The Texas Citizens Participation Act, Tex. Civ. Prac. & Rem. Code §§ 27.001 et seq. (the TCPA), Texas’ anti-SLAPP statute, is likely to receive a much needed overhaul after the Texas Senate unanimously passed H.B. 2730 on May 17, 2019. If the Texas governor signs it into law, as expected based on the bill’s broad bipartisan support in the Texas House and Senate, the revisions will take effect on September 1, 2019, and will clarify – and significantly narrow – the types of claims to which the TCPA applies. Also, importantly for companies seeking to protect their trade secrets and enforce their restrictive covenants, the changes to the TCPA would exempt such claims from its purview.
The TCPA was originally enacted in 2011 to protect citizens who exercise their First Amendment rights from retaliatory legal actions that seek to intimidate or silence them. Specifically, the TCPA allows a party to file a motion to dismiss within 60 days of service of a lawsuit if it can establish that the legal action is based on, relates to, or is in response to the party’s exercise of the right of free speech, the right to petition, or the right of association. If the party-defendant meets this burden, the plaintiff must then establish “by clear and specific evidence a prima facie case for each essential element of the claim in question.” If the defendant is ultimately successful on its motion to dismiss, the defendant is entitled to recover its attorneys’ fees.
Importantly, while a TCPA motion to dismiss is pending – and during any subsequent appeal of the trial court’s ruling on the motion – discovery and all other proceedings at the trial court are stayed. This stay can result in significant delay, which can be particularly harmful in cases in which an employer seeks emergency injunctive relief to prevent the irreparable harm associated with the use and disclosure of misappropriated trade secrets or the violation of restrictive covenants by former employees.
The TCPA’s current broad language has resulted in a substantial number of TCPA challenges, many of which are far removed from the rights the TCPA was originally intended to protect. In fact, commentators have often compared the breadth of the TCPA’s application to California’s anti-SLAPP statute, with many suggesting that the TCPA may be one of the broadest anti-SLAPP statutes on the books. In many instances, defendants in trade secret and restrictive covenant cases have filed challenges under the TCPA purely in an effort to increase the costs of the case to the plaintiff and to delay the litigation, including discovery.
Given this backdrop, the Texas Legislature passed the recent revisions in H.B. 2730 to remedy the TCPA’s “unexpected applications” by “clarifying the scope and applicability of” the statute. Most notably, the bill adds exemptions for claims that seek “recovery for misappropriation of trade secrets or corporate opportunities” and claims “to enforce a non-disparagement agreement or a covenant not to compete,” as well as deceptive trade practice and common law fraud claims. The bill also makes many other significant changes to the TCPA, including the following:
- Amending the definition of “exercise of the right of association” to require that such association “relat[e] to a governmental proceeding or a matter of public concern.” Under the current version of the TCPA, defendants in restrictive covenant cases have argued that the TCPA applies to such claims to the extent they implicate the right of the employee to associate with his or her new employer.
- Amending the definition of “matter of public concern” to include statements or activities regarding public officials, figures, and celebrities, matters of political, social, or other interest to the community, and subjects of concern to the public. Importantly, the bill removes “a good, product, or service in the marketplace” from this definition, which many defendants used to argue that the TCPA applied to trade secrets and restrictive covenants claims.
- Excluding from the definition of “legal action” certain procedural motions, alternative dispute resolution proceedings, and post-judgment enforcement actions, but adding to the definition claims for declaratory relief.
- Amending the TCPA to only cover legal actions that are “based on” or “in response to” a party’s exercise of the rights protected by the TCPA, removing actions that merely “relate to” such rights.
- Clarifying that, in determining whether a TCPA motion should be granted, courts may consider any evidence the court could consider on a motion for summary judgment.
- Making the imposition of sanctions if the TCPA motion is granted discretionary, rather than mandatory.
H.B. 2730 represents a strong response from the Texas Legislature to the flood of TCPA motions that have ensued since the statute’s initial enactment in 2011. While there may still be questions regarding the scope and applicability of the TCPA, it is clear that the legislature intends to significantly curtail the use of TCPA motions. Also, importantly, it exempts trade secret and restrictive covenant litigation, where the delays associated with a TCPA motion and its accompanying stay of proceedings can have significantly harmful effects on a plaintiff. Accordingly, even if H.B. 2730 does not solve all of the issues that have arisen over the past decade under the TCPA, it is a good start.