*1 COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS CHANDNI I, INC., A Texas Corporation; §
HARSHAD PATEL, An Individual; No. 08-18-00107-CV ASHWIN PATEL, An Individual; SUNIL §
PATE, An Individual; MANISH Appeal from the VANMALI, An Individual; EL PASO §
HOSPITALITY, LLC; MANDEEP, LLC; 34th District Court CHANDNI VENTURE OF TEXAS, INC., §
A Texas Corporation; and UJASHIV of El Paso County, Texas MANAGEMENT, INC., A Texas §
Corporation, (TC# 2014DCV0779) §
Appellants,
§
v.
§
DHARMESH PATEL,
§
Appellee.
§
O P I N I O N
This case involves an interlocutory appeal from the trial court’s denial of Appellants’ motion to dismiss under the Texas Citizens Participation Act (TCPA). In five issues, Appellants contend: (1) the trial court erred in denying their timely-filed motion to dismiss because Appellee’s claims for theft and fraud are based on, relate to, or are in response to Appellants’ exercise of their right of free speech or association and thus fell within the scope of the TCPA; (2) Appellee failed to establish by clear and specific evidence a prima facie case on each essential *2 element of his claims; (3) Appellee’s shareholder inspection claim was based on, related to, or was made in response to Appellants’ exercise of the right of petition because the complained-of communications were made during or pertained to a judicial proceeding; (4) Appellants met their burden of proof in establishing each essential element of the valid defense of effective consent; and (5) Appellants are entitled to costs, attorney’s fees, and expenses. [1] We affirm.
BACKGROUND
This appeal arises out of a shareholder derivative suit brought by Dharmesh Patel against the managers and directors of Chandni I, Inc., a corporation that owns and manages a Quality Inn & Suites in El Paso, Texas. The facts are mostly procedural. Dharmesh filed his original petition on March 10, 2014, asserting claims for fraud and conversion, among other causes. He amended his petition four times. In his Third Amended Petition, filed on February 15, 2017, he included causes of action for fraud against several of the managers and directors individually, including Harshad Patel, Sunil Patel, Ashwin Patel, and Manish Vanmali. He also asserted claims for conversion against all defendants, except for Chandni I, individually and derivatively. In his Fourth Amended Petition, filed on November 13, 2017, he again asserted causes of action for fraud against Harshad, Sunil, Ashwin, and Manish individually but modified his conversion claims against the defendants by bringing them only in a derivative capacity. His fifth and final amended petition was filed on February 21, 2018 and included causes for theft and conversion against the named defendants, fraud against Harshad, and a new claim for shareholder inspection. Two months later on April 20, 2018, Appellants filed a motion to dismiss under the Texas Citizens Participation Act (TCPA), asserting that the claims for fraud, theft, and shareholder inspection *3 were made in response to their exercise of freedom of speech, association, and petition. The trial court denied the motion and set a hearing for the purpose of assessing fees, costs, expenses, and sanctions against Appellants as required under the TCPA. Appellants then filed this interlocutory appeal.
DISCUSSION Timeliness Under the TCPA In their first issue, Appellants contend the trial court erred in denying their timely-filed motions to dismiss under the TCPA. Appellee contends Appellant’s motions to dismiss his fraud and theft claims were untimely because those claims had already been raised in previous petitions and therefore the 60-day deadline for filing for dismissal under the TCPA had already expired. Because further analysis of the issue is unnecessary if the motions were untimely, we address timeliness first. [2]
Standard of Review
We review a trial court’s ruling on a motion to dismiss de novo. MVS International Corporation v. International Advertising Solutions, LLC , 545 S.W.3d 180, 190 (Tex.App.—El Paso 2017, no pet.).
Applicable Law
The Texas Citizen’s Participation Act (TCPA) authorizes a party to file a motion to dismiss if the claim against him relates to his exercising his right of free speech, petition, or association. T EX .C IV .P RAC .&R EM .C ODE A NN . § 27.003. A defendant wanting to take advantage of the statute must file a motion to dismiss within 60 days after the date of service of the “legal action” he seeks to have dismissed. T ODE . § 27.003(b).
The Legislature has defined “legal action” in the context of the TCPA to mean “a lawsuit,
cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or
filing that requests legal, declaratory or equitable relief.” T ODE . § 27.001(6). Thus, an amended petition asserting new claims based upon new factual allegations
will reset a TCPA deadline as to the new legal action.
Jordan v. Hall
, 510 S.W.3d 194, 198
(Tex.App.—Houston [1st Dist.] 2016, no pet.). But an amended petition, by itself, does not reset
the 60-day clock if it adds no new claims and relies upon the same factual allegations underlying
the original petition.
Id
. Additional factual details in a subsequent petition also do not reset the
TCPA clock if the essential factual allegations as to the claim were present in the prior petition.
In re Estate of Check
, 438 S.W.3d 829, 837 (Tex.App.—San Antonio 2014, no
pet.)(acknowledging that to hold otherwise would negate the early dismissal envisioned by the
statute);
see also Paulsen v. Yarrell
,
Analysis
Appellants contend they timely filed a motion to dismiss the fraud and Texas Theft *5 Liability Act claims asserted in Appellee’s Fifth Amended Petition. Appellee, however, asserts the fraud and Texas Theft Liability Act claims in his Fifth Amended Petition are the same claims raised in Appellee’s prior petitions and relied on the same essential factual allegations.
The Fraud Claim
Appellants assert the Fifth Amended Petition includes a new claim for fraud against Harshad Patel, and because it was a newly-asserted legal action they had 60 days to file their motion to dismiss that cause under the TCPA. The Fifth Amended Petition was filed on February 21, 2018 and Appellants’ motion to dismiss under the TCPA was filed on April 20, 2018. If the fraud claim against Harshad was indeed a new legal action, their motion to dismiss was timely. T ODE . § 27.003(b).
But as Appellee correctly points out, the fraud claim against Harshad is the same claim he asserted in his Third and Fourth Amended Petitions and involves the same factual allegations; the only difference is the Fifth Amended Petition dropped certain factual allegations regarding the other defendants from the fraud claim against Harshad. The Third and Fourth Amended Petitions assert Harshad and the other defendants: (1) utilized their positions as managers and directors of Chandni I to obtain loans using corporate assets as collateral and then used the loan money to purchase investment properties that were placed in the individual defendants’ personal corporations that then competed directly with Chandni I; (2) made a distribution from Chandni I to themselves but not to the other shareholders; (3) utilized their positions to obtain personal loans from Chandni I without following corporate procedures; (4) concealed their activities by not providing information and access to corporate records; (5) misappropriated and comingled Chandni I’s corporate funds to purchase and operate rival hotels and other real estate; and (6) *6 underreported earnings and personally took cash proceeds without authorization. The petitions further assert these acts were done deliberately and that Harshad and the other defendants had misrepresented and concealed corporate information from Appellee, and Appellee was induced through his trust in the Appellants to invest monies in the Appellants’ enterprise, which he would not have done absent the concealment. The petitions also asserted Appellee had, as a result of their fraud, lost monies he would have received as distributions as a shareholder. The Fourth Amended Petition differed from the Third in that Appellee brought the same claims on behalf of Chandni I derivatively instead of bringing them in his individual capacity as he did in the Third. These very same causes and factual theories are asserted in the Fifth Amended Petition under the section, “Fraud-As to HARSHAD, SUNIL, ASHWIN and MANISH.”
Appellants contend, however, that a new legal action was raised under a separate section
in the Fifth Amended Petition entitled “Fraud-As to HARSHAD,” that raised a claim against
Harshad individually. But no new claims or factual theories are raised in that section. Appellee
simply reasserts: (1) that he relied on his trust in Harshad in his decision to invest in their venture;
(2) that Harshad intentionally misrepresented and concealed information from him; and (3) that he
lost monies he would have received as a shareholder. The same essential factual theories underlie
this claim as were asserted in prior petitions, the only difference being that the theories were
narrowed and the other defendants were dropped from the amended claim and it was brought
against Harshad only. Because no new claims were added in the Fifth Amended Petition against
Harshad and the claim asserted relies upon the same factual allegations underlying the Third and
Fourth Amended Petitions, the 60-day deadline was not reset as to the fraud claim and Appellants’
motion to dismiss was untimely.
See Jordan
,
The Theft Claim
Appellants also assert Appellee’s claim for theft under the Texas Theft Liability Act was a new legal action that served to reset the 60-day deadline under the TCPA. Specifically, Appellants contend the theft claim requires proof of wrongful intent to deprive, which was not an element of the conversion claim previously asserted in the Fourth Amended Petition. Appellee contends, however, the theft claim was alleged as conversion in the Fourth Amended Petition and asserts the same elements were plead and the same essential factual allegations were asserted; the mere fact the claim was labeled theft instead of conversion does not reset the 60-day clock.
A similar issue was addressed by our sister court in
Paulsen
, which involved claims for
defamation. In
Paulsen
, a law professor submitted an amicus curiae letter to a trial judge
presiding over a family-law case.
Paulsen
,
The attorney filed an interlocutory appeal of the trial court’s denial of her motion to
dismiss, contending the defamation claim involving the cover sheet was a “legal action” under the
TCPA that reset the 60-day period for filing a motion to dismiss.
Paulsen
,
Here, Appellants are similarly arguing that a “new” claim was asserted when Appellee
attempted to distinguish his claims for conversion and theft of corporate assets. “Conversion” is
*9
the unauthorized and unlawful assumption and exercise of dominion and control over the personal
property of another in denial of or inconsistent with the owner’s rights.
Freezia v. IS Storage
Venture, LLC
, 474 S.W.3d 379, 386 (Tex.App.—Houston [14th Dist.] 2015, no pet.)(
citing
Waisath v. Lack’s Stores, Inc.
,
In his Fourth Amended Petition, in a section entitled “Conversion Against All Defendants Except CHANDNI I,” Appellee asserted the Appellants: (1) knowingly and without corporate authority fraudulently took and converted monies and loan proceeds from Chandni I and its shareholders, specifically asserting they distributed $1.8 million of Chandni I’s assets to themselves; (2) misused their positions as managers and directors of Chandni I to willfully and maliciously take and convert corporate monies and loan proceeds of Chandni I and used them to purchase competing hotels, real property, and other assets for their own benefit and to the detriment of Chandni I and its shareholders; and (3) took these monies in violation of Chandni I’s and the shareholder’s rights to the funds. In his Fifth Amended Petition, Appellee splits this claim into two. Under his second cause of action, entitled “Conversion Against All Defendants Except CHADNI I,” Appellee asserted the Appellants: (1) misused their corporate positions to distribute loan proceeds in the amount of $1.8 million to themselves and used them to purchase real property and hotels; and (2) did so without corporate authority and with the intent to deprive Chandni I of *10 its assets and loan proceeds. Under his third cause of action, entitled “Theft Pursuant to the Texas Theft Liability Act Against All Defendants Except CHANDNI I,” Appellee asserted the Appellants: (1) knowingly and without corporate authority took and converted Chandni I’s monies and loan proceeds for their own use and benefit; (2) willfully and maliciously converted Chandni I’s monies and loan proceeds in the amount of $1.8 million to purchase several hotels, other real properties, and assets for their own benefit and to the detriment of Chandni I; and (3) wrongfully took the monies for their own use.
While these claims have some differences in word order, phrasing, and structure, the same
essential factual allegations are asserted that were previously asserted in the Fourth Amended
Petition. As was the case in
Paulsen
, an attempt to split a claim into two distinct but essentially
identical claims that are both based on the same essential underlying facts as the original claim
does not assert a new legal action resetting the 60-day TCPA filing deadline.
Paulsen
, 455
S.W.3d at 198. To hold otherwise would subvert the stated purpose of the act, which is to provide
for the
early
dismissal of claims that seek to inhibit a defendant’s constitutional rights to petition,
speak freely, associate freely, and participate in government as permitted by law.
See id
;
see also Deaver v. Desai
, 483 S.W.3d 668, 672 (Tex.App.—Houston [14th Dist.] 2015, no pet.)(“The
[TCPA] attempts to protect the rights of these citizens by providing for the quick and inexpensive
dismissal of meritless lawsuits.”). While Appellants urge that new facts were also raised in the
theft claim, they have not pointed to new
essential
facts and simply cite to a combination of
additional details and facts that were already asserted in the Fourth Amended Petition. In both
his Fourth and Fifth Amended Petitions, Appellee asserted the Appellants misused their corporate
positions to wrongfully and knowingly distribute $1.8 million of Chandni I assets and loan
*11
proceeds to themselves, used those wrongfully obtained funds to purchase real property and other
assets for their own benefit, and did so in violation of Chandni I’s and the shareholders’ rights to
the distributed funds. Because additional factual details in a subsequent petition do not reset the
TCPA clock if the essential factual allegations as to the claim were present in the prior petition,
Appellants have failed to show the motion to dismiss the theft claim under the TCPA was timely.
In re Estate of Check
,
Relating to the Exercise of the Right to Petition
In their third issue, Appellants contend Appellee’s shareholder inspection claim was based on, related to, or was made in response to their exercise of the right to petition because the complained-of communications were made during or pertained to a judicial proceeding. Specifically, they contend an email in which Appellants’ counsel rebuffed a request for a shareholder inspection was a communication pertaining to a judicial proceeding.
Applicable Law
As noted above, the TCPA authorizes a party to file a motion to dismiss if the claim against
it relates
to
its exercising
the right of free speech, petition, or association.
T ODE . § 27.003. The moving party must show by a preponderance of
the evidence that the claim relates to the exercise of those rights.
Id
., at § 27.005. In making its
ruling, the court will consider the pleadings and supporting and opposing affidavits.
Id
., at
§ 27.006;
see also Pena v. Perel
,
The “exercise of the right to petition,” as relates to this case, is defined as a communication in or pertaining to a judicial proceeding. Id ., at § 27.001(4)(A). A “communication” is defined *12 as including “the making or submitting of a statement or document in any form or medium, including oral, visual, written, audiovisual, or electronic.” Id ., at § 27.001(1).
Once a defendant has carried his initial burden to establish that the claims against him are covered by the TCPA, the burden shifts to the plaintiff to present a prima facie case for each element of his claim by clear and specific evidence to avoid mandatory dismissal. T ODE . § 27.005(c). If the plaintiff is able to make such a showing, the defendant may still obtain a dismissal under the act by establishing each essential element of a valid defense. Id ., at § 27.005(d).
Analysis
In his Fifth Amended Petition, Appellee raised a claim for shareholder inspection. In it, he asserted he had his request to inspect Chandni I’s records refused even though he was entitled as a shareholder to view them under Texas Business Organizations Code § 21.218. Specifically, he contended that in November 2017 he served a written demand for a shareholder inspection that Appellants denied. Appellants argue that the request was made in the context of a lawsuit after discovery had already occurred and that the shareholder inspection request was actually a discovery request. Thus, the email from counsel replying to the request was a communication regarding discovery and was part of a judicial proceeding. Appellants acknowledge that the TCPA does not define “judicial proceeding,” but cite several cases they assert stand for the proposition that communications related to discovery requests and discovery responses are communications made in a judicial proceeding.
Those cases are distinguishable, however, in that they involve claims arising out of the act of filing a lawsuit, serving discovery responses and subpoenas, and pre-suit demand letters *13 threatening to file suit. [3] Here, the letter requesting shareholder inspection, sent via facsimile, stated in pertinent part:
The purpose of this letter is to serve as written demand under Texas Business Organizations Code § 21.218. As you know, Dharmesh Patel[] is a shareholder of Chandni I, Inc. As a shareholder, Mr. Patel has a right, upon written demand stating a proper purpose, to examine and copy any relevant books, records of account, minutes, and share transfer records.
Mr. Patel’s purpose in making this demand for inspection includes ascertaining the financial condition of the corporation, determining the value of shares, and investigating company management, waste of corporate assets, self- dealing or other wrongdoing.
As a result, we are requesting an inspection date of December 18, 2017 at 1:00 p.m. If you have any questions or comments, please do not hesitate to call. Appellants assert the demand was actually a discovery request, and their response to this demand was a covered communication under the TCPA because it was a response to a discovery request. The response, sent via email from Appellants’ counsel, refused the request for inspection but suggested they would allow the inspection if Appellee provided additional legal authority to support his request.
But the demand, and the response to it, did not involve a discovery request; it was a demand
to exercise a statutory right that does not derive from a judicial proceeding but is based on the
relationship between a shareholder and a corporation. The mere fact that judicial review of the
issue
could
occur if an agreement was not reached does not automatically make it a matter related
to a judicial proceeding.
See Levatino v. Apple Tree Café Touring, Inc.
,
Remaining Issues
Because we have concluded that Appellants have not met their burden to show their TCPA
motion to dismiss the fraud and theft claims was timely filed, and that Appellants’ motion to
dismiss the shareholder inspection claim was not based on the exercise of the right to petition, we
need not address Appellants’ contentions regarding whether Appellee had established a prima facie
case (Issue Two) or whether Appellants met their burden of proof in establishing a valid defense
to Appellee’s prima facie case (Issue Four).
See Sutterfield
,
CONCLUSION
Having overruled Issues One through Five, the judgment of the trial court is affirmed. December 13, 2019
YVONNE T. RODRIGUEZ, Justice Before Rodriguez, J., Palafox, J., and McClure, Senior Judge
McClure, Senior Judge (Sitting by Assignment)
Notes
[1] Although Appellants do not list their request for costs, attorney’s fees, and expenses as an issue presented, they do raise and brief the issue.
[2] Appellee does not contend Appellants’ motion to dismiss the shareholder inspection claim was untimely.
[3]
See Collins v. Collins
, No. 01-17-00817-CV,