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‘Actual malice’ and product disparagement

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From the Summer 2003 issue of The News Media & The Law, page 11.

From the Summer 2003 issue of The News Media & The Law, page 11.

By Wendy Tannenbaum

Most courts adjudicating product disparagement lawsuits have assumed that the legal element known as “actual malice” — a constitutional mandate in defamation cases brought by public officials or public figures — is equally necessary in the context of product disparagement as it is in libel. The Supreme Court has not yet addressed the issue directly, however, and until it does, the applicability of the “actual malice” standard to product disparagement claims remains technically open for debate.

In the seminal case New York Times v. Sullivan, the Supreme Court held that a public official who sues the news media for defamation cannot prevail unless he proves that the defendant newsperson acted with “actual malice.” The Court defined “actual malice” as knowledge of falsity or reckless disregard for the truth of the statements at issue.

The purpose of the “actual malice” doctrine, which has since been extended to apply in defamation cases brought by any public figure, is to protect a speaker’s First Amendment rights and prevent a possible “chilling effect” on free speech. The underlying rationale is that a public figure generally chooses to subject himself to public scrutiny and has the ability to access channels of communication to deny false statements.

It is easy to understand why “actual malice” might be applied in product disparagement cases. The claim differs only slightly from libel, the main distinction being that the injury in product disparagement is economic harm to one’s business, while libel injures a person’s reputation. At the heart of both claims is speech, which requires extra protection under the Constitution.

Moreover, it is hard to dispute that a company that produces a product — such as Suzuki, Bose or Brown & Williamson, all of which have brought product disparagement claims against the media in the past — is not a “public figure” for legal purposes. These businesses depend on making their names recognizable in the public sphere.

As one federal court said in a 1981 opinion, “a manufacturer’s interest in the reputation of its product is not nearly as significant as an individual’s interest in his personal reputation and the public’s interest in obtaining information about the quality and character of products is comparable to its interest in obtaining information about people.” (Simmons Ford, Inc. v. Consumers Union)

Indeed, most courts that have confronted the issue have either decided that “actual malice” applied in product disparagement suits or assumed, without directly deciding, that it did.

In Bose v. Consumers Union, a case about a review of loudspeakers that eventually reached the Supreme Court, the trial court applied the “actual malice” standard and found in favor of the reviewer. Because Bose did not contest the standard on appeal, the Supreme Court did not directly face the question when, in 1984, it issued an opinion on the manner in which an appeals court should review an “actual malice” determination.

Advocates for application of “actual malice” use the Bose case as evidence of the Supreme Court’s implicit acceptance of the standard in product disparagement cases.

In the May opinion from the U.S. Court of Appeals in San Francisco (9th Cir.) in Suzuki Motor Corp. v. Consumers Union, the court declined to address whether the “actual malice” formulation applied to Suzuki’s claim that a bad car review in the magazine Consumer Reports constituted product disparagement. The court simply assumed, for purposes of the motion before it, that the standard applied. Suzuki, in court papers, had stipulated that proof of “actual malice” would be required at trial but reserved the right to challenge the standard later.

The Washington Legal Foundation, a nonprofit legal group, submitted a friend-of-the-court brief in the Suzuki case arguing that the product disparagement tort and its requirements furnish “sufficient protection to satisfy the First Amendment without invoking actual malice.”

The legal difference between product disparagement and libel — namely economic damages versus reputational harm — mandates use of a negligence standard, rather than “actual malice,” according to the group.

Because the issue was raised only by an amicus party, the Ninth Circuit declined to address the issue at this stage of the litigation. It may be forced to face the question square-on if Suzuki challenges use of the “actual malice” standard in future arguments.

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