Constellation Brands, Inc. v. Roach

CONSTELLATION BRANDS, INC. AND FREDERICK H. SCHRADER, Appellants v. ROBERT M. ROACH, Appellee

No. 01-21-00155-CV

Court of Appeals of Texas, First District

December 29, 2022

On Appeal from the 189th District Court Harris County, Texas Trial Court Case No. 2018-59845

Panel consists of Justices Landau, Guerra, and Farris.

MEMORANDUM OPINION

Amparo Guerra Justice.

Appellants Constellation Brands Inc. and Frederick H. Schrader appeal from the trial court's denial of their motion to dismiss under the Texas Citizens Participation Act (TCPA) appellee Randy M. Roach's claims against them in the Fifth Amended Petition. Schrader also separately appeals the trial court's denial of his amended special appearance. In a number of issues on appeal, appellants contend that the trial court erred in denying their motions and refusing to dismiss the Fifth Amended Petition.

We affirm in part and reverse and render in part.

Background

This case was brought by Robert M. Roach, Jr. (Roach), a Houston-based lawyer, against Frederick H. Schrader (Schrader), Roach's friend and the former owner of Schrader Cellars, LLC (Schrader Cellars), a California winery. It is undisputed that in the early 2000s, Roach and Schrader formed a California limited liability company named "Roach Brown Schrader, LLC" (RBS, LLC), whose business was described as "[w]ine production and sales."^[1]

The parties dispute the purpose of RBS, LLC. According to Roach Schrader and Roach^[2] formed a partnership to produce a cabernet sauvignon with clone 337 grapes from the To Kalon vineyard in Napa County, California, which was later known as the Schrader RBS cabernet sauvignon (RBS wine). As part of their partnership agreement, Roach alleges that he made an initial investment of $135,000 in exchange for an equity interest in the partnership and its assets. Roach asserts that the creation of the corporate entity RBS, LLC was a formalization of Schrader and Roach's partnership agreement.

Although Schrader acknowledges the formation of RBS, LLC, he contends it was formed as "a mechanism to gain [Roach's] personal entry into the Napa Valley Vintners [(NVV)], which is located in California." Roach applied to the NVV in 2004, but his application was rejected on the basis that it did not appear "RBS is a separate and distinct brand from Schrader [Cellars]." Schrader admits he received $135,000 from Roach as a personal loan-not an investment in a partnership- which was used to purchase grapes and cover related vinification expenses for Schrader Cellars, not RBS LLC. Schrader Cellars produced and sold wines under various labels, including "Schrader RBS," and all trademark rights belonged to Schrader Cellars, LLC. According to Schrader, because Roach's application to NVV was rejected, RBS, LLC did not conduct any business, record any profits, declare any income, hold any meetings, or enter into an operating agreement.

The parties agree that, throughout their friendship, Schrader visited Texas on occasion for social events, as well as to attend various wine dinners and events hosted by Roach. Although Schrader contends these were merely social events Roach alleges that Schrader attended these events and dinners to promote and "market RBS wine" and that Schrader actively sought customers and purchasers of the RBS wine at these events and dinners. Further, Roach alleges that, at these events and dinners, Schrader publicly called Roach "partner" and "Vintner Roach" and publicly described Roach as a "co-owner of the RBS wine to the people who attended these Texas wine dinners."

In November 2013, Schrader (as the registered agent listed for RBS, LLC) was notified by the California Franchise Tax Board that RBS, LLC had failed to file the required tax returns for the past several years, and it warned that unless these returns were filed, the entity would be automatically suspended and forfeit all rights, powers, and privileges, including the right to conduct business, use the entity name, or enforce contracts. After receiving these notices, Schrader notified Roach and Brown that he intended to dissolve RBS, LLC "as it se[rve]s no purpose now." Roach acknowledged receiving this email from Schrader, but he testified at his deposition that he did not manifest "any agreement or willingness to even discuss cancelling or dissolving the LLC," and he did not respond to this email in the hopes that it would avoid an "evaluation fight." Thereafter, Schrader filed a Limited Liability Company Certificate of Cancellation with the California Secretary of State, purporting to dissolve RBS, LLC.

In June 2017, Schrader sold Schrader Cellars, LLC to Constellation Brands, Inc. ("Constellation"). The rights to RBS wine were included in this sale.

On September 4, 2018, Roach filed the underlying suit against Schrader. Roach filed his first amended petition in April 2019, adding Constellation as a party. Schrader filed a special appearance on June 17, 2019. The parties conducted jurisdictional discovery, including depositions of Schrader and Roach, and supplemented their special appearance briefing with the relevant discovery. Roach also amended his petition numerous times; the live petition at the time of the special appearance hearing was the Fourth Amended Petition, which contained the following causes of action:

• Conversion (against Schrader and Constellation);

• Money Had and Received and Restitution (against Schrader and Constellation);

• Breach of Fiduciary Duty (against Schrader);

• Unjust Enrichment (against Schrader and Constellation);

• Constructive Trust (against Schrader and Constellation);

• Equitable Accounting Based on Fiduciary Relationship (against Schrader);

• Fraud (against Schrader);

• Conspiracy with Schrader to Commit Fraud and to Breach his Fiduciary Duties (against Constellation);

• Declaratory Judgment to Declare Roach's Partnership Interest in Boars' View^[3]; • Declaratory Judgment to Declare Schrader's Representations in the 2013 Cancellation Document "Materially False" or "Fraudulent";

• Declaratory Judgment to Declare Roach's Partnership and Ownership Interests in RBS, LLC and Partnership Assets;

• Declaratory Judgment "to Declare Roach's Ownership Interest in the RBS LLC and Partnership Assets at the Time of the Sale of Schrader Cellars to Constellation and Today"; and

• Declaratory Judgment to Declare Roach's Legal and Equitable Ownership Interest in Schrader Cellars at the Time of the Sale of Schrader Cellars to Constellation.

After a non-evidentiary hearing, the trial court denied Schrader's special appearance. Schrader appealed from the denial of his special appearance, and we recently issued an opinion affirming in part and reversing and rendering in part.

In that opinion, we concluded that Schrader attended a handful of wine events in Texas with Roach, at which he allegedly made misrepresentations related to Roach's ownership interest in RBS wine. See Schrader v. Roach, No. 01-20-00183-CV, 2022 WL 2203210, at *8-11 (Tex. App.-Houston [1st Dist.] June 21, 2022, pet. filed) (mem. op.). He also actively solicited customers and buyers of RBS wine and otherwise promoted RBS wine at these events. Id. Because Schrader actively sought to gain business from Texas at these events where the alleged misrepresentations were made, we concluded the trial court has specific personal jurisdiction over Roach's fraud claims and held that the trial court did not err in denying Schrader's special appearance as to the fraud claims. Id. at *11-12.

With respect to Roach's remaining claims for conversion, money had and received, restitution, unjust enrichment, declaratory judgment, and breach of fiduciary duty, however, we concluded that nearly all the operative facts giving rise to these claims occurred in California and that Schrader's Texas contacts were not substantially connected to the operative facts of Roach's claims. Id. at *12-14. Accordingly, we held that the trial court did not have personal jurisdiction over Schrader as to these claims and erred in denying Schrader's special appearance as to these claims. Id. at *13-14.

On January 11, 2021, while Schrader's appeal from the trial court's denial of his special appearance was pending in this Court, Roach filed a Fifth Amended Petition, which included additional factual allegations and asserted a number of new causes of action:

• Knowing Participation in Breach of Fiduciary Duty (against Constellation);

• Equitable Accounting Based on Fiduciary Relationship (against Constellation);

• Fraud (against Constellation);

• Setting Aside Constellation's Acquisition of Schrader Cellars, LLC (against Schrader and Constellation);

• Declaratory Judgment Incident to Request for Equitable Relief of Setting Aside Sale of Schrader Cellars, LLC;

• Partnership (against Schrader);

• Breach of Contract (against Schrader); • Tortious Interference with Existing Contract (against Constellation);

• Quantum Meruit (against Schrader);

• Concert of Action (against Constellation);

• Joint Venture Liability, Joint Enterprise Liability, and Partnership Liability (against Constellation and Schrader);

• Declaratory Judgment declaring the Indemnity Agreement False and a Violation of Public Policy (against Constellation and Schrader).

On February 22, 2021, Schrader filed a Supplemental and Amended Special Appearance (Amended Special Appearance) reaffirming the issues Schrader had raised in his prior special appearance and challenging jurisdiction over the subsequent claims added by Roach. Later that same day, Schrader and Constellation moved to dismiss the Fifth Amended Petition under the TCPA (the TCPA motion). On March 16, 2021, the trial court denied Schrader's Amended Special Appearance but did not state the basis for its...