Dallas Morning News, Inc. v. Hall

524 S.W.3d 369, 45 Media L. Rep. (BNA) 2293, 2017 WL 2290194, 2017 Tex. App. LEXIS 4807
CourtCourt of Appeals of Texas
DecidedMay 25, 2017
DocketNO. 02-16-00371-CV
StatusPublished
Cited by12 cases

This text of 524 S.W.3d 369 (Dallas Morning News, Inc. v. Hall) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dallas Morning News, Inc. v. Hall, 524 S.W.3d 369, 45 Media L. Rep. (BNA) 2293, 2017 WL 2290194, 2017 Tex. App. LEXIS 4807 (Tex. Ct. App. 2017).

Opinion

OPINION

BILL MEIER, JUSTICE

I. Introduction

A 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, 89 L.Ed.2d 783 (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 determtae 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.

II. Background

A. Appellees

Lewis 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.”'

In 2013, Lewis and Richard formed a “partnership/joint venture” with Scott Schuster and Dustin Rail. Lewis handles the pharmaceutical responsibilities, and Richard, Schuster, and Rail manage the operations, sales, and marketing aspects of the venture. The business entails several entities, including . RXpress Pharmacies and Xpress Compounding (collectively RXpress).

B. Compounding Pharmacies

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.”1 Recent years saw [372]*372a 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 substantial profits.”

The 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.2

C. Prior Litigation

Appellees 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 taxes.

Appellees sued Schuster and Rail, 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 in-state pharmacy and had wrongfully diverted millions of dollars of partnership property to themselves.

The 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 pharmacy network.

In February 2016, Ancillary Medical Services Management, LLC sued Appel-lees for breach of fiduciary duty and other torts involving Ancillary’s investment in RXpress.

D. The Dallas Morning News Articles

In 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 [373]*373Schuster/Rall- litigation. The article was republished in the print edition of The Dallas Morning News the following day.

On 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 RXpress.

On 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.”

And 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.”

E. This Lawsuit

Four days after the final article was published, Appellees áüed 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.

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Bluebook (online)
524 S.W.3d 369, 45 Media L. Rep. (BNA) 2293, 2017 WL 2290194, 2017 Tex. App. LEXIS 4807, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dallas-morning-news-inc-v-hall-texapp-2017.