Insurance Litigation

Ever heard of the Texas Citizen’s Participation Act?

If you’re a business owner thinking about suing over a negative review on social media, you might want to think again.

Back in 2011, the Texas legislature passed the Texas Citizen’s Participation Act  (“TCPA”), which went into effect when the governor signed it on June 17, 2011.  The TCPA is Texas’s version of an anti-SLAPP statute, and most Texas lawyers still are not aware of its existence, it may be the most formidable anti-SLAPP statute yet.  Public figures considering filing defamation suits against people who say unkind things about them in the press or online, or businesses who threaten to sue over things like negative reviews on Yelp, might want to reconsider.

SLAPP is an acronym for “Strategic Lawsuit Against Public Participation.”  SLAPP suits are lawsuits—typically asserting claims for defamation—designed to intimidate people into foregoing the exercise of their First Amendment rights.  The typical SLAPP plaintiff does not expect to win the lawsuit but rather uses a SLAPP suit as a way of shutting up his critics.  The lawsuit may be frivolous, but its target still incurs defense costs (which could be quite substantial) as well as the other burdens associated with litigation.  To counter SLAPP suits, a number of states have passed anti-SLAPP statutes, which are intended to bring a quick end to frivolous SLAPP suits, and limit the defense costs that the targets of such suits are required to absorb.

The legislative purpose behind the TCPA, which is codified in Tex. Civ. Prac. & Rem. Code § 27.001, et seq., 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.”  To effectuate that end, when a person is sued for conduct that amounts to the exercise of the right of free speech, right to petition, or right of association, within 60 days after service of the legal action that person can file a motion to dismiss.  Once the motion to dismiss is filed, all discovery stays until the court rules on the motion to dismiss (although the court may allow specified and limited discovery relevant to the motion).  The court then must hold a hearing within 90 days after service of the motion.[1]  Section 27.006 says that at the hearing, the motion is to be decided based on the “the pleadings and supporting and opposing affidavits stating the facts on which the liability or defense is based.”

Section 27.005 provides that the court must dismiss the action if the defendant must establish, by a preponderance of 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.”  The court may not dismiss the action if the plaintiff “establishes by clear and specific evidence a prima facie case for each essential element of the claim in question.”[2]  If the court grants the motion, § 27.009(a) requires the court to award “court costs, reasonable attorney’s fees, and other expenses incurred in defending against the legal action as justice and equity may require,” plus sanctions against the party who brought the legal action as the court determines sufficient to deter the party who brought the legal action from bringing similar actions.”

For instance, the Dallas Court of Appeals ruled in Young v. Krantz, 434 S.W.3d 335 (Tex. App.—Dallas 2014, no pet.), the defendants were sued over an unflattering review of the plaintiff’s work on Angie’s List.  The trial court denied the defendants’ motion to dismiss under the TCPA, and the defendants filed an interlocutory appeal of that decision.  The court of appeals ruled that the defendants proved by a preponderance of the evidence that they were sued for exercising their right to free speech by communicating their review of the plaintiff’s services, which shifted the burden to the plaintiffs to establish by clear and specific evidence a prima facie case for each essential element of their claims.  Because expressions of opinion like the ones posted by the defendants are protected free speech, and also because the defendant did not show that the statements were false or that the defendants were negligent regarding the truth of the statements, the plaintiffs failed to make out their prima facie case for each essential element of their defamation claim.  The court of appeals reversed and dismissed the plaintiffs’ case and remanded the case back to the trial court for an award of attorney’s fees and sanctions in accordance with § 27.009(a).

Because the trial court in Young denied the motion to dismiss, the court of appeals did not have occasion to discuss the amount of attorney’s fees and sanctions to be awarded.  The Supreme Court of Texas did, however, have occasion to consider these matters in Sullivan v. Abraham, 488 S.W.2d 294 (Tex. 2016).  In Sullivan, the Supreme Court of Texas reiterated that both the award of attorney’s fees and the award of sanctions are mandatory when a defendant prevails on a TCPA motion to dismiss.  However, much of the supreme court’s opinion in Sullivan focused on the phrase, “as justice and equity may require” in § 27.009(a)(1).  The trial court had interpreted this phrase as authorizing the court to award the defendant’s “reasonable attorney’s fees,” or some lesser amount, if “justice and equity” so required.

In Sullivan, the defendant requested $67,290.00 in attorney’s fees, $4,381.01 in costs and expenses, and sanctions.  After a hearing on Sullivan’s motion, the trial court issued a letter ruling, granting dismissal and announcing “that justice and equity necessitate Defendant’s recovery of reasonable attorney’s fees in the amount of $6,500.00 and costs in the amount of $1,500.00.”  The court of appeals ruled that an award of sanctions was mandatory and reversed to the extent the trial court failed to award them, but upheld the trial court’s attorney’s fee award as an exercise of the trial court’s discretion to award less than a reasonable fee in the interest of “justice and equity.”   The supreme court did not take issue with the court of appeals’ determination that the trial court erred in failing to award sanctions, but it did take issue with the notion that the trial court could award less that a reasonable fee based on concerns of “justice and equity”  The supreme court ruled that the phrase “as justice and equity may require” applied only to “other expenses incurred in defending against the legal action,” and that the court had no discretion to award less that the “reasonable attorney’s fees” in the interest in equity or fairness.  Quoting Garcia v. Gomez, 319 S.W.3d 638, 642 (Tex. 2010), the court said that a reasonable fee “is one that is not excessive or extreme, but rather moderate or fair,” but it was error for the trial court to reduce the fee based on notions of “justice and equity.”  Rather, the court suggested[3] that fees may be determined under the lodestar approach, as set out in cases like El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012).

Neither the supreme court’s nor the court of appeals’ opinion gives much information about the nature of the dispute between Sullivan and Abraham.  Both Michael Quinn  Sullivan and Salem Abraham have Wikipedia pages and both appear to be prominent, politically active  Republicans.  The court of appeals’ opinion says that Sullivan said something to someone named Greer about a political event attended by Abraham, and Greer published an article about the event that allegedly defamed Abraham.  Whatever Greer wrote in that article, Abraham’s decision to sue could prove very costly.  On remand, the attorney’s fee award could very easily amount to the roughly $67,000 in attorney’s fees claimed at trial, plus another $50,000 or so for the fees incurred on appeal.

[1] Section 27.008 provides that if the court fails to rule on the motion within 90 days, the motion is considered to have been denied by operation of law and the moving party may appeal.

[2] The words “clear” and “specific” in the context of the Act have been interpreted respectively to mean, for the former, “unambiguous,” “sure,” or “free from doubt” and, for the latter, “explicit” or “relating to a particular named thing.”  In re Lipsky, 460 S.W.3d 579, 590 (Tex. 2015).  “Prima facie case” refers to evidence sufficient as a matter of law to establish a given fact if it is not rebutted or contradicted. It is the minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.  Id.

[3] The supreme court said that the parties agreed that fees should be determined under the lodestar approach, and the court did suggest that they were wrong, or that some other method of determining a reasonable fee should apply.

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