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Embattled Dentist Loses News Defamation Claim

DALLAS (CN) - A journalist's false allegation of personal bankruptcy did not defame a dentist whose clinics were accused of fraud, a Texas appeals court ruled.

Dr. Richard Malouf, the founder and former majority owner of All Smiles Dental Care, is the dentist in question.

A few months after Malouf's chain of dental clinics agreed in March 2012 to settle Medicare fraud claims for $1.2 million, WFAA-TV broadcast a two-minute piece by investigative reporter Brett Shipp on recent civil fraud allegations filed against Malouf.

The June 26 report said Malouf "has yet to comment on the allegations but filed for bankruptcy and is in the process of divesting his once impressive empire."

Malouf and his wife, Leanne, filed suit in Dallas County Court that October, claiming that he had not personally filed for bankruptcy and had not divested assets.

The court refused to dismiss claims against Shipp, but a three-judge panel with the 5th District Court of Appeals unanimously reversed on Tuesday.

In determining whether the lawsuit relates to his free-speech rights, the court must consider the entire news report, not just the complained-of statements, the court found.

"We must consider the broader context of the speech to know whether or not it relates to an issue identified an a matter of public concern by the legislature," Justice Jim Moseley wrote for the court. "We agree with Shipp that the entire communication - not just the allegedly defamatory portion - and the surrounding circumstances must be considered in determining whether the lawsuit relates to Shipp's exercise of his right of free speech."

The appellate panel emphasized how Malouf has been the subject of a Medicaid fraud investigation by state authorities, and is accused of billing the state for unnecessary orthodontic work performed on children of welfare families.

"In this context, the complained-of statements were communications made in connection with an issue related to the government's efforts to recover damages for Malouf's alleged violations of Medicaid laws," the opinion states.

A prima facie case for each essential element of the defamation claim also requires more, the court found, rejecting Malouf's argument that a false accusation of bankruptcy is defamation per se.

"A statement that a dentist is personally bankrupt does not adversely affect the dentist's fitness to practice dentistry - he may be a great dentist but a bad businessman," Moseley wrote. "Therefore, we conclude Shipp's statement about Malouf was not defamatory per se."

WFAA did not immediately respond to a request for comment Wednesday.

The Maloufs could not be reached for comment Wednesday. Their October complaint alleged that WFAA and its reporters published more than 40 stories about them and their home in the past year.

Tuesday's ruling makes no mention of the other defendants or claims, one of which reports on water-park slides being installed in the back yard of the Maloufs' mansion.

Court records show that the Maloufs filed a September 2013 fraud lawsuit after allegedly paying more than $553,000 for water-park components that were inadequate and impossible to assemble.

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