Injunctions Against Allegedly Libelous Commercial Advertising Under Texas Law

Two weeks after Judge George Hanks Jr. made his decision, here are the ins and outs Easyknock, Inc. v. Feldman & Feldman, P.C. (S.D. Tex.):

Easy Knock is accused of operating a “sale leaseback” business in which Texas homeowners transfer their homesteads and pay a percentage off the value of their property. In return, they also get an agreement to rent back their homestead properties, along with the option of buying back the whole deed. Defendant Feldman & Feldman P.C., a law firm, posted eight statements on its website discussing Easy Knock’s business practices of alleged predatory pricing. Easy Knock has now sued Defendants Feldman & Feldman P.C. and certain of its attorneys (collectively “Feldman & Feldman”) under Texas law for defamation and tortious interference…. Prior to an adjudication that the statements are in fact defamatory or otherwise unlawful, Easy Knock has applied to the Court for injunctive relief in the form of a temporary restraining order against Feldman & Feldman….

An order preventing future statements from being made constitutes a pre-recorded restraint of speech. Texas courts have held for a long time that such orders violate the Texas Constitution. A judicial order that requires the removal or retraction of statements on a website or to be removed from it is similarly presumed to violate Texas Constitution.

{In comparison, After If the adjudication is that the statements were defamatory, injunctive relief may be available. It does not violate Texas Constitution. Because speech at this point of litigation is not protected, it is possible to make such an adjudication. According to Texas court precedents, “if a plaintiff wins in a defamation case based upon statements made by the defendant on the internet,” the court may order the defendant delete the defamatory material and request third-party publishers to do so. This remedy is available because it constitutes the erasure of past speech that has already been found to be unprotected in the context in which it was made.”}

Defamatory statements that amount to threats or written words may be subject to injunction before they are adjudicated. Injunctive relief granted by the Texas Supreme Court injunctive orders regarding defamatory statements does not violate Texas Constitution’s right to freedom of expression. If oral or written statements take on this nature, they can be held responsible for being restrained. … Publications which merely cause adverse business or social effects do not rise to the level of intimidation or coercion necessary to overcome the protection….

Banner 3

Defamatory statements can be stopped in very specific circumstances. A commercial speech refers to “expressions that are solely related to the economic interest of both the speaker and the audience”. {The parties disagree on whether the defamatory statements made by website users constitute commercial speech. are considered “expression[s]The speaker’s and the listeners’ economic interests were the only focus of their speech. Feldman & Feldman argues that the alleged statements are not commercial speech because they address issues of public concern: violations of the consumer protection statutes. The Court disagrees. … “[W]The common sense determination of whether speech is commercially or not is called “commonsense”. Lawyer advertising, in particular, is considered commercial speech. … Accordingly for purposes of its analysis, the Court will assume that the statements constitute commercial speech.}

The Texas Constitution guarantees freedom of speech to commercial speech. However, certain forms of commercial speech regulation may still be allowed. But … “misrepresentations in commercial speech can only be restrained if … the applicant first establishes that commercial speech that was false and misleading has actually been uttered.” Here, even assuming that the statements at issue constitute commercial speech, an order granting injunctive relief would violate Feldman & Feldman’s constitutional right to free speech.

The Court will first need to determine if Easy Knock proved that misleading or false statements of facts have been made in order for a restriction on commercial speech. Easy Knock is not allowed to seek injunctive relief if this cannot be done. Easy Knock identifies eight statements on Feldman & Feldman’s website concerning its business practices that it alleges are “false” and/or “defamatory.” Easy Knock claims these statements are false, because they refer to Easy Knock as a mortgage lender and are involved in home loan lending. Easy Knock asserts that all of these “facts are false.”

When viewed in context, the Court concludes that the alleged falsified statements are more statements about legal opinions than statements factual. These statements cannot be used as a basis to restrict commercial speech. Easy Knock also claims there are documents that can be seen that show its business practices. These documents establish that Easy Knock is not subject to laws regarding lenders.

In fact, one federal judge in this district has published an opinion that is in substantial agreement with Feldman & Feldman’s legal opinions regarding Easy Knock’s status as a lender and being subject to the laws governing lenders. This number could grow, given that at least 8 other cases are currently pending where the issue will be addressed. Accordingly the Court finds that (1) Easy Knock has not established that the website statements at issue are false or misleading and (2) an order granting injunctive relief would violate Feldman & Feldman’s free speech protections guaranteed by the Texas Constitution.