What Constitutes Defamation to Business?

July 5, 2010 | Erin Herbold

 

In 2008, the plaintiffs (Ohio dairy farmers) brought suit against a livestock company alleging that the defendant (an Indiana livestock company) knowingly and intentionally sold them 284 calves that they represented as being milk-producing replacement heifers, but actually turned out to be “freemartins.” Freemartins are sterile female cattle, meaning that they are biologically incapable of producing milk.  The plaintiffs sued, claiming that the defendants breached their contract, breached the warranty of fitness for a particular purpose, committed fraud, and violated the Packers and Stockyards Act.  The seller countered that the farmers knew that the calves were sold “as-is” and that they assumed the risk that the calves would not produce milk.

The litigation continued and, in 2009, in an attempt to find other cattle buyers that were in the same situation as the farmers so as to bolster their contract action against the defendant, the farmers placed an ad in a major weekly Midwest agricultural publication that ran on three consecutive weeks.  The ad sought “…dairymen who bought replacement heifers that turned out to be freemartins” from the seller.  The seller’s counsel sent a letter to the farmer’s lawyer asserting that the ad was defamatory.  About three weeks later, however, a flier containing the same language as the ads was circulated at a popular northeastern Indiana livestock auction.  The seller then brought a counterclaim alleging four counts of defamation – three for each separate time the ad ran in the ag publication and one for the flier.  The farmers moved for summary judgment on several grounds – that they didn’t publish the flier, that the ads were true, that the ads were not malicious, that the language of the ads was not defamatory and that the seller wasn’t damaged by the ads.  

The U.S. District Court for the Northern District of Indiana first addressed the legal requirements for establishing defamation under Indiana law. The court noted that defamation is “that which tends to injure reputation or to diminish esteem, respect, good will, or confidence in the plaintiff, or to excite derogatory feelings or opinions about the plaintiff.”  A party alleging defamatory conduct must prove that the defendant published the suspect communication, that it had defamatory imputation, that malice was present and that the defendant suffered damages as a result of the publication.   Also, the court noted that for a defamatory statement that is published, each publication constitutes a separate act of defamation.

On the publication requirement, the court held that no evidence was presented that the farmers had published the flier or authorized it to be published and that the seller conceded that point.  Thus, the farmers were entitled to summary judgment with respect to the seller’s defamation claim concerning the flier (lack of publication is a complete defense to a defamation claim).  But, there was no question that the farmers were responsible for published the ad in the ag publication for three consecutive weeks.  So the court analyzed the components of a defamation claim based on the facts of the case with respect to the ads.

While the farmers asserted that the plain language of the ads were not defamatory, the court disagreed.  The court noted that any statement that implies misconduct in a person’s trade or business is presumed to be defamatory per se.  Here, the court determined that the ads implied misconduct in the seller’s trade or business and were defamatory per se.

As for the malice component, the court noted that, in the context of defamation, “malice” simply means the lack of legal justification.  With respect to a private party such as the seller, there is no requirement that the statement be made spitefully or with ill-will.  The court believed that the farmers did not produce any evidence that could lead a jury to conclude that they were not negligent with respect to the truth or falsity of the ads.  Thus, the farmers failed to negate the malice element.     

On the damages issue, the court noted that the seller need not prove that they actually incurred damages due to the ads because the ads were defamatory per se.  The famers failed to negate the damage element – the court believed that the farmers’ argument that the seller suffered from a general decline in the livestock market rather than the ads was based on conjecture and assumption rather than undisputed facts.

Truth is an absolute defense to a defamation claim, and the farmers claimed that the ads were not defamatory because they were true – the seller knew that they had sold heifers in the past to other parties that turned out to be freemartins.  But, the court noted that because the ads were per se defamatory, the farmers had to also establish that the sellers were intentionally deceiving other buyers by knowingly or negligently selling freemartins as breedable heifers.  Because the farmers did not proffer any evidence that the seller was withholding information from their buyers, the court could not say that, as a matter of law, the ads were true. 

Thus, the case will proceed to trial on the issue of defamation with respect to the ads.  LDT Keller Farms, L.L.C. v. Holmes Livestock Co., Inc., No. 1:08-CV-243, 2010 U.S. Dist. LEXIS 63982 (U.S. Dist Ct. N.D. Ind., Jun. 25, 2010).