NCDR, L.L.C. v. Mauze & Bagby, P.L.L.C., et

Case: 12-41243 Document: 00512556712 Page: 1 Date Filed: 03/11/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 11, 2014
No. 12-41243
Lyle W. Cayce
Clerk
NCDR, L.L.C.; DENTISTRY OF BROWNSVILLE, P.C., doing business as
Kool Smiles; KS2 TX, P.C.,
Plaintiffs–Appellees
v.
MAUZE & BAGBY, P.L.L.C.; GEORGE WATTS MAUZE, II; JAMES
THOMAS BAGBY, III,
Defendants–Appellants
Appeal from the United States District Court
for the Southern District of Texas
Before STEWART, Chief Judge, KING, and PRADO, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:
I. INTRODUCTION
Defendant–Appellant M&B1, a Texas law firm, engaged in an advertising
campaign to solicit former dental patients from Kool Smiles2 dental clinics as
potential clients. M&B appeals the district court’s denial of its Texas “anti-
1
The Defendants–Appellants consist of two Texas lawyers (George Watts Mauzé II and
James Thomas Bagby III) and their law firm (Mauzé & Bagby, P.L.L.C.). They are collectively
referred to as “M&B.”
2
Plaintiff–Appellees own dental clinics in Texas and around the country. They are
NCDR, L.L.C.; Dentistry of Brownsville, P.C. d/b/a Kool Smiles; and KS2 TX, P.C. d/b/a/ Kool
Smiles. They are collectively referred to as “Kool Smiles.”
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SLAPP” motion to dismiss a claim brought against them by Plaintiff–Appellee
Kool Smiles. The district court determined that M&B’s speech fell within a
commercial speech exemption to Texas’s anti-SLAPP statute—the Texas
Citizen’s Participation Act (“TCPA”). While M&B challenges that determination
and asks this Court to render judgment in its favor, Kool Smiles challenges this
court’s jurisdiction and argues that the Texas statute at issue does not apply in
federal court.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Kool Smiles runs a national chain of dental clinics that provide care
primarily to economically disadvantaged children. M&B is a Texas law firm that
engaged in an advertising campaign soliciting former Kool Smiles patients to
represent. M&B contends that Kool Smiles has been the subject of multiple
media reports and government investigations regarding allegations of Medicaid
fraud and bad medical provision. As part of the campaign, 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.
B. Procedural Background
Based on M&B’s ads and website, Kool Smiles brought causes of action
under federal law for trademark infringement, false advertising, and cyber-
piracy under the Lanham Act. Kool Smiles also brought state claims for
defamation, business disparagement, injury to business reputation, and trade
name and service mark dissolution.
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M&B brought several motions to dismiss. One was brought pursuant to
the TCPA. See Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001–27.011 (West 2011).
The TCPA is an anti-SLAPP3 statute that allows a claim to be dismissed when
the defendant can show that the claim was brought to chill the exercise of First
Amendment rights. Id. § 27.003(a); see also infra Part II.C. M&B also brought
motions to dismiss pursuant to Federal Rule of Civil Procedure (“FRCP”) 8(a) for
failure to plead with sufficient particularity and FRCP 12(b)(6) for failure to
state a claim on which relief may be granted.
The district court’s order contained four holdings. First, the court held
that the TCPA does not apply to Kool Smiles’s three federal claims brought
under the Lanham Act. Second, the court held that the TCPA does not protect
M&B’s speech because its advertisements and website fall into the “commercial
speech” excemption to the TCPA. Third, Kool Smiles’s pleadings were sufficient
such that M&B’s FRCP 8(a) motion failed. Fourth, Kool Smiles stated a claim,
such that M&B’s FRCP 12(b)(6) motion failed.
M&B brought this appeal. M&B does not appeal the district court’s
rulings on its motions to dismiss based on FRCP 8(a) or FRCP 12. Thus, M&B
only seeks interlocutory review of the denial of its TCPA motion. As to this
TCPA appeal, M&B does not appeal the district court’s first ruling regarding
Kool Smiles’s federal causes of action. Instead, M&B’s only argument on appeal
is that the district court erred in concluding that M&B’s speech fell into the
“commercial speech” exemption such that the anti-SLAPP motion to dismiss was
not available. However, Kool Smiles, in their brief, raises other issues on appeal,
discussed below.
3
SLAPP is an acronym for “strategic litigation against public participation.”
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C. The Statute at Issue: The TCPA
The purpose of the TCPA 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. & Rem. Code Ann. § 27.002. To achieve
this, the TCPA provides a means for a defendant, early in the lawsuit, to seek
dismissal of certain claims in the lawsuit. See id. § 27.003.
If a legal action is based on, relates to, or is in response to a party’s
exercise of the right of free speech, right to petition, or right of association, that
party may file a motion to dismiss the legal action. Id. § 27.003(a). The motion
to dismiss generally must be filed no later than sixty days after service of the
legal action, although the TCPA provides that a court can extend the filing
deadline on a showing of good cause. Id. § 27.003(b). On the filing of a motion
to dismiss pursuant to § 27.003(a), all discovery in the legal action is suspended
until the court has ruled on the motion to dismiss, except as provided by
§ 27.006(b). Id. § 27.003(c). Section 27.006(b) states, “[o]n a motion by a party
or on the court’s own motion and on a showing of good cause, the court may allow
specified and limited discovery relevant to the motion.” Id. § 27.006(b).
Section 27.005, entitled “Ruling,” sets out the burden shifting scheme:
(a) The court must rule on a motion under Section 27.003 not later
than the 30th day following the date of the hearing on the motion.
(b) Except as provided by Subsection (c), on the motion of a party
under Section 27.003, a court shall dismiss a legal action against
the moving party if the moving party shows by a preponderance of
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the evidence that the legal action is based on, relates to, or is in
response to the party’s exercise of:
(1) the right of free speech;
(2) the right to petition; or
(3) the right of association.
Id. § 27.005(a)–(b) (emphasis added). However, the motion to dismiss may not
be granted “if the party bringing the legal action establishes by clear and specific
evidence a prima facie case for each essential element of the claim in question.”
Id. § 27.005(c).
“In determining whether a legal action should be dismissed under [the
TCPA], the court shall consider the pleadings and supporting and opposing
affidavits stating the facts on which the liability or defense is based.” Id.
§ 27.006(a).
The Section entitled “Appeal” provides:
(a) If a court does not rule on a motion to dismiss under Section
27.003 in the time prescribed by Section 27.005, the motion is
considered to have been denied by operation of law and the moving
party may appeal.
(b) An appellate court shall expedite an appeal or other writ,
whether interlocutory or not, from a trial court order on a motion to
dismiss a legal action under Section 27.003 or from a trial court’s
failure to rule on that motion in the time prescribed by Section
27.005.
(c) An appeal or other writ under this section must be filed on or
before the 60th day after the date the trial court’s order is signed or
the time prescribed by Section 27.005 expires, as applicable.
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Id. § 27.008.4
III. DISCUSSION
A. Jurisdiction
Because the district court’s order denying the motion to dismiss was not
a final judgment resolving all the issues of the suit, we must first determine
whether this court has jurisdiction. M&B invokes the collateral order doctrine
as a basis for jurisdiction before this court. Kool Smiles argues that this court
lacks jurisdiction over this interlocutory appeal because it does not fall within
the “independent, immunity-style right” that the collateral order doctrine
recognizes as immediately appealable. We disagree.
Where the district court’s order is not a final judgment ending the action,
the collateral order doctrine can confer limited appellate jurisdiction. Will v.
Hallock, 546 U.S. 345, 349 (2006). The following three conditions must be met
for a collateral order appeal: (1) the order must conclusively determine the
disputed question; (2) it must resolve an important issue completely separate
from the merits of the case; and (3) it must be effectively unreviewable on appeal
from a final judgment. Id.
In Henry v. Lake Charles American Press, 566 F.3d 164 (5th Cir. 2009),
this Court analyzed a district court’s denial of a motion to dismiss pursuant to
Louisiana’s anti-SLAPP statute, Article 971, under the main requirements of the
collateral order doctrine: (1) conclusivity, (2) separability, and (3)
unreviewability.5 566 F.3d at 171–78. Before so doing, the court noted that
4
The legislature amended several subsections of the TCPA in 2013. The statutes as
cited within are from the TCPA as applicable at the time of the suit.
5
Henry also treats the importance of an issue as a fourth, separate requirement. 566
F.3d at 178–79. However, it not clear whether importance is a fourth requirement or is instead
wrapped up in the second and third requirements. See, e.g., Mohawk Indus., Inc. v. Carpenter,
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determining whether an order is appealable should be done not on a case-by-case
basis, but on a type-of-order-by-type-of-order basis. Id. at 173. “Thus, for our
present purposes, we do not look to whether the order in the context of this
particular case is immediately appealable, but to whether orders denying
motions brought under anti-SLAPP statutes such as [Louisiana’s] satisfy the
conditions of the collateral order doctrine.” Id. The court ultimately held that
“a district court’s denial of a motion brought under an anti-SLAPP statute such
as [Louisiana’s] is an immediately-appealable collateral order,” such that this
Court had jurisdiction over the appeal. Id. at 181.
Whether a denial of a motion to dismiss pursuant to the TCPA is
immediately reviewable under the collateral order doctrine is an issue of first
impression. Although Henry used broad language (“statutes such as Article 971
satisfy the conditions of the collateral order doctrine”), because Texas’s anti-
SLAPP statute is not identical to Louisiana’s, this Court conducts its own
collateral order doctrine inquiry to determine whether the denial of an anti-
SLAPP motion to dismiss satisfies the three requirements of the collateral order
doctrine. All three must be satisfied for the Ccourt to have jurisdiction. Below,
the three requirements are evaluated against the TCPA. Because we hold that
the TCPA satisfies all three requirements, the collateral order doctrine supplies
jurisdiction.
1. Does the district court’s order conclusively determine the disputed
question?
The requirement that the district court’s order “conclusively determine”
558 U.S. 100, 107 (2009) (specifying that the second condition requires important questions
separate from the merits and that the third requirement—reviewability—cannot be answered
without making a judgment about the importance of the right that would be lost).
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the disputed question means that the order must be final as to only the one
inquiry that the order determines. See Behrens v. Pelletier, 516 U.S. 299, 307–08
(1996) (“Whether or not a later summary judgment motion is granted, denial of
a motion to dismiss is conclusive as to [the right to avoid the burden of
litigation.]”). To be considered “conclusive,” it should be “unlikely that the
district court will revisit the order.” Henry, 566 F.3d at 174 (citing 15A Charles
Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice &
Procedure § 3911, at 333 (2d ed. 1992)).
Because the TCPA and Louisiana’s anti-SLAPP statute are similar on this
point, Henry’s analysis on conclusivity applies with equal force here: “A district
court’s denial of [a TCPA] motion is conclusive as to whether [the TCPA]
mandates dismissal of the suit. . . . If a trial court denies [a TCPA] motion, then
the case proceeds as it normally would. There is also no indication that a trial
court would revisit [its earlier TCPA decision].” See Henry, 566 F.3d at 174.
Thus, the district court’s order denying TCPA relief is conclusive for purposes of
the collateral order doctrine.
2. Does the district court’s order resolve an important issue separate
from the merits of the case?
In order for an issue to be immediately appealed, it must be separate from
the merits of the case. Issues are not separate “where they are but steps
towards [a] final judgment in which they will merge.” Cohen v. Beneficial Indus.
Loan Corp., 337 U.S. 541, 546 (1949). The question of separability turns on
whether the matter at issue “is significantly different from the fact-related legal
issues that likely underlie the plaintiff’s claim on the merits.” Johnson v. Jones,
515 U.S. 304, 314 (1995). The Supreme Court has described “separate” issues
as those that are “conceptually distinct from the merits of the plaintiff’s claim.”
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Id. (citations and internal quotation marks omitted). For example, issues
concerning immunity from suit are often separate from the underlying dispute
in the litigation. Henry, 566 F.3d at 174. Claims of qualified immunity are
distinct from the merits of a plaintiff’s claim. Id. (citing Mitchell v. Forsyth, 472
U.S. 511, 527–28 (1985)). The Henry court conceded that the fact that
determining an anti-SLAPP motion can require the district court to assess the
merits of the plaintiff’s claim weighed against a finding of separability. Id. at
175. It went on to hold, however, that because the anti-SLAPP statute had a
distinct purpose from that of the underlying suit, separability was still present.
Id. An anti-SLAPP motion “resolves a question separate from the merits in that
it merely finds that such merits may exist, without evaluating whether the
plaintiff’s claim is to succeed.” Id. (citing Batzel v. Smith, 333 F.3d 1018, 1025
(9th Cir. 2003) (internal quotation marks omitted)). Further, although an anti-
SLAPP motion “looks to the plaintiff’s probability of success, the court decides
it before proceeding to trial and then moves on. Immediate appellate review
would thus determine an issue separate from any issues that remain before the
district court.” Id. at 176.
Separability under the TCPA is even clearer than separability under the
Louisiana statute because Louisiana’s statute relies in part on an analysis of the
merits of the underlying claim. Louisiana’s statue specifies that if the defendant
meets his burden under the statute to show that the plaintiff’s suit is in
connection with the defendant’s right to free speech, the suit is dismissed unless
the plaintiff can establish “a probability of success on the claim.” Henry, 556
F.3d at 170 (citing La. Code Civ. Proc. Ann. art. 971(A)(3)). By contrast, the
TCPA does not require so searching a review into the plaintiff’s probability of
success. Instead, a plaintiff can defeat an anti-SLAPP motion if he merely
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establishes a prima facie case for each element of the claim. Tex. Civ. Prac. &
Rem. Code Ann. § 27.005(c). Thus, the TCPA “has a purpose distinct from that
of the underlying suit.” See Henry, 566 F.3d at 175. More directly, “an anti-
SLAPP motion ‘resolves a question separate from the merits in that it merely
finds that such merits may exist, without evaluating whether the plaintiff’s
claim will succeed.’” Id. (quoting Batzel, 333 F.3d at 1025). As explained in
Henry, “‘[t]he purpose of an anti-SLAPP motion is to determine whether the
defendant is being forced to defend against a meritless claim,’ not to determine
whether the defendant actually committed the relevant tort.” Id. (quoting
Batzel, 333 F.3d at 1025). In sum, the denial of a motion to dismiss brought
pursuant to the TCPA resolves an important issue separate from the merits of
the case, satisfying the collateral order doctrine’s separability requirement.
3. Is the district court’s order effectively unreviewable on appeal from a
final judgment?
For the collateral order doctrine to apply, the district court’s order must
be effectively unreviewable on appeal. “Perhaps the embodiment of
unreviewability, then, is immunity from suit . . . .” Henry, 566 F.3d at 177. In
determining whether a right confers immunity, the critical inquiry is whether
the statute provides a right not to stand trial in the first place and to otherwise
avoid the burdens of litigation. Mitchell v. Forsyth, 472 U.S. 511, 525–26 (1985).
If an essential part of the defendant’s claim is the right to avoid the burden of
trial, then this final requirement of the collateral order doctrine is met because
obtaining relief after trial is too late. Id. at 525. In Henry, the court held that
the denial of a Louisiana anti-SLAPP motion satisfied the unreviewability
requirement. 566 F.3d at 178. (“[The statute] thus provides a right not to stand
trial, as avoiding the costs of trial is the very purpose of the statute.”).
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The TCPA’s own provisions for interlocutory review are instructive. To be
sure, state law does not control the question of whether appellate review is
available in federal court. See, e.g., Englert v. MacDonnell, 551 F.3d 1099, 1107
(9th Cir. 2009) (“We emphasize that our brief discussion of the availability of
mandamus in Oregon is not intended to suggest that Oregon law determines the
availability of appellate review here. On the contrary, federal law is controlling
on this issue.”). However, numerous courts have recognized that the absence or
presence of interlocutory statutory review mechanisms at the state level informs
the question of whether interlocutory appeal is permissible in federal courts. See
Liberty Synergistics Inc. v. Microflo Ltd., 718 F.3d 138, 151 (2d Cir. 2013); DC
Comics v. Pac. Pictures Corp., 706 F.3d 1009, 1015–16 (9th Cir. 2013); Metabolic
Research, Inc. v. Ferrell, 693 F.3d 795, 800–01 (9th Cir. 2012); Godin v.
Schencks, 629 F.3d 79, 85 (1st Cir. 2010); Englert, 551 F.3d at 1105–06; Batzel,
333 F.3d at 1025. This “is relevant not because state law determines the
availability of appellate review [in federal court]—it does not—but rather
because [it demonstrates whether] ‘lawmakers wanted to protect speakers from
the trial itself rather than merely from liability.’” Godin, 629 F.3d at 85 (quoting
Batzel, 333 F.3d at 1025).
Thus, in Batzel, the court found “instructive that California’s anti-SLAPP
statute provide[d] that an order denying an anti-SLAPP motion may be appealed
immediately.” 333 F.3d at 1025. This, along with that statute’s legislative
history, evidenced “that California lawmakers wanted to protect speakers from
the trial itself rather than merely from liability.” Id. The court continued by
explaining that, “[i]f the defendant were required to wait until final judgment
to appeal the denial of a meritorious anti-SLAPP motion, a decision by this court
reversing the district court’s denial of the motion would not remedy the fact that
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the defendant had been compelled to defend against a meritless claim brought
to chill rights of free expression.” Id. Accordingly, the court concluded that “a
defendant’s rights under the anti-SLAPP statute are in the nature of immunity:
They protect the defendant from the burdens of trial, not merely from ultimate
judgments of liability.” Id.; see also Godin, 629 F.3d at 85 (citing Englert, 551
F.3d at 1107, with approval for the proposition that “whether [a] state anti-
SLAPP statute provides for interlocutory appeals is significant to whether
interlocutory appeals should be permitted in federal courts”).
Equally instructive on the importance of an expedited state appeal process
is the analysis undertaken by the Englert and Metabolic Research
courts—apparently the only two federal courts to have concluded that orders
denying motions to dismiss anti-SLAPP suits are not immediately appealable
under the collateral order doctrine. In Englert, the Ninth Circuit held that
Oregon’s anti-SLAPP statute “was not intended to provide a right not to be
tried.” 551 F.3d at 1105. In reaching this conclusion, the court reasoned that
“the failure of the Oregon anti-SLAPP statute to provide for an appeal from an
order denying a special motion to strike . . . surely suggests that Oregon does not
view such a remedy as necessary to protect the considerations underlying its
anti-SLAPP statute.” Id. The court continued that:
The failure of the Oregon Legislature to provide for an appeal from
the denial of a special motion to strike provides compelling evidence
that, unlike their California counterparts, Oregon lawmakers did
not want to protect speakers from the trial itself, as much as they
wanted to have in place a process by which a nisi prius judge would
promptly review the evidence underlying the defamation complaint
to determine whether it had sufficient merit to go forward.
Id. at 1106 (citation and internal quotations marks omitted). Englert
emphasized that this distinguished the case from Batzel which had “held that,
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if a legislature provided an appeal unique to its anti-SLAPP statute . . . it could
be inferred that its purpose was to confer immunity from suit—an immunity
which can only be vindicated by permitting an interlocutory appeal.” Id. at 1107.
The Metabolic Research court reached the same conclusion in connection
with Nevada’s anti-SLAPP statute. 693 F.3d at 801. There, the court held that
its review of Nevada’s law led it to the conclusion that the statute’s “underlying
values and purpose [were] satisfied without resort to an immediate appeal
because, unlike California’s, it [did] not furnish its citizens with immunity from
trial.” Id. Underlying this holding were the court’s observations that “Nevada’s
anti-SLAPP statute [did] not expressly provide for an immediate right to
appeal,” and that the statute explicitly indicated that its purpose was to provide
defendants immunity from “civil liability” as opposed to immunity from suit or
trial. Id. at 802. Accordingly, like the Englert court, the Metabolic Research
court concluded that a motion to dismiss under Nevada’s anti-SLAPP statute did
not satisfy the third prong of the collateral order doctrine.
With respect to the right to an immediate appeal, the TCPA is more
similar to the statutes at issue in Batzel and Godin than those considered in
Englert and Metabolic Research. Section 27.008 of the TCPA provides that “[a]n
appellate court shall expedite an appeal or other writ, whether interlocutory or
not, from a trial court order on a motion to dismiss a legal action under Section
27.003 or from a trial court’s failure to rule on that motion in the time prescribed
by Section 27.005.” Tex. Civ. Prac. & Rem. Code Ann. § 27.008(b). Consistent
with Batzel, Godin, Englert, and Metabolic Life, it appears that, by providing
this right, the Texas legislature has indicated the nature of the underlying right
the TCPA seeks to protect. That right is not simply the right to avoid ultimate
liability in a SLAPP case, but rather is the right to avoid trial in the first
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instance. Thus, “[b]ecause the anti-SLAPP motion is designed to protect the
defendant from having to litigate meritless cases aimed at chilling First
Amendment expression, the district court’s denial of an anti-SLAPP motion
would effectively be unreviewable on appeal from a final judgment.” Batzel, 333
F.3d at 1025.
We also note that this conclusion is consistent with the Supreme Court’s
most recent pronouncements on the collateral order doctrine. In Will, for
example, the Court explained that immediate review must advance “some
particular value of a high order.” 546 U.S. at 352. “That is, it is not mere
avoidance of a trial, but avoidance of a trial that would imperil a substantial
public interest, that counts when asking whether an order is effectively
unreviewable if review is to be left until later.” Id. at 353 (citation and internal
quotation marks omitted). As the Metabolic Research court explained, “[a]
legislatively approved immunity from trial, as opposed to a mere claim of a right
not to be tried, is imbued with a significant public interest.” 693 F.3d at 800; see
also Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 879 (1994) (“When
a policy is embodied in a constitutional or statutory provision entitling a party
to immunity from suit (a rare form of protection), there is little room for the
judiciary to gainsay its ‘importance.’”). Likewise, “[i]t would be difficult to find
a value of a ‘high[er] order’ than the constitutionally-protected rights to free
speech and petition that are at the heart of [an] anti-SLAPP statute. Such
constitutional rights deserve particular solicitude within the framework of the
collateral order doctrine.” DC Comics, 706 F.3d at 1015–16 (second alteration
in original). Thus, we hold that this Court has jurisdiction to interlocutorily
consider the denial of a TCPA anti-SLAPP motion to dismiss.
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B. The TCPA’s Applicability in Federal Court
Kool Smiles argues on appeal that the TCPA does not apply in federal
court because it conflicts with both FRCP 12(d) and Federal Rule of Appellate
Procedure (“FRAP”) 4. M&B argues that Kool Smiles did not raise this specific
argument before the district court and thus it is waived. We agree.
As a general rule, “[a]n argument not raised before the district court
cannot be asserted for the first time on appeal.” XL Speciality Ins. Co. V. Kiewit
Offshore Servs., Ltd. 513 F.3d 146, 153 (5th Cir. 2008). Merely mentioning a
legal issue in general terms is also insufficient; an argument must be “raised to
such a degree that the trial court may rule on it.” Id. (quotation marks and
citation omitted). In the district court, in its response brief in opposition to
M&B’s motion to dismiss, Kool Smiles argued only that the TCPA conflicted with
FRCP 8, 9, and 12. The rules raised before the district court differ from those
before us (FRCP 12(d) and FRAP 4).
Before this court, Kool Smiles argues that FRCP 12(d) and FRAP 4 conflict
with the TCPA. This was not the question raised before the district court. To
begin, we note that Kool Smiles never claimed in district court that FRAP 4
conflicted with the TCPA. And while Kool Smiles raised FRCP 12, its discussion
in district court was brief and only generally mentions motions to dismiss. Kool
Smiles’ argument largely focused on the pleading standards articulated in FRCP
8 and 9. Moreover, before the district court, Kool Smiles did not specifically
address FRCP 12(d). And yet, an analysis of whether a state law or rule
conflicts with federal procedural rules requires a precise discussion of the
specific federal rule at issue (as well as the allegedly conflicting state law or
rule). Consequently, the district court’s order did not address these rules. By
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not “rais[ing the issue] to such a degree that the trial court may rule on it,” Kool
Smiles waived its FRCP 12(d) and FRAP 4 arguments.
Because Kool Smiles waived its argument that the TCPA is a procedural
law that conflicts with the Federal Rules of Civil Procedure, we proceed
assuming that it does not. Thus, we continue by reviewing the district court’s
determination that the TCPA’s commercial speech exemption applies to the
speech underlying this lawsuit.
C. Commercial Speech Exemption
The district court ruled that the TCPA does not protect M&B’s conduct
because its speech falls within the “commercial speech” exemption to the TCPA.
It found that M&B is primarily engaged in selling legal services to clients and
that the ads offered those services to potential customers (i.e., clients). M&B’s
main argument is that the district court incorrectly interpreted the “commercial
speech” exemption. Kool Smiles replies that the plain language of the statute
exempts M&B’s speech from the protections offered by the TCPA.
The “commercial speech” exemption to the TCPA, enacted in June 2011,
states that the TCPA:
[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.
Tex. Civ. Prac. & Rem. Code Ann. § 27.010(b). This Court reviews a district
court’s interpretation of a state statute de novo, interpreting the state statute
the way the state supreme court would, based on prior precedent, legislation,
and relevant commentary. F.D.I.C. v. Shaid, 142 F.3d 260, 261 (5th Cir. 1998).
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“When construing a state statute absent explicit state-court guidance, we must
attempt to predict state law, not to create or modify it.” Truong v. Bank of Am.,
N.A., 717 F.3d 377, 381 (5th Cir. 2013) (citation and internal quotation marks
omitted).
The Supreme Court of Texas has not yet interpreted the TCPA, much less
the “commercial speech” exemption. When the parties filed their briefs, no
Texas state court or federal court had interpreted the exemption. In 2013, four6
intermediate Texas state court cases analyzing the exemption were released.
Two address whether a defendant’s action “arises out of the sale or lease of
goods, services, or an insurance product.” The other two address whether the
intended audience is “an actual or potential buyer or customer.”
The first, Newspaper Holdings, Inc. v. Crazy Hotel Assisted Living, Ltd.,
No. 01-12-00581-CV, 2013 WL 5761051, at *1 (Tex. App.—Houston [1st Dist.]
Oct. 24, 2013, no pet.), involved a defamation case arising from a series of
articles in a newspaper. The articles reported regulatory compliance problems
and investigations into the Crazy Water Retirement Hotel [“the Hotel”]—an
assisted living facility—and its owner. Id. at *1–*2. Specifically, the paper
published a summary of its own article stating, in part: “Month after month in
2010 complaints from residents and employees at the Crazy Water Retirement
Hotel kept city and state inspectors returning to the building, investigating
complaints of unsafe conditions, building disrepair, failure to provide services
and verbal abuse of residents.” Id. at *1.
6
A fifth case mentions the commercial speech exemption, but does not discuss it.
Whisenhunt v. Lippincott, No. 06-13-00051-CV, 2013 WL 553968, at *4 n.5 (Tex.
App.—Texarkana Oct. 9, 2013, pet. filed) (“Because we conclude that the statute does not
apply, we need not decide whether the commercial speech exception applies in this case.”).
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The Hotel and its owner brought several state law claims against the
newspaper and its source, alleging that the paper published defamatory and
damaging statements. Id. at *4. The defendants moved to dismiss the suit
under the TCPA. Id. The trial court denied the motion. Id. at *5. The
defendants appealed. Id. at *1. The Hotel contended that the paper was a
corporation primarily engaged in the business of selling or leasing goods or
services, and as a result, the TCPA’s provision for “commercial speech” exempted
the paper from protection. Id. at *14.
The court of appeals relied on precedent from the California Supreme
Court as a guide for the issue of first impression. Id. (citing Simpson
Strong–Tie Co., Inc. v. Gore, 230 P.3d 1117 (Cal. 2010)). California’s anti-SLAPP
statute’s commercial speech exemption is similar, but not identical, to Texas’s.
See id. at *14. The Texas court borrowed the four-prong analysis that the
California Supreme Court devised. Id. at *14–*15. To determine whether the
exemption applies, courts should examine whether:
(1) the cause of action is against a person primarily engaged in the
business of selling or leasing goods or services;
(2) 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;
(3) the statement or conduct was made either for the purpose of
obtaining approval for, promoting, or securing sales or leases of,
or commercial transactions in, the person’s goods or services or in
the course of delivering the person’s goods or services; and
(4) the intended audience for the statement or conduct [is an actual
or potential buyer or customer].
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Id. (alteration in original) (citing Simpson, 230 P.3d at 1129). The court also
adopted Simpson’s determination that the statute put the burden of proving that
the commercial speech exemption applies on the party asserting it. Id. at *15.
As to the four prongs, the court stated it was undisputed that the newspaper was
in the business of reporting community events. Id. But, the court went on, the
stories the Hotel complained of did not arise out of the sale of the goods and
services that the newspaper sells—newspapers. Id. Thus, the exemption did not
apply to remove the TCPA’s protection from the newspaper. Id. at *16.7
Because the Supreme Court of Texas has not yet interpreted the TCPA,
we must make an Erie guess. See Truong, 717 F.3d at 381 (“When construing
a state statute absent explicit state-court guidance, we must attempt to predict
state law, not to create or modify it.” (citation and internal quotation marks
omitted)). Applying the Crazy Hotel analysis to the present case, the language
in M&B’s ads and website arose directly from the solicitation of the services it
provides. 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.
As cited above, for the commercial speech exemption to apply, the intended
audience must be an actual or potential buyer or customer. The two other Texas
intermediate state court cases addressing the commercial speech exemption
7
The second intermediate Texas state case addressing whether a defendant’s conduct
arose from “sale or lease of goods, services, or an insurance product,” Tex. Civ. Prac. & Rem.
Code Ann. § 27.010(b), determined that a letter to a parole board from a client’s attorney did
not. Pena v. Perel, No. 08-12-00275-CV, 2013 WL 4604261, at *3 (Tex. App.—El Paso Aug. 28,
2013, no pet.).
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dealt with the audience provision. Both concerned businesses upset with the
ratings they received from the Better Business Bureau (“BBB”). Better Bus.
Bureau of Metro. Dallas, Inc. v. BH DFW, Inc. 402 S.W.3d 299, 303–04 (Tex.
App.—Dallas 2013, pet. filed); Better Bus. Bureau of Metro. Hous., Inc. v. John
Moore Servs., Inc., No. 01–12–00990–CV, 2013 WL 3716693, at *1–*2 (Tex.
App.—Houston [1st Dist.] July 16, 2013, pet. filed). Both held that the
commercial speech exemption did not apply—so the BBB’s speech was protected
by the TCPA—because the BBB’s intended audience was not an actual or
potential buyer or customer, as required by the exemption. BH DFW, 402
S.W.3d at 309; John Moore Servs., 2013 WL 3716693, at *5; see also Tex. Civ.
Prac. & Rem. Code Ann. § 27.010(b). The BBB sells its accrediting services to
businesses; the actual and potential buyers or customers of the BBB’s
membership service are the accredited businesses, not the general public. BH
DFW, 402 S.W.2d at 302. Because the intended audience of the business review
was the general public, not a business customer seeking accreditation, the
commercial speech exemption did not apply. Id. at 309. By contrast, M&B’s
intended audience is its potential customers—potential legal clients.
M&B argues that the California Supreme Court, interpreting a “similarly-
worded exemption,” held that the exemption “did not exempt attorney
advertisements from the protections of the Anti-SLAPP law.” But M&B neglects
the fact that the California Supreme Court’s holding rested on a clause in the
California statute that is not present in Texas’s anti-SLAPP statute. 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.” Cal. Civ. Proc. Code § 425.17(c)(1). The
California high court held that an attorney advertisement soliciting clients was
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not such a representation of fact about his business operations, goods, or
services, and thus was not within the commercial speech exemption. Simpson,
230 P.3d at 1129. Texas’s commercial speech exemption contains no such
limitation, making Simpson’s holding inapplicable. Ultimately, we conclude that
the Supreme Court of Texas would most likely hold that 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. See Tex. Civ. Prac. & Rem. Code Ann. § 27.010(b).
IV. CONCLUSION
For the reasons above, we AFFIRM the district court.
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