NCDR, L.L.C. v. Mauze & Bagby, P.L.L.C., 2014 WL 941049, — F.3d —- (5th Cir. Mar. 11, 2014)
M&B, a Texas law firm, solicited former dental patients from plaintiff Kool Smiles’ dental clinics as potential clients. Allegedly, “M&B ran television, radio, and internet advertisements, and developed a website that strongly implied, or even accused, Kool Smiles of performing unnecessary, and at times harmful, dental work on children to obtain government reimbursements.” Kool Smiles sued for trademark infringement, false advertising (standing?), and “cyber-piracy” (I assume cybersquatting) under the Lanham Act. Kool Smiles also sued under state law for defamation, business disparagement, injury to business reputation, and “trade name and service mark dissolution” (dilution?). The district court denied M&B’s anti-SLAPP motion, determining that M&B’s speech was within the commercial speech exemption to Texas’s anti-SLAPP statute, the Texas Citizen’s Participation Act. The court of appeals affirmed the only issue on appeal: the applicability of the TCPA to the state claims (M&B didn’t appeal the rejection of its attempt to apply the TCPA to the federal claims as well).
A structural comment: while I have no objection to M&B’s interlocutory appeal, which does address an important question, merely listing plaintiff’s claims makes clear that there are bigger problems with this case, which should be cut down to the disparagement/defamation claims that could, depending on the facts, potentially be sustained, and the junk should be kicked out pronto. M&B brought “several” motions to dismiss, but the district court rejected them all—according to the district court, the motions just generally attacked the plausibility/particularity of the complaints, without getting into the doctrinal reasons that the Lanham Act/trademark claims could not succeed.
The court of appeals had jurisdiction over this interlocutory appeal because, under the collateral order doctrine, the district court’s order conclusively determined the disputed question; resolved an important issue separate from the merits; and was effectively unreviewable on appeal from a final judgment.
The TCPA provides an expedited means to kick out claims relating to protected speech and suspend discovery on such claims. The party bringing the claim must establish “by clear and specific evidence a prima facie case for each essential element of the claim in question” to avoid dismissal. Kool Smiles waived the argument that the TCPA doesn’t apply in federal court because it conflicts with the Federal Rules of Civil Procedure, so that remains unresolved.
The district court held that M&B’s conduct was within the “commercial speech” exception to the TCPA, in that M&B is primarily engaged in selling legal services to clients and that the challenged ads offered those services to potential customers. The statute says that it: “[D]oes not apply to a legal action brought against a person primarily engaged in the business of selling or leasing goods or services, if the statement or conduct arises out of the sale or lease of goods, services, or an insurance product or a commercial transaction in which the intended audience is an actual or potential buyer or customer.”
There are no state supreme court cases interpreting the TCPA. Four intermediate cases have analyzed the commercial speech exemption, but none were exactly on point. One involved a defamation case arising from a series of articles in a newspaper. The court in that case borrowed the California anti-SLAPP standard for determining whether the exemption applied, including whether “the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person’s or a business competitor’s business operations, goods, or services.” The stories didn’t arise out of the sale of newspapers, so the exemption didn’t apply.
Here, the challenged language arose directly from the solicitation of M&B’s services. “The solicitation of a service or good is inherent in the sale of the service. Otherwise, there would be a mostly arbitrary distinction created. For example, statements made while fixing a customer’s roof would be exempted, but statements made while convincing a customer to hire the roofer to fix the roof would not.”
Two other cases concerned businesses upset with their BBB ratings. Both held that the commercial speech exemption didn’t apply, so the BBB’s speech was protected, because the BBB’s intended audience was not an actual or potential buyer or customer; the BBB sells its services to businesses, not to the general public, and the latter was the intended audience of the reviews at issue. Here, though, M&B’s intended audience was its potential customers—potential legal clients.
M&B relied on California precedent protecting attorney ads. But there’s a clause in the California statute not present in Texas’s. California’s statute’s commercial speech exemption requires that the speech “consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services.” Soliciting clients by using statements about noncompetitors doesn’t fall within that description. But Texas’s commercial speech exemption contains no such limitation. Thus, M&B’s ads and other client solicitation are exempted from the TCPA’s protection because M&B’s speech arose from the sale of services where the intended audience was an actual or potential customer.