AMERICAN ADDICTION CENTERS, INC., RECOVERY BRANDS, LLC, and ADDICTION LABS OF AMERICA, LLC, Plaintiffs, v. NATIONAL ASSOCIATION OF ADDICTION TREATMENT PROVIDERS, Defendant.
NO. 3:19-cv-00376
IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION
JUDGE RICHARDSON
January 25, 2021
Pending before the Court is Defendant’s Motion to Dismiss First Amended Complaint (Doc. No. 31, “Motion“). Plaintiffs have responded to the Motion (Doc. No. 39), and Defendant has filed a reply (Doc. No. 43).
BACKGROUND1
Plaintiff American Addiction Centers (“AAC“) is a for-profit corporation and leading provider of inpatient and outpatient substance abuse treatment services for adults struggling with drug addiction, alcoholism, and co-occurring mental/behavioral health issues. Plaintiff Recovery Brands, LLC (“Recovery Brands“) operates a portfolio of informational websites that help those suffering from addiction to find information, including directories of treatment providers, about treatment options and recovery. Plaintiff Addiction Labs of America (“ALA“) operates a testing
Defendant National Association of Addiction Treatment Providers (“NAATP“) is an addiction treatment industry trade association that boasts of a nationwide membership in excess of 600 different providers and more than 930 different treatment facilities. Plaintiffs allege that NAATP has positioned itself as the de facto regulator of the addiction treatment industry and has sought to damage Plaintiffs and their reputations through lying about Plaintiffs’ practices, excluding Plaintiffs from its membership, blocking Plaintiffs’ participation in online advertising platforms, threatening retaliation against its members who use Plaintiffs’ services, barring membership to all providers who own or operate online directories or use marketing channels not controlled or approved by NAATP, and applying its restrictive standards to Plaintiffs and not to others.
The 396-paragraph First Amended Complaint (“FAC“) asserts causes of action for: (1) violation of the Lanham Act; (2) defamation; (3) tortious interference with business relationships; (4) breach of contract and breach of the duty of good faith and fair dealing; and (5) violation of the Tennessee Consumer Protection Act. Defendant has moved to dismiss all of Plaintiffs’ claims for failure to state claims upon which relief can be granted, pursuant to
MOTION TO DISMISS STANDARD
For purposes of a motion to dismiss under
In determining whether a complaint is sufficient under the standards of Iqbal and its predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it may be appropriate to “begin [the] analysis by identifying the allegations in the complaint that are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 680. This can be crucial, as no such allegations count toward the plaintiff’s goal of reaching plausibility of relief. To reiterate, such allegations include “bare assertions,” formulaic recitation of the elements, and “conclusory” or “bald” allegations. Id. at 681. The question is whether the remaining allegations – factual allegations, i.e., allegations of factual matter – plausibly suggest an entitlement to relief. Id. If not, the pleading fails to meet the standard of
On a
DEFENDANT’S ALLEGED OVERARCHING DEFENSES
Defendant initially asserts that three overarching legal concepts “doom” Plaintiffs’ claims. The Court will address these defenses in turn.
A. Trade associations have an absolute right to make membership decisions.
Defendant contends that trade associations generally have unlimited discretion to grant or refuse admission or membership, citing to cases more than fifty years old from state courts in other jurisdictions. (Doc. No. 32 at 6). In response, Plaintiffs argue that the general discretion afforded to a trade association’s membership decisions has no bearing whatsoever on Plaintiffs’ claims. (Doc. No. 39 at 2). The Court agrees with Plaintiffs. Plaintiffs do not ask this Court to force Defendant to admit any one of them into membership,2 and only one of Plaintiffs’ claims seeks damages related to Defendant’s exclusion of Plaintiffs from NAATP membership. (Doc. No. 27, Cause No. 4). That claim is one for breach of contract and is based upon an alleged contractual promise, not the lack or abuse) of discretion of the trade association with respect to membership issues. (Id. at ¶¶ 367-381).
Therefore, this “overarching legal concept” does not apply.
Defendant contends that it is absolutely immune3 for any communications with or testimony before members of Congress.4 Plaintiffs respond that they have not sued based upon communications with Congress or made during congressional hearings; rather, the only claims related to Defendant’s alleged false and defamatory congressional testimony arise from Defendant’s republication (to the public) of such testimonial statements—actions that fall outside the absolute-immunity doctrine upon which Defendant relies. In reply, Defendant claims that simply alerting a new audience to the existence of a preexisting statement does not republish it, citing Clark v. Viacom Int’l Inc., 617 F. App’x 495 (6th Cir. 2015), without explaining how its asserted principle applies herein.
Defendant’s reliance upon Clark under these facts is not well taken. Clark involved a defendant who made certain statements “continuously available” on its website, and the plaintiffs argued that the statements were “republished” each time there were changes in the commercial advertisements around the borders of the website. Clark, 617 F. App’x at 506-07. The court stated
Plaintiffs here allege that Defendant “republished” the statements made before Congress via entirely different means of communication (at its annual meeting and via websites and media outlets), not that Defendant simply changed the presentation to Congress or changed an existing presentation on its websites. (e.g., Doc. No. 27 at ¶¶ 58 and 136-141). The Court does not see a basis, from Clark or otherwise, to recognize absolute immunity as to the alleged republications here at issue. For purposes of this Motion, therefore, Plaintiff has sufficiently alleged claims for which Defendant is not entitled to absolute immunity.
Defendant also argues that it is entitled to a “qualified common interest privilege” for “all communications made in good faith upon any subject-matter in which the party communicating has an interest, or in reference to which he has a duty,” citing Southern Ice Co. v. Black, 189 S.W. 861 (Tenn. 1916). It is interesting that Defendant chose to quote a case that is more than 100 years old and limits this privilege to communications “made in good faith.” This requirement of good faith is still existing law. See, e.g., Bohler v. City of Fairview, No. 3:17-cv-1373, 2018 WL 5786234, at *15 (M.D. Tenn. Nov. 5, 2018) (common interest privilege premised on good faith);
The FAC clearly alleges that the defamatory statements Defendant made were deliberately and willfully made and made with actual malice. (e.g., Doc. No. 27 at ¶¶ 58, 136, 279, 321-24, 328-29, 345, 361, and 389). Plaintiffs have sufficiently alleged that Defendant’s actions were not taken in good faith, so for purposes of this Motion, the qualified privilege asserted by Defendant does not apply.
This is actually a straightforward application of a basic principle. As the Sixth Circuit has explained:
“it is generally inappropriate for a district court to grant a
12(b)(6) motion to dismiss on the basis of qualified immunity.” Wesley v. Campbell, 779 F.3d 421, 433 (6th Cir. 2015). We clarified, “Although an officer‘s entitlement to qualified immunity is a threshold question to be resolved at the earliest possible point, that point is usually summary judgment and not dismissal underRule 12 .” Id. at 433–34 (internal marks and citations omitted).
Courtright v. City of Battle Creek, 839 F.3d 513, 518 (6th Cir. 2016). The Court does not see why this principle would not apply to Defendant’s assertion of a qualified privilege, just as it applies to assertions of qualified immunity. In fact, extant case law indicates that it does apply to assertions of privilege. See, e.g., Del Monte Int’l, GmbH v. Ticofrut S.A., No. 16-23894-CIV, 2017 WL 4901805, at *3 (S.D. Fla. Sept. 27, 2017) (“Because the Court‘s inquiry on a motion to dismiss is limited to the Complaint, there is no support at this stage for showing that Defendant was privileged in its alleged interference.“); Chapin Revenue Cycle Mgmt., LLC v. JDA eHealth Sys., Inc., No. 8:11-cv-858-T-33AEP, 2012 WL 469824, at *4 (M.D. Fla. Feb. 13, 2012) (“Defendants may assert privilege as an affirmative defense, but such an assertion is inappropriate in a motion to dismiss.“). And the principle fits perfectly in the present case, given that Plaintiff has included
C. All claims of defamation must satisfy the “actual malice” standard.
Defendant also contends that because Plaintiffs AAC and Recovery Brands are “public figures,” for purposes of their defamation claims, they must show that Defendant made the alleged defamatory statements with “actual malice.”
If the plaintiff in a defamation case is a public official or public figure, he or she must also prove that the libelous statement was made with actual malice—that is, with knowledge that it was false or with reckless disregard of whether it was false or not. Hudik v. Fox News Network, LLC, No. 3:19-cv-00127, 2021 WL 62832, at *5 (M.D. Tenn. Jan. 7, 2021); Hibdon v. Grabowski, 195 S.W.3d 48, 58 (Tenn. Ct. App. 2005) (quoting New York Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964)).5
The Court need not determine at this time whether Plaintiffs were “public figures” when the allegedly defamatory statements were made because Plaintiffs have sufficiently alleged that Defendant acted with actual malice when defaming Plaintiffs. (e.g., Doc. No. 27 at ¶¶ 121 (NAATP 2018 Annual Meeting); 136, 141, and 159 (republishing congressional testimony); 250 (concerted effort to damage AAC’s business and attack ALA’s diagnostic testing services); 300 (defaming
LANHAM ACT CLAIMS
The Lanham Act prohibits any person from, in connection with any goods or services, using in commerce any false or misleading representation of fact which, in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of another person’s goods, services or commercial activities.
Plaintiffs allege that Defendant uses the touted benefits of being on its online directory as a means to generate new, dues-paying members and engages in nationwide or regional advertising by and through the use of that directory. (Doc. No. 27 at ¶ 272). Plaintiffs assert that Defendant made false and misleading statements about Plaintiffs’ goods, services and commercial activities (including their online directory services) in numerous places, including at Defendant’s 2018 annual meeting, at a 2019 national conference, in various publications, and on various websites. (Id. at ¶¶ 273-74). Plaintiffs allege that these false and misleading statements were willful, made
Defendant first argues that Plaintiffs have no standing to bring this claim. In Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), the Court held that to have statutory standing, any plaintiff asserting a federal statutory violation must: (1) be within the “zone of interest” protected by the statute; and (2) show “proximate causation” between plaintiff‘s injury and the alleged statutory violation. Bridgestone Brands, LLC v. Apollo Auto Sales & Servs., Inc., No. 15-cv-00857, 2017 WL 11476333, at *7, n.5 (M.D. Tenn. Apr. 27, 2017). Although the zone of interests test is “not especially demanding,” a plaintiff must still “allege an injury to a commercial interest in reputation or sales.” Lexmark, 572 U.S. at 129, cited in Carhartt, Inc. v. Innovative Textiles, Inc., 440 F. Supp. 3d 710, 718 (E.D. Mich. 2020). The proximate-cause element deals with “whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits.” Act, Inc. v. Worldwide Interactive Network, No. 3:18-CV-186, 2020 WL 4195269, at *8 (E.D. Tenn. July 21, 2020) (citing Lexmark, 572 U.S. at 133).
Defendant attacks what it calls Plaintiffs’ “claim that a trade association must let someone in who wants to be a member or that it cannot communicate the requirements of membership to its members or applicants.” With respect to such claim, Defendant argues, Plaintiffs simply do not fall within the zone of interests protected by the Lanham Act. (Doc. No. 32 at 11-12). But Defendant misses the mark here, because Plaintiffs in fact do not claim that Defendant’s failure to allow them membership violated the Lanham Act. As indicated above, they claim instead that Defendant’s false and misleading statements violated the Lanham Act. Moreover, Plaintiffs claim that Defendant did more than merely communicate the requirements of membership; instead, Plaintiffs rely on (alleged) misconduct going far beyond that. (Doc. No. 39 at 7-9 and
Defendant also contends that Plaintiffs have not alleged that Defendant’s alleged false and misleading statements were part of a “commercial advertisement or promotion.” The Sixth Circuit has defined “commercial advertising or promotion” as: (1) commercial speech; (2) for the purpose of influencing customers to buy the defendant‘s goods or services; (3) that is disseminated either widely enough to the relevant purchasing public to constitute advertising or promotion within that industry or to a substantial portion of the plaintiff‘s or defendant‘s existing customer or client base. Grubbs v. Sheakley Grp., Inc., 807 F.3d 785, 801 (6th Cir. 2015), cited in Act, 2020 WL 4195269, at **4–5.
The FAC alleges that Defendant is a competitor of Plaintiffs in interstate commerce in the online directory business, specifically online directories of treatment providers. (Doc. No. 27 at ¶ 272). Plaintiffs also allege that Defendant engages in advertising and promotion through its online directories, websites, and other marketing. (Id.) Plaintiffs contend that Defendant made false and misleading statements about Plaintiffs’ goods and services that deceived recipients of those statements, many of whom were existing and/or prospective customers of Plaintiffs. Plaintiffs also assert that the specific statements alleged in ¶ 274 of the First Amended Complaint and those cited in response to Defendant’s Motion (Doc. No. 39, pp. 7-8, 11) were false and misleading under the Lanham Act. Plaintiffs also have alleged that those defamatory statements caused them harm. (Doc. No. 27 at ¶¶ 269, 277-79, 281-85).
Plaintiffs have asserted that the defamatory statements by Defendant were made for the purpose of influencing addiction treatment centers and other similar providers not to purchase online directory or other services from Plaintiffs. (Doc. No. 39 at 8; Doc. No. 27 at ¶ 275-78).
Defendant’s factual assertions to the contrary (Doc. No. 43 at 2) are of facts outside the pleadings that cannot now be considered (or have their truth, or lack thereof, determined) under the standards governing the current Motion. Moreover, whether each of the alleged false or misleading statements was actually false or misleading cannot be determined on a motion to dismiss. That issue is for another day.
Defendant also argues that Plaintiffs have failed to identify any allegedly false or misleading statements that were anything other than opinions about whether Plaintiff AAC was or could become in compliance with Defendant’s Code of Ethics. This blanket, conclusory statement is not supported by any citations to authority.6 Neither does Defendant cite to any specific alleged defamatory statements or show how they were simply opinions. The Court will not do Defendant’s work and parse each alleged defamatory statement from the FAC. Defendant has not carried its burden, and the Motion as to this point will be denied.
Defendant challenges on laches grounds only one claim, that being Plaintiffs’ claim related to Defendant’s communications with Google in 2016 and 2017.8 (Doc. No. 32 at 14). However, Plaintiffs do not claim that those communications violated the Lanham Act. On the other hand, Plaintiffs do identify other statements allegedly made in violation of the Lanham Act and made more than one year prior to the filing of this lawsuit. See Doc. No. 39 at 7-8 and 14 (“The only statements at issue in the Lanham Act false advertising claim that took place more than a year before the filing of this lawsuit are statements made by NAATP representatives at the December 12, 2017 U.S. House of Representatives Energy and Commerce Committee meeting that were then republished by NAATP and its representatives on various websites in May 2018.“) In other words,
Unlike the operation of statutes of limitations, which turns primary on the amount of time deemed to run against the applicable limitations period, laches is not a mere matter of time, but principally a question of the inequity of permitting the claim to be enforced. Top Tobacco, L.P. v. Abdelshahed, 439 F. Supp. 3d 992, 1004 (M.D. Tenn. 2020), order vacated in part on reconsideration on other grounds, No. 3:19-cv-00356, 2020 WL 5366523 (M.D. Tenn. Sept. 8, 2020) (quoting Kehoe Component Sales Inc. v. Best Lighting Prods., Inc., 796 F.3d 576, 584 (6th Cir. 2015)). Ordinarily, a party asserting laches must show (1) a lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting it. Id. For claims under the Lanham Act, the laches period begins to run when the plaintiff has actual or constructive knowledge of the alleged infringing activity. Id.
If the plaintiff has filed its Lanham Act claim within the time that it would have been required to file in the forum state an analogous state-law claim, then the plaintiff‘s delay in asserting its rights is presumptively reasonable. Top Tobacco LP, 439 F. Supp. 3d at 1004. But a delay beyond the analogous limitations period “is presumptively prejudicial and unreasonable.” Kehoe, 796 F.3d at 585-86. The presumption that arises after the lapse of an analogous limitations period is not irrebuttable, however; in the end, the laches analysis depends upon whether the plaintiff lacked diligence in asserting its claim and “whether the defendant was prejudiced by the plaintiff‘s dithering.” Id. at 585. Essentially, therefore, the court determines (1) whether laches presumptively applies by deciding whether the analogous limitations period under state law expired, and then (2) applies the traditional laches factors (unreasonable delay/lack of diligence by
For the Lanham Act claims in this case, the relevant benchmark is the one-year limitations period prescribed (at
This Court has held that the defense of laches is not appropriate at the motion to dismiss stage because there is no evidence in the record as to the reasonableness of any delay in bringing the action or as to any prejudice suffered by Defendant. Kenyon v. Clare, No. 3:16-cv-00191, 2016 WL 6995661, at *4 (M.D. Tenn. Nov. 29, 2016). The strictures of
As noted above, the only statements at issue in Plaintiffs’ Lanham Act claims that also took place more than a year before this lawsuit are Defendant’s statements to Congress in December 2017 that were then republished by Defendant in May 2018. The First Amended Complaint alleges that Plaintiffs discovered this false and defamatory testimony in May 2018, when Defendant and its members “republished” it. (Doc. No. 27 at ¶¶ 136-37).
The Court notes that Defendant’s arguments with regard to Plaintiffs’ Lanham Act claims are painted with a broad brush and fail to show why specific statements should be dismissed. The reality, inconvenient though it may be, is that it often behooves a defendant-movant to address the alleged defamatory statements one by one.10 The doctrine of laches is an affirmative defense, and Defendant has the burden of ultimately proving it. Kenyon, 2016 WL 6995661, at *3. As indicated above, the motion-to-dismiss stage is not the time for either side to “prove” anything with evidence. But it potentially can be a time for a defendant-movant to “prove“—or explain, to be precise—if it can, that laches necessarily will apply based on the plaintiffs’ allegations (taken as true). Defendant, however, has the burden on a motion to dismiss to explain why any claim(s) should be dismissed based on laches. Defendant has failed to provide—or even attempted to
DEFAMATION
Under Tennessee law, to establish a prima facie case of defamation, a plaintiff must prove that: “(1) a party published a statement; (2) with knowledge that the statement was false and defaming to the other; or (3) with reckless disregard for the truth of the statement or with negligence in failing to ascertain the truth of the statement.” Hudik, 2021 WL 62832, at *4 (quoting Bohler v. City of Fairview, Tennessee, 429 F. Supp. 3d 477, 490 (M.D. Tenn. 2019)). Plaintiffs have identified 11 such alleged defamatory statements. (Doc. No. 39 at 15-16 and corresponding cites to the FAC).
Defendant first argues that “almost all” of the alleged defamatory statements are barred by the applicable statute of limitations.11 The only specific oral communications Defendant identifies as being barred by the statute of limitations,12 however, are the allegedly slanderous statements made by Defendant to Google and LegitScript in 2017 and oral communications at Defendant’s National Annual Meeting in May 2018.
Plaintiffs represent that they are not bringing any claims for slander (oral defamation)—for oral statements—that occurred more than six months prior to the filing of the Complaint. In
The applicable limitations period for libel (written defamation) is one year.
Plaintiffs represent that the only communications that pre-date May 6, 2018 and are part of Plaintiffs’ defamation claims are: (1) the written communications to Google and LegitScript that pre-date May 6, 2018 and (allegedly) state or imply that Plaintiffs were unethical and/or deceptive bad actors or criminals who needed to be barred from marketing on Google’s Ads program; and (2) the (allegedly) false statements made in a December 12, 2017 congressional hearing and republished by Defendant in May 2018. (Doc. No. 39 at 18). As to each of these categories of communications, Plaintiffs claim that Tennessee’s “discovery rule” applies and tolls14 the statute
Tennessee courts have held that in cases where the alleged libel is contained within documents not available to the general public, the limitations period begins to run when the plaintiff knew, or with reasonable diligence could have discovered, that it had been defamed. Watson v. Fogolin, No. M2009-00327-COA-R3-CV, 2010 WL 1293797, at *4 (Tenn. Ct. App. Apr. 1, 2010) (citing Leedom v. Bell, No. 03A01-9704-CV-00136, 1997 WL 671918, at *7 (Tenn. Ct. App. Oct. 29, 1997)). In Leedom, the court held that the discovery rule, which ensures fairness by not requiring “that suit be filed when circumstances totally beyond the control of the injured party make it impossible for him to bring suit,” should be applied to libel cases. Id. (noting a trend to apply the discovery rule in those limited situations where the allegedly libelous statement occurred in private or confidential publications which are not readily available to the plaintiff or the general public); see also Kinser v. Bechtel Power Corp., 868 F. Supp. 2d 702, 704 (E.D. Tenn. 2012) (Tennessee’s discovery rule may apply in exceptionally rare instances where the “secretive or inherently undiscoverable” nature of a libelous publication prevents a plaintiff from knowing or discovering through the use of reasonable diligence that he had been defamed).
With regard to the allegedly false statements made in the December 2017 congressional hearing and republished during the annual meeting on May 20-22, 2018, and thereafter, Plaintiffs argue those statements were not actionable until they were “republished” in May 2018 and, therefore, the statute of limitations ran from May 2018, not from December 2017. The “republication doctrine” provides that “where the same defamer communicates a defamatory statement on several different occasions to the same or different audience, each of those statements constitutes a separate publication,” triggering a new the statute of limitations. Lokhova v. Halper, 441 F. Supp. 3d 238, 254 (E.D. Va. 2020). Republication includes instances where the publisher has “affirmatively reiterated” the statement. Id. The general rationale behind the rule is that if the speaker affirmatively says the same thing again at a later time to a new audience, then he has intended to engender additional reputational harm to the plaintiff. See Clark, 617 F. App‘x at 504–05.16 The key factor is whether the speaker intended to and did reach a new audience. Id. at 505
The Court finds that Plaintiffs have sufficiently alleged republication by Defendant of the statements Defendant‘s representatives made first to the congressional committee, a limited audience, and then to a different and broader audience through presentations at the May 2018 annual meeting and thereafter on Defendant‘s websites. As with Plaintiffs’ Lanham Act claims, the question of when Plaintiffs had reason to know of this claim or reasonably should have discovered it (and, thus, when the statute of limitations began to run), for purposes of this defamation claim, cannot be determined at this point of the litigation.
Next, Defendant argues that the alleged defamatory statements published at the 2018 annual meeting were not defamatory.17 (Doc. No. 32 at 16). Whether a statement “was, in fact, understood by readers in its defamatory sense is ultimately a question for the jury.” Finney v. Jefferson, No. M2019-00326-COA-R3-CV, 2020 WL 5666698, at *3 (Tenn. Ct. App. Sept. 23, 2020) (quoting Memphis Publ‘g Co. v. Nichols, 569 S.W.2d 412, 419 (Tenn. 1978)); Finley v. Kelly, 384 F. Supp. 3d 898, 906 (M.D. Tenn. 2019). But, as an initial matter, whether a statement “is capable of conveying a defamatory meaning is a question of law.” Id. (emphasis added); Hudik, 2021 WL 62832, at *4.
Citing Revis v. McClean, 31 S.W.3d 250 (Tenn. Ct. App. 2000), Defendant claims that the alleged defamatory statements made at Defendant‘s 2018 annual meeting expressed only Defendant‘s opinions about the alleged facts. Revis held (in the context of a motion for summary judgment, not a motion to dismiss) that an opinion is not automatically protected by the Constitution and may be actionable as defamatory if the communicated opinion may reasonably be understood to imply the existence of undisclosed defamatory facts justifying the opinion. Id. at 253. Tennessee courts have adopted the rule promulgated in the Restatement 2d of Torts (and followed by the Supreme Court in Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990)) that a statement of opinion is actionable only if it implies the allegation of undisclosed defamatory facts as the basis for the opinion. See Stockdale v. Helper, No. 3:17-cv-00241, 2020 WL 887593, at *23–24 (M.D. Tenn. Feb. 24, 2020), aff‘d in part, rev‘d in part, and remanded on different grounds, 979 F.3d 498 (6th Cir. 2020).
Plaintiffs identify the first of the allegedly defamatory statements from the 2018 annual meeting as Slide 10 of an allegedly offending slideshow, which states (allegedly falsely) in writing that Plaintiffs’ websites are “deceptive” because they are “unbranded, aggregation and lead sales sites” (Doc. No. 39 at 15; Doc. No. 27 at ¶¶ 112-117, 274; Doc. No. 27-1).18 The FAC alleges that
Second, Plaintiffs claim that Defendant falsely stated in writing, at its 2018 annual meeting, that Plaintiffs were acting deceptively and unethically because of their “greed” and “desperation.” (Doc. No. 39 at 15; Doc. No. 27 at ¶¶ 118-19, 274, 306). Slide 13 of the annual meeting presentation asserts that Defendant was having to “have this conversation” about deceptive and dishonest businesses because those businesses are greedy, desperate, lacking in awareness, and do not have the ability to do it the right way (“more inclined to do things the wrong way“). Plaintiffs contend that Slide 13 referred to Plaintiffs by implication since (according to Plaintiff), taken in context, it referred back to Slide 10, which specifically listed Plaintiffs’ websites.
In deciding whether a statement is defamatory in the context of a motion to dismiss, the Tennessee Court of Appeals has observed:
A trial court may determine that a statement is not defamatory as a matter of law only when “the statement is not reasonably capable of any defamatory meaning and cannot be reasonably understood in any defamatory sense.” ... When considering whether a statement is capable of being defamatory, it must be judged within the context it is made.....Additionally, it “should be read as a person of ordinary intelligence would understand [it] in light of the surrounding circumstances.” ... To this end, courts are not bound to the plaintiff‘s interpretation of the allegedly defamatory material, and if the words “do not reasonably have the meaning plaintiff ascribes to them, the court must disregard” plaintiff‘s interpretation.
Grant, 2015 WL 5772524, at *10 (internal citations omitted), cited in Finley, 384 F. Supp. 3d at 906; see also Finney, 2020 WL 5666698, at *3.
Importantly, context matters. Plaintiffs have asserted, in the FAC, that Defendant positioned itself as the de facto regulator for the addiction treatment industry (Doc. No. 27), essentially that Defendant tried to appear as the authority for ethical practices within the addiction treatment industry, so any allegations that Plaintiffs violated Defendant‘s standards of ethical conduct allegedly took on significant meaning in that industry. The Court reads Plaintiffs’ allegations as asserting that if Defendant (as the de facto regulator of industry conduct)
Defendant argues that Slide 13 does not even mention Plaintiffs. In the alleged context, however, whether a jury would conclude that the second slide referred back to those providers listed on Slide 10 (including Plaintiffs) is a factual issue that cannot be determined at this time; it is enough that the jury could so conclude. Similarly, whether Plaintiffs’ allegations are true must also be determined in context and is a question for another day. Plaintiffs have sufficiently alleged that Defendant made these allegedly defamatory statements19 to hundreds of representatives of the industry it purported to regulate—representatives who could be influenced to do or not do business with Plaintiffs.
In light of all these allegations, the Court finds that Plaintiffs have sufficiently alleged the making of statements at the 2018 annual meeting that are capable of being defamatory; that is, capable of being a serious threat to Plaintiffs’ reputation and capable of reasonably being construed as holding Plaintiffs up to public hatred, contempt or ridicule.
Next, Defendant argues that a number of Plaintiffs’ allegations concerning statements in media articles do not even concern Plaintiffs, although Defendant has failed to identify even one
Defendant also asserts, albeit it in a single sentence, that “such claims” are infirm because they are based on mere hyperbole or exaggerated statements. However, once again failing to identify and truly explain what it is they are talking about, Defendant fails to point here to any specific statements. In any event, Tennessee‘s recognition that “mere hyperbole will not typically amount to defamation is not a general license to propagate falsehoods as long as those falsehoods take the form of overstatement.” Bohler, 2018 WL 5786234, at *16. And, again, context matters: “Without an appropriate context suggestive of rhetorical hyperbole, overstatement is just another species of falsehood and entirely appropriate for a defamation case if all other requirements are met.” Id.
Defendant argues again that it is entitled to a qualified common interest privilege for communications made in good faith regarding any subject-matter in which the party communicating has an interest, or in reference to which it has a duty to a person having a corresponding interest or duty. (Doc. No. 32 at 17). Again, the Court notes the term “in good faith” that is crucial to the applicability of the claimed privilege, and it finds that Plaintiffs have sufficiently alleged the absence of good faith (i.e., bad faith), intent and actual malice. See Bohler, 2018 WL 5786234, at *15.
Defendant next argues that its republication of the contents of its official testimony to the congressional committee is protected by the “fair report privilege.” The basis of the fair report privilege is “the interest of the public in having information made available to it as to what occurs in official proceedings and public meetings.” Burke v. Sparta Newspapers, Inc., 592 S.W.3d 116, 121 (Tenn. 2019). In Funk v. Scripps Media, Inc., 570 S.W.3d 205 (Tenn. 2019), the Tennessee Supreme Court stated that traditionally, courts held that this privilege applied to “fair and accurate reports of official actions or proceedings. Id. at 212.20
As the Funk opinion notes, however (and the Restatement (2d) of Torts provides): “A person cannot confer this privilege upon himself by making the original defamatory publication himself and then reporting to other people what he had stated. This is true whether the original publication was privileged or not.” Restatement (Second) of Torts § 611 (1977), cited in Funk, 570 S.W.3d at 217. This provision prevents journalists from using the privilege as a sword rather than a shield. Id. It precludes a party republishing its own statement from receiving protection for such republishing based solely on the (alleged) grounds that the republishing constitutes a “fair reporting” of the party‘s original statement.
Defendant‘s republishing of the congressional testimony was a republication of its own testimony.21 Defendant is attempting to confer the fair report privilege upon itself based on its making the original defamatory statements itself and then reporting those statements to others. Such an attempt is prohibited (regardless of whether the testimony originally was subject to congressional immunity) under the Restatement section cited in Funk and quoted above.
Next, Defendant contends that Plaintiffs’ allegations about remarks by Defendant‘s Executive Director in two Alcoholism and Drug Abuse Weekly articles (July 30, 2018 and February
The Court agrees with Plaintiffs that, at a minimum, these statements imply (and indeed assume) certain facts, namely the occurrence of historical events such as the deployment of particular sales practices—sales practices described in a matter-of-fact way as unethical and out of compliance (with ethical standards). A jury could find that a service provider regarded as having engaged in unethical, non-compliant sales practices could be subject merely to disapproval and scorn, but it also potentially could find that the service provider is subject to worse, i.e., hatred, contempt or ridicule. As it found above in relation to the alleged defamatory statements made before Congress and then republished by Defendant via websites and social media outlets and at the 2018 annual meeting, the Court finds that these alleged statements, in context, are capable of defamatory meaning.
For purposes of this Motion, the Court finds that Plaintiffs have sufficiently alleged plausible claims for defamation.
TORTIOUS INTERFERENCE WITH BUSINESS RELATIONSHIPS
In order to establish intentional (tortious) interference with business relationships under Tennessee law, a plaintiff must prove the following: (1) an existing business relationship with specific third parties or a prospective relationship with an identifiable class of third persons; (2) the defendant‘s knowledge of that relationship and not a mere awareness of the plaintiff‘s business dealings with others in general; (3) the defendant‘s intent to cause the breach or termination of the
Concerning the fourth element, “improper motive or means,” the plaintiff must demonstrate that the defendant‘s predominant purpose was to injure the plaintiff. Pearson Educ., Inc. v. C&N Logistics, Inc., No. 3:18-cv-00438, 2018 WL 6528128, at *7 (M.D. Tenn. Dec. 12, 2018). In Trau-Med, the Tennessee Supreme Court embraced a broad view of what can constitute improper motive and improper means. Kolstad v. Leehar Distributors, LLC, No. 3:18-cv-00060, 2018 WL 6832086, at *7 (M.D. Tenn. Dec. 28, 2018). Either improper motive or improper means will suffice. Watson‘s Carpet and Floor Coverings, Inc. v. McCormick, 247 S.W.3d 169, 176 (Tenn. Ct. App. 2007). One such improper means is defamation. Kolstad, 2018 WL 6832086, at *7; Pearson Educ., 2018 WL 6528128, at *7. The Court finds that Plaintiffs’ factual allegations of existing and prospective business relationships, Defendant‘s knowledge of those relationships, Defendant‘s intent to cause the breach or termination of those relationships, Defendant‘s improper motive and improper means, and resulting damages (as discussed below) are sufficient to allow Plaintiffs’ claim of tortious interference with business relationships to survive.
The FAC alleges (Doc. No. 27, ¶¶ 335-365) that Plaintiff AAC had existing and prospective business relationships with 300 or more of Defendant‘s members, many of which paid to advertise on AAC‘s directory websites. (Id. at ¶ 336). In addition, Plaintiffs AAC and ALA had existing and
Plaintiff AAC also alleges that it had an existing and prospective business relationship with Google to use Google‘s marketing services24 and that Defendant was well aware of that existing and prospective business relationship. AAC alleges that Defendant interfered in its relationship with Google by misrepresenting that AAC‘s directory websites were unethical, deceptive rogue “lead generators” and “call center aggregators.” (Doc. No. 27 at ¶¶ 348-351). Plaintiffs allege that Defendant worked with both Google and LegitScript, using upon false and misleading statements, with the improper purpose of ensuring that AAC would not be certified to participate in, and would be barred from participation in, the advertising services offered by Google, Facebook, YouTube and Bing. (Id. at ¶¶ 355-59). AAC additionally alleges that it had prospective business relationships with numerous patients that it could have reached through online advertising had Defendant, who was fully aware of those prospective business relationships, not interfered to preclude such advertising. (Doc. No. 27 at ¶ 360).
Defendant asserts throughout its argument on this claim that Plaintiffs are required or have failed to “demonstrate” certain things. Defendant also argues that Plaintiffs cannot “establish” improper motive. The test, as stated above, is whether Plaintiffs have sufficiently alleged facts to support a claim that is plausible on its face, and the Court finds that they have. Defendant also argues that Plaintiffs have failed to identify any contracts with third parties that were breached because of Defendant‘s actions, but the existence of a contract is not a requirement for tortious interference with business relationships (see above).
For all these reasons, Plaintiffs have sufficiently alleged tortious interference with business relationships claim, and the Motion as to this claim will be denied.
BREACH OF CONTRACT/IMPLIED DUTY OF GOOD FAITH AND FAIR DEALING
The FAC alleges that AAC‘s25 membership in Defendant constituted a contractual relationship whereby AAC paid membership dues and agreed that the then-applicable rules and
Plaintiffs contend that AAC agreed to follow the then-applicable rules of Defendant and that failure to follow those rules would be grounds for expulsion from membership in Defendant. (Id. at ¶ 368). AAC asserts that it did not violate any of Defendant‘s rules that were in effect when it was a member (the rules to which it agreed to be bound). AAC argues that there were no legitimate grounds under the parties’ contract26 for Defendant to exclude AAC from membership, and yet Defendant excluded AAC, in breach of the contractual relationship between the parties. (Id. at ¶¶ 369-70). AAC avers that, by excluding AAC from the benefits of membership without a legitimate reason, Defendant breached the contract and also breached the duty of good faith and fair dealing implied in every contract, resulting in damages to AAC. (Id. at ¶¶ 378-81).
Defendant asserts that Plaintiffs have failed to identify any provision of the actual written contract that Defendant allegedly breached. Defendant also contends that Sections 3.6 and 3.7 of the By-Laws (Doc. No. 32-1), which address expiration and termination of membership, “strongly undercut any claim of breach of contract,” and that one particular screen of the members’ “click-through agreement” (Doc. No. 32-2) requires applicants to adhere to the NAATP Ethics Code.27 However, Defendant provides no explanation or analysis as to how these provisions apply to the facts alleged by Plaintiffs. (Doc. No. 32 at 22).
Under Tennessee law,29 a viable claim for breach of contract has three essential elements: (1) the existence of an enforceable contract; (2) non-performance amounting to a breach of that contract; and (3) damages caused by the breach of contract. Carpenter v. Cars Recon, Inc., No. 3:17-cv-01156, 2018 WL 6446589, at *3 (M.D. Tenn. Dec. 7, 2018). Plaintiffs have alleged the existence of an enforceable contract, and Defendant has not disputed (and instead has actually filed documents30 evidencing) that fact. Plaintiffs allege that Defendant breached the contract by terminating AAC‘s and Recovery Brands’ memberships and that the breach resulted in damages to Plaintiffs. The allegation as to Plaintiffs’ damages is not conclusory only; rather, Plaintiffs contend that Defendant‘s breach damaged AAC by keeping AAC from the benefits of
It is well established that, in Tennessee, the common law imposes a duty of good faith in the performance of contracts. Walton, 2020 WL 1640440, at *9; Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 660 (Tenn. 2013). The “breach of the duty of good faith and fair dealing ‘is not a cause of action in and of itself but is a part of a breach of contract cause of action.‘” Z.J. v. Vanderbilt Univ., 355 F. Supp. 3d 646, 699 (M.D. Tenn. 2018) (quoting Doe v. Univ. of the South, No. 4:09-cv-62, 2011 WL 1258104, at *18 (E.D. Tenn. Mar. 31, 2011)). It may be more apt to say that the duty of good faith and fair dealing is a part of every contract. The implied covenant of good faith and fair dealing creates a duty to provide basic fairness. Id.31 Although the implied covenant does not create new contractual rights or obligations, it protects the parties’ reasonable expectations as well as their rights to receive the benefits of their agreement. Dick Broad., 395 S.W.3d at 666; see also Clippinger v. State Farm Mut. Automobile Ins. Co., No. 2:20-cv-02482-TLP-cgc, 2020 WL 6750357, at *7 (W.D. Tenn. Nov. 17, 2020). Thus, “there is an implied covenant of good faith and fair dealing in every contract, whereby neither party shall do anything
As indicated, Plaintiffs allege that by excluding them from membership in NAATP (and the benefits thereof) without a legitimate reason (and, alternatively, without providing reasonable notice, due process, or opportunity to be heard), Defendant breached the duty of good faith and fair dealing implied in their contractual relationship. Plaintiffs also aver that by announcing the adopting of new ethics rules and, on the same day, before those rules were technically even in force, excluding AAC from Defendant‘s membership for allegedly failing to comply with those new rules, Defendant breached its duties of good faith and fair dealing. (Doc. No. 27 at ¶¶ 377-78). Plaintiffs thus have plausibly alleged that Defendant in bad faith interfered with AAC‘s prerogative to enjoy the benefits of its (membership) contract with Defendant; this means Plaintiffs have plausibly alleged breach of the covenant of good faith and fair dealing as that covenant (and its actual operation) is properly construed. In practical effect, it means that Defendant potentially
Defendant argues only that Plaintiffs cannot establish a breach of contract claim and, therefore, there is no corresponding duty of good faith and fair dealing. Because the Court has found that Plaintiffs have sufficiently stated a claim for breach of contract, it likewise finds this argument without merit.
TENNESSEE CONSUMER PROTECTION ACT
The Tennessee Consumer Protection Act (“TCPA“) prohibits the use of “[u]nfair or deceptive acts or practices affecting the conduct of any trade or commerce.”
In order to recover under the TCPA, a plaintiff must prove that (1) the defendant engaged in an unfair or deceptive act and (2) the defendant‘s conduct caused an ascertainable loss of money or property. Best Choice, 446 F. Supp. 3d at 272 (citing Tanzer, 403 S.W.3d at 810). As to the second element, the alleged unfair or deceptive act or practice must in fact cause the damages of which the plaintiff complains. Id. Because the TCPA is remedial, courts have determined that it should be construed liberally in order to protect the consumer. Miolen v. Saffles, No. E2018-00849-COA-R3-CV, 2019 WL 1581494, at *8 (Tenn. Ct. App. Apr. 12, 2019). Whether a particular
Plaintiffs have identified nine specific ways in which Defendant allegedly made disparaging, false and/or misleading representations of fact in the conduct of trade or commerce, plus a “catch-all” allegation for “any and all other disparaging statements set forth in the First Amended Complaint.” (Doc. No. 39 at 31-32; Doc. No. 27 at ¶ 383). Plaintiffs allege they have suffered an ascertainable loss as a result of Defendant‘s willful and knowing misrepresentations. (Id. at ¶¶ 392-94).
Defendant maintains that, to the extent these claims relate to any alleged communications with Google and LegitScript, those claims are time-barred by the applicable one-year limitations period.
Second, Defendant argues that it is a trade association and does not engage “in the conduct of any trade or commerce,” as those terms are defined in the TCPA, stating that Plaintiffs cannot point to any advertising or offering of services for sale by Defendant in which Defendant engaged in deceptive conduct. Plaintiffs respond that Defendant competes with Plaintiffs in the online directory advertising business by specifically providing online directory services as part of the consideration for membership fees paid to it by addiction treatment providers.35 Plaintiffs assert that the misrepresentations at issue were made to potential customers of both Plaintiffs and Defendant. As explained above in connection with Plaintiffs’ Lanham Act and defamation claims, Plaintiffs have set forth facts showing that the alleged misrepresentations and defamatory statements were made at Defendant‘s annual meeting, on its websites, in trade journals and other nationally circulated written media, and otherwise to potential customers of both Defendant and Plaintiffs. The Court finds that this alleged factual content is sufficient to allege that Defendant engaged in commerce at the time of the alleged misrepresentations and defamatory statements.
Defendant next contends that just as the TCPA does not apply to employer-employee relationships, it should not apply to relationships between a trade association and one of its
Finally, in a brief argument, Defendant states that the alleged disparaging communications alleged in the TCPA claim were merely statements of opinion and not actionable under the TCPA. (Doc. No. 32 at 24). The Court above has addressed the supposed “opinion” status of these communications and finds that, again, Plaintiffs have sufficiently alleged a factual basis for finding that the alleged statements are not opinions and that they plausibly suggest a valid claim for false and disparaging statements, not opinions.
For these reasons, Plaintiffs have sufficiently alleged a plausible claim under the TCPA for purposes of a motion to dismiss, and the Motion will be denied with respect to this claim as well.
CONCLUSION
The Court above has addressed at some length some rather specific (if not always thoroughly briefed) arguments and aspects of Plaintiffs’ claims and of Defendant‘s arguments for their dismissal. But it is also worth taking a proverbial step back to look at the big picture and why it likewise supports denial of the Motion. A plaintiff satisfies Iqbal and Twombly—generally irrespective of what the defendant has to say now or what it might prove later—if it (a) sets forth cognizable legal theories, (b) alleges factual matter (rather than mere conclusions and other content that does not count in the
Plaintiffs have done those things here, pleading cognizable legal claims that would be supported by the alleged non-conclusory facts to the extent they prove to be true. Most notably, Plaintiffs, perhaps to a fault,36 have alleged copious factual matter to support its various claims. Therefore, all of their claims survive at this stage.
For this reason, the Motion will be denied.
An appropriate order will be entered.
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE
Notes
Richardson, supra, at 1026–27. A plaintiff’s complaint cannot be expected to—and typically would not—get into most of the many events and circumstances that ultimately could determine the outcome of the limitations analysis in some cases. Thus, the question of whether a state limitations period unquestionably and unqualifiedly expired (in light of every possible consideration and not just the primary considerations) generally is not well suited to resolution at the motion-to-dismiss stage.At first glance, the entirety of limitations law seems to comprise little more than a collection of claim-specific statutes from which it is easy to glean deadlines for bringing particular claims. A closer look, however, reveals a far different reality. The statutes tend not to correspond simply to specific claims, and they do not prescribe any deadlines. In fact, limitations law involves far more than the statutes themselves. In reality, finding the applicable statute and divining the actual deadline for a claim requires a confusing multi-step analysis. Although it is important to note that additional steps may be required to address additional issues raised in a limited number of cases, the following discussion sets forth a “core” limitations analysis implicated by a typical case.