I know what you did last summer

They say that breaking up is like knocking over a coke machine. It’s just not going to happen on the first push. This is also true of my attempt to break up with the Texas Citizens Participation Act, or “TCPA.”

A quick recap: I fell in love with the TCPA when Texas courts started applying its broad definitions so broadly that you could file a motion to dismiss in just about any kind of lawsuit, as long as the claims had something to do with a “product or service in the marketplace.” That included departing employee lawsuits, the focus of my practice.

I’ll admit, it was a toxic relationship, one the Texas legislature probably never intended.

Then the backlash came. The Texas legislature, the Fifth Circuit Court of Appeals, and the Dallas Court of Appeals conspired to sabotage our relationship. See Turn Out the Lights, the Party’s Over: Texas Legislature Takes All the Fun Out of the TCPA.

The legislature dealt the cruelest blow. Last summer it amended the TCPA to carve out most claims based on non-competes and trade secrets. See Tex. Bus. & Com. Code § 27.010(a)(5).

Like a meddling parent, the legislature was determined to keep me and the TCPA apart. How am I supposed to file a TCPA motion to dismiss a departing employee lawsuit if the statute doesn’t apply to non-compete and trade secrets claims anymore? That’s my bread and butter.

Keep hope alive

But wait. There is hope. Breach of non-compete and misappropriation of trade secrets are not the only claims made in departing employee lawsuits. As I explained in my viral YouTube video What Are the Key Legal Issues in a Departing Employee Lawsuit?, breach of fiduciary duty is another common claim when an employee leaves a company to work for a competitor.

Does an employee really owe an employer a fiduciary duty, the highest common-law duty known to man? Well, sort of. For a brief explanation, see Fiduciary Duty Lite: What Employees Can and Can’t Do Before Leaving.

The typical theory in a departing employee lawsuit is that the employee, while still on the company’s payroll, schemed with others to compete with the company. If the employee crosses the line into actually competing with her employer, that can be a breach of the employee’s limited “fiduciary” duty to the employer.

There’s no exemption in the amended TCPA for claims of breach of fiduciary duty, and Texas courts have applied the statute to such claims. See, e.g., O’Hern v. Mughrabi, 579 S.W.3d 594, 603-4 (Tex. App.–Houston [14th Dist.] 2019, no pet. h.) (TCPA applied to suit making single claim of breach of fiduciary duty); Elite Auto Body LLC v. Autocraft Bodywerks, Inc., 520 S.W.3d 191, 194, 205 (Tex. App.–Austin 2017, pet. dism’d) (TCPA applied to claims against former employees including breach of fiduciary duty).

So if you’re on the defense side of a departing employee lawsuit, you may not be able to file a TCPA motion to dismiss the non-compete and trade secret claims, but you could still file a TCPA motion to dismiss the breach of fiduciary duty claim. And even if that motion is denied, you get an interlocutory appeal.

This is especially important when the employee doesn’t have a non-compete. Proving that the employer’s information was a trade secret can be difficult, so in cases without a non-compete, breach of fiduciary duty is sometimes the employer’s strongest theory.

Hey, I just met you

Still, my loyal Fivers know that carving out non-compete and trade secrets claims was not the only change the legislature made to the TCPA last summer. The legislature also changed the definition of “matter of public concern.”

The previous definition of “matter of public concern” was the match that lit the prairie fire that swept across Texas litigation. That definition covered communications about a product or service in the marketplace, which meant just about any kind of lawsuit.

But House Bill 2730 reigned in that broad definition, making these changes:

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Is this new definition of “matter of public concern” broader or narrower?

Before, the definition included an issue related to a product or service in the marketplace. That prong of the definition covered a potentially wide range of lawsuits, but its language was fairly specific.

The new definition, in contrast, is vague to the point of being tautological. The statute now effectively defines “matter of public concern” to include “a subject of concern to the public.” Wow, thanks for that clarification, Texas legislature.

So does a claim for breach of a former employee’s breach of fiduciary fall under the new definition of matter of public concern?

And this is crazy

Here’s the argument that it applies. Let’s say a salesman decides he’s not happy with his job. He starts talking with some co-workers, or maybe with a competitor, about leaving the company and forming a new venture that will compete for the company’s customers. Then he starts talking to his customers about it. Maybe he even tells his customers to delay their orders until after he leaves.

Arguably, those communications are about competition in the salesman’s industry, which is a matter of interest to the community and a subject of concern to the public. So if the employer claims breach of fiduciary duty based on these communications, you could argue the TCPA applies.

The counter-argument says this is just too much. If “matter of public concern” is construed to include competition between two private companies, one could argue, then the TCPA would still apply to almost everything. That can’t be what the legislature intended.

That’s essentially what the Dallas Court of Appeals said about the previous version of the TCPA. In a series of decisions, the Dallas court reigned in the scope of the TCPA by holding that communications between private parties about doing business are not matters of public concern, despite the broad “product or service in the marketplace” language that was in the statute. The Fort Worth Court of Appeals took a similar view. See Metroplex Courts Push Back on Broad Application of TCPA.

It’s a safe bet those courts will take the same approach to the TCPA’s new definition of a matter of public concern. They are likely to reject the argument that an employee’s communications about competing with his private employer are a subject of concern to the public just because there is a general public interest in free competition.

But other courts may be more receptive to the argument. The Austin Court of Appeals and the Houston Court of Appeals took more of a “plain meaning” approach to the earlier version of the TCPA. That’s how the TCPA got applied to non-compete and trade secrets claims in the first place. See A SLAPP in the Face to Texas Trade Secrets Lawsuits.

So call me maybe

If you take a similar plain meaning approach to the new definition of matter of public concern, there is at least a reasonable argument that the definition applies to communications about competing with an employer. So, if an employer sues a former employee for breach of fiduciary duty based on the employee’s alleged scheme to compete with the employer, the employee should at least consider filing a motion to dismiss the claim under the TCPA.

I’ve prepared a sample motion that does just that.

*MASSIVE LAWYER DISCLAIMER: Every case is different, and this sample motion is just an idea for Texas litigators to consider; I’m not necessarily endorsing it, and non-lawyers should consult with qualified counsel about these issues.

Keep in mind, the plaintiff can defeat the TCPA motion by offering evidence that the employee owed a fiduciary duty, the employee breached the duty, and the breached caused damages.

But that can be a real hurdle for the employer. Whether the alleged conduct of the employee constitutes a breach may present a legal question for the judge. And even when there is evidence of a breach, it is sometimes difficult for the employer to show the breach caused actual compensable damages. (Another lurking issue is that the fiduciary duty claim may be preempted by the trade secrets statute, but I’ll save that for the “advanced” course.)

Bottom line: filing a TCPA motion to dismiss a breach of fiduciary duty claim in a departing employee lawsuit will sometimes be a good strategy for the defense.

Some will think it crazy to apply the TCPA to a claim against an employee for breach of fiduciary duty. But is it any crazier than the cases that applied the earlier version of the TCPA to departing employee litigation? As discussed above, the new definition of matter of public concern is arguably just as broad as the old definition.

Plus, this may shock you, but sometimes employers use contrived claims of breach of fiduciary duty to try to punish or bully employees who exercise their right to leave the company and compete freely. Isn’t that the kind of claim the TCPA is supposed to prevent?

If so, maybe I’m not so crazy to consider getting back together with the TCPA. The statute promised me it has changed its ways, so maybe I’ll give it one more chance before I finally tip over that coke machine.

________________________

IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

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.

 

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