Andrew White v. NHI-REIT of Axel, LLC

Dallas, TX - Contract attorney represented Andrew White with a Contract dispute.

NHI-REIT (NHI) owns three assisted living facilities in Indiana, North

Carolina, and Tennessee. In 2015, NHI leased the facilities to SH Regency Leasing,

LLC (Regency Leasing) for ten years (the Lease). Regency Leasing then subleased

the facilities to three of its subsidiaries (the Subtenants) (Regency Leasing and the

Subtenants are collectively referred to as Regency).

In connection with the Lease, NHI and the Subtenants entered into a security

agreement (Security Agreement). The Security Agreement was perfected and gave

NHI a security interest in all Regency assets, including the proceeds from checks

written by facilities’ residents (the Collateral).

Andrew White owns or controls East Lake Capital Management, LLC (East

Lake), a private equity firm based in Dallas, Texas that specializes in real estate and

senior living-related investments. White also owns or controls Regency and ELCM

Partners, LLC, East Lake’s parent entity and manages these and various other

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entities who perform work for the benefit of East Lake. He also directs East Lake

employees, including Chelsea Balestra, Benjamin Lord, David Gawlas, and Wesley

Murray.1



In 2018, Regency Leasing began to default under various Lease provisions.

Regency also stopped invoicing residents and depositing their checks, resulting in

the accumulation of checks valued at millions of dollars. Regency also closed its

bank accounts and the Regency entities have not held accounts in their own name

since that time.

East Lake and Regency Leasing initiated this lawsuit against NHI and its

parent company, asserting claims for (i) business disparagement, (ii) defamation,

(iii) a declaratory judgment that the Lease had not been breached, and (iv) a

temporary injunction.

NHI counterclaimed for breach of the Lease and Security Agreement. The

counterclaim was later supplemented and NHI asserted claims and third-party claims

against White, Balestra, East Lake, Regency, and others for fraudulent transfer,

tortious interference, conspiracy, and aiding and abetting. NHI also filed an

emergency motion seeking the appointment of a receiver over Regency Leasing.

According to NHI, after it moved for a receiver, White, Balestra, Lord,

Gawlas, and Murray visited one or more of the facilities to collect the uncashed

1

Lord, Gawlas, Murray, and Balestra have dismissed their appeal. Thus, only appellant White remains.

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resident checks that had accumulated. White also notified NHI that Regency

intended to abandon the facilities. Nonetheless, Balestra and others continued to

collect resident checks. The checks were made out to the various Regency entities

but were deposited in ELCM’s bank account.

White moved to dismiss under the TCPA and subsequently supplemented the

motion. NHI responded and objected to the supplement. After a hearing, the trial

court denied appellant’s motion and supplemental motion (together, the motion to

dismiss).

II. ANALYSIS

A. Standard of Review and Applicable Law

The TCPA protects citizens from retaliatory lawsuits that seek to silence or

intimidate them for exercising their rights in connection with matters of public

concern. In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015) (orig. proceeding); see

generally TEX. CIV. PRAC. & REM. CODE §§ 27.001–.011.2.2

The stated purpose

of the statute 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. &

2

The Texas Legislature amended the TCPA effective September 1, 2019. Those amendments apply to

“an action filed on or after” that date. Act of May 17, 2019, 86th Leg., R.S., ch. 378, § 11, 2019 Tex. Sess.

Law Serv. 684, 687. Because this lawsuit was filed before September 1, 2019, the law in effect before

September 1 applies. See Act of May 21, 2011, 82d Leg., R.S., ch. 341, § 2, 2011 Tex. Gen. Laws 961–

64, amended by Act of May 24, 2013, 83d Leg., R.S., ch. 1042, 2013 Tex. Gen. Laws 2499–2500. All

citations to the TCPA are to the version before the 2019 amendments took effect.

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REM. CODE § 27.002; see also ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d

895, 898 (Tex. 2017) (per curiam).

To accomplish this purpose, the statute provides a procedure to expedite

dismissing claims brought to intimidate or to silence a defendant’s exercise of a

protected right. Coleman, 512 S.W.3d at 898; see also TEX. CIV. PRAC. & REM.

CODE §§ 27.003(a), 27.005(b); Youngkin v. Hines, 546 S.W.3d 675, 679 (Tex.

2018). The movant bears the initial burden of showing by a preponderance of the

evidence that the legal action is based on or is in response to the movant’s exercise

of the right of free speech, the right of association, or the right to petition. TEX.

CIV. PRAC. & REM. CODE § 27.005(b); see also S&S Emergency Training Sols.,

Inc. v. Elliott, 564 S.W.3d 843, 847 (Tex. 2018). If the movant makes this showing,

the burden shifts to the nonmovant to establish by clear and specific evidence a prima

facie case for each essential element of its claims. TEX. CIV. PRAC. & REM.

CODE § 27.005(c); see also Elliott, 564 S.W.3d at 847.

We review the trial court’s ruling on a TCPA motion to dismiss de novo. See

Adams v. Starside Custom Builders, LLC, 547 S.W.3d 890, 894 (Tex. 2018); Dyer

v. Medoc Health Servs., LLC, 573 S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet.

denied). “In conducting this review, we consider, in the light most favorable to the

nonmovant, the pleadings and any supporting and opposing affidavits stating the

facts on which the claim or defense is based.” Dyer, 573 S.W.3d at 424; see also

TEX. CIV. PRAC. & REM. CODE § 27.006(a). However, the plaintiff’s petition is

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generally “the best and all-sufficient evidence of the nature of the action.” Hersh v.

Tatum, 526 S.W.3d 462, 467 (Tex. 2017).

B. Is NHI’s lawsuit predicated on White and Balestra’ right to freedom of

speech?

No. NHI’s lawsuit is not predicated on White’s freedom of speech because

the communications at issue concerned a private business dispute.

For the TCPA to apply, each claim “must be factually predicated on the

alleged conduct that falls within the scope of [the] TCPA’s definition of free speech,

petition, or association.” See Stroud v. Clearview Energy, No. 05-18-00729-CV,

2019 WL 1930176, at *6 (Tex. App.—Dallas May 1, 2019, no pet.). The exercise

of the right of free speech is defined as “a communication made in connection with

a matter of public concern.” TEX. CIV. PRAC. & REM. CODE § 27.001(3).

Here, NHI’s claims are based on the security agreement between NHI and

Regency. The security agreement was to protect NHI in case of default under the

Lease. According to NHI, Regency and the Subtenants were permitted to use the

collateral (i.e. the checks) in the ordinary course of business, but that right ceased

upon default under the Lease.

NHI also alleged that it demanded that Regency pay all receivables to the

landlord and segregate all checks and deliver them to the landlord in the form

received with proper endorsements. But according to NHI, Regency didn’t follow

the security agreement and misused, commingled, and fraudulently transferred the

checks from residents. Specifically, NHI pleads that:

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 In early 2018, White or others instructed employees at the

[Regency] facilities not to deposit checks received from

residents. Due to these instructions, more than $2 million in

resident checks accumulated at the [Regency] Facilities and were

held by the executive directors and/or other employees at the

[Regency] Facilities;

 Because of the uncashed checks . . . the bank accounts of the

elderly residents who provided these checks remained

unchanged" and upon information and belief, several residents

lost their insurance benefits or government benefits after their

outstanding balances . . . exceeded the applicable income/asset

thresholds;

 After receiving the Security Notice, Regency and its Subtenants

did not instruct the residents to pay Landlord and instead . . . sent

invoices to residents demanding additional payments and began

collecting additional checks from the residents for November and

December 2018 payments;

 [East Lake and others] then began cashing these checks and the

checks that had been previously provided, but uncashed, since

February 2018;

 Resident checks were deposited or transferred to bank accounts

held or controlled by East Lake and/or White rather than those

for the use and benefit of Regency and the Subtenants;

 [East Lake, White and Balestra, and others] conspired and aided

and abetted in the purported misuse of the checks.

These allegations form the basis for NHI’s counterclaims for breach of the security

agreement, fraudulent transfer, tortious interference with existing contracts, and

aiding and abetting.

White’s motion to dismiss argued that the TCPA applies to the foregoing

claims, and identified the following as communications implicating free speech

under the TCPA: (i) depositing residents’ checks or transferring the checks to bank

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accounts after deposit; (ii) instructing employees not to deposit residents’ checks;

(iii) sending invoices to residents demanding additional payments; and (iv)

conspiring with each other in performing the above acts and in the course of

operating their facilities.

The parties dispute whether the foregoing are TCPA defined

“communications.”3

But even assuming they are, they were not made in connection

with a matter of public concern. See TEX. CIV. PRAC. & REM. CODE § 27.001(3);

Creative Oil, 591 S.W.3d at 135.

“‘Matters of public concern’ include issues related to: (i) health or safety; (ii)

environmental, economic, or community well-being; (iii) the government; (iv) a

public official or public figure; or (v) a good, product, or service in the marketplace.”

TEX. CIV. PRAC. & REM. CODE § 27.001(7).

Thus, the phrase ‘matter of public concern’ commonly refers to matters ‘of

political, social, or other concern to the community,’ as opposed to purely private

matters.” Creative Oil, 591 S.W.3d at 135. Consequently, to be entitled to

protection, the communication itself must address a subject of legitimate news

interest; that is a subject of general interest and of value and concern to the public.

Erdner v. Highland Park Emergency Ctr., 580 S.W.3d 269, 276 (Tex. App.—Dallas

3

A TCPA “communication” includes “the making or submitting of a statement or document in any

form or medium, including oral, visual, written, audiovisual, or electronic.” TEX.CIV. PRAC. & REM. CODE

§ 27.001(1).

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2019, pet. denied) (mem. op.) (communication must relate to matter of public

concern).

Communications about the economic well-being of private parties, however,

are not matters of public concern. To be covered by the TCPA, communications

must involve environmental, health, or safety concerns that have public relevance

beyond the pecuniary interests of the private parties involved. Creative Oil, 591

S.W.3d at 136; id. at 137 (“A private contract dispute affecting only the fortunes of

the private parties involved is simply not a ‘matter of public concern’ under any

tenable understanding of those words.”).

Accordingly, private business dispute communications do not involve matters

of public concern where they only address private economic interests. See Pingua

Lei v. Nat. Polymer Int’l Corp., No. 05-18-01041-CV, 2019 WL 2559756, at *6

(Tex. App.—Dallas June 21, 2019, no pet.) (mem. op.); see also, Erdner, 2019 WL

at *5 (communications about forming a freestanding emergency room business and

possible scope of its future activities were not exercise of free speech simply because

communications could result in healthcare services being offered to the public at

some point in the future); Staff Care, Inc. v. Eskridge Enters., LLC, No. 05-18-

00732-CV, 2019 WL 2121116, at *5 (Tex. App.—Dallas May 15, 2019, no pet.)

(mem. op.) (statements about a business dispute involving physicians’ agreement

were not in connection to an issue related to health and safety or community wellbeing such that they were “matter of public concern”); Dyer, 573 S.W.3d at 428

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(communications discussing misappropriating proprietary software and other

confidential information were not tangentially related to a matter of public concern

simply because the information belonged to a healthcare company).

White urges that the communications implicate matters of public concern

because they were “made in the context of the operations and services” White

provided at the facilities, and thus were made “in connection with a good, product,

or service in the marketplace.” TEX. CIV. PRAC. & REM. CODE § 27.001(7). But,

“[t]he words ‘good, product, or service in the marketplace’. . . do not paradoxically

enlarge the concept of matters of public concern’ to include matters of purely private

concern.” See Thomas v. BioTE Medical, LLC, No. 05-19-00163-CV, 2020 WL

948087, at *2 (Tex. App.—Dallas Feb. 26, 2020, no pet.). “[T]he ‘in the

marketplace’ modifier suggests that the communication must have some relevance

to a public audience of potential buyers or sellers.” Id. (citing Creative Oil, 591

S.W.3d at 134).

White further argues that the communications also concern “health or safety”

and “economic and community well-being” because they relate to care and

assistance provided to facilities’ residents and to residents that NHI claims lost

insurance or governmental benefits because White failed to deposit the checks.

These arguments are similarly unpersuasive.

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Depositing checks, sending invoices, and internal billing directives do not

implicate a matter of public concern. The public has no discernable interest in a

private business’s receivables.

Likewise, the parties’ rights and performance under a security agreement are

of no political, social, or other consequence to the community. See Brady v.

Klentzman, 515 S.W.3d 878, 884 (Tex. 2017) (matters of public concern involve

subjects of general interest and value to the public).

And there is nothing to demonstrate that the communications about the

facilities’ internal business operations are related to services the facilities provided

to the residents. See Staff Care, 2019 WL 212116, at *5–6; see also Creative Oil,

591 S.W.3d at 136.

Moreover, White’s involvement in the healthcare business does not render

every communication in the operation of that business a matter of public concern.

See Staff Care, 2019 WL 2121116, at *5 (statements about a business dispute

involving physicians not a matter of public concern).

As we said in Dyer:

We cannot conclude communication discussing allegedly tortious

conduct are tangentially related to a matter of public concern simply

because proprietary and confidential information that was to be

appropriated belong to a company in the healthcare industry or because

the alleged tortfeasors hoped to profit from their conduct.

Dyer, 573 S.W.3d at 428.

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Viewing the pleadings and evidence in the light most favorable to the nonmovant, as we must, we cannot conclude the communications were made in

connection with a “matter of public concern.”

Accordingly, we conclude White did not establish by a preponderance of the

evidence that NHI’s claims are based on, related to, or in response to appellant’s

exercise of a right of free speech as defined by the TCPA.

C. Is NHI’s lawsuit predicated on White’s TCPA defined right to

association?

NHI’s lawsuit is not predicated on White’s right to association because there

is no public or citizen participation.

“‘Exercise of the right of association’ means a communication between

individuals who join together to collectively express, promote, pursue, or defend

common interests.” TEX. CIV. PRAC. & REM. CODE § 27.001(2). To be an

exercise of the right of association under the TCPA, the nature of the communication

between individuals who join together must involve public or citizen participation.

Erdner, 580 S.W.3d at 275.

Here, White has not shown that the communications involved any public or

citizen participation. In this instance, there is nothing to suggest public or citizen

participation in White’s internal business affairs or in this purely private dispute.

Under these circumstances, construing the TCPA to find a right of association

simply because there are communications between parties with a shared interest in

a private business transaction does not further the TCPA’s purpose to curb strategic

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lawsuits against public participation. See BusPatrol Am., LLC v. Am. Traffic Sols.,

Inc., No. 05-18-00920-CV, 2020 WL 1430357, at *8 (Tex. App.—Dallas Mar. 24,

2020, pet. filed) (mem. op.).

Accordingly, we conclude that White did not establish by a preponderance of

the evidence that NHI’s claims are based on, related to, or in response to White’s

exercise of a right of association as defined by the TCPA.

Having resolved White’s first issue against him obviates the need to consider

his remaining issues. See TEX. R. APP. P. 47.1. Accordingly, we affirm the trial

court’s order denying the motion to dismiss.