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

United States Court of Appeals, Fifth Circuit

March 11, 2014

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

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Southern District of Texas.

For NCDR, L.L.C., DENTISTRY OF BROWNSVILLE, P.C., doing business as Kool Smiles, KS2 TX, P.C., Plaintiffs - Appellees: Darren Lee McCarty, Esq., Michael Arthur Correll, Sean Michael Whyte, Alston & Bird, L.L.P., Dallas, TX.

For MAUZE & BAGBY, P.L.L.C., GEORGE WATTS MAUZE, II, JAMES THOMAS BAGBY, III, Defendants - Appellants: Kimberly S. Keller, Keller Stolarczyk P.L.L.C., Boerne, TX.

Before STEWART, Chief Judge, KING, and PRADO, Circuit Judges.

OPINION

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EDWARD C. PRADO, Circuit Judge:

I. INTRODUCTION

Defendant-Appellant M& B[1], a Texas law firm, engaged in an advertising campaign to solicit former dental patients from Kool Smiles[2] dental clinics as potential clients. M& B appeals the district court's denial of its Texas " anti-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

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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.

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-SLAPP[3] 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.

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).

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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 the evidence that the legal action is based ...

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