Courts Have Ordered Trial Courts To Grant TCPA Motions To Dismiss Based On No-Contest Clause Claims
Friday, November 10, 2023

The Texas Legislature created a statute to protect parties’ rights to freedom of speech and to petition the courts: the Texas Citizen’s Participation Act (TCPA). See Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011. The TCPA’s purpose is “to encourage and safeguard the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of a person to file meritorious lawsuits for demonstrable injury.” Tex. Civ. Prac. & Rem. Code Ann. § 27.002; see In re Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (noting that the TCPA “protects citizens who petition . . . from retaliatory lawsuits that seek to intimidate or silence them”) The TCPA provides this protection by authorizing a motion to dismiss early in the covered proceedings, subject to expedited interlocutory review. McLane Champions, LLC v. Hous. Baseball Partners LLC, 671 S.W.3d 907, 914 (Tex. 2023) (citing Tex. Civ. Prac. & Rem. Code Ann. §§ 27.003, .008).

Parties who move for dismissal under the TCPA invoke a three-step, burden-shifting process: (1) the movants seeking dismissal must demonstrate that a legal action has been brought against them and that the action is based on or is in response to an exercise of a protected constitutional right; (2) if the movants succeed, the burden then shifts to the party bringing the legal action to avoid dismissal by establishing by clear and specific evidence a prima facie case for each essential element of the claim in question; and (3) if the nonmovant succeeds, the burden then shifts back to the movants to justify dismissal by establishing an affirmative defense or other ground on which they are entitled to judgment as a matter of law. Newstream Roanoke 6.125, LLC v. Shore, No. 02-22-00506-CV, 2023 WL 5615871, at *3 (Tex. App.—Fort Worth Aug. 31, 2023, no pet. h.) (mem. op.); Hanson v. Johnson, No. 02-23-00040-CV, 2023 WL 3643640, at *2 (Tex. App.—Fort Worth May 25, 2023, no pet.) (mem. op.).

In Malicoat v. Hughes, trust beneficiaries sued a trustee for breach of fiduciary duty and sought injunctive relief and other relief. No. 02-23-00122-CV, 2023 Tex. App. LEXIS 7483 (Tex. App.—Fort Worth September 28, 2023, no pet. history). The trustee then gave notice that she was going to enforce a no contest clause in the trust, which was required by that particular clause. The parties then attended mediation and resolved the first suit. The trustee then filed a second suit seeking a declaration that the no contest clause was triggered by the first suit. The beneficiaries then filed a motion to dismiss under the TCPA, which was denied. The court of appeals reversed, and ordered the trial court to grant the motion to dismiss.

The court of appeals first held that the beneficiaries passed the first step in the TCPA analysis: “because Hughes alleges in the Second Lawsuit that Cass and Malicoat violated the in terrorem clause by filing and maintaining the First Lawsuit, Cass and Malicoat have established that Hughes’s legal action is based on or is in response to their right to petition.” Id. (citing Marshall v. Marshall, No. 14-18-00094-CV, 2021 WL 208459, at *4, 7 (Tex. App.—Houston [14th Dist.] Jan. 21, 2021, pet. denied) (mem. op.) (holding that appellee’s allegation that appellants had violated an in terrorem clause by contesting a will in a different lawsuit implicated appellants’ exercise of their right to petition); see also Serafine v. Blunt, 466 S.W.3d 352, 360 (Tex. App.—Austin 2015, no pet.) (concluding that the filing of a lawsuit is an exercise of the right to petition under the TCPA)).

The court then turned to whether the trustee established by clear and specific evidence a prima facie case for each essential element of her declaratory judgment claim based on the no contest clause. The trustee argued that she established that the beneficiaries “violated the in terrorem clause in two ways: (1) ‘they unsuccessfully sought to challenge the appointment of [Hughes] as the Trustee of the Marital Trust by seeking her removal as Trustee,’ and (2) ‘they unsuccessfully sought to impair [Hughes’s] exercise of powers expressly granted to [her] by the trust.’” Id.  

Regarding the first argument, the court held that the beneficiaries were not seeking to challenge the trustee’s appointment, but were seeking to remove the trustee, which did not contradict any term of the trust: “the Trust does not contain any provisions regarding the removal of a trustee. Accordingly, the trust provisions of the Texas Property Code—which authorize the removal of a trustee—govern. Moreover, because the Trust is silent regarding the removal of a trustee, Cass and Malicoat did not violate the in terrorem clause by seeking Hughes’s removal as trustee.” Id.

Regarding the second argument, the court held that the trust’s no contest clause gave a safe harbor period, that after the trustee sends notice, that the beneficiary can dismiss the offending action. The court determined that the beneficiaries nonsuited their claim for injunctive relief within the safe harbor period, and therefore, did not violate the no contest clause. The court held that even if the safe harbor provision was not triggered, the beneficiaries request for injunctive relief did not trigger the no contest clause:

Although Hughes argues that those requests for injunctive relief impaired certain express powers given to her as trustee of the Marital Trust, we note that Cass and Malicoat alleged in the First Lawsuit that Hughes had breached her fiduciary duties owed as trustee of the Marital Trust and that, unless enjoined, they would “continue to be damaged by Hughes’s indiscriminate use of the Marital Trust principal.” We further note that Section 112.038(b) of the Texas Property Code provides that an in terrorem clause “generally will not be construed to prevent a beneficiary from seeking to compel a fiduciary to perform the fiduciary’s duties, seeking redress against a fiduciary for a breach of the fiduciary’s duties, or seeking a judicial construction of a will or trust.” Tex. Prop. Code Ann. § 112.038(b). More importantly, Section 114.008(a)(2) of the Texas Property Code expressly authorizes a trial court to “enjoin the trustee from committing a breach of trust” as a remedy to a breach of trust that has occurred or might occur. Id. § 114.008(a)(2). Thus, we conclude that Cass and Malicoat’s requests for injunctive relief did not violate the in terrorem clause because the trial court was authorized to enjoin Hughes from committing a breach of trust.

Id. The court also held that the beneficiaries had to be unsuccessful, and the trial court never denied the request for injunctive relief. The Court reversed the trial court and ordered that the TCPA motion be granted. See also Roach v. Roach, No. 05-22-00194-CV 2023 Tex. App. LEXIS 7256 (Tex. App.—Dallas September 18, 2023, no pet. history) (ordering court to grant TCPA motion to dismiss in no contest clause case).


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