In the next iteration of a case we first reported in January, pitting the behemoth news publishing company Gannett and the sprawling Texas-based tax consulting firm Ryan, LLC, the Beaumont Court of Appeals has affirmed a trial court order denying Gannett’s motion to dismiss Ryan’s defamation claim under the Texas Citizens Participation Act.
USA Today a/k/a Gannett Co., Inc., Gannett Publishing Services, LLC, and Gannett Satellite Information Network, LLC v. Ryan, LLC (No. 09-22-00432-CV; delivered May 2, 2024) arose from a contract between Gannett and Ryan’s predecessor, S.A.L.T. Payroll Consultants, Inc. for tax consulting work in Kentucky and Indiana. Gannett and its subsidiaries are incorporated in Delaware and have their principal place of business in Virginia. SALT was incorporated in Florida. The contract specified that New York applied. Ryan later acquired SALT and performed tax consulting work for Gannett in Texas, including securing an unemployment tax refund. The dispute, however, stemmed from Gannett’s alleged failure to pay $192,000 in contingency fees on significant tax refunds from Kentucky and Indiana.
Ryan brought suit in Montgomery County, asserting breach of contract and other claims. Most notably, Ryan pleaded a defamation cause of action based on alleged false statements Gannett published in its various media outlets about the nature of Ryan’s services. Gannett filed a special appearance as to the contract claims but not the defamation claim, asserting that Texas had neither general jurisdiction over the company nor specific jurisdiction over the contract claim. After a hearing, the trial court denied the special appearance. Gannett filed an interlocutory appeal. The Beaumont Court of Appeals reversed, dismissing the breach of contract claim for lack of subject matter jurisdiction. That left the defamation claim, which Gannett moved to dismiss under the TCPA. The trial court likewise denied that motion. Gannett sought interlocutory relief.
In an opinion by Justice Johnson, the court of appeals affirmed. The facts of the case are long and somewhat tedious to recite, but the gist of Ryan’s claim is that Gannett, through USA Today, other media outlets, podcasts, and other publications accusing Ryan of unlawful and unethical practices in securing a motor fuels tax refund for a client in Arizona (including an allegation that the FBI was actively investigating the matter), caused Ryan “to suffer substantial financial and reputational harm.” Gannett responded in its TCPA motion by asserting the “substantial truth” defense and that the actual malice standard should apply because Ryan is a “public figure.” Ryan disputed that and argued that the negligence standard should apply. In Ryan’s view, USA Today knew or should have known its reporting on the Arizona dyed diesel fuel refund was false because, in short, Ryan did everything publicly and above-board in accordance with Arizona law, including the firm’s retention of former gubernatorial aides who had not worked on the dyed diesel issue. The same went for Ryan’s similar activities in North Dakota, also part of USA Today’s reporting. In terms of damages, Ryan stated that because of USA Today’s reporting, it lost Deloitte LLP as a client.
After disposing of an evidentiary issue, the court turned to the TCPA motion to dismiss. Ryan did not dispute that the TCPA applied, so the court’s first inquiry was whether Ryan established a prima facie case for defamation. This required the court to determine the publication’s “‘gist or meaning by examining how a person of ordinary intelligence would view it[,]’ asking how a ‘hypothetical reasonable reader’ would understand the publication, and not how any particular reader actually understood it” (citations omitted). The proper test is “whether an alleged defamatory statement is more damaging to the plaintiff’s reputation in the mind of the average reader than a truthful statement would have been” (citations omitted). The court agreed with Ryan that USA Today’s articles presented Ryan “in an unfavorable light . . . both as a whole and in discrete sections by implication” (citations omitted). Specifically, “Ryan met its prima facie burden to show a hypothetical reasonable reader would understand the articles [to] imply that Ryan, as well as the Governor Arizona, and the former State employees hired by Ryan, had engaged in unethical, if not unlawful, conduct or even corruption, and further that Ryan and the Governor were under investigation by the FBI for their conduct or possible corruption.” First round to Ryan.
Next, the court addressed the private vs. public figure issue. Gannett did not take a position on the issue, while Ryan asserted that it was a private person that only needed to establish negligence. Assuming that to be the case, the court concluded that Ryan had presented “at least a minimum quantum of [clear and specific] evidence that USA Today acted negligently when making the statements that are the subject of this lawsuit” (citations omitted). It further ruled that Ryan had offered clear and specific evidence that USA Today’s publications resulted in some damages, including the loss of a client. The burden then shifted to Gannett to demonstrate by clear and specific evidence its affirmative defenses, which were based on “accurate reporting,” “privileged reporting about official proceedings or acts of public officials,” “privileged commentary on matters of public concern,” and “constitutionally-protected opinion.” Here the court concluded that Gannett didn’t do this “because the evidence in the record established a question of fact exists about whether Ryan’s work on behalf of its clients was ‘unsupported by law’” (citations omitted). [For the record, it appears to us that Ryan simply lost one case in the Arizona courts and won the other in the North Dakota courts, just like they do everywhere else.] Further, the court concluded that a fact issue existed as to whether USA Today “accurately reported whether the FBI was investigating Ryan, and that fact issue precludes USA Today from proving it is entitled to judgment as a matter of law on the affirmative defense of accurate reporting on this aspect of the alleged defamatory gist claim” (citations omitted). The court thus affirmed the trial court’s denial of Gannett’s TCPA motion.
For what it’s worth, this looks like a correct opinion to us. Judging from the facts discussed by the court in its opinion, the articles really do look like a hit job on Ryan, whether the parties’ contract dispute had anything to do with it or not. And from our pretty decent knowledge of the way Ryan conducts business in Texas, it certainly doesn’t look like they did anything differently in Arizona and North Dakota that they don’t do at the Texas Comptroller’s office or in the Capitol or the courts every day. This is hardly the stuff of nefarious political intrigue, back-room dealing, or questionable methods of influence-peddling. Instead, it is simply the push and pull of state taxation between taxpayers, their representatives, tax administrators, and judicial referees.
