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O'Gara v. Binkley

United States District Court, N.D. Texas, Dallas Division

April 24, 2019

TODD O'GARA and WANU WATER INC., Plaintiffs,
v.
JOSEPH P. BINKLEY III, Defendant.

          MEMORANDUM OPINION AND ORDER

          JANE J. BOYLE UNITED STATES DISTRICT JUDGE

         Plaintiffs Todd O'Gara, founder, president, and chairman of Wanu Water Inc., and Wanu Water bring suit against a company investor, Defendant Joseph P. Binkley III, based on his involvement in an alleged orchestrated campaign to harass and damage Plaintiffs' reputations. The alleged campaign took the form of several emails in which Binkley and other investors/directors questioned O'Gara's academic credentials and ability to lead the company, all in an alleged attempt to undermine other directors' and stockholders' confidence in the company and induce breaches of contract. Binkley seeks dismissal of this suit under the Texas Citizens Participation Act (TCPA) and Federal Rule of Civil Procedure 12(b)(6) arguing that the Complaint violates his rights of association and free speech and that O'Gara and Wanu Water fail to state any plausible claims for relief. Having been fully briefed, the Court finds that the TCPA does not apply in federal court, and thus, declines to grant Defendant's Motion to Dismiss pursuant to the TCPA. However, as discussed below, the Court GRANTS Defendant's Motion to Dismiss (Doc. 8) under Rule 12(b)(6).

         I.

         BACKGROUND[1]

         This dispute involves a series of allegedly defamatory emails and interactions between investors[2] of Wanu Water and the founder and president of the company, O'Gara. In 2010, O'Gara founded Wanu Water (formerly known as FLUROwater). Doc. 1, Compl., ¶ 7. The company is a Delaware corporation, based in California, and creates and sells nutrient-infused water. Id. ¶ 2. Binkley is a Texas investor in Wanu Water and as of July 2018, he owned a 0.13% share of the company's outstanding equity. Id. ¶ 3.

         Discussed in more detail below, the events giving rise to this lawsuit began in August 2018, when Binkley and other investors began emailing O'Gara, his legal counsel, and other investors regarding O'Gara's purported academic credentials and management concerns they had. Id. ¶¶ 26-68. Based on this conduct, Plaintiffs filed suit against Binkley on September 28, 2018, invoking this Court's diversity jurisdiction. Id. ¶ 4. Although all the claims are brought under California law and based on the same alleged conduct, the claims are brought by O'Gara individually, Wanu Water individually, or by both Plaintiffs jointly. Specifically, O'Gara brings his own claims for tortious interference with business relations, id. ¶¶ 69-76; tortious interference with contract, id. ¶¶ 77-84; and libel, id. ¶¶ 85-91. Wanu Water brings its own claim for libel. Id. ¶¶ 100-08. And both Plaintiffs bring claims for civil conspiracy, id. ¶¶ 92-99; and unfair and/or unlawful business practices in violation of California's unfair competition laws, id. ¶¶ 109-13.

         On November 5, 2018, Binkley filed this Motion to Dismiss under the Texas Citizens Participation Act (TCPA) and Federal Rule of Civil Procedure 12(b)(6) arguing that the Complaint violates his rights of association and free speech and that Plaintiffs otherwise fail to state any plausible claims for relief. See generally Doc. 8, Mot. to Dismiss. Plaintiffs filed their Response (Doc. 20) to Binkley's Motion, and Binkley filed his Reply (Doc. 25). Binkley's Motion is therefore ripe for the Court's review.

         II.

         DISMISSAL UNDER THE TEXAS CITIZENS PARTICIPATION ACT

         Binkley first seeks dismissal of this suit arguing that Plaintiffs' Complaint is a violation of his rights of association and free speech, and thus, is subject to dismissal under the TCPA, also known as an anti-SLAPP statute. Doc. 8, Def.'s Mot. to Dismiss, 2; see also Serafine v. Blunt, 466 S.W.3d 352, 356 (Tex. App.-Austin 2015, no pet.) (“SLAPP is an acronym for ‘Strategic Lawsuits Against Public Participation'”). Plaintiffs argue that the TCPA does not apply in federal court because it is procedural, and alternatively, even if it were substantive, it would not apply because it conflicts with federal procedural rules. Doc. 20, Pls.' Resp., 5-9.

         A. Which Anti-SLAPP Statute Governs-Texas or California?

         Before the Court can discuss any potential anti-SLAPP statute applicability in this case, the Court must first determine which statute to consider-Texas or California-because they differ in their reach and application. See Diamond Ranch Acad., Inc. v. Filer, 117 F.Supp.3d 1313, 1320 (D. Utah 2015) (“court[s] only engage in a choice of law analysis if a true conflict exists between the two state laws.”).[3] Although the parties agree, for purposes of this motion to dismiss, that California state law governs Plaintiffs' causes of action discussed below, they dispute whether Texas's or California's anti-SLAPP statute applies. Binkley argues that Texas's anti-SLAPP statute should apply since that is where he resides and allegedly made these statements. Doc. 8, Def.'s Mot. to Dismiss, 8. Plaintiffs counter that California's anti-SLAPP statute should apply because even if Binkley made the statements in Texas-which they argue is unclear since his email signature lists a Nashville, Tennessee area code-Binkley cannot overcome the Restatement's presumption in favor of applying the law of a plaintiff's domicile-here, California. Doc. 20, Pls.' Resp., 10-11 & n.6.

         “District courts sitting in diversity apply the choice-of-law rules of the forum state.” Smith v. EMC Corp., 393 F.3d 590, 597 (5th Cir. 2004). Texas uses the “most significant relationship” test provided by the Restatement (Second) of Conflict of Laws for all choice-of-law cases except contract cases in which the parties have agreed to a valid choice of law clause or where there is a statutory directive. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 420-21 (Tex. 1984); Restatement (Second) of Conflict of Laws §§ 6, 145 (1971) [hereinafter “Restatement”].[4] And more specifically, when conducting a choice-of-law analysis regarding a tort claim, Texas courts look to § 145 of the Restatement. TV-3, Inc. v. Royal Ins. Co. of Am., 28 F.Supp.2d 407, 419-20 (E.D. Tex. 1998). The factors to be considered under Restatement § 145 include: “(a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (d) the place where the relationship, if any, between the parties is centered.” Restatement § 145(2). Section 145 further provides that these factors are to be considered “according to their relative importance with respect to the particular issue.” Id.

         Plaintiffs argue that because the Restatement requires the defamation laws of a plaintiff's domicile and place of injury (in this case, California)to generally apply, irrespective of where the defamatory statements were made, California's anti-SLAPP statute should be applied. Doc. 20, Pls.' Resp., 9. However, the fact that California law governs Plaintiffs' substantive claims-e.g., defamation-is not dispositive on this issue since laws from different states can apply to different claims. See Chi v. Loyola Univ. Med. Ctr., 787 F.Supp.2d 797, 803 (N.D. Ill. 2011) (applying Arizona law to plaintiff's defamation claim but applying Illinois's anti-SLAPP statute); see also Spence v. Glock, Ges.m.b.H., 227 F.3d 308, 311 n.6 (5th Cir. 2000) (noting that Texas courts are required to undertake an “issue by issue” choice-of-law analysis). This is because the “issue of whether a statement is defamatory . . . is distinct from the issue of whether the statement is privileged” by a state's anti-SLAPP statute. Chi, 787 F.Supp.2d at 803 (quoting Global Relief Found. v. N.Y. Times Co., 2002 WL 31045394, at *10 (N.D. Ill. Sept. 11, 2002)).

         Instead, in the anti-SLAPP context, courts typically consider the place where the allegedly tortious conduct occurred and the speaker's domicile in determining what state's law to apply.[5] This is because the primary purpose behind an anti-SLAPP statute is to encourage and safeguard its citizens' constitutional rights. See, e.g., Tex. Civ. Prac. & Rem. Code § 27.002. Although it is unclear whether or not Binkley in fact made these allegedly defamatory statements in Texas, it is undisputed that Binkley is domiciled in Texas, which weighs heavily in favor of applying Texas's anti-SLAPP statute.[6] See Underground Sols., Inc., 41 F.Supp.3d at 726 (finding that a speaker's residence is one of the “central” factors to consider in determining which state's anti-SLAPP statute to apply). Thus, the Court finds that applying California's anti-SLAPP statute to a Texas defendant would impede on Texas's interest in protecting its citizens and fulfilling the statute's purpose in a similar way that applying Texas's defamation law to a California plaintiff would infringe on California's interests. The Court therefore will analyze whether Texas's anti-SLAPP statute applies in federal court.

         B. Does Texas's Anti-SLAPP Apply in Federal Court?

         Having found that Texas's anti-SLAPP statute is the one that potentially would apply in this case, the Court must now determine whether it in fact applies under the doctrine set out in Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Texas's anti-SLAPP statute “protects citizens who petition or speak on matters of public concern from retaliatory lawsuits that seek to intimidate or silence them.” In re Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (citing Tex. Civ. Prac. & Rem. Code §§ 27.001-.011). Specifically, “[i]f 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.” Tex. Civ. Prac. & Rem. Code § 27.003(a). The statute's purpose 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.” Id. § 27.002. “To effectuate this purpose, the TCPA creates a special procedure for obtaining the early dismissal of allegedly retaliatory and unmeritorious lawsuits that are based on the defendant's exercise of certain First Amendment rights.” Misko v. Backes, 2018 WL 2335466, at *1 (N.D. Tex. May 4, 2018) (citing In re Lipsky, 411 S.W.3d 530, 539 (Tex. App.-Fort Worth 2013, orig. proceeding)).

         Whether the TCPA applies in federal court is an “important and unresolved issue” in the Fifth Circuit-i.e., whether the TCPA is substantive and does not conflict with federal procedural rules.[7] See Block v. Tanenhaus, 867 F.3d 585, 589 & n.2 (5th Cir. 2017). “To the extent courts in this circuit have signaled that state anti-SLAPP laws apply in federal court, courts have done so in the context of an exercise of diversity jurisdiction, by virtue of the doctrine set out in Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).” Misko, 2018 WL 2335466, at *2 (citing Henry v. Lake Charles Am. Press, L.L.C., 566 F.3d 164, 168-69 (5th Cir. 2009) (“Louisiana law, including the nominally-procedural Article 971 [(Louisiana's anti-SLAPP provision)], governs this diversity case.”); Williams v. Cordillera Commc'ns, Inc., 2014 WL 2611746, at *2 (S.D. Tex. June 11, 2014) (explaining that state anti-SLAPP statutes “are enforceable in federal courts sitting in diversity jurisdiction” by virtue of the Erie doctrine)).

         However, in Henry v. Lake Charles American Press, a case involving an appeal from a denial of a motion to dismiss under Louisiana's anti-SLAPP statute, the Fifth Circuit “stated without explanation that [the] ‘Louisiana [anti-SLAPP] law . . . governs this diversity case.'” Block, 867 F.3d at 589 n.2. Based in part on the lack of an Erie-style analysis in Henry, subsequent Fifth Circuit cases-in an attempt to reconcile Henry with the majority of cases stating that the applicability of anti-SLAPP statutes in federal cases is an open question-have interpreted Henry as “assuming the applicability of [Louisiana's anti-SLAPP statute] for purposes of that case without deciding its applicability in federal courts more generally.” Id. (citing Lozovyy v. Kurtz, 813 F.3d 576, 582-83 (5th Cir. 2015)); see also Cuba v. Pylant, 814 F.3d 701, 706 & n.6 (5th Cir. 2016) (discussing Henry yet still assuming without deciding that Texas's anti-SLAPP statute controls as state substantive law in diversity suits); Culbertson v. Lykos, 790 F.3d 608, 631 (5th Cir. 2015) (“We have not specifically held that the TCPA applies in federal court; at most we have assumed without deciding its applicability.”). Therefore, because the applicability of Texas's anti-SLAPP statute “in federal court is an important and unresolved issue in this circuit, ” Block, 867 F.3d at 589, the Court embarks on determining its application to this case.

         Here, Plaintiffs brought suit pursuant to the Court's diversity jurisdiction. Doc. 1, Compl., ¶ 4. Thus, “[u]nder the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law.” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). And “[i]f there is a ‘direct collision' between a state substantive law and a federal procedural rule that is within Congress's rulemaking authority, federal courts apply the federal rule and do not apply the substantive state law.” Block, 867 F.3d at 589 (citing All Plaintiffs v. All Defendants, 645 F.3d 329, 333 (5th Cir. 2011)). This means that the Court “should not apply a state law or rule if (1) a Federal Rule of Civil Procedure ‘answer[s] the same question' as the state law or rule and (2) the Federal Rule does not violate the Rules Enabling Act.” Abbas v. Foreign Policy Grp., LLC, 783 F.3d 1328, 1333 (D.C. Cir. 2015) (quoting Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 398 (2010)).

         Although the Fifth Circuit has assumed that the TCPA applies in federal court, other circuits, as well as a dissent from the Fifth Circuit, have thoroughly and persuasively addressed this issue. For example, in Cuba v. Pylant, Judge Graves authored a well-reasoned dissent disputing the majority's presumption that the TCPA applies. Instead, Judge Graves went on to conduct an Erie analysis and concluded that:

the TCPA is procedural and must be ignored. The TCPA is codified in the Texas Civil Practice and Remedies Code, provides for a pre-trial motion to dismiss claims subject to its coverage, establishes time limits for consideration of such motions to dismiss, grants a right to appeal a denial of the motion, and authorizes the award of attorneys' fees if a claim is dismissed. This creates no substantive rule of Texas law; rather, the TCPA is clearly a procedural mechanism for speedy dismissal of a meritless lawsuit that infringes on certain constitutional protections. Because the TCPA is procedural, I would follow Erie's command and apply the federal rules.

Id. at 719 (internal citations omitted). Judge Graves went on to state that even if the TCPA were deemed substantive, it would still yield to federal law because it conflicts with federal procedural rules-namely with Federal Rules of Civil Procedure 12(b)(6) and 56 because the TCPA heightens the pleadings standards and burdens of proof required to defeat an anti-SLAPP motion. Id. at 719-20 (noting that to survive a motion to dismiss the TCPA requires evidence of a claim to be “unambiguous, sure, or free from doubt, ” whereas Rule 12(b)(6) only requires facts sufficient to state a claim that are plausible on their face). Similarly in Abbas v. Foreign Policy Group, LLC, the D.C. Circuit held that federal courts sitting in diversity cannot apply the Washington D.C. anti-SLAPP statute's special motion-to-dismiss provision because it conflicts with Rules 12 and 56. 783 F.3d at 1333-34.

         Having reviewed the issue, the Court joins other courts in agreeing with and adopting Judge Graves' dissent in Cuba, and thus, the Court finds that Plaintiffs' claims are not subject to dismissal under the TCPA in federal court. See, e.g., William Noble Rare Jewels, L.P. v. Sky Glob. L.L.C., 2019 WL 935954, at *1-2 (N.D. Tex. Feb. 25, 2019) (Godbey, J.); Rudkin v. Roger Beasley Imports, Inc., 2017 WL 6622561, at *2-3 (W.D. Tex. Dec. 28, 2017), report and rec. accepted, 2018 WL 2122896 (W.D. Tex. Jan. 31, 2018) (Yeakel, J.). Even if the TCPA were considered substantive, as Judge Graves's dissent and the D.C. Circuit's opinion in Abbas found, the Court finds that the TCPA clearly conflicts with Rules 12 and 56, which already addresses the same question of when a party's claims are subject to pretrial dismissal in federal court. See Ins. Safety Consultants LLC v. Nugent, 2016 WL 2958929, at *5 (N.D. Tex. May 23, 2016) (Boyle, J.) (citing Abbas and holding that plaintiffs' state-law claims were not subject to dismissal under the TCPA). Accordingly, the Court declines to apply the TCPA in federal court, and thus, declines to grant Binkley's Motion to Dismiss on this ground.

         III. DISMISSAL UNDER RULE 12(b)(6)

         Next, the Court turns to Defendant's grounds for dismissal under Rule 12(b)(6).

         A. Rule 12(b)(6) Standard

         Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 12(b)(6) authorizes a court to dismiss a plaintiff's complaint for “failure to state a claim upon which relief can be granted.” Id. 12(b)(6). In considering a Rule 12(b)(6) motion to dismiss, “[t]he court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). “The court's review [under 12(b)(6)] is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the ...


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