What is Defamation of a Business?
When we think of defamation, we often think of individuals. Defamation claims against businesses are similar in nature though not completely the same. To determine whether a business has been the victim of defamation, we must first determine if the statement actually qualifies as defamatory.
The basic defamation cases that apply to individuals also apply to businesses. An individual will have an action for libel or slander if someone maliciously defames their personal character or profession. This means that the status or reputation of the individual is hurt and the person who made the statement knew it was false when they made it and did it anyway to cause injury. The statement will be judged to determine whether it: The test for applied to businesses, must be changed slightly because the business does not have the status of a human. An entity may have an action for libel or slander if someone maliciously defames the property or business of that entity. This means that the property or business is hurt and the person who made the statement knew it was false when they made it and did it anyway to cause injury. The statement will be judged to determine whether it: The major difference between defamation against a person and defamation against an entity , is the fact that defamation against a person generally refers to them as being bad in some way. For a business defamation claim, the statement generally accuses a business of committing a crime or being a criminal gang. This is the case because the defamation must concern the business and not a human. So the statement must suggest that the business or its owners have committed a crime. That would cause injury to a business in a way similar to the way that a personal insult would hurt an individual. Some statements about a business generally do not concern the business. Statements that are simply insults are not enough to amount to defamation against a business. Defamation must not only concern the business but must also accuse the business of some type of crime. This is like accusing a person of a crime or saying that the business is bad because it engages in criminal activity. Saying a business is bad without saying anything about crimes, even if that is what the speaker means, is not enough to create a claim for defamation.
Proving Business Defamation: Important Requirements for Companies
It is relatively rare for a company or business to sue for defamation, but when it does, its claim must contain the same elements found in an individual defamation claim. However, the nature of those elements may differ for businesses and companies.
Falsity
In a lawsuit for defamation, the need to prove the falsity of the defamatory statement is a critical element that is seemingly universal. However, while this element is also required in a personal defamation claim, businesses and companies may face different standards regarding that requirement and how it is met.
For example, suppose a person falsely states that Widget Corporation’s CEO had sex with an underage woman? Could this be the basis of a defamation lawsuit? To qualify as a defamatory statement, the statement must be false, and an accusation of criminal activity is necessarily defamatory regardless of whether it is true (unless it involves freedom of speech issues inherent to public discourse).
Now suppose the allegation is one of competitive malfeasance, like tortious interference with contract. If one competitor openly alleges that his competitor stole his idea, that will likely constitute defamation if the claim is untrue. But what if the claim isn’t an open allegation- it’s a secret complaint to a government agency, like the Federal Trade Commission? Such a private complaint will be treated as a published accusation of competitive malfeasance in violation of the law, subjecting it to defamation litigation.
Harm
The harm suffered by a company or business is different than the harm suffered by an individual. For an individual, there are various harms that are deemed automatically injurious for a defamation case: for example, an allegation of sexual abuse or a sexual disease. In fact, even if I tell you that the world is flat or fallacy, you would probably agree that my statement is clearly false and therefore injurious to my reputation, even if you find it uninteresting.
But what about the harm suffered by a company or business? There are many harms unique to businesses for which certain states have deemed them automatically injurious. For instance, most states require the plaintiff business to show actual, quantifiable losses to prove harm. Because the profit motive is the primary purpose of a business, normally the harm in a business defamation case comes down to the business suffering financial losses to its bottom line. These kinds of cases are called "economic torts" because of their reliance on inferring harm from lost profits. State courts have explicitly accepted this across the country to allow for recovery of damages caused by defamation of a business or company.
Fault
The standard for proving fault in a business defamation case also differs from the requirements in a personal defamation case. In a business defamation case, the plaintiff (business or company) must prove actual malice by a "preponderance of the evidence" which is considered the "high burden." Actual malice is defined as when the defendant made a false statement and either knew that it was false or acted with such reckless disregard that they should have known or suspected that the statement was false. The rationale for adopting this high burden is that it allows businesses to protect their reputations.
Victims of defamation of character have different requirements than defamation of a business reputation. The former need only meet the fault element by a "preponderance of the evidence," which is a considerably lower burden than that of the latter.
Well Known Defamation Cases Involving Businesses
Bouchelle v. Barlow – Although this lawsuit was settled out of court in early 2006, this particular example is a noteworthy one because it was filed by a major hotel chain against a New Orleans monthly publication. The article that prompted the lawsuit explained a large theft ring that had developed at a number of hotels in New Orleans, and it identified the hotel in which Bouchelle worked as the "headquarters," so to speak, for the gang. A civil suit was filed on behalf of Bouchelle, her supervisor, and the managers of the hotels, and a monetary settlement was awarded to the plaintiffs.
MCF Pet Services v. Better Business Bureau of Metropolitan Houston – In March 2015, MCF Pet Services filed this defamation lawsuit against the BBB after the BBB gave them an "F" rating. The BBB based this score on MCF’s failed attempts to resolve customer complaints, to which MCF disagreed. At first, the BBB claimed that the BBB name was protected speech, but reversed their decision on appeal.
Hawkes Bay Harv. v. Mission Woods – In August 2004, a civil defamation claim was made by Hawkes Bay Havest against Mission Woods, a Canadian woman who had once been an employee of the New Zealand-based company. After her employment with the company had ended, she made a number of negative online comments about the company on a numerous websites and premises, and so the company initiated this lawsuit. The case was heard in New Zealand District Court, and ended on January 23, 2008. The Court awarded Hawkes Bay damages in the amount of $35,000 (Canadian dollars), and their costs (a total of $117,423). They also requested that Mission Woods remove all defamatory online comments.
Times-Call v. Texas Pen Company – After working on a story about the Texas Pen Company for his university newspaper, Texas Tech student Thomas Marshall granted an interview with the Times-Call where he discussed information he had obtained about the company’s CEO. The article was published in 2008, and the upcoming TPC v. Times-Call decision is set to clarify whether the paper is liable for damages.
How Businesses Combat Defamation: Legal Arguments
In the face of a defamatory statement or review, a business has several options. The most obvious is to contact the person who made the statement and ask them to retract their statement. This often involves some type of threat or lawsuit to intimidate the person into retracting their statement. The simplest method to achieve this is to send a cease and desist letter, through an attorney. Specifically, the letter should ask the person to retract their statement and include the legal basis for the retraction demand. In most cases, the person who made the statement will comply with the demand, even if they are confident in its veracity.
While a cease and desist letter is an easy and inexpensive first step, it can carry risks. Even though the letter can be short and may only ask for a retraction, most of the time it will be viewed as a threat of a lawsuit. This can lead to negative public relations consequences that you were likely trying to avoid. It is not uncommon for a recipient of a cease and desist letter to take to social media to complain about being bullied. If the cease and desist letter is sent right after the defamatory statement is made, it can suggest that the business has something to hide. A better strategy might be to wait until the reputation damage of the defamatory statement becomes more apparent . Of course, this assumes that the statement was false, which many times it is not.
If the cease and desist letter does not work, the next strategy is to fight back publicly. Depending on the defamatory content, a company can fight back by putting out content that refutes the defamatory statement in a factual manner. This can include press releases, internet posts and videos. However, as is the case with a cease and desist letter, these actions can carry their own risks. If the defamatory statement has already received media attention, publicizing the response to the defamatory statement could draw additional attention to it. The results can be disastrous if the response is poorly crafted, as it can make the company look defensive and horrified by the statement. That is the last thing you want to convey to your customers and potential customers, who might be inclined to believe the defamatory statement, especially if the statement is true.
The final option is litigation. If the defamatory statement receives wide media attention, it may be worth considering filing a defamation lawsuit. Since a lawsuit will likely become public information, it should probably only be undertaken if the defamatory statement has harmed the business enough to justify the cost and attention it will receive as a result of the litigation.
The Risks Companies Face When They Sue for Defamation
Like any litigation, suing for defamation can have serious consequences for a business. Unlike some other types of harm, defamation is difficult to quantify in monetary terms, and thus difficult to recover in a lawsuit. A company that decides to sue based on defamation-related claims may be forced into litigation over many months, even years, and may never win a penny. And legal fees can be substantial even when a lawsuit fails.
There are also reputational consequences for businesses that sue for defamation. Whether or not the allegations are true, a defamation lawsuit will bring public attention to the allegedly defamatory statements. Usually there are good reasons for companies to keep controversies private, including their desire to avoid scandalous headlines that might dissuade customers or potential business partners.
There are also risks associated with the need for a counterclaim in a lawsuit for defamation (e.g., counterclaims for intentional interference with prospective economic advantage, trade libel, or business disparagement). Such counterclaims are often worth a lot more than the original defamation claims—and can even be worth millions of dollars. Because damages caused by trade libel and business disparagement are measured by the business lost from the disparaging statements, they are often much larger than defamation damages, as defamation is limited to economic losses in the form of damage to the company’s reputation.
Accessing an Attorney
If you are unsure about whether to file a claim against someone for defamation, it is even more important that you consult with legal experts who specialize in defamation law for businesses. This is perhaps one of the most complex areas of the law, and you will have a much better chance at a successful case if you get legal help as early as possible. Because defamation cases can often be tricky to prove, it helps if you are extra prepared before meeting with a lawyer. Any evidence you can gather beforehand may be crucial to your case , including: If this sounds like a lot to keep track of, just remember that you do not have to know everything about defamation in order to have a good case—you just need to be well-informed enough to help your lawyer identify all the pieces of the puzzle that matter. Your lawyer will sort out what exactly needs to be presented in court and how to best present the information, so don’t worry about figuring it all out yourself. Remember: Your lawyer is there to help you through every step of the process and help you get the best outcome possible.