Defamation in the business setting: Basics and practical perspectives

Abstract

Managers need solid grounding in defamation law so they can make informed decisions about the wisdom of making certain statements about competitors or former employees, L ast year a Florida jury awarded GTE $100 million on its defamation claim against Home Shopping Network. On the heels of this came another Florida jury's $26 million verdict in favor of Clifford Zalay, who had sued his former employer, John Hancock, for defamation. Attorneys, professors, and judges have found these decisions noteworthy; corporate managers should take heed as well, because the cases send important nationwide signals apart from the spectacular size of the damage awards. To place the GTE verdict in proper perspective, it should be noted that the awardthe largest ever in a defamation case -p robab ly would have been reduced on appeal if not for GTE's later agreement to accept considerably less from Home Shopping Network in settlement. As for Zalay, the run-of-the-mill defamation case will not yield a verdict even remotely dose to the amount John Hancock was ordered to pay. It would be a mistake, however, to pass off the decisions as freaks that are insignificant except for their startling damage awards. The real importance of GTE and Zalay is that they forcefully demonstrate the coming of age for good or i l l -of business-related defamation suits. 1 Recent defamation cases with strong business connections provide reliable evidence that during the 1990s such claims will continue to have a major effect on business. With their remarkable damages awards based on statements that were fairly typical of those triggering defamation claims, GTE and Zalay may spur the filing of even more business-related defamation suits. Would-be plaintiffs may perceive that the cases have effectively increased the limits of potential recovery. That perception may be enough to convince a wavering party to file suit over an arguably false and objectionable statement. Corporate managers must therefore develop a heightened awareness of legal considerations associated with defamation claims. Despite the proliferation of these suits in recent years, most managers have not become aware of the relevant issues unless they have had the unfortunate of being involved in such a case. This learning by experience approach is undesirable because the education comes after the fact--after the damage has been done or the mistake has been m a d e a n d invariably at a high price in various ways. It is far better to understand basic legal considerations associated with defamation liability before that liability even potentially arises than to be forced, by pending litigation, to deal with legal consequences one did not consider before making the statement that triggered the lawsuit. A prior understanding of relevant legal considerations helps a corporate manager spot, and take appropriate action concerning, potentially t roublesome issues that could arise from a given statement. The manager who lacks this understanding may instead forge ahead with inadvisable statements that effectively invite litigation and its undesirable consequences regardless of which party ultimately prevails. In an attempt to foster such an understanding, this article examines current issues in defa-