Back in my day, there was only one night when you could watch NFL action: Monday. Once Don Meredith started signing “Turn Out the Lights . . .” that was all the pro football you were going to get until the next Sunday. There was no “Thursday Night Football,” or even “Football Night in America.” And we liked it.
The other thing we did back in the good old days, meaning roughly 2017 until now, was file a TCPA motion to dismiss in a lawsuit that wasn’t really about “freedom of speech” or “freedom of association,” at least not in the First Amendment sense. Like a non-compete or trade secrets case.
That was fun, but business lobbies and the Texas legislature were not so amused. They mobilized to pass House Bill 2730 which, like the proverbial Federal Reserve raising interest rates, takes away the punch bowl just when the party gets going.
In broad terms, the amendment to the TCPA does three things:
First, it exempts certain types of claims from the TCPA, most notably non-compete and trade secrets claims. I may be biased, considering that is the focus of my litigation practice, but I see this as the most significant change.
Second, the amendment changes the TCPA’s broad definitions of the right of association and the right of free speech that led to such widespread use of the statute. It does not go so far as making those definitions synonymous with constitutional rights. But the previous definition of the key term “matter of public concern,” which was broad and vague, has been replaced with a definition that is significantly different—but still broad and vague.
Third, HB2730 changes the procedures for TCPA motions. For example, the statute now requires 21 days’ notice of a hearing on a TCPA motion, establishes a response deadline seven days before the hearing, and tweaks the rules for awarding attorney’s fees and sanctions. These changes will be important for practicing Texas litigators to note but probably won’t have any significant public policy impact.
The amendments take effect September 1, 2019 and are not retroactive. The previous statute will continue to apply to suits filed before September 1.
That’s all I’m going to say about the specific changes to the TCPA, because they are relatively self-explanatory, and I’m sure there will be no shortage of articles exploring the nooks and crannies of the textual changes.
I want to focus on some larger questions, like these:
Does the amended TCPA now do a better job of solving the problem it was intended to solve? (Sort of.)
Would it have been better for the legislature to scrap the whole statute? (Probably.)
Is the new exemption for non-compete and trade secrets claims a good idea? (It depends.)
What does this change mean for Texas non-compete and trade secrets law more generally? (Perhaps the time has come for “non-compete reform” in Texas.)
At the risk using a trendy corporate buzzword, let’s “drill down.”
The Empire SLAPPs Back
First, does the TCPA now solve the problem it was intended to solve?
To answer that question, we have to figure out what the problem was. People call the TCPA an “anti-SLAPP” statute. SLAPP stands for Strategic Lawsuit Against Public Participation. So, apparently there was a Strategic-Lawsuit-Against-Public-Participation crisis in Texas before the TCPA.
Funny thing is, in over 20 years of Texas litigation practice, I’ve never seen a SLAPP in my practice. I don’t think I know anybody who has handled one. I probably know more people who have spotted Sasquatch than people who have seen a true SLAPP.
Don’t get me wrong, I’m sure SLAPPs exist, just like Bigfoot. But here’s the odd thing. Think back to 2010, the year before the TCPA was passed. To jog your memory, the no. 1 song that year was by Ke$ha, who was still using that dollar symbol in her name. Remember how in 2010 Texans across the state were terrified to speak their minds about issues of public concern? Remember how business in Texas courthouses ground to a halt under an avalanche of SLAPP lawsuits?
Yeah, I don’t remember that either. I’m just not convinced that SLAPPs were ever really “a thing.”
But obviously someone was concerned about SLAPPs. Legislators don’t just pass new laws without getting something in return.
I would bet that big media companies had something to do with it. That’s just a guess, but an educated guess.
It would fit a familiar pattern. When doctors and their insurance companies got tired of nuisance medical malpractice suits, they pushed the legislature to pass the Texas Medical Liability Act. When builders got tired of nuisance homeowner lawsuits, they pushed for passage of the Texas Residential Construction Liability Act. You get the idea.
I’d bet that media companies got tired of nuisance lawsuits claiming defamation and wanted the legislature to do something about it. And because the ostensible purpose of the statute was to protect First Amendment rights, they got free speech groups on board.
Don’t get me wrong, I’m all about the First Amendment. In my younger, wilder days I was even labeled the “free speech extremist” in a college seminar. But I always thought the best legal defense to an attack on First Amendment rights was, you know, the First Amendment.
Call me old-fashioned, but I like the notion that the rules of the civil litigation system ought to be the same for all kinds of lawsuits. And if you take that idea seriously, it means sometimes saying no to special-interest exceptions, even when the special interest seems like a deserving one.
Otherwise, you get civil litigation rules that look like the US Tax Code: encrusted with the barnacles of special-interest exemptions.
Hey, I get it. That’s how politics works. Special-interest protections are just the way the game is played and the sausage gets made. But us practicing litigators don’t have to like it, or pretend like it’s a good thing.
And then there’s the more practical problem with special-interest legislation: the unintended consequences. The TCPA’s definitions were so broad that people started filing TCPA motions in cases the legislature probably never intended, like trade secrets cases. See A SLAPP in the Face to Texas Trade Secrets Lawsuits – Part 1.
This did not sit well with Chamber of Commerce types. Business groups were fine with the TCPA in theory, because most businesses have better things to do than filing SLAPPs against defenseless consumers. But businesses do like to file lawsuits when their employees leave to join competitors. So when defendants started filing TCPA motions in non-compete and trade secrets lawsuits, you knew the “pro-business” groups and politicians would not be happy campers.
I put “pro-business” in quotes to question whether favoring lawsuits against employees who join competing companies is really pro-business. Usually there are two businesses involved in such a dispute: the business the employee left, and the business the employee joined. What is the real “pro-business” position in such a case, a government decree prohibiting the employee from working for a competitor, or letting the employee go where the market demands?
It would be an interesting experiment to see what would happen to business in a state if non-competes for at-will employees were generally prohibited. Would companies in that state stop investing in innovation and human resources, fearful that their investments would be wasted?
Ideally, the experiment would involve a a state that has no political or ideological baggage, like California, the world’s fifth-largest economy.
Alas, the real world is not a laboratory, so there’s no way to know for sure. But here’s a hypothesis: if Texas really wanted to favor competition and innovation, it would prohibit non-competes except in narrow circumstances like the sale of a business.
Politically, that doesn’t seem to be in the cards. For whatever reason, business groups tend to take a short-sighted, conventional view of their interests, so they like enforcement of non-competes. Carving non-compete suits out of the TCPA is the latest proof of that.
Two Wrongs Don’t Make a Right
So now we have a special-interest statute, the TCPA, with a special-interest exception, non-compete and trade secrets claims. Which one was the mistake, the original statute, or the exception?
I think you can make a case that the legislature went wrong both times. The original TCPA was ill-conceived and had language going far beyond the purported basis for the statute. You could make a good case for just scrapping the whole thing.
But if we’re going to have an anti-SLAPP statute, I don’t see why it shouldn’t apply to departing employee lawsuits. Granted, that’s probably not the kind of lawsuit legislators had in mind when they voted for the TCPA. But a non-compete or trade secrets suit is just as likely to raise “SLAPP” concerns as any other kind of lawsuit.
Mind you, I’m not bashing plaintiffs in departing employee lawsuits—I’ve represented them and will continue to do so. But any lawyer who handles non-compete cases knows there are plenty of cases of non-compete abuse.
Here’s a common scenario: a high-performing salesperson gets fed up with her job and decides to make a fresh start working for a competitor. She’s careful not to poach any customers from her first employer, but the first employer is still angry. So even though her non-compete is too broad to hold up in court and her industry doesn’t have any real secrets, the first employer sues her for breach of non-compete and misappropriation of trade secrets. They have deeper pockets and want to “send a message.”
Texas already has procedures for dismissing groundless lawsuits, but that won’t do this employee much good, because the employer’s claims are not entirely groundless.
No, what the employee needs in this situation is some way to contest the merits of the employer’s claims early in the lawsuit, before getting buried under a mountain of legal fees. Maybe a procedure where the employee files a motion that requires the employer to offer evidence to support its claims before the employee has to endure the expensive discovery process?
Ok, never mind. That would be crazy. Kind of like pro football on Thursday nights.
*Update: On the eve of HB 2730 becoming effective, the Fifth Circuit carved back the TCPA even more, holding it does not apply in federal court. See Shrinkage: TX Legislature and 5th Circuit Cut the TCPA Down to Size.
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.