The Elements of Commercial Disparagement in Texas

commercial disparagement elements
You are probably familiar with the legal concept of defamation. This is when someone makes an intentionally false statement intended to hurt another person’s reputation. There is a related but distinct business tort known as “commercial disparagement” or “business disparagement.” While defamation addresses injury to the victim’s reputation, commercial disparagement deals with injury to the victim’s economic interests.

Making False Statements 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.”

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.

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.

Considering a Business Disparagement Lawsuit?

Commercial disparagement litigation is often a lengthy and complex affair. It is not as easy as you might think to prove a statement is false, even if you know that to be the case. And as discussed above, when the person or company bringing the suit is a public figure, Texas courts will require proof of actual malice, not just negligence. This is why it is imperative to work with a qualified Dallas business disputes attorney who understands how to deal with these types of cases. Contact the offices of Lindquist Wood Edwards LLP to talk to a lawyer now.

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