Defamation, Product Disparagement and Related Torts


Chapter 4
Defamation, Product Disparagement and Related Torts


The First Amendment declares, “Congress shall make no law … abridging the freedom of speech, or of the press. …”1 That sounds absolute. As we have seen in the discussion in the first three chapters, however, it is not. A business executive might criticize his or her local government, but had better not advocate its violent overthrow by creating a potential riot. A citizen is privileged to yell, “Go to hell!” (or worse) at a political rally, but not “Fire! Fire!” in a packed movie theater. Advertising agencies and business corporations have extensive liberty to print and broadcast messages promoting products and services, but not to make deceptive, false or unfair claims that might mislead the public.


The subjects of this chapter are defamation, product disparagement and related torts—areas in which the First Amendment plays only a limited role. The purpose of this chapter is not to provide a definitive treatment of these complex topics, but rather to suggest some of the legal dilemmas that advertising and public relations professionals might encounter while speaking with their publics or promoting goods and services. You will also see how the courts have reacted when forced to make tough choices in this area between either upholding freedom of expression or protecting an individual’s, corporation’s or product’s reputation.



Defamation


Defamation is one of the most common and most serious legal problems currently facing the mass communications industry. Although much defamation litigation arises out of newsgathering activities, defamation is of just as much concern to the public relations and advertising professions. Corporate, product, service and business reputations can be defamed in advertising or public relations messages as well as in other types of business communications.


On the other side of the equation, public relations specialists in particular have the responsibility to inform their clients about the possibly far-reaching consequences of bringing defamation suits; each court appearance or motion could expose their clients to further, potentially adverse coverage. Public relations practitioners should also help their clients understand that fair and accurate accounts of trials, legislative sessions and government actions and documents may be insulated from such suits. Thus, unfavorable and even damaging statements about their clients, in certain contexts, are protected speech under current defamation law.



Background


From the time that caveman Urg smartly clubbed caveman Zog over the head after Zog criticized Urg’s cave drawings as being “too post-modern,” for eons and eons and millennia and millennia and centuries and centuries, people have been concerned about their reputations. Whether it’s within their tribes, religious sects, social orders or local communities, members of such groups have been resolute in protecting their good names and personal standing.


For almost as long, the remedy for those who felt their reputations had been besmirched was to step outside and engage in fisticuffs or, if members of the aristocracy, engage in duels, often referred to as “affairs of honor.” Eventually, in jolly old England, folks began to feel these remedies were somewhat inefficient in maintaining social order and so decided to bring these confrontations into the courtrooms rather than the town squares.


Thus over the centuries, the British developed the common law of defamation. Not surprisingly, when the British colonized the New World, they brought with them their common law, including law related to defamation. Equally not surprising, when the Colonists broke away to form a new country, they had plenty to do in creating a new nation without worrying about changing the common law, and so, British common law evolved into American common law. Today, the American and British laws of defamation resemble first cousins—many similarities, but some noticeable differences.


American common law is state-made law; there is no federal common law. Therefore, technically, there are 50 different sets of defamation laws in the United States. But, because of the way the law evolved, beginning with the original 13 states and then adopted state by state with each new addition to the union, the laws of defamation from Alaska to Wyoming look remarkably alike. That’s why the discussion below is generally applicable to all jurisdictions, with a few variations around the edges (e.g., the effect of a retraction or length of time to bring a suit).



Terminology


Defamation is commonly defined as statements that expose a person to hatred or contempt, lower that person in the esteem of friends and associates or hurt his or her business. Traditionally, printed defamation was referred to as libel and spoken defamation was called slander. In today’s more complicated communications world, it might be better to think of libel as speech that is “fixed” rather than transitory. For example, is defamation that is broadcast libel or slander? If the offending statements came from a script or are on video recordings, they likely would be regarded as libelous. If they were ad-libs—spontaneous comments broadcast live—they would probably be classified as slander.


Because of its more long-lasting nature, courts have tended to regard libel as more serious than slander. Also, because virtually all defamation involving the mass media, including advertising and public relations, will most likely be treated as libel, the terms defamation and libel will generally be used interchangeably throughout the rest of this chapter to refer to the tort of defamation.


Although there have been criminal laws against defamation enacted by legislatures in every state, the overwhelming majority of libel and slander cases are handled as civil wrongs to be settled between individuals. This involves a branch of tort law—defined for our purposes as claims of harm to persons or personal property (e.g., automobile mishaps, determinations of negligence in medical malpractice cases and so forth). Criminal libel, in which the prosecuting attorney and the police get involved, is exceedingly rare. Those who lose a civil libel suit in court are not “found guilty” of libel, but are simply held liable for the injury caused by the libel.


Nearly every press release, news article or advertisement holds the potential for a libel suit. Although there have been a number of libel actions arising out of major advertising campaigns or momentous news stories originating in news releases, most libel suits are prompted by small messages that seem minor and are, for that reason, sometimes carelessly handled.


Libel suits are expensive, time-consuming and fatiguing for both sides. The person instigating the action (the plaintiff) seeks money damages to pay for restoring what he or she believes to be a sullied individual or business reputation. Judges and juries often are hard pressed to place precise dollar values on an individual’s, organization’s or product’s reputation, much less on the depreciation caused by a libelous statement. As a result, libel suits often end in frustration for everyone concerned.


Many who bring suit for libel may be less interested in obtaining money than in moral vindication—in having some official organization, such as a court of law, put a stop to an unfair advertising campaign or in proclaiming to one and all that a wrong against them has been committed. Former Chief Justice Warren Burger and others have urged the government and the legal profession to develop mechanisms outside the judicial system for handling a share of civil disagreements. This search for what is called alternative dispute resolution has led to the creation of advertising review boards and other mediation services.2


For now, however, and probably for the near future, defamation questions are likely to be ultimately resolved in courts, and when plaintiffs win they are usually awarded a sum of money. This may seem a crude and inappropriate means to restore so intangible a thing as reputation, but it appears to have worked over time. If nothing else, payment of cold, hard cash translates the harm into a language everybody can understand.



The Elements of Libel


Before a plaintiff can expect to win a libel suit, he or she must establish at the outset that (a) the offending defamatory statements have been made; (b) the offending statements have been published to at least one third party by the defendant (the one being sued, e.g., an advertising agency or public relations department); (c) the plaintiff has been identified in the statements; (d) the actions of the defendant are the true cause of the actual harm suffered by the plaintiff; (e) the plaintiff is entitled to be compensated by money damages for that harm; and (f) the defamatory statements appeared because the defendant has done all this with the required degree of fault established by law. Let’s take a closer look at each of these points in turn.



Defamation Defined


The plaintiff must show that the words, in fact, did have a defamatory meaning. Some words may be libelous per se (i.e., in and of themselves). Swindler, cheat, blackmailer, prostitute, forger, tax-evader, crook, swine-flu carrier—say these words about the next person who walks in the door (no matter who it turns out to be) and that person will have little trouble convincing a jury that the individual who has been so characterized is likely to be looked down upon by his or her fellow citizens.


Libel per quod means the words might appear to be perfectly innocent, but the way they are used makes them understood to be libelous by those familiar with the person who is the subject of the statement. Suppose the following item appears in a company newsletter for employees: “Mr. and Mrs. L.Q.C. Lamar III last week became the proud parents of twins.” Upon reading this news, fellow employees might feel it appropriate to express their congratulations to the happy couple. The item is incorrect, however. The company publication misidentified the new parents. Have the Lamars been defamed? Quite possibly, if some readers knew that the couple married only a few months ago. In this situation, the knowledge the readers brought into their reading of the story—extrinsic circumstances— makes the item defamatory.


It also should be noted that the actual words themselves need not be false and clearly defamatory to be actionable nonetheless. In what is often called “libel by implication,” courts have consistently held that if reasonable people exposed to the message draw a defamatory meaning from how the statements in the message relate to each other or from how an illustration suggests a meaning perhaps not intended by the communicator defendant, the message will be considered libelous even if, technically, each fact in the message is true. The statement, “John and Mary were seen entering the Smithville Hotel at 4 p.m. and then seen leaving four hours later smiling and hugging,” could lead to a conclusion that is contrary to the actual truth that John and Mary had been a team in a dance competition held at the Smithville Hotel, won first prize and, as a result, split $10,000 in prize money.


Advertising and public relations professionals should develop the habit of carefully reviewing their communications for statements that possibly might be seen as defamatory before they are published. One method, often suggested by media lawyers, is to list every person and organization mentioned in the communication and note exactly what is being said about each. Finding and eliminating potentially libelous material in advance of publication is not only the best method for avoiding a possible lawsuit, but the mark of true professional communicators who know their business.



Publication


The offending words must reach an audience, if only a small one. Person A may defame Person B in a confidential memo, for example, but Person B will not have a legitimate lawsuit for defamation unless Person A has shown the offending statements to at least one additional third party.


Technically, publication occurs the moment a third person has seen the communication. In Dun & Bradstreet v. Greenmoss Builders, Inc.,3 the Supreme Court affirmed a substantial judgment against a credit reporting company for publicizing false and defamatory information, although only five copies of the credit report had been sent to the company’s subscribers. In 1982, the Alton, Ill., Telegraph was hit with a $9.2 million libel judgment (enough to force the paper into bankruptcy, although the suit was eventually settled for $1.4 million) stemming from a note that never even got into the newspaper.4 It was an internal memorandum written by two of the paper’s reporters that accused a local contractor of having ties with a savings and loan institution that seemed, to the reporters at least, connected to organized crime. If communication circulates, publication has occurred.


Unlike these examples and unfortunately for the defendant, a plaintiff often has a relatively easy time demonstrating that publication has occurred because the defendant advertising agency or public relations department has disseminated the defamatory information to thousands, if not millions, of readers or viewers in network television advertising, press release material published in hundreds of news outlets or in campaigns on YouTube, Facebook or other social networking sites.



Identification


If the audience, or even a tiny portion of it, believes that the defamatory statements refer to the plaintiff, then that person has been identified. Unfortunately, identification also is often made easy for the plaintiff by the defendant because of the emphasis on clearly identifying subjects inherent in the training of professional communicators. A plaintiff identified in a news release by name, age, title, place of business and hometown probably will have little difficulty convincing a jury that he or she is the subject of the defamatory comments.


Identification need not be by name, however. Veiled references may be enough for readers to know, or think they know, whom the story is about. Suppose, for example, a medical writer doing a story on liposuction for a local publication interviewed several of the 20 plastic and reconstructive surgeons in the area who perform this kind of medical procedure, as well as a number of former patients who underwent the surgery. The writer included comments from one, unidentified, former patient who, while generally satisfied with the results, had significant issues with what she believed to be a lack of communication between her surgeon’s primary assistant (a former, head operating-room nurse) and herself that led to minor, post-operative complications.


This statement clearly could be harmful to the surgeon’s reputation for providing competent medical care, but no surgeon was named in the story and the former patient was given a fictitious name. Is there sufficient identification of any surgeon in this story to single out one potential plaintiff? The answer, most likely, is yes. The average reader of the story probably would not know the identity of the unnamed surgeon, but it is very likely that every general practitioner who refers patients to surgeons for special procedures would know immediately which medical specialist employs a former, head operating-room nurse as his or her primary assistant (odds are great that there would not be two fitting this bill in the local area) and, therefore, which surgeon was the subject of the defamatory comments.


Identification of group members for libel purposes is more difficult. A statement such as “students at Siwash U. are deep into booze and drugs” may be hurtful to you if you are enrolled at Siwash University, but the courts would almost certainly decide that the student body is too large for any single member to be sufficiently identified by the statement. However, each member of a small group, traditionally about 25 members or fewer, may sue and be able to collect, even if he or she is not personally identified in a defamatory communication.


Two racy paragraphs from a 1952 book, U.S.A. Confidential, by Jack Lait and Lee Mortimer, illustrate this point. Breathlessly revealing “inside” information turned up in their travels, the two writers had this to say about employees in a chic, specialty store in Dallas:



In the inevitable lawsuits that followed, the court found that the models— there were only nine of them—indeed had been identified. But 30 “sales girls,” acting on behalf of the 382 then working at Nieman-Marcus, were not. The court held that this group was too large to permit individual identification.


Could the 30 “sales girls” sue as a group? The answer to the question is almost certainly no. This a good place to note who can be a plaintiff in a libel suit. The reason they could not sue is that the group of 30 is not recognized in the law as having legal standing. An individual obviously is so recognized. So, also, is any entity that is recognized as an individual in the eyes of the law, such as a company, partnership or other legal entity. By incorporating, the organization may act as an individual for such purposes as owning property, buying or selling goods and so forth, and it also means that such an entity can defend its reputation in a court of law. In the above example, both Mr. Marcus, as an individual, and the Nieman-Marcus Company, as an incorporated organization, could bring lawsuits for defamation and both would have the legal standing to do so.



Causation


As in any tort, the plaintiff in a defamation suit must allege and prove that the actions of the defendant were the logical and proximate cause of the claimed injury. Often this is easily accomplished because the plaintiff is simply charging that the defendant published libelous statements seen by acquaintances who now think less of the plaintiff, or clients who have withdrawn their business or customers who are now former customers.


Other times, however, the causation factor is not so straightforward. For example, let’s assume that a new restaurant, The Pickled Onion, has recently opened and has been doing good business in its first few months of operation. The food critic for the local entertainment Web site has finally gotten around to reviewing the new eating establishment and has given it a terrible review (“The steer my steak came from must have died of old age”). Subsequent to the review, the restaurant’s business has begun to slowly decline. The owners of The Pickled Onion have filed suit, charging that the review damaged the restaurant’s reputation and is the cause of the fall-off in business.


Most likely, the Web site’s owners would argue that even if the statements in the published review about the quality of food at The Pickled Onion are libelous, the plaintiff cannot show that the loss of revenue has been caused solely by the actions of its food critic. Perhaps the restaurant’s economic downturn was caused by the normal decline in patrons suffered by any new restaurant once the “initial tryers” have dined there once. Alternatively, it might be attributable to the worsening economic conditions in the local area, or maybe it’s a seasonal slump. Perhaps it’s some combination of all of these. Clearly, the owners of The Pickled Onion will have their work cut out for them to prove that the review was the sole, or even a contributing cause, of the loss in business.



Compensation


Traditionally, a plaintiff seeking compensation for harm to reputation has been entitled to seek four different kinds of monetary awards: nominal damages, special damages, either presumed or actual damages (in some jurisdictions these two and special damages are sometimes lumped together into “general” or “compensatory” damages) and punitive (or “exemplary”) damages. Let’s look at each of these in turn.


Some may think it odd, but the general rule in American law is that a plaintiff has to be awarded something of value to win a lawsuit—the common law generally does not recognize moral victories. Therefore, a plaintiff not interested in seeking a large award, but interested in vindication of its good name, might simply seek a small or nominal damage award. Although inflation probably has increased the amount, traditionally, “$1.00” (and most likely attorney fees) was the typical language of such an award. Of course, it is also possible that, although a plaintiff actually was seeking millions for the supposed harm to reputation, a judge or jury found that even though the plaintiff technically had proven a case of libel, there had been no real harm done and, therefore, the plaintiff was not deserving of more than a nominal award of damages.


Special damages are often thought of as “out-of-pocket dollar loss.” To obtain special damages, a plaintiff must produce evidence sufficient to prove that the libelous statements cost the plaintiff demonstrable monetary loss. In the example of the disputed restaurant review discussed above, most likely the plaintiff restaurant, if victorious in the suit, would be limited to special damages amounting to the provable loss of revenue attributable to the negative rating by the food critic.


The third category of damages, either presumed or actual damage, is one of the more unusual and, from the defendant’s view, dangerous, aspects of defamation law. It developed over time in response to the situation in which a plaintiff was able to the show the first four elements of a case of defamation and logically claim that the plaintiff’s acquaintances, therefore, thought less of the plaintiff as a result, but was incapable of placing a dollar value on how much damage had been done. Despite such lack of evidence, every judge and member of a jury trying such a defamation suit intuitively knew that they too would have lost something of real value if suffering loss of esteem in the eyes of their friends and acquaintances.


In reaction to this anomalous situation, the law eventually provided a category of damages, called presumed damages, that requires no proof of actual monetary loss on the part of the plaintiff. This means that a judge or jury may presume that harm occurred and award an amount of money presumed to compensate the plaintiff for that harm—an invitation for large damage awards for the plaintiff that many courts seem unable to resist. In Gertz v. Robert Welch, Inc.,6 the Supreme Court limited this category of damages to actual damages in cases brought by private plaintiffs against media defendants when reporting matters of public interest. Although actual damages differ from presumed damages in that they require at least some evidence that the harm occurred, once established, judges or juries may award any amount of money thought necessary to compensate plaintiffs. The possibility of such mega-verdicts should be all the impetus needed for advertising and public relations professionals to take all possible precautions to avoid becoming embroiled in a libel suit.


Punitive damages are awarded not to compensate the plaintiff, but to punish the defendant. In that manner, they resemble a civil fine. In most parts of the world that recognize this category of damages, the defendant writes the check to the government. In American law, however, the defendant writes that check to the plaintiff as a kind of “extra bonus” for the harm suffered. Because they are meant to punish instead of compensate, punitive damages, generally, are awarded only when the defendant’s actions are so outrageous that they offend the conscience of judges or juries. In a defamation suit, punitive damages might be awarded if the statements of the defendant were not only false and defamatory, but the defendant knew they were false when published and the statements were purposefully meant to harm the plaintiff. Like presumed damages, punitive damage awards can reach mega-amounts and are as dangerous, if not more so, to defendants.