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Doctor's Data, Inc v. Stephen J. Barrett

November 22, 2011

DOCTOR'S DATA, INC., PLAINTIFF,
v.
STEPHEN J. BARRETT, M.D., NATIONAL COUNCIL AGAINST ) HEALTH FRAUD, INC., AND QUACKWATCH, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Edmond E. Chang

MEMORANDUM OPINION AND ORDER

Plaintiff Doctor's Data, Inc. alleges that Defendants Stephen J. Barrett, M.D., the National Council Against Health Fraud, Inc., and Quackwatch, Inc. publish false and defamatory information about Doctor's Data on various websites owned and operated by Barrett. Doctor's Data alleges that Barrett's conduct violates Section 43 of the Lanham Act, 15 U.S.C. § 1125, as well as several Illinois state laws.*fn1 Defendants move to dismiss [R. 38] all of the counts. For the following reasons, Defendants' motion is granted in part and denied in part.

I.

In evaluating a motion to dismiss, the Court must accept as true the complaint's factual allegations. Doctor's Data is a scientific and medical laboratory in the business of analyzing blood, tissue, and other samples for health care practitioners. R. 24 (Compl.) ¶ 1. Some of Doctor's Data's clients practice traditional or "mainstream" medicine, while others would be considered practitioners of "alternative" medicine. Id.

¶ 34. Defendant Barrett is a retired physician who resides in, and is a citizen of, North Carolina. Id. ¶¶ 7-8. Barrett is the president of the National Council Against Health Fraud, Inc. (NCAHF), a named defendant in this case. Id. ¶ 15. Barrett operates NCAHF's website and edits Consumer Health Digest, a weekly electronic newsletter published on the site. Id. ¶ 16. Barrett is also the owner and operator of www.quackwatch.com. Id. ¶ 9. Defendant Quackwatch, Inc. dissolved in April 2009, but Plaintiffs allege that Barrett continues to do business under the name "Quackwatch." Id. ¶¶ 10-13.

Doctor's Data claims that Barrett uses his websites to disseminate false and misleading information about Doctor's Data and other medical laboratories. Doctor's Data attached seven articles to the complaint. See R. 24-1 -- 24-7. Doctor's Data claims that these articles exemplify Barrett's efforts to damage Doctor's Data's reputation and harm its business. Compl. ¶ 54. For example, one of the articles authored by Barrett states that Doctor's Data defrauds patients by processing urine tests that are misleading and are then "used to persuade patients they are toxic when they are not."

R. 24-1 (Pl.'s Exh. A) at 5. In another posting, Barrett writes that a patient sued Doctor's Data alleging that he was incorrectly diagnosed "and the test used to diagnose [the patient] -- Doctor's Data's urine toxic metals test -- is a fraud." R. 24-3 (Pl.'s Exh. C) at 1. Doctor's Data seeks a permanent injunction prohibiting Barrett from publishing disparaging statements on the internet as well as monetary damages.

II.

Barrett first argues that Doctor's Data's claims were filed as part of a so-called "strategic lawsuit against public participation" (SLAPP) and should be dismissed pursuant to Illinois' anti-SLAPP statute, known as the Illinois Citizen Participation Act (ICPA), 735 ILCS 110/1, et seq. R. 40-1 (Defs.' Br.) ¶¶ 2-27. The ICPA, which became effective in 2007, immunizes acts undertaken "in furtherance of the constitutional rights to petition, speech, association, and participation in government . . . regardless of intent or purpose, except when not genuinely aimed at procuring favorable government action, result, or outcome." 735 ILCS 110/15. The ICPA "applies to any motion to dispose of a claim in a judicial proceeding on the grounds that the claim is based on, relates to, or is in response to any act or acts of the moving party in furtherance of the moving party's rights of petition, speech, association, or to otherwise participate in government." Id.

The ICPA requires a court to dismiss claims to which it applies unless the plaintiff produces "clear and convincing evidence that the acts of the moving party are not immunized from, or are not in furtherance of acts immunized from, liability by this Act." 735 ILCS 110/20(c). In other words, the ICPA's immunity "will apply where: (1) the defendant's acts were in furtherance of his rights to petition, speak, associate, or otherwise participate in government to obtain favorable government action; (2) the plaintiff's claim is based on, related to, or in response to the defendant's 'acts in furtherance'; and (3) the plaintiff fails to produce clear and convincing evidence that the defendant's acts were not genuinely aimed at procuring favorable government action." Sandholm v. Kuecker, 942 N.E.2d 544, 564 (Ill. App. Ct. 2010).

Although Barrett argues that the entire complaint should be dismissed pursuant to the ICPA, only the state law claims are potentially covered by the Act. The ICPA does not apply to Doctor's Data's federal claims under the Lanham Act because such application would frustrate substantive federal rights. See, e.g., Hilton v. Hallmark Cards, 599 F.3d 894, 900-01 (9th Cir. 2010) (noting that California's anti-SLAPP statute gives no protection against a federal Lanham Act claim). The ICPA is a substantive law, see Chi v. Loyola University Medical Center,787 F. Supp. 2d 797, 808 (N.D. Ill. 2011); thus, applying it to federal claims would permit state law to affect and alter the substance of federal claims in violation of the Supremacy Clause of the Constitution. See Martinez v. State of California, 444 U.S. 277, 284 n.8 (1980). Moreover, applying the ICPA (and other state anti-SLAPP laws) to federal claims would frustrate uniformity in applying federal law by altering the scope of the Lanham Act from state-to-state. The ICPA applies to the state law claims only.

In any event, Doctor's Data argues that the ICPA does not apply at all in this case because North Carolina law governs whether or not Barrett is immune from liability for the state law claims asserted against him (the anti-SLAPP issue).*fn2 R. 70 ¶¶ 15-19. Barrett maintains that Illinois law governs this issue and, therefore, the ICPA applies. R. 73 ¶ 3.

The Court applies the choice-of-law rules of Illinois, the forum state. Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009). In Illinois, a choice-of-law determination is only necessary when there is a conflict of laws and the difference will affect the outcome of the case. Townsend v. Sears, Roebuck & Co., 879 N.E.2d 893, 898-99 (Ill. 2007). Doctor's Data has identified a conflict between North Carolina and Illinois law, and the difference is clearly decisive. North Carolina does not have an anti-SLAPP statute. Thus, if North Carolina law applies, Barrett cannot assert an anti-SLAPP defense. On the other hand, if Illinois law applies, Barrett may invoke the ICPA, which "provid[es] a new, qualified privilege for any defamatory statements communicated in furtherance of one's right to petition, speak, assemble, or otherwise participate in government." Sandholm, 942 N.E.2d at 559-60. Then, if Doctor's Data is unable to produce clear and convincing evidence that Barrett's statements were not genuinely aimed at procuring favorable government action, the ICPA states that all of the state law claims against Barrett must be dismissed. Id. at 564, 570.

Illinois courts have adopted the approach of the Second Restatement of Conflict of Laws in making a choice-of-law determination. Townsend, 879 N.E.2d at 903. Under the Second Restatement approach, the objective is to apply the law of the state with the most significant relationship to the dispute and the parties, as defined by the issues raised. Barbara's Sales, Inc. v. Intel Corp., 879 N.E.2d 910, 919-20 (Ill. 2007);

Townsend, 879 N.E.2d at 901 (Illinois follows the doctrine of depecage, "which refers to the process of cutting up a case into individual issues, each subject to a separate choice-of-law analysis.").

Doctor's Data's action is grounded in tort. The complaint sets forth ten causes of action under Illinois law, all of which are based on the allegedly defamatory statements published on Barrett's websites. In his defense, Barrett asserts that the ICPA applies to the statements made on his websites and, thus, immunizes him from any claims based on this speech. Under the doctrine of depecage, the issue of whether a statement is defamatory is distinct from the issue of whether that statement is privileged. See Chi, 787 F. Supp. 2d at 803; Global Relief Found. v. New York Times Co., 2002 WL 31045394, at *10 (N.D. Ill. Sept. 11, 2002) (applying Illinois choice of law to find that Illinois law applied to defamation action, but that defenses to defamation, namely anti-SLAPP, should be considered under California law); Wilkow v. Forbes, Inc., 2000 WL 631344, at *5 (N.D. Ill. May 15, 2000), aff'd, 241 F.3d 552 (7th Cir. 2001); Vantassell-Matin v. Nelson, 741 F. Supp. 698, 704 (N.D. Ill. 1990) (noting in choice-of-law context that "the threshold question [of defamation] and the defenses are different issues and call for different analyses"). The parties agree that Illinois law governs the alleged torts in this case. The conflict-of-law dispute is limited to whether Barrett's statements are potentially protected under Illinois law (as Barrett contends), or whether he is restricted to defenses recognized in North Carolina (as Doctor's Data contends).

The following factors are considered in deciding which state has the more significant relationship to this issue: (1) the place of the injury; (2) the place where the injury-causing conduct occurred; (3) the parties' domiciles; and (4) the place where the relationship between the parties is centered. Restatement (Second) of Conflicts of Laws § 145(2). In tort cases, the place of injury is a central factor in determining which state's law governs. However, as Chi recognized, this factor is less important in the anti-SLAPP context:

The purpose behind an anti-SLAPP law is to encourage the exercise of free speech-indeed, Illinois's stated policy in enacting the ICPA was to "encourage [ ] and safeguard[ ] with great diligence" the "constitutional rights of citizens and organizations to be involved and participate freely in the process of government." 735 ILCS 110/5. In light of this policy goal, the place where the allegedly tortious speech took place and the domicile of the speaker are central to the choice-of-law analysis on this issue. A state has a strong interest in having its own anti-SLAPP law applied to the speech of its own citizens, at least when, as in this case, the speech initiated within the state's borders. 787 F. Supp. 2d at 803.

Of course, this case is different from Chi because Barrett, a citizen and resident of North Carolina, argues that his speech is protected under Illinois' anti-SLAPP statute. Barrett does not adequately explain why Illinois would have a significant interest in having its law applied to non-Illinois speakers. Nor does Barrett argue that the speech originated in Illinois, which would make the second factor (where the injury-causing conduct occurred) weigh in favor of applying Illinois law to Barrett's anti-SLAPP defense. In contrast, North Carolina has a significant interest in determining how much protection to give North Carolina speakers. See Chi, 787 F. Supp. 2d at 803; Global Relief, 2002 WL 31045394, at *11. For these reasons, the Court concludes that North Carolina law governs. The ICPA does not apply to this action.

Even if the ICPA applied, the Court would not dismiss the state law claims at this early stage. Although "the Act's clear objective as an anti-SLAPP statute is to provide citizens with an immediate way to dispose of such lawsuits," Sandholm, 942 N.E.2d at 550, the parties would be entitled to engage in limited discovery on, at the least, whether the ICPA protects Barrett's statements, and specifically whether there is ...


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