- posted: Sep. 30, 2023
- Business Law
It can take years for a company to develop a reputation among its customers, suppliers, investors and employees. But that reputation can be quickly impaired when someone disseminates falsehoods about the company, its employees or its goods and services. This is known as business defamation and it may entitle the injured company to legal relief and compensation.
Business defamation differs from personal defamation in that damages are not presumed. The defamed company must prove monetary losses or other economic damages. Further, there must be an identifiable link between the false statements and the harm suffered by the company. The losses must also be reasonably quantifiable, not speculative. In other words, there must be a measurement of the amount of loss attributable to the defamatory statements.
Proving damages caused by business defamation often requires the use of expert witnesses. In many cases, experts demonstrate that the company had a long history of stable financial results right up until the time the defamatory statements were published. Then there was a significant or even precipitous drop in performance. Financial reports and projections also are used to show how the false statements brought actual economic harm to the business.
There are several different kinds of economic losses that may be demonstrated, including:
- Lost revenue — If the defamatory statements caused an immediate and significant loss in sales, this will be evident in the periodic financial reports. Lost future revenue may be shown in the company’s sales projections. While future revenue is hard to predict, sales projections may be persuasive evidence if the analyses are logical and credible.
- Lost profits — Revenue and profits are often tied together. However, not all sales generate the same profit margins. Defamatory statements might cause only a modest reduction in revenue but a large drop in net profits. Both recent profit reports and future profit analyses can be used in assessing damages.
- Lost shareholder value — Defamatory statements can affect the value of the shares. This is particularly important when the stock is publicly traded. Poor financial performance easily affects stock price in the near term. Also, defamation losses may undermine the public’s faith in maintaining or growing shareholder value, which in turn can affect current and future stock prices.
- Damage control — Companies might spend large sums of money in refuting false claims and pursuing defamation actions. Advertising, public relations firm costs, legal fees are often necessary expenses in countering business defamation. These costs may be compensable in a business defamation lawsuit.
Proving these damages can be complex, especially because valuation of a company’s worth and future prospects is subjective and may be challenged by the defendant’s own experts. An experienced business defamation attorney can analyze your situation and advise about the best approach to proving the case.
Hemmer Wessels McMurtry PLLC is a full-service business law firm serving the Fort Mitchell area of Kentucky. If your company has a business defamation issue, please contact us online or call 859-344-1188 for an initial consultation.