The Third District of the Texas Court of Appeals held that an action by an employer against a former employee for breach of contract and trade secret misappropriation fell within the commercial speech exemption of the Texas Citizens Participation Act (TCPA). Rose v. Sci. Mach. & Welding, Inc., Case No. 03-18-00721-CV (Tex. App. – (Austin), June 25, 2019) (Baker, J).

Scientific Machine & Welding, Inc., produces specialty parts and equipment. Kevin Rose had been employed as Scientific’s operations manager, pursuant to which he worked with customers to develop manufacturing drawings and blueprints for Scientific to create final products. Rose left Scientific to work for its customer FlashParking. Scientific subsequently sued Rose, alleging that Rose “improperly removed and divulged trade secrets and proprietary assets of Scientific,” including manufacturing drawings, to FlashParking. Rose moved to dismiss the suit under the TCPA, which safeguards “the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government.” After the trial court denied Rose’s motion, Rose appealed.

The Texas Court of Appeals affirmed, holding that although the TCPA applied to Scientific’s suit because the suit related at least to Rose’s exercise of the right of association, the statute’s commercial speech exemption also applied, such that dismissal was not required. The court applied the Texas Supreme Court’s four-part test for the application of the commercial speech exemption as laid out in Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018). The court concluded that the exemption applied because:

• The defendant was primarily engaged in the business of selling goods (manufacturing blueprints) and services (drawing, sourcing, etc.)
• The defendant engaged in the alleged conduct in his capacity as a seller of such goods and services.
• The conduct arose out of a commercial transaction.
• The intended audience of the alleged conduct (FlashParking) was an actual or potential customer of the defendant for the kind of goods or services the defendant provides (as shown by the new employment relationship).

Because Scientific’s lawsuit was exempt from the TCPA’s provisions, the court concluded that the trial court properly denied Rose’s motion to dismiss.

Practice Note: While the Castleman test would seem to apply to most garden-variety trade secret misappropriation claims, it also appears to leave open the possibility that a claim arising, for example, from the theft of trade secrets unrelated to an employee’s primary job responsibilities would not be considered “commercial speech.” Such a claim might therefore be subject to dismissal.