If someone's business suffers economic losses because of another person's false and disparaging statements, the business owner may be entitled to tort compensation in a trade libel lawsuit. Trade libel is a business tort that involves the publication of a false and unprivileged statement of fact disparaging the property, goods or services of a business.
Trade libel in California, also sometimes referred to as business defamation or product disparagement, differs from ordinary defamation in several key aspects.
Product Disparagement Involves Monetary Damage to the Plaintiff's Business
Under most circumstances, the tort of defamation involves non-monetary injury to an individual's good name and reputation. Unlike ordinary defamation, the tort of product disparagement requires proof that the defendant's libelous or slanderous statements caused monetary damage to the plaintiff's business. In other words, to successfully sue someone for trade libel in California, the business owner must establish that his or her business suffered a monetary loss because of the disparaging statement.
There is an exception to this rule, however, for statements that imply that the business engages in fraud, dishonesty or questionable business practices. If the defendant imputes business dishonesty or questionable business practices to the plaintiff's business, the plaintiff does not have to prove that it suffered a monetary loss due to the libelous statement. This is called libel per se in business defamation.
In Business Defamation, the Plaintiff Must Prove the Statement was False
In contrast to ordinary libel, for a successful trade libel or business defamation case, the plaintiff must prove that the statement made by the defendant was false. This is an important distinction, because with ordinary defamation, the defendant's statement is presumed to be false and the defendant has the burden of proving that the statement was true. This means that the plaintiff seeking to recover tort compensation for business libel has a heavier burden than the plaintiff in a typical defamation case.
Trade Libel is an Intentional Tort
A defendant in a trade libel lawsuit is subject to liability only if he or she actually knew the disparaging statement was false, or published the statement with reckless disregard to whether or not it was true. The defendant will also be liable if he or she acted with ill will or intended to interfere with the plaintiff's economic interests.
Because the public has a recognized interest in knowing about the quality of consumer goods on the market, so long as the defendant's statements do not impugn the plaintiff's personal or corporate reputation (that is, the statements do not imply business dishonesty or questionable business practices), liability for business defamation cannot be based on mere negligence.
Injunctive Relief may be Available for Trade Libel
Because of the economic interests involved in trade libel, a defendant in a California trade libel lawsuit may be enjoined from disparaging the quality of the plaintiff's product. In the ordinary libel or slander case, by contrast, injunctive relief is not available. Of course, other relief for trade libel would include compensation for monetary losses the business suffered as a result of the libelous statements.
If a California business owner believes his or her business or product has been the subject of trade libel, he or she should contact a local tort attorney experienced in handling business matters involving unfair trade practices.
Sources: Leonardini v. Shell Oil Co., 216 Cal. App. 3d 547, 264 Cal. Rptr. 883 (1989); Melaleuca v. Clark, 66 Cal. App. 4th 1344, 78 Cal. Rptr. 2d 627 (1998); Polygram Records v. Superior Court, 170 Cal. App. 3d 543, 216 Cal. Rptr. 252 (1985).
Additional Resources: The Law of Defamation; Defaming the Dead
Disclaimer: This article is in no way intended as legal advice. For help with specific legal issues, one should contact an attorney in one's local area.
Jessie Vanwinkle - Jessie Vanwinkle is an attorney in practice since 1998. View her full profile for more information.
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