Do I Have a Valid Texas Business Disparagement Case?

What is the difference between business disparagement and defamation in Texas? The answer is critical to understand if you are a business owner and you’re trying to determine if you might have a valid claim against a party who has disparaged your business.

This article provides information on the difference between business disparagement and defamation, and it lays out the elements of a valid disparagement case.

There is a Difference Between Business Disparagement and Defamation

Both business disparagement and defamation concern the spread of false information that causes harm. However, the distinction primarily revolves around the target of the harm.

In a business disparagement case, the false assertion harms the economic interests of the business.

In a defamation case, the false assertion harms the reputation of an individual (who may be a business owner, for instance).

In the Texas Supreme Court case of Forbes v. Granada Biosciences (2003), the court clarified that “the two torts differ in that defamation actions chiefly serve to protect the personal reputation of an injured party, while a business disparagement claim protects economic interests.”

The Elements of a Business/Commercial Disparagement Lawsuit

In Forbes, the Texas Supreme Court clarifies that there are four elements of a business disparagement claim. According to the court, the plaintiff must be able to show:

  • Defendant published false and disparaging information about the business;
  • Defendant acted with malice;
  • Defendant acted without privilege; and
  • Defendant’s actions resulted in special damages to the plaintiff.

1. Making False Statements (2) with Malice

Commercial or business disparagement is not simply a matter of criticizing a company or even saying offensive things about the company’s owners or employees. Indeed, even if someone makes false or misleading statements about a company, that by itself does not prove commercial disparagement. The Texas Supreme Court has established four specific elements for any disparagement case.

First, the plaintiff must prove that the defendant “published false or disparaging information” about the plaintiff. The statements must be false. In fact, commercial disparagement is also referred to as “injurious falsehood.” A defendant can always raise truth as a defense.

Second, the defendant must have made the false statements with “malice”. According to the Texas Supreme Court, malice can be proven in a couple of different ways. Either the defendant “acted with ill will or intended to interfere in the economic interest of the plaintiff.” Alternatively, the defendant knew they were making a false statement or “acted with reckless disregard” for the truth.

When it comes to malice, the status of the plaintiff dictates the burden of proof. Texas courts have held that when the plaintiff is a public figure, there must be proof of “actual malice” by the defendant. This refers to the knowledge of falsity or reckless disregard standard. A public figure cannot satisfy the malice requirement merely by demonstrating the defendant’s ill will or intent to interfere with its economic interests. In contrast, a private individual may demonstrate malice through the defendant’s “negligence.”

3. Privilege

The third element of business disparagement is establishing the defendant’s lack of “privilege”. In this context, privilege means that the defendant has some sort of legal immunity that protects them, even from the consequences of making a defamatory statement with malice. Privilege may be absolute or conditional.

Absolute privilege is based on the “status of the actor,” according to the Texas Supreme Court and not his or her motivation. For example, if the defendant made false statements about a business in the course of a judicial proceeding–i.e., testifying as a witness during a trial–that would be subject to absolute privilege. Similarly, statements made by members of the state or federal legislature during debates have absolute privilege. In other words, you cannot sue a member of Congress for defaming your business.

A conditional or qualified privilege arise out of certain circumstances, such as a media outlet publishing information that is deemed to be in the public interest. But as the Texas Supreme Court has observed, since business disparagement “incorporates malice as an element,” only absolute privilege has relevance in this context. The existence of malice defeats any possible conditional privilege.

4. Special Damages

The fourth and final element of commercial disparagement is proving the plaintiff suffered “special damages” as a direct result of the defendant’s false statements. Essentially, the plaintiff has to show the court how the defendant’s actions caused others to avoid doing business with the plaintiff.

Unlike defamation or libel, where the injury is simply to the plaintiff’s reputation, the Texas courts have said proof of “loss of trade or other dealings” is “essential” to recovering damages for business disparagement. Even if the plaintiff proves every other element–false statements, malice, and lack of privilege–they will recover nothing without proof of special damages.

Failure to allege special damages can also affect the applicable statute of limitations to a commercial disparagement lawsuit. Under Texas law, defamation lawsuits that only allege injury to reputation must be filed within one year of the publication of the offending statement. In contrast, the statute of limitations is two years for suits alleging injury to “property,” which includes economic interests.

The statute of limitations for a business disparagement claim is two years.

The Elements of a Defamation Lawsuit

The elements of a defamation claim are clarified in the Texas Supreme Court case of WFAA-TV v. McLemore (1998). According to the court, in a defamation case, a plaintiff must be able to show:

  • Publication of a false statement to a third party;
  • Statement defamed the plaintiff; and
  • Requisite degree of fault.

In some cases, a plaintiff must be able to prove damages. There is a one-year statute of limitations in defamation claims. If another party’s false statements harmed you and more than one year has passed, if those statements affected your economic interests as a business, you still may be eligible to file a business defamation lawsuit.

Contact a Texas Business Disparagement Attorney

If you were harmed as a result of business disparagement or defamation, you may be eligible to file a lawsuit. An experienced business defamation lawyer in Texas can analyze your case and discuss your options for moving forward. Contact Lindquist Wood Edwards LLP today.

The information presented here is not legal advice. If you believe you have been the victim of business disparagement or defamation, you should speak to a qualified attorney about the facts of your case.