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Texas Supreme Court Defines “commercial-speech exemption” in the Anti-Slapp Law

Written by Robert Ray

I am a Texas attorney. I am Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization. My principle office is in Lantana, Texas in the DFW area. I am a past chair of the Texas State Bar Computer & Technology Section. I was appointed by the Chief Justice to serve one year as and ex-officio member on the Judicial Committee on Information Technology.

The Texas Citizens Participation Act (TCPA), also know as the Anti-Slapp statute, provides for the expedited dismissal of certain legal actions based on, relating to, or responding to a defendant’s exercise of the right of free speech. But the TCPA does not apply to actions based on certain commercial speech.

Problem

What does the commercial-speech exemption of the Texas Anti-Slapp Act mean and how is it applied?

Facts

Castleman runs an online platform that serves as a middleman between consumers and various product suppliers. O’Connor provide “virtual assistant” services to receive and fulfill the customer orders placed Castleman’s website. Castleman provided O’Connor with written instructions on how to fill those orders.

Castleman later accused O’Connor of failing to follow the instructions and over-ordering products. Castleman demanded compensation for his lost profits (estimated around $8,000) from O’Connor.

When O’Connor refused to pay, Castleman published statements about the dispute on various online platforms including a personal blog, YouTube, and social media.

O’Connor sent Castleman a cease-and-desist letter demanding that Castleman erase and retract all statements about O’Connor and his company, publish apologies that O’Connor found “satisfactory,” and pay O’Connor $315,000. When Castleman refused, O’Connor sued Castleman for defamation. Castleman moved to dismiss the suit under the TCPA, asserting that the action relates to and is in response to Castleman’s exercise of his right to free speech. In response, O’Connor argued that the TCPA does not apply because the action is not based on Castleman’s exercise of his free-speech right, and even if it were, the commercial-speech exemption applies.

The trial court and the court of appeals agreed that the commercial-speech exemption applied and refused to dismiss the defamation claim.

The court had to decide what the commercial-speech exemption was and how to apply it.

Castleman v. Internet Money Ltd., 546 S.W.3d 684 (Tex. 2018)

What is the commercial-speech exemption

Specifically, the TCPA

does 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, insurance services, or a commercial transaction in which the intended audience is an actual or potential buyer or customer.

The Texas courts of appeals are divided on the proper interpretation and application of this exemption. Most have held that the exemption applies only if the plaintiff’s action is based on statements or conduct directed to the defendant’s actual or potential buyers or customers, as opposed to the plaintiff’s buyers or customers or to the “public at large.”

Many have reached this conclusion by relying on a California Supreme Court decision addressing a similar statute. See Newspaper Holdings, 416 S.W.3d at 88–89 (relying on Simpson Strong-Tie Co., Inc. v. Gore, 230 P.3d 1117, 1129 (Cal. 2010) (adopting four-element test and holding that the California statute’s commercial-speech exemption applies only if the speaker’s intended audience includes actual or potential buyers or customers of the speaker’s goods or services)).

Others, including the court of appeals in this case, have refused to follow the California Court’s decision because it addressed a commercial-speech exemption that differs in both language and structure from the Texas exemption. The court of appeals affirmed the trial court’s denial of Castleman’s TCPA-dismissal motion because Castleman’s statements on which O’Connor bases his claims arise out of “the sale or lease of goods [or] services” or a “commercial transaction in which the intended audience [was] an actual or potential buyer or customer.” TEX. CIV. PRAC. & REM. CODE § 27.010(b). According to the court of appeals, the exemption does not require that the statements arise out of Castleman’s sale of good or services or a transaction in which the intended audience was Castleman’s actual or potential buyer or customer.

The Texas Supreme court ruled that courts could not follow the California courts because the two statutes were different, However, it ruled that the Texas Anti-Slapp statute carried the same meaning as the California statute.

Considering the differences between the California and Texas statutes, we agree with the court of appeals’ refusal to rely on California’s construction of its commercial-speech exemption. But we conclude that the Texas exemption, when construed within its own statutory context, carries the same meaning.

What are the rules for the commercial-speech exemption?

Castleman v. Internet Money Ltd., 546 S.W.3d 684 (Tex. 2018)

Ruling

Focusing on the text and context of the TCPA’s commercial-speech exemption, we construe the exemption to apply when (1) the defendant was primarily engaged in the business of selling or leasing goods, (2) the defendant made the statement or engaged in the conduct on which the claim is based in the defendant’s capacity as a seller or lessor of those goods or services, (3) the statement or conduct at issue arose out of a commercial transaction involving the kind of goods or services the defendant provides, and (4) the intended audience of the statement or conduct were actual or potential customers of the defendant for the kind of goods or services the defendant provides.

Here, although Castleman was primarily engaged in the business of selling goods, his allegedly defamatory statements did not arise out of his sale of goods or services or his status as a seller of those goods and services. Castleman made the statements in his status as a customer or consumer of O’Connor’s services. Moreover, the intended audience of Castleman’s statements was not an actual or potential buyer or customer of the goods he sells. Castleman intended his statements to reach O’Connor’s actual or potential customers. His statements constituted protected speech warning those customers about the quality of O’Connor’s services, not pursuing business for himself. Neither Castleman nor his business stood to profit from the statements at issue, and although he might have been personally gratified by the damage the statements might make to O’Connor’s business, the statements do not fall within the TCPA’s commercial-speech exemption. We thus conclude that the TCPA’s commercial-speech exemption does not apply here.

Notes

The court went into a lengthy discussion of the “oxford comma” again if you enjoy those discussions.

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Texas Supreme Court Defines “commercial-speech exemption” in the Anti-Slapp Law

by | Apr 30, 2018 | Supreme Court | 0 comments

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