEX. FAM. CODE § 154.125. Per statutory guidelines, once the oldest child turns eighteen years of age or graduates from high school, Father’s monthly support obligation is reduced to $1,319.84, or twenty percent of Father’s monthly net resources. See id.

*6 We conclude the trial court properly included Father’s BAH and BAS as resources under section 154.062 of the family code in calculating his support obligation to K.M.B. and P.J.B. as $1,659.80 per month. We resolve Father’s first issue against him.

The Trial Court Did Not Err By Modifying The Support Order

In his second issue, Father contends the trial court erred by modifying the support order because the evidence is insufficient to show a material and substantial change in the circumstances of the parties or the minor children.

The family code permits the trial court to modify a child support order if the movant shows (1) the circumstances of a child or a person affected by the order has materially and substantially changed since the earlier of: (a) the date of the order’s rendition, or (b) the date the settlement agreement on which the order is based was signed; or (2) three years have elapsed since the order was rendered or last modified and the child support award differs by either twenty percent or $100 from the amount that would be awarded in accordance with the child support guidelines. TEX. FAM. CODE § 156.401(a). Thus, Mother is not required to show a material and substantial change of circumstances to warrant modification of the December 2011 child support order if three or more years have lapsed and if the amount ordered at that time—$673 per month—differs by twenty percent or $100 from the current amount of support ordered in accordance with child support guidelines—$1,659.80. Id.; see also Njeako v. Njeako, No. 14-04-00991-CV, 2005 WL 3072025, at *5 (Tex. App—Houston [14th Dist.] Nov. 17, 2005, no pet.) (mem. op.).

Father testified at the March 5, 2019 hearing. He confirmed “child support has not been modified since [December 2011],” when the trial court ordered him to pay monthly child support to Mother in the amount of $673 per month. Father’s counsel affirmed that amount was ordered and not agreed. There is no dispute the amount of child support ordered in the divorce decree differs by twenty percent or $100 from the amount ordered in the May 2019 child support review order. On the record, the trial court correctly stated the family code provides:

[If] it [has] been three years since the entry of the initial [child support] order and support will differ by 20 percent or $100....

* * *

If the previous order was ordered, neither party is required to prove material or substantial change for modification of child support under those circumstances.

Father did not dispute the trial court’s statements.

Although the trial court’s May 2019 child support review order finds “the circumstances of the parties and/or children have materially and substantially changed” since rendition of the child support order in the December 2011 divorce decree, the trial court also “further [found] modification of the prior order regarding child support and medical support is appropriate and is in the best interests of the children.” We already concluded Father’s BAH and BAS constitute resources under section 154.062 of the family code and the trial court followed statutory guidelines in assessing child support in the monthly amount of $1,659.80, or twenty-five percent of his net resources, for his two minor children. Reading the language of the trial court’s May 2019 order together with the court’s statements at the March 2019 hearing, we conclude the trial court followed the statutory requirements for modification under family code section 156.401(a)(2), and Mother was not required to show a material and substantial change in circumstances. TEX. FAM. CODE § 156.401(a)(2); see also Njeako, 2005 WL 3072025, at *5. Therefore, the trial court’s order increasing Father’s support obligation to $1,659.80 per month did not constitute an abuse of discretion.8

*7 We resolve Father’s second issue against him.

The Trial Court Did Not Err By Awarding Mother Attorney’s Fees

In his third issue, Father contends the trial court erred by awarding Mother her attorney’s fees “without reference to the evidence or actions of the parties.” We note the trial court awarded Mother a portion, and not all, of her attorney’s fees.

The Texas Family Code invests a trial court with broad discretion to award reasonable fees to a party in a modification proceeding to be paid directly to the party’s attorney. TEX. FAM. CODE § 106.002(a) (in a suit affecting the parent-child relationship (SAPCR), “the [trial] court may render judgment for reasonable attorney’s fees and expenses ... to be paid directly to an attorney.”); In re B.J.W., No. 05-17-00253-CV, 2018 WL 3322882, at *1 (Tex. App.—Dallas July 6, 2018, no pet.) (mem. op.) (“Section 106.002 of the family code invests a trial court with general discretion to award reasonable attorney’s fees in all suits affecting the parent-child relationship, including modification suits.”); In re R.C.S., 167 S.W.3d 145, 152 (Tex. App.—Dallas 2005, pet. denied) (“It is within the trial court’s sound discretion to award reasonable attorney’s fees in a suit affecting the parent-child relationship.”). The statute does not designate to whom fees may be awarded, nor does it limit the trial court’s designation. TEX. FAM. CODE § 106.002(a). While section 106.002 does not impose a prevailing-party requirement, it is one factor a trial court may consider in making a determination on an attorney’s fees award. See In re M.A.N.M., 231 S.W.3d 562, 566 (Tex. App.—Dallas 2007, no pet.); see also In re A.T.T., 583 S.W.3d 914, 924 (Tex. App.—El Paso 2019, no pet.) (recognizing family code allows trial court to award attorney’s fees to prevailing party in SAPCR proceeding); Coburn v. Moreland, 433 S.W.3d 809, 840 (Tex. App.—Austin 2014, no pet.) (“The absence of a bright-line rule (or even an articulable rule) [is] consistent with the broad discretion trial courts are afforded in awarding attorney’s fees in SAPCR proceedings.”). We review a trial court’s award of attorney’s fees in a SAPCR for an abuse of discretion. In re S.C., No. 05-18-00629-CV, 2020 WL 3046203, at *2 (Tex. App.—Dallas June 8, 2020, no pet.) (mem. op.); In re R.C.S., 167 S.W.3d at 152.

In this case, Mother requested a new trial on the grounds Father did not include his BAH and BAS in his calculation of net resources. As discussed, supra, the trial court correctly included these military allowances in its assessment of Father’s child support obligation to his two minor children as reflected in the May 2019 order. Under the circumstances of this case, we cannot say the trial court abused its discretion in awarding Mother reasonable attorney’s fees.

An attorney’s fee award must be supported by the evidence. Thomas v. Thomas, 895 S.W.2d 895, 898 (Tex. App.—Waco 1995, no writ.). To support a request for reasonable attorney’s fees, testimony should be given regarding the hours spent on the case, the nature of preparation, the experience of the attorney, and the prevailing hourly rates. See Goudeau v. Marquez, 830 S.W.2d 681, 683 (Tex. App.—Houston [1st Dist.] 1992, no writ). Sworn testimony from an attorney concerning an award of attorney’s fees is considered expert testimony. Nguyen Ngoc Giao v. Smith & Lamm, P.C., 714 S.W.2d 144, 148 (Tex. App.—Houston [1st Dist.] 1986, no writ).

*8 At the March 2019 hearing, Susan Vrana, Mother’s attorney, testified Mother hired her to represent her in this matter and entered into an agreement to pay Vrana attorney’s fees of $450 per hour plus court costs. Vrana further testified:

[P]rior to 8:30 today, I had spent 14 hours on my time at ... $450 an hour, that’s $6,300. She had $103 in filing fees.

I anticipate that we’ll be here about an hour[-]and-a-half this morning and post[-]trial there would be about another hour in drafting or reviewing and obtaining entry of an order, so that would be another hour[-]and-a-half of time for a total of $7,075.

In this matter I filed a Motion for New Trial, a Motion to Reform the Judgement [sic]. I’ve reviewed the pay of [Father] and done research regarding his income. I’ve made at least three trips to the courthouse for hearings or to set matters or to appear for pretrials. I’ve prepared my client for at least two hearings.

On February 1st, within the discovery period in this matter I was served discovery by Mr. Durrance and I filed objections, but also answered that discovery, spent our time answering discovery that was due yesterday, the day before trial.

My fees in this matter are reasonable for my experience and length of practice and my services were necessary for [Mother]. And we are asking the Court, because of the resistance in this matter by [Father] to pay support based on his income, we’re asking that [Mother] be awarded judgment against him in the amount of $7,075 for attorney’s fees.

I’ve practiced family law for 41 years in this county and have been board certified since 1985.

Father’s attorney told the court he did not have any questions for Vrana. This evidence is sufficient to support the award of attorney’s fees. See In re W.M.R., No. 02-11-00283-CV, 2012 WL 5356275, at *14 (Tex. App.—Fort Worth Nov. 1, 2012, no pet.) (mem. op.). We conclude the trial court did not abuse its discretion in awarding $4,000 in attorney’s fees to Mother.

We resolve Father’s third issue against him. We affirm the trial court’s judgment. We deny as moot any pending motions.

Footnotes

1

The July 2, 2018 order reflects the trial court was “presented with this agreed Order for New Trial.”

2

Father complains the trial court failed to make “findings of fact and conclusions of law,” but section 154.130 refers to specified “findings” the trial court must make under enumerated circumstances. TEX. FAM. CODE § 154.130.

3

Section 154.130(a) of the Texas Family Code states, “Without regard to [Texas Rules of Civil Procedure] 296 through 299[,] in rendering an order of child support, the court shall make the findings required by Subsection (b) if: (1) a party files a written request with the court before the final order is signed, but not later than 20 days after the date of rendition of the order; (2) a party makes an oral request in open court during the hearing; or (3) the amount of child support ordered by the court varies from the amount computed by applying the percentage guidelines under [the family code].” TEX. FAM. CODE § 154.130(a).

4

Findings under Subsection (b)(2) are required only if evidence of the monthly net resources of the obligee has been offered. TEX. FAM. CODE § 154.130(c).

5

Father’s base monthly pay with the Army is $4,493.10. He receives an additional $2,511 per month from the Army as a housing allowance and $369.39 per month as a basic subsistence allowance. The housing and subsistence allowances are not subject to federal income tax.

6

See Rose v. Rose, 481 U.S. 619, 107 S.Ct. 2029, 95 L.Ed.2d 599 (1987). In Rose v. Rose, the United States Supreme Court held the inability to subject certain federal benefits to garnishment does not prohibit a state court from utilizing them in child support proceedings. In Rose, the Court addressed the issue of whether a veteran could be held in contempt in a state court for failure to pay child support when his veteran’s benefits were his only source of income. The Court stated that “[w]hile [veteran’s benefits] are exempt from garnishment or attachment while in the hands of the Administrator, we are not persuaded that once these funds are delivered to the veteran a state court cannot require that the veteran use them to satisfy an order of child support.” Id. at 635, 107 S.Ct. 2029.

7

Other states have come to the same conclusion with respect to the inclusion of military allowances for the purpose of calculating an obligor’s child support obligation. See Childs v. Childs, 310 P.3d 955 (Alaska 2013) (father’s military allowance for housing constitutes income for purposes of determining his child support obligation); In re Long, 921 P.2d 67 (Colo. App. 1996) (service member’s basic allowance for quarters is included as income for purposes of calculating child support); Dep’t of Revenue v. Price, 182 So.3d 782 (Fla. Dist. Ct. App. 2015) (overseas housing allowance, an allowance to offset off-base housing expenses when a military service member is deployed to a location where housing costs are higher than what the basic allowance for housing covers, is gross income for purposes of calculating child support obligation); Shelhamer v. Hodges, 382 Mont. 187, 366 P.3d 255 (2016) (father’s annual military housing allowance and annual basic subsistence allowance, provided in addition to his base pay, constitute “actual income” included in calculating his child support obligation); Alexander v. Armstrong, 415 Pa.Super. 263, 609 A.2d 183 (1992) (service member’s allowance for quarters and variable housing allowance are included as income for child support, although they are not taxable).

8

Due to our resolution of this issue, we need not address whether the record demonstrates a showing of a material and substantial change in circumstances, including any such change arising out of Father’s pay increases since the December 2011 order on child support. Moreover, Father has not made any argument in his brief on appeal that family code section 156.401(a)(2) does not apply to this case. Nor did Father include anything in the record on appeal showing section 156.401(a)(2) does not apply to this case. See In re Marriage of Pyrtle, 433 S.W.3d 152, 166 (Tex. App.—Dallas 2014, pet. denied) (burden is on appellant to see that sufficient record is presented on appeal to show error requiring reversal) (quoting Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990)); see also Holley v. Holley, 864 S.W.2d 703, 707 (Tex. App.—Houston [1st Dist.] 1993, writ denied) (same) (“In the absence of a complete record, we must presume the evidence before the trial court supported its judgment.”).

Court of Appeals of Texas, Dallas.

KBIDC INVESTMENTS, LLC, Appellant

v.

ZURU TOYS INC., Zuru Inc., and Zuru Ltd., Tinnus Enterprises, LLC and Josh Malone, Appellees

No. 05-19-00159-CV

|

Opinion Filed June 26, 2020

Attorneys & Firms

Eric H. Findlay, Tyler, Debra Elaine Gunter, for Appellees ZURU Toys Inc., ZURU Inc., and ZURU Ltd.

J. Carl Cecere, for Appellees Tinnus Enterprises, LLC and Josh Malone.

Josh Malone, J. Carl Cecere, for Appellees Malone, Josh.

Carlos Ramon Soltero, Scotty G. Arbuckle III, Kevin J. Terrazas, Austin, for Appellant.

Before Justices Myers, Whitehill, and Pedersen, III

MEMORANDUM OPINION

Opinion by Justice Myers

*1 This case concerns a dispute between two inventors of systems for filling and sealing recreational water balloons. KBIDC Investments, LLC claims that its predecessor in interest, Kendall Harter, was the original inventor of the system used by appellees. Appellant brought suit alleging Josh Malone and his company, Tinnus Enterprises, LLC, misappropriated Harter’s trade secrets, used them to create Bunch O’ Balloons, took the product to market with the help of manufacturers Zuru Inc., Zuru Ltd., and Zuru Toys Inc. (collectively, “Zuru”), and made millions of dollars. The trial court rendered summary judgment that appellant take nothing on its claims. A jury found that Malone and Tinnus’s attorney’s fees through trial on appellant’s claim under the Texas Theft Liability Act were $194,970.

Appellant brings four issues on appeal contending (1) this Court lacks jurisdiction over this appeal because the trial court’s judgment is not final; (2) the trial erred by granting appellees’ motion for summary judgment because appellant presented some evidence of misappropriation; (3) the trial court erred by granting appellees’ motion for summary judgment because appellant was denied the opportunity to conduct necessary and appropriate discovery; and (4) the trial court erred by awarding Malone and Tinnus their attorney’s fees. We reverse the trial court’s judgment that appellant take nothing from Zuru Toys Inc., and we reverse the award of appellate attorney’s fees to Malone and Tinnus. In all other respects, we affirm the trial court’s judgment.

BACKGROUND

Appellant’s predecessor in interest, Kendall Harter, was an inventor and entrepreneur, and he was the owner of Blue Matrix Labs. In 2010, Harter saw there were ways that the recreational activity of playing with water balloons could be improved, including by filling multiple balloons at a time and by having the balloons seal themselves when they were full. He spent a few years developing a system. He eventually settled on using a manifold with multiple tubes on which the neck of the balloons would fit. The manifold was connected to a water source.

During the development process, Harter, who lived in Austin, worked with an engineering company in Farmers Branch, ARCO Ideas, Inc., to help develop his ideas. Those ideas included creating a water balloon filler–launcher. In March 2013, Harter created a drawing of the balloon filler–launcher and a partial prototype:

In developing the balloon filler–launcher, ARCO and Harter decided it needed a flow meter so that each balloon would be filled to a consistent level. ARCO contacted several companies, including Capstone Metering, to design a flow meter to fill multiple balloons simultaneously.

In 2013, Malone worked for a company, Realtime Group, and while working as Realtime’s employee, Malone did some consulting work for Capstone. Some of Malone’s work with Capstone was from his home office, and some was at Capstone’s office. Malone finished his work with Capstone by January 2014.

*2 Meanwhile, starting in 2010, Malone had been experimenting using O-rings on water balloons.1 Malone testified that in January 2014, he had his “light bulb moment” and conceived of his system for filling and sealing many water balloons at once. The system, which he called Bunch O’ Balloons, consisted of multiple narrow, straw-like tubes, with a balloon fitted over the end of the tube with an O-ring on the outside of the neck of the balloon holding the balloon on the tube. The other end of each tube fit into a cup-like device. The cup had thirty or more of these balloon-fitted tubes.

When the cup was attached to a water source, such as a garden hose, the water flowed through the tubes, filling the balloons simultaneously. As the balloons filled with water, they fell off the tubes and the O-rings sealed them.

Malone filed for a patent for the system on February 7, 2014. In July 2014, he launched a Kickstarter campaign for Bunch O’ Balloons. See https://www.kickstarter.com/projects/bunchoballoons/bunch-o-balloons-100-water-balloons-in-less-than-1 (Kickstarter video) (last visited June 24, 2020).2 Malone advertised that Bunch O’ Balloons would fill and seal over 100 water balloons in one minute. The Kickstarter campaign was a success, and Malone quickly met and then exceeded his goal.

In August 2014, Harter demonstrated in a YouTube video his version of a self-sealing, water-balloon-filling system he called the Zorbz Replicator.3

This system did not seal the balloons by an O-ring on the exterior but by having adhesives on the inside of the neck of the balloon and a small ball inside the balloon held in place by the specially designed neck of the balloon acting as a check valve blocking the water from escaping through the neck of the balloon.

In China, the Zuru companies, which manufacture and distribute toys, took notice of Harter’s and Malone’s products and began negotiations with them to manufacture and distribute the products. Harter told Zuru that Bunch O’ Balloons was a design stolen from him. Zuru reached an agreement with Malone for the right to manufacture and distribute Bunch O’ Balloons, but Harter refused to have Zuru sell his products. Zuru sold millions of Malone’s Bunch O’ Balloons products worldwide.

The success of Bunch O’ Balloons led to imitation, and Malone went to court to stop other companies, including Telebrands Corp., that were copying his product, infringing his patents, and seeking to have his patents invalidated. In 2015, Harter gave a deposition and provided an affidavit in Telebrands’ litigation against Malone and his company, Tinnus Enterprises.

*3 Harter’s Zorbz Replicator was less successful than Bunch O’ Balloons, and Harter’s company, Blue Matrix Labs, filed for bankruptcy protection. Appellant purchased the company in late 2016.

In 2017, appellant filed suit against Malone, Tinnus, and Zuru alleging Malone and Tinnus misappropriated Harter’s trade secrets to develop Bunch O’ Balloons and that Zuru was aware of Malone’s misappropriation when it manufactured and distributed Bunch O’ Balloons. Malone and Tinnus and Zuru Inc. and Zuru Ltd. moved for summary judgment, asserting appellant had no evidence to support its allegations. The trial court granted their no-evidence motions for summary judgment.

One of appellant’s causes of action was that appellees were liable under the Texas Theft Liability Act (TTLA). That statute states that the trial court shall award the prevailing party “costs and reasonable attorney’s fees.” TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b). Malone and Tinnus pleaded for attorney’s fees under the statute. Appellant demanded a jury trial on the amount and reasonableness of the attorney’s fees. The jury determined Malone and Tinnus’s reasonable attorney’s fees through the summary judgment on the causes of action and the trial on attorney’s fees were $194,970, and the jury awarded additional amounts in the event of appeal. The trial court signed a final judgment incorporating the summary judgments and the jury’s verdict.

JURISDICTION

In its first issue, appellant contends this Court lacks jurisdiction over this appeal because the judgment is not final. Appellant asserts the judgment does not dispose of one of the parties, Zuru Toys, Inc. We conclude the judgment is final and this Court has jurisdiction.

The supreme court discussed the problem of determining judgment finality in Lehmann v. Har-Con Corp., 39 S.W.3d 191 (Tex. 2001):

[T]he general rule, with a few mostly statutory exceptions, is that an appeal may be taken only from a final judgment. A judgment is final for purposes of appeal if it disposes of all pending parties and claims in the record, except as necessary to carry out the decree.”

....

[T]he language of an order or judgment can make it final, even though it should have been interlocutory, if that language expressly disposes of all claims and all parties. It is not enough, of course, that the order or judgment merely use the word “final”. The intent to finally dispose of the case must be unequivocally expressed in the words of the order itself. But if that intent is clear from the order, then the order is final and appealable, even though the record does not provide an adequate basis for rendition of judgment.

....

[A]n order that grants a motion for partial summary judgment is final if in fact it disposes of the only remaining issue and party in the case, even if the order does not say that it is final, indeed, even if it says it is not final.... Also, an order can be final and appealable when it should not be. For example, an order granting a motion for summary judgment that addressed all of the plaintiff’s claims when it was filed but did not address claims timely added by amendment after the motion was filed may state unequivocally that final judgment is rendered that the plaintiff take nothing by his suit. Granting more relief than the movant is entitled to makes the order reversible, but not interlocutory.

*4 ....

A statement like, “This judgment finally disposes of all parties and all claims and is appealable”, would leave no doubt about the court’s intention.

Id. at 195, 200, 204, 206 (Tex. 2001).

In this case, Zuru Inc. and Zuru Ltd. moved for summary judgment. The trial court signed an interlocutory order granting their motion. In the “Final Judgment,” the trial court ordered that appellant’s claims against “ZURU Toys, Inc., ZURU, Inc., and ZURU, Ltd., ... are hereby dismissed with prejudice as to re-filing the same and that Plaintiff shall take nothing.” The judgment also stated, “This is a Final Judgment that disposes of all parties and all claims and is appealable.”

The “Final Judgment” disposes of appellant’s claims against Zuru Toys Inc. by stating the claims against Zuru Toys Inc. “are hereby dismissed with prejudice ... and that Plaintiff shall take nothing.” The trial court expressed its intent that the judgment be final by stating, “This is a Final Judgment that disposes of all parties and all claims and is appealable.” See id. at 206.

We conclude the judgment is final and that this Court has jurisdiction over this appeal. We overrule appellant’s first issue.

SUMMARY JUDGMENT

In the second issue, appellant contends the trial court erred by granting appellees’ no-evidence motions for summary judgment on appellant’s claims.

Rule 166a(i) provides that after an adequate time for discovery, a party “may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial.” TEX. R. CIV. P. 166a(i). We review a no-evidence summary judgment under the same legal sufficiency standard used to review a directed verdict. See Flood v. Katz, 294 S.W.3d 756, 762 (Tex. App.—Dallas 2009, pet. denied). Thus, we must determine whether the nonmovant produced more than a scintilla of probative evidence to raise a fact issue on the material questions presented. See id. at 762. When analyzing a no-evidence summary judgment, “we ‘examine the entire record in the light most favorable to the nonmovant, indulging every reasonable inference and resolving any doubts against the motion.’ ” Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006) (quoting City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005)). A no-evidence summary judgment is improperly granted if the nonmovant presented more than a scintilla of probative evidence to raise a genuine issue of material fact. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003). “More than a scintilla of evidence exists when the evidence ‘rises to a level that would enable reasonable, fair-minded persons to differ in their conclusions.’ ” Id. (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)). “Less than a scintilla of evidence exists when the evidence is ‘so weak as to do no more than create a mere surmise or suspicion’ of a fact.” Id. (quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)).

*5 Plaintiffs often must prove trade secret misappropriation through circumstantial evidence. Sw. Energy Prod. Co. v. Berry-Helfand, 411 S.W.3d 581, 598 (Tex. App.—Tyler 2013) (citing SI Handling Sys., Inc. v. Heisley, 753 F.2d 1244, 1261 (3rd. Cir. 1985)), rev’d on other grounds, 491 S.W.3d 699 (Tex. 2016). “A fact issue is raised by circumstantial evidence if a reasonable person would conclude from the evidence that the existence of the fact is more reasonable than its nonexistence.” Guthrie v. Suiter, 934 S.W.2d 820, 831 (Tex. App.—Houston [1st Dist.] 1996, no writ). “All that is required is that the circumstances point to ultimate facts sought to be established with such a degree of certainty as to make the conclusion reasonably probable.” Id. “No fact issue is raised where the evidence is so indefinite and uncertain as to preclude a finding.” Id. at 831–32.

In deciding whether a disputed material fact issue exists precluding summary judgment, evidence favorable to the nonmovant will be taken as true. In re Estate of Berry, 280 S.W.3d 478, 480 (Tex. App.—Dallas 2009, no pet.). Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005). We review a summary judgment de novo to determine whether a party’s right to prevail is established as a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex. App.—Dallas 2000, pet. denied).

MISAPPROPRIATION BY MALONE

Appellees moved for summary judgment on the ground that appellant had no evidence they had misappropriated appellant’s trade secrets or other property. Appellant sued appellees for statutory and common-law misappropriation of trade secrets, violation of the TTLA, and for unfair competition. Misappropriation, or unlawful appropriation, is an element of each these causes of action. See TEX. CIV. PRAC. & REM. CODE ANN. § 134.002(2) (under TTLA, “ ‘Theft’ means unlawfully appropriating property....”); id. § 134A.003, .004 (under Texas Uniform Trade Secrets Act, party may receive injunctive relief and damages for misappropriation of trade secrets); Vertex Servs., LLC v. Oceanwide Houston, Inc., 583 S.W.3d 841, 849 (Tex. App.—Houston [1st Dist.] 2019, no pet.) (elements of common-law misappropriation, “also called unfair competition”).4

*6 For Malone to have misappropriated Harter’s trade secrets concerning filling multiple balloons with a manifold and using O-rings to make balloons self-sealing, he must have had some access to Harter’s trade secrets and knowledge of them. See RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 40, cmt. c (“proof of the defendant’s knowledge of the trade secret together with substantial similarities between the parties’ products or processes may justify an inference of use by the defendant”).5 We must determine whether appellant presented any evidence that Malone had access to Harter’s ideas for him to acquire knowledge of them and misappropriate them.

Malone’s Work at Realtime Group

Appellant asserts Malone could have learned of Harter’s ideas about filling multiple balloons with a manifold and using O-rings for self-sealing balloons from Harter’s consultant, ARCO. From 2012 to 2014, Harter worked with ARCO to develop his ideas. Besides the balloon filler–launcher, Harter also disclosed to ARCO his ideas for self-sealing balloons and for simultaneously filling multiple balloons.

When Harter was working with ARCO, Malone worked as a product-design consultant for The Realtime Group. One of Realtime’s clients was Capstone Metering, and Malone worked some at Capstone’s premises. ARCO hired Capstone to design a flowmeter for Harter’s balloon filler–launcher.

Thus, Harter’s evidence is that ARCO had Harter’s filler–launcher design, ARCO hired Capstone to design a flowmeter for it, and Malone may have been working at Capstone’s premises at that time. The record contains no evidence that ARCO sent Harter’s designs to Capstone or, even if it did send the design, that Malone had access to the design. Malone testified in his deposition that he was “involved” with “water meter” at Realtime and Capstone, but there is no evidence that Malone worked on the flowmeter for Harter’s balloon filler–launcher. ARCO was required by its agreements with Harter to obtain nondisclosure agreements from anyone who would see Harter’s designs, and there is no evidence that it did not do so. Nor is there any evidence that Malone signed a nondisclosure agreement concerning Harter’s designs.

This evidence does not make it reasonably probable that Malone had access to Harter’s design. Instead it is too indefinite and uncertain to show Malone had access to Harter’s design to constitute circumstantial evidence of Malone’s misappropriation of the design. See Guthrie, 934 S.W.2d at 831.

The Initials “JM” on ARCO’s Drawings

*7 Appellant also asserts Malone worked at ARCO and was exposed to Harter’s designs while working there. Harter disclosed various ideas to ARCO, including a “Provisional Patent Application” stating that water balloons could be sealed with “[s]mall rubber bands/o-rings that are applied to the neck of the balloon after it is filled that acts as a closure to restrict the flow of liquid or gas out of the balloon opening.”6 The document also described a system of filling the balloons similar to both Harter’s and Malone’s systems: “This method involves a manifold distribution system that disseminates water throughout various fill nozzles, thereby distributing liquid to multiple water balloons simultaneously.” Harter testified in his affidavit that in 2012, he made drawings for filling multiple water balloons at one time:

Although the similarity of this drawing to Bunch O’ Balloons is apparent, similarity of design is not evidence of misappropriation without evidence Malone knew of Harter’s design. See RESTATEMENT § 40 cmt c.

Appellant’s evidence for his assertion that Malone worked for ARCO and was exposed to Harter’s ideas at ARCO is that the initials “JM” appear on drawings ARCO prepared for other products designed by Harter, including drawings for a sandwich maker and a water-balloon gun.7 Appellant also points to Malone’s Linkedin.com profile, which states that his technical skills include “CAD,” computer-aided design. Appellant also asserts, without citing any evidence other than Harter’s affidavit, that Malone’s house was “within a 30-minute drive of ARCO’s offices” in Farmer’s Branch. Appellant also asserts that ARCO had no employees with the initials “JM” at that time.

Appellant’s argument that “JM” stands for Josh Malone is speculation. Appellant provides no evidence to support its theory that Malone is the only person with the initials “JM” who is skilled in CAD and lives within a thirty-minute drive of ARCO’s offices.

This evidence is too indefinite and uncertain to show Malone had access to Harter’s designs. It does not constitute circumstantial evidence that Malone worked at ARCO, that he had access to Harter’s provisional patent application or drawings, or that he misappropriated Harter’s trade secrets. Furthermore, the fact that no one with the initials “JM” worked at ARCO at that time is not evidence that Malone worked for ARCO or prepared the balloon-launcher or sandwich-maker drawings for ARCO.

Malone’s E-mail with Zuru

Appellant argues that statements by Malone in an e-mail to Zuru are evidence that Malone had access to one of Harter’s patent applications before it was public.

On August 15, 2014, Malone and Zuru exchanged e-mails negotiating the terms of the licensing agreement for Bunch O’ Balloons. One of Zuru’s concerns was the possibility of litigation with Harter’s companies concerning Harter’s Zorbz balloon products. Zuru proposed that half of Malone’s commission be withheld and used by Zuru for any litigation concerning Zorbz. Malone wrote back stating:

Agree to all except Zorbz indemnification. A few comments regarding that:

– I understand your concern, and will help address it however I can

– we are not prepared to accept this category of risk (aggressive or frivolous legal actions)

– several statements in the warranties section address this issue, and I am happy for you to add language there

I urge you to compare the patent application documents to assess any risk of infringement

*8I do not know and have never spoken to anyone who developed Zorbz IP

– I have not been a party to any NDA or contract in this field

Hypothetically if Zorbz consultants gave away IP, that does not create any liabilities for us under U.S. law

(Italicization added.) Appellant asserts that the three italicized statements constitute evidence that Malone had access to Harter’s trade secrets.

Concerning Malone’s statement urging Zuru “to compare the patent application documents to assess any risk of infringement,” appellant argues Zuru could not have compared the patent applications without Malone having access to Harter’s trade secrets and confidential information because one of Harter’s patent applications was not published until February 26, 2015, six months after the August 15, 2014 e-mail.

In support of this assertion, appellant cites to Harter’s patent application publication for “Self-Sealing Balloons and Related Components and Methods of Manufacturing.” However, it is not clear what “patent application documents” Malone was referring to in his e-mail with Zuru. Harter’s self-sealing-balloons patent application discusses making water balloons self-sealing in two ways: (1) by inserting a small sphere into the balloon that would act as a check valve by blocking the neck of the balloon after it was filled with water and by having the neck of the balloon operate as an elastic band to hold the check-valve ball in place, and (2) by making the neck of the balloon adhesive in the presence of water. The patent application also discussed methods for manufacturing the water balloons and check valves. The patent application did not discuss any matters resembling Bunch O’ Balloons, which worked by fitting balloons onto narrow tubes with the balloons self-sealing through the use of O-rings on the outside of the necks of the balloons, not adhesives inside the balloons or check valves held in place by the design of the neck of the balloon.

Harter testified in his deposition that he had “multiple” patents related to the Zorbz Replicator. If Malone was referring to the self-sealing balloon patent application, it is no evidence he had access to Harter’s trade secrets concerning either filling multiple balloons at one time or making them self-sealing with O-rings because that patent application does not discuss either of those matters. If Malone was referring to a different patent application, then there is no evidence whether that patent application was unpublished on August 15, 2014.

We conclude Malone’s statement to Zuru to “compare the patent applications” was too indefinite and uncertain to constitute circumstantial evidence that Malone had access to Harter’s relevant designs for water balloons or that Malone misappropriated Harter’s designs.

Appellant argues in its reply brief that the second italicized statement, “I do not know and have never spoken to anyone who developed Zorbz IP,” calls Malone’s credibility into question. Appellant points to evidence that Malone and Harter had exchanged e-mails about Zorbz only a month before Malone’s e-mail with Zuru. Appellant did not point to this statement in either its response to the motion for summary judgment or in its appellant’s brief. However, even considering the statement, it is, at most, evidence that Malone lied to Zuru. It is no evidence that Malone had access to Harter’s trade secrets on self-sealing water balloons with O-rings or filling multiple water balloons with a manifold. Appellant had the burden of producing some evidence that Malone misappropriated Harter’s trade secrets, and the second italicized statement is not circumstantial evidence of that.

*9 Appellant argues that the third italicized statement in the e-mail, “[h]ypothetically, if Zorbz consultants gave away IP, that does not create any liabilities for us under U.S. law,” shows Malone had access to and misappropriated Harter’s trade secrets. Appellant stated in the response to the motion for summary judgment: “That Mr. Malone would suggest the exact method by which he misappropriated the confidential trade secrets of Mr. Harter and Blue Matrix is telling.” Appellant states in its brief on appeal that Malone’s “telling choice of language at the time strongly suggests the precise method by which he misappropriated the confidential information and trade secrets....” We disagree. Appellant provides no evidence of who this hypothetical consultant was, what secrets were disclosed by or misappropriated from the consultant, or how Malone had access to the consultant or the consultant’s information. We conclude Malone’s statement is too indefinite and uncertain to constitute circumstantial evidence that he had access to and misappropriated any of Harter’s trade secrets about self-sealing water balloons using O-rings or for filling multiple water balloons using a manifold device.

“It’s some evidence.”

Appellant also points to a comment by the trial court at a hearing on the parties’ motions to compel discovery and for special exceptions. Appellant argues the trial court concluded that Zuru’s statement in the August 15, 2014 e-mails about wanting indemnity for potential suits by Harter was “some evidence” of Malone’s misappropriation of Harter’s trade secrets.

At the hearing, appellant’s lawyer told the trial court that Zuru wanted an indemnification provision in the licensing agreement because Harter had told Zuru that the Bunch O’ Balloons concept was “picked from our engineers in the Dallas/Fort Worth area and was essentially a stolen idea based on the replicator concept we were working on.” The following discussion then occurred:

The Court: And it’s Kendall Harter who told them it was stolen.

[Appellant’s Attorney]: Yes, Your Honor, that’s what it is saying.

The Court: Because Kendall Harter thinks it was stolen.

[Appellant’s Attorney]: Yes, Your Honor. And he’s telling the—

The Court: It wasn’t that they got the thief to admit it, the purported victim claims it was stolen.

[Appellant’s Attorney]: Yes, Your Honor. And he says, I’ve been working on the—

The Court: How is that evidence? That’s just a claim?

[Appellant’s Attorney]: Well, no, Your Honor, it’s telling him that I was working on this. I have my designs. I have my other things. I was doing this exact same thing and that this was—

The Court: I guess I should take that back. It’s some evidence.

[Appellant’s Attorney]: Yes, Your Honor.

The Court: It’s not dispositive, if the accusers’ own claims were evidence of their truthfulness, then nobody would need any other evidence. They would just say you took that from me.

[Appellant’s Attorney]: Absolutely, Your, Honor, and they will have a chance at trial to rebut that; but like you said, it is some evidence. That’s all we need, it’s some evidence to show—

The Court: But you need something more than something purely self-serving.

[Appellant’s Attorney]: You don’t actually, no, Your Honor, they don’t have anything to rebut it, you wouldn’t. It’s just—again, if it’s some evidence, that’s all you need.

In context, it appears what the trial court said was “some evidence” was Harter’s statement that Malone and Zuru stole his Zorbz Replicator trade secrets.

Even if the trial court meant that the e-mail about indemnification from a potential lawsuit from Harter was “some evidence,” that evidence “does not point to ultimate facts with such a degree of certainty as to make the conclusion [i.e., that Malone had access to and misappropriated Harter’s designs] reasonably probable.” Guthrie, 934 S.W.2d at 831. Therefore, it was not circumstantial evidence that Malone had access to and misappropriated Harter’s trade secrets concerning making balloons self-sealing using O-rings or filling multiple balloons using a manifold.

March 2015 Luncheon

In March 2015, Malone asked Harter to meet with him. Malone testified he was concerned that Harter may have been siding with Telebrands in that company’s attempt to have Malone’s patent for Bunch O’ Balloons set aside.

*10 During the luncheon meeting, Malone told Harter that Harter’s patent application for self-sealing balloons (discussed above) had the wrong illustrations. Most of the illustrations in the patent application were for a sandwich maker, which had nothing to do with the text in the application. Appellant argues Malone “should not have had any knowledge, information, or even idea about the sandwich maker unless he improperly received information through ARCO—in violation of the non-disclosure agreement.”

The patent application was published on February 26, 2015, and it was public information at the time of the March 2015 luncheon. Therefore, Malone’s knowledge of the patent application at the luncheon is not evidence of his having access to Harter’s confidential information.

Most of the illustrations on the patent application are clearly for a sandwich maker. The illustrations include a drawing of what appears to be machine with a slice of bread and a substance labeled “Creamy Peanut Butter” in an envelope next to the bread. The illustrations also included charts stating: “Place Bread,” “Start Machine,” “Dispense Foodstuff,” “Spread on Bread,” “Present Sandwich,” “Extract Sandwich,” “Eat Sandwich.” Malone did not need access to confidential information to discern that most of the illustrations in the patent application concerned a sandwich maker. Only four of the nineteen illustrations in the patent application appear to concern the Zorbz self-sealing balloon, which used an internal check valve with the specially designed neck of the balloon and internal adhesives to seal the balloon, not an external O-ring.

Harter also testified in his affidavit that as they were leaving the restaurant, Malone told him, “I’m going to tell your investors!” Harter testified that the identity of his company’s investors “was not public and there is no way that Malone could have found out the [identity] of the investors because Blue Matrix was not a public company.” Harter stated that one of the key investors received a letter signed by Malone. Malone testified in his deposition that Harter told him at the luncheon that one of his investors “was a famous third baseman for the Yankees or something. And so I think I Googled it, and then I think I further confirmed it from public records.” Malone was then asked, “What public records?” And he answered, “I don’t remember. It could have been registration with the Secretary of State, but I don’t remember for sure.” A moment later, he said, “Now I can answer the last question. He was the assignee of record in the patent office.”

Appellant argues it was factually false that the investor was the assignee for the pending patent application for self-sealing balloons. That published patent application shows the assignee is Harter’s company, Blue Matrix Labs. However, Malone did not say the investor was the assignee of the patent application for self-sealing balloons; Malone said the investor “was the assignee of record in the patent office.” Harter testified he had multiple patents for Zorbz water balloons; appellant did not present evidence that the investor was not “the assignee of record in the patent office” for one of Harter’s other patents. Malone did not specify what the investor had been assigned, and appellant did not ask Malone what the investor had been assigned.

Even if Malone came by knowledge of the investor’s identity by inappropriate means, it is too indefinite and uncertain to show that Malone came into contact with Harter’s ideas for filling multiple balloons with a manifold or for making balloons self-sealing using O-rings.

Use of Zorbz Balloons

*11 Appellant also argues the evidence shows Malone had access to Harter’s prototype self-sealing balloons later marketed under the brand name Zorbz. In the Kickstarter video, Malone shows how many Zorbz and other brands of water balloons he could fill in one minute, and he compares that to the number of Bunch O’ Balloons he could fill in a minute. In the video, the Zorbz balloons are white. Appellant’s summary judgment evidence included a written draft of a script for the Kickstarter video that Malone e-mailed to someone on June 25, 2014.

Appellant does not explain the link between Malone’s alleged use of Zorbz prototype balloons and his alleged misappropriation of Harter’s trade secrets. We will presume the argument is that if Malone had access to Harter’s prototype balloons, then Malone had access to Harter’s trade-secret designs.

Appellant first argues that the Zorbz balloons in the video were the prototype balloons because Zorbz balloons were not available to the public when Malone made the video. The record does not show the date on which Malone made the video. However, the Kickstarter campaign began July 22, 2014, so the video was made sometime between June 25 when Malone was working on the script and July 22, 2014. Harter testified that Zorbz balloons were sold between April and September 2014. Therefore, the fact that Malone used the balloons in June and July 2014 is not evidence they were Harter’s nonpublic prototype balloons.

Appellant also argues the balloons in the video must be the prototype balloons because the balloons Malone identified as Zorbz balloons in the video were white and Harter used white balloons for his prototype. Appellant’s summary judgment evidence included Malone’s receipt for a package of Zorbz balloons he ordered, and the receipt included a picture of the balloon package. The picture showed the package included white balloons as well as blue, red, and yellow balloons. Therefore, the fact that the Zorbz balloons in the video were white is not evidence they were Harter’s nonpublic prototype balloons.

Appellant also argues Malone had access to Harter’s prototype balloons because the drafts of the script call for a voiceover stating, “We made as many water balloons as we could in 1 minute using 4 different methods. Using the old fashioned way we were able to make 6 balloons. Using a Tie-Knot, it was 8 balloons. With Zorbs [sic], we made 30.” Therefore, appellant argues, Malone must have had Zorbz balloons on or before June 25 to make those claims in the script. Yet Malone’s receipt for the balloons shows he ordered them on June 24 for delivery between June 26 and July 1. This evidence shows the script was written before Malone received the balloons.

Appellant’s evidence included Malone’s deposition. Malone testified that an initial script was provided to him, he revised it, and he sent back the script that is in the record. The e-mails show the script was sent to him on June 23, and he returned the revised script on June 25. In both scripts, the voiceover says tests of Zorbz balloons showed thirty of them could be filled in one minute. Malone testified in his deposition that he timed filling Zorbz water balloons, but he did not testify when he did the testing other than that it was before the filming of the video. He also testified that the scripts’ statements that he filled thirty Zorbz balloons in one minute were not accurate. In the actual Kickstarter video, the voiceover, which is Malone’s voice, said he filled ten Zorbz balloons in one minute.

This evidence does not show Malone had access to Zorbz prototype balloons or that Malone tested any Zorbz balloons before he received those he ordered. Instead, the evidence shows Malone received and edited scripts for the Kickstarter video that stated a voiceover would state how many Zorbz balloons Malone could fill in a minute. The scripts stated thirty balloons per minute, but by the time the video was filmed and produced, which was after Malone received and could have tested the balloons, that number changed to ten. This evidence does not show that Malone had access to and misappropriated Harter’s trade secrets.

*12 Moreover, the Zorbz balloons used a different sealing system from Malone’s system using O-rings, and the package of Zorbz balloons did not come with a Zorbz Replicator, which was the device for filling multiple balloons at one time. So even if Malone had received Zorbz prototype balloons, it does not tend to show that he had access to Harter’s concepts for self-sealing balloons using O-rings or for filling multiple balloons using a manifold.

“Do or Die”

Appellant also points to Malone’s comments in an interview published in D Magazine. In the interview, Malone said that before Bunch O’ Balloons, his inventing “wasn’t quite working out,” he was “really, really discouraged,” and believed this was his “last chance. It was do or die.”8 Malone also stated in his deposition that he came up with the idea for Bunch O’ Balloons in a few weeks. Appellant argues: “The evidence shows that Mr. Malone’s alleged creation of Bunch O’ Balloons is nothing more than recasting misappropriated products he gained from KBIDC.” Appellant then points to Malone’s LinkedIn profile where he describes his business entity, Tinnus: “TINNUS stands for There Is Nothing New under the Sun. This describes my approach which is to find the best products, technologies, or methods and use them, improve them, or replace them.” However, neither Malone’s melancholy and anxiety about possibly having to give up inventing nor the name and philosophy of his company is any evidence that Malone had access to and misappropriated Harter’s trade secrets concerning sealing water balloons with O-rings or filling multiple balloons with a manifold.

We conclude that none of the evidence appellant cites, whether viewed separately or collectively, constitutes evidence that Malone misappropriated trade secrets belonging to Harter and later to appellant to create Bunch O’ Balloons. Therefore, the trial court did not err by granting Tinnus and Malone’s motion for summary judgment.

MISAPPROPRIATION BY ZURU INC. AND ZURU LTD.

Zuru Inc. and Zuru Ltd. moved for summary judgment on the ground that appellant had no evidence they unlawfully used, disclosed, appropriated, secured, or stole Harter’s trade secrets or other property. To prevail, appellant had to present some evidence that the Zuru entities knew or had reason to know they derived their knowledge of Harter’s trade secrets through a person who used improper means to acquire the trade secrets. See CIV. PRAC. § 134A.002(3)(B)(ii)(a).

Appellant’s legal theory is that the Zuru entities received Harter’s trade secrets from Malone, who had misappropriated them from Harter. To support this theory, appellant had to present some evidence that Malone misappropriated Harter’s trade secrets. As discussed above, appellants failed to present any such evidence. Therefore, appellant presented no evidence that the Zuru entities unlawfully used, disclosed, appropriated, secured, or stole Harter’s or appellant’s trade secrets or other property.

*13 We conclude the trial court did not err by granting Zuru Inc. and Zuru Ltd.’s motion for summary judgment.

We overrule appellant’s second issue.

SUMMARY JUDGMENT FOR ZURU TOYS INC.

Appellant also contends the trial court erred by rendering judgment for Zuru Toys Inc. Zuru Toys Inc. did not move for summary judgment with Zuru Inc. and Zuru Ltd. Instead, Zuru Inc. and Zuru Ltd.’s motion for summary judgment identified the movants as “ZURU Ltd. and ZURU Inc. (collectively ‘ZURU’), incorrectly named as ZURU Toys Inc. ...” Even though Zuru Toys Inc. did not move for summary judgment, the final judgment states that appellant’s “affirmative claims for relief asserted against Defendants ... ZURU Toys, Inc. ... are hereby dismissed with prejudice as to re-filing the same and that Plaintiff shall take nothing.” As this Court has stated, “An order that grants summary judgment to a party who did not move for summary judgment is erroneous and must be reversed.” Mitchell v. Baylor Univ. Med. Ctr., 109 S.W.3d 838, 844 (Tex. App.—Dallas 2003, no pet.).

Zuru Toys Inc. filed a motion for summary judgment on the day the court signed the final judgment. A motion for summary judgment must be filed at least twenty-one days before the summary judgment hearing. TEX. R. CIV. P. 166a(c). Zuru Toys Inc.’s motion filed the day of the final judgment did not follow this requirement. Nothing in the record shows the trial court considered or ruled on that motion for summary judgment. We conclude the trial court erred by rendering judgment that appellant take nothing from Zuru Toys Inc.

DISCOVERY AND CONTINUANCE

In his third issue, appellant contends the trial court erred by denying its motion to compel discovery and its motion to continue the summary judgment hearing.

Motions to Compel Discovery

Appellant filed motions to compel discovery responses against Zuru and against Malone and Tinnus on August 11, 2017, and January 25, 2018. The trial court denied the motions. “In general, a party may obtain discovery regarding any matter that is not privileged and is relevant to the subject matter of the pending action.” TEX. R. CIV. P. 192.3(a).

We review a trial court’s denial of a motion to compel discovery for an abuse of discretion. Carbonara v. Tex. Stadium Corp., 244 S.W.3d 651, 658 (Tex. App.—Dallas 2008, no pet.). A trial court abuses its discretion when it acts “without reference to any guiding rules and principles”; in other words, if it acts arbitrarily or unreasonably. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). Even where a party shows an abuse of discretion in a discovery ruling, the complaining party must still show harm to obtain a reversal. See TEX. R. APP. P. 44.1(a); see also Ford Motor Co. v. Castillo, 279 S.W.3d 656, 667 (Tex. 2009). Harmful error is error that “probably caused the rendition of an improper judgment” or “probably prevented the appellant from properly presenting the case to the court of appeals.” TEX. R. APP. P. 44.1(a).

On appeal, appellant complains about appellees’ failure to comply with its request that appellees provide copies of all communications between them. Zuru’s “COO” testified in her deposition that there were hundreds of e-mails between Zuru and Malone. However, appellant states Malone produced “a handful” of e-mails with Zuru, but Zuru produced no e-mails between it and Malone. Appellant also asserts on appeal that the trial court erred by denying its motion to compel discovery concerning marketing, sales, and use of Bunch O’ Balloons.

*14 Appellant provides no argument explaining how these discovery requests were relevant to the only issue in the motion for summary judgment, whether Malone misappropriated Harter’s trade secrets concerning self-sealing water balloons with O-rings and filling multiple balloons with a manifold system. Malone patented Bunch O’ Balloons in February 2014. Therefore, any misappropriation of Harter’s trade secrets had to have occurred before then. Appellant provides no explanation of how communications between Malone and Zuru, which began in August 2014, could be relevant to events allegedly occurring no later than February 2014.

Likewise, appellant provides no explanation of how “information related to marketing/sales/use of Bunch O’ Balloons” was relevant. Appellant states in its brief that the “marketing/sales/use” information “goes directly to one of the elements ZURU raised in its summary judgment motion.” Appellant does not identify which element or provide a citation to the record. Appellant may be referring to Zuru’s motion for summary judgment on appellant’s unfair competition cause of action asserting, “KBIDC has not and cannot bring forth any summary judgment evidence that ZURU used KBIDC’s trade secrets in competition with KBIDC.” To meet this no-evidence challenge, appellant would have to show Bunch O’ Balloons incorporated appellant’s trade secrets and that Zuru used those trade secrets in competition with appellant. The only way appellant could show Bunch O’ Balloons incorporated its trade secret was to present some evidence that Malone misappropriated Harter’s trade secrets and used them to design Bunch O’ Balloons. The marketing, sales, and use information by Zuru would be relevant to show whether Bunch O’ Balloons was sold in competition with appellant’s Zorbz products, but we fail to see how that information could be relevant to showing Bunch O’ Balloons was a result of Malone misappropriating Harter’s Trade secrets.

We conclude appellant has failed to show how the trial court’s denial of the motion to compel discovery constituted harmful error.

Motion for Continuance

Appellant moved for a continuance of the summary judgment hearing set for May 17, 2018, because it had not had an adequate opportunity for discovery before appellees filed their motions for summary judgment.

A party may move for no-evidence summary judgment “after adequate time for discovery.” TEX. R. CIV. P. 166a(i). This rule does not require that discovery has been completed. Specialty Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 145 (Tex. App.—Houston [14th Dist.] 2000, pet. denied). To determine whether adequate time for discovery has passed, we examine such factors as: (1) the nature of the case; (2) the nature of evidence necessary to controvert the no-evidence motion; (3) the length of time the case was active; (4) the amount of time the no-evidence motion was on file; (5) whether the movant had requested stricter deadlines for discovery; (6) the amount of discovery already taken place; and (7) whether the discovery deadlines in place were specific or vague. Robertson v. Sw. Bell Yellow Pages, Inc., 190 S.W.3d 899, 902 (Tex. App.—Dallas 2006, no pet.). A party claiming a continuance is necessary in order to conduct discovery must establish “the materiality and purpose of the discovery sought, and whether the party seeking the continuance has exercised due diligence to obtain the discovery sought.” Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 161 (Tex. 2004).

In this case, appellant filed the suit in Travis County on January 24, 2017. The summary judgment hearing was May 17, 2018, one year, four months, and twenty-three days after appellant filed suit. Malone and Tinnus moved for summary judgment on January 19, 2018, almost five months before the summary judgment hearing. Zuru moved for summary judgment on April 16, 2018, about one month before the summary judgment hearing. The only evidentiary issues in the motions for summary judgment were (1) whether appellant could present some evidence that Malone misappropriated Harter’s trade secrets for self-sealing water balloons with O-rings and for filling multiple balloons at one time with a manifold; and (2) whether appellant could present some evidence that Zuru knew or should have known of Malone’s misappropriation.

*15 Appellant asserts discovery was delayed six months while venue was transferred from Travis County to Collin County. However, appellant cites no authority for the assertion that discovery could not occur while the case’s transfer was pending. Also, the record shows some discovery occurred during this time. Appellant has not shown discovery could not have taken place while the transfer-of-venue proceedings were pending.

Appellant also sought a continuance of the summary judgment hearing to take the depositions of four individuals: Alex Stegall, Jim Williamson, Laura Jensen, and Allison Malone. However, appellant did not explain how the depositions of these four individuals were material to the issues in the motions for summary judgment. Appellant stated in its motion for continuance:

Each of these persons has important information related to the issues raised in Defendants’ motion for summary judgment. For example, Alex Stegall was the primary contact for Mr. Malone concerning his kickstarter campaign, press releases, and other media publications related to Bunch O’ Balloons. It is expected that Ms. Stegall will be able to verify the statements Mr. Malone made in these many media reports as well as the timeline for when certain testing, marketing, and other development of Bunch O’ Balloons occurred. Likewise, Mr. Williamson was involved in the production of certain components of the Bunch O’ Balloons product in late January/early February 2014 and had communications and contacts with Mr. Malone during the relevant period concerning Bunch O’ Balloons. Further, Laura Jensen participated in Mr. Malone’s kickstarter video, would have tested the product, and Mr. Malone has already admitted that his kickstarter video falsely stated that Ms. Jensen was a neighbor. In addition, Allison Malone was listed as a person with relevant knowledge on Defendants Tinnus and Malone’s disclosures, would have knowledge of the testing and development of the Bunch O’ Balloons product, and was a regular participant in videos and other efforts on behalf of Mr. Malone. Her testimony will be important to show the development and testing of Bunch O’ Balloons.

KBIDC believes that documents and testimony from these and other persons are necessary for the case and particularly as it relates to the element of misappropriation, which has been challenged by Defendants’ motions for summary judgment. Some or all of this testimony will likely further establish evidence supporting the misappropriation of Plaintiff’s trade secrets and property.

Although appellant states the witnesses’ testimony “will likely further establish evidence supporting ... misappropriation,” the motion provides no explanation of how their testimony would do so. Except for Williamson, none of the witnesses appear to have been involved with appellees before Malone patented Bunch O’ Balloons. Appellant’s explanation to the trial court regarding the need to depose Williamson was that during January to February 2014, Williamson was “involved in the production of certain components” for Bunch O’ Balloons and that he had “communications” with Malone. Although other parts of the record show this time period was immediately before Malone applied for the patent for Bunch O’ Balloons, appellant did not explain in the motion the potential relevance of that time period. Appellant also did not explain how Williamson or any of the other potential deponents would have had knowledge that Malone misappropriated the design for Bunch O’ Balloons from Harter. During the hearing on the motion for continuance, appellant did not mention Williamson. Appellant also provided no explanation for its failure to depose these witnesses during the preceding sixteen months other than “Defendants’ refusal to produce key documents, discovery disputes, scheduling issues for all the parties.” Appellant did not explain how these matters prevented their deposing these witnesses.

*16 As for the factors concerning discovery deadlines, there were no strict deadlines. Appellant asserts the trial court erred by not signing a discovery control plan in this case. Rule 190.1, headed “Discovery Control Plan Required,” states, “Every case must be governed by a discovery control plan....” TEX. R. CIV. P. 190.1 Appellant states the discovery control plan often is used as a guide to determine whether there has been an adequate time for discovery. Although appellant mentioned the lack of a discovery control plan in its motion for continuance and response to the motion for summary judgment, it did not move for the court to sign a discovery control plan. To preserve error for appellate review, a party must have made known its complaint by a request, objection, or motion that stated the grounds for the ruling the party sought, and the party must have obtained a ruling on the request, objection, or motion. TEX. R. APP. P. 33.1(a)(1). In this case, the record does not show that appellant requested or moved for the court to sign a discovery control plan. Nor does the record show appellant objected to the lack of a discovery control plan. Even if appellant’s statements about the lack of a discovery control plan constituted a request, objection, or motion, the record does not show the trial court ruled on it. Therefore, appellant failed to preserve error from the lack of a discovery control plan. Id.

We conclude appellant has not shown the trial court abused its discretion by denying its motion for continuance.

We overrule appellant’s third issue.

ATTORNEY’S FEES

In its fourth issue, appellant contends the trial court erred by awarding Malone and Tinnus their attorney’s fees. Appellant contends the trial court erred by not requiring Malone and Tinnus to segregate the fees for defending the cause of action under the TTLA from the fees related to the other causes of action. Appellant also contends the trial court erred by not submitting its requested jury instruction on segregation of attorney’s fees. Appellant also contends the requested fees were excessive and not supported by legally or factually sufficient evidence. Finally, appellant contends the trial court erred by awarding Tinnus and Malone their attorney’s fees incurred in the litigation over their recovery of attorney’s fees.

The evidence shows Malone and Tinnus’s attorneys billed them $133,310 for fees through the trial court’s order granting partial summary judgment, $51,660 following the granting of the motion for summary judgment through the end of the month before the jury trial, and their attorney testified he expected the billing for the month including the trial to be $10,000.

Segregation of Attorney’s Fees

Appellant argues Malone and Tinnus were required to segregate the fees incurred for the one cause of action where fees were recoverable by statute, the TTLA claim, from the three causes of action where fees were not recoverable, namely, violation of the Texas Uniform Trade Secrets Act,9 common-law misappropriation of trade secrets, and unfair competition. Appellant asserts that because Malone and Tinnus did not do so, the question of attorney’s fees must be remanded to the trial court. Malone and Tinnus argue that appellant’s allegations in the four causes of action are practically identical, so all the work performed on the case necessarily applied to all four causes of action, and no work on the case did not apply to the TTLA claim.

Texas follows the American Rule, which provides that litigants must pay their own costs of litigation, and the costs of litigation may be shifted to another party only if specifically provided for by statute or contract. See Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 483–84, 487 (Tex. 2019); Epps v. Fowler, 351 S.W.3d 862, 865 (Tex. 2011). Appellant had no contract with Malone and Tinnus. The only statute authorizing shifting attorney’s fees in this case is section 134.005(b) of the Civil Practice & Remedies Code, which provides, “Each person who prevails in a suit under this chapter [the TTLA] shall be awarded court costs and reasonable and necessary attorney’s fees.” CIV. PRAC. § 134.005(b). Both appellant and Malone and Tinnus pleaded for attorney’s fees under this provision. Malone and Tinnus, however, were the prevailing parties; therefore, they are entitled to recover all their costs and reasonable and necessary attorney’s fees concerning the TTLA claim.

*17 Because Malone and Tinnus are allowed to recover only the attorney’s fees that were reasonable and necessary for the TTLA claim, they had to segregate those fees from the fees for work that did not apply to the TTLA claim. “To the extent such services would have been incurred on a recoverable claim alone, they are not disallowed simply because they do double service” by applying to Malone and Tinnus’s defense of the other three claims. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313 (Tex. 2006). Merely because the facts concerning the different claims are intertwined does not mean the party seeking fees does not have to segregate the fees for the recoverable claims from the unrecoverable claims. “[I]t is only when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined that they need not be segregated.” Id. at 313–14. Thus, under Tony Gullo, the question is whether all the fees Malone and Tinnus incurred concerned the TTLA claim or whether some of the fees were unrelated to the TTLA claim. If all the fees related to the TTLA claim, segregation was unnecessary, even if those fees also related to the other claims.

Appellant appears to argue that in 2017, eleven years after Tony Gullo, the supreme court overruled that part of Tony Gullo by holding segregation on a claim-by-claim basis is required in all cases, citing Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017). In that case, Horizon sued its former employees who had gone to work for Acadia, Horizon’s competitor, taking with them Horizon’s confidential information. Id. at 857. Horizon brought claims for breach of contract and violation of the TTLA as well as numerous torts. Id. The breach of contract claim was based on the defendants’ breaches of non-compete agreements. The TTLA claim was based on the defendants’ misappropriating Horizon’s trade secrets and other property. Id. at 883. Horizon sought to recover its attorney’s fees for breach of contract and TTLA. Horizon prevailed in a jury trial on many of its claims, including TTLA and breach of contract. The jury awarded Horizon substantial damages and attorney’s fees. Id. at 858. The supreme court concluded that no evidence supported the claim for breach of contract, but it affirmed the judgment on the TTLA claim. Id. at 883. Therefore, the only claim Horizon had for recovering attorney’s fees was the TTLA claim. Id. The supreme court stated:

When Horizon’s expert testified about Horizon’s attorney’s fees, he segregated the fees unrelated to Horizon’s breach of contract and TTLA claims, but he did not specifically delineate the fees on a claim-by-claim basis. Thus, we have no way to know the amount of attorney’s fees relating solely to the TTLA violations. In this instance, vacating the attorney’s fees award and remanding for a new trial on the issue is proper.

Id. at 884. Nothing in this paragraph is inconsistent with Tony Gullo. The breach of contract and TTLA claims were not related and did not involve the same facts; they were distinct causes of action. Therefore, Horizon had to segregate its fees relating to the breach of contract claim from the fees related to the TTLA claim. Because Horizon did not do so, the attorney’s fees issue was remanded to the trial court. Id. The principle in Tony Gullo that segregation is not necessary “when discrete legal services advance both a recoverable and unrecoverable claim” is unaffected by Horizon Health Corp. See Tony Gullo, 212 S.W.3d at 313–14.

Appellant also cites Transverse, L.L.C. v. Iowa Wireless Servs., LLC, No. A-10-CV-517-LY, 2020 WL 614590 (W.D. Tex. Feb. 7, 2020) (report and recommendation of United States Magistrate Judge). In that case, Transverse sued Iowa Wireless Services (IWS) over a non-disclosure agreement and supply contract, asserting claims for breach of contract, TTLA, and numerous other causes of action. Id. at *1. IWS prevailed, and it was entitled to its attorney’s fees under the TTLA. Id. at *2. The magistrate ordered IWS to segregate the fees for the recoverable TTLA claim from the fees relating to the other claims. IWS refused to segregate, arguing it did not have to segregate and that it was entitled to the fees for all the claims because the claims arose out of the same facts. Id. at *2, *3. The magistrate disagreed and cited numerous places where there were fees for tasks separate from the TTLA claim that IWS could have segregated. Id. at *4 n.2. The magistrate stated, “segregation was not an impossible task factually, as there were many approaches IWS could have taken to meet its burden.” Id. at *4. In this case, however, appellant has not pointed out any fees that do not apply to the TTLA claim.

*18 Malone and Tinnus’s argument is that all of their attorney’s fees were reasonable and necessary to their prevailing on appellant’s TTLA claim. Their attorney testified to that fact. He also testified that the attorney’s fees would have been the same if the TTLA claim had been the only claim. Appellant does not identify any invoice entry that did not apply to the TTLA claim.

We conclude appellant has not shown the trial court erred by awarding Malone and Tinnus their attorney’s fees without requiring segregation of the fees among the different claims.

Jury Instruction

Appellant argues the trial court erred by refusing to submit appellant’s proposed instructions pertaining to the jury question on attorney’s fees. The jury question asked the jury, “What is a reasonable fee ... for the reasonable and necessary services of Defendants’ attorneys in the defense of Plaintiff’s claim under the Texas Theft Liability Act?” The question instructed the jury to consider the Arthur Andersen factors. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). Appellant asked that the jury also be instructed as follows:

1. The party seeking an attorney’s fees award bears the burden of proving that legal work relating to claims for which fees may be recovered has been properly segregated from legal work relating to claims for which fees are not recoverable.

2. Segregation must be on a claim-by-claim basis.

3. No matter how nominal, an unrecoverable fee that does not advance a recoverable claim must be segregated from the request for attorney’s fees.

4. You may not award any amount for work relating to claims for which fees are not recoverable.

(Footnotes and internal quotation marks omitted.) The trial court refused to submit these instructions.

Rule of Civil Procedure 277 requires the trial court to “submit such instructions and definitions as shall be proper to enable the jury to render a verdict.” TEX. R. CIV. P. 277. “This rule ... affords the trial court considerable discretion in deciding what instructions are necessary and proper in submitting issues to the jury.” State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 451 (Tex. 1997). We review the trial court’s refusal of a requested jury instruction for abuse of discretion. Costilla v. Crown Equip. Co., 148 S.W.3d 736, 741 (Tex. App.—Dallas 2004, no pet.). “A trial court should submit explanatory instructions when in its sole discretion, it determines that the instructions will help the jury to understand the meaning and effect of the applicable law and presumptions.” Depriter v. Tom Thumb Stores, Inc., 931 S.W.2d 627, 629 (Tex. App.—Dallas 1996, writ denied). Trial courts should refuse to submit unnecessary instructions, even if the instructions are legally correct statements. Id. at 630.

Appellant discusses in its brief why the instructions are legally correct statements and how it preserved its argument. However, appellant does not explain why the trial court’s decision not to submit the instructions was arbitrary or unreasonable or without reference to any guiding rules or principles. See id. at 628–29 (defining abuse of discretion when court refuses to submit requested jury instructions). Nor does appellant explain why these instructions were necessary. Appellant cites no authority requiring trial courts to submit these instructions. We conclude appellant has not shown the trial court abused its discretion by refusing to submit the instructions.

“Fees for Fees”

*19 Appellant also contends the trial court erred by awarding Malone and Tinnus their attorney’s fees incurred after the court granted their motion for summary judgment because those fees were related solely to the litigation concerning the award of attorney’s fees.

Appellant observes that the Supreme Court has stated, “In our legal system, no attorneys, regardless of whether they practice in bankruptcy, are entitled to receive fees for fee-defense litigation absent express statutory authorization.” Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121, 133–34 (2015). We agree that shifting the cost of litigating anything, including the recovery of attorney’s fees, requires statutory or contractual authorization. But the recovery of attorney’s fees for litigating attorney’s fees is not per se prohibited. See, e.g., Comm’r, Immigration & Naturalization Serv. v. Jean, 496 U.S. 154, 162–65 (1990) (under Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A), party prevailing against United States entitled to attorney’s fees for preparing attorney’s fees application and for litigation about attorney’s fees); Saldivar v. Rodela, 894 F. Supp. 2d 916, 939 (W.D. Tex. 2012) (under International Child Abduction Remedies Act, 22 U.S.C. § 9007(b)(3), petitioner entitled to legal fees for work preparing attorney’s fees application and litigation over fees).

The TTLA provides, “Each person who prevails in a suit under this chapter shall be awarded court costs and reasonable and necessary attorney’s fees.” CIV. PRAC. § 134.005(b). Unlike the language before the Supreme Court in Baker Botts,10 this statute contains few limitations. The only limitation is that the fees be “reasonable and necessary.” Unlike some statutes, section 134.005 contains no limitation that the award of attorney’s fees be limited to fees incurred in the defense or prosecution of the statutory claim. Cf., e.g., TEX. AGRIC. CODE ANN. § 251.004(b) (“attorney’s fees incurred in the defense”); TEX. ALCO. BEV. CODE ANN. § 108.80(b) (“reasonable attorney’s fees incurred in the defense or prosecution of the action”); CIV. PRAC. § 62.044(b) (“reasonable attorney’s fees incurred in dissolution of the writ”). Instead, the fees must be reasonable and necessary to the party “prevailing.” Prevailing, under the TTLA, includes the award of attorney’s fees because the award of attorney’s fees is mandatory. See CIV. PRAC. § 134.005(b) (“Each person who prevails ... shall be awarded ... attorney’s fees.”). Thus, the attorney’s fees incurred to obtain the attorney’s fees award may be part of the reasonable and necessary fees for a “party who prevails in a suit under this chapter.” Id.

*20 In support of its argument that Malone and Tinnus may not recover their attorney’s fees incurred as they pursued their right to attorney’s fees, appellant cites Austin ISD v. Manbeck, 338 S.W.3d 147 (Tex. App.—Austin 2011), rev’d in part on other grounds, 381 S.W.3d 528 (Tex. 2012). In that case, the Austin Court of Appeals concluded that section 408.221(c) of the Labor Code did not permit a workers’ compensation claimant seeking attorney’s fees to recover the fees incurred for seeking the fees.11 Id. at 154–55. Section 408.221(c) allows a workers’ compensation claimant to recover attorney’s fees from an insurance carrier when the insurance carrier seeks judicial review of certain final decisions by the administrative appeals panel. See TEX. LAB. CODE ANN. § 408.221(c). However, the statute limits the claimant’s recovery of attorney’s fees to fees “incurred by the claimant as a result of the insurance carrier’s appeal” and “only for the issues [appealed from the appeals panel] on which the claimant prevails” in the judicial review. Id. In Manbeck, the claimant prevailed before the appeals panel, and the insurance carrier sought judicial review. Manbeck, 338 S.W.3d 149. The claimant filed a counterclaim for attorney’s fees under section 408.221(c). After two-and-a-half years of litigation in the trial court, the insurance carrier nonsuited its claim for judicial review. Id. at 150. The claimant’s counterclaim for attorney’s fees was tried to a jury, which determined the amount of the claimant’s attorney’s fees both before and after the insurance carrier’s nonsuit. The court of appeals determined that the post-nonsuit fees, i.e., those incurred in seeking the claimant’s attorney’s fees, were not recoverable under section 408.221(c) because they were not incurred in prevailing on the issues on which the insurance carrier sought judicial review. Id. at 156. Section 134.005(b) contains no such limitation.

Appellant also argues that allowing a prevailing party to recover its attorney’s fees in seeking attorney’s fees “would be designed merely to spawn more satellite litigation in search for an ever expanding universe of fees for fees ... [and] are a fertile ground for mischief and misuse of the litigation process.” These concerns are dealt with by the requirement that the fees be “reasonable and necessary.” If the factfinder determines that the prevailing party’s attorney’s fees for obtaining the fees were unnecessary or unreasonable, the factfinder may reduce the award of fees appropriately. Likewise, if the nonprevailing party uses the litigation process to increase the prevailing party’s attorney’s fees in seeking to be awarded its rightful attorney’s fees, the factfinder may determine those additional fees were reasonable and necessary, and the trial court may award them. See Comm’r, INS, 496 U.S. 162–66.

We conclude the trial court did not err by awarding Malone and Tinnus their attorney’s fees incurred in seeking to recover their attorney’s fees under section 134.005(b).

Appellant also argues the trial court abused its discretion by refusing to submit a jury instruction that the jury may not award attorney’s fees for time spent seeking an award of attorney’s fees. Because we have concluded section 134.005(b) permits such an award, the requested instruction was an incorrect statement of the law, and the trial court did not abuse its discretion by not submitting the instruction.

Sufficiency of the Evidence

Appellant argues the trial court erred by awarding Malone and Tinnus the attorney’s fees found by the jury because the fees awarded were “grossly excessive and not supported by factually or legally sufficient evidence.” The reasonableness and necessity of attorney’s fees “are questions of fact to be determined by the fact finder and act as limits on the amount of fees that a prevailing party can shift to the non-prevailing party.” Rohrmoos, 578 S.W.3d at 489.

*21 When reviewing the legal sufficiency of the evidence, we consider all the evidence before the jury, crediting evidence in support of the verdict if reasonable jurors could, and disregarding evidence contrary to the verdict unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 823, 827 (Tex. 2005); Morris v. Wells Fargo Bank, N.A., 334 S.W.3d 838, 842 (Tex. App.—Dallas 2011, no pet.). If there is more than a scintilla of evidence to support the finding, the evidence is legally sufficient. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998). When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). If the evidence furnishes a reasonable basis for differing conclusions by reasonable minds as to the existence of a vital fact, then there is legally sufficient evidence, more than a scintilla, to support the fact. Id.

When reviewing the factual sufficiency of the evidence, we examine all the evidence and set aside a finding only if it is so contrary to the evidence as to be clearly wrong and unjust. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998); Cameron v. Cameron, 158 S.W.3d 680, 683 (Tex. App.—Dallas 2005, pet. denied). In conducting our review of both the legal and factual sufficiency of the evidence, we are mindful that the jury, as fact finder, was the sole judge of the credibility of the witnesses and the weight to be given their testimony. City of Keller, 168 S.W.3d at 819; Hinkle v. Hinkle, 223 S.W.3d 773, 782 (Tex. App.—Dallas 2007, no pet.). We may not substitute our judgment for the fact finder’s, even if we would reach a different answer on the evidence. See Maritime Overseas Corp., 971 S.W.2d at 407; Hinkle, 223 S.W.3d at 782. A challenge to attorney’s fees as being excessive is a factual sufficiency challenge to the award. Lerma v. Border Demolition & Envtl., Inc., 459 S.W.3d 695, 705 (Tex. App.—El Paso 2015, pet. denied) (citing Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406 (Tex. 1998) (“The standard of review for an excessive damages complaint is factual sufficiency of the evidence.”)).

“[A] claimant seeking an award of attorney’s fees must prove the attorney’s reasonable hours worked and reasonable rate by presenting sufficient evidence to support the fee award sought.” Rohrmoos, 578 S.W.3d at 501–02. Sufficient evidence to support an award of attorney’s fees includes, at a minimum, the following evidence: (1) the particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services. Id. at 502. The evidence must include details about the work performed. Id. at 505. This calculation, when supported by sufficient evidence, creates a presumption of the reasonable and necessary attorney’s fees that can be shifted to the other party. Id. at 499.

Malone and Tinnus’s lead counsel testified as their expert witness on attorney’s fees. He testified to the experience of each lawyer and legal assistant working on the case, the rates charged for their work, and the reasonableness of the rates. He testified about the average rates in different parts of the state. He also testified that he and the firm’s intellectual property lawyer (who had the primary relationship with Malone and Tinnus) reviewed the invoices before they were sent to “determine if the time was reasonable and necessary. Sometimes we might decide that an entry was too steep for the services that were rendered, too much time, maybe it’s inefficient. Sometimes we might decide that we’re just going to give the client a break for business reasons.” He also testified, “We believe in our hearts and our minds that what we’ve written down is reasonable and fair and it’s properly recorded and billed.”

*22 Malone and Tinnus offered into evidence their attorneys’ redacted invoices. They also presented charts showing the division of the fees by the procedures they concerned.

Appellant argues the fees were unreasonable because Malone and Tinnus were not entitled to an award of attorney’s fees for work occurring after the trial court granted their motion for summary judgment. As discussed above, Malone and Tinnus were allowed to recover attorney’s fees for their attorneys’ services in obtaining judgment for their attorney’s fees under section 134.005(b).

Appellant also argues the fees were unreasonable because the attorneys failed to exercise billing judgment. See El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 762 (Tex. 2012). Appellant points out that only one billing entry mentions the TTLA. However, as discussed above, all of their attorneys’ work on all of the claims applied to the TTLA because the claims were essentially the same: whether Malone misappropriated Harter’s trade secrets and used those trade secrets without Harter’s or appellant’s permission to design Bunch O’ Balloons, making him millions of dollars. Thus, the fact that only one entry specifically mentions the TTLA does not show lack of billing judgment.

Appellant also asserts “there was ample evidence of overstaffing, excessive redaction that precludes a meaningful evaluation of the tasks for which Appellees’ counsel seeks to be paid, duplicative or unnecessary work on which Malone/Tinnus did not pursue or prevail, and billing for administrative tasks.” Appellant cites to several pages of the invoices. However, whether these were “duplicative or unnecessary or ... [were] billing for administrative tasks” concern whether the billings were reasonable and necessary, which was a fact question for the jury. Malone and Tinnus’s expert witness testified he had inspected each of the invoices and determined that the tasks performed and the amounts billed were reasonable and necessary, so some evidence supports the jury’s determination.

Concerning the argument of excessive redaction, attorney invoices are routinely redacted when offered into evidence to protect attorney–client and work-product privileges. See In re Nat’l Lloyds Ins. Co., No. 13-15-00219-CV, 2015 WL 4380929, at *5 (Tex. App.—Corpus Christi–Edinburg July 14, 2015, orig. proceeding) (mem. op.), mand. granted, 532 S.W.3d 794 (Tex. 2017); see also, e.g., Harris Cty. App. Dist. v. Am. Multi-Cinema, Inc., No. 01-18-00786-CV, 2020 WL 930834, at *3 (Tex. App.—Houston [1st Dist.] Feb. 27, 2020, no pet.) (mem. op.); In re T.R.H., No. 04-18-00834-CV, 2019 WL 6887143, at *1 (Tex. App.—San Antonio Dec. 18, 2019, no pet.); Tex. Mut. Ins. Co. v. DeJaynes, 590 S.W.3d 654, 660 (Tex. App.—El Paso 2019, pet. filed). Malone and Tinnus’s lead attorney testified the redactions were due to work-product and attorney–client privileges. The billing entries listed the attorney who performed the task, the date, the attorney’s billing rate, the length of time to complete the task, and a description of the task except that any privileged material was redacted. The redacted material mostly consisted of the topic of the attorney’s conversations with the client or with co-counsel or the topic of certain research. Appellant does not assert that any of the material redacted was not privileged.

*23 The supreme court has not required that parties waive their attorney–client and work-product privileges when seeking to recover attorney’s fees from opposing parties. We decline to do so. Malone and Tinnus’s attorneys provided a great deal of information about the fees, and their lead counsel testified and was cross-examined by opposing counsel about the invoices. We conclude that the redactions in the attorney’s-fees invoices did not render the evidence insufficient to support the jury’s verdict.

We conclude appellant has not shown the evidence is insufficient to support the jury’s finding on attorney’s fees through trial.

Appellant also argues Malone and Tinnus failed to present sufficient evidence to support the award of attorney’s fees for appeal. This Court has held that when “parties were entitled to attorney’s fees under section 38.001 of the Texas Civil Practice and Remedies Code for work performed at the trial court level, the trial court abused its discretion in failing to award conditional appellate attorney’s fees when presented with a request for and evidence of those fees.” Scott Pelley P.C. v. Wynne, 578 S.W.3d 694, 702 (Tex. App.—Dallas 2019, no pet.). We see no reason why that same interpretation should not apply to section 134.005(b).

To recover fees for contingent appellate services, a party must “provide opinion testimony about the services it reasonably believes will be necessary to defend the appeal and a reasonable hourly rate for those services.” Yowell v. Granite Operating Co., No. 18-0841, 2020 WL 2502141, at *13 (Tex. May 15, 2020). Malone and Tinnus’s expert witness did not meet this standard. He testified as follows concerning appellate attorney’s fees:

In the event that one of the parties is unhappy with what happens here, then the judgment, which happens, somebody may seek to appeal this decision to the Court of Appeals. In the event that happens, based upon my experience with appellate law, in the State of Texas in particular, and with the Fifth Court of Appeals in Dallas in particular, it’s my opinion that a reasonable fee for handling an appeal to the Dallas Court of Appeals is $30,000.

After the Dallas Court of Appeals, if it’s presented in this case, and if it then turns around and enters its judgment, the parties have the right to ask our Supreme Court of Texas to review the appellate court’s opinion. The Supreme Court of Texas is not required to do so in most cases. It’s their discretion to do so. So you file a petition asking them to review it, and you provide information about the case. They decide whether they will hear it or not. They may reject that petition. They may grant that petition. If they grant it, that just means they’re going to let you file a formal brief and perhaps come make argument to them and then they will make a decision. If they reject it, then you’re back with the decision from the Court of Appeals.

It’s my opinion that a reasonable fee for preparation of the—or responding to a petition for a request to the Supreme Court to review an appellate court decision from the Court of Appeals would be $10,000. And if the Supreme Court of Texas were to say, yes, we will we’ll hear your case, and we were to then brief it and present our arguments before the Supreme Court of Texas, down in Austin, then I believe that an additional fee of $25,000 for that exercise is reasonable and appropriate.

Actually—I’m sorry. Yes, $25,000. And so that their total fees—and these others, these fees, it’s my opinion that these appellate fees will be appropriate. Those that may or may not happen, but we need to establish that now so that if it does happen, you’ve had a chance to make a decision on what those fees will be.

*24 This testimony does not provide the reasonable hourly rate for any of the reasonable and necessary services for the appeals process. Also, concerning the appeal to the court of appeals, it does not “provide opinion testimony about the services it reasonably believes will be necessary to defend the appeal.” Id. Accordingly, Malone and Tinnus’s evidence of appellate attorney’s fees is insufficient.

We sustain appellant’s fourth issue as to the award of attorney’s fees for appeal, and we otherwise overrule appellant’s fourth issue.

CONCLUSION

We reverse the trial court’s judgment that appellant take nothing from Zuru Toys Inc., and we reverse the award of appellate attorney’s fees to Malone and Tinnus. In all other respects, we affirm the trial court’s judgment. We remand the case to the trial court for further proceedings.

Footnotes

1 In his deposition in this case on May 2, 2018, Malone testified that between 2010 and 2012 he did experimentation with putting O-rings on water balloons. In his deposition on August 8, 2017, in a suit against Telebrands Corp. before the Patent Trial and Appeal Board, Malone testified he did not remember whether, between 2010 and 2012, he tried sealing balloons with “rubber bands” but that he might have.
2 During preparation of this opinion, the website address for the Kickstarter video changed. However, the website under the new address appears substantially similar to that under the previous address, and the video on the website appears to be the same as that at the former website address.
3 The website address for this video is part of the summary judgment evidence. However, the video is no longer present at that address, and we were unable to find this video.
4 Appellant argues that the tort of unfair competition does not include misappropriation as an element. We disagree. As the Houston (First District) Court of Appeals explained, common-law misappropriation and unfair competition are the same cause of action. See Vertex, 583 S.W.3d at 849 (“common law misappropriation (also called unfair competition”). The elements of common-law misappropriation are:

(1) the creation of plaintiff’s product through extensive time, labor, skill, and money;

(2) the defendant’s use of that product in competition with the plaintiff, thereby gaining a special advantage in that competition (i.e., a ‘free ride’) because defendant is burdened with little or none of the expense incurred by the plaintiff; and

(3) commercial damage to the plaintiff.

Id. (quoting BP Auto., L.P. v. RML Waxahachie Dodge, L.L.C., 448 S.W.3d 562, 571–72 (Tex. App.—Houston [1st Dist.] 2014, no pet.)). Appellant’s petition alleges unlawful competition as follows:

38. Plaintiff developed trade secrets in Austin, Texas, including self-sealing balloons, replicators, and launchers through extensive time, labor, skill, and money and using confidential information and trade secrets.

39. Defendants used these trade secrets in competition with Plaintiff, without having to be burdened by the expense incurred by Plaintiff.

40. Plaintiff has suffered commercial damages as a result of Defendants’ conduct to include lost sales. Plaintiff therefore is entitled to actual damages in an amount over $1,000,000, and costs.

This allegation is identical to the elements set forth in Vertex. Although those elements do not use the word “misappropriation,” the wrongful acquisition and use of the product, i.e., misappropriation, is implicit in the elements. See Fjell Tech. Group v. Unitech Int’l, Inc., No. 14-14-00255-CV, 2015 WL 457805, at *8 (Tex. App.—Houston [14th Dist.] Feb. 3, 2015, pet. denied) (claims for conversion, unfair competition, misappropriation, and claims under the TTLA shared common element of “whether the defendant wrongfully acquired, used, or transmitted the plaintiff’s property”).

5 “Although it is unclear whether Texas expressly follows the Restatement (Third) of Unfair Competition, we observe the Texas Supreme Court has acknowledged section 40 and other sections of this Restatement as defining trade secrets and remedies available for their protection.” Twister B.V. v. Newton Research Partners, LP, 364 S.W.3d 428, 438 (Tex. App.—Dallas 2012, no pet.). In Southwest Energy Production Co. v. Berry-Helfand, 491 S.W.3d 699, 722 (Tex. 2016), the supreme court cited a case from the Fifth Circuit, General Universal Systems, Inc. v. HAL, Inc., 500 F.3d 444, 450–51 (5th Cir. 2007), and observed that the case cited comment c of section 40.
6 This description is different from Bunch O’ Balloons, in which the O-rings are applied to the necks of the balloons before they are filled.
7 This water-balloon gun appears to be a different device from the water balloon filler–launcher discussed above. Nothing in the drawing shows the product involved self-sealing balloons of any type or that it would fill multiple water balloons at one time.
8 Here are the relevant statements from Malone’s D Magazine interview:

[Q] How many times did your wife tell you to stop fooling around with the dumb water balloon thing and get back to your old consulting job?

[A] She’s been supportive. This was a really tough time. I’d spend half my time consulting, half of it inventing. It wasn’t quite working out. I updated my resume and my LinkedIn, but the job openings were horrible. I couldn’t imagine having to go back to the corporate world. I was just really, really discouraged. This was my last chance. It was do or die.

9 A prevailing defendant may recover attorney’s fees under the Texas Uniform Trade Secrets Act if “a claim of misappropriation is made in bad faith.” Civ. Prac. § 134A.005(1). Malone and Tinnus did not seek attorney’s fees under this provision.
10 Baker Botts concerned compensation of the attorneys representing a debtor-in-possession in bankruptcy. The statute provided that the attorneys were to be awarded “reasonable compensation for services rendered” but were not to receive compensation for “services that were not—(I) reasonably likely to benefit the debtor’s estate; or (II) necessary to the administration of the estate.” 11 U.S.C. § 330(a)(1)(A), (a)(4)(A)(ii). The attorneys represented ASARCO throughout the four years of bankruptcy proceedings. 576 U.S. at 135 S. Ct. at 125. At the conclusion, Baker Botts prepared its fee application (for which it was entitled to compensation under 11 U.S.C. § 330(a)(6)), and the bankruptcy court awarded it $120 million for its work in the bankruptcy proceedings, and an additional $5 million for time spent litigating in defense of their fee applications. Id. The Supreme Court observed that the statute “allows ‘reasonable compensation’ only for ‘actual, necessary services rendered.’ ” Id. at 128. Given this language, the Supreme Court “concluded that the phrase ‘reasonable compensation for services rendered’ necessarily implies loyal and disinterested service in the interest of a client.” Id. at 129. (internal punctuation omitted). “Time spent litigating a fee application against the administrator of a bankruptcy estate cannot be fairly described as ‘labor performed for’—let alone ‘disinterested service to’—that administrator.” Id. Section 134.005 of the Civil Practice & Remedies Code does not contain the fee limitations present in 11 U.S.C. § 330.
11 This Court and the San Antonio Court of Appeals came to the same conclusion. Discovery Prop. & Cas. Co. v. Tate, 298 S.W.3d 249, 260 (Tex. App.—San Antonio 2009, pet. denied); Twin-City Fire Ins. Co. v. Vega-Garcia, 223 S.W.3d 762, 769–70 (Tex. App.—Dallas 2007, pet. denied). The Houston (14th District) Court of Appeals concluded that a workers’ compensation claimant could recover attorney’s fees incurred in preparing for and attending the hearing on attorney’s fees under section 408.221(c), but the supreme court reversed the court of appeals’ decision on the ground that the insurer was entitled to a jury trial on attorney’s fees under section 408.221(c). The supreme court did not address whether the claimant was entitled to recover the attorney’s fees incurred in litigating the fees. Transcontinental Ins. Co. v. Crump, 274 S.W.3d 86, 103–04 (Tex. App.—Houston [14th Dist.] 2008), rev’d on other grounds, 330 S.W.3d 211 (Tex. 2010).

Court of Appeals of Texas, Dallas.

Jeffory G. SNOWDEN, Appellant

v.

Brian RAVKIND, Tracy Edmondson Gamble d/b/a Frisco Strong, and Megan Dewolfe, Appellees

No. 05-20-00188-CV

|

Opinion Filed June 24, 2020

Attorneys & Firms

Mark L. Hill, Dallas, Warren V. Norred, Arlington, for Appellant.

Israel L. Suster, Plano, for Appellees Ravkind, Brian.

Court Smith, Frisco, for Appellees DeWolfe, Megan.

Mark L. Hill, Byron K. Henry, Dallas, for Appellees Gamble, Tracy Edmondson.

Before Chief Justice Burns, Justice Whitehill, and Justice Molberg

MEMORANDUM OPINION

Opinion by Chief Justice Burns

*1 By opinion dated February 27, 2020, the Court denied Jeffory G. Snowden’s motion for an extension of time to file his petition for permissive appeal and dismissed the petition as untimely. Before the Court is Snowden’s motion for rehearing. We grant the motion and vacate this Court’s February 27th opinion and judgment. We further grant Snowden’s motion for an extension of time to file his petition for permissive appeal.

In his petition for permissive appeal, Snowden seeks to appeal the trial court’s January 10, 2020 amended order denying his motion to compel Tracy Edmondson Gamble and Megan DeWolfe to produce bank records. Because the law is well-settled, there is no controlling question of law. See Workers’ Compensation Solutions v. Texas Health, L.L.C., No. 05-15-01504-CV, 2016 WL 945571 (Tex. App.—Dallas March 14, 2016, no pet.) (mem. op.). Accordingly, we deny the petition and dismiss the appeal for want of jurisdiction. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(d); TEX. R. APP. P. 28.3, 42.3(a).

Court of Appeals of Texas, Dallas.

Erin WALKER, Appellant/Cross-Appellee

v.

PEGASUS EVENTING, LLC, Ellen Doughty-Hume, and Alistair Hume, Appellees/Cross-Appellants

No. 05-19-00252-CV

|

Opinion Filed June 16, 2020

Attorneys & Firms

Christine M. Renne, for Appellees/Cross-Appellants.

Alan Dabdoub, David S. Coale, Christian Orozco, for Appellant/Cross-Appellee.

Before Justices Pedersen, III, Reichek, and Carlyle

MEMORANDUM OPINION

Opinion by Justice Pedersen, III

*1 On the Court’s own motion, we withdraw the opinion of January 7, 2020, and vacate the judgment of the same date. The following is now the opinion of the Court.

This appeal is from an interlocutory order granting in part and denying in part a motion to dismiss filed pursuant to the Texas Citizens Participation Act (TCPA). See TEX. CIV. PRAC. & REM. CODE ANN. §§ 27.001–.011.1 Appellant/cross-appellee Erin Walker, the movant below, contends that the district court should have granted her motion in its entirety. Cross-appellants/appellees Pegasus Eventing, LLC (Pegasus), Ellen Doughty-Hume, and Alistair Hume,2 the non-movants, assert Walker forfeited her motion, and, alternatively, the court properly denied the motion in part on its merits. We hold the hearing on Walker’s motion was untimely, which resulted in a forfeiture of the motion. We dismiss appellees/cross-appellants’ cross-appeal for lack of jurisdiction. Accordingly, we affirm and remand, as explained below.

I. BACKGROUND

Appellees Doughty-Hume and Alistair Hume own appellee Pegasus, which provides eventing training3 and horse boarding. Doughty-Hume was certified by the United States Eventing Association (USEA) as an instructor pursuant to the Instructor Certification Program (ICP).

In April 2016, Walker sought out Doughty-Hume for eventing training. Over the next sixteen months, Doughty-Hume trained Walker and boarded her horses. Walker claims that, unbeknownst to her at the time, Doughty-Hume’s training methods caused horses to over-face4 and to suffer avoidable injuries. Moreover, Doughty-Hume allegedly (i) pushed Walker to perform jumps above her competition level and skill; and (ii) placed a horse that she believed to be sick in the barn near Walker’s horses. In addition, while lunging a horse named Beau, Doughty-Hume became frustrated and allegedly used the whip to move Beau forward. Beau grew anxious and stood up on his hind legs. This caused him to lose his balance, fall backwards, and hit his head forcibly on the ground, thereby suffering a fatal injury.

Walker obtained additional lessons from other instructors and came to the conclusion that Doughty-Hume’s training was dangerous to riders and horses. By August 2017, Walker fired Doughty-Hume as her instructor and moved her horses from appellees’ barn.

That same year, the USEA investigated Doughty-Hume after it received complaints regarding her teaching methods and her purported mistreatment of horses. The USEA reached an agreement with Doughty-Hume that she could maintain her certification if, going forward, she would (i) “instruct and ride without use of excessive force”; (ii) “[p]rovide humane care for all horses boarded”; (iii) “[a]void over-facing horses and/or riders, especially when jumping”; and (iv) “[m]ount children and amateur adults on horses appropriate to riders’ experience, disposition, [and] skills – i.e. on horses who are not too young, not too green, [and] sufficiently compliant.”

*2 Thereafter, Walker and another of Doughty-Hume’s clients each made an additional complaint to the USEA regarding Doughty-Hume. In connection with the investigation of these complaints, Walker provided a statement to the USEA. Following its investigation, the USEA revoked Doughty-Hume’s certification based on its determination that “a greater than preponderance of pertinent and credible evidence support[ed] the complaints.”

Appellees sued Walker and three other clients of Doughty-Hume—Stephanie Clifford, Glendon Crain, and Kelsey Silvey. Appellees asserted five causes of action against all defendants: business disparagement, tortious interference with existing contracts, tortious interference with prospective business relations, intentional infliction of emotional distress, and civil conspiracy. Appellees also asserted a defamation claim against Clifford, Crain, and Silvey. The foregoing claims were premised on defendants’ purported campaign to harm appellees through disparaging statements and allegedly false accusations of illegal conduct.

Pertinent to this appeal, Clifford was served with process on September 22, 2018. On September 24, Walker filed a motion to dismiss appellees’ claims pursuant to the TCPA. See CIV. PRAC. & REM. § 27.003. The certificate of service on Walker’s motion reflects that the motion was served that day on Christine Renne, who was counsel for appellees, and on Rothwell Pool, who was counsel for Crain. Walker did not serve Clifford with the motion.

Three weeks later, on October 15, Clifford filed an original answer pro se. Clifford’s answer contained a “c/o” designation beneath her name that listed the address of Michael Avenatti, an out-of-state attorney. However, Avenatti did not sign the answer.

Walker’s motion was set for hearing on November 13, 2018. See id. § 27.004(a) (requiring that hearing on motion to dismiss be set no later than sixtieth day after date of service of motion, subject to enumerated exceptions). Prior to the hearing date, appellees filed a motion for discovery and for continuance of the hearing. Compare id. § 27.003(c) (providing that all discovery is suspended during the pendency of a motion to dismiss) with id. § 27.006(b) (“On a motion by a party ... and on a showing of good cause, the court may allow specified and limited discovery relevant to the motion.”).

Appellees’ motion was set for hearing on November 1, but that hearing never occurred. Instead, on November 1, the parties signed and filed a Rule 11 agreement with the court. See TEX. R. CIV. P. 11. The agreement provided that appellees would cancel the hearing on their motion for discovery, and the parties would allow limited discovery relevant to Walker’s motion to dismiss. In addition, Walker agreed to cancel the hearing on her motion and to request that the hearing instead be conducted in December 2018. See CIV. PRAC. & REM. § 27.004(a) (permitting extension of deadline for conducting hearing on TCPA dismissal motion, upon agreement of parties, subject to requirement that such hearing may not occur more than ninety days after service of motion). Moreover, the parties agreed that the hearing on Walker’s motion would not “be set later than the statutorily mandated time frame, which is up to 120 days (January 22, 2019) after service of the ... Motion.” See id. §§ 27.004(c), 27.006(b) (permitting extension of deadline for conducting hearing on TCPA dismissal motion, if court allows discovery, subject to requirement that such hearing may not occur more than 120 days after service of motion). On November 16, the parties signed a second Rule 11 agreement that set forth deadlines for responding to each other’s discovery requests. This agreement contemplated that discovery would be completed by December 7, 2018.5

*3 Pursuant to the November 1 agreement, Walker’s motion to dismiss was set for hearing on December 18, 2018. On the day before the hearing, the parties filed several documents with the court, including, by Walker, a reply brief in support of her motion, and, by appellees, a sur-reply brief and a first amended petition. Among other new allegations, appellees’ amended petition accused Walker and the other defendants of making false statements about appellees “and their alleged treatment of working students, some of whom were minors.”

At the beginning of the December 18 hearing on Walker’s motion to dismiss, the district court asked whether Clifford had been served with the motion or with notice of the hearing. Walker’s counsel responded he had not served Clifford with the motion, and he served the notice of hearing only on Avenatti. Both Crain’s and appellees’ counsel concurred that, for the hearing to proceed, Clifford needed to be served with the motion. See TEX. R. CIV. P. 21(b) (providing that notice of hearing must be served on all parties not less than three days before time specified for hearing). Walker’s counsel argued to the contrary and also urged that the TCPA mandated that the hearing on the motion to dismiss occur within 120 days of service of the motion, i.e., by January 22, 2019.6 The court reset the hearing for January 11 and instructed counsel to serve Clifford with notice of the hearing and all documents related to Walker’s pending motion.

Also at the December 18 hearing, appellees’ counsel, Renne, stated that Walker had produced over 2,000 pages of text messages to appellees. Renne asked, “If I find additional information, may I still submit that as well as some affidavits?” She also asked for an opportunity to more thoroughly review and respond to Walker’s reply brief. Based on these requests, the court stated, “I’m going to give you a date where you’ll have an opportunity to digest the briefs and materials provided.” The court gave counsel until January 4 to supplement the record with any additional materials that they wished to submit in support of, or in opposition to, Walker’s motion to dismiss.

Following the December 18 hearing, Walker served Clifford with the motion to dismiss and the notice of the reset hearing. In addition, Walker supplemented her document production to appellees. On January 4, appellees again amended their petition, this time to assert for the first time a defamation claim against Walker based on the documents that she had produced in her supplemental production. Appellees also filed a supplemental brief that urged the upcoming January 11 hearing was untimely because it was not held within ninety days after Walker served her motion on appellees, i.e., by December 24, 2018. See id. § 27.004(a). Appellees asserted that the only permissible basis for holding the hearing beyond the ninety-day deadline—to allow for discovery, see id. §§ 27.004(c), 27.006(b)—did not apply here. Appellees renewed their objection at the January 11 hearing. The court overruled the objection, stating, “I set this matter for hearing within the 60 day period. I recessed the hearing to cure a defect in service, and I’m reconvening the hearing today.” The court also stated that it “want[ed] the record to be closed effective at the beginning of this hearing because otherwise I’ll never have a stopping point ... to make a ruling.”

*4 A little over a month later, on February 8, the court denied Walker’s motion to dismiss as to appellees’ business disparagement claim and granted the motion as to appellees’ remaining claims, except for appellees’ defamation claim, which the court’s order did not reference. The court based its order on appellees’ original petition, which was their live pleading as of the date of Walker’s motion to dismiss. This petition did not allege a defamation claim against Walker, but the parties agree that they tried appellees’ defamation claim by consent for purposes of Walker’s motion to dismiss. Accordingly, Walker asserts that the court’s order should have included a ruling on the defamation claim.

On February 12, 2019, Walker filed a motion for mandatory attorney’s fees and sanctions. See id. § 27.009. The court held a hearing on this motion ten days later. At the hearing, appellees made another objection as an alternative to their prior objection that the January 11 hearing was untimely. Specifically, assuming that the hearing on Walker’s motion to dismiss occurred on December 18, appellees urged that the motion was overruled by operation of law thirty days later, on January 18, 2019. See id. §§ 27.005(a), 27.008(a). According to appellees, this ruling by operation of law rendered the February 22 hearing moot. The court overruled appellees’ objection, stating, “The hearing actually took place in January.... [T]here had been a defect in service on one of the parties to the lawsuit, and I recessed that matter to reconvene in January after service on Ms. [Clifford].”

On February 27, 2019, the court granted Walker’s motion for attorney’s fees and sanctions, and it amended this order on March 1. See id. § 27.009. Both the original and amended orders awarded Walker $30,000 in reasonable and necessary attorney’s fees and an additional $1,000 as a sanction against appellees. Walker appealed the court’s February 8 order, see id. § 51.014(a)(12) (permitting appeal of interlocutory order that denies motion to dismiss under Civil Practice and Remedies Code section 27.003), and appellees cross-appealed the February 8 and March 1 orders, see Pickens v. Cordia, 433 S.W.3d 179, 181–82, 187–88 (Tex. App.—Dallas 2014, no pet.) (in movant’s appeal from order denying movant’s TCPA motion to dismiss in part, also considering non-movant’s cross-appeal from portion of order granting such motion), disapproved on other grounds by Hersh v. Tatum, 526 S.W.3d 462, 466–67 (Tex. 2017).

II. ANALYSIS

A. Jurisdiction Over Appellees’ Cross-Appeal

We begin by considering appellees’ cross-appeal. Appellees’ cross-appeal ultimately seeks to alter or reverse the trial court’s granting of Walker’s motion to dismiss appellees’ claims for tortious interference with existing contracts, tortious interference with prospective business relations, intentional infliction of emotional distress, and civil conspiracy.

Apart from statutory exceptions, appellate courts generally only have jurisdiction over final judgments. Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001). If permitted by statute, appellate courts have jurisdiction over certain interlocutory orders. Minett v. Snowden, No. 05-18-00003-CV, 2018 WL 2929339, at *11 (Tex. App.—Dallas June 12, 2018, pet. denied) (mem. op.); see also Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992) (orig. proceeding) (“Interlocutory orders may be appealed only if permitted by statute.”). We strictly apply statutes granting interlocutory appeals because they are a narrow exception to the general rule that interlocutory orders are not immediately appealable. Minett, 2018 WL 2929339, at *11; see, e.g., Tex. A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 841 (Tex. 2007). Pursuant to section 51.014(a)(12) of the Civil Practice and Remedies Code, “[a] person may appeal from an interlocutory order of a district court ... that ... denies a motion to dismiss filed under Section 27.003.” CIV. PRAC. & REM. § 51.014(a)(12); see, e.g., Shankles v. Gordon, No. 05-14-01444-CV, 2015 WL 3454429, at *1 (Tex. App.—Dallas June 1, 2015, no pet.) (mem. op.). However, “the statute does not permit an interlocutory appeal of an order granting a motion to dismiss under section 27.003.” Shankles, 2015 WL 3454429, at *1; see also Schlumberger Ltd. v. Rutherford, 472 S.W.3d 881, 891 (Tex. App.—Houston [1st Dist.] 2015, no pet.) (dismissing appeal from partial grant of TCPA motion to dismiss for want of jurisdiction).

*5 In Schlumberger, as in this case, the trial court partially granted and partially denied a motion to dismiss filed under section 27.003 in a single interlocutory order. Schlumberger, 472 S.W.3d at 886, 889–90. The appellant, Schlumberger, contended that our sister court had jurisdiction over the entire interlocutory order—including the partial granting of the motion to dismiss—because the interlocutory order partially denied the motion to dismiss. Id. at 889-90. The court held:

Applying “interlocutory order” as a reference to a specific ruling is consistent with the courts’ general approach of “strictly” applying statutory authorizations of interlocutory appeals as narrow exceptions to the general rule disallowing interlocutory appeals. CMH Homes, 340 S.W.3d at 447. This construction also has the benefit of making the right of interlocutory appeal hinge entirely on the substance of the interlocutory order—as the Legislature provided by delineating the specific types of interlocutory rulings that are eligible for interlocutory appeals—rather than the form in which the trial court issues its ruling. Were we to accept Schlumberger’s interpretation, trial courts could insulate partial grants of TCPA motions to dismiss from interlocutory review simply by issuing them as standalone written orders, separate from any other written order that partially denies the motion. Such an interpretation would elevate form over substance in a way that is not consistent with the text and structure of the statute.

Id. at 890 (citing CMH Homes v. Perez, 340 S.W.3d 444, 447 (Tex. 2011)). The court concluded that “denial of a motion to dismiss does not provide an avenue of interlocutory appeal to all other ancillary rulings contained within the same written ‘interlocutory order.’ ” Id. at 891.

Here, appellees have sought to cross-appeal the partial granting of a motion to dismiss filed under section 27.003. We agree with the Schlumberger court and adopt the reasoning that the partial denial of a motion to dismiss brought under section 27.003 does not provide an avenue for interlocutory appeal of a partial granting of the motion to dismiss, even if the rulings were made in the same order. See id. Thus, the statute does not confer jurisdiction upon this Court over appellees’ cross-appeal. See CIV. PRAC. & REM. § 51.014(a)(12). We dismiss the cross-appeal for lack of jurisdiction.

B. Partial Denial of Appellant’s Motion to Dismiss

We next consider Walker’s interlocutory appeal of the trial court’s denial of the motion to dismiss appellees’ business disparagement and defamation claims.

The TCPA requires a defendant seeking the statute’s protections to move for dismissal and to obtain a hearing on the motion within certain clearly defined periods. Braun v. Gordon, No. 05-17-00176-CV, 2017 WL 4250235, at *3 (Tex. App.—Dallas Sept. 26, 2017, no pet.) (mem. op.). The failure to meet these requirements results in the defendant’s forfeiting the statute’s protections, and the case should continue as if the motion to dismiss were never filed. Id. Specifically, if the trial court does not hold a hearing at all, then we lack jurisdiction over an appeal related to the motion. See In re Herbert, No. 05-19-01126-CV, 2019 WL 4509222, at *1 (Tex. App.—Dallas Sept. 19, 2019, orig. proceeding) (mem. op.) (“[C]ourts of appeals lack jurisdiction over an appeal involving [a TCPA] motion if the trial court refuses to hold a timely hearing despite the movant’s reasonable requests to the trial court for that hearing.”).7 Moreover, in a case in which the trial court denied the defendant’s motion on the basis that the hearing was untimely, our sister court affirmed, based in part on this Court’s decision in Braun. See Grubbs v. ATW Invs., Inc., 544 S.W.3d 421, 422–25 (Tex. App.—San Antonio 2017, no pet.); cf. Dallas Morning News, Inc. v. Mapp, No. 05-14-00848-CV, 2015 WL 3932868, at *3 (Tex. App.—Dallas June 26, 2015, no pet.) (mem. op.) (holding “trial court is without authority to grant a motion to dismiss under the [TCPA] more than thirty days after the hearing” on the motion). In light of the foregoing cases, to the extent the hearing on Walker’s motion was untimely, we conclude that the district court should have proceeded as if the motion had never been filed. In this scenario, it should have refused to hold a hearing on the motion, or if it held such a hearing, it should have denied Walker’s motion in its entirety.

*6 Turning to the merits of the timeliness question, the TCPA requires that the hearing on a motion to dismiss must be set not later than the sixtieth day after the date the motion is served. CIV. PRAC. & REM. § 27.004(a). The hearing may be extended in certain specified circumstances, including an agreement of the parties to do so, “but in no event shall the hearing occur more than 90 days after service of the motion.” Id. The statute additionally provides that, if the court “allows” specified and limited discovery relevant to the motion, the court may extend the hearing date to “allow” such discovery, “but in no event shall the hearing occur more than 120 days after the service of the motion.” Id. §§ 27.004(c), 27.006(b).8

In this case, the parties, by agreement, extended the hearing date on Walker’s motion to December 18, 2019, which was eighty-five days after Walker served her motion on appellees and Crain. See id. § 27.004(a). However, the court rescheduled the hearing to January 11, 2019, upon learning that Clifford was neither served with the motion nor notified of the hearing.9 January 11 was 109 days after Walker served her motion on appellees and Crain. Thus, the hearing on Walker’s motion to dismiss was untimely unless (i) the period for the hearing to occur did not begin to run until appellees amended their petition, or (ii) such period did not commence until Clifford was served following the December 18 hearing, or (iii) the court extended the hearing to “allow” “specific and limited discovery relevant to the motion.” Id. §§ 27.004(c), 27.006(b). We will consider each of these possibilities in turn.

C. Commencement of Period for Hearing to Occur

Walker contends that “[a]ppellees reset the TCPA deadlines when they amended their Petition twice with new allegations and a new claim of defamation against Walker.” As support, Walker cites Campone v. Kline, which notes that “[t]he deadline for filing a TCPA motion may be reset if an amended petition asserts claims based upon new factual allegations.” No. 03-16-00854-CV, 2018 WL 3652231, at *6 (Tex. App.—Austin Aug. 2, 2018, no pet.) (mem. op.) (citation and internal quotation marks omitted). The plaintiffs’ original petition in that case alleged defamation against a sole defendant arising from statements that the defendant purportedly made to a specific individual, Charlotte Michelson. Id. at *4. The plaintiffs amended their petition to add new factual allegations about other instances of defamation and to allege new and distinct injuries, including adding a new defendant. Id. at *4–5. In that circumstance, our sister court held that the defendants’ motion to dismiss was timely as to all of plaintiffs’ defamation claims other than those grounded in the alleged statements on which plaintiffs’ original petition was based. Id. at *6; cf. Stephan v. Baylor Med. Ctr. at Garland, 20 S.W.3d 880, 889 (Tex. App.—Dallas 2000, no pet.) (stating that each republication of defamatory statement generally inflicts “new and distinct injury” and thus can be basis of new and separate claim).

*7 In contrast to Campone, we held in Mancilla v. Taxfree Shopping, Ltd. that the filing of an amended petition that did not alter the essential nature of the plaintiff’s action did not restart the deadline for filing a motion to dismiss under the TCPA. Mancilla v. Taxfree Shopping, Ltd., No. 05-18-00136-CV, 2018 WL 6850951, at *3–4 (Tex. App.—Dallas Nov. 16, 2018, no pet.) (mem. op.); accord Hayes v. Cavin, No. 03-17-00501-CV, 2018 WL 4939010, at *3 (Tex. App.—Austin Oct. 12, 2018, pet. denied) (mem. op.) (declining to hold that trial court erred in determining motion to dismiss was untimely, given that trial court could have concluded plaintiffs’ amended petition did not allege new and distinct injuries and instead clarified their defamation claim).

In this case, appellees’ first and second amended petitions added new factual allegations regarding disparaging and defamatory statements purportedly made by Walker. For example, as noted above, appellees’ first amended petition accused Walker and the other defendants of making false statements about appellees “and their alleged treatment of working students, some of whom were minors.” In addition, appellees’ second amended petition alleged that Walker made false allegations to the USEA on January 14 and 15, 2018, that Doughty-Hume purchased alcohol for minors and “skinny dip[ped]” with working students. Appellees’ second amended petition also added Walker as a defendant with respect to their defamation claim.

Assuming that the foregoing pleading amendments reset the deadline for Walker to file an amended or supplemental motion to dismiss in response to the amendments, we conclude, under the circumstances of this case, that the amendments did not reset the deadline for conducting a hearing on Walker’s motion. Namely, the deadlines in section 27.004 require the hearing to occur within a specified number of days after “service of the motion.” CIV. PRAC. & REM. § 27.004(a)–(c). Under this language, the period for the hearing to occur ran from when Walker served her motion to dismiss, as opposed to when appellees filed, or served Walker with, their amended petitions.

We address next when Walker’s motion was “serv[ed]” for purposes of section 27.004. The statute does not specify on whom the motion must be served to start the clock with respect to the deadlines for conducting a TCPA hearing. However, since these deadlines are specific and relatively short, In re Herbert, 2019 WL 4509222, at *1, we interpret the phrase “service of the motion” to mean service on the claimants, as opposed to service on all parties. See TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 441 (Tex. 2011) (“Language cannot be interpreted apart from context.”). To conclude otherwise would permit a defendant/movant to expand the deadline for conducting a dismissal hearing by delaying service of the motion on one or more of the co-defendants/non-movants.

Walker also contends that appellees are barred from urging that the January 11 hearing was untimely, given their counsel’s concurrence that the December 18 hearing should be reset to allow for service of the motion to dismiss on Clifford. In Walker’s view, appellees cannot profit from an error that they purportedly invited. See Haler v. Boyington Capital Grp., Inc., 411 S.W.3d 631, 637 (Tex. App.—Dallas 2013, pet. denied) (“[T]he doctrine of invited error provides that a party may not complain of an error which the party invited.”). We are not persuaded by this argument because it was Walker’s error in failing to serve Clifford with the motion that necessitated rescheduling the hearing beyond the ninety-day deadline to allow for such service. See CIV. PRAC. & REM. § 27.004(a). In addition, irrespective of who requested that the hearing be rescheduled, the statute mandates that the hearing must occur within the deadlines specified therein. See id. Accordingly, the invited-error doctrine does not apply here. Cf. Tex. Workers’ Compensation Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591, 596 (Tex. 2000) (“Where the common law is revised by statute, the statute controls.” (citation and internal quotation marks omitted)).

*8 In sum, the deadlines in section 27.004 began to run on September 24, 2018, the date that Walker served her motion to dismiss on appellees.

D. Extension of Deadline to Allow Discovery

Given our conclusion above, the hearing on Walker’s motion to dismiss was untimely unless the district court extended the hearing date for the purpose of allowing discovery relevant to the motion. See id. §§ 27.004(c), 27.006(b). Walker urges that section 27.004(c) applies based on the parties’ Rule 11 agreement to allow discovery and to hold a hearing on the motion no “later than the statutorily mandated time frame, which is up to 120 days (January 22, 2019) after service of the ... [m]otion.” She asserts that the court had a ministerial duty to enforce this agreement, see Fortis Benefits v. Cantu, 234 S.W.3d 642, 651 (Tex. 2007) (“As this is a valid pretrial agreement under Rule 11, the trial court had a duty to enforce its terms.”), and that appellees are bound by the agreement, cf. TEX. R. CIV. P. 191.1 (“Except where specifically prohibited, the procedures and limitations set forth in the rules pertaining to discovery may be modified in any suit by the agreement of the parties.”); id. R. 191.2 (“Parties and their attorneys are expected to cooperate in discovery and to make any agreements reasonably necessary for the efficient disposition of the case.”); In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 846 (Tex. 2008) (orig. proceeding) (“Discovery agreements serve an important role in efficient trial management, permitting the parties to settle their disputes without resort to judicial supervision.”).

We do not agree. Under the terms of section 27.004, parties may not, by agreement, extend the hearing date beyond ninety days after service of the motion, CIV. PRAC. & REM. § 27.004(a), though the court may “allow” discovery and conduct the hearing up to 120 days after service, id. § 27.004(c). To permit a Rule 11 agreement to serve as an “allow[ance]” of discovery by the court would circumvent the statutory restriction that parties may not agree to an extension beyond ninety days. See Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008) (“The Court must not interpret the statute in a manner that renders any part of the statute meaningless or superfluous.”). Accordingly, we conclude that a Rule 11 agreement is insufficient to trigger the 120-day deadline. The filing of a Rule 11 agreement with the trial court, though required to enforce the agreement, is not itself a request for enforcement or for any other affirmative action by the trial court. Exito Elecs. Co. v. Trejo, 142 S.W.3d 302, 306 (Tex. 2004) (per curiam); see also Schoendienst v. Haug, 399 S.W.3d 313, 320 (Tex. App.—Austin 2013, no pet.) (“[A] rule 11 agreement signed by the parties and filed with the court is not in itself a court order.”). Moreover, such an agreement is enforceable through a separate breach of contract claim, see Mantas v. Fifth Court of Appeals, 925 S.W.2d 656, 658 (Tex. 1996) (orig. proceeding) (per curiam), not through a trial court’s exercise of its contempt powers, see In re Coppock, 277 S.W.3d 417, 420 (Tex. 2009) (“Obligations that are merely contractual cannot be enforced by contempt.”) (orig. proceeding). Thus, a Rule 11 agreement does not suffice as an “allow[ance]” of discovery by the court on a “showing of good cause,” as is required by sections 27.004(c) and 27.006(b) for the 120-day hearing deadline to apply.

*9 Walker also asserts that, at the December 18 hearing, the court granted a discovery extension, thereby activating section 27.004(c). We disagree with this characterization of the record. In response to Renne’s statement that Walker had produced over 2,000 pages of text messages, the court gave the parties until January 4 to supplement the record with additional materials in support of, or in opposition to, Walker’s motion. On this record, the court did not “allow” additional discovery by affording the parties an extension of time to file additional exhibits in support of their respective positions.

In conclusion, section 27.004(c) of the Civil Practice and Remedies Code does not apply here. Therefore, the hearing on Walker’s motion was untimely. See id. § 27.004(a). Absent a timely hearing, Walker forfeited her motion, see In re Herbert, 2019 WL 4509222, at *2; Braun, 2017 WL 4250235, at *3, and the district court should have denied the motion in its entirety, see Grubbs, 544 S.W.3d at 422–25; Mapp, 2015 WL 3932868, at *3. Given our disposition of these issues, we need not reach the other issues raised in Walker’s appeal. See TEX. R. APP. P. 47.1.

III. CONCLUSION

We affirm the portion of the district court’s February 8 order denying Walker’s motion to dismiss as to appellees/cross-appellants’ business disparagement and defamation claims. We dismiss appellees/cross-appellants’ cross-appeal for lack of jurisdiction. We remand this cause to the district court for further proceedings consistent with this opinion.

Carlyle, J., concurring in part and dissenting in part.

CONCURRING AND DISSENTING OPINION

CORY L. CARLYLE, JUSTICE

Though I concur in dismissing appellees’ cross-appeal, I disagree with the majority’s determination that Erin Walker forfeited her TCPA motion to dismiss because she failed to comply with the act’s prescribed time limits and no timely hearing occurred. Because I believe the majority takes too narrow a view of TCPA timelines and ignores distinctions between this scenario and prior case law, I respectfully dissent from that determination.

The majority views the parties’ Rule 11 agreement to conduct discovery as an impermissible agreement to extend the TCPA’s statutory timelines. See Grubbs v. ATW Invs., Inc., 544 S.W.3d 421, 425 (Tex. App.—San Antonio 2017, no pet.) (parties’ agreement to postpone TCPA hearing beyond section 27.004(a)’s time limit so they could mediate resulted in no hearing being held within statutorily allowed time and thus movant forfeited TCPA protections such that non-movant need not even object at trial level). I disagree.

Resolving this issue requires interpreting two sections of the TCPA. See TEX. CIV. PRAC. & REM. CODE §§ 27.004(c), 27.006(b). The majority reads those sections to require trial court action granting discovery and sees, in the absence of such action, a failure of a necessary prerequisite to extending statutory deadlines. As we are often reminded, our job as appellate court justices is to interpret the law the legislature wrote, not the one we think they meant to write, or even the one they should have written. See Stegall v. TML Multistate Intergovernmental Emp. Benefits Pool, Inc., No. 05-18-00239-CV, 2019 WL 4855226, at *1 (Tex. App.—Dallas Oct. 2, 2019, no pet.) (mem. op.) (quoting Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 538, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012)).

Section 27.004(c) says: “If the court allows discovery under Section 27.006(b), the court may extend the hearing date to allow discovery under that subsection, but in no event shall the hearing occur more than 120 days after the service of the motion under Section 27.003.” (emphasis added). The statute does not purport to require trial court action other than allowance of discovery on a showing of good cause, and we must take the legislature at its word. Lippincott v. Whisenhunt, 462 S.W.3d 507, 509 (Tex. 2015) (per curiam). We certainly do not have the opposite situation where a trial court prohibited discovery, and though it did not manifest its allowance by specific written or verbal order, the trial court did nothing to stand in the way of discovery. In a commonsense understanding of the word, the trial court “allowed” discovery to occur. See Allow, DICTIONARY BY MERRIAM-WEBSTER (defining “allow” as “permit” or “to fail to restrain or prevent”), https://www.merriam-webster.com/dictionary/allow.

*10 Section 27.006(b) says: “On a motion by a party or on the court’s own motion and on a showing of good cause, the court may allow specified and limited discovery relevant to the motion.” Again, this section does not require trial court action, though it requires a showing of good cause. The word doing the relevant work in this section is, again, “allow.” The legislature did not write a requirement that the trial court enter an order, only that it allow discovery.1 The trial court allowed discovery here. I would find the showing of good cause in the parties’ Rule 11 agreement to conduct limited discovery.

This court addressed section 27.006(b) recently, refusing to impose a requirement that trial courts specifically invoke section 27.004(c) when allowing discovery as a prerequisite to applying the extended timeline for allowed-discovery cases. See Forget About It, Inc. v. BioTE Med., LLC, 585 S.W.3d 59, 65 (Tex. App.—Dallas 2019, pet. denied). In that case, we declined to read into the statute’s text a requirement that courts specifically state they are allowing limited TCPA discovery. See id.; see also Lippincott, 462 S.W.3d at 508 (stating courts may not “judicially amend a statute by adding words not contained in the language of the statute”).

Here, as responsible parties commonly do on discovery matters, both sides agreed to conduct limited discovery relevant to Walker’s TCPA motion.2 The parties did not agree to extend the TCPA’s prescribed timeline, which is prohibited. See Grubbs, 544 S.W.3d at 425. Rather, the allowed discovery triggered the trial court’s discretion regarding section 27.004(c)’s 120-day deadline. Thus, the strict prohibition on extending TCPA deadlines by agreement is inapplicable. See id. The parties’ approach was entirely consistent with repeated reminders from law professors, judges, and continuing legal education speakers that lawyers should do what they can to avoid going to trial judges with discovery disputes. Justice Kagan’s recent proclamation applies: “The statute says what it says—or perhaps better put here, does not say what it does not say.” See Cyan, Inc. v. Beaver Cty. Emp. Ret. Fund, ––– U.S. ––––, 138 S. Ct. 1061, 1069, 200 L.Ed.2d 332 (2018). The court only had to allow discovery, and here it did.

*11 The majority also disregards TCPA construction guidelines. The act states: “This chapter does not abrogate or lessen any other defense, remedy, immunity, or privilege available under any other constitutional, statutory, case, or common law or rule provisions.” TEX. CIV. PRAC. & REM. CODE § 27.011(a). Rule 11 is one of those rule provisions. Today’s majority opinion upends Rule 11 use in TCPA discovery, ignoring section 27.011(a)’s construction directive.

Other TCPA provisions guide us as to the act’s construction and purpose: the act “shall be construed liberally to effectuate its purpose and intent fully.” Id. § 27.011(b). Its 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.” Id. § 27.002.

Courts have cited section 27.002 to support a strict reading of the act’s timelines in furtherance of its purpose to protect plaintiffs’ rights to bring lawsuits with some merit. See Grubbs, 544 S.W.3d at 425; Braun v. Gordon, No. 05-17-00176-CV, 2017 WL 4250235, at *3 (Tex. App.—Dallas Sept. 26, 2017, no pet.) (mem. op.). In previous cases, movants have failed to meet a statutory prerequisite such as securing a hearing, and that failure was fatal under the TCPA because by its terms, we encourage lawsuits to move forward. See Braun, 2017 WL 4250235, at *3. In other cases, courts have concluded parties may not agree to extend TCPA timelines because, in order to protect plaintiffs’ rights to bring “meritorious lawsuits for demonstrable injury,” those timelines must remain sacrosanct. See Grubbs, 544 S.W.3d at 425. Neither of those scenarios is presented here. The TCPA’s purpose is not furthered by concluding that the parties’ discovery agreement somehow offended the TCPA timeline scheme even though every act thereafter occurred within the statutory timelines.3 The parties’ acts here furthered the twin purposes of the TCPA and should be met with the predictability of an appellate court recognizing that adherence. See TEX. CIV. PRAC. & REM. CODE § 27.002.

The practical effect of the majority opinion is to reward the Pegasus parties’ contrary litigation positions. When Pegasus needed discovery and moved for it, Walker agreed to it. When the trial judge decided the hearing needed to be reset because a party to the litigation had not been served with notice of the hearing, Pegasus agreed to the reset, saying nothing to contradict the judge’s and Walker’s counsel’s understanding that the case was proceeding as a TCPA-case-with-discovery-allowed on the 120-day timeline.4

Now Pegasus contends (1) the trial court never “allowed” discovery by issuing a formal discovery order; (2) thus, a hearing had to have been held within 90 days of the motion’s service; (3) no hearing was held within that time period; (4) an order disposing of the motion wasn’t filed within 30 days of the relevant hearing; and (5) the notice of appeal, filed less than 20 days after the trial court’s (according-to-Pegasus) late order but more than 20 days after the motion was denied by operation of law (again, according to Pegasus), was untimely. The result is a non-merits determination of the TCPA appeal. We should be loath to dispose of our cases on procedural grounds when a creditable interpretation exists to get to the merits, though it continues to happen.5

*12 Under the most charitable view, the majority has chosen to elevate one TCPA purpose—the rights of a plaintiff to file a “meritorious lawsuit for demonstrable injury”—over another—“encourag[ing] and safeguard[ing] the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law.” Less charitably, the majority expands a branch of TCPA case law in a manner that produces cheap victories for parties willing to engage in “gotcha” litigation, while furthering none of the legislative purposes underpinning that prior case law.

Footnotes

1

The underlying case was filed before the effective date of the 2019 amendments to the TCPA. Accordingly, all citations are to the prior version of the statute.

2

In this opinion, we will collectively refer to Pegasus, Doughty-Hume, and Hume as “appellees.”

3

“Eventing is an equestrian sport in which horse and rider compete in three events over three days.” Eriksson v. Nunnink, 233 Cal. App. 4th 708, 713, 183 Cal.Rptr.3d 234 (2015). These events include jumping over obstacles.

4

Over-facing occurs when a horse approaches an obstacle that it does not feel comfortable jumping over, and the horse then comes to a stop.

5

Specifically, Walker would complete her document production by November 20, and appellees would complete their production by December 7.

6

Walker’s counsel did not mention that section 27.004(c) allows an extension of the hearing date to 120 days only if the court allows discovery.

7

Accord RPM Servs. v. Santana, No. 06-19-00035-CV, 2019 WL 4064576, at *2 (Tex. App.—Texarkana Aug. 29, 2019, pet. denied) (mem. op.) (“[W]e do not have jurisdiction to hear an interlocutory appeal under the TCPA when there has been neither a hearing on the motion to dismiss, nor an express order dismissing the motion.”); Wightman-Cervantes v. Hernandez, No. 02-17-00155-CV, 2018 WL 798163, at *1 (Tex. App.—Fort Worth Feb. 9, 2018, pet. denied) (mem. op.) (“Since the trial court held no hearing on [the] motion, it necessarily did not fail to rule on that motion within thirty days after the hearing on the motion. Thus, [the] motion was not denied by operation of law.”); Braun, 2017 WL 4250235, at *2 (“If the trial court does not expressly deny the motion to dismiss and the motion to dismiss is not denied by operation of law because there was no hearing, then there is no order subject to an interlocutory appeal.”).

8

Namely, “[o]n a motion by a party or on the court’s own motion and on a showing of good cause, the court may allow specified and limited discovery relevant to the motion.” Id. § 27.006(b). Moreover, “[i]f the court allows discovery under Section 27.006(b), the court may extend the hearing date to allow discovery under that subsection, but in no event shall the hearing occur more than 120 days after the service of the motion under Section 27.003.” Id. § 27.004(c).

9

Notwithstanding the district court’s statement at the January 11 hearing that it had “recessed” the December 18 hearing, the TCPA required that the hearing on Walker’s motion occur within 90 days, or if the court allowed discovery, within 120 days, of the service of Walker’s motion. See id. § 27.004(a), (c).

1

We read the TCPA strictly. See In re Panchakarla, No. 19-0585, 2020 WL 2312204, at *3 (Tex. May 8, 2020) (per curiam) (orig. proceeding) (declining to “judicially amend” TCPA “by adding words that are not contained in the language of the statute”); Torres v. Pursuit of Excellence, Inc., No. 05-18-00676-CV, 2019 WL 2863866, at *2 (Tex. App.—Dallas July 2, 2019, pet. denied) (mem. op.) (“Relief under the TCPA requires the filing of a motion to dismiss under the Act. Until Torres filed her motion to dismiss under the Act, the trial court had no motion before it on which it was empowered to rule in accordance with the TCPA. The Act empowers the court to rule on a motion pending before it; it does not empower the court to apply the TCPA sua sponte. The trial court could not have granted this relief without a pending motion.” (citations to TCPA omitted)).

2

See In re Bandin, 556 S.W.3d 891, 896 (Tex. App.—Houston [14th Dist.] 2018, orig. proceeding) (Busby, J., concurring). Then-Justice Busby concurred in the court’s opinion finding, in part, no clear abuse of discretion when the trial court ordered post-TCPA-hearing discovery. He discussed the concept that “there is no reason to think the Legislature would have assumed it was settled legal practice to complete discovery before a dispositive hearing. For example, trial courts have long had discretion to consider additional evidence received after a hearing in deciding whether to grant summary judgment.” This reasoning applies here: there is no reason to believe the legislature would have assumed the settled legal practice of party resolution of discovery issues would not continue in the TCPA context. The lack of a “court order” requirement in the TCPA provides at least some support for this idea.

3

The motion here was served September 24, 2018, and the hearing took place January 11, 2019, before the drop-dead 120th day of January 22, 2019. The trial court issued its order on February 8, 2019, within 30 days of the hearing. Walker filed her notice of appeal February 27, 2019, a day before it was due.

4

I want to be clear here that my objection is not to Pegasus’s failure to object; if a movant is forfeiting the act’s protections, the non-movant need not alert anyone.

5

See, e.g., B.C. v. Steak N Shake Operations, Inc., 532 S.W.3d 547 (Tex. App.—Dallas 2017) (op. on remand), rev’d, 598 S.W.3d 256 (Tex. 2020); see also Jay Tidmarsh, Resolving Cases “On the Merits,” 87 DENV. U. L. REV. 407, 431–36 (2010) (advocating for a “fair outcome” principle, that “Lawsuits should be decided according to procedural rules that are designed, interpreted, and implemented to give the parties the maximal opportunity to participate in shaping an outcome that can be sustained upon critical scrutiny.”).

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