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What Is Business Disparagement and How Is It Dealt With in Texas?

Derogatory statements published online, in the media, communicated personally that adversely affect a company’s sales, business, or credit can be remedied in Texas with a cause of action known as business disparagement. While the tort is similar to defamation in many ways, the two are distinct and exist for different purposes. Defamation protects reputation while business disparagement safeguards economic interests.

Words unjustifiably casting doubt on the quality of a business’s goods or services, or its trustworthiness—such as by falsely alleging it is dishonest, unethical, or incompetent, or that a product causes harm when it does not—can give rise to a valid claim for business disparagement if it results in some actual economic loss.

The Elements of Business Disparagement in Texas

To prove a cause of action for business disparagement in Texas, the plaintiff must be able to show each of the following elements:

  1. The defendant published disparaging words about the plaintiff’s economic interests;
  2. The disparaging words were false;
  3. The defendant published the words with malice; and
  4. The publication caused special damages.

It is often added that a defendant must have published the words “without privilege,” but that has not actually been ruled in Texas to be part of a plaintiff’s burden of proof. To have a “privilege” means the speaker is given some sort of immunity from suit—such as with the judicial proceedings privilege that protects parties from liability for damaging statements made in the course of a lawsuit—but that is almost always an affirmative defense the responding party has a burden to establish itself.

To “publish” a statement simply means to communicate—either written or verbally—to someone other than the plaintiff who is capable of understanding its meaning. Often that is a statement made to the public at large (such as by a book, article, or on social media) but it can also be a statement made in private to some key third person.

Words can be explicitly disparaging to a business’s economic interests or do the same by implication. Statements are considered in their whole context and can create a substantially false impression by omitting key information or juxtaposing facts in a misleading way. There are all kinds of ways in which disparagement may occur to a business’s economic interests, such as castigating its character or that of its employees, casting doubt on the company’s financial status, or anything else that causes real harm.

To publish a disparagement with “malice” in Texas means to do it either: (i) knowing the statement is false, (ii) with reckless disregard as to whether the statement is true, (ii) with ill will towards the plaintiff, or (iv) with intent to interfere in the plaintiff’s economic interests. Acting with reckless disregard further is construed to mean making a statement that turns out to be false when having serious doubts as to its truth or accuracy.   

The term “special damages” means tangible harm that has actually occurred – e.g., the loss of specific sales or a higher interest rate charged on credit that can be tied back to be a result of the disparagement.

The types of remedies available for a valid business disparagement claim include monetary recovery for a loss of sales, loss of credit, or even a business being entirely destroyed. The expenses of mitigation—such as taking steps to counteract online disparagement—are also recoverable. It is a tort cause of action so attorney’s fees will ordinarily not be recoverable and it is near impossible to get an injunction since that could constitute a constitutionally-impermissible prior restraint of speech. The good news is that exemplary damages may be available if there was specific intent to cause the business harm.

Related Causes of Action for a Business

The most directly related cause of action is of course defamation, which can be available if there was a false statement of fact which causes harm in the form of impaired reputation or mental anguish without actual pecuniary loss. The owner of a business is the proper plaintiff for a defamation claim, and that can be either an individual, company, or partnership. Defamation is not limited to just private persons.

Oher business torts will often be available whenever there is a claim for business disparagement. The most common ones include tortious interference (with existing contract or prospective economic relations), slander of title, violations of the Deceptive Trade Practices Act, or even a claim for common law unfair competition if it is another in the same industry engaging in the disparaging conduct.

Any type of business disparagement or defamation claim that involves the communication of statements to or association between a defendant and third parties can be sure to result in a motion under the Texas Citizens Participation Act (TCPA)—also commonly known as an “anti-SLAPP” motion—seeking to dismiss the claims for impeding constitutional rights. The TCPA is very broad in Texas, complicated, and sometimes abusively used because it can allow the defendant to recover attorney’s fees and costs. It is important then to have an experienced business litigation attorney involved to review, advise you about, and avoid the traps for this type of claim.

Contact a Texas Litigation Attorney for Your Business Disparagement Claim

If derogatory statements about your business have caused you unwarranted harm in Texas, then you may have the right to seek damages in a lawsuit. Wright Commercial Litigation is a boutique firm based in McKinney that helps businesses in Collin County, Dallas County, and far beyond in Texas recover from all kinds of losses. Contact the firm today to schedule an initial consultation on your business litigation matter.