BancPass, Inc. v. Highway Toll Administration, L.L.C.

Citations: 863 F.3d 391; 2017 U.S. App. LEXIS 12595; 2017 WL 2981020Docket: No. 16-51073

Court: Court of Appeals for the Fifth Circuit; July 13, 2017; Federal Appellate Court

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Defendant-Appellant Highway Toll Administration, L.L.C. (HTA) is appealing the district court's denial of its motion for summary judgment, which was based on the assertion of Texas’s judicial proceedings privilege in a defamation case brought by Plaintiff-Appellee BancPass, Inc. HTA contends that Texas law grants it absolute immunity from defamation claims related to communications about judicial proceedings made in good faith. In response, BancPass filed a motion to dismiss the appeal, arguing that the court lacks jurisdiction for an interlocutory appeal or that HTA forfeited its right to a pre-trial ruling on the privilege issue. The court denied BancPass’s motion to dismiss and upheld the district court's decision against HTA.

The case stems from a competitive dispute between HTA and BancPass, both of which provide toll collection services. HTA manages electronic toll payments for rental cars, while BancPass has developed the PToll App, enabling users to manage toll payments directly using their mobile devices. BancPass's app allows rental-car customers to avoid fees associated with default toll payment systems by registering their vehicles temporarily. In April 2014, BancPass announced the launch of its app at a prominent industry conference. In response, HTA's CEO sent a letter to TxDOT expressing concerns about BancPass's operations and threatened legal action to protect HTA’s rights, indicating a proactive stance to counter BancPass's competitive advantage.

HTA did not communicate concerns regarding a letter to BancPass. On September 3, 2014, HTA’s outside counsel sent letters to Google and Apple, demanding the removal of the PToll App from their stores. The letters claimed the app violated internal policies and facilitated unlawful activities, particularly by enabling users to falsely represent rental vehicles as part of BancPass’s fleet, potentially violating state vehicle registration laws. The letters warned that this misrepresentation could lead to felony charges for users and create significant procedural and financial issues for rental agencies and state authorities. HTA accused Google and Apple of facilitating tortious conduct by providing the app with legitimacy, while also stating that BancPass was interfering with contracts between rental agencies and drivers. However, the letters did not mention any direct tortious interference with HTA’s own contracts or indicate that HTA would pursue legal action against BancPass. Following these communications, HTA threatened legal action against BancPass unless it ceased marketing the app, but BancPass declined and filed a suit in October 2014 for a declaratory judgment asserting its app did not tortiously interfere with HTA’s rights. After obtaining HTA's letters, BancPass amended its complaint to include a defamation claim. HTA counterclaimed for a declaratory judgment on tortious interference. In summary judgment proceedings, HTA argued that the letters were absolutely privileged under Texas law due to the judicial proceedings privilege. However, the district court denied HTA's summary judgment on the defamation claim, ruling the letters did not qualify for absolute privilege, and declared that the PToll App did not tortiously interfere with HTA's rights. HTA subsequently filed an emergency motion to stay proceedings pending an appeal of the court's ruling.

The court denied HTA's motion, noting that HTA's delay in asserting its absolute immunity defense until summary judgment appeared to be a litigation tactic to evade trial. HTA appealed the denial, claiming it was immediately appealable under the collateral order doctrine. BancPass sought to dismiss the appeal, arguing that the court lacked jurisdiction due to the absence of an ongoing judicial proceeding and that HTA had forfeited its right to an interlocutory appeal, labeling it a tactic to avoid trial.

Jurisdiction must be established before addressing the merits, as per 28 U.S.C. § 1291, which typically restricts review of pretrial orders, including denials of summary judgment, until a final judgment is made. However, the collateral order doctrine allows interlocutory appeals from certain decisions deemed effectively final, including denials of absolute immunity, which protect defendants from the burdens of litigation. The court referenced its previous ruling in Shanks, affirming that Texas’s judicial proceedings privilege constitutes complete immunity from suit, thus making related denials appealable. BancPass contended that HTA’s statements did not qualify for the privilege but did not directly challenge the overarching conclusions in Shanks and Troice regarding the appealability of immunity claims.

Jurisdiction over an appeal is determined by the type of order being appealed, not by the merits of the case. The court asserts jurisdiction based on previous rulings in Shanks and Troice. BancPass contends that even with jurisdiction, the appeal should be dismissed because the district court labeled HTA's appeal as a 'litigation tactic to avoid trial,' suggesting HTA forfeited its appeal rights. BancPass refers to case law that allows exceptions to the general rule that a notice of appeal transfers jurisdiction from the trial to the appellate court. Specifically, in United States v. Dunbar, the court unanimously held that a district court can deem an interlocutory appeal on double jeopardy motions as frivolous, allowing the trial to proceed without relinquishing jurisdiction. This ruling was intended to prevent defendants from delaying trials through frivolous motions. Subsequent cases have extended this concept to immunity defenses, with courts able to certify an appeal as frivolous to maintain trial schedules. While this court has not formally recognized the Dunbar rule for immunity appeals, several district courts within the circuit have applied similar principles, maintaining jurisdiction despite an interlocutory appeal when deemed frivolous.

The recognition of the Dunbar rule by sister circuits supports the assertion that a district court can maintain jurisdiction over an interlocutory appeal of an immunity denial, even after labeling the appeal as frivolous or dilatory. This authority is discretionary; the court may choose to retain jurisdiction but is not obligated to do so. The district court's order in this case, however, does not constitute a valid certification of frivolousness. Although the court criticized HTA's litigation tactics regarding the timing of their absolute immunity defense and appeal, it did not explicitly determine that HTA forfeited its right to a pre-trial appeal, which would allow the court to retain jurisdiction. Instead, it concluded that HTA's notice of appeal stripped the court of jurisdiction. Precedent indicates that forfeiture cannot be assumed without explicit written certification from the district court. The court emphasizes the need for such certification to facilitate efficient appellate review. In this instance, the district court failed to make the necessary findings for frivolousness or forfeiture, leading to the denial of BancPass’s motion to dismiss and the continuation to the merits of HTA’s appeal.

HTA argues that the district court wrongly denied summary judgment based on Texas's judicial proceedings privilege. Summary judgment is warranted when there is no genuine dispute of material fact, and this court reviews such denials de novo, particularly in immunity cases. Without a ruling from the Texas Supreme Court on whether the judicial proceedings privilege protects HTA’s communications with TxDOT, Google, and Apple, the court is tasked with predicting how the state’s highest court would decide the issue. It concludes that Texas case law does not support the application of this privilege in the present context. Under Texas law, statements made during judicial proceedings are protected from civil libel or slander claims, encompassing communications from judges, jurors, attorneys, parties, or witnesses, and applies to all procedural aspects of the case. Courts, including those in Texas, generally follow the Restatement (Second) of Torts for this privilege.

Section 586 of the Restatement addresses attorney protection regarding communications related to judicial proceedings, allowing attorneys to publish potentially defamatory statements if they are relevant to such proceedings. Texas appellate courts have similarly expanded this privilege to include communications made in anticipation of judicial actions, while also recognizing limitations on the privilege's scope, particularly for statements made outside formal proceedings. The comments to sections 586 and 587 stress that the privilege applies only when communications are made in good faith and seriously considered in relation to a contemplated proceeding.

Texas courts caution against overextending the privilege, emphasizing it cannot be used as a shield for making false claims against adversaries in the community. Courts analyze whether the defendant genuinely contemplated litigation at the time of communication and if the statement is relevant to that potential proceeding. The district court assumed that HTA had good faith in considering a tortious interference claim against BancPass, and that the privilege applied to communications by both attorneys and non-attorneys as per section 587.

However, the court must evaluate the entire context of the communication to determine its relevance to the anticipated litigation. While HTA argued that Texas courts have interpreted the "some relation" requirement broadly, the district court found no analogous cases supporting HTA's position due to the disconnect between the communications and the later tortious interference claim. Texas case law suggests that the purpose of the communication must relate to the anticipated litigation, focusing on the legal rights pursued. This implies that the privilege does not apply in this instance due to insufficient connection between the communications and HTA’s tortious interference claim.

Texas caselaw requires an analysis of the connection between communications and the specific legal action HTA claims to have been contemplating. The letters sent to Google and Apple contained vague accusations of unlawful conduct unrelated to HTA's tortious interference claim and did not indicate HTA's intention to pursue any legal action against BancPass. Similarly, while the letter to TxDOT mentioned potential legal action, it lacked specificity and did not request assistance in pursuing any claims against BancPass. The communications aimed at third parties with little interest in the purported dispute were deemed insufficient to establish a connection to any judicial proceeding. Texas law indicates that for a communication to relate to a proposed or ongoing judicial proceeding, the recipient must have a direct interest or relevant evidentiary information. The letters to Google and Apple did not reference any litigation between HTA and BancPass, and the relationship described in the letter to TxDOT was ultimately hypothetical. This reasoning aligns with the decision in Burzynski v. Aetna Life Insurance Co., where similar communications were found not to be protected under Texas law due to the lack of a reasonable legal interest from the recipients. The court concluded that the denial of privilege in this case was appropriate and affirmed the district court's judgment, denying BancPass's motion to dismiss the appeal.

The Supreme Court has endorsed the Seventh Circuit's certification procedures, affirming that appellate courts can establish summary processes to eliminate frivolous claims. As the district court did not classify this interlocutory appeal as frivolous or forfeited, it lost jurisdiction to proceed with the trial. However, the appeal is not dismissed on waiver grounds since the district court has not issued findings on either frivolousness or waiver, allowing this court to hear the timely appeal. 

Apostol highlighted that the district court's certification of an appeal as frivolous or forfeited is essential for it to retain jurisdiction for trial, a sentiment echoed by other courts insisting on a clear finding to avoid jurisdictional divestiture. In contrast, Rivera-Torres established that formal certification is unnecessary if the appeal is evidently meritless, thereby not affecting the district court's jurisdiction. BancPass assumes that proper certification would necessitate dismissal of the appeal. While the court acknowledges that a district court maintaining jurisdiction over a frivolous immunity appeal requires proper certification, it refrains from deciding if such certification would impact this court's jurisdiction or whether it was warranted in this case. 

Additionally, references are made to Texas case law regarding the attorney-client privilege in communications related to litigation, noting differing interpretations on whether a statement must further representation to qualify for privilege. The cases emphasize that a statement must relate to a judicial proceeding and may be deemed privileged if it is connected to an ongoing litigation process.

Business communications are not automatically privileged simply because they may relate to future litigation. The mere mention of a potential lawsuit does not transform an entire conversation into one connected to a proposed judicial proceeding. For instance, in Krishnan v. Law Offices of Preston Henrichson, P.C., the court noted that a letter informing Dr. Caballero of a negligence claim regarding an unauthorized tubal ligation served merely as notice of an intended claim. Similarly, in Crain v. Smith, the court emphasized that factual allegations within a demand letter must be anchored to a specific lawsuit to establish relevance and privilege.

The absence of clear connections between statements and a particular lawsuit can undermine claims of privilege, as highlighted in McCrary v. Hightower, which stressed that privilege applies only to communications related to actual contemplated proceedings. In Dall. Indep. Sch. Dist. v. Finlan, the court found that certain statements in a press release were privileged due to their relation to existing litigation between the same parties. Furthermore, communications detailing alleged grievances by counsel are generally protected under this absolute privilege, akin to allegations presented in a court petition.

In a specific case involving a letter related to alleged lease violations, the court determined that the letter lacked sufficient indication of an impending judicial proceeding, as it did not explicitly reference any court action. The mere suggestion that litigation might occur if demands are unmet was deemed inadequate. The letter identified the attorney's capacity and referenced an estate administration proceeding, yet did not establish a clear nexus to future litigation.

A letter to a police chief must reference a judicial proceeding for the author to claim absolute immunity from defamation. Previous cases, such as Watson v. Kaminski, indicate that the communication does not need to specify the anticipated litigation. Additionally, Russell highlights that recipients of an attorney's allegedly defamatory letter may be considered potential witnesses, and thus, the absolute privilege cannot justify sharing defamatory content with the public or unrelated third parties. In Sriberg v. Raymond, it was noted that a third party, although neutral, could be implicated in a scheme if the letter suggests manipulation. Theiss v. Scherer emphasized that privilege applies when a letter is addressed to an attorney representing a party with a financial interest, with copies sent only to those directly involved in the proceedings.