C&D to competitor's clients can be "commercial advertising & promotion"

Matonis v. Care Holdings Gp., L.L.C., No. 19-cv-20247-UU, 2019 WL 3386378 (S.D. Fla. Jul. 25, 2019)

The defendant Care Companies engage in healthcare management consulting, “advising healthcare providers on, inter alia, patient intake strategies and revenue management.”  Plaintiff Matonis is a healthcare management consultant who provided consulting services to the Care Companies pursuant to a consulting agreement with a confidentiality provision and a non-solicitation provision with respect to the Care Companies’ employees, consultants, and agents. In 2016, while still employed with the Care companies, Matonis founded her own consulting company (Caliber) to help health care providers track their revenue. Defendants allegedly explicitly authorized her work with Caliber (apparently after the fact of founding). The Care Companies then offered Matonis a W-2 employment contract, which she declined because the proposal contained a two-year non-competition restriction and would have required her to shut down Caliber.  The Care Companies transitioned her clients to other Care employees and officially terminated the relationship.

During the winding down period and after, Matonis expanded the healthcare consulting services provided by Caliber into patient intake and revenue management, leading to direct competition with her former employer. Defendants allegedly informed a number of Matnois’s Care clients that she was still affiliated with the Care Companies but was unable to work because she was suffering from ongoing health issues and had requested time off. She allegedly found this out after clients reached out to her to check on her health. After one such call, the client contacted Care employees, expressing his dissatisfaction with their dishonesty. Quirk, an employee, assured the client that at Matonis would continue to work with the Care Companies indefinitely and was still available to be his point person, despite the fact that Matonis had been terminated almost a month prior.

After numerous clients terminated their relationships with the Care Companies, in-house counsel allegedly sent cease and desist letters to Matonis’s Care clients and to Matonis directly. The letters asserted that Matonis was still subject to “broad confidentiality and non-solicitation provisions” in her Consulting Agreement and threatened legal action if Matonis continued to solicit Care clients and/or if those clients sought Matonis’ services. In addition, the Care Companies allegedly created an “out of office” auto-response message on Mantonis’ former email account at Care, allegedly creating the false impression that she remained affiliated with the Care Companies and tainting her reputation as a professional who promptly returns her client’s messages.

Finally, Matonis alleged that defendant CareOptimize’s website falsely advertises that it serves over twenty thousand healthcare providers nationwide, when in fact it serves closer to five thousand healthcare providers at any given time. The website allegedly misrepresents its client base, listing two clients even after both companies terminated their relationship with CareOptimize.

Matonis sued for false advertising/unfair competition under state and federal law, defamation, tortious interference, and declaratory judgment that she wasn’t barred from working with the Care Companies’ current, former, or prospective clients.

False advertising: defendants argued that its C&D letters weren’t commercial speech or advertising for purposes of the Lanham Act and the allegedly false statements on Defendants’ website didn’t directly disparage Matonis; neither argument succeeded.

Under the Gordon & Breach test (which, as a reminder, has a prong requiring “commercial competition” that doesn’t survive Lexmark, though that doesn’t matter here), these particular C&Ds were commercial speech.  “Commercial speech encompasses not merely direct invitations to trade, but also communications designed to advance business interests ....” Matonis alleged that defendants utilized the cease and desist letters as a tool to disparage her as someone who ignores contractual obligations. Defendants allegedly stood to profit from them because Matonis’ consulting company was now in direct competition with them and the clients to whom the letters were sent were former Care clients who were interested in Matonis’ services.  This sufficed to avoid dismissal.

As for the website statements, disparagement isn’t required for false advertising.  If the argument was that Matonis failed to allege injury, it was enough to allege that the parties were direct competitors and that defendants falsely represent the number of clients they represent and the scope of the representation at this tage.

Defamation per se: allegations that defendants falsely represented that (1) Matonis was suffering from an ongoing health problem that affected her ability to work on their accounts; (2) she is in violation of a non-solicitation agreement by working with the Care Companies’ former clients; and (3) continued work with her would expose them to legal liability sufficed to allege defamation per se, which in Florida covers falsehods that are injurious to the target’s trade and professional reputation.