Court of Appeals of Texas, Second District, Fort Worth
THE DALLAS MORNING NEWS, INC. AND KEVIN KRAUSE APPELLANTS
LEWIS HALL AND RICHARD HALL, INDIVIDUALLY AND ON BEHALF OF RXPRESS PHARMACIES AND XPRESS COMPOUNDING APPELLEES
THE 43RD DISTRICT COURT OF PARKER COUNTY TRIAL COURT NO.
WALKER, MEIER, and GABRIEL, JJ. WALKER and GABRIEL, JJ.,
concur without opinion.
private individual who sues a media defendant for defamation
over statements of public concern bears the burden to prove
that the statements are false, or not substantially true.
Philadelphia Newspapers, Inc. v. Hepps, 475 U.S.
767, 776-77, 106 S.Ct. 1558, 1564 (1986); KBMT Operating
Co. v. Toledo, 492 S.W.3d 710, 711, 713‒15 (Tex.
2016). In this interlocutory appeal from the denial of a
motion to dismiss under the Texas Citizens' Participation
Act (TCPA), we must determine whether Appellees Lewis Hall
and Richard Hall, individually and on behalf of RXpress
Pharmacies and Xpress Compounding, established by clear and
specific evidence a prima facie case that Appellants The
Dallas Morning News, Inc. and Kevin Krause published false
statements about Appellees and their pharmaceutical
compounding business. See Tex. Civ. Prac. & Rem.
Code Ann. §§ 27.003(a), .005(c) (West 2015), §
51.014(a)(12) (West Supp. 2016). Because we conclude and hold
that Appellees met their burden, and because Appellants'
other issue is unpersuasive, we will affirm.
has been a state-licensed pharmacist for forty-three years.
His son, Richard, has worked in the pharmacy business for
most of his adult life and has operated Lewis's
pharmaceutical business "over the years."
2013, Lewis and Richard formed a "partnership/joint
venture" with Scott Schuster and Dustin Rall. Lewis
handles the pharmaceutical responsibilities, and Richard,
Schuster, and Rall manage the operations, sales, and
marketing aspects of the venture. The business entails
several entities, including RXpress Pharmacies and Xpress
Compounding (collectively RXpress).
is a compounding pharmacy. According to the U.S. Food and
Drug Administration, compounding "is a practice in which
a licensed pharmacist . . . combines, mixes, or alters
ingredients of a drug to create a medication tailored to the
needs of an individual patient." Recent years saw a surge in
the popularity of compounded medications and correlating
growth in the compounding pharmacy industry-including the
revenues that it generated. RXpress was no exception; after
its formation, the business "thrived and made
success enjoyed by the compounding industry, however, has not
been immune from controversy, or consequences. Allegations of
abusive marketing and exorbitant prices have circulated,
pharmacy benefit managers have responded to sharply increased
spending on compounded medications by discontinuing coverage
for compounding ingredients, and the federal government has
investigated and prosecuted compounding pharmacies for
violating federal anti-kickback laws and defrauding
Tricare-the health-insurance program for active and retired
military personnel and their families. One such high-profile
prosecution involved two North Texas men who were accused of
engaging in a complex, conspiratorial kickback scheme that
bilked Tricare out of $65 million.
have been involved in a number of recent lawsuits that are
relevant to the primary issue in this appeal. In September
2015, RXpress sued Ruth E. Haynes, its former accountant, for
falsely representing that she was a certified public
accountant and for advising RXpress in such a way as to cause
it to incur over $12 million in unnecessary federal income
sued Schuster and Rall, their business partners, in January
2016 for fraud, theft, breach of fiduciary duty, and other
torts, alleging, among other things, that their partners had
misled them regarding the purchase of an instate pharmacy and
had wrongfully diverted millions of dollars of partnership
property to themselves.
same month, Xpress Compounding sued Prime Therapeutics, LLC,
a pharmacy benefit manager, for a declaration that Prime was
not entitled to terminate Xpress Compounding from Prime's
February 2016, Ancillary Medical Services Management, LLC
sued Appellees for breach of fiduciary duty and other torts
involving Ancillary's investment in RXpress.
The Dallas Morning News Articles
February and March 2016, Krause authored, and The Dallas
Morning News published, a series of articles that
largely centered around the potentially illegal business
practice in which compounding pharmacies financially
incentivize physicians to write prescriptions for their
products and services. The first article, published on
The Dallas Morning News's website on February 5,
2016, stated that federal authorities were investigating
RXpress, which had been "accused of paying illegal
kickbacks to physicians for writing prescriptions";
explained that federal authorities were investigating other
compounding pharmacies for alleged violations of federal law;
and referenced the Haynes and Schuster/Rall
litigation. The article was republished in the print edition
of The Dallas Morning News the following day.
February 9, 2016, The Dallas Morning News published
an article online that reported on Texas's apparent
effort to crack down on illegal relationships between
compounding pharmacies and physicians (in the form of a
then-new state law that allows regulators to inspect a
pharmacy's financial records). The article stated that
"RXpress Pharmacy, of Fort Worth, is currently being
investigated for possible violations of the anti-kickback law
by the Department of Defense due to its use of Tricare
money." Slightly revised articles were published online
on February 10, 2016, and in print on February 11, 2016. Both
articles contained a substantially similar statement about
February 24, 2016, The Dallas Morning News published
an article online that reported on the arrest of the two
North Texas men who had been indicted for defrauding Tricare
out of $65 million. Referring to RXpress, the article stated
that "The Dallas Morning News recently reported
that a Fort Worth compounding pharmacy is under investigation
in connection with similar allegations."
finally, on March 11, 2016 online and on March 13, 2016 in
print, The Dallas Morning News published an article
that reported on Prime's decision to terminate Xpress
Compounding from its network. The articles, which referenced
the Prime, Haynes, and Ancillary
litigation, led with the following statement, "A North
Texas drug compounding business that's the subject of a
federal health care fraud investigation was recently thrown
out of a private health insurance network over suspicions of
fraud, court records show."
days after the final article was published, Appellees sued
Appellants for libel. Appellees alleged that Appellants had
defamed them by publishing statements that Appellees were
"under investigation by authorities concerning violation
of criminal statutes" and by publishing statements that
accused Appellees of defrauding the federal government,
insurance providers, or both. Appellants timely moved to
dismiss Appellees' claims under the TCPA. Regarding
Appellees' under-investigation claim, Appellants argued
that Appellees could not meet their burden to establish that
Appellants had falsely reported that Appellees were under
federal investigation. Regarding Appellees' defrauding
claim, Appellants argued that the articles had merely
reported on third-party allegations that had been lodged
against Appellees in the Haynes, Prime,
Schuster/Rall, and Ancillary lawsuits and
that Appellees could not meet their burden to establish that
Appellants' coverage of those third-party allegations was
false and not privileged. The trial court denied
Appellants' motion to dismiss and objections to
TCPA protects citizens from retaliatory lawsuits that seek to
intimidate or silence them on matters of public concern.
In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015) (orig.
proceeding). Its purpose is to identify and summarily dispose
of lawsuits designed only to chill First Amendment rights,
not to dismiss meritorious lawsuits. See Tex. Civ.
Prac. & Rem. Code Ann. § 27.002 (West 2015).
the TCPA's two-step dismissal process, the initial burden
is on the defendant-movant to show by a preponderance of the
evidence that the plaintiff's claim "is based on,
relates to, or is in response to the [movant's] exercise
of, " among other things, the right of free speech.
Id. § 27.005(b). If the movant satisfies this
burden, the second step shifts the burden to the plaintiff to
establish "by clear and specific evidence a prima facie
case for each essential element of the claim in
question." Id. § 27.005(c). "[C]lear
and specific evidence" requires a plaintiff to
"provide enough detail to show the factual basis for its
claim." Lipsky, 460 S.W.3d at 591. A
"prima facie case" means "the 'minimum
quantum of evidence necessary to support a rational inference
that the allegation of fact is true.'" Id.
at 590 (quoting In re E.I. Dupont de Nemours &
Co., 136 S.W.3d 218, 223 (Tex. 2004) (orig.
review de novo a trial court's ruling on a motion to
dismiss under the TCPA. United Food & Commercial
Workers Int'l Union v. Wal-Mart Stores, Inc., 430
S.W.3d 508, 511 (Tex. App.-Fort Worth 2014, no pet.). We
consider the pleadings and supporting and opposing affidavits
stating the facts on which the liability or defense is based.
Tex. Civ. Prac. & Rem. Code Ann. § 27.006(a) (West
Appellees' Burden to Establish Falsity Element
is no dispute that the TCPA applies to Appellees' libel
claims. The only dispute is whether Appellees met their
burden to establish the falsity element of their defamation
claims. Specifically, in what we construe as their first of
two issues, Appellants argue that Appellees failed to
establish by clear and specific evidence a prima facie case
(1) that Appellants falsely reported that Appellees were
under federal investigation and (2) that Appellants falsely
reported allegations that were made against Appellees in
other civil lawsuits- that Appellees had defrauded the
federal government, private insurers, or both.
United States Supreme Court and [the Supreme Court of Texas]
long ago shifted the burden of proving the truth defense to
require the plaintiff to prove the defamatory statements were
false when the statements were made by a media defendant over
a public concern, " just like we have here. Neely v.
Wilson, 418 S.W.3d 52, 62 (Tex. 2013). Thus, one element
of Appellees' defamation claims-in fact, the only element
that Appellants challenged in their motion to dismiss-is that
Appellants published a false statement. See D Magazine
Partners, L.P. v. Rosenthal, No. 15-0790, 2017 WL
1041234, at *3 (Tex. Mar. 17, 2017).
approaching the question of falsity, the common law of libel
"overlooks minor inaccuracies and concentrates upon
substantial truth." Masson v. New Yorker Magazine,
Inc., 501 U.S. 496, 516, 111 S.Ct. 2419, 2432‒33
(1991). Therefore, as long as a statement is substantially
true, it is not false. Toledo, 492 S.W.3d at 714.
Logically then, courts utilize the substantial-truth doctrine
in determining the truth or falsity of a defamatory
publication. Neely, 418 S.W.3d at 63. A
publication's truth or falsity depends on whether the
gist of the publication was more damaging to the
plaintiff's reputation than a truthful or accurate
publication would have been. D Magazine, 2017 WL
1041234, at *4; Neely, 418 S.W.3d at 63 ("[I]f
a broadcast taken as a whole is more damaging to the
plaintiff's reputation than a truthful broadcast would
have been, the broadcast is not substantially true and is
actionable."). We determine a publication's gist by
construing the publication "as a whole in light of the
surrounding circumstances based upon how a person of ordinary
intelligence would perceive it." Turner v. KTRK
Television, Inc., 38 S.W.3d 103, 114 (Tex. 2000);
see D Magazine, 2017 WL 1041234, at *4.