Media Law Prof Blog

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Louisiana State Univ.

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Wednesday, August 3, 2005

May Publisher of Newsletter Be Held Liable For Negligence and Negligent Misrepresentation? Texas Court of Appeals Decides Case of First Impression

In Reynolds v. Murphy, the Texas Court of Appeals affirmed in part and reversed and remanded in part a grant of summary judgment to "an investment-related newsletter" sued by "one of its subscribers who alleges that he incurred losses as a result of making investments in accordance with recommendations in the newsletter." Ernest Reynolds claimed that the trial court erred by granting summary judgment "in nine issues, complaining specifically that (1) the United States Supreme Court  holding Lowe v. Securities and Exchange Commission, protecting publishers from prior restraing of free speech by federal agencies, does not extend to abolish all private causes of action for the consequences of a misuse of speech, (2) the limited First Amendment protection of Lowe should not be extended to shield publishers and nonpublisher author of harmful speech from liability for their actions.... [and others]". Reynolds sued on various grounds, "including breach of contract, negligence, negligent misrepresentation, fraud and misrepresentation, and violations of the Texas Deceptive Trade Practices Act (DTPA)....The trial court granted summary judgment...without stating the grounds upon which the judgment was based."

The case is one of first impression in Texas. "In his first and second issues, Reynolds contends that a First Amendment case relied on by appellees, Lowe, does not provide authority for summary judgment....He contends that Lowe does not address the specific issues in this case and that it cannot be used to shield a publisher and author for wrongful speech. Thus, we begin with an analysis of the Lowe case. The issue in Lowe was whether the Securities and Exchange Commission (SEC) could obtain a permanent injunction prohibiting the publication of securities newsletter containing "nonpersonalized investment advice and commentary....The Supreme Court held that the newsletter was a bona fide publication of general circulation. Thus, it was not an "investment advisor"...and the government could not impose a prior restraint....We agree that Lowe is not directly on point. This case does not involve an attempt by a governmental entity to restrain speech. It concerns a private litigant's attempt to impose liability on a publisher and author. In addition, the First Amendment does not protect fraudulent or deceptive speech...., nor does it give one the right to breach a contract or make false warranties. Thus, summary judgment would not have been proper on First Amendment grounds as to Reynolds' breach of contract, fraud and misrepresentation, and DTPA claims. We have found no Texas authority construing Lowe...[B]ut since Lowe was decided, two cases in other jurisdictions have explored whether publishers of similar newsletters could be liable to private litigants for negligent investment "advice" given in a similar format. Those cases held that subscription newsletter similar to the one at issue here could not be held liable for negligence and negligent misrepresentation." The appellate court upheld the trial court's determination of summary judgment except as to the grant of summary judgment with regard to the issue of fraud and misrepresentation of Murphy's skills.

Read the entire opinion here.

http://lawprofessors.typepad.com/media_law_prof_blog/2005/08/in_reynolds_v_m.html

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