On motion for rehearing, the Austin Court of Appeals has withdrawn its previous opinion and judgment and substituted a new opinion in a legal malpractice action that the trial court dismissed under the Texas Citizen Participation Act.
In 2014 plaintiff started a business to flip houses. In her maiden venture, she bought a house, renovated it, and sold it to two buyers in 2016. A few months later, the house began falling apart. The buyers promptly sent plaintiff a demand letter under the DTPA alleging that she made material representations regarding the condition of the property. In early 2017, plaintiff hired a law firm to represent her. After that, things did not go well. Explaining that she did not want protracted and expensive litigation, she allegedly tried to get her lawyers to “‘go to the judge’ and ask him ‘throw the lawsuit out’” based on the seller’s disclosure and “as is” sales contract she executed with the buyers. The lawyers, however, conducted discovery, compelled mediation, added several third-party defendants, encouraged plaintiff to hire an expensive expert, and eventually advised her to settle the case in 2020 after running up more than $120,000 in expenses and attorney’s fees. In 2021 plaintiff filed suit against her lawyers for negligence, gross negligence, breach of fiduciary duty, and DTPA violations. The lawyers filed a TCPA motion to dismiss. The trial court granted the motion and ordered plaintiff to pay attorney’s fees to each of her several lawyers. Plaintiff appealed.
These are the basic facts in Kirsten Hanna, Upside UP Properties, LLC, and Upside Up Ventures, Inc. v. M. Matthew Williams; David Howell; Law Firm of M. Matthew Williams; Leighton, Williams, Adkinson & Brown, PLLLC; and Leighton, Michaux, Adkinson & Brown, PLLC (No. 03-22-00254-CV; decided August 24, 2023). The primary issue of interest in the case was the court’s revised TCPA analysis. First, plaintiff alleged that the TCPA did not apply because the lawyer defendants “failed to meet their burden to demonstrate by a preponderance of the evidence that her lawsuit is ‘based on or in response to’ their exercise of the right to petition” (this case was governed by the TCPA as amended in 2019). She argued that the lawyers could not point to any specific communications that implicated their right to petition and, furthermore, that her claims arose from alleged failures to communicate or act according to her instructions.
Changing its mind from the prior opinion, the court agreed with plaintiff that “to the extent her claims are based on or in response to [defendants’] failures to communicate or act, such failures do not implicate the TCPA” (citations omitted). However, the court went the other way on the question of whether defendants “sufficiently identified in their motions the ‘specific communications’ they contended implicated the TCPA because the motions incorporated by reference particular paragraphs of [plaintiff’s] petition in which she alleged specific communications that [defendants] had allegedly made ‘in or pertaining to’ the Homebuyers’ [DTPA] Lawsuit.” These included statements made directly to the plaintiff (drafting a filing a motion for summary judgment, retention of an expert witness, and settling the case) and statements defendants made in court filings and discovery requests.
But while the plaintiff’s claims are “based on and in response to” the direct statements, that is not the case with respect to those made in court filings and discovery requests. “Those communications, themselves, cannot fairly be considered a factual predicate or impetus for [plaintiff’s] claims” (citations omitted). At most, the court opined, “those communications might operate as evidence of some of the alleged ‘unnecessary work,’” but they are not actionable in themselves. Plaintiff’s claims, rather, concern “the alleged performance of unnecessary or substandard work and the overbilling therefor, as well as on the misrepresentation causing her to incur such expenses, not to mention alleged omissions and failures to communicate and act” (citations omitted). In other words, plaintiff’s claims “are not ‘based on’ those communications because the communications are not a ‘main ingredient’ or a ‘fundamental part’ of Hanna’s causes of action.” Similarly, plaintiff’s claims cannot be considered “in answer to” the defendants’ filings and discovery requests.
The court drew a further distinction between “communications used as evidence to support a claim and claims that are based on or in response to (i.e., factually predicated upon) those communications” (citations omitted). Plaintiff’s negligence, gross negligence, breach-of-fiduciary duty, and DTPA claims had nothing to do with defendants’ court filings and discovery requests and did not implicate the TCPA.
That leaves only the direct statements defendants made to plaintiff. Plaintiff argued that those communications came under the commercial speech exemption in § 27.010(a)(2), CPRC. This exemption applies to “a legal action brought against a person primarily engaged in the business of selling or leasing goods or services if the statement or conduct arises out of the sale or lease of goods, services, . . . or a commercial transaction in which the intended audience is an actual or potential buyer or customer.” Here the lawyers conceded that they were primarily engaged in selling legal services, but argued that “their alleged misrepresentations to [plaintiff] and their alleged filing of unnecessary and excessive court and discovery documents . . . were not made in their capacity as sellers of legal services and did not arise out of a commercial transaction involving the sale of legal services” (citing Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018) for the four elements of the commercial-speech exemption). Again reversing course from its prior opinion, the court found that defendants’ alleged misrepresentations about drafting and filing a summary-judgement motion and negligent advice about hiring an expert and settling the case “were made by [defendants] pursuant to her engagement of them to represent her and thus in their capacity as sellers of legal services.” As such, they met the second prong of the Castlemant test.
In the same vein, the court determined that plaintiff’s allegations “arose out of a commercial transaction involving the kind of services [defendants] provide (i.e., legal services) (citation omitted)., thus satisfying the third prong of the test. As to the fourth prong, whether “plaintiff was the intended audience of defendants’ allegedly false and negligent statements by virtue of her being both an actual customer (i.e., client) of theirs and a direct recipient of the communications” and “paid [defendants] for the at-issue legal services,” plaintiff satisfied the test. Having established all four elements required by Castleman, plaintiff’s claims were exempt from the TCPA. The court remanded to the trial court for further proceedings.
Even though decided differently than the first time, this case is highly instructive as to the application of the TCPA to a legal malpractice claim commenced before September 1, 2023. On that date, thanks to the enactment of HB 527 last spring, the TCPA will change to exclude a legal malpractice claim brought by a client or former client. Given the volume of satellite litigation that has occurred on that issue over the past 12 years, the legislation brings a very welcome change, indeed.
