A RECENT SUPREME COURT libel decision could mean trouble for loose-lipped managers.
It all started when Dun & Bradstreet issued a credit report, falsely stating that Greenmoss Builders Inc., a general contractor in Waitsfield, Vt., had filed for bankruptcy. The Court upheld a $350,000 libel damage award to Greenmoss.
The decision marks the biggest shift in libel law in more than 10 years, removing a category of speech from First Amendment protection. "When talking erroneously about private people to a small audience, you may not receive protection under the First Amendment," says Floyd Abrams, a libel counsel at Cahill Gordon & Reindel, in Manhattan. "It's a threatening opinion, in terms of its potential effect on business." The case virtually eliminates constitutional protection for oral and written communication that is not a matter of "public concern," allowing states to rely on their own common law, which varies greatly.
Under common law, normal business conversation regarding one's employees or competitors is usually privileged -- in most states, a libel plaintiff must prove that the speech was knowingly wrong. If you go beyond this "privilege" to vent your spleen against a business associate or employee, you may now be in trouble.
Abrams says the decision could affect how companies deal with competitors and employees. "What might have been thought of as routine, if harsh, commentary on one's competitors may now be looked at more closely by the libel law," he says, adding that the decision could make managers reluctant to write letters of recommendation. Some companies, he says, may resort to purchasing libel insurance.
Bruce Sanford, a libel attorney at Baker & Hostetler, in Washington, D.C., says he expects to see "cases involving credit reporting, disgruntled employees who sue for wrongful discharge, and statements made in the context of tender offers on hostile takeovers. This could incite a whole new slew of lawsuits among commercial companies, and Dun & Bradstreet will make it easier for plaintiffs to recover damages."
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.