As we discussed in a prior blog post, class action lawsuits brought under Section 11 of the Securities Act of 1933 are now being brought in Texas state court following the Supreme Court’s decision in Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018). In responding to such lawsuits, defendants may consider filing an Anti-SLAPP Motion to Dismiss under the Texas Citizens Participation Act (the “TCPA”). SLAPP stands for a “strategic lawsuit against public participation.” Under the TCPA, a defendant may move to dismiss a SLAPP suit brought in response to the defendant’s right to petition, association, or free speech. To avoid dismissal, the plaintiff must establish by clear and specific evidence a prima facie case for each element of the claim in question. TEX. CIV. PRAC. & REM. CODE § 27.005(b). The TCPA also has certain protections built into the statute, such as a mandatory discovery stay, requirements for expedited consideration of the motion, and a mandatory award of attorneys’ fees and costs if the court dismisses any claims. Id. §§ 27.003(c); 27.004(a); 27.009(a). To take advantage of the TCPA, a moving defendant first must establish that the lawsuit is based on or is in response to a party’s exercise of his or her right to petition, right of association, or right to free speech. Id. § 27.003(a).
As demonstrated in Macomb County Employee’s Retirement Sys. v. Venator Materials PLC, No. DC-19-02030, a defendant in a Section 11 class action may argue that the TCPA applies in a couple of ways. First, a defendant may argue that communications made in a registration statement implicate the defendant’s right to petition because they are communications that pertain to an executive proceeding before a department of the federal government (the SEC) and because they are communications in connection with an issue under consideration or review by an executive or other governmental body. TEX. CIV. PRAC. & REM. CODE §§ 27.001(4)(A)(iii); 27.001(4)(B). Additionally, to the extent the alleged misstatements at issue were made in connection with matters of political, social, or other interest to the community or are subject of concern to the public, then the communications would implicate the defendant’s right to free speech, which is another hook for the TCPA’s application. Id. §§ 27.001(7)(B); 27.001(7)(C). Currently, right to free speech implicated any issues related to health or safety, or environmental, economic, or community well-being. But a recent amendment to the TCPA, which goes into effect on September 1, 2019, removes these topics from the operative definition and will force a defendant to argue that the communications were matters of social or other interest to the community or a subject of public concern generally. See 86th Leg., R.S., H.B. No. 2730, § 1. The court has not yet ruled on the defendants’ TCPA motion to dismiss in the Venator Materials case, but the TCPA’s application to class action lawsuits brought under Section 11 of the Securities Act is an area ripe for litigation in the near future and a possible avenue for a defendant to gain quick dismissal and recover its fees and costs if the motion is successful.