Patriot Contracting, LLC v. Mid-Main Props., LP

650 S.W.3d 819

PATRIOT CONTRACTING, LLC and Stephen J. Friedman, Appellants

v.MID-MAIN PROPERTIES, LP, Appellee

NO. 14-20-00724-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed April 28, 2022

Shahmeer Halepota, Nathan Campbell, Robert H. Bateman, Kelsi White, John Zavitsanos, Patrick Yarborough, Houston, Luke Ott, Jeffrey A. Shadwick, Eric Lipper, Houston, for Appellee.

Dale Wainwright, Austin, Justin Bernstein, for Appellant.

Panel consists of Justices Jewell, Bourliot, and Poissant.

Kevin Jewell, Justice

Patriot Contracting, LLC and Stephen J. Friedman appeal the trial court's order denying their motion to dismiss under the Texas Citizens Participation Act ("TCPA"), as well as the court's finding that the motion was frivolous and intended solely for delay. The trial court determined among other things that the motion was untimely, and the primary issue in this appeal is whether factual allegations in appellee's amended counterclaim triggered a new sixty-day deadline to file the motion. We hold that the trial court did not err in concluding that appellants’ motion was untimely because appellee's eighth amended counterclaim did not allege new essential facts and therefore did not trigger a new sixty-day deadline in which to file the motion. We also conclude that the trial court did not abuse its discretion in finding that the motion was frivolous.

We affirm.

Background

Appellee Mid-Main Properties, LP is a commercial property developer. In 2014, Mid-Main hired appellant Patriot Contracting, LLC as the general contractor for a construction project in the Houston Midtown area. Appellant Stephen J. Friedman owns Patriot.

The project involved constructing four residential apartment towers above a common parking garage with retail space at ground level. Construction began in late 2014. According to Mid-Main, over the next two and one-half years, Patriot and its subcontractors performed defective work that caused significant damage and delay. Patriot also allegedly demanded excess payments from Mid-Main because Patriot had difficulty paying its subcontractors. Mid-Main claims that Patriot abandoned the project twice in April 2017, and Mid-Main terminated the contract after Patriot's second abandonment.

During the project, Patriot submitted pay applications, which sought retainage amounts and represented that Patriot had paid its subcontractors amounts due. According to Mid-Main, however, Patriot did not substantially complete the work for which it sought payment and did not obtain unconditional releases and lien waivers from its subcontractors—both preconditions to earning the retainage. Based on Mid-Main's alleged failure to pay the amounts requested in the applications, Patriot recorded a mechanic's lien against the project in May 2017. Patriot's lien put Mid-Main at risk of defaulting on its construction loan. Mid-Main claims that Friedman repeatedly contacted Mid-Main's construction lender in an unsuccessful attempt to buy Mid-Main's loan and acquire the project at a significant discount.

Eventually, Mid-Main made its own arrangements with subcontractors to finish construction through "restart agreements." According to Mid-Main, Friedman told subcontractors not to return to the project and advised them to demand retainage from Mid-Main in exchange for entering a restart agreement, even though Mid-Main had paid some retainage to Patriot previously. Because of Friedman's and Patriot's actions, Mid-Main contends it made duplicative retainage payments to subcontractors to resume construction. Nonetheless, the project construction was completed in February 2018.

Patriot sued one of its subcontractors in March 2017 and later added Mid-Main as a defendant. On June 16, 2017, Mid-Main filed a counterclaim against Patriot, in which Mid-Main asserted claims for common law fraud related to the allegedly false pay applications and for a declaratory judgment that Patriot's lien was void.¹ Mid-Main amended its counterclaim several times, adding and deleting claims over time. The key pleadings for our purposes are Mid-Main's Seventh and Eighth Amended Counterclaims. Mid-Main filed its Seventh Amended Counterclaim on December 20, 2019. In that pleading, Mid-Main asserted the following claims: (1) breach of contract; (2) breach of warranty; (3) negligence; (4) negligent misrepresentation; (5) fraud; (6) personal liability of Friedman under Texas Property Code section 53.085 for signing false affidavits supporting the disputed pay applications; (7) breach of surety bonds; (8) declaratory judgment; (9) Friedman tortiously interfered with Mid-Main's prospective relations by interfering with Mid-Main's efforts to obtain additional financing for the project; and (10) Patriot and Friedman tortiously interfered with Mid-Main's restart agreements with subcontractors after Patriot abandoned the project.²

Trial was scheduled to begin in early September 2020. Patriot requested an emergency continuance in August, seeking to continue trial until January 2021. The trial court granted the continuance in part, setting the case for trial on November 2, 2020.

On September 2, in anticipation of trial, Mid-Main filed its Eighth Amended Counterclaim. In that document, Mid-Main did not add any new claims, and it deleted two claims. Mid-Main, however, modified certain assertions in the "factual background" section, which we discuss in detail below.

Patriot filed another emergency motion for continuance on October 5, which the court denied. On October 9, however, the trial court granted another party's continuance motion and reset trial for November 30, 2020, with pre-trial to occur November 18.

The following week, on October 14, Patriot and Friedman filed a "Motion to Dismiss, for Discovery Stay, and Stay of Trial Pursuant to the [TCPA]." A motion to dismiss a legal action under the TCPA must be filed not later than the sixtieth day after the date the legal action is served.³ Although Patriot and Friedman had not filed a TCPA motion to dismiss any of Mid-Main's prior counterclaims, they contended their motion was timely as to the Eighth Amended Counterclaim because that pleading alleged new claims and new wrongful acts. Patriot and Friedman contended that Mid-Main's Eighth Amended Counterclaim contained "new allegations as to tortious interference, false pay applications, and fraudulent lien," all of which were based on and in response to Friedman's protected free speech and petition rights and thus should be dismissed. Due to the new alleged claims and acts, appellants asserted that the "TCPA clock was reset."

Mid-Main responded to the TCPA motion to dismiss with three arguments: (1) the motion was untimely; (2) assuming the motion was timely, the challenged claims are not covered by the TCPA; and (3) further assuming the claims are covered by the TCPA, Mid-Main could establish a prima facie case for each challenged cause of action. Among other exhibits attached to its response, Mid-Main submitted a "redline" version of its Eighth Amended Counterclaim showing the changes made to its Seventh Amended Counterclaim. According to Mid-Main, "[t]he content of the fraud, declaratory judgment, tortious interference, and Section 53.085 claim paragraphs is identical to what Mid-Main filed in 2019." Mid-Main asserted that it had not alleged any new "essential facts" necessary to "reset" the "TCPA clock" and that "Patriot and Friedman are incapable of pointing to a single substantive difference between the causes of action the parties have been litigating for three years and the pleading filed in September 2020."

The trial court denied appellants’ motion to dismiss. In its order, the trial court found the following:

1. The Motion was untimely. Patriot and Friedman did not comply with the statutory requirement to file their motion "not later than the 60th day after the date of service of the legal action." Tex. Civ. Prac. & Rem. Code § 27.003(b).

2. The Motion requested dismissal of a cause of action that the plain text of the statute clearly exempts from dismissal pursuant to Tex. Civ. Prac. & Rem. Code § 27.010(a)(12), and there is no good faith argument for the extension, modification, or reversal of existing law.

3. The Motion requested dismissal of causes of action not covered by the plain text of Tex. Civ. Prac. & Rem. Code §§ 27.001, 27.003, and there is no good faith argument for the extension, modification, or reversal of existing law.

4. The Motion requested dismissal of claims subject to prior motions for no-evidence summary judgment that have been denied.

5. [Struck]

6. [Struck]

7. The Motion was frivolous for the reasons stated above.

8. The Motion filed was solely intended to delay this case, which is assigned for trial beginning November 30, 2020.

Based on these findings, the trial court ordered that, under section 27.009(b), Mid-Main recover its costs and reasonable attorney's fees incurred in responding to the motion in an amount to be determined later.

Patriot and Friedman timely noticed an interlocutory appeal, which stayed proceedings in the trial court. See Tex. Civ. Prac. & Rem. Code §§ 27.003 ; 27.005; 51.014(a)(12), (b).

TCPA Motion to Dismiss

A. Relevant Law and Standard of Review

The TCPA contemplates an expedited dismissal procedure applicable to claims brought to intimidate or silence a defendant's exercise of the rights to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law without impairing a person's right to file meritorious lawsuits for demonstrable injury. See Tex. Civ. Prac. & Rem. Code § 27.002 ; Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC , 591 S.W.3d 127, 132 (Tex. 2019) ; ExxonMobil Pipeline Co. v. Coleman , 512 S.W.3d 895, 898 (Tex. 2017) (per curiam). Among its many balancing measures, the act imposes a deadline for seeking dismissal of actions within the statute's purview. Absent an extension, a dismissal motion must be filed "not later than the 60th day...