Federal Court Examines Illinois’ Savings Clause, Job-Related Per Se Defamation in Warring Yelp.com Posts

Shortly after their business relationship imploded, the parties in Levin v. Abramson, 2020 WL 249649, brought dueling defamation claims in Federal court premised on March 2017 Yelp posts by the parties.

The former client defendant (the “Client”) skewered the plaintiffs lawyer and her law firm (“Lawyer”) on Yelp.com in which he braded the Lawyer, among other things, an incompetent predator who defrauded Client.

The Lawyer responded with a post of her own the same day.  She added some factual context to Client’s screed and portrayed the reason behind Client’s vitriol as a simple billing dispute.  Lawyer also added in her retort that Client had a pattern of suing all of his lawyers.

Lawyer’s Complaint alleged claims for defamation and false light invasion of privacy.  Client counter-sued for defamation, too, and added legal malpractice and breach of fiduciary duty claims based on Lawyer’s Yelp response.

The Lawyer moved to dismiss Client’s counterclaims and both parties filed cross-motions for summary judgment.

Lawyer’s Motion to Dismiss

Rejecting the Lawyer’s argument that the Client’s defamation suit was untimely, the Court examined the interplay between Code Sections 13-201 [735 ILCS 5/13-201], the one-year statute of limitations for defamation suits and 13-207 [735 ILCS 5/13-207], the Illinois “savings” statute that permits otherwise time-barred counterclaims in certain circumstances.

The Court noted that each side’s alleged defamatory Yelp posts were published on March 22, 2017.  So the defamation one-year limitation period would normally expire March 22, 2018.  The Lawyer filed her defamation suit on March 8, 2018 – two weeks before the defamation statute lapsed while Client filed his counter-claim in January 2019 – almost 10 months after the limitations ran.

However, since the Lawyer’s defamation claim accrued before the defendant’s defamation counter-suit lapsed – March 22, 2018 – Section 13-207 preserved or “saved” the defendant’s countersuit even though it wasn’t filed until 10 months later.

The court then focused on whether the Client sufficiently alleged per se defamation against the Lawyer’s Rule 12(b)(6) attack.

Two salient stripes of per se defamation include statements (1) that impute a plaintiff’s inability to perform or want of integrity in the discharge of his duties of office or employment and (2) that prejudice a plaintiff or impute a lack of ability in his or her trade.  These particular per se claims must directly involve a plaintiff’s job performance;  generalized personal attacks on a plaintiff’s integrity and character are non-actionable.

The Court rejected Lawyer’s truth defense argument – that her Yelp retort was substantially true.  The Court found that whether, as Lawyer said in her post, that Client had in fact sued all of his other lawyers, lost his bid to reverse his credit card payment to Lawyer, and that his complaints to ARDC and CBA were rejected, were questions more appropriate for a summary judgment motion and not a dismissal motion.

Next, the Court addressed Lawyer’s argument that Client failed to properly allege in his Counterclaim what his job was and therefore couldn’t make out a claim that Lawyer’s Yelp response prejudiced Client in his work.  The Court held that when considering Client’s Counterclaim exhibits and supporting affidavit [both of which established that client owned a record label] Client plausibly pled Lawyer’s Yelp statements could prejudice him in his role as business owner.  On this point, the Court also credited Client’s argument that plaintiff’s Yelp response could cause the record company to lose current and future clients.

Cross-Motions for Summary Judgment

Both sides moved for summary judgment on plaintiff’s defamation and false light claims.  The Court considered Lawyer’s argument that Client’s Yelp post contained actionable facts as opposed to non-actionable opinions.

Black-letter defamation law cautions that opinions that do not misstate facts are not actionable. Whether a given statement consists of a factual (and therefore actionable) assertion, the court considers (1) whether the statement has a precise and readily understood meaning, (2) whether the statement is verifiable, and (3) whether the statement’s literary or social context signals it has factual content.

The Court found that Client’s Yelp review contained both opinion and factual elements.  The Client’s statements that Lawyer illegally charged Client’s credit card, exceeded a $4,000 ghost-writing budget by nearly $10,000, and that Client’s credit card sided with him in his dispute with Lawyer were all verifiable enough to be factual.  The Court also found that defendant’s branding plaintiff a “con artist” – normally non-actionable name-calling or opinion – rose to the level of actionable fact when viewed in context with other aspects of the Yelp review.

According to the Court, for the Lawyer to win summary judgment on her defamation claim, she must show that no reasonable jury fact could decide that Client’s Yelp statements were substantially true. Conversely, on the Client’s cross-motion, the Court noted that he must establish that a jury could only conclude that his Yelp review statements were substantially true for him to prevail on his cross-motion.

The Court found the record revealed genuine disputed fact questions as to (1) who severed the Lawyer-Client relationship and when, (2) whether the Lawyer agreed to cap her fees at $4,000 [which Lawyer disputed], (3) whether there was in fact a $4,000 budget for Lawyer’s ghost-writing work and (4) whether Lawyer had authority to charge Client’s credit card once the $4,000 retainer was exhausted.  These factual discrepancies led the Court to deny the warring summary judgment motions.

Afterwords:

Levin meticulously dissects the governing legal standards that control pleadings and dispositive motion practice in Federal courts.

The case also provides a trenchant analysis of Illinois per se defamation law, particularly the contours of job performance-related per se defamation, the truth defense, and the importance of the fact-versus-opinion analysis inherent in such a claim.

 

 

British Firm’s Multi-Million Dollar Trade Secrets Verdict Upheld Against Illinois Construction Equipment Juggernaut – IL Fed Court

Refusing to set aside a $73-plus million jury verdict for a small British equipment manufacturer against construction giant Caterpillar, Inc., a Federal court recently examined the contours of the Illinois trade secrets statute and the scope of damages for trade secrets violations.

The plaintiff in Miller UK, Ltd. v. Caterpillar, Inc., 2017 WL 1196963 (N.D.Ill. 2017) manufactured a coupler device that streamlined the earthmoving and excavation process.  Plaintiff’s predecessor and Caterpillar entered into a 1999 supply contract where plaintiff furnished the coupler to Caterpillar who would, in turn, sell it under its own name through a network of dealers.

The plaintiff sued when Caterpillar terminated the agreement and began marketing its own coupler – the Center-Lock – which bore an uncanny resemblance to plaintiff’s coupler design.

After a multi-week trial, the jury found for the plaintiff on its trade secrets claim and for Caterpillar’s on its defamation counterclaim for $1 million – a paltry sum dwarfed by the plaintiff’s outsized damages verdict.

The Court first assessed whether the plaintiff’s three-dimensional computerized drawings deserved trade secrets protection.

The Illinois Trade Secrets Act (ITSA), 765 ILCS 1065/1, defines a trade secret as encompassing information, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers that (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.

Misappropriation means “disclosure” or “use” of a trade secret by someone who lacks express or implied consent to do so and where he/she knows or should know that knowledge of the trade secret was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.  Intentional conduct, howver, isn’t required: misappropriation can result from a defendant’s negligent or unintentional conduct.

Recoverable trade secret damages include actual loss caused by the misappropriation and unjust enrichment enjoyed by the misappropriator.  Where willful and malicious conduct is shown, the plaintiff can also recover punitive damages.  765 ILCS 1065/4.

In agreeing that the plaintiff’s coupler drawings were trade secrets, the Court noted plaintiff’s expansive use of confidentiality agreements when they furnished the drawings to Caterpillar and credited plaintiff’s trial testimony that the parties’ expectation was for the drawings to be kept secret.

The Court also upheld its trial rulings excluding certain evidence offered by Caterpillar.  One item of evidence rejected by the court as hearsay was a slide presentation prepared by Caterpillar to show how its coupler differed from plaintiff’s and didn’t utilize plaintiff’s confidential data.

Hearsay prevents a litigant from using out-of-court statements to prove the truth of the matter asserted.  An exception to the hearsay rule applies where an out-of-court statement (1) is consistent with a declarant’s trial testimony, (2) the party offering the statement did so to rebut an express or implied charge of recent fabrication or improper motive against the declarant, (3) the statement was made before the declarant had a motive for fabrication, and (4) the declarant testifies at trial and is subject to cross-examination.

Since the slide show was made as a direct response to plaintiff’s claim that Caterpillar used plaintiff’s confidential information, the statement (the slide show) was made after Caterpillar had a motive to fabricate the slide show.

The Court then affirmed the jury’s $1M verdict on Caterpillar’s defamation counter-claim based on plaintiff’s falsely implying that Caterpillar’s coupler failed standard safety tests in written and video submissions sent to Caterpillar’s equipment dealers.  The plaintiff’s letter and enclosed DVD showed a Caterpillar coupler bucket breaking apart and decapitating a life-size dummy. (Ouch!)  The obvious implication being that Caterpillar’s coupler is unsafe.

The Court agreed with the jury that the plaintiff’s conduct was actionable as per se defamation.  A quintessential defamation per se action is one alleging a plaintiff’s lack of ability or integrity in one’s business.  With per se defamation, damages are presumed – meaning, the plaintiff doesn’t have to prove mathematical (actual) monetary loss.

Instead, all that’s required is the damages assessed “not be considered substantial.”  Looking to an earlier case where the court awarded $1M for defamatory statements in tobacco litigation, the Court found that the jury’s verdict against the plaintiff coupler maker here was proper.

Afterwords:

The wide use of confidentiality agreements and evidence of oral pledges of secrecy can serve as sufficient evidence of an item’s confidential nature for purposes of trade secrets liability.  Trade secrets damages can include actual profits lost by a plaintiff, the amount the defendant (the party misappropriating the trade secrets) was unjustly enriched through the use of plaintiff’s trade secrets and, in some egregious cases, punitive damages.

The case also shows that a jury has wide latitude to fashion general damage awards in per se defamation suits.  This is especially so in cases involving deep-pocketed defendants.

 

‘Substantial Truth’ Defeats Wisconsin Plaintiff’s Tortious Interference Suit – 7th Circuit

In Wesbrook v. Ulrich 2016 WL 6123534, the Seventh Circuit examined the reach of the truth defense to a tortious interference with contract action stemming from a bitter dispute between a prominent Wisconsin medical clinic and one of its high-level employees.

The plaintiff sued a former co-worker and ex-supervisor for tortious interference with contract claiming the two worked in concert to engineer the plaintiff’s firing from the clinic.  The plaintiff claimed the defendants repeatedly made critical statements about him to third parties that resulted in his being ostracized by clinic staff and ultimately let go.  The District Court granted summary judgment for the clinic and the plaintiff appealed.

Held: Affirmed.

Reasons:

To prove tortious interference with contract in Wisconsin, the plaintiff must show (1) a valid contract or a prospective contractual relationship with a third party, (2) defendant’s interference with that relationship, (3) interference by the defendant that was intentional, (4) a causal connection between the interference and damages, and (5) the defendant wasn’t justified or privileged to interfere.

To sue a co-worker for tortious interference, the plaintiff must show (1) that the employer did not benefit from the co-worker’s/defendant’s statement, and (2) the co-worker’s act was independently tortious (i.e., fraudulent or defamatory).

Whether conduct or a statement is privileged is a fact-driven question that looks at the nature, type and duration of the conduct and whether the conduct was fair under the circumstances.  But where the challenged statement is true, it is privileged as a matter of law.  There can be no cause of action aimed at a true statement; even one motivated by ill will toward a plaintiff.

The same holds for “substantially true” statements.  Even where a statement isn’t 100% accurate, so long as it’s true in most of its particulars, it’s still privileged and will defeat a tortious interference claim.  Tort law does not demand “artificial precision” in common use of language.

Here, the defendants’ challenged statements concerning plaintiff were substantially true.  Defendants’ verbal and written assertions that plaintiff had an autocratic management style, threatened his subordinates, and that several employees had lodged complaints against him were true enough to defeat plaintiff’s claims.  While there were arguably some factual specifics that were either embellished or omitted from the statements, the Court viewed their substance as sufficiently accurate to negate plaintiff’s tortious interference suit.

The Seventh Circuit also based its decision granting summary judgment for the defendants on policy grounds.  It reasoned that if a plaintiff could sue a co-worker every time he believed that co-worker instigated or contributed to the firing decision, it would swallow up the general rule that at-will employees cannot sue for breach of contract where they are fired without warning or cause.

Afterwords:

1/ An interesting case in that it examines the tortious interference tort in the factually anomalous setting of an at-will employee suing his co-workers instead of his employer after a discharge;

2/ The key holding from the case is that truth is a defense not only to defamation but also to tortious interference with contract under Wisconsin law;

3/ A statement’s truth is construed flexibly: it doesn’t have to be completely accurate.  Even if there are exaggerated aspects of a statement, so long as the statement meets the substantially true test, the speaker will be privileged to tortiously interfere.