Yes, the Statement Hurt Your Business, But is it True? Using Experts in Defamation Cases

Defamation cases lie at the intersection of the right to free speech guaranteed by the First Amendment and protecting individuals and companies from being unjustly and publicly impugned. A hallmark of defamation cases is the dispute over whether or not the statement is actually false. No matter how harmful a statement may be, if the statement is true, it is not actionable. Along with the more traditional defamation cases regarding whether or not an individual’s reputation has been unjustly marred, there are an increasing number of commercial defamation cases where businesses claim they were defamed and lost profits as a result. In those cases, the question over whether the statement is false often involves an inquiry into the company’s products and practices. Given the complexity of commercial defamation cases, expert witnesses are routinely used to litigate the truth or falsity of the statements at issue. In fact, a Court even stated that it was “at a loss ” as to how the plaintiff could have proved that the statements about the plaintiff’s products were false without the use of expert witnesses. As commercial defamation cases become more prevalent, litigants are routinely using expert witnesses to litigate the truth or falsity of the alleged defamatory statements.

Defamation

“Defamation is the injury to one’s reputation either by written expression, which is libel, or by oral expression, which is slander.” Defamation is generally a state common law action and different states have various elements. Generally, the elements of defamation are (1) a false statement; (2) publication without privilege or authorization to a third party; (3) by at least a negligence standard of fault and (4) the statement either causes special damages or constitutes defamation per se. MapInfo Corp. v. Spatial Re-Eng’g Consultants, No. 02-cv-1008, 2006 U.S. Dist. LEXIS 70408, at *42 (N.D.N.Y. Sept. 28, 2006). Statements that “tend to injure another in his or her trade, business or profession” or “impugn the basic integrity or creditworthiness of a business” constitutes defamation per se. Id. When a defamation is per se injury is assumed but actual damages must still be proven.

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One of the more disputed issues is whether the statements are actually false. It is the plaintiff’s burden to prove falsity “and the inquiry only advances the issues of whether the statements are defamatory . . . after their falsity is established.” There are certain defamation claims that can arise out of technically truthful statements that contain a defamatory inference. These claims are commonly referred to as “defamation by indication.” “They are premised not on direct statements, but false suggestions, impressions and implications arising from otherwise truthful statements.” Plaintiffs bear a heavy burden in “defamation by indication” cases. “Where the factual statements at issue are substantially true, a plaintiff must make a rigorous showing that the language of the communication as a whole can be reasonably read both to impart a defamatory inference and to affirmatively suggest that the author intended or endorsed that inference.”

Using Expert Witnesses to Litigate Falsity

Generally, truth is a complete defense to defamation cases. The first step in any defamation case is whether or not the statement is false. In the first instance, it is the plaintiff’s burden to establish falsity. In many complex commercial defamation cases the subject matter is unique and expert witnesses can be necessary to litigate the truth or falsity of the statements. However, it is not just the plaintiff who can offer expert evidence to prove the falsity of the statement. Defendants too are often entitled to offer their own expert to establish that despite the plaintiff’s unhappiness with the statements, the statements are true. As the Court in Melalecua, Inc. v. Clarkpoignantly stated:

“[A] defamation defendant may also find it helpful or necessary to present expert testimony as to the truth of an allegedly defamatory statement. Not only is truth a complete defense to defamation, but the broad protection the First Amendment affords defamation defendants would be turned on its head if a defendant could not also use expert testimony to establish disputed statements were in fact true.”

A dispute between competitor purchasers of delinquent tax liens sheds light on the use of expert witnesses in commercial defamation cases. In Mun. Revenue Serv., Inc. v. Xspand, Inc., the plaintiff was in the business of purchasing delinquent tax liens from municipalities and school districts. 700 F. Supp. 2d 692 (M.D.Pa. 2010). A competitor used allegedly false and misleading advertising that informed potential customers that the plaintiff’s transactions actually produced debt and not revenue for the taxing entity. Plaintiff further alleged that the defamatory ads caused a substantial loss of business including current and prospective customers. There was a dispute over whether expert witnesses should be allowed to testify about the truth or falsity of the statements about how the plaintiff’s transactions should be properly recorded. Ultimately, the Court held that a critical issue for the jury to decide is how the transactions “should have been properly booked” and that “it is axiomatic that to prove the falsity of this statement, [plaintiff] must proffer expert testimony.” In its ruling, the Court cited Rule 702 of the Federal Rules of Evidence, which requires expert testimony when factual matters are outside the ken of lay individuals.

Commercial defamation cases also arise out of statements regarding a competitor’s products. In one commercial defamation case arising out of allegedly false published statements that the plaintiff’s products contained benzene, the Court recognized the importance of the expert testimony and stated “indeed, without the assistance of expert testimony, we are frankly at a loss as to how [plaintiff] would ever be able to meet one of its principle burdens here, that is, demonstrating the falsity of [defendant’s] statements about the existence of benzene in [plaintiff’s] products.” In a dispute between competitor concrete insulating manufacturers, the plaintiff alleged that its competitor was falsely advertising about the insulating ability of its own products. The competitor filed a counterclaim for defamation and other cases of action. Both sides offered expert witnesses who were well-versed in the science behind the insulation and each expert presented reports about whether the statements about the insulation capabilities were false.

In a somewhat different context, in Jacques v. Bank of Am. Corp. a bank faced a defamation lawsuit from a former employee who claimed that the bank had “blacklisted” him. In Jacques, an employee was fired from a bank because he was accused of activating online banking accounts outside of banking hours and without customer consent to receive incentive credit for opening up new accounts. After he was fired, the bank reported the firing to a background check database called Early Warning Services, LLC. The bank reported that the former employee had been “terminated . . . for internal fraud supported by a written confession.” The former employee’s new employer found the report on Early Warning Services, LLC and the former employee was promptly fired. The former employee then sued the bank, claiming that he was defamed and blacklisted. The former employee brought forward a criminal law expert and an expert in human resource management, labor, employment law and employee and industrial relations. The bank objected to his use of these expert witnesses. The Court denied the bank’s motion and allowed the criminal law expert evidence about the “criminal element of the conduct of Plaintiff” and the employment expert’s evidence about the acceptable standard of practices for human resources.

Truth or falsity is at the heart of many defamation suits. Generally speaking, regardless of how harmful the statement is, if it is actually true, a defamation lawsuit will almost certainly fail. In commercial defamation cases whether a statement is true or false can be a complex question. It is for this reason that Courts have been increasingly allowing expert witnesses to come forward to help the fact-finder determine whether the statement is actually false. Particularly when the statement at issue is about a company’s products or practices litigants would be well-served to utilize qualified experts to attack the critical issue — whether the statement is true or false.

Joseph B. Evans focuses his practice on the defense of Federal and New York State criminal and regulatory inquiries and the prosecution of complex litigation matters. He is an associate at Gage Spencer & Fleming LLP, a trial law firm well known for defending the nation’s most high-profile white-collar criminal cases from inception to verdict.