Disparagement: What Is It?
Disparagement refers to false statements that injures a person’s reputation or business, in a manner similar to defamation. A claim of disparagement is similar to slander, but it relates to statements that harm a person’s business rather than personal reputation.
If you claim a competitor made disparaging statements about your business, you must show that the statements were false (because if they were true, then you cannot recover damages from disparagement). Moreover, the statement must be false as to a material fact — for example , a competitor’s statement that it just landed a multi-million dollar deal for a client would be considered disparaging and false — but statements about the general state of a company’s business (e.g., not having large contracts or being successful at the time) may not be enough to sustain a claim.
If you meet the elements of a business disparagement cause of action, you may be able to recover for denigrating statements made to a third party that result in specific damages (i.e., loss of a particular contract) and that caused a special damage (e.g., lost revenue of a specific amount).
Disparagement: The Legal Context
The legal framework for disparagement varies from one jurisdiction to another, and it is primarily governed in the United States under common law (court rules and procedures that evolved over centuries). While written laws (statutes) may not specifically mention disparagement, many statutes codify elements of disparagement or defamation claims, and thus have some bearing upon the subject. But in addition to disparagement being a statute-free cause of action, disparagement can be a stand-alone claim, or combined with other claims, such as "breach of contract."
While "slander" traditionally refers to spoken disparagement and "libel" refers to written disparagement, from a legal perspective, disparagement encompasses both. Therefore, the legal framework for disparagement typically incorporates libel principles. With a few exceptions, contemporary cases relating to disparagement generally refer to libel elements, in both state and federal courts. The elements of proving libel generally mirror elements of proving slander.
However, because the requirements for adequately stating a claim for libel are higher, whereas the requirements for stating a claim for slander are comparatively lower, the application of slander to disparagement claims serves to widen the legal rules that allow collateral attack upon disparaged property entitlements. However, only certain "particulars," or actions, taken in disparagement are actionable.
For instance, whether spoken or written, what type of statements are actionable in disparagement? Of course this will depend upon the facts and circumstances of the case, but generally, courts have narrowed the scope and limitations on actionable particulars in disparagement. In fact, courts mostly limit actionable particulars in slander to the following:
Disparagement: Essential Elements
There are several elements required to prove and establish a claim or cause of action for disparagement of a business or economic interest. To satisfy all of the elements, the plaintiff must prove that the defendant made one or more false statements by disparaging the plaintiff’s goods and/or services, which (1) were published to a third party; (2) were specifically in reference to and ascertainable as the plaintiff’s goods and (or) services; (3) were made by the defendant with the requisite intent; (4) were published without any privilege or justification; and (5) resulted in harm to the plaintiff’s economic interests.
Whether a statement is false is typically a question for the jury. Malice typically requires that the inner workings of the defendant’s mind be determined. But, the plaintiff may prove malice with circumstantial evidence of the defendant’s state of mind.
Malice can exist in various forms. A defendant acts with actual or specific or actual malice when he or she makes a statement with the intent to cause the recipient to believe the statement and to detrimentally rely on it. A defendant acts with demalicious or [demalicious] or general malice where he or she makes a statement without caring whether the statement is false or true. A plaintiff may recover for general or demalicious malice where the defendant is acting solely (or even regarded by the law as acting solely) out of a desire to harm the plaintiff. A defendant acts with implied malice as well where the defendant has no specific intent to cause harm but is acting in conscious disregard of the probability of the harm to others.
The damages requirement is that the plaintiff must suffer pecuniary damages as a result of a disparaging statement. While actual pecuniary loss is not required, the plaintiff must suffer a non-pecuniary damages, such as personal humiliation, mental anguish, or suffering, as a result of the defendant’s conduct. The plaintiff does not have to prove the defendant intended to harm the plaintiff’s reputation. Nor does the plaintiff have to prove the defendant intended that any third parties would or did hear the complained of statement. The plaintiff’s damages are usually measured by pecuniary losses and damages that flow from the harm to the plaintiff’s economic interests.
Disparagement vs Defamation
Just as defamation is not the same thing as slander, disparagement is not the same as defamation. Specifically, defamation requires damage to a person’s reputation, while disparagement requires damage to a person’s business reputation. This distinction is clear from the statutes: damage to a person’s reputation is the substantive element of a defamation claim, whereas damage to a person’s business activities is the substantive element of a disparagement claim.
It is for this reason that defamation plaintiffs can sue for statements that cause emotional distress, but disparagement plaintiffs cannot (at least not for the act of disparagement itself). That is, a statement that is just a plain lie about a company’s product or service doesn’t necessarily support an emotional distress claim against the defendant. Ordinarily, the only way that such a plaintiff can recover damages for emotional distress as a result of disparagement, assuming that there are other tortious acts alleged, is by claiming the distress as a result of the other torts.
Actually, because disparagement is an offense bared on the notion that the lie was told about the company’s product or service in order to get something — the primary example being that the false statement was made in order to push the disparager’s own product or service — it might even be fair to say that the intentional tort of disparagement is a kind of fraud, albeit one with a special name and elements.
Disparagement: Available Defenses
A defendant in a disparagement claim may potentially raise a number of defenses in response. Among these can be truth. An alleged defamatory statement that can be shown to be true is a defense to such claims, but truth in this sense must be contrasted with actual truth or verifiability of the statement itself. Put simply, even if a statement is literally true or false, subjective truth may apply in the context of that statement. For example, an accurate description of a person’s conduct can be defamatory where the statement is not intended to convey a mere fact—it is the implication that something negative exists about the person that was defamatory.
Privilege, though, is a related, but separate defense. In the context of disparagement and defamation , absolute privilege protects certain statements made in authorized judicial proceedings and legislative bodies. Qualified privilege applies to speeches made in good faith on a matter of justifiable public interest or where a person legitimately needs to act in the protection of his own interests. Moreover, if a privileged statement that otherwise would be disparaging is re-published with malice, then the privilege may be lost.
An opinion is also a defense to a claim of disparagement as long as such opinion is fairly stated and relates to the subject of the opinion. This often leads to battles over context, such as what the reasonable reader would have believed was implied by the statement based on the circumstances. The standard in California for such a determination is whether the publication makes its defamatory meaning "clear to the reader that it is the author’s opinion."
All of these defenses, when effective, can mean the difference between dismissal of a claim or a judgment in favor of a defendant.
Disparagement: Legal Consequences
Legal Action: Vindication and the Litigation Process. Being found liable for disparagement can mean not only the potential for damages, which we’ll discuss below, but also the costs associated with legal action. This might include legal fees, court costs, and other expenses that can add up considerably.
Damages: If a disparagement claim is successful, the party found to have made the false statements may be liable for damages. Direct monetary damages can include the loss of business, loss of goodwill, and a variety of other damages that directly correlate to the disparaging statement that has been made about your product, service, or business.
Indirect damages could also be considerable. A reputation tarnished by disparagement could mean a long period of repair – through action, additional advertising or marketing, or other efforts. The loss of business as a result of a disparagement may mean significant lost revenue; this in turn could lead to demoralized staff, lower retention, and possible turnover – all of which have their own associated costs.
In short, losing a disparagement claim may be a whilet-ale proposition for a business or individual, leading to significant economic and public relations problems.
Current Developments in Disparagement Law
With the widespread rise of the Internet and social media platforms, the last two decades have been a period of great change for disparagement law and the rights of entities with trademark assets. Social media platforms such as Facebook and Twitter have resulted in now daily situations where disparagement of a trademark takes place in the blink of an eye (or a "tweet"). Today, there exists a thin line between clever marketing and actionable disparagement of a trademarked asset that every business must be vigilant of. While the speed and reach of communications technology has evolved rapidly, the basic concepts of disparagement and its potential risks and costs for businesses have remained constant. Businesses large and small must be aware of the potential risks of any messages conveyed on its Internet and social media accounts. As mentioned, businesses must also be aware of and stay educations about how disparagement cases can achieve high profile (and high costs), particularly in the digital age, which results in having a much wider audience in a shorter period of time.
Avoiding Disparagement Claims
While it may be difficult to completely safeguard against unintentional disparagement, there are several best practices individuals and businesses can follow to mitigate the risk of statements crossing the line into defamation. For starters, individuals should take extra care when reviewing and proposing language for their employment agreement, separation agreement and other relevant contracts. The language in the contract will serve as the basis for legal liability, so it is important to be clear and specific about what content is prohibited.
If the individuals are part of public-facing content, including advertising campaigns, press releases or other marketing initiatives, they should consider disclaiming any statements made by third parties, and should avoid statements that could be interpreted as suggesting opinions about competitors , suppliers and the like.
For encapsulating sensitive information or relaying negative statements about others, it can be useful to use more generic wording. For instance, statements like "our technology is superior to the other options available" or "the competitor has a weaker rating." This type of broad-stroke phraseology can help safeguard not only against disparagement claims, but also against other claims such as false advertising or invasion of privacy.
Finally, always beware of how communications or social media activity will be interpreted by those outside your organization, particularly if the comments are those made by third parties. While you cannot control how others will interpret or build upon your statements, what you say and what information you share can provide fertile ground for misunderstanding and misinterpretation.