When Libel Makes You Liable

Forty years later, major players in the Supreme Court case that redefined libel law are still at odds over whether New York Times v. Sullivan has helped or hurt the relationship between journalists and politicians.

One of our country’s most well known constitutional protections is the First Amendment’s guarantee of freedom of speech. While the freedom of speech is one of our most cherished constitutional rights, it does not come without qualifications and one area that falls outside the First Amendment’s protection is defamation.

Defamation is the publication of a false statement that tends to injure another’s reputation or good name. Defamatory statements can be either spoken (slander) or in writing (libel) and can occur in a variety of context—whether it be a personal attack on an individual’s reputation, or the disparagement of a small business owner’s products or services. Our legal system applies varying standards of liability for defamation, depending on the context of the false statements and the status of the victim.

The law of defamation and the First Amendment serve two competing interests. The former protects an individual’s interest in one’s personal reputation and provides an avenue for an individual to not only vindicate his or her good name, but to also obtain redress for harm caused by such statements. The First Amendment, on the other hand, protects freedom of expression and “was fashioned to assure unfettered interchange of ideas for the bringing about of political and social changes desired by the people.”

In defamation lawsuits, courts must balance an individual’s interest in the integrity of his or her personal reputation against the First Amendment’s guarantee of freedom of speech. Through a series of decisions, the Supreme Court has attempted to balance these interests and formulate different standards of liability for the varying types of defamation.

Defamation law began to take shape after the Supreme Court issued its landmark decisions in New York Times Co. v. Sullivan (1964) and, ten years later, in Gertz v. Robert Welch, Inc. (1974). In New York Times, the Supreme Court distinguished between “private figures” and &quo;public figures” and granted greater protections to defendants in defamation actions brought by public figures. In order to recover damages for defamation, a public figure must demonstrate that the defendant issued the defamatory statement with “‘actual malice’ – that is, with knowledge that it was false or with reckless disregard of whether it was false or not.”

In Gertz, the Supreme Court defined a less protective standard for defamation actions brought by private figures. The Supreme Court ruled that private figures can recover damages in a defamation claim upon a showing of mere negligence (i.e., the conduct was not reasonable), although actual malice must still be shown to recover punitive damages.

The reasoning behind the Supreme Court’s decision to afford greater protections to a private figure in defamation lawsuits was three-fold. First, the Supreme Court recognized the overriding importance of debate on public issues and that less stringent defamation laws with respect to public debate may have a chilling effect on such speech. The Supreme Court noted that “debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.”

Second, the Supreme Court recognized that private individuals will typically lack available opportunities to contradict the false statement and thereby to minimize its adverse impact on reputation. Public officials and public figures, on the other hand, “usually enjoy significantly greater access to the channels of effective communication and hence have a more realistic opportunity to counteract false statements than private individuals normally enjoy. Private individuals are therefore more vulnerable to injury, and the state interest in protecting them is correspondingly greater.”

Finally, the Supreme Court reasoned that “[a]n individual who decides to seek governmental office must accept certain necessary consequences of that involvement in public affairs. He runs the risk of closer public scrutiny than might otherwise be the case.” With respect to other public figures, the Supreme Court noted:

For the most part those who attain this status have assumed roles of especial prominence in the affairs of society. Some occupy positions of such persuasive power and influence that they are deemed public figures for all purposes. More commonly, those classed as public figures have thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved. In either event, they invite attention and comment.

In other words, “public officials and public figures have voluntarily exposed themselves to increased risk of injury from defamatory falsehood concerning them,” whereas a private individual “has relinquished no part of his interest in the protection of his own good name.”

In the small business community, defamation may occur when another party, possibly a competitor or disgruntled employee, makes false statements that tend to disparage the fitness of the individual to carry out his or her lawful business, trade or profession. For this type of defamation to be actionable in court, the defamatory statements must relate to the skills or character required to carry out the particular occupation of the business owner (i.e., the statements must impute fraud, want of integrity or incompetence in the line of his or her business).

Another form of defamation that may affect a small business owner is statements that disparage the business’s goods or services. Courts have recognized this type of disparagement (known as “trade libel” or “trade disparagement”) as a form of actionable defamation.

“Trade disparagement” differs from personal defamation claims in at least three respects. First, proof of special harm is required in all cases (proof of lost profits, for example). Second, to recover those pecuniary damages a plaintiff must demonstrate that the defendant made the disparaging statements with knowledge that they were false or with reckless disregard of whether it was false or not (i.e., the New York Times standard of proof ). Finally, because of the economic interest involved in trade disparagement cases, a court may in a proper case enjoin a party from making future disparaging remarks about a business’s products or services. Typically, such “prior restraints” are not allowed under the Constitution and are generally not entered by courts in personal defamation cases.

Our legal system has attempted to strike a balance between the overriding importance of free speech against other competing interests, both personal and business. As you can see, these legal principles not only govern political debate and public issues, but may also affect day-to-day decisions of the small business owner.