Woods Servs., Inc. v. Disability Advocates, Inc.

• Decision Date: 17 October 2018
• Docket Number: CIVIL ACTION NO. 18-296
• Citation: 342 F.Supp.3d 592
• Parties: WOODS SERVICES, INC. v. DISABILITY ADVOCATES, INC., d/b/a Disability Rights New York
• Court: U.S. District Court — Eastern District of Pennsylvania

342 F.Supp.3d 592

WOODS SERVICES, INC.

v.DISABILITY ADVOCATES, INC., d/b/a Disability Rights New York

CIVIL ACTION NO. 18-296

United States District Court, E.D. Pennsylvania.

Signed October 17, 2018

Mark A. Aronchick, Dylan J. Steinberg, Rebecca Santoro Melley, Jonathan L. Cochran, Hangley Aronchick Segal Pudlin & Schiller, Philadelphia, PA, for Woods Services, Inc.

Clifford H. Zucker, Disability Advocates, Albany, NY, Adrianna Yanez, Walter H. Swayze, III, Chester F. Darlington, Michael B. Pullano, Segal McCambridge Singer & Mahoney, Ltd., Matthew G. Laver, Weber Gallagher Simpson Stapleton Fires & Newby LLP, Philadelphia, PA, for Disability Advocates, Inc.

MEMORANDUM RE: MOTION TO DISMISS

Baylson, J.

I. Introduction

In this case, Plaintiff Woods Services, Inc. ("Plaintiff") has moved, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss counterclaims filed by Defendant Disability Advocates, Inc. d/b/a Disability Rights New York ("Defendant").

For the reasons described below, the motion is granted in part and denied in part.

II. Relevant Factual and Procedural History

As discussed in a prior opinion of this Court (ECF 26), Plaintiff's complaint (ECF 1, "Compl."), filed on January 24, 2018, alleges that Defendant issued a public report (the "DRNY Report") regarding purported abuse and neglect of New York residents in the care of Plaintiff, a provider of residential, educational, and clinical services to children and adults with developmental disabilities. (Id. ¶ 1). According to Plaintiff's complaint, all investigations and inquiries have generally found no basis for the DRNY Report's allegations of abuse and neglect. (Id. ¶ 3). Plaintiff's complaint brings causes of action for defamation, commercial disparagement, intentional interference with contractual relationships, and intentional interference with prospective contractual relationships.

On February 15, 2018, Defendant filed a motion to dismiss Plaintiff's complaint (ECF 8), which this Court denied on May 9, 2018. (ECF 26). In the Court's opinion, the Court found:

(1) The Court has personal jurisdiction over Defendant;

(2) Pennsylvania law applies to Plaintiff's claim for defamation;

(3) Whether Plaintiff is a public figure is a question of fact inappropriate for resolution at the motion to dismiss stage; and

(4) The complaint satisfies Plaintiff's obligations to plead actual malice.

On June 4, 2018, Defendant timely answered Plaintiff's complaint and brought counterclaims. (ECF 32). On June 25, 2018, Plaintiff filed a motion to dismiss Defendant's counterclaims. (ECF 40). On July 16, 2018, Defendant amended its counterclaims as a matter of course, pursuant to Fed. R. Civ. P. 15(a)(1)(B). (ECF 42, "AC" or "Amended Counterclaims"). Thereafter, on July 30, 2018, Plaintiff timely filed the subject of this Memorandum: a motion to dismiss Defendant's Amended Counterclaims. (ECF 43, "Mot."). Defendant filed a response on August 13, 2018 (ECF 47, "Opp'n"), and Plaintiff filed a reply on August 20, 2018. (ECF 51, "Reply"). This Court held oral argument on the motion, as well as on two discovery motions, on September 20, 2018. (ECF 63).

III. The Amended Counterclaims

Defendant's Amended Counterclaims allege that, pursuant to 42 U.S.C. § 15001, et seq., any State that accepts federal financial assistance for services for individuals with developmental disabilities is required to have a system to protect and advocate the rights of individuals with developmental disabilities. (AC ¶¶ 3–4). Such a system is allegedly referred to as a Protection & Advocacy System ("P & A System"), and Defendant alleges that it serves as the designated P & A System for New York State. (Id. ¶ 1). Defendant alleges that it receives eight federal grants, and, pursuant to its mandate under federal law, investigates allegations of abuse and neglect, engages in individual advocacy, and pursues systemic litigation on behalf of persons with disabilities. (Id. ¶ 12).

Defendant alleges that on or about October 26, 2017, it provided a copy of the DRNY Report—titled "Abuse & Neglect of New York State Residents at Woods Services in Pennsylvania"—to Plaintiff. (Id. ¶ 15). Thereafter, according to Defendant's Amended Counterclaims, on October 30, 2017, Defendant released the report. (Id. ¶ 16). Also on October 30, 2017, Defendant alleges, Plaintiff posted to its website a document entitled "Wood's Response to the DRNY Report," which Defendant alleges contained false, misleading, and defamatory statements about Defendant and its staff. (Id. ¶¶ 17–19). Although Plaintiff has attached that response to its Motion, this Memorandum will limit its analysis to the allegations of Defendant's Amended Counterclaims. Those allegations include, but are not limited to, statements by Plaintiff that Defendant had an "extremist agenda," that Defendant reported certain findings that it knew or should have known were "specious" and "completely false," that Defendant "misuses" taxpayer funds, and that Defendant engaged in harassment and disparagement of Plaintiff. (See id. ¶¶ 20–41).

Defendant also asserts that, in addition to the statements contained in the October 30, 2017 document described above, Plaintiff made other false statements to the New York State Office for Persons with Developmental Disabilities, and engaged in conduct to undermine and restrict Defendant's access to its clients such as by failing to provide residents with a phone in a private setting so they could speak to Defendant's attorneys in confidence. (Id. ¶ 46–48).

Defendant further alleges that Plaintiff's sought-after relief in this litigation, as evidenced by its complaint and settlement demands, violates federal law and is made for the purposes of intimidation. (See, e.g., id. ¶¶ 50, 51, 53–55, 155).

Defendant also alleges that Plaintiff has retaliated and discriminated against Defendant, its lawyer, Michael Fiske, its staff, and Plaintiff's own patients and residents by interfering with Defendant's rights under federal law. (See, e.g., id. ¶¶ 101, 116).

Therefore, Defendant brings the following counterclaims:

Count I: Defamation

Count II: Retaliation under the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. (the "ADA")

Count III: Retaliation under Section 504 of the Rehabilitation Act, 29 U.S.C. § 794

Count IV: Common Law Abuse of Legal Process

Count V: Violation of New York Anti-SLAPP Law, N.Y. Civ. Rts. Law §§ 70–a, 76–a

IV. Legal Standard

In considering a motion to dismiss under Rule 12(b)(6), "we accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (internal quotation marks and citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

V. Analysis

A. Count I: Defamation

1. Parties' Contentions

Plaintiff's motion to dismiss contends that Defendant's counterclaim for defamation fails to state a claim because:

(1) Defendant is a public figure exercising governmental power, such that defamation claims it brings must plead actual malice;

(2) Defendant's counterclaim fails to demonstrate actual malice;

(3) Plaintiff's allegedly defamatory statements, when viewed in context, are not defamatory;

(4) Plaintiff's allegedly defamatory statements are statements of opinion that are not provable as false, such that they cannot form the basis for a defamation claim; and

(5) Defendant has failed to allege special harm against Plaintiff.

In response, Defendant asserts that:

(1) Determining whether Defendant is a "public figure" would be premature at this stage in the litigation;

(2) Determining whether there is "actual malice" would be premature at this stage in the litigation;

(3) Defendant's counterclaim sufficiently alleges actual malice by Plaintiff

(4) Defendant's statements are not pure opinion, are provable, and have a defamatory meaning; and

(5) Defendant has adequately alleged special harm.

In its reply, Plaintiff contends, among other things, that it would not be premature for the Court to determine that Defendant is a "public figure" or that Defendant failed to plead "actual malice," as there are various cases resolving those issues at the motion to dismiss stage.

2. First Amendment Analysis

The Supreme Court requires that when a "public figure" asserts a claim for defamation, the cause of action must plausibly allege that the statements were published with "actual malice." See Curtis Publishing Co. v. Butts, 388 U.S. 130, 162–65, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967) (Warren, C.J., concurring); New York Times Co. v. Sullivan, 376 U.S. 254, 279–80, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). A party is determined to be a public figure by examining "the nature and extent of an individual's participation in the particular controversy giving rise to the defamation." Gertz v. Robert Welch, Inc., 418 U.S. 323, 352, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). The Court has indicated that parties who are not public figures for all purposes may still be limited-purpose public figures with respect to a particular controversy. Id.

Defendant does not admit or deny that it is a public figure, but instead argues that the determination is better made with the benefit of a full factual record. As this Court previously determined as to Plaintiff, whether Defendant is a limited-purpose public figure is a "difficult and fact-specific" question, not suitable for resolution under Rule 12(b)(6). See Woods Servs., Inc. v. Disability Advocates, Inc., No. CV 18-296, 2018 WL 2134016, at *6 (E.D. Pa. May 9, 2018) (citing Schiavone Const. Co. v. Time, Inc., 619 F.Supp. 684, 702 (D.N.J. 1985) ; Marcone v. Penthouse Intern. Magazine for Men, 754 F.2d 1072, 1082 (3d Cir. 1985) ). Thus, this Court...