Jim Crane will get the chance to take to trial his lawsuit accusing the former owner of the Houston Astros of duping him into paying too much when he bought the team in 2011, the Texas Supreme Court determined Friday in a 7-2 ruling.
Crane and Houston Baseball Partners, the entity created to buy the Astros, sued former owner Drayton McLane, his company McLane Champions and media giant Comcast in 2013 claiming the defendants’ lies and deceptions caused them to pay far too much when they bought the Major League Baseball team and a stake in Houston Regional Sports Network in 2011 for $615 million. Crane is seeking in damages the difference between what he paid for the network stake, $332 million, and its actual value, which he alleges is zero and argues HBP was misled about what affiliate rates the Houston Regional Sports Network would be able to charge distributors of its programming.
On appeal, the justices had to determine if the Texas Citizens Participation Act, which is a state law intended to bring an early end to baseless lawsuits seeking to chill free speech, could apply to end this lawsuit, as McLane argued. Under the TCPA, free speech is defined as “communication made in connection with a matter of public concern.”
As McLane saw it, the purchase and sale of the Houston Astros and the regional sports network was clearly a matter of public concern to the city of Houston and Astros fans everywhere. McLane pointed to statements Crane had made at a press conference when he filed this lawsuit in 2013 that the outcome would affect millions of fans as proof.
Not so fast, held the majority of the Texas Supreme Court, characterizing the dispute as one based on negotiations subject to a nondisclosure agreement between private parties in a private business transaction “that later generated public interest.”
The majority held that while the TCPA can sometimes apply to private communications made in connection with a matter of public concern — like those here that preceded the sale of the team —that isn’t always the case.
The communication that spawned the lawsuit “must have some relevance to a public audience … at the time it was made, regardless of the happenstance of after-the-fact ramifications.” Otherwise, the TCPA would apply to communications made in any private business deal that impacts “economic or community well-being.”
“In sum, the alleged misrepresentations were made in connection with negotiations to close the purchase and sale of the Astros and its interest in the Network at a favorable price,” the court held, “And the result is a garden-variety fraud and breach-of-contract dispute between a private buyer and a private seller regarding statements made during a private negotiation that have nothing to do with ‘the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law.’
“That the subject of the purchase agreement — a professional sports team — is generally of public interest does not render the specific communications at issue relevant to a public audience when they were made. As a result, we hold that the communications were not ‘made in connection with a matter of public concern’ under the TCPA.”
The court’s ruling affirms that a Harris County trial judge in January 2020 and the Fourteenth Court of Appeals in June 2021 made the right call in declining to dismiss the case.
The court also addressed McLane’s argument that Houston Baseball Partners doesn’t have standing to sue because it assigned that right to an affiliate when it purchased the Astros. The majority wrote that while such an assignment may prevent Houston Baseball Partners from prevailing, it does not mean the plaintiff here has a lack of standing to bring suit.
“Here, the legal principle Champions raises that may prevent Partners from recovering is its capacity to sue on the purchase agreement — that is, its ‘legal authority to act’ despite the assignment,” Justice Debra Lehrmann wrote for the majority. “And the assignment may (or may not) affect Partners’ ability to recover damages from Champions. But it does not affect Partners’ constitutional standing and thus does not call into question the court’s subject matter jurisdiction. At this stage of the litigation, we need not inquire further into the assignment’s impact on Partners’ claims.”
Chief Justice Nathan Hecht dissented from the majority, writing he would have held that the TCPA clearly applies to this case because the claims are based on McLane’s communications about the network’s value which are matters of public concern.
“According to Partners itself, its claims are not merely that a private business deal went bad, as the Court would have it,” he wrote. “Its claims are that the Astros, a public figure, together with community wellbeing in the team’s hometown of Houston, were harmed in the process — clearly matters of public concern.”
He pointed out in his 16-page dissent what he called “problems with the court’s myopia,” including that the case law it cited in support of the position that the TCPA doesn’t apply actually supports the opposite conclusion.
“It is frankly difficult to fathom how the court can conclude from the cases it cites that inconsequential statements in a single healthcare or petroleum facility are of public concern, but misrepresentations made in the prominent sale of a national baseball club for $615 million that the buyer itself claims will affect thousands of fans and the City of Houston are of no more public concern than one lessor’s opinion about the one well on his lease,” he wrote.
The majority construed the TCPA too narrowly, he wrote.
According to court documents, the Houston Regional Sports Network was formed in 2003 by the Houston Astros and the Houston Rockets to broadcast games in the greater Houston area. Comcast bought a $157.5 million interest in the network in 2010 and signed an agreement to distribute the programming to its other affiliates for a fee.
The idea was, according to court documents, that HRSN would sign similar agreements with other distributors for the same rates.
Crane and his Houston Baseball Partners purchased the Astros and its stake in HRSN in November 2011. Not long after, the network became insolvent.
Comcast filed an involuntary bankruptcy petition against HRSN in September 2013, and HBP sued the team’s former owner, McLane, as well as Comcast and others involved in the sale, alleging fraud, civil conspiracy and breach of contract.
HBP alleged that Comcast and McLane had lied in two specific ways: when Comcast vouched that the affiliate rates HRSN intended to charge were “reasonable” and “achievable,” and when it was told that it was Comcast — not the Astros — that had come up with the affiliate rate figure.
The lawsuit languished for years after Comcast removed it to federal court where the bankruptcy was pending and it where was subsequently abated for five years. After it was remanded to Harris County District Court in 2019, McLane and Comcast asked for dismissal under the TCPA.
The Fourteenth Court of Appeals upheld the trial court’s refusal to dismiss after finding in part that even though HBP transferred all its rights under the purchase and sales agreement to an affiliate, HBP Team Holdings, it could still bring this suit.
At oral arguments before the court in October, Justice Jimmy Blacklock seemed dubious of the claim that Crane had been harmed by the deal, noting the value of his investment has climbed nearly 600 percent since he purchased the Astros more than a decade ago.
He joined in Chief Justice Hecht’s dissent, but also authored his own four-page dissent, drilling down on that issue and writing he would have tossed Crane’s suit.
Justice Blacklock wrote that Crane’s allegation he was harmed by the deal may have been “plausible” in 2013 when he filed suit, but that claim “rapidly became less and less plausible” in the years since, considering the Astros’ dominance in the league and the skyrocketing value of the franchise.
Today, the team Crane paid $615 million for is valued at $2.25 billion, and the claim that Crane suffered any damages in the deal “is difficult to take seriously,” Justice Blacklock wrote.
“The plaintiffs’ briefing in this court asserts that if not for the alleged false representations by the sellers of the Astros in 2011, Mr. Crane and his investors ‘would never have entered into’ the deal to buy the team,” he wrote. “If that is true, then they should be thanking the defendants — not suing them — for inducing them to go down a road that has led to so much success.”
The judicial remedy in fraud cases like these is to rescind the deal.
“Surely Mr. Crane has no interest in unwinding his purchase of the Astros by returning the team to its prior owners in exchange for the $615 million he claims to regret having paid — although I suspect Mr. McLane would gladly take that deal,” he wrote.
He concluded by writing that courts shouldn’t be in the business “of making a party’s successful business deals even more successful” and suggested an alternative way to end this lawsuit.
“A party who may have had some reason to seek redress in 2013 need not continue to press his claims when, over time, a deal that once looked like a grave injury comes to look far more like a great victory,” he wrote.
In December, the Texas Supreme Court granted a motion that let NBC Universal and Comcast out of the lawsuit, leaving only the claims involving the current and former owners of the team to be decided.
Houston Baseball Partners is represented by Thomas M. Farrell and Charles B. Hampton of McGuire Woods and Ronald G. Franklin.
McLane is represented by Charles L. “Chip” Babcock, Nancy W. Hamilton and Brett Kutnick of Jackson Walker, David J. Beck of Beck Redden and Wayne Fisher and Bernard G. Johnson III of Fisher Boyd Johnson & Huguenard.
The case number is 21-0641.