BEAUMONT – A financial connection between a university foundation and its donors is not proven by school spirit alone, says a Texas appeals court, which issued a partial dismissal to litigation brought by those donors after renovations were made to the football stadium at Texas A&M University and necessary seating changes occurred as a result.
On June 13, Court of Appeals for the Ninth District of Texas at Beaumont justices Hollis Horton, Leanne Johnson and Jay Wright decided to affirm in part and reverse/remand in part an appeal from Texas A&M University’s 12th Man Foundation, in a lawsuit brought by Robert C. Hines, Executor of the Estate of Nathan Hines, Et.Al.
Wright wrote the Court’s opinion in this case.
“The Foundation (formerly the Aggie Club) was created as a charitable organization to promote A&M sports in several ways, which included financing athletic scholarships. In the 1970s, the Foundation decided to raise money by soliciting donations by promising prospective donors they would receive desirable seats at A&M football games, as well as other benefits. The donation that the Foundation received from these efforts varied. The quality and quantity of seats the Foundation promised also varied depending upon variable that included the amount the Foundation received as a donation, the year the donation occurred, the duration of the endowment (many of which the Foundation allegedly promised as a benefit that lasted during the donor’s life),” Wright said.
“When A&M joined the Southeast Conference, the decision was made by the University that A&M’s football stadium, Kyle Field, needed renovation. To raise funds toward these renovations, the Foundation adopted a similar procedure to partially fund the University’s project to rebuild the stadium. In developing the project to fund for the rebuilt stadium, the Foundation decided it would need to relocate some of those donors who had previously donated funds, been promised seats, and had what the plaintiffs claimed they were promised in return for their donations, the ‘best available seats’ seats in Kyle Field for the duration of their respective endowments. Even though the donors who were displaced were offered the opportunity to have other seats and parking in the rebuilt Kyle Stadium, the plaintiffs’ claims these seats and parking are not what they were promised and are in locations that are less-desirable than the areas the Foundation promised to provide in exchange for the donations that the plaintiffs gave.”
Figuring that many of its then-existing donors might be dissatisfied with its offer in what was then the not-yet-rebuilt Kyle Stadium, the Foundation claimed that it offered to return to the donors their original donation – an offer that some of the Foundation’s donors accepted, while others wanted what they claimed the Foundation originally promised.
Subsequently, the donors that were dissatisfied with the offer sued the Foundation, launching claims for breach of contract, promissory estoppel and other causes of action.
“After numerous procedural maneuvers that included motions, depositions, venue changes, an effort at certifying a class, which this Court reversed, and the plaintiffs filing four amended petitions, the Foundation filed the motion resulting in this interlocutory appeal, and its motion to dismiss the case under the Texas Citizens Participation Act,” Wright said.
“In its motion, the Foundation argued that plaintiffs’ suit ‘is based on or is in response to’ the Foundation’s exercise of its constitutional right of association, and that the evidence supporting its motion established that it has valid defenses to all of the plaintiffs’ claims. The Foundation also alleged that the claims in plaintiffs’ fourth amended petition had no basis in law or fact because the Foundation owed no fiduciary duty or burden of good faith and fair dealing to plaintiffs. The trial court denied the motion, and this appeal ensued.”
Using a three-part lens of timeliness, right of association and matters of public concern, Wright and his colleagues found, in its view, that the trial court erred by denying the Foundation’s TCPA motion to dismiss as to the claims of breach of fiduciary duty and breach of good faith and fair dealing.
First, the appeals court looked at the factor of timeliness.
“The Foundation’s motion to dismiss under the TCPA was not timely as to some of the Plaintiffs’ claims. The TCPA dictates that a motion to dismiss must be filed ‘not later than the 60th day after the date of service of the legal action.’ Plaintiffs filed their original petition on Dec. 28, 2017. That petition alleged causes of action for breach of contract, promissory estoppel, breach of fiduciary duty and lack of good faith, as did plaintiffs’ first amended petition. Although the record does not reflect when the Foundation was served with plaintiffs’ original petition, it does show that plaintiffs’ first amended petition was served on the Foundation on Nov. 12, 2018. The Foundation did not file its TCPA motion to dismiss until Feb. 28, 2023, more than 60 days after Nov. 12, 2018. The 60-day requirement language of the TCPA references service of the ‘legal action,’ rather than service of the suit. We therefore must decide whether the claims the plaintiffs’ alleged in their fourth amended petition triggered a new 60-day period that allowed the Foundation to seek their dismissal by challenging them in a TCPA motion to dismiss. We hold that plaintiffs’ fourth amended petition, filed and served Dec. 30, 2022, rendered the Foundation’s Feb. 28, 2023, TCPA dismissal motion timely as to the causes of action for a ‘breach of fiduciary duty’ and ‘lack of good faith and ordinary care’ only, Wright said.
“On the other hand, the Foundation’s TCPA motion to dismiss is untimely as to plaintiffs’ claims for breach of contract and promissory estoppel, since those claims were asserted in plaintiffs’ original petition and carried forward through each amended petition more than 60 days before the Foundation filed its motion to dismiss. Still, even when timely, a party that files a TCPA motion to dismiss must also show that the claims subject to its motion – which in this case we have decided are the plaintiffs’ new claims for breach of fiduciary duty and breach of good faith and fair dealing asserted for the first time by the plaintiffs in their fourth amended petition – arise from the Foundation’s right of association, whether they implicate ‘a matter of public concern,’ and whether the plaintiffs have met their burden to ‘establish by clear and specific evidence a prima facie case for each essential element of the claim in question.’ If the burden shifted to the plaintiffs and the plaintiffs met their burden, we must determine whether the Foundation established a defense to the claims that are the subject of the Foundation’s TCPA motion to dismiss.”
Secondly, the appeals court looked at the right of association.
“The TCPA defines ‘exercise of the right of association’ as “joining together to collectively express, promote, pursue or defend common interests relating to a governmental proceeding or a matter of public concern.’ The Foundation asserts that the organization consists of individuals who have ‘joined together to collectively…promote…[their] common interest’ in A&M sports, and plaintiffs do not dispute this proposition. Therefore, we conclude the plaintiffs’ suit against the Foundation is based on or in response to the Foundation’s exercise of the right of association,” Wright said.
Finally, the court turned its attention to the factor of matters of public concern. To be covered by the TCPA, a “matter of public concern” would include “a matter of political, social or other interest to the community” or as “a subject of concern to the public.”
“Here, the parties dispute whether the representations allegedly made by employees of the Foundation about the benefits of donating to the Foundation became enforceable as if they became contractual obligations of the Foundation since the donors supposedly made their respective donations to the Foundation as gifts,” Wright said.
“Further, the money the Foundation received from the donors was used largely to defray expenses that are generally borne by other states at the taxpayer’s expense for building football fields despite the fact that at the end of the day, Kyle Field even though built with donations is still owned by A&M. Under the circumstances, we conclude that the Foundation’s fundraising to defray the expenses that Texas A&M incurs, which allows that University to benefit from a football team that plays football in a first class stadium is ‘a matter of public concern.”
Wright continued that the documents submitted to the court fail to show the Foundation had a fiduciary duty to the plaintiffs or that a special relationship existed between the Foundation and the plaintiffs that would have given rise to a fiduciary duty of care.
“First, the Hines’ assert that the Foundation is liable to them because a duty of good faith and fair dealing was owed by the officers and directors of the Foundation to the membership (which included the Hines’s). This is a misunderstanding of the duties in a non-profit organization situation because the duty of good faith and fair dealing of an officer or director is owed to the non-profit organization – not the individual members of the non-profit organization,” Wright stated.
“Second, the Hines’s argue that a special relationship existed based upon ‘Aggie loyalty’ and ‘Aggie core values’ giving rise to a fiduciary obligation to the members. There are two kinds of fiduciary relationships: formal and informal. It was undisputed that no traditional fiduciary relationship existed between the parties, meaning there was no evidence that the Foundation and the plaintiffs had an attorney-client, insurer-insured or trustee-beneficiary relationship.”
As a result, Wright and his colleagues felt that a prima facie case was not proven as to the count of breach of fiduciary duty, or that a special relationship had been shown between the Foundation and the Hines plaintiffs.
“The pleadings and evidence presented by the Hines plaintiffs potentially show a dispute pertaining to an alleged donation and contractual relationship. But merely because the parties may have expectations in relation to a gift or donation, or whether they had a contractual relationship does not create a duty of good faith and fair dealing, nor does it establish a formal or informal fiduciary relationship. Oral representations in connection with contract claims do not give rise to a ‘special relationship” that creates a fiduciary duty,” Wright said.
“The Hines parties additionally pleaded that the Foundation ‘assured plaintiffs’ that, in exchange for their ‘generous, early and loyal support’ they would ‘be rewarded’ by, among other things, having the ‘best available’ parking at the stadium. They allege that the Foundation met their promise of ‘loyalty and honor with disloyalty and dishonor.’ However, these assurances do not create a fiduciary obligation. The pleadings and evidence fail to set forth a prima facie claim for breach of a fiduciary obligation or duty of good faith and fair dealing. The Hines plaintiffs have failed to set forth ‘clear and specific evidence’ to support their claims for breach of fiduciary duty and good faith and fair dealing.”
Wright and his fellow justices then issued their ruling’s conclusion.
“We conclude that the Foundation met its initial burden to show that plaintiffs’ newly asserted claims against it fall within the TCPA. Therefore, the burden shifted to plaintiffs to establish by clear and specific evidence a prima facie case for each element of their claims for breach of fiduciary duty and good faith and fair dealing. Plaintiffs failed to establish a prima facie case for either of these claims,” Wright stated.
“We hold that the trial court erred by denying the Foundation’s TCPA motion to dismiss as to these claims, only. We reverse the trial court’s denial of the Foundation’s TCPA motion to dismiss as to these claims and remand the case to the trial court to render judgment dismissing these claims. On remand, the trial court may also determine what amount should be awarded to the Foundation for attorney’s fees, costs, and other expenses as allowed under the TCPA.”
Court of Appeals, Ninth District of Texas at Beaumont case 09-23-00175-CV
1A District Court Newton County, Texas case CV-1814312
From the Southeast Texas Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com