Also known as: disparagement of business · business disparagements · trade libel · commercial disparagement · product disparagement · injurious falsehood
Written by attorneys — see sources below.
A tort imposing liability on one who publishes a false statement disparaging another's property or business interests. The plaintiff must prove falsity as part of the prima facie case along with fault consisting of knowledge of falsity, reckless disregard, or ill will. Liability extends only to pecuniary loss that results directly from third-party conduct induced by the falsehood or to reasonable expenses incurred to counteract the publication.
Terry sent false bulk text messages to Valley Harvest stating that Black Grain's seeds had failed germination tests. Valley Harvest canceled its season order and warned neighboring farmers, causing Black Grain to lose all repeat business for the planting season. The messages were a substantial factor in the cancellations because recipients acted immediately and expressly cited the false statements, with no independent rule cutting off liability.
Scott posted a false claim that Highland Bistro caused a mass food-poisoning outbreak. North Restaurant and other long-term clients canceled events within forty-eight hours, expressly citing the allegation and producing $180,000 in lost revenue. The loss consisted of direct pecuniary harm from client conduct plus the costs Highland Bistro incurred to counteract the publication.
Star Sustainability distributed a report to Noon Environmental's clients stating that the firm manipulated sampling results. The report's underlying facts were accurate even though the overall implication was disputed. Because the facts stated were true, Star Sustainability incurred no liability for injurious falsehood despite the resulting contract cancellations.
A procurement officer emailed State A's contracting office that Contractor Corp routinely lied about minority subcontracting goals. State A staff placed an internal summary of the email in the specific highway project file and removed Contractor Corp from the shortlist. Contractor Corp must prove that State A understood the statement as bearing on its interests in the pending bid.
Marilyn sent Delta Museum a dossier containing false statements that Central Museum had sold forgeries. Delta received the dossier the same day an independent appraiser questioned provenance and later canceled all transactions. Because the appraiser's concerns alone would have caused the cancellations, the false statements were not a substantial factor in the pecuniary loss.
In May 1970, Consumers Union published a seven-page article in Consumer Reports. The article evaluated medium-priced loudspeakers and included a boxed section on the Bose 901 system manufactured by Bose Corporation. The article described the system as unique and unconventional. It stated that individual instruments heard through the Bose system seemed to grow to gigantic proportions and tended to wander about the room. A violin appeared ten feet wide and a piano stretched from wall to wall. Bose Corporation took exception to the statements. After Consumers Union refused to publish a retraction, Bose filed a product disparagement action in the United States District Court for the District of Massachusetts. After protracted pretrial discovery, the district court denied summary judgment and conducted a nineteen-day bench trial on liability. At trial, engineer Arnold Seligson, who supervised the listening tests and prepared the internal report on which the article was based, testified for nearly six days. His initial report used the phrase “wander around the room.” During cross-examination he drew a sketch showing back-and-forth movement along the wall between the speakers. He explained that the word “about” meant what he had drawn. The district court found that the perceived movement was along the wall rather than about the room. It found the published statement false and disparaging. It found Seligson’s testimony claiming the words meant lateral movement not credible. It concluded that the statement had been published with actual malice. The Court of Appeals for the First Circuit reversed. It accepted the disparaging character of the statement but held that it would conduct a de novo review of the actual-malice determination rather than apply the clearly-erroneous standard. The Supreme Court granted certiorari to consider whether the Court of Appeals had erred in refusing to apply Rule 52(a).
MediaWatch reported that Prairie Herald had retracted multiple stories for inaccuracies. Several advertisers canceled campaigns during a broader decline in print advertising. The false report remained a substantial factor in the cancellations even though general market forces also influenced the decisions.
In 1968, Chicago police officer Richard Nuccio shot and killed a youth named Nelson. State authorities prosecuted Nuccio and obtained a conviction for second-degree murder. The Nelson family retained petitioner Elmer Gertz, a Chicago attorney, to represent them in civil litigation against Nuccio. Respondent Robert Welch, Inc., publishes American Opinion, a monthly magazine expressing the views of the John Birch Society. In March 1969, the magazine published an article titled "FRAME-UP: Richard Nuccio And The War On Police." The article accused Gertz of participating in a Communist conspiracy to discredit local law enforcement, described him as a "Leninist" and "Communist-fronter," and claimed he had been an officer of the National Lawyers Guild, which it portrayed as a Communist organization involved in planning attacks on Chicago police during the 1968 Democratic Convention. The article contained numerous inaccuracies, including the false implication that Gertz had a criminal record. Gertz had served as an officer of the National Lawyers Guild approximately fifteen years earlier but had no involvement in planning the 1968 demonstrations. He had never been a member of the Marxist League for Industrial Democracy or the Intercollegiate Socialist Society. The managing editor of American Opinion made no effort to verify the charges against Gertz before publication and appended an editorial introduction stating that the author had conducted extensive research. Gertz filed a diversity action for libel in the United States District Court for the Northern District of Illinois. The district court ruled that the statements constituted libel per se under Illinois law. After a trial, the jury awarded Gertz $50,000 in compensatory damages. The district court later entered judgment for the defendant notwithstanding the verdict, applying the New York Times standard. The Court of Appeals for the Seventh Circuit affirmed. The Supreme Court granted certiorari to review the application of constitutional standards to defamation of a private individual.
The plaintiff must plead and prove falsity as part of the prima facie case. This differs from defamation, where falsity is presumed and truth is an affirmative defense. The requirement flows directly from the elements of injurious falsehood.
The defendant is subject to liability only if the plaintiff shows the defendant knew the statement was false, acted with reckless disregard as to its truth, or acted with ill will or intent to interfere. Mere negligence is insufficient.
…388 U. S., at 170 (opinion of Black, J.). Such a rule would, indeed, obviate the fear that the prospect of civil liability for injurious falsehood might dissuade a timorous press from the effective exercise of First Amendment freedoms. Yet absolute protection for the communications media requires a total sacrifice of the competing…
…opinion Opinion of Justice Stevens An unusual metaphor in a critical review of an unusual loudspeaker system gave rise to product disparagement
Recovery is limited to pecuniary loss that results directly and immediately from third-party conduct induced by the falsehood, including impairment of vendibility, plus expenses reasonably incurred to counteract the publication such as litigation costs.
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The publication is a legal cause if it is a substantial factor in bringing about the pecuniary loss and no independent rule of law relieves the publisher of liability because of the manner in which the loss occurred. Preexisting client dissatisfaction does not automatically defeat causation when the falsehood supplies the decisive impetus.
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Yes. The publisher is not liable if the facts stated, or the facts implied as justification for any opinion, are true.
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When properly raised, the plaintiff must show that the recipient understood the communication as applicable to the plaintiff's legally protected interests affected by the falsehood rather than as abstract background information.
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