Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:In 1999, Ernest Reynolds received an advertisement for Technology Investing, a newsletter published by Phillips Investment Resources LLC and authored by Michael Murphy. Reynolds ordered a subscription by phone and began receiving the newsletter as well as supplemental faxes and email bulletins. In his pleadings, Reynolds alleges that he relied on the newsletter for “research and information in making investment decisions” and that he attempted to follow the advice given in the newsletter. Reynolds also alleges in his pleadings that in 2001 he became concerned about the advice he was receiving in the newsletter. Specifically, he was not seeing the returns on his investments that the newsletter described. Eventually, he sold those stocks at a loss despite Murphy’s recommendation to hold the stock as a long-term investment. Reynolds sued the the appellees for breach of contract, negligence, negligent misrepresentation, fraud and misrepresentation, and violations of the Texas Deceptive Trade Practices Act. The appellees filed no-evidence and traditional motions for summary judgment. The trial court granted summary judgment for appellees without stating the grounds upon which the judgment was based. HOLDING:The appellees were entitled to summary judgment on all of Reynolds’s claims except his claim that appellees engaged in fraud and misrepresentation by representing Murphy’s talents and skills in an untrue light. The court affirms the trial court’s judgment except as to that claim. The court reverses and remands the claim that the appellees engaged in fraud and misrepresentation by representing Murphy’s talents and skills in an untrue light for further proceedings consistent with this opinion. Reynolds contends that a First Amendment case relied on by the appellees, Lowe v. Securities and Exchange Commission, 472 U.S. 181, 105 S.Ct. 2557 (1985), does not provide authority for summary judgment on all of his claims against appellees. In Lowe, The U.S. Supreme Court held that the newsletter at issue there was a bona fide publication of general circulation. Thus, it was not an “investment adviser” subject to federal regulation, and the government could not impose a prior restraint on its publication. agree that Lowe is not directly on point. The case this court considers 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. 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 newsletters similar to the one at issue here could not be held liable for negligence and negligent misrepresentation. Ginsburg v. Agora Inc., 915 F. Supp. 733 (D. Md. 1995). Daniel v. Dow Jones & Co., 520 N.Y.S.2d 334 (N.Y. Civ. Ct. 1987). The court agrees with the analysis and holdings of these cases. If the summary judgment evidence shows that appellees authored and published an investment newsletter of general circulation, similar to those at issue in Lowe and Ginsburg, then the appellees are entitled to First Amendment protection from Reynolds’ negligence and negligent misrepresentation claims. The court holds that the summary judgment evidence established as a matter of law that Technology Investing is offered to the general public and the information provided in the publication is of a general nature, that is, it is not specifically tailored to the financial situation of any individual subscriber. That the newsletter was available only to subscribers, was supplemented by hotline access and “Flash Bulletins,” and is not as widely published as many well-known newspapers does not change the general nature of the publication. There is no evidence that the pool of potential subscribers was limited only to a certain group or that any of the advice contained in the newsletter, flash bulletins or hotline updates was specifically tailored to the financial condition or other circumstances of any individual subscriber. The issues of the newsletter included in the summary judgment evidence show that general advice was given. The trial court did not err by granting summary judgment on First Amendment grounds on Reynolds’s negligence and negligent misrepresentation claims. The only specific example of bad advice that Reynolds alleges is the different advice given about Microsoft stock. Attached to his summary judgment response are copies of pages from the August 2000 Overpriced Stock Service. As evidence that different advice was given in the August 2000 issue of Technology Investing information regarding holding Microsoft stock was contained in the Technology Investing newsletter but not the Overpriced Stock Service; however, assuming Murphy was the author of Overpriced Stock Service, the evidence shows that the Overpriced Stock Service was geared toward short-selling, and the Technology Investing newsletter was geared toward long-term gains. Reynolds further contends that he raised a fact issue as to whether appellees engaged in fraud and misrepresentation by failing to disclose that Murphy had a prior criminal record and a past history of drug use and by misrepresenting Murphy’s qualifications and experience. Both the alleged drug use and bank robberies are far-removed in time from Murphy’s current investment-related activities. There is no evidence of any drug use or criminal activity since that time, the court states. Additionally, the court states, Murphy received a presidential pardon for the criminal convictions. Finally, Reynolds has not brought forward any evidence linking these events to Murphy’s performance or the quality of his investment advice. The information about Murphy’s past is not material as a matter of law. Thus, it cannot support a claim under Texas Business and Commerce Code 17.46(b)(24). Reynolds’s claims under section 17.46(b)(5), (7), and (12) relate to his claims that appellees misrepresented Murphy’s skill and expertise as a stock analyst. The issues of Technology Investing relied on by both appellees and Reynolds consistently emphasize the long-term investment approach described in that publication as opposed to more aggressive or short-term methods advocated by Murphy in different contexts, including, apparently, the investment funds he manages. The court holds that Reynolds did not raise a fact issue as to his claims under 17.46(b)(5) and (12). Although the poor performance records of Murphy’s investment funds cited in the article are over a relatively long-term period, the court does not believe this raises a fact issue under 17.46(b)(7) because the newsletter clearly indicates that the investment funds Murphy managed were separate from the investments recommended in Technology Investing and involved a different strategy, the court concludes. Reynolds did not raise a fact issue on his claim under 17.46(b)(8). That section applies only to misrepresentations of fact, not opinion, the court states. OPINION:Livingston, J.; Livingston, Gardner and McCoy, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.