NEW ORLEANS (CN) - A Texas law firm will face defamation claims due to its advertising being commercial speech and not protected free speech, the 5th Circuit ruled.
The operators of the Kool Smiles chain of dental clinics sued law firm Mauze & Bagby PLLC and principal partners George Mauze and James Bagby in Houston federal court in 2012.
The operators allege the law firm makes "false and unsubstantiated representations" on a website set up to solicit Kool Smiles' patients.
The site asks "whether their children were (1) 'strapped down to a papoose board or (2) 'upset, crying, terrified, or traumatized,'" the complaint claims.
Kool Smiles alleges its patients are asked if it performed unnecessary dental work on children's baby teeth.
"Defendants' questions deliberately misled the public by unfairly casting Kool Smiles and its provision of dental services in an unfavorable light," the complaint states.
On March 11, a three-judge panel with the federal appeals court affirmed the trial court's denial of the law firm's motion to dismiss the defamation claim. The lower court decided the law firm's speech fell within a commercial speech exemption under Texas' law against strategic lawsuits against public participation (SLAPP), the Texas Citizen's Participation Act.
Writing for the panel, Judge Edward C. Prado noted the Texas Supreme Court has yet to rule on the TXPA and that the panel must "predict state law, not to create or modify it."
"Ultimately, we conclude that the Supreme Court of Texas would most likely hold that M&B's ads and other client solicitation are exempted from the TCPA's protection because M&B's speech arose from the sale of services where the intended audience was an actual or potential customer," the 21-page opinion stated.
The panel was not persuaded by the law firm's argument that the California Supreme Court interpreted a similarly-worded anti-SLAPP law as not exempting attorney advertisements.
"But M&B neglects the fact that the California Supreme Court's holding rested on a clause in the California statute that is not present in Texas's anti-SLAPP statute," Prado wrote. "California's statute's commercial speech exemption requires that the speech 'consists of representations of fact about that person's or a business competitor's business operations, goods, or services ... Texas's commercial speech exemption contains no such limitation."
On its web site, the law firm alleges Kool Smiles has collected over $25 million in Medicaid reimbursements.
It says Congress "substantially increased" Medicaid reimbursements five years ago in order to increase availability of dental services to underprivileged children.
"Since the passage of this legislation, hundreds of dental clinics, targeting children eligible for Medicaid, have opened throughout our country," the website states. "Unfortunately, many of these dental clinics have exploited our children to increase their revenue."
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