How to protect your company when damaging statements are published about it Featured

9:01pm EDT June 30, 2012
How to protect your company when damaging statements are published about it

A dissatisfied client takes his complaints to the public forum by publishing statements calling your product junk and your operation a joke. A competitor slams your business on an online forum, accusing your firm of producing dangerous products.

How do you defend yourself, and do you have a case for a lawsuit?

“The Internet opens up a worldwide web of opportunity for people to publish their opinions about anything and everything, says Ian Simpson, a shareholder specializing in liability and defamation at Garan Lucow. And once alleged defamatory statements are published, the damage is already done.

“Deciding whether to move ahead with a lawsuit requires analyzing whether you have a legal basis for an action because you have to prove all of the elements of a claim and understand that it often takes a lot of resources to pursue the case.”

Smart Business spoke with Simpson about defamation, how free speech is protected and when to take action against a party that is making defamatory statements about your business or product.

What is defamation?

Generally, defamation is a false accusation of wrongful conduct, or a malicious misrepresentation of someone or some entity’s words or actions that is published to third parties, causing damage. Libel is the written form of defamation, and slander is the verbal form. Classic examples of defamation where damages are presumed include lack of chastity or criminal conduct. Defamation includes untrue statements with defamatory meaning that could harm a reputation, generally without charging criminality or lack of chastity. In most cases, damages have to be proven rather than presumed. The statements must be published and available to the public — not merely be stated in a confidential document — resulting in damage.

What defenses are used to protect those charged with defamation?

Truth is generally a defense under the First Amendment of the United States Constitution. Most matters of opinion are protected against claims of defamation, as such statements cannot be proven as true or false. For example, ‘In my opinion, Company X’s products are not high quality’ is a protected statement. Further, in the United States, public figures, celebrities, politicians and others who put themselves in the public spotlight are generally unable to sue for defamation unless they can prove the statements were made with actual malice.

Is a business owner considered a public figure?

Another area where statements are generally protected, unless actual malice is found, are matters of public interest. A private company may be involved in a public dispute of interest to consumers. This essentially places it in an arena similar to that of a ‘public figure’ because policy favors granting increased protections to statements made in controversies of interest to the public. Say a company is involved in coal mining and environmental safety. Because this issue is of public interest, alleged defamatory statements become a matter of public concern and are protected under the law unless malice is proven.

How has the Internet impacted companies’ vulnerability to defamatory statements?

The Internet essentially gives the public a speakerphone to air opinions online, and those statements are protected as long as they are expressly stated as opinion and not made with malicious intent. Further, federal law generally protects businesses that merely serve as online conduits for the statements of others (online review sites, for example) are generally protected against claims of defamation, although the maker of the comment may still be liable. Similarly, most blog sites, if not the posts themselves, are protected by law.

Although companies that operate as mere forums are generally protected, there is no similar protection for a company that is not considered a forum of opinion that adopts, republishes or retains defamatory statements.

The crux of many defamation cases is how opinions are stated. They must be couched as opinions to be protected. Where a person or company has stated opinions as ‘fact,’ the risk of liability is greatly increased.

What are the first steps to stop a party from making defamatory statements?

First, consult with an attorney. Typically, an attorney will create a cease-and-desist letter expressly demanding the person or company making the alleged defamatory statements stop immediately. If the person or company does not stop voluntarily, a written demand for a retraction of the statements will be made.

A written demand for a retraction will set the stage for future litigation. If no retraction, published in a similar manner to the original statement, is made, additional damages may be obtained if a lawsuit is pursued. Note that the statute of limitations for a claim of defamation is one year from the date of the publication of the alleged defamatory statements, so aggrieved parties must act promptly to protect their rights to bring an action under the law.

How can a business protect itself from being the victim of a defamation suit?

Always discuss with an attorney strong matters of opinion or statements about competitors or matters of public interest before those statements are published. Also, consider bringing in a legal adviser to train employees on Internet commentary and what is permissible and acceptable. It is generally ill-advised to be interviewed for any publication without consideration of the potential for defamation that may exist in the making of casual comments in such interviews, and the right to review the interview to reconsider any such comments before publication is essential.

Defending a defamation suit can be expensive and can effectively destroy a business. We highly recommend companies in the publishing and Internet business carry insurance covering claims of alleged defamation.

Ian Simpson is an attorney at Garan Lucow specializing in liability and defamation law. Reach him at isimpson@garanlucow.com or (248) 952-6456.

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