A company’s reputation is often its most important asset. Damage to reputation can lead to lost customers, revenue, investors, and employees. Not surprisingly, reputational risk is becoming a top concern for companies of all sizes. The proliferation of social media has exacerbated these concerns.
Today, a company’s reputation can be ruined in a matter of minutes, as disgruntled customers or even competitors can broadcast defamatory information instantaneously across the world via social media, often under the guise of anonymity. Some larger companies have formed media response teams to monitor broadly disseminated negative comments. More recently, however, companies have begun fighting back by bringing lawsuits against these individuals. A Massachusetts social media defamation case, Clay Corporation v. Colter, in which a car dealership obtained a $700,000 pre-judgment attachment, highlights this emerging trend.
Plaintiffs’ Complaint and Motion for Preliminary Injunction
The dispute began in June 2012 when, after Clay Nissan terminated an employee, her brothers began a social media campaign, claiming—without any factual support—that it had terminated their sister’s employment “because she had cancer,” and urging others to boycott the company. The following month, the company and its owner (“Clay”), filed a complaint in the Massachusetts Superior Court against these individuals alleging that they maliciously published defamatory statements using social media, and intentionally interfered with Clay’s advantageous relations with current and prospective customers. Clay also filed a motion for preliminary injunction, seeking a $1.5 million attachment and to enjoin the defendants from publishing further defamatory statements.
To establish a claim of defamation in Massachusetts, the plaintiff must show: (1) that the defendant published a statement; (2) of and concerning the plaintiff; that was both (3) defamatory, and (4) false; and (5) either caused economic loss, or is actionable without proof of economic loss. See Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009); White v. Blue Cross & Blue Shield of Massachusetts, Inc., 442 Mass. 64, 66 (2004). A statement is defamatory if it “may reasonably be read as discrediting [the plaintiff] in the minds of any considerable and respectable class of the community.” Disend v. Meadowbrook Sch., 33 Mass. App. Ct. 674, 675 (1992).
Under Massachusetts law, a plaintiff bringing a claim for intentional interference with advantageous relations must show: (1) a business relationship or contemplated contract of economic benefit; (2) the defendant’s knowledge of such relationship; (3) the defendant’s interference with the relationship through improper motive or means; and (4) the plaintiff’s loss of advantage directly resulting from the defendant’s conduct. See Am. Private Line Services, Inc. v. E. Microwave, Inc., 980 F.2d 33, 36 (1st Cir. 1992); Blackstone v. Cashman, 448 Mass. 255, 260 (2007). An “advantageous relation” is a “contemplated contract” or prospective business relationship. Buster v. George W. Moore, Inc., 438 Mass. 635, 652 n.22 (2003). Damages for such claims include attorneys’ fees in some circumstances.
To obtain a preliminary injunction in Massachusetts, a plaintiff must demonstrate: (1) a likelihood of success on the merits; (2) that irreparable harm will result if the injunction is denied; and (3) that the risk of irreparable harm to the plaintiff outweighs the potential harm to the defendant in granting the injunction. See Tri-Nel Mgmt., Inc. v. Bd. of Health of Barnstable, 433 Mass. 217, 219 (2001).
On September 12, 2012, after holding a two-day evidentiary hearing, the court determined that Clay had met the preliminary injunction standard on both the defamation and intentional interference claims. In its decision, the court explained the following: Clay’s service manager—who was aware of the defendants’ sister’s illness when she was hired and who accommodated her illness during her employment—terminated her employment one year later due to inappropriate interactions with employees and customers. Soon after learning of their sister’s termination, the defendants began a “far reaching, extremely aggressive social media campaign” against Clay, launching a Facebook page dedicated to boycotting the businesses and a separate website urging readers to “fight the company that fired the woman without cause who is fighting stage four melanoma.”
The defendants claimed on their Facebook and website pages that their sister was terminated because she had cancer, that Clay had terminated other cancer patients, and that Clay had a pervasive policy of discrimination against cancer patient employees. The court found, however, that these statements had no factual or evidentiary support. The court further explained that Clay’s business was “severely and adversely impacted” by the defendants’ social media campaign, and that it suffered “a loss of over $100,000 higher than normal.” Accordingly, the court found that Clay established a reasonable likelihood of success on the defamation and intentional interference claims, and issued a $1.5 million attachment on the defendants’ real estate holdings and bank accounts.
However, given its concerns over the defendants’ First Amendment rights, the court refused to restrain the defendants’ freedom of speech, limiting the relief to monetary recovery. The court explained that under applicable precedent, “even allegedly false and defamatory statements are protected from prior injunctive restraint by the First Amendment” and the Massachusetts Constitution. See Nyer v. Munoz-Mendoza, 385 Mass. 184, 188 (1982).
Defendants’ Petition for Interlocutory Appellate Review
On September 19, 2012, the defendants filed a petition for interlocutory appellate review, requesting that the Massachusetts Appeals Court vacate the pre-judgment attachment. The defendants argued that the attachment “constitutes a prior restraint on speech” in violation of the First Amendment and the Massachusetts Constitution, that there was no legal or factual support for the court’s ruling, and that the pre-judgment attachment was precluded by the Massachusetts anti-SLAPP statute.
On December 7, 2012, the Appeals Court ruled that the trial court properly held that the plaintiffs were likely to prevail on their defamation and intentional interference claims, but reduced the attachment to $700,000. Noting that Clay’s Chief Financial Officer was unable to quantify the exact loss attributable to the defendants’ conduct, the Appeals Court concluded that the $1.5 million attachment was “speculative” and “excessive,” and that a more specific quantification of the loss is required where “an inordinately large attachment might have a chilling effect on a party’s right to free speech.”
Defendants’ Special Motion to Dismiss Under Anti-SLAPP Statute
On September 6, 2012, the defendants filed a special motion to dismiss under Mass. Gen. Laws ch. 231 § 59H, the Massachusetts “anti-SLAPP” statute, seeking dismissal of the plaintiffs’ claims and attorneys’ fees. The anti-SLAPP statute was enacted in 1994 to combat “strategic litigation against public participation” actions, defined as “meritless suits” that use litigation to “intimidate opponents’ exercise of rights of petitioning and speech.” Vittands v. Sudduth, 49 Mass. App. Ct. 401, 413 (2000). Many other states have enacted similar statutes.
The defendants argued that their activities—“peaceful boycotting,” “picketing,” and “advocating on behalf of their sister,” who filed a discrimination claim with the Massachusetts Commission of Discrimination related to her termination—were protected as “right[s] of petition” under the U.S. and Massachusetts Constitutions. They further argued that the Clay entities could not meet their burden under the anti-SLAPP statute of showing that the defendants’ petitioning was “devoid of any reasonable factual support or any arguable basis in law,” and that the defendants’ acts “caused actual injury” to Clay.
On December 11, 2012, the court denied the special motion to dismiss, concluding that the defendants’ statements and activities were not protected under the anti-SLAPP statute because they were “not part of any effort to convince a government official or body to do or refrain from doing anything.” Clay Corp. v. Colter, CV-12-01138, 2012 WL 6554752, at *4 (Mass. Super. Dec. 11, 2012); see also Kobrin v. Gastfriend, 443 Mass. 327, 331 (2005) (explaining statute was enacted to provide “remedy for those citizens targeted by frivolous lawsuits based on their government petitioning activities”); Fustolo v. Hollander, 455 Mass. 861, 871 (2010) (explaining statute is not so broad to include “free speech” as a protected activity).
The court also rejected the defendants’ argument that their activity of “advocating on behalf of their sister” was protected under the anti-SLAPP statute because the statute “only protects a party who is seeking relief from the government ‘for a grievance of his own’ or ‘otherwise petitioning on his own behalf.’” Clay Corp., 2012 WL 6554752, at *4 (quoting Kobrin and Fustolo).
Clay Corporation v. Colter is part of a larger trend of defamation actions brought by businesses against online commentators based on their false and defamatory statements. In fact, a recent Washington Post article reported that due to the explosion of online review websites, such as Yelp, lawsuits based on defamatory information posted to these sites are “on the rise.” Providers of online services, including online review websites and other social media, however, are generally immune from liability for content independently created by third-party users under Section 230 of the Communications Decency Act. See 47 U.S.C. § 230(c); Levitt v. Yelp! Inc., C-10-1321 EMC, 2011 WL 5079526, at *6 (N.D. Cal. Oct. 26, 2011).
In the past, many of these cases did not succeed, but courts are beginning to recognize that relief may be necessary, given the real and immediate harm to businesses caused by online defamation. The court in Clay Corporation, for example, noted that the defendants’ “relentless campaign against the plaintiffs,” if continued, would likely lead to the “the crippling or destruction of the plaintiffs’ business.”
In another recent case, Miss Universe L.P., LLP v. Monnin, the Miss Universe organization won a $5 million arbitration award against a former Miss USA pageant contestant based on defamatory statements she made using social media, and later, on television. Apparently disgruntled after failing to make it past the preliminary competition, the contestant falsely claimed in a Facebook post that the pageant was “rigged” and “dishonest” because she “witnessed another contestant who said she saw the list” of top finalists before the judging took place. She then appeared on NBC’s “Today” show, repeating her false accusations. The Miss Universe organization’s corporate sponsor, expressing concerns about the allegations and the effect on its image, later abandoned its proposed $5 million sponsorship and “site fee” for the 2013 Miss Universe pageant.
Other recent cases include:
- Obsidian Finance Group, LLC v. Cox (D. Or.) —In January 2011, a financial advisory firm and its senior principal filed a complaint in Oregon federal court alleging that the defendant blogger published numerous defamatory statements about them on her website and “other websites,” including statements relating to supposed “tax fraud,” “illegal and fraudulent activity,” and hiring “a hitman to kill” her. The plaintiffs won a $2.5 million jury verdict in November 2011. The case is now on appeal in the U.S. Court of Appeals for the Ninth Circuit.
- Desert Palm Surgical, P.L.C. v. Petta (Ariz. Super. Ct.) —In December 2011, a medical group and two of its doctors won a $12 million jury verdict in an online defamation case against a former patient. The patient had posted false statements regarding the doctors and the cosmetic medical treatment she received to online review websites, MySpace, and to an independent website that she published.
- Dietz Development LLC v. Perez (Va. Cir. Ct.)—In October 2012, a construction contractor filed a complaint and motion for preliminary injunction in Virginia state court seeking $750,000 in damages and an injunction based on a former customer’s defamatory online reviews on Yelp and Angie’s List. On December 5, 2012, the court issued an order granting the preliminary injunction in part, ordering the defendant to delete and modify certain false statements. On December 26, 2012, the defendant filed a petition for appellate review, which is now pending in the Virginia Supreme Court.
- mLogica Inc. v. Karan (Cal. Super. Ct.)—In April 2012, a technology company and its top executive obtained a $1.56 verdict and an injunction in an Internet defamation case brought in the California Superior Court. The plaintiffs’ claims were based on false statements about their business practices that the defendant made on his blog and by email, including that they never paid vendors and engaged in “illegal business conduct.” The case is now on appeal.
- Lynch v. Christie (D. Me.)—In July 2012, the U.S. District Court for the District of Maine issued a $100,000 pre-judgment attachment on the defendant’s real estate based on the plaintiff’s likelihood of succeeding on the merits of his social media defamation case. The plaintiff, a chiropractor, alleged that the defendants, a former patient and two other individuals, published a website and Facebook page falsely claiming that the plaintiff sexually abused the patient. The case is scheduled for trial later this year.
In light of consumers’ increased reliance on the Internet as a source of information, companies’ concerns over their reputations, and social media users’ newfound ability to ruin those reputations in an instant, expect to see an increase in litigation. As courts grapple with the complex questions these cases present, including challenging First Amendment issues, the caselaw will continue to develop, providing more predictability to litigants—but for now, outcomes remain uncertain in this evolving area of the law.