Posted on Friday, December 26th, 2014.
By: James T. Prusinowski, Esq.
Lauren W. Kavanagh, Esq.
Trimboli & Prusinowski, L.L.C.
Small and midsized businesses more often than not rely upon referrals for work, new clients and customers. Therefore, the reputation for the company is one of its largest assets and most coveted commodity. If a business loses its reputation due to something it has done (e.g., Arthur Anderson and Enron) it will likely struggle to regain its reputation and could go out of business. However, with the information the internet can disseminate, a company does not need to do anything wrong to have a bad reputation follow it.
Anyone today can establish a website and post information on the site. There are many websites devoted to having consumers provide reports about experiences while interacting with businesses: Yelp!, RipOffReports, ScamScam, GlassHouse, Etc. Information can be posted on to these sites for legitimate purposes; however, people can post to these services to spite a company, too. Negative postings on these sites can be devastating to a business as many of these sites are designed to have their results rise to the top of a search engine search, so when a company’s name is searched the negative post rises to the top of the first search page.
It can be extremely difficult to have these types of sites remove false negative reviews. Recently, several plaintiffs sued Yelp! under California law and the Computer Decency Act (“CDA”) alleging, among other things, that the company used negative reviews as a bargaining chip to extort businesses to pay for advertising on the site. Levitt v. Yelp!, 765 F.3d 1123, 1127-30 (9th Cir. 2014) The small businesses alleged that Yelp! advertising sales representatives told them that they would remove bad reviews if the businesses paid for the advertising. Id. Additionally, one plaintiff alleged that when it failed to renew its paid advertising with Yelp!, the company intentionally removed positive reviews for the plaintiff’s business from the site. Id. at 1128. The plaintiffs all alleged that they suffered losses as a result of these tactics by Yelp!. Id.
The Ninth Circuit dismissed plaintiffs extortion claims under California law without addressing the CDA. The court based its holding largely on the fact that none of the plaintiffs alleged that Yelp! representatives threatened economic loss or harm in exchange for payment, a critical element of extortion under both federal and California law. Id. at 1133. Additionally the court held:
Id. at 1133 (9th Cir. 2014)
The court concluded by leaving the door open a bit for plaintiffs, noting that other causes of action could be sufficiently pled in light of plaintiffs’ allegations.
Cases like Levitt v. Yelp! demonstrate how protecting a business’s online reputation that can be harmed by negative postings (and even the manipulation of both negative and positive positings) is of paramount concern for a business; however, the law in New Jersey has not developed an adequate method of assisting a company to remove false and improper information. Federal law protects the websites themselves and does not compel them to remove information, even if it is shown to be inaccurate. In some cases, the individual poster can be held responsible for the posting, but the process is difficult and often ends poorly for the business that has been defamed. An example of the ramifications of online defamation can be seen in a recent decision by the New Jersey Supreme Court involving two individuals, not a business; however, the reputational issues are the same for a company or person.
In W.J.A. v. D.A., 210 N.J. 229 (2012), the plaintiff, who was the uncle of the defendant, was accused of molesting the nephew. The nephew had initially filed a civil complaint against the uncle, which was dismissed because the statute of limitations had expired. Id. at 233. The uncle, however, filed a counterclaim of defamation, and the jury awarded him monetary damages for defamation and for frivolous litigation.
The nephew, unable to pay the judgment against him, declared bankruptcy and subsequently created a website. He began posting in his blog on the website regarding his uncle and continued to accuse him of improper activities. The nephew stated in the blog that he, “was outraged by the justice [he] believed [he] did not get through that time and was desperate for any help [he] could get from anyone,” and that, “I was molested by my [u]ncle [W.J.A.], when I was a minor many, many times” W.J.A. v. D.A., 416 N.J. Super. 380, 382, (App. Div. 2010) aff’d and remanded, 210 N.J. 229 (2012) The nephew also included his uncle’s name and address on the website. 210 N.J. at 234.
The uncle, through his attorney, asked his nephew to remove the website, which he did; however, due to the reputational damage that had been caused, the uncle pursued a second defamation claim against his nephew. Id. at 235.
Even though the uncle was not able to show he had actually suffered monetary damages, he was allowed to proceed to trial and prosecute his claim. Regarding the damages, the Court said:
The egregious facts in W.J.A. highlight another complication many victims of online defamation face in New Jersey- the single publication rule. In New Jersey, the statute of limitations for an action for libel or slander is one year after the publication of the alleged libel or slander. N.J.S.A. 2A:14-3. Under New Jersey’s single publication rule, a plaintiff can only maintain one cause of action arising from the publication of defamatory material regardless of the number of copies of the publication at issue are distributed or sold. Churchill v. State, 378 N.J. Super. 471, 478 (App. Div. 2005). Practically speaking, the single publication rule acts to prevent the constant tolling of the one-year statute of limitations for defamation claims. It can also act, however, as a double edged sword for a person or business that is unaware of false claims that may be published about them or their business on the internet.
Clearly, the potential financial and reputational harm to individuals and businesses continues to grow as the law slowly develops and adapts. If you or your business has faced any of these or other potential issues resulting from social media postings, you should contact an attorney experienced in handling these types of issues who can advise and assist you in protecting yourself or your business.