Elements of a Business Defamation Claim

Defamation is a type of tort claim alleging that a false statement of fact about the plaintiff has caused the plaintiff to suffer financial harm. Spoken defamatory statements are known as slander, while written defamatory statements are called libel. Both individuals and businesses can file defamation lawsuits, although the elements that they must prove are slightly different. In a personal defamation claim, it might be enough for a plaintiff to show that a false statement caused damage to their reputation or standing in the community. A business claiming defamation, by contrast, must usually show that the defamatory statement has directly affected their financial interests, such as by costing them business or affecting their credit.

Defamation as a First Amendment Exception

Courts in the U.S. have set a rather high standard of proof for defamation plaintiffs, largely because of the First Amendment’s guarantees of freedom of speech and freedom of the press. A defamation lawsuit, after all, is asking a court to penalize someone for the content of their speech. The U.S. Supreme Court has held that the First Amendment does not protect defamatory statements, stating that “[l]iberty of speech, and of the press, is...not an absolute right, and the State may punish its abuse.” Near v. Minnesota, 283 U.S. 697, 708 (1931).

Elements of a Business Defamation Claim

The exact requirements for a defamation claim vary from state to state, but several elements are common across the country.

1. False Statement of Fact About the Plaintiff

A plaintiff claiming defamation must show that the defendant made a false statement of fact that concerned the plaintiff. This element has several parts. First, the statement must be something that purports to be factual. Statements of opinion cannot be defamatory. For example:

  • “Joe’s Diner has the worst mashed potatoes in the city” is a statement of opinion.
  • “Joe’s Diner puts motor oil in their mashed potatoes” is a statement of fact, and it could be defamatory if it is not true.

Second, the statement must be about the plaintiff. In the above example, it must be reasonably clear that the defendant is talking about Joe’s Diner, and not any other business.

Finally, the statement must be false. The plaintiff has the burden of proving this. If the allegedly defamatory statement involves unsavory ingredients in the mashed potatoes at Joe’s Diner, the diner might need to reveal how they make their mashed potatoes.

2. Publication

The allegedly defamatory statement must have been “published.” In this context, this means that the statement must have been made to the public in some form, whether the defendant told it to another person, posted it online, or had it published in the local newspaper.

3. Fault

The exact standard for proving a defendant’s fault varies among jurisdictions, and it may also vary depending on the plaintiff. In personal defamation claims, for example, most plaintiffs must prove that the defendant was reckless as to the truth of the statement. A plaintiff who is a public figure, however, must prove that a defendant acted with “actual malice,” meaning that the defendant knew that the statement was false or had “reckless disregard of whether it was false or not.” New York Times Co. v. Sullivan, 376 U.S. 254, 280 (1964).

Many courts hold business plaintiffs to a similar standard to public figures in defamation claims. This means that a business might need to prove that the defendant either knew that a statement was false or acted recklessly about it. A simple mistake of fact by the defendant, without knowledge of falsity or intent to harm the plaintiff, is probably not enough to sustain a business defamation claim.

4. Lack of Privilege

A defendant can assert certain privileges as a defense to defamation. One of these is truth, meaning that if a defendant can show that their statement is true, by definition it cannot be defamatory.

Statements made in the course of legal or legislative proceedings are usually privileged against defamation claims. If someone sues Joe’s Diner over the alleged contents of their mashed potatoes, the lawyers who brought the lawsuit cannot be sued for defamation for what they say in court filings or in the courtroom. An elected legislator debating a proposed bill regulating mashed potato content cannot be sued for defamation if they repeat allegations about Joe’s Diner in a legislative chamber.

5. Actual Damage to Economic Interests

Finally, a business plaintiff must show that the defamatory statement caused actual economic damages. Some jurisdictions allow businesses to allege defamation per se, which involves false statements that are presumed to be injurious and therefore do not require additional proof of financial losses. For individuals, statements that could constitute defamation per se include false allegations of criminal activity or false claims that a person is incompetent at their profession.

Losses and damages that could support a business defamation claim might include loss of business opportunities due to the false statement. Suppose, for example, that Joe’s Diner was in the process of signing a franchising deal that would have been worth thousands — perhaps even millions — of dollars, but the opportunity vanished because of false statements involving their mashed potatoes recipe.