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Government Contracts

Unfair Trade Practices Leads to Loss of Government Contract

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Staff Care, Inc., a subsidiary of the staffing company AMN Healthcare, Inc. worked with Eskridge Enterprises, LLC. to provide contract medical staffing as needed. Staff Care supplied clinicians and physicians, while Eskridge, a Service-Disabled Veteran-Owned Small Business (SDVOSB), placed physicians on assignments under federal contracts. In late 2008, both companies entered into a contract agreement where Staff Care would provide Eskridge healthcare providers and be compensated upon a fee schedule.

Case Background

In May 2017, Eskridge received a lucrative government contract which led to Staff Care removing their physicians from the contract with Eskridge. Staff Care further demanded that physicians not work directly with Eskridge. Staff Care also required Eskridge to pay reassignment fees if it worked directly with any of its physicians. Eskridge accused Staff Care’s interference and unfair trade practices as the reason it lost the lucrative government contract. Staff Care’s alleged interference brought both companies to file suit against each other.

Staff Care filed suit for breach of contract for $750,000 in services rendered that Eskridge failed to pay from their agreement with each other. Eskridge counterclaimed for deceitful trade practices- “false advertising, breach of contract, tortious interference, unfair competition, and economic duress.” The trial court denied Staff Care’s motion to dismiss. Staff Care appealed to the Court of Appeals of Texas challenging the trial court’s order.

Texas Citizen Participation Act and Staff Care’s Motion to Dismiss

On an interlocutory appeal, Staff Care filed a motion to dismiss pursuant to the Texas Citizen Participation Act (TCPA). The TCPA was signed into law in 2011 to protect Texan citizen's free speech.  It deters Strategic Lawsuits Against Public Participation (SLAPP) lawsuits by defending individuals and organizations from lawsuits that infringes their right to petition, association, and free speech. Staff Care’s motion to dismiss stated Eskridge’s counterclaims were based on Staff Care’s exercise of free speech and association.

Staff Care argued the protections of the TCPA applied because its communications related to “health or safety, community well-being, and a service in the marketplace.” It cited its communications with physicians as a shared common interest to promote a business relationship. It also argued the commercial speech exemption in the TCPA does not apply because the wrongful conduct involved communications from Staff Care to its physicians and clients rather than from the services Staff Care offered to Eskridge. Eskridge however asserted that the commercial speech exemption applied and claimed it established all the elements of its counterclaims.

Public Policy Concerns

The Court of Appeals of Texas reviewed the trial court’s denial of Staff Care’s motion to dismiss in the light most favorable to the non-movant, Eskridge. It analyzed whether Staff Care’s communications were an exercise of the right of free speech in connection with a matter of public concern. Eskridge asserted the communications were not a matter of public concern because the communications were not made to the public at large. However, the Court of Appeals of Texas noted the statute does not require the communication be made public.

The Appeals Court however agreed with Eskridge’s argument that the communications are matters of concern because it involves physicians in the healthcare industry. It identified the case, ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 900 (Tex. 2017), where the Supreme Court of Texas identified TCPA applicability only requires that the Defendant’s statements be in connection with issues related to health and safety in the case. The Court of Appeals however found that the communications at issue had no relation to health and safety. They were not a matter of public concern. It also held the private communications Staff Care had encouraging physicians to work with it instead of Eskridge did not involve the public or citizen participation. It concluded Staff Care failed to prove by preponderance of the evidence that Eskridge’s interference counterclaim is based on, related to, or in response to its exercise of free speech or association. It ruled the TCPA did not apply to the counterclaim.

Commercial Exemption

TCPA provides a two-step procedure to expedite the dismissal of claims brought to silence a defendant’s right of free speech. The Defendant must prove the Plaintiff’s lawsuit is based on, related to, or in response to the Defendant’s exercise of the right to free speech. If proven, the burden shifts to the Plaintiff to establish their claim is exempt from the TCPA’s exemption. The case is dismissed if the Plaintiff is unable to prove its claims. The commercial speech exemption however allows parties to avoid the burden shifting requirements of the TCPA. In Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018), the Supreme Court of Texas explained that the commercial speech exemption only applies to “certain communications related to services in the marketplace.” It also stated that the exemption applies when businesses are likely to profit from the statements at issue, like how Staff Care stood to profit from telling its physicians they were not allowed to work with Eskridge. The Court of Appeals of Texas ruled that the commercial speech exemption applied to Eskridge’s counterclaim.

We Can Help

The Court of Appeals of Texas affirmed the trial court’s order denying Staff Care’s motion to dismiss on May 15, 2019. As you can see from this case, working together with different companies on government contracts does not always lead to a happy ending. If you have concerns that a partner is trying to cheat you out of what you deserve, contact the experts in government contracts at Whitcomb Selinksy Law PC. Please call (303) 534-1958 or complete an online contact form.

About the AuthorRaymundo Ribota

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