Inside Track: Business Reputation: Online Reviews Spark Numerous Disparagement Lawsuits:

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  • Inside Track
    January
    02
    2013

    Business Reputation: Online Reviews Spark Numerous Disparagement Lawsuits

    Joe Forward
    Legal Writer

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    Many websites allow individuals to post reviews about products and services. If those reviews are not true, businesses can sue, and these types of cases are on the rise. This article explains the recent developments in this area with insight from Milwaukee lawyer Donald Daugherty.
    Business Reputation: Online Reviews Spark Numerous Disparagement Lawsuits

    Jan. 2, 2013 – Blogs, social networks, and other websites that allow people to review products and services can help consumers make purchasing decisions. But disparaging online reviews have sparked litigation in recent years, according to Milwaukee lawyer Donald Daugherty.

    Daugherty, of Whyte Hirschboeck Dudek S.C., says websites like Angie’s List and Yelp can help inform consumers. For instance, Yelp allows people to post reviews about professional service providers (including lawyers) or rate local restaurants. Angie’s List does the same.

    But competitors, disgruntled persons, or others can cross a legal line by making disparaging remarks that illegally hurt the reputation of a business.

    “There have been literally hundreds of lawsuits against posters of bad reviews as well as Yelp itself, the site on which these bad reviews are posted,” said Daugherty in a recent State Bar PINNACLE seminar, “Protecting Reputational Business Interests in Wisconsin.”

    Daugherty also noted that in some cases, businesses are suing competitors alleged to have used proxies to post bad reviews about the plaintiff’s business.

    Recent Cases

    Recently, a Washington D.C.-based contractor sued a woman for $750,000, alleging her negative reviews on Yelp and Angie’s List damaged his business’s reputation and caused the business to lose money. In 2010, a cosmetic surgeon in Chicago sued three women for posting negative reviews about breast surgeries the doctor performed.

    In Pittsburgh, a construction business owner sued a woman for posting on Angie’s List that the construction company did not have insurance, even though it did. Since the websites hosting these comments are generally protected under federal law, suits are directed at individuals.

    “The law is important and valuable tool for a business to have in protecting its reputation,” Daugherty said. “The cases aren’t necessarily about the recovery of dollars. Often, it’s just a counteroffensive in the public debate over what the plaintiff believes is an unfair statement.”

    On the other hand, individuals often cite the First Amendment right to free speech to defend against claims of trade or business disparagement, Daugherty says. Like defamation claims, truth is an absolute defense, and opinions generally constitute protected speech.

    Donald Daugherty

    “The law is important and valuable tool for a business to have in protecting its reputation,” says Milwaukee lawyer Donald Daugherty. “The cases aren’t necessarily about the recovery of dollars. Often, it’s just a counteroffensive in the public debate over what the plaintiff believes is an unfair statement.”

    Developments in the Law

    When an individual posts negative comments online that are not substantially true, one avenue of relief is to sue based on trade disparagement (also known as commercial or product disparagement) under Wisconsin and federal law. But since those claims can be hard to prove, Daugherty says business owners must carefully consider whether to file a lawsuit.

    One consideration for businesses, and the lawyers who advise them, is that a lawsuit can bring negative public attention to a business, thereby aggravating the situation.

    “A lawsuit could raise the profile and generate publicity,” Daugherty said. “People will hear about how others are maligning the business” as it attempts to defend its reputation.

    “Sometimes it’s better to resolve these cases on nonlegal remedies, such as reaching out to the poster of the bad review or trying to find out what he or she specifically did not like,” he said.

    But what if the business can’t determine the poster’s identity? For example, a Texas business has asked a federal court to make Google reveal the identity of a person who said the business was posting fake customer reviews to bolster its own business.

    The lawsuit alleged that Google could reveal her identity because Google retains the IP and email addresses of commentators to their websites (the person posted the comment on Google Places). Once revealed, the Texas business could sue her for business defamation, according to the complaint. The Texas business is also suing a competitor over the alleged “bogus” post.

    “Attorneys warn anyone who writes an online review to be truthful in their posts as the number of lawsuits over potentially slanderous statements continue to pop up across the United States,” reported the Austin Business Journal, which is following the case.

    Coincidentally, New York recently introduced legislation that would prevent persons from posting comments to websites anonymously.

    Specifically, the proposed law would require any website administrator in New York to “remove any comments posted on his or her web site by an anonymous poster unless such anonymous poster agrees to attach his or her name to the post and confirms that his or her IP address, legal name, and home address are accurate.”1 This would allow businesses to more easily identify a person posting false information. The law is designed to curtail cyberbullying.

    On the other hand, some states, such as California, have imposed laws to curtail so-called strategic lawsuits against public participation (SLAPP suits) on the basis of free speech when the statements made concern a public issue.

    Such cases are subject to an initial motion to strike, “unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.”2 Plaintiffs who don’t overcome a motion to strike will pay attorney fees and costs.

    Anti-SLAPP laws are designed to prevent lawsuits with a chilling effect on free speech. But they do not protect individuals who make false statements with intent to cause pecuniary loss. For instance, California’s anti-SLAPP law exempts representations of fact about goods and services.3

    Proving Trade Disparagement

    In Wisconsin, like many other states, a plaintiff asserting common law trade disparagement claims must prove four basic elements: 1) a false statement about products or services; 2) intent to cause pecuniary loss; 3) pecuniary loss in fact; and 4) that the publisher knows the statement is false or acts in reckless disregard of its truth or falsity.

    Daugherty says violations of federal trademark law, the Lanham Act, often accompany state trade disparagement claims. Specifically, 15 U.S.C. § 1125(a) prohibits persons from making false or misleading statements about goods and services in interstate commerce.

    The federal Decency Protection Act, 47 U.S.C. § 230 largely protects host websites from liability for trade disparagement and defamation claims arising from third-party posts or comments. But that law does not protect the individuals who use the sites to post comments or reviews.

    “Potential defendants include, most notably, competitors who say bad things about your products or services,” Daugherty said. “Given the rise of blogs, there are a number of cases in which offensive statements have come from media types or citizen journalists.”

    To learn more, check out State Bar of Wisconsin PINNACLE’s seminar, “Trending Topics in Business Litigation,” available through webcast replay Jan. 9, 2013.

    Joe Forward is the legal writer for the State Bar of Wisconsin.

    Endnotes

    1 NY Assembly Bill No. SO6779 (Introduced March 21, 2012).

    2 Cal. Civ. Pro. Code § 425.16.

    3 Id. at § 425.17.