The Fort Worth Court of Appeals has reversed a trial court order dismissing an investment firm’s defamation and business disparagement lawsuit against one of its brethren.

Nexpoint Advisors, L.P. v. United Development Funding IV and Mike Wilson (No. 02-22-00427-CV; delivered August 3, 2023) arose from a letter sent by plaintiff to United’s chairman and CEO that “expressed certain concerns about [United’s] management practices and expressed a desire to become involved in [United’s] management.” United replied, acknowledging receipt of plaintiff’s letter, followed by a lengthy explanation of “its ‘concerns’ about conducting discussions with [plaintiff] arising from the recent ‘short and distort’ campaign, which had allegedly been carried out against it by others, and [United’s] belief that [plaintiff’s] principals and allies had been complicit in that effort.” The response further alleged that the “short and distort” campaign caused the problem in the first place. United then published the response letter on its public website, which produced “[o]ther reiterations of these or similar allegedly defamatory statements [] in other press releases, publications, and public filings over the next several weeks by [United].” Plaintiff sued United and its employee, Wilson, for defamation, business disparagement, tortious interference with existing contract, and tortious interference with prospective business relations.” Defendants moved to dismiss under the TCPA and for attorney’s fees. The trial court granted the motions to dismiss, and a jury trial was conducted on the amount of attorney’s fees for defendants jointly, not separately. The jury returned a verdict for attorney’s fees, and the trial court rendered a take nothing judgment against plaintiff and awarded attorney’s fees as determined by the jury. Plaintiff appealed.

The court of appeals affirmed the TCPA dismissal as to Wilson but reversed and remanded as to United. Plaintiff argued that the TCPA did not apply based on the commercial speech exemption in § 27.010(a)(2), CPRC. Citing the Castleman factors, the court ruled that the exemption applied to plaintiff’s claims. First, United was primarily engaged in the business of selling or leasing goods or services (i.e., investment and financial services; sales of stock). Second, United made the allegedly defamatory statements “in the defendant’s capacity as a seller or lessor of those goods or services.” Here United made the statements “as part of its response to [plaintiff’s] overture to become involved in [United’s] management.” That response requested plaintiff to

“provide responses to the conflict-of-interest-related questions outlined on the attachment to [the] letter, and detailed information about the ‘transaction’ that you are interested in discussing with [United]. The Board will review your responses and indicate whether it is comfortable proceeding.” The court held these statements squarely in United’s capacity as a seller of its services, both in purporting to protect its investors and soliciting plaintiff for a specific proposal.

Third, the court determined that the allegedly defamatory statements “arose out of a ‘commercial transaction’ involving the kinds of services the defendant provides.” As both parties referred to their exchange as a proposed “transaction,” the court had no difficulty concluding that they were a prelude to a business deal. Since the commercial speech exemption “does not require a completed transaction” but can “include conduct or statements that merely propose a commercial transaction” (citations omitted), United’s statements met this prong of the test. And fourth, the court found that “the intended audience of the statement or conduct was actual or potential customers of the defendant for the kind of goods or services the defendant provides.” Here United’s CEO testified that United published its response letter to “broker-dealers that represented or that had [United] accounts in addition to being filed with its SEC 8-K filing and press release to the public,” as well as to others. The court reversed the TCPA dismissal as to United, as well as the attorney’s fees awarded jointly to Wilson and United, and remanded back to the trial court.

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