Defamation. Does it happen in the business world?

We all know what defamation is.  Often it is in the news when one celebrity claims that another celebrity said something false about them.  One of the better known cases is between Bill Cosby and a number of women over allegations of rape.  Defamation has lots to do with hurting someone's reputation and although we are most acquainted with cases between two people it can also happen between two businesses.  If a first business damages the reputation of a second business then the second business may have a cause of action against the first business.  The cause of action is not called Defamation but "Trade Libel".

Trade Libel has a few cousins that in some ways overlap.  They are:

1. Intentional Interference with Prospective Economic Advantage:  Used when the defendant intentionally disrupts or diverts the business relationship of another by improper methods which fall outside the boundaries of fair competition.
2. Negligent Interference with Prospective Economic Advantage:  Similar to the above but is not done intentionally.  Rather the defendant acts unreasonably and wrongfully.
3. Unfair Competition:  Here the California Business and Professions Code §17200 prohibits any "unlawful, unfair, or fraudulent business act or practice" and any "unfair, deceptive, untrue or misleading advertising".

If you would like to have me post a blog on one of the above let me know but for now lets discuss Trade Libel. 

Trade Libel occurs through the publication of a false statement that intentionally disparages the quality of property and induces another not to deal with the plaintiff, which causes the plaintiff actual pecuniary damage.  Key cases in California courts include Polygram Records, Inc. v. Superior Court, Nichols v. Great American Insurance Companies, and Erlich v. Etner.

To give rise to a cause of action for Trade Libel the plaintiff must prove the following elements:

• A False Statement:  Whatever was said or written by the defendant was false.  To be actionable the statement by the has to be an assertion, not an opinion (Hofmannn Co. v. E.I. Du Pont de Nemours & Co.)
• The Statement was Disparaging:  This may seem a bit obvious but clearly the defendant's statement must disparage the plaintiff (Nichols v. Great American Insurance Companies).
• The Statement was Published:  The defendant must have communicated the disparaging statement orally or in writing (Guess, Inc. v. Superior Court).
• The Statement Induces Others not to Deal with the Plaintiff:  The plaintiff must show that defendant's statement played a material and substantial part in inducing others not to deal with him.
• The Inducement causes Plaintiff Harm:  The inducement must be shown to have caused harm to the plaintiff.  The plaintiff cannot just show a general decline in his business.  Plaintiff must identify transactions and customers lost as a result of the inducement.

Defendant also has defenses that they may present in court to defeat a claim of Trade Libel by the plaintiff.  These defenses include Statute of Limitations, Absolute Privilege, Qualified Statutory Privilege, and Constitutional Privileges.

As you can see, the plaintiff has their work cut out for them to prove that the defendant is liable for Trade Libel.  In particular the element of proving the harm that was caused by defendant's inducement.  However an "ounce of prevention is worth a pound of cure" so be careful with statements that you make.  Check your facts and dot your i's and cross your t's when making a disparaging statement about another business or just not make such statements at all.

This blog posting is just a brief introduction into Trade Libel.  I recommend that you consult an attorney whenever:

1. You have been accused of making a disparaging statement;
2. You have received a disparaging statement; or
3. You plan on making a disparaging statement.

A qualified attorney can help you with determining your legal risks and minimizing them.

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