They’re Saying Bad Things About My Company. Can I Sue?

Sooner or later, every company ends up finding negative statements about it published on the Internet in chat rooms, bulletin boards, blogs or otherwise. I periodically get asked, what can I do?

A New Jersey court recently addressed a claim of trade libel. Bovial Corporation vs. SAC Capital, Docket ESX-L-1583-06 (N.J. Law Div., August 20, 2009). Trade libel is similar to defamation. However, where defamation is a claim based on general injury to reputation, trade libel is a claim based on specific injury to the good will associated with particular goods or services. In New Jersey, for example, the claim is sometimes referred to as a claim for "product disparagement." The use of a brand for a specific good or service, however, can actually help to insulate a company from defamation since negative statements about a brand tend more to diminish the brand than the company as a whole.

Both defamation and trade libel involve claims of a false statement being made to others and resulting damages. One key difference, however, is that for defamation, a drop in stock value, for example, can be valid evidence of damage cause by defamation. For trade libel, the claimant must prove lost sales caused by the libelous statements (referred to as “special damages”).

The tough thing about bringing either of these claims is proving damages. In the Bovial case, the plaintiff’s claim was dismissed on the basis that Bovial had allegedly failed to plead special damages with specificity. Why didn’t Bovial claim defamation? Because the statute of limitations had run on any claim for defamation whereas claims for trade libel are subject to a longer statute of limitations. In New Jersey, claims for defamation must be brought within one year, whereas claims for trade libel may be brought within six years.