Timothy Castleman and Castleman Consulting, LLC v. Internet Money Limited D/B/A the Offline Assistant and Kevin O'Connor, Individually ( 2018 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-16-00320-CV
TIMOTHY CASTLEMAN AND CASTLEMAN CONSULTING, LLC, APPELLANTS
V.
INTERNET MONEY LIMITED D/B/A THE OFFLINE ASSISTANT AND KEVIN
O’CONNOR, INDIVIDUALLY, APPELLEES
On Appeal from the 237th District Court
Lubbock County, Texas
Trial Court No. 2016-519,740, Honorable Les Hatch, Presiding
October 18, 2018
MEMORANDUM OPINION ON REMAND
Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.
The trial court denied the motion of Timothy Castleman and Castleman
Consulting, LLC (Castleman) to dismiss the defamation suit filed against them by Internet
Money Limited d/b/a The Offline Assistant and Kevin O’Connor (collectively referred to as
Offline). Castleman thought itself entitled to such relief per the terms of the “Texas
Citizens Participation Act” (TCPA). TEX. CIV. PRAC. & REM. CODE ANN. § 27.01 et seq.
(West 2015). We affirmed the decision on one ground mentioned by the trial court. Via
Castleman v. Internet Money Ltd., 546 S.W.3d 684 (Tex. 2018), the Supreme Court
disagreed with our decision, reversed and remanded the cause directing us to “consider
Castleman’s remaining issues.” Id. at 691. Upon doing that, we again affirm the trial
court’s order denying dismissal.
Background
According to the limited record before us, the dispute arose from a commercial or
business relationship between Castleman and Offline. The former retained the latter to
help order and deliver products sold over the Castleman website. Allegedly, Offline failed
to properly comply with instructions from Castleman about how to perform its tasks, which
deviations purportedly resulted in Castleman experiencing lost profits. Offline responded
by alleging that it had followed the instructions provided.
Eventually, Castleman posted on the internet comments about Offline’s
performance. For instance, it titled one of its blogs “Warning: Stay Away From The Offline
Assistant Company & Kevin O’Connor” and wrote about the business relationship
between the two, how he mentored O’Connor, how he “help[ed] [O’Connor] grow his
business,” and the controversy arising therefrom. That blog also contained allegations
that 1) “[n]o one from [O’Connor’s] company . . . reviewed any of the orders to ensure
they were being done correctly despite his assurances they do quality control and project
management on all jobs,” 2) “[t]here was an 85% error rate by his staff in ordering
products for us,” 3) O’Connor “doesn’t stand behind his employees[‘] work,” and 4) Offline
“has zero quality control or checks to ensure work is being done correctly.” Through other
internet avenues, Castleman stated that 1) his “goal [was] to protect other business
owners from losing $8k or having to take a company to court like [he’s] doing,” and 2)
2
“[t]he fallout for this is going to be maybe 10 or 100 multiples of what this guy owes me,
and none of it had to happen.”
Offline deemed the comments defamatory, demanded their removal, and
requested damages. So too did it sue Castleman when the latter refused Offline’s
demands.
Upon answering the petition, Castleman invoked the provisions of the TCPA and
moved to dismiss the suit. According to Castleman, Tim Castleman had “the right to
speak his mind on the behavior of companies and individuals with whom he [did]
business. He has done so, and [Offline is] now trying to make him pay for it. But
Castleman’s statements [weren’t] defamatory; they [fell] within no exception to the liberty
of free speech that would allow a reasonable person to find them defamatory.”
Furthermore, the “Texas Citizens Participation Act” purportedly “protect[ed] him from
[Offline’s] attempts to impose upon him the cost of defending such a lawsuit.”
The trial court denied the motion to dismiss and issued findings of facts and
conclusions of law supporting its decision. Among other things, it determined that 1) “[t]he
statements at issue arose out of the sale of goods, and the intended audience is actual
or potential buyers or customers”; 2) Castleman’s “statements were made with either the
knowledge of their falsity or, at the very least, with reckless disregard as to their truth or
falsity”; 3) Castleman “admitted their intent to harm [Offline] and acknowledged the
damage their statements were causing [Offline]”; 4) Castleman failed to prove that “the
legal action was based on, related to, or was in response to [Castleman’s] exercise of the
right of free speech, the right to petition, or of the right of association”; 5) “Defendant
Castleman Consulting, LLC did not file a motion to dismiss under the Texas Citizens
3
Participation Act,” only Tim Castleman”; and 6) Castleman’s “acts fall within an exception
to the Citizens Participation Act.” Castleman appealed.
Disposition
Several issues remain for disposition. The primary one concerns whether the trial
court properly denied the motion to dismiss. The trial court’s findings and conclusions
revealed several grounds upon which it acted. Obviously, the one upon which we relied
in initially affirming ultimately proved wrong. The others now before us encompass
whether 1) Offline established a prima facie case of defamation, and 2) whether
Castleman established as a matter of law the truthfulness of the purportedly false
statements. To those we add the need to determine whether Castleman Consulting, LLC
was actually a party to the motion to dismiss and, if so, whether the movants were entitled
to attorney’s fees.
Prima Facie Case
We first consider the matter of a prima facie case. Again, Castleman moved to
dismiss under § 27.005 of the Civil Practice and Remedies Code. The latter provides that
“on the motion of a party . . . a court shall dismiss a legal action against the moving party
if the moving party shows by a preponderance of the evidence that the legal action is
based on, relates to, or is in response to the party’s exercise of: (1) the right of free
speech; (2) the right to petition; or (3) the right of association.” TEX. CIV. PRAC. & REM.
CODE ANN. § 27.005(b)(1)-(3). However, dismissal may not occur “if the party bringing
the legal action establishes by clear and specific evidence a prima facie case for each
essential element of the claim in question.” Id. § 27.005(c).
4
Reviewing a decision to deny a § 27.005 motion to dismiss implicates the de novo
standard of review. Patterson v. T.V. Channel 25 Broad. Station, 489 S.W.3d 589, 591
(Tex. App.—Texarkana 2016, no pet.); See Batra v. Covenant Health Sys., __ S.W.3d
__, __, 2018 Tex. App. LEXIS 8215, at *15 (Tex. App.—Amarillo Oct. 9, 2018, no pet. h.).
Furthermore, our review of the order is akin to that applicable when reviewing a summary
judgment. That is, we consider the pleadings and evidence in a light most favorable to
the nonmovant. Batra, 2018 Tex. App. LEXIS 8215, at *14-15; E. Tex. Med. Ctr. Athens
v. Hernandez, No. 12-17-00333-CV, 2018 Tex. App. LEXIS 3921, at *5 (Tex. App.—Tyler
May 31, 2018 pet. denied) (mem. op.); Dolcefino v. Cypress Creek EMS, 540 S.W.3d
194, 199 (Tex. App.—Houston [1st Dist.] 2017, no pet.); Warner Bros. Entm’t, Inc. v.
Jones, 538 S.W.3d 781, 801 (Tex. App.—Austin 2017, pet. filed). So too do we assess
whether the parties satisfied their respective burdens. Performing this task likens to
swinging on a pendulum.
That is, we start with the movant. He, she, or it has the burden to prove the cause
falls within the scope of the TCPA. Greer v. Abraham, 489 S.W.3d 440, 443 (Tex. 2016);
Batra, 2018 Tex. App. LEXIS 8215, at *11-12. Once that is done, we swing in the direction
of the nonmovant. To avoid dismissal, he, she, or it must establish by “clear and specific
evidence a prima facie case” for each essential element of the claim in question. Batra,
2018 Tex. App. LEXIS 8215, at *12. Once that occurs, we tighten our grip as we swing
back towards the movant to determine if he, she, or it established, by a preponderance
of the evidence, any available defense. Id. at *13-14. The tether on which we swing
consists of the pleadings and affidavits filed by the parties. TEX. CIV. PRAC. & REM. CODE
ANN. § 27.006(a) (requiring the court to “consider the pleadings and supporting and
5
opposing affidavits stating the facts on which the liability or defense is based”); accord
Batra, 2018 Tex. App. LEXIS 8215, at *12 (stating that the trial court is statutorily required
to consider all pleadings, and supporting and opposing affidavits stating the facts on
which a claim of liability is based).
Here, we conclude that Castleman satisfied his initial burden. Section 27.001
applies to defamation actions. See Greer, 489 S.W.3d at 443. Additionally, the exception
thought available to Offline was deemed unavailable in the Supreme Court’s Castleman
opinion. That said, our journey takes us to Offline and its burden.
The “clear and specific evidence” standard mentioned in § 27.005(c) neither
imposes a higher evidentiary burden nor bars the use of circumstantial evidence.
Andrews Cty. v. Sierra Club, 463 S.W.3d 867, 867 (Tex. 2015). Nonetheless, the
evidence must have some degree of detail. Schofield v. Gerda, No. 02-15-00326-CV,
2017 Tex. App. LEXIS 4579, at *27 (Tex. App.—Fort Worth May 18, 2017, no pet.) (mem.
op.). As said by the Supreme Court in In re Lipsky, 460 S.W.3d 579 (Tex. 2015),
“pleadings and evidence that establishes the facts of when, where, and what was said,
the defamatory nature of the statements, and how they damaged the plaintiff should be
sufficient to resist a TCPA motion to dismiss.” Id. at 591. So, the nonmovant’s burden is
satisfied when there exists of record the minimum amount of evidence needed to support
a rational inference that the allegations of fact are true. Id. at 590. In other words, the
record must contain sufficient evidence to support a rational inference that each element
of the cause of action exists. With these rules in mind, we turn to the record and situation
at bar.
6
Like most every cause of action, defamation has multiple elements. They consist
of a false statement by the defendant to a third party, that defamed the plaintiff, which
was uttered with the requisite degree of fault, and which caused damage. Bedford v.
Spassoff, 520 S.W.3d 901, 904 (Tex. 2017); Batra, 2018 Tex. App. LEXIS 8215, at *18-
19. Damages need not be proved if the statement was defamatory per se, however.
Bedford, 520 S.W.3d at 904.
Regarding the element of a false statement, the question is whether the words
spoken are reasonably susceptible of a defamatory meaning. Dallas Morning News, Inc.
v. Tatum, __ S.W.3d __, __, 2018 Tex. LEXIS 404, at *9-10 (Tex. May 11, 2018). That
is, the statement must be verifiably false and not merely an opinion masquerading as a
verifiable fact. Id. We decide that by focusing on the statement’s entire context. Id. But,
again, it is not enough that the statement is false, it must also be defamatory. That entails
an objective, as opposed to subjective, inquiry. Id. at *11-12. The inquiry is one of law,
not fact, and implicates a two-step process. Id. Via the first, we decide if the meaning
assigned to the statement by the plaintiff is reasonably capable of arising from its text,
while the second obligates us to decide if that meaning is reasonably capable of defaming
the plaintiff. Id.
In reviewing Castleman’s brief, his challenge on appeal concerns the statements,
whether they actually were opinions, and whether they were false. Little is said about the
other elements of defamation. So, we begin with the contentions posed in the brief. As
previously mentioned, the statements consist of Castleman telling others via the internet
that 1) “[n]o one from [O’Connor’s] company . . . reviewed any of the orders to ensure
they were being done correctly despite his assurances they do quality control and project
7
management on all jobs,” 2) “[t]here was an 85% error rate by his staff in ordering
products for us,” 3) O’Connor “doesn’t stand behind his employees[‘] work,” and 4) Offline
“has zero quality control or checks to ensure work is being done correctly.” Viewing the
evidence in a light most favorable to Offline, we find evidence from which a rational
factfinder could reasonably conclude that one or more of the utterances were false.
For instance, the record contains written electronic exchanges between O’Connor
and Castleman wherein the latter accused Offline of wrongfully doubling orders to be sent
to Castleman customers. It is this purported doubling of orders that resulted in the alleged
“85% error rate,” according to Castleman. Offline denied the allegation, informed
Castleman that it was simply following the directions Castleman had provided it and
forwarded to Castleman those directions. Furthermore, those directions revealed that
each time a customer ordered one item Offline was supposed to order two. From Offline’s
viewpoint, it did exactly as directed by Castleman, and, in abiding by his directives, there
could be no “85% error rate.” Castleman rejected the explanation, demanded that Offline
accept responsibility for the supposed error, demanded reimbursement for the expense
of doubling the orders, and posted the aforementioned comments on various internet sites
when O’Connor refused to accede to the demand.
Whether or not Castleman actually told Offline to double order items is not a matter
we need to resolve, given the status of the case. Our task is only to determine if evidence
appears of record (when construed in a light most favorable to Offline) that allows one to
reasonably infer that the allegation about the “85% error rate” was false. Such evidence
does. The accuracy of Castleman’s representation about an “85% error rate” is
dependent upon whether he had directed O’Connor to double each order. No other basis
8
for the error rate was assigned by Castleman. So, if O’Connor followed his instructions
and, consequently, doubled the orders, there would be no “85% error rate,” and the
statement about the existence of such a rate would be false. O’Connor provided evidence
of the instructions in question, the directive to double orders, and Offline’s compliance
with them. Thus, there is evidence that no such “85% error rate” existed and Castleman’s
contrary statement was false.
The same is also true about the statement that “[n]o one from [O’Connor’s]
company . . . reviewed any of the orders to ensure they were being done correctly despite
his assurances they do quality control and project management on all jobs.” The record
contains evidence of personnel from Offline contacting a Castleman employee to inquire
about the accuracy of an order. The Castleman employee told Offline that the particular
order should not be doubled. This evidence belies the allegation that “no one from” Offline
“reviewed any of the orders to ensure they were being done correctly.” Simply put,
evidence appears of record from which one can reasonably infer that at least two of the
utterances Castleman published on the internet were false.
As for whether those falsehoods were defamatory, we note that falsehoods are
defamatory if the words tend to injure the person’s reputation, exposing him to hatred,
contempt, ridicule, or financial injury, or if it tends to impeach the person’s honesty,
integrity, or virtue. Hoskins v. Fuchs, 517 S.W.3d 834, 840 (Tex. App.—Fort Worth 2016,
pet. denied); TEX. CIV. PRAC. & REM. CODE ANN. § 73.001 (West 2017) (defining libel as a
“a defamation expressed in written or other graphic form that tends to blacken the memory
of the dead or that tends to injure a living person’s reputation and thereby expose the
person to public hatred, contempt or ridicule, or financial injury or to impeach any person’s
9
honesty, integrity, virtue, or reputation or to publish the natural defects of anyone and
thereby expose the person to public hatred, ridicule, or financial injury”). This said, we
turn to the context of the misrepresentations. They were published on forums or internet
sites containing viewers who knew him and who may have been likely to use the services
of Offline and O’Connor. His expressed intent was to “warn” his readers and listeners
against using the services of Offline and O’Connor by describing the quality, or lack
thereof, of their work. The utterances and their entire context portrayed Offline and
O’Connor as failing to perform, as breaching promises, and as being comparable to
thieves by refusing to take responsibility for the supposed error. Third parties both read
the comments and decided to eschew the business services offered by Offline and
O’Connor. Moreover, in at least one instance, Castleman thanked a reader for deciding
not to hire the subjects of his commentary. These circumstances connote effort to ascribe
to O’Connor and his business the moniker of ineptness and untrustworthiness and he
used falsehoods indicative of that. Such a meaning of his words and purpose reasonably
arises from the falsehoods and their context. That he succeeded by actually dissuading
others from hiring Offline and O’Connor upon their reading of the falsehood reveals that
those falsehoods were reasonably capable of defaming O’Connor and Offline, that is, of
exposing them to financial injury.
As for the verifiability of the statements, Castleman argues that they were not
verifiable and that they were mere expressions of opinion. To reiterate what the Supreme
Court said in Dallas Morning News, statements that are not verifiable as false are not
defamatory. Dallas Morning News, Inc., 2018 Tex. LEXIS 404, at *46-47. And, even if
susceptible to verification, they do not expose the speaker to liability if their entire context
10
discloses that they were not intended to assert a fact. Id. Finally, should they not be
verifiable or intended to assert a fact, they are “called an opinion.” Id.
Castleman’s proclamations about Offline’s error rate and lack of personnel to
review orders began with an explanation of the basis for his statements. That basis
consisted of 1) his accountant noticing a $7,897.68 loss “caused by Kevin O’Connor’s
Offline Assistant Company”; 2) Castleman or his subordinates perusing the last 100
orders placed by Offline for him; 3) uncovering the supposed “85% error rate”; 4)
“dig[ging] deeper”; and 5) “pull[ing] our financial records from the store, the supplier, and
match[ing] them to our credit card statements for them to get a full accounting of just how
bad it was.” He then described for his readers his effort to address the matter with Offline,
which included a description of how he asked O’Connor to “explain why none of the orders
were checked by his project manager (as promised when he signed up) or anyone else
on his staff for accuracy” and “why they hadn’t followed the spreadsheet directions”
Castleman had provided. In alluding to his accountant’s discovery and in describing a
purportedly in-depth investigation involving the perusal of business records and
confirmation of the supposed error, Castleman’s words had a multifold effect. They
revealed 1) that he purportedly verified the purported “85% error rate” as fact, 2) the
statement purportedly was a verifiable fact, and 3) he intended his readers to believe the
statement was verifiably factual. We add to that his 1) parenthetical about Offline having
promised to have a project manager check orders, 2) insinuations that none of the orders
were checked, and 3) the accusation that Offline personnel “hadn’t followed the
spreadsheet directions.” In so coupling the evidence, we see how Castleman wanted his
11
readers to conclude that his comment about “no one from” Offline “review[ing] any of the
orders to ensure they were being done correctly” was more than mere opinion.
In effect, Castleman’s words acted as a syllogism. Its premise was that there
would be no errors if Offline both 1) followed its instructions and 2) provided the requisite
personnel to assure compliance with them, as agreed. Its conclusion was that because
an investigation proved that 85% of the orders were erroneous then Offline failed to
provide the requisite personnel to assure compliance with the instructions, as agreed. So
cast, one can view Castleman’s words as voicing more than a mere opinion about no one
at Offline reviewing the orders and complying with the spreadsheet directions.
In short, at least two falsehoods by Castleman were posed as verifiable fact and
intended by him to be so viewed. At least two were not masquerading as mere opinion.
While Castleman said little if anything about the remaining elements of defamation,
we nonetheless address them. Statements that injure one’s office, profession, or
occupation are normally defamatory per se. Dallas Morning News, Inc., 2018 Tex. LEXIS
404, at *9. The defamatory statements discussed above were aimed at Offline’s
profession and hit their mark, or so at least some evidence would allow a reasonable
person to infer. Given that the remarks disparaged the ability of Offline and O’Connor to
properly conduct their business, they were defamatory per se. See In re Lipsky, 460
S.W.3d at 596 (stating that to qualify as damages per se, the disparaging words must
affect the plaintiff in some manner that is peculiarly harmful to his trade, business, or
profession and not merely his general character). The statements being defamatory per
se, Offline and O’Connor need not prove damages, id. at 593, even though some
12
evidence appears of record from which it can be reasonably inferred that they actually
suffered them.
As for the requisite degree of fault, Offline was a private entity while O’Connor was
a private individual when the statements were uttered. No one suggested otherwise.
Thus, the two plaintiffs need only present evidence sufficient to illustrate that Castleman
acted negligently in publishing his remarks. Id. at 593. Negligence, in the context of
defamation, denotes a failure to investigate the truth or falsity of a statement before its
publication and the failure to act as a reasonably prudent person. Harwood v. Gilroy, No.
04-16-00652, 2017 Tex. App. LEXIS 5931, at *17-18 (Tex. App.—San Antonio June 28,
2017, no pet.) (mem. op.). That is, the plaintiff need only show that the defendant knew
or should have known the defamatory statement was false. Id. There is evidence of
record illustrating that Castleman investigated what he deemed to be an error, discussed
the matter several times with O’Connor via email or other electronic means, and was
referred to the instructions given O’Connor on how to place orders on his behalf. Those
instructions were part of an electronic file (i.e. “Google Drive”) made available to Offline’s
personnel, and they contained directions informing the reader to double the order actually
placed by a customer. After O’Connor and Castleman engaged in these electronic
communications, someone accessed the Google Drive containing the internet
instructions and removed the directive about doubling a customer’s order. Castleman
then began posting on his internet “warning” about and diatribe against Offline and
O’Connor.
The foregoing reveals an investigation into the accuracy of O’Connor’s explanation
and justification for placing the orders that were placed. The initial instructions provided
13
the measuring stick against which O’Connor’s conduct was to be gauged as proper or
improper. If he was told to double the orders, then there was no “85% error rate,” and
Castleman’s statement about that rate would be quite false. Yet, someone changed the
measuring stick, and the defamatory comments began. At the very least, one can
reasonably infer that Castleman knew or should have known of the measuring stick
legitimizing O’Connor’s conduct and rendering inaccurate his comments about an “85%
error rate. Nevertheless, he made his comments disparaging the manner in which Offline
performed. Thus, prima facie evidence of negligence, if not a higher mens rea, appears
of record.
Finally, the very evidence that illustrates Castleman’s words to be false negate his
defense of truthfulness. Again, Castleman’s statements arose from Offline’s doubling of
orders. If Offline was told to double the orders and it did so, then the allegation about an
“85% error rate” is false. X cannot legitimately claim that Y provided defective service
when Y did the very thing told him by X. Similarly, if Offline personnel actually called a
Castleman employee to inquire about the accuracy of an order (as indicated by the
evidence of record), then uttering that no one from Offline reviewed any of the orders is
a falsehood.
We caution that our review of the record was undertaken per the standard of
review. Again, it obligated us to view the evidence in a light most favorable to Offline.
That does not mean the ultimate fact-finder must construe it similarly. Whether it be the
trial court or jury, it has the authority to interpret the evidence as it chooses. Nevertheless,
in undertaking our review of the record, we encountered sufficient clear and specific
evidence to support a rational inference that the allegations of fact, that is the elements
14
of defamation, are true. Thus, the trial court did not err in denying Castleman’s motion to
dismiss.
Who Were the Movants
Next, we address whether both Castleman and Castleman Consulting, LLC moved
to dismiss the cause per the TCPA. One may question whether this topic has little
consequence given our conclusion that the trial court did not err in denying the motion.
Nevertheless, we were directed to “consider Castleman’s remaining issues” by the
Supreme Court. This is one of the “remaining issues.”
The trial court found that only Castleman, individually, moved to dismiss the action.
In assessing the finding’s accuracy, we are mindful of our obligation to construe pleadings
to do substantial justice. Wise Elec. Coop., Inc. v. Am. Hat Co., 476 S.W.3d 671, 717
(Tex. App.—Fort Worth 2017, no pet.). Though some may debate about whether a motion
is a pleading, we see little reason to forgo application of the same rule to it. This seems
especially appropriate given that substance must control over form. See Sedano v.
Mijares, 333 S.W.3d 815, 819 (Tex. App.—Houston [1st Dist.] 2010, no pet.).
Here, Castleman alluded to himself and the “right to speak his mind” in the opening
paragraph of the motion. Nothing was said of Castleman Consulting. Yet, he later
explains that “[t]his motion refers to Castleman and his company, on the one hand, and
O’Connor and his company, on the other collectively.” We also note the prayer wherein
the trial court was told that “Castleman prays that the Court dismiss O’Connor’s suit.”
This prayer tends to comport with the explanation that the two litigants on both sides of
the dispute were being alluded to “collectively.” If this were not so, then we would have
to read the prayer as a request for the dismissal of only O’Connor’s portion of the suit.
15
That seems nonsensical if not absurd since both O’Connor and Offline sued. Why a
defendant would want to dismiss the claims of only one plaintiff when the grounds for
dismissal apply to both would leave us shaking our heads in wonderment. So, in doing
substantial justice here we construe the use of the name “Castleman” in the prayer as a
request by the collective of defendants aimed at the opposing collective of plaintiffs. In
other words, both Castleman, individually, and Castleman Consulting moved to dismiss
the claims of both O’Connor, individually, and Offline.
Attorney’s Fees
The final issue before us concerns Castleman’s request for attorney’s fees under
§ 27.009 of the Civil Practice and Remedies Code. Had the collective of Castleman and
Castleman Consulting succeeded in establishing that their motion to dismiss should have
been granted, an award of fees would have been appropriate. TEX. CIV. PRAC. & REM.
CODE ANN. § 27.009(a) (stating that “[i]f the court orders dismissal of a legal action under
this chapter, the court shall award to the moving party . . . court costs, reasonable
attorney’s fees, and other expenses incurred in defending against the legal action as
justice and equity may require”). But, they did not succeed. So, neither are entitled to
attorney’s fees under § 27.009(a).
We overrule all “the remaining issues” and affirm the order of the trial court denying
the motion to dismiss.
Brian Quinn
Chief Justice
16