Appellants Iron Tigga, LLC and Abraham Quintanilla III appeal the denial of their motion to dismiss a lawsuit filed by the Law Offices of David W. Showalter, LLP regarding legal fees. The appellants argue that the lawsuit should be dismissed under the Texas Citizens Participation Act (TCPA). The court agrees with the appellants, leading to a reversal and remand of the case.
The background involves a 2007 lawsuit where Quintanilla was sued by fellow Kumbia Kings members for breach of contract and fraud. In a 2012 bench trial, the court ruled against one plaintiff but awarded the Ramirez brothers $393,266 in damages, plus attorney's fees of $65,000 and potential appellate fees based on Showalter's testimony. Showalter had represented the plaintiffs in the initial suit and subsequent collection efforts, including successfully declaring the judgment debt non-dischargeable in bankruptcy court and obtaining a receiver for Quintanilla's assets.
In 2018, the Ramirez brothers engaged new attorneys to seek a writ of garnishment against Quintanilla’s father, alleging Quintanilla owed debts that could not satisfy the judgment. The court granted this request, leading to a writ preventing Abraham Quintanilla Jr. from paying debts owed to his son. As of January 4, 2018, the total amount owed by Quintanilla under the judgment, including interest, was $1,082,753.82.
On June 3, 2021, Showalter initiated a lawsuit in the 148th District Court against Quintanilla and the Ramirez brothers, alleging that they terminated his involvement just prior to a settlement and have since failed to pay him legal fees stipulated in a 2006 fee agreement. The contract outlined a tiered percentage of settlement proceeds owed to Showalter based on the nature of the settlement's execution. Showalter accused Quintanilla of intentionally interfering with this agreement by negotiating a covert settlement with the Ramirez brothers without informing him, thereby denying him compensation for his contributions to the underlying litigation. He also claimed Quintanilla, in conspiracy with the Ramirez brothers, sought to unlawfully deprive him of his entitled share of the settlement proceeds.
In response, Quintanilla filed a motion to dismiss on August 25, 2021, under the Texas Citizens Participation Act (TCPA), asserting that Showalter’s claims were based on Quintanilla's right to petition and lacked clear evidence. The motion argued the TCPA was applicable as Showalter's allegations related to communications and documents pertinent to judicial proceedings. It noted a prior settlement agreement dated June 26, 2019, involving Quintanilla and the Ramirez brothers, which resolved claims from a 2007 lawsuit, including a $750,000 settlement. Quintanilla contended that the settlement was not covert since it arose from ongoing public judicial proceedings. Additionally, the settlement agreement included a clause where the Ramirez brothers affirmed they had not transferred any claims related to Showalter. Further, an interpleader filed by Medina on January 11, 2021, indicated that $65,000 from the settlement was withheld due to a claim by Showalter, despite instructions from the Ramirez brothers to not release any funds to him.
Medina in the interpleader indicated she has no claim to the disputed funds. Abraham's motion to dismiss highlighted that he filed a plea in intervention on March 4, 2021, to protect the confidentiality of a settlement agreement and prevent its release to non-interested parties. The motion included copies of Medina's interpleader and Abraham's plea. The motion to dismiss under the Texas Citizens Participation Act (TCPA) was supported by evidence, including an affidavit from Quintanilla denying any knowledge of or interference with contracts between the Ramirezes and Showalter, stating he had not communicated with the Ramirez brothers for over nine years and that all settlement discussions were handled by his attorney. The motion also included a sealed copy of the settlement agreement. Showalter responded, asserting the TCPA did not apply as his suit was based on Quintanilla's conduct, not communication, and that any relevant communications occurred outside of judicial proceedings. He provided an affidavit claiming he only learned of his discharge as counsel in mid-2019 and of the settlement agreement in October 2020. Showalter alleged that the secretive nature of the settlement compromised the judgment amount, resulting in his failure to receive his entitled 45% fee despite a decade of litigation on a contingent fee basis. He contended that the settlement was reached without his knowledge or the approval of the receiver, who would not have consented to such terms. In his reply, Quintanilla argued that his involvement in the settlement could not be the proximate cause of the Ramirez brothers' alleged breach regarding Showalter’s contingency fee.
Showalter contended in a sur-reply that Quintanilla's actions were a proximate cause of his injury, citing a court order that required Quintanilla to distribute funds through a receivership. This order mandated that Quintanilla turn over all received assets to the receiver within three days. Quintanilla responded, asserting that the receiver's authority was limited to his assets and that the judgment settlement was funded by Abraham, not from Quintanilla's assets. He claimed the receivership was moot as the 2012 judgment had been satisfied. During a November 19, 2021 hearing, Quintanilla's counsel indicated that Abraham had funded the settlement to eliminate a garnishment writ and that the settlement was reached after Showalter was discharged as counsel for the Ramirez brothers. However, Showalter's counsel disputed this, stating that he was not officially discharged until after the settlement occurred and was unaware of the settlement details until late 2020. Showalter's counsel acknowledged that the receivership would terminate upon court approval of the settlement.
The trial court denied Quintanilla's motion to dismiss on December 7, 2021, leading to an interlocutory appeal. Following the hearing but before the ruling, Showalter amended his petition to add Medina as a defendant. On February 2, 2022, Quintanilla's appellate counsel submitted an affidavit and emails from the presiding judge, indicating that he found a cited case by Showalter instructive and would deny the TCPA motion to dismiss. The emails suggested the possibility of a secret settlement meant to defraud attorneys and indicated that discovery might uncover relevant details. Quintanilla requested to supplement the appellate record with the affidavit and emails, while Showalter argued against their inclusion, asserting they were not part of the proper record. The court assumed, without deciding, that the emails were not part of the appellate record and did not consider them in its analysis.
Quintanilla's brief raises several key legal issues regarding the trial court's denial of his TCPA Motion to Dismiss. The primary concerns include:
1. Reversal of the trial court’s decision based on its reliance on the ruling in *Honeycutt* without adhering to the precedents set in *Berry* and *Raub*.
2. The trial court's erroneous conclusion that a settling defendant could be liable to a former attorney if a "secret settlement" was arranged to defraud that attorney, despite a lack of evidence from Showalter to support the existence of such a settlement.
3. The trial court's error in denying the TCPA motion based on the speculative possibility that discovery might uncover evidence of a "secret settlement" or other elements pertinent to Showalter's claims.
4. Failure to consider whether Quintanilla's defense of justification warranted dismissal of Showalter's claims.
5. The trial court's error in denying the TCPA motion and not awarding Quintanilla attorneys’ fees, given the absence of clear and specific evidence establishing a prima facie case for each element of Showalter’s claims.
The brief clarifies that a party seeking dismissal under the TCPA must first demonstrate that the legal action is connected to the exercise of free speech, the right to petition, or the right of association. If the party meets this burden, the plaintiff must then provide clear and specific evidence for each essential claim element. Even if the plaintiff does so, dismissal is required if the moving party shows an affirmative defense or legal grounds for judgment. The determination of whether the TCPA applies to the claims involves assessing the nature of the claims in relation to Quintanilla's exercise of the right to petition, defined as communications in a judicial proceeding, which must be actual and pending. The types of communication covered are extensive, encompassing various forms and mediums. At the time of the hearing, Showalter's allegations claimed that Quintanilla interfered with a fee agreement by proposing a covert settlement without notifying Showalter.
Showalter alleged that the Defendants secretly exchanged money or property to fulfill an underlying judgment and intentionally concealed their actions from him. He acknowledged that statements made by lawyers during lawsuits typically qualify as an “exercise of the right to petition” under the Texas Citizens Participation Act (TCPA), but argued that communications related to the settlement negotiations were not connected to any judicial proceeding; instead, they were part of a covert agreement. Showalter maintained that wrongdoing cannot be shielded from judicial scrutiny merely by later mentioning it to a court.
The court found that the broad language of the TCPA encompasses Showalter’s claims against Quintanilla, as the 2019 settlement agreement was signed by relevant parties and settled ongoing judicial claims, with the presiding judge's approval. The court clarified that the TCPA's definition of “communication” does not necessitate public disclosure, allowing even confidential agreements to qualify if filed with the court. Showalter contended that more than a tangential connection between the claim and the communication is required, referencing a case where misrepresentations to a plaintiff were deemed too remote from SEC review to fall under the TCPA. However, the court distinguished this case, asserting that the relationship between the settlement agreement and the judicial proceedings was substantial, qualifying the negotiations and agreement as "communications pertaining to" those proceedings.
As a result, the court determined that Showalter’s claims against Quintanilla were based on communications related to a judicial proceeding, confirming the applicability of the TCPA. The court then proceeded to evaluate whether Showalter presented clear and specific evidence to establish a prima facie case for each claim.
A "prima facie case" under the Texas Citizens Participation Act (TCPA) requires legally sufficient evidence to establish a claim as factually true unless countered. It signifies the minimum necessary evidence to support a rational conclusion about the truth of an allegation. In the TCPA context, "clear" means unambiguous, while "specific" refers to being explicit or related to a particular matter. Showalter alleged tortious interference and civil conspiracy against Quintanilla. For tortious interference, essential elements include: 1) a valid contract; 2) intentional interference by the defendant; 3) proximate causation of injury; and 4) actual damages incurred. Civil conspiracy requires: 1) a combination of two or more persons; 2) a shared objective; 3) a meeting of the minds on that objective; 4) at least one unlawful act in pursuit of the objective; and 5) resulting damages. Showalter's affidavit indicated Quintanilla was aware of his contingency fee arrangement with the Ramirezes, having been present during related testimony. Showalter referenced *Honeycutt v. Billingsley*, which established that an attorney may recover if a settlement occurs without their knowledge, despite their interest being acknowledged by the parties involved. The *Honeycutt* case involved an attorney's right to a percentage of settlement fees after a client unilaterally changed representation, supporting Showalter's claims about his own contingency arrangement.
The jury determined that Honeycutt breached the original fee agreement, awarding Billingsley $13,000 in damages. The First Court of Appeals affirmed the jury's findings, stating that the defenses of novation and accord and satisfaction did not absolve Honeycutt of liability. The case of Honeycutt is distinguished from the current matter because there was no indication of an agreement between Showalter and the Ramirez brothers prohibiting unilateral settlements. Furthermore, Honeycutt specifically addressed whether Billingsley could recover from Honeycutt, the former client under a contingency fee agreement, rather than from the defendant in the lawsuit. In Texas law, an attorney's rights under a contingency fee contract are entirely derivative of the client's rights. If an attorney is discharged without cause, they may seek compensation in quantum meruit or enforce the contract against the client, not the opposing party. Previous cases have established that an attorney lacks standing to sue the opposing party for fees owed by the former client, particularly if there is no evidence of collusion to defraud the attorney. In this case, Showalter failed to present clear evidence that Quintanilla sought to defraud him or that the Ramirez brothers assigned any part of their claim to him. The settlement agreement confirmed that the Ramirezes had not assigned their claims to any other party.
To establish the second element of a tortious interference claim, the defendant must demonstrate that they intended to cause the resulting consequences of their actions or believed those consequences were substantially certain to occur. In this case, there is no evidence indicating that Quintanilla intended for the Ramirezes to breach their contingency fee agreement with Showalter or that he believed such a breach was likely due to the settlement. The record shows that Quintanilla fulfilled his obligations under the settlement, paying more than the damages awarded in the prior judgment. Consequently, Showalter failed to provide clear and specific evidence for a prima facie case of tortious interference. Additionally, since Showalter's civil conspiracy claim relies on proving that Quintanilla engaged in an unlawful act by negotiating the settlement, Showalter also did not meet the burden of proof for that claim. The court did not need to consider whether Quintanilla established affirmative defenses. As a result, Quintanilla's issues on appeal were upheld, leading to the reversal of the trial court's judgment. The case is remanded with instructions to grant Quintanilla’s TCPA motion to dismiss, award court costs and attorney’s fees, consider sanctions, and conduct further proceedings in line with this opinion.
