Supreme Court Limits Forum Shopping in Patent Cases

In a closely-watched case, the Supreme Court greatly narrowed venue for patent cases.  The ruling will limit forum shopping and greatly reduce the number of cases filed in the Eastern District of Texas, which is perceived as the most favorable district for plaintiffs bringing patent claims.

In recent years as many as much as 30-40% of all patent infringement suits in the country were filed in the rural Eastern District of Texas.  Plaintiffs ranged from giant tech companies to non-practicing entities, known pejoratively as “patent trolls”—meaning individuals or companies that do not manufacture any products but attempt to enforce patents far beyond their actual value through frivolous and expensive litigation in places that were perceived to be friendly to plaintiffs.

How did this happen?  Federal law has a venue provision specific to patent cases, 28 U.S.C.  § 1400(b).  The statute provides that suits for patent infringement may be brought only “in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”  In 1957, the Supreme Court held that for purposes of Section 1400(b), a domestic corporation “resides” only in its state of incorporation.  Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957).  This meant most patent cases had to be filed in the defendant’s home state or where they had a regular and established place of business.

In 1988, Congress adopted a new definition of “reside” as it applies in the general federal venue statute, 28 U.S.C. § 1391(c).  The new statute provided that except as otherwise provided by law and for all venue purposes, a corporation can be sued “in any judicial district in which such defendant is subject to the court’s personal jurisdiction.”  The Federal Circuit held that the new general venue statute controlled over the older and more restrictive patent venue statute.  VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574, 1578 (Fed. Cir. 1990).  Thus, for over 25 years, patent plaintiffs have been able to file suits against major American manufacturers almost anywhere they wanted.  Venues that were perceived to be favorable to patent plaintiffs—like the Eastern District of Texas—were inundated with patent suits.  Entire support systems of local lawyers as well as hotels, restaurants, and temporary office locations grew to support the flood of patent cases.

Those days are now at an end.  In an 8-0 opinion, the Supreme Court held that the original patent venue statute and the Supreme Court’s 1957 interpretation continues to be the rule for patent cases.  Corporate defendants can no longer be sued anywhere the plaintiffs want.  The plaintiffs’ favored districts will no longer be available for nearly every suit.  In Texas, the Eastern District federal courts and all of the support systems will face a major contraction as the new ruling takes effect.  The ruling is being hailed by large corporations as a major rebalancing of litigation fairness in this very lucrative and expensive area.

TC Heartland LLC v. Kraft Foods Group, No. 16-341 (May 22, 2017)

Whose Right is it Anyway? Unconstitutional Speaker Discrimination in Texas’ Anti-SLAPP Scheme

Freedom of speech and thought lie at the core of liberty.  Though many philosophers, statesmen, and legal practitioners have opined on the value of free speech and thought, Justice Louis Brandies best captured the value of free speech and thought in our constitutional scheme:

Those who won our independence believed that the final end of the state was to make [people] free to develop their faculties, and that in its government the deliberative forces should prevail over the arbitrary. . . They believed that freedom to think as you will and speak as you think are means indispensable to the discovery and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty; and that this should be a fundamental principle of American government.

Whitney v. California, 274 U.S. 357, 375 (1927) (Brandeis, J., concurring).

Despite its central place in our constitutional scheme, the right to free speech is extremely fragile. Government imposed limitations to speech and thought sometimes elude detection, because government does not always directly regulate speech and, even when it does, the limitations are not always obvious.  Notwithstanding the sometimes opaque nature of direct impositions, a major threat to speech and thought comes from indirect government impositions.

SLAPP Suits as Indirect Government Impositions to Speech

Strategic litigation against public participation (SLAPP) provides one example of an indirect governmentally-imposed limitation to speech and thought.  These are suits brought by one party in an effort to silence another party against whom the suit is filed.  The prototypical SLAPP suit involves a defamation claim against the defendant.  Though government is not directly involved in chilling or silencing the defendant’s speech, the judicial system is the means by which the plaintiff chills or silences the defendant’s speech.  The threat of a potential judgment looming over the defendant implicates the government in the plaintiff’s effort to chill or silence the defendant’s speech.

Texas’ Anti-SLAPP Legislation

Texas enacted Anti-SLAPP legislation to curb litigants’ efforts to employ the judicial system as a means to silence or chill another’s speech.  The Texas Citizens Participation Act (TCPA) provides pretrial procedural checks against litigation designed to chill a party’s right to free speech, among other first Amendment rights.  See Tex. Civ. Prac. & Rem. Code §§ 27.001-011.  The Act allows a party to file a motion to dismiss the case, with an award of attorney fees and costs to the movant if successful on the motion.

This procedure is available to any party, regardless of whether it is an individual or entity and regardless of whether the suit is against the person for an act committed in his or her individual capacity or in his or her capacity as a member of the electronic or print media.  There are, however, four exemptions. Commercial speech falls outside the TCPA.  Suits for bodily injury, wrongful death, or survival also fall outside of the TCPA, as do insurance code suits or actions arising out of insurance contracts.   Enforcement actions by the state also do not fall within the TCPA.  See Tex. Civ. Prac. & Rem. Code § 27.010(a)-(d).

The Act also provides pretrial appellate procedural checks against suspected SLAPP suits.  If the party alleging a First Amendment right violation is unsuccessful in his motion to dismiss, that party may take an automatic, accelerated interlocutory appeal on the trial court’s denial of the motion to dismiss.  See Tex. Civ. Prac. & Rem. Code §§ 27.008, 51.014(a)(12).  Again, this appellate procedure is available to any party asserting a violation of his right to free speech, association, or to petition government.

The Texas Civil Practice and Remedies Code provides an additional appellate procedure to members “of the electronic or print media, acting in such capacity, or a person whose communication appears in or is published by the electronic or print media.”  Tex. Civ. Prac. & Rem. Code § 51.014(a)(6).  If a party falls into this select category, that party may take an automatic, accelerated interlocutory appeal on a trial court’s denial of a motion for summary judgment based on a claim or defense arising under the free speech or press clause of the First Amendment.  Id.

Speaker Favoritism in Texas’ Anti-SLAPP Appellate Procedure

The significance of this additional appellate procedure for members of the electronic or print media, and for a person whose article appears in electronic or print media, is that this select group gets two bites at the appellate apple by way of an automatic interlocutory appeal.  If, for example, a person is sued for defamation for his op-ed piece published online, he may file a motion to dismiss and subsequently appeal the trial court’s denial without first seeking permission to take the issue on interlocutory appeal.  Even if he loses the first interlocutory appeal, he may then file a motion for summary judgment and subsequently appeal the trial court’s denial again without seeking permission to take the issue on interlocutory appeal.

Parties who do not fall within this select group get one-shot at an automatic, accelerated interlocutory appeal.  Though TCPR section 51.014(a)(6) aims to keep free speech channels open, it only does so for a select group of speakers.  All other speakers are directly excluded.  So this raises the question, is section 51.014(a)(6) an example of unconstitutional speaker-based discrimination?

The United States Supreme Court has held that it is “axiomatic that the government may not regulate speech based on its substantive content or the message it conveys.” Rosenberger v. Rector & Visitors of the Univ. of Va., 515 U.S. 819, 829 (1995).  Following this precept, government “may not favor one speaker over another.”  Id.  Government action that discriminates against speech based on its message is presumed unconstitutional.  Id.  Viewpoint discrimination, however, is a more egregious form of content discrimination:  “When the government targets not subject matter, but particular views [or ideology, opinion, or perspective] taken by speakers on a subject, the violation of the First Amendment is all the more blatant.”  Id.; see also R. A. V. v. St. Paul, 505 U.S. 377, 391 (1992).

So far, lower courts have only obliquely grazed this issue.  In Main v. Royall, for example, the Dallas Court of Appeals had to decide whether book authors and publishers fell within section 51.014(a)(6)’s scope, i.e., whether they could be construed as members of the electronic or print media.  348 S.W.3d 381 (Tex. App.–Dallas 2011, no pet.).  The court focused on the legislative purpose driving section 51.014(a)(6)—“to provide members of the media with a mechanism to obtain immediate appellate review . . . of issues arising under the free speech and free press clause [to] avoid[] the time and expense of a trial when the defendant may be entitled to a constitutional or statutory privilege precluding liability”— and held that book authors and publishers comfortably fit into the forms of media protected by the statute.  Id. at 386-87.

The court dismissed the plaintiff’s argument that applying the statute to book authors would require future courts to apply the statute to anyone “with a computer, typewriter, or printer” and exclude only those persons writing by pen and pencil.  Id.  This latter issue was one the court did not have to decide to dispose of the matter.  Id.  But it is an issue that the courts must, at some point, confront.

A right

Perhaps a court may construe section 51.014(a)(6) to apply to any person writing by way of computer, or typewriter, and, perhaps a court may construe the statute to reach people writing with a pen or pencil.  The statute clearly excludes oral communications made outside of the presence of cameras, computers, or other media.  The statute would also likely not apply to any communication between persons by way of text message.

Selective procedural protection under section 51.014(a)(6) raises three related problems: First, affording media personnel and outlets additional First Amendment protection over ordinary citizens raises the specter of favored viewpoints, which is odious to the First Amendment.  Perhaps more people value an opinion piece published on CNN.com over a competing opinion posted on a neighbor’s personal blog. The value in securing an equal opportunity for your neighbor publicly to voice his opinions and concerns lies in part in the act itself, an act of civic engagement; and in part on the content itself, which promotes the search for truth and contributes to the market place of ideas; and, finally, in part on its secondary function, as a means through which ordinary citizens can improve journalistic rigor—an often neglected value in the age of “fake news”—and political governance.

Second, and related to the importance of civic engagement, affording “media” outlets and personnel greater First Amendment protection than ordinary citizens adds to civil discord and distrust.  Even before, but far more after the Supreme Court decided Citizens United v. Federal Election Commission, there has been public clamor over corporate influence in government and money-backed interests potentially undermining our democratic processes.  That The Dallas Morning News is part of the press and, thereby, explicitly protected by the First Amendment should not veil the fact that The Dallas Morning News is a for-profit corporate body, owned by A.H. Belo Corporation.  And, tellingly, section 51.014(a)(6) was enacted to afford extra First Amendment protection to media outlets eighteen (18) years before similar, though not the same, protection was afforded to every other person in section 27.  Freedom of the press, freedom of speech, and the right to petition the government are inseparable rights, entitled to equal constitutional protection, not one greater than the other.  See McDonald v. Smith, 472 U.S. 479, 482-485 (1985).

Third, and related to the second, section 51.014(a)(6) provides less protection to the people who often need the most protection from baseless suits designed to silence them.  It was not lost on the legislature when it passed section 51.014 that litigation costs alone are speech prohibitive.  See House research Org., Bill Analysis, Tex. S.B. 76, 73rd Leg., R.S. (41) (stating that the purpose of the section is “to allow a newspaper, radio station or television station that was sued for libel to make an immediate appeal of a judge’s refusal to grant a summary judgment” so that an appellate court may “sort out unmeritorious libel cases before a case enters the time-consuming and expensive trial phase.”).  Although section 27.003 affords every person similar protection to section 51.014(a)(6), only media parties have the option to allow the sixty-day deadline to file a motion to dismiss to pass and, instead, opt into some discovery to file an informed summary judgment motion, leveraging an automatic and accelerated appeal against both the non-movant and the trial judge.   If an ordinary citizen loses on a section 27 motion to dismiss and loses on an automatic interlocutory appeal, he must bear the cost of further litigation, all the way to trial if he does not settle or win on summary judgment.

Conclusion

Texas’ Anti-SLAPP scheme provides a necessary check against indirect government impositions to free speech, a free press, and the right to petition the government.  Though its direct statutory measures in section 27 afford equal constitutional protection to all parties whose First Amendment rights are threatened by a SLAPP suit, its direct statutory measure in section 51.014(a)(6) favors media speakers over ordinary speakers.  Implied in the right to speak is the recipient’s right to listen, a right to receive information; likewise, implied in the right to publish is a right to collect information.  See Richmond Newspapers v. Va., 448 U.S. 555, 599 n.15 (1980) (Stewart, J., concurring).  When government decides who may speak, it also decides what one may hear; when government decides who may publish and by what means, it also decides what information one may collect to inform his or her understanding of this limited life he or she has.  The right to freedom of speech is a very fragile right; one must be on guard to detect subtle impositions to it—indeed, an imposition may sometimes come in the guise of protecting the very right it diminishes.

Tortious Interference with Inheritance Rights

The question of whether Texas recognizes a cause of action for tortious interference with inheritance rights will go before the Texas Supreme Court in February.  The Court granted the petition in a case from the Amarillo Court of Appeals on December 23, 2016.  Justice Quinn wrote the majority opinion in Jackson Walker, LLP v. Kinsel, No. 07-13-00130-CV, 2015 WL 2085220 (Tex. App.—Amarillo Apr. 10, 2015, pet. granted), a case transferred from the Fort Worth Court of Appeals.  In the Supreme Court, the case is styled Kinsel v. Lindsey, no. 15-0403.

Justice Quinn wrote that neither Amarillo nor Fort Worth have recognized the cause of action, which is described in § 774B of the Restatement (Second) of Torts and, “it is not for intermediate courts to create new causes of action.”  A dissent authored by Justice Pirtle cited cases from 12 courts of appeals that have at least mentioned the cause of action.  The dissent also stated that six intermediate appellate court cases, including two from Amarillo, had recognized the cause of action and that no court has expressly rejected the cause of action.  Disagreeing with the dissent, the majority opinion stated that no Texas appellate court had recognized the cause of action.

Almost a year after the Walker opinion, the Austin court of appeals did expressly reject the cause of action.  Archer v. Anderson, 490 S.W.3d 175 (Tex. App.—Austin 2016, pet. filed), reversed a $2.5 million judgment.  A petition is pending in this case (no. 16-0256).  Full briefing was completed in late December.  It is likely the Supreme Court will grant that petition and hear the cases together.

Whether one can even have inheritance “rights” is an issue.  The Archer opinion notes that a prospective beneficiary’s interest in receiving an inheritance is merely an “expectancy or hope.”  However, most of the other opinions have not focused on that issue.  The cases usually arise from a situation in which a decedent had a prior will specifically dividing property among individuals and changed it to exclude or dilute those individuals’ interests, allegedly because of interference by one or more of the individuals who ended up with a much greater share of the estate under the new will.

This issue has been percolating over the last two decades and is ready for Supreme Court analysis.  Stay tuned.

Jackson Walker, LLP v. Kinsel, No. 07-13-00130-CV

Anderson v. Archer, No. 03-13-00790-CV

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Using Texas’ Anti-SLAPP Statute to Combat SSAPP (Strategic Sanctions Against Public Participation)

Texas, like many other states, enacted legislation to curb meritless lawsuits whose purpose lies solely in chilling a person’s right to free speech and/or to petition his or her government.  Under Texas’ Anti-SLAPP (Strategic Litigation Against Public Participation) law, a party may file a motion to dismiss a legal action which is “based on, relates to, or is in response to [his or her] exercise of the right of free speech, right to petition, or right of association.” Tex. Civ. Prac. & Rem. Code § 27.003(a).   The statute is designed to protect every person’s right to exercise his or her First Amendment communicative rights and does so by nipping SLAPP suits in the bud (at earliest stage of litigation) and by awarding to the party whose speech rights have been burdened by meritless litigation court costs, attorney fees, and other expenses incurred in defense of the meritless suit.  See Tex. Civ. Prac. & Rem. Code §§ 27.002, 27.009.

A growing tactic by defendants, which includes counter-defendants and cross-defendants, is to include in an answer to a lawsuit, counterclaim, or cross-claim, a counter-claim against the plaintiff, counter-plaintiff, or cross-plaintiff for attorney fees and other damages pursuant to Texas Civil Practice & Remedies Code Chapter 10 and Texas Rule of Civil Procedure 13.   Chapter 10 authorize a court to sanction a party for filing a pleading or motion for an improper purpose or for filing a pleading or motion which lacks factual or legal support.  Rule 13 authorizes sanctions against a party who, in bad faith or for the purpose of harassment, files any groundless document with the court.

Notably, a defendant’s Answer is likely not the proper place to request sanctions against another party; this is especially true with respect to Rule 13 sanctions, which must be requested by motion. See Tex. R. Civ. P. 13.  But, often the defendant does not immediately secure a hearing on the requested sanctions.  Rather, the defendant simply sits on the request for sanctions, most likely as “leverage” toward some early resolution (settlement or dismissal), or in hopes that discovery will yield some evidence of bad faith or groundlessness to later support sanctions.

This strategic use of sanctions threatens to chill a person’s right to petition his or her government, and it certainly serves as an imposition to that same right.  So, the question arises, can the Anti-SLAPP statute be used as an Anti-SSAPP (Strategic Sanction Against Public Participation) measure?  The answer may be yes.

Whenever the Chapter 10 or Rule 13 sanction is predicated on a petition or other pleading which requests legal or equitable relief, the right of the petitioner to petition his or her government is implicated.  The Act defines “exercise of the right to petition” as “a communication in or pertaining to . . . a judicial proceeding.”  Tex. Civ. Prac. & Rem. Code § 27.001(4)(A)(i).  Since both Chapter 10 and Rule 13 arise in the context of filings in a judicial proceeding, their use falls within the Act’s definition of the exercise of the right to petition.

The Act defines “legal action” as “a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal or equitable relief.” Tex. Civ. Prac. & Rem. Code § 27.001(6).  Insofar as Chapter 10 or Rule 13 sanctions are asserted via a pleading or motion, they would qualify under the first part of this definition. But the requested sanctions under Chapter 10 or Rule 13 must also constitute a form of legal or equitable relief in order to fall under Chapter 27.  The defendant requests for attorney fees, court costs and related expenses as the appropriate sanction, is a request for legal relief.

Obviously, Chapter 10 and Rule 13 would not qualify as quintessential money damages, which fall under legal relief.  These sanctions are imposed because of the abuse of the procedural rules or injury to legal processes.  Chapter 10 and Rule 13 allow the court to sanction a party for abusing his or her right to petition, for using his or her government as a means to harm or harass a fellow citizen. These sanctions are not imposed primarily to rectify a wrong done to any other party.

However, Chapter 27 is not limited to “quintessential damages” or “quintessential claims.”  Chapter 27 has a broad purpose which would reach SSAPP practices: “to encourage and safeguard the constitutional rights of persons to petition . . . 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 § 27.002.

Of course, one may always, as a form of relief, move for Chapter 10 or Rule 13 sanctions in response to another’s request for Chapter 10 or Rule 13 sanctions.  Unlike Chapter 10 and Rule 13, though, it is mandatory for the court to award court costs, attorney fees, and other expenses to a successful movant under Chapter 27, and the court may order sanctions against the party employing SSAPP to deter similar future conduct.  See Tex. Civ. Prac. & Rem. Code § 27.009(a)(1)-(2).  In this manner, Chapter 27 provides a greater remedy than Chapter 10 or Rule 13 to a party exercising her right to petition her government, when she is faced with a challenge to that right via legal procedural rules.

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Fort Worth Court of Appeals Considers Parental Rights of Sperm Donor

In our post-Obergefell world, it is expected that the courts will be grappling with a variety of same-sex family law issues.  One group of such issues relates to artificial reproductive technology (“ART”), medical technology used to achieve pregnancy using techniques such as surrogacy, sperm donorship, and in vitro fertilization.

In In re P.S., No. 02-16-0008-CV, 2016 Tex. App. LEXIS 11657 (Tex. App.—Ft. Worth Oct. 27, 2016, no pet. h.). the Fort Worth Court of Appeals was asked to consider the parental rights of a man who donated sperm to a woman who wanted to raise the child with her same-sex partner.

In P.S., mother and father were friends.  Mother, who is gay, wanted to have a child, so she asked father to donate sperm.  Father collected his sperm and gave it to mother, who inseminated herself and conceived a child.  When the child was born, father signed an acknowledgement of paternity and the child’s birth certificate.

After the child was born, father lost contact with mother for a short period of time.  Mother then married her girlfriend, rescinded the acknowledgment of paternity that father had signed, and asked father to relinquish his parental rights to the child.  Father sought assistance from the Office of the Attorney General (“OAG”) because he wanted to be able to have possession of the child.

The trial court signed an order establishing the parent-child relationship between the child and father, appointed father and mother joint managing conservators, ordered father to pay child support, and set up a possession schedule for father.  Mother appealed, arguing, in pertinent part, that father should not be considered a parent because he was simply a “donor” because the Texas Family Code provides that a “donor” is not a parent of a child conceived by assisted reproduction.

The Fort Worth Court of Appeals analyzed the pertinent provisions of the Texas Family Code.  The court found that, while the Family Code does state that a “donor” is not a parent of a child conceived by means of assistive reproduction, a “donor” is defined as “an individual who provides…sperm to a licensed physician to be used for assistive reproduction.  Because father provided his sperm directly to mother and not through a licensed physician, he did not meet the statutory definition of “donor.”  Therefore, the Family Code did not prohibit him from being named as a parent.  The court of appeals affirmed the trial court.

In re P.S., No. 02-16-0008-CV, 2016 Tex. App. LEXIS 11657 (Tex. App.—Ft. Worth Oct. 27, 2016, no pet. h.)

The Interplay Between Federal Rule 56 and Daubert

The Fifth Circuit Court of Appeals’ opinion in Operaciones Tecnicas Marinas, SAS v. Diversified Marine Services, LLC illustrates the interplay between the requirements of Federal Rule of Civil Procedure 56—the summary judgment rule—and the requirements of Daubert case law that an expert adequately exclude alternative causes.

Diversified Marine Services, LLC (Diversified) was called upon to repair the engines of two vessels owned by Operaciones Tecnicas Marinas, SAS (OTM).  While the scope of the oral contract was disputed, the parties acknowledged that the initial repair estimate of $100,000-$120,000 ultimately cost OTM $345,000.  The boats were picked up and put to sea.  Four hours later the crews were forced to shut off the malfunctioning center engines.  The boats had to be towed to Columbia.

OTM filed its action alleging breach of contract, negligence and breach of warranty.  In the trial court, Diversified filed a motion for summary judgment under Rule 56, and in response OTM offered the testimony of its expert that the condition of the engines upon inspection in Cartegena was inconsistent with engines that had been recently rebuild or overhauled.  OTM concedes it had not attempted to prove the “precise cause” of the engines’ malfunction; instead it maintained that it presented sufficient evidence to create a dispute of a material fact.  The district court nevertheless granted Diversified’s motion for summary judgment.

On appeal, the Fifth Circuit reversed, holding that all OTM had to show at the summary judgment stage of the litigation is that there was a dispute of a material fact.   Because OTM’s expert saw no evidence of engine overhauls, a material fact was in dispute.  The Court thus vacated the judgment and remanded the case back to the district court for further proceedings.

Operaciones Technicas Marinas, SAS v.Diversified Marine Services, LLC, No. 15-30932 (5th Cir., Aug. 5, 2016, unpublished).

The Intersection of the Anonymous Right to Free Speech, the Texas Citizens Participation Act, and Rule 202 Pre-Suit Discovery

The Austin Court of Appeals recently considered how the Texas Citizens Participation Act (TCPA) applies to a Rule 202 petition for pre-suit discovery in a case involving anonymous online speech.  The TCPA requires a court to dismiss a legal action when a movant shows the action relates to the movant’s exercise of free speech rights.  Rule 202 of the Texas Rules of Civil Procedure permits a person to petition a court for an order authorizing depositions before a suit is filed in order to investigate a potential claim or suit.  The Austin appellate court was called upon to answer the question of how these two requirements coexist.

In In re Chris Elliott, No. 03-16-00231-CV (Tex. App—Austin Oct. 7, 2016), PumpStopper.com, which is registered to Chris Elliott, published an article reporting negatively about MagneGas, a Delaware technology company.  MagneGas filed a Rule 202 Petition and a Motion to Compel Elliott’s deposition to investigate a potential claim against “the authors, publishers, and distributors” of The Pump Stopper, who MagneGas alleged made false and misleading claims about the company.

John Doe 1 (“Doe”), who identified himself as an author, publisher and/or distributor who utilizes the website, filed a TCPA motion to dismiss the Rule 202 petition.  Doe argued the Rule 202 petition related to Doe’s exercise of his right to free speech and the rights of free speech of other potential defendants.

After a brief non-evidentiary hearing, the trial court ordered Elliott’s deposition.  Elliott then filed a writ of mandamus with the Austin Court of Appeals and sought emergency relief.

The court of appeals concluded that Doe’s TCPA motion to dismiss was sufficient to invoke the TCPA and to stay discovery.  The court held that the TCPA’s definition of “legal action” is broad and encompasses a Rule 202 petition, as it includes “a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal or equitable relief.  The court noted that the TCPA’s language specifically states that although the court may allow specified and limited discovery relevant to the TCPA motion to dismiss on a showing of good cause, otherwise all discovery is suspended until the court has ruled on the motion to dismiss.  Because the district court’s order allowing Elliott’s deposition was not the specified and limited discovery contemplated by the TCPA, the appellate court held that the district court had abused its discretion by permitting the deposition before ruling on Doe’s TCPA motion to dismiss.

In re Chris Elliott, No. 03-16-00231-CV (Tex. App.–Austin Oct. 7, 2016).

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Federal Subject Matter Jurisdiction is not Lost by Voluntary Dismissal of the only Claim Conferring Jurisdiction

The Fifth Circuit has reiterated the rule that federal subject matter jurisdiction is measured at the time of removal and is not destroyed by subsequent events including the voluntary dismissal of the only claim conferring federal question jurisdiction.

In GlobeRanger Corp. v. Software AG, No. 15-10121 (5th Cir. Sept. 7, 2016), the court untangled a jurisdictional knot worthy of a law school exam.  GlobeRanger sued Software AG in federal court for trade secret misappropriation.  Software AG objected claiming no federal jurisdiction so GlobeRanger dismissed and refiled in state court asserting numerous claims including conversion.  Software AG then removed the case arguing that most of the claims were preempted and barred by the federal Copyright Act.  GlobeRanger moved to remand but the district court denied the motion and dismissed the case under Rule 12(b)(6), leading to the first appeal. GlobeRanger Corp. v. Software AG, 691 F.3d 702, 709 (5th Cir. 2012) (“GlobeRanger I”) held that at least some of the factual allegations were outside the subject matter of the Copyright Act and therefore not preempted.  It also affirmed the denial of GlobeRanger’s motion to remand.  The opinion suggested that the district court could have found on remand with a more developed record that the conversion claim was not fully preempted.  But that issue was never reconsidered because GlobeRanger dropped the conversion claim, leaving only a state law claim for misappropriation of trade secrets to be tried in federal court under supplemental jurisdiction.

The jury found that Software AG had misappropriated trade secrets and awarded $15 million to GlobeRanger, leading to the second appeal.  In the second appeal the parties’ jurisdictional positions again flipped from where they were in GlobeRanger I.  Now GlobeRanger argued that there was federal jurisdiction while Software AG argued there was none.

Software AG argued that GlobeRanger was in a jurisdictional dilemma.  Either the trade secret claim was governed and preempted by federal copyright law, or it wasn’t governed by federal law and there was no federal jurisdiction.

The circuit court began with the preemption question, whether the misappropriation of trade secrets claim was equivalent to the anti-copying principle of federal copyright law.  It agreed with GlobeRanger that state law prevents acquisition through a breach of a confidential relationship or improper means and thus involves an extra element not found in copyright law.  “Because trade secret law protects against not just copying but also any taking that occurs through breach of a confidential relationship or other improper means, all ten circuits that have considered trade secret misappropriation claims have found them not preempted by the Copyright Act.”

The court then considered Software AG’s alternative argument that no federal question jurisdiction existed (the only asserted basis for federal jurisdiction) so the case should have been remanded to state court.  The opinion started with the “fundamental principle” that jurisdiction is determined at the time of removal, citing Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939).  A dismissal of some claims does not undo an initial determination of jurisdiction.  It does create a question whether the remaining state law claims should be retained as a discretionary exercise of the court’s supplemental jurisdiction, but Software AG never asked the district court to exercise that discretion and thus waived the issue.

Ironically, GlobeRanger’s federal judgment was saved by its dismissed conversion claim.  The court found that the original complaint alleged conversion of only intangible property, which is preempted by federal copyright law and thus supported federal question jurisdiction at the time of removal.  Even though the conversion claim was later dismissed, the district court continued to have supplemental jurisdiction over the state law misappropriation of trade secrets claim.  So by asserting a claim that was preempted and barred by federal law, GlobeRanger was able to retain a federal court verdict and judgment over a purely state law claim.

GlobeRanger Corp. v. Software AG, No. 15-10121 (5th Cir. Sept. 7, 2016)

DOES A DEPOSITION ON WRITTEN QUESTIONS IN LIEU OF AN AFFIDAVIT CONCERNING COST & NECESSITY OF SERVICES SATISFY TEXAS CIVIL PRACTICE & REMEDIES CODE §18.001?

If you are defense counsel in a personal injury suit, you may be accustomed to receiving an affidavit concerning cost and necessity of services from plaintiff’s counsel immediately or shortly following your answer to the suit. In many cases you may not know whether the case warrants hiring an expert to controvert the affidavit within Texas Civil Practice and Remedies Code Section 18.001’s thirty-day time frame.  To avoid possible exclusion of controverting evidence, you will need to file a motion for leave with the court or secure a Rule 11 agreement with plaintiff’s counsel to file a controverting affidavit.

But what if you receive notice of a deposition on written questions by plaintiff’s counsel to the plaintiff’s medical service providers and subsequently have the responses served on you? If those written questions include whether the costs of those services were reasonable and the services necessary, could plaintiff’s counsel use the deposition on written questions to prove the reasonableness and necessity of costs and services under Section 18.001?

Defense counsel must be prepared to respond appropriately. So the question arises: Is there any meaningful difference between an affidavit and a deposition that would prevent the application of Section 18.001 to the latter?

Black’s Law Dictionary distinguishes between an “affidavit” and a “deposition.” An affidavit is defined as a “voluntary declaration of facts written down and sworn to by a declarant.” Affidavit, Black’s Law Dictionary (10th ed. 2014).  A “deposition” is defined as a “witness’s out-of-court testimony that is reduced to writing for later use in court or for discovery purposes.” Deposition, Black’s Law Dictionary (10th ed. 2014).

On their face, these definitions look similar, but affidavits and depositions are different in practice:

“Definition of the term ‘Deposition’ (Depositio). In the civil law it meant simply the testimony of a witness. In very old English practice, simply the written testimony of a witness. In modern practice it means the testimony of a witness given or taken down in writing, under oath or affirmation, before a commissioner, examiner, or other judicial officer, in answer to interrogatories and cross interrogatories, and usually subscribed by the witness. A deposition is therefore distinguished from an affidavit, which is always an ex parte statement drawn up in writing without any formal interrogation, and signed and sworn to by the party making it, although in affidavits the party making it is constantly called a deponent, and said to depose.”

Deposition, Black’s Law Dictionary (10th ed. 2014).

Section 18.001 requires a party to serve an “affidavit.” A strict reading of the statute would exclude a deposition on written questions. After all, a deposition on written questions to a non-party, like a medical service provider, employs the coercive power of a court to require the non-party to answer. See Tex. R. Civ. P. 200, 205.  This is not present with affidavits.  Also, unlike with affidavits, another party may object to the written questions and serve cross-questions “on all other parties,” and the other parties may subsequently serve “redirect questions on all other parties.” See Tex. R. Civ. P. 200.

On the other hand, the purpose of the statute was to save time and expenses to litigants and inconvenience to medical providers by providing a simple procedure to prove up the reasonableness and necessity of medical expenses.  Were one to look at the purpose of the statute, he or she may conclude that form should not be put before substance, so that either an affidavit or deposition on written questions may be used so long as the information included in the latter satisfies Section 18.001.  This conclusion would be especially compelling if an opposing party chose to forego serving or failed to serve objections and cross-questions in response to the notice of deposition on written questions by the plaintiff.

For defense counsel, pending some clarification by the legislature or the courts, the best practice would be to treat a deposition on written questions as if it satisfies Section 18.001. Depending on when the notice of deposition on written questions to a plaintiff’s medical service provider is served, you may not be in a position to serve (meaningful) objections and cross questions in response.  File a controverting-affidavit within the statutory time frame or file a motion for leave to do so.  If for some reason you did not file a controverting affidavit, or if you filed a motion for leave which was denied, then object in your pretrial materials—for example in a motion in limine—and in trial to the use of a deposition on written questions as a means to prove the reasonableness and necessity of costs and services.

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Texas Nuisance Law Gets A Face-Lift

The Supreme Court of Texas clarified the Texas nuisance doctrine in Crosstex N. Tex. Pipeline, L.P. v. Gardiner.  Justice Boyd opened by noting that Dean Prosser declared nuisance as the law’s “garbage can.”  He proceeded to clean up this area of the law.

The Court said “nuisance” refers not to a defendant’s conduct or to a cause of action, but to a type of legal injury involving interference with the use and enjoyment of real property.  A defendant can be liable for causing a nuisance if it intentionally causes it, negligently causes it, or—in limited circumstances—causes it by engaging in abnormally dangerous or ultra-hazardous activities.

Crosstex operates a natural-gas pipeline.  It purchased a tract along the pipeline’s path in rural Denton County to use for a compressor station.  The Gardiners own an undeveloped 95-acre ranch across the road.  Crosstex installed “hospital-grade” mufflers on the compressor-station engines, which it believed sufficient to eliminate unreasonable noise levels.  It was not.  One neighbor said the noise was like “an engine of a locomotive sitting on [his] driveway.”  Another said the noise was like “standing in the middle of an airport with jet airplanes taking off all around.”  Crosstex tried multiple mitigation efforts, but a Crosstex representative admitted the building needed to be fully enclosed and Crosstex didn’t have the money.

The Gardiners complained that the compressor station greatly diminished their ranch’s value and ruined both their financial investment and their ability to use and enjoy their land.  The trial court submitted intentional-nuisance and negligent-nuisance claims to the jury, which found Crosstex had not intentionally created a nuisance, but it had negligently created a nuisance that was permanent and reduced the ranch’s fair market value by over $2 million.

Justice Boyd’s unanimous opinion confirmed the trial court’s submitted definition.  A ‘nuisance’ is a condition that substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities attempting to use and enjoy it.  The court said the term “nuisance” does not refer to the “wrongful act” or to the “resulting damages,” but only to the legal injury—the interference with the use and enjoyment of property—that may result from the wrongful act and result in the compensable damages.  To qualify as a legal injury, the interference must be “substantial,” in light of all the circumstances.  The “unreasonableness” inquiry focuses on the interference’s effect on the plaintiff’s comfort or contentment, not on the defendant’s conduct.  It is based upon an objective standard of persons of ordinary sensibilities, not on the subjective response of the plaintiff.  The “substantial” and “reasonableness” inquiries require balancing of the following factors:

  •  the character and nature of the neighborhood, each party’s land usage, and social expectations;
  •  the location of each party’s land and the nature of that locality;
  • the extent to which others in the vicinity are engaging in similar use of their land;
  •  the social utility of each property’s usage;
  • the likelihood that the defendant’s conduct will interfere with the plaintiff’s use and enjoyment of their land;
  • the magnitude, extent, degree, frequency, or duration of the interference and resulting harm;
  • the relative capacity of each party to bear the burden of ceasing or mitigating the usage of their land;
  • the timing of each party’s conduct or usage that creates the conflict;
  • the defendant’s motive in causing the interference; and
  • the interests of the community and the public at large.

Addressing the first category of potential liability, intentional nuisance, the court said the evidence must establish that the defendant intentionally caused the interference that constitutes the nuisance, not just that the defendant intentionally engaged in the conduct that caused the interference.  The effects of the substantial interference must be unreasonable.  The defendant’s conduct must not be unreasonable.  However, a defendant’s reasonable conduct could still be actionable if it was negligent.

Addressing the second category of potential liability, the court said a defendant can be liable for “negligently” causing a “nuisance” if the plaintiff proves “the existence of a legal duty, a breach of that duty, and damages proximately caused by the breach.”  A nuisance may result from “a failure to take precautions against a risk apparent to a reasonable man.”

The third category, strict-liability nuisance, includes claims based on conduct that invades another’s interests and is culpable because abnormal and out of place in its surroundings.  The court did not affirmatively endorse a strict liability claim based on a nuisance injury, but said that to the extent such a claim exists, it arises only out of conduct that constitutes an “abnormally dangerous activity” or involves an abnormally “dangerous substance” that creates a “high degree of risk” of serious injury.

            Three remedies are available for a private-nuisance claim: damages, injunctive relief, and self-help abatement.  The decision to enjoin the defendant’s conduct is a discretionary decision for the judge after the case has been tried and the jury discharged.  When an injunction or abatement is inappropriate, the claimant may recover damages.  Generally, when a nuisance is temporary, the landowner may recover only lost use and enjoyment that has already accrued.  If the nuisance is permanent, the owner may recover lost market value.

Crosstex N. Tex. Pipeline, L.P. v. Gardiner, No. 15-0049.

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