Current Article Analysis

Defenses to Negligence Claims

Once the elements of negligence are met, the analysis then shifts to potential defenses available to the tortfeasor. The two primary defenses to claims of negligence are comparative negligence and assumption of the risk .

Comparative Negligence

In cases where the injured party’s conduct has played a factor in the harm suffered, the Restatements allow the tortfeasor to assert the defense of comparative negligence. This defense requires a jury to allocate the proportion of negligence committed by each party in terms of percentage (refer to Table 9.3 ). Ultimately, successfully asserting comparative negligence reduces (but does not eliminate) the final award to the plaintiff.

TABLE 9.3Comparative Negligence Formula

Suppose Abel is injured by Baker’s conduct and suffers damages totaling $100,000. A jury finds that Baker was 80 percent responsible for the injury but that Abel also contributed to his own injury and was 20 percent responsible for the harm. How much does Abel ultimately recover?

Legal Speak >))

Punitive Damages

Monetary damages, generally a multiple of the actual damages, that are awarded partly to punish the tortfeasor and partly to deter others from acting in a similar manner.

Note that comparative negligence is a cousin to the common law doctrine of contributory negligence, whereby even 1 percent of negligence on the part of the plaintiff is a complete bar to any plaintiff recovery. The overwhelming majority of states do not follow this standard because of its harshness on the injured party. Four states—Alabama, Maryland, North Carolina, and Virginia—along with the District of Columbia continue to recognize the contributory negligence defense. Indiana follows the contributory negligence rule in medical malpractice cases only.

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Assumption of the Risk

When the injured party knows that a substantial and apparent risk is associated with certain conduct and the party goes ahead with the dangerous activity anyway, the Restatements allow the tortfeasor to assert the defense of assumption of the risk so long as

1. the injured party/plaintiff knows or should know (by virtue of the circumstances, warning signs, etc.) that a risk of harm is inherent in the activity and

2. the injured party/plaintiff voluntarily participates in the activity.

Certain activities are considered to be “inherently dangerous” (such as bungee jumping or parachuting), and companies that are providers of these activities may have limited protection from liability if they act reasonably in minimizing the dangers and make full disclosures of the risks to participants.

In Case 9.5 , a state appellate court considers the assumption-of-the-risk defense in the context of leisure sports.

CASE 9.5 Zeidman v. Fisher, 980 A.2d 637 (Pa. Super. Ct. 2009)

FACT SUMMARY Zeidman and Fisher were participants in a golf foursome at a charity tournament. On one hole where the view of the fairway was partially blocked, the foursome became concerned that they might inadvertently hit any players hidden by the blind spots on the fairway ahead of them. The group agreed that Zeidman would take a golf cart and ride ahead to see whether the course was clear for the group to hit. Zeidman made his observation and returned to his foursome in the cart. Because he intended on returning to his foursome to report that the group ahead was out of harm’s way and because he never signaled to his group that it was safe to hit, Zeidman never entertained the possibility that one of his group would hit a shot. Before Zeidman returned, Fisher, becoming impatient, hit his shot while Zeidman was driving his cart back to the foursome. Fisher’s shot was errant, and the ball struck Zeidman in the face, causing serious and permanent injuries. The trial court dismissed Zeidman’s negligence lawsuit against Fisher on summary judgment, ruling that Zeidman had assumed the risk of participating in the golf match and this assumption of risk barred any recovery. Zeidman appealed.

SYNOPSIS OF DECISION AND OPINION The Pennsylvania Superior Court reversed the trial court’s decision and ruled in favor of Zeidman. The court reasoned that the assumption-of-the-risk doctrine requires that the evidence show that the injured party

1. fully understood the specific risk,

2. voluntarily chose to encounter it, and

3. manifested a willingness to accept the known risk.

In this case, an objectively reasonable person may have assumed that no risk existed because Zeidman’s agreed-upon task was to check whether the fairway was clear and then report to his own foursome if it was safe to hit. Because he had not yet completed this task, Zeidman did not manifest a willingness to accept a known risk.

WORDS OF THE COURT: Assumption-of-the-Risk Doctrine “In the circumstances of the present case, it is obvious that Zeidman, on returning from his forward observer mission, did not consciously assume the risk of friendly fire when, to the contrary, he had every right to anticipate none of his playing partners would attempt a tee shot until his return to the tee box. To grant summary judgment on the basis of assumption of the risk it must first be concluded, as a matter of law, that the party consciously appreciated the risk that attended a certain endeavor. . . . Accordingly, whether Zeidman is able to convince a jury that his version of events is true remains to be seen, he, in any event is entitled to his day in court.”

Case Questions

1. If Zeidman had signaled to his partners that all was clear from the fairway and was then hit while returning in the cart, would Fisher be entitled to a summary judgment based on assumption of the risk?

2. What duty did Fisher owe Zeidman in the first place? Was it a special-relationship duty?

3. Focus on Critical Thinking: What other leisure sports or activities might be covered under the assumption-of-the-risk doctrine? Is it good public policy to shield negligent parties with the doctrine?

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CONCEPT SUMMARY Negligence Analysis

· Duty: Did the tortfeasor owe a duty to the injured party?

· Breach: Did the tortfeasor breach the reasonably prudent person standard?

· Causation: Except for the tortfeasor’s breach of duty, would the plaintiff have suffered the injury?

· Proximate (legal) cause: Was the breach the closest in proximity? Were there any superseding causes? Was the harm foreseeable?

· Damages: Did the injury to person or property result in losses?

· Defenses: Did the injured party contribute to the injury (comparative negligence)? Did the injured party know of the risk but go ahead anyway (assumption of the risk)?

INTENTIONAL BUSINESS-RELATED TORTS

LO 9-4

Apply the elements and defenses of the torts of defamation, trade libel, and product disparagement and discuss the applicability of each in the business environment.

While the law provides relief for injured parties in a variety of circumstances, there are some intentional torts that are more important to business owners and managers because they have the potential to impact business relationships and operations.

Defamation

The law recognizes an individual’s or a company’s reputation as a valuable asset by imposing liability on any party that makes false and defamatory statements affecting another party’s reputation. In this context, the term party means an individual, business, or product. Just as in all civil lawsuits, the untrue statements must have caused the victim to suffer damages. Generally, we think of written defamation as libel and oral (spoken) defamation as slander . In order to recover for a defamation action, the plaintiff must prove four elements:

· Defamatory statement: A false statement concerning a party’s reputation or honesty or a statement that subjects a party to hate, contempt, or ridicule. In order to qualify as defamatory, the statement must have a tendency to harm the reputation of the plaintiff. 4 Because many statements can be interpreted in more than one way, the law provides that the statement is defamatory so long as a defamatory interpretation is an objectively reasonable one and the plaintiff shows that at least one of the recipients did in fact make that interpretation. Note that the statement must be false, not merely unkind. Moreover, if a statement was pure opinion, that statement is not defamatory. That is, a defamatory statement is one that must be provable as false.

· Dissemination to a third party: In the Restatements, this requirement is referred to as publication, but in this context it does not literally require the statement to be published. Rather, this element requires that the statement must somehow reach the ears or eyes of someone other than the tortfeasor and the victim. For example, suppose a manager telephones one of his employees and says, “You are the one who stole $100 in petty cash, so you’re fired.” Even if the accusatory statement is false, the manager has not defamed the employee based on that action alone. No third party heard the statement, and, thus, the dissemination element is missing.

· Specificity: The statement must be about a particular party, business, or product. Thus, any general statement about a profession as a whole cannot constitute defamation, but a false statement about a specific company can be the basis of a reputation claim.

· Damages: In a business context, the aggrieved party must be able to prove that they suffered some pecuniary harm. Examples of damages in a defamation suit include situations in which the victim has lost a valuable client due to the tortfeasor’s defamatory comment or the victim is unable to secure employment because of a tortfeasor’s defamatory comment during a reference check.

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Legal Speak >))

Pecuniary Harm

Lost revenue or profits, both actual and potential.

Legal Speak >))

Malice

The intent, without justification or excuse, to commit a wrongful act or inflict harm.

Public Figure Standard

If the victim is a public figure, such as a candidate for political office or a celebrity, the defamation must have been committed with malice or reckless disregard for the truth. This “public figure” rule is based on the U.S. Supreme Court’s landmark ruling in New York Times v. Sullivan. 5 The case involved a public official, the police commissioner of New York City, who sued The New York Times for defamation based on allegations printed in the newspaper that accused him of complicity in criminal activity. In announcing the public figure standard, the Court ruled that, in order for a public figure to prevail in a defamation case, the plaintiff must provide evidence that the defamer either had “actual knowledge” that the statement was false or made the defamatory statement with a “reckless disregard for the truth.”

In Case 9.1 , a federal court of appeals considers whether a professional football coach is a public figure in a defamation context.

CASE 9.1 Turner v. Wells, 879 F.3d 1254 (11th Cir. 2018)

FACT SUMMARY The National Football League hired the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP and one of its partners, Theodore Wells (collectively Wells), to investigate allegations of bullying within the Miami Dolphins organization. The investigation centered on the bullying of a football player, Jonathan Martin, who abruptly left the Dolphins team midway through the 2013 season. At the time, Martin was an offensive lineman in his second year with the Dolphins. After leaving a Dolphins facility on October 28, 2013, Martin checked himself into a hospital for psychological treatment. Later, Martin explained that he left the team because of persistent taunting from other Dolphins players.

After several months of investigation, Wells published a 144-page report (the Report) that concluded that bullying by other Dolphins players contributed to Martin’s decision to leave the team. The Report also included several references to their offensive line coach, James Turner (Turner), and opined that Turner’s unprofessional conduct played a role in Martin’s struggles. The Report noted that Dolphins coaches and players created a culture that enabled the bullying by discouraging players from snitching on other players, known in the organization as “the Judas Code.” It concluded that the treatment of Martin and others in the Miami Dolphins organization at times was “offensive and unacceptable in any environment.”

After receiving the Report in February 2014, the Dolphins fired Turner, who in turn filed a defamation lawsuit against Wells and his law firm. The trial court found in favor of Wells because

1. the Report consisted of opinions and therefore was not actionable in a defamation suit and

2. Turner was a public figure and failed to adequately plead actual malice in his complaint. Turner appealed.

SYNOPSIS OF DECISION AND OPINION The U.S. Court of Appeals for the eleventh Circuit affirmed the decision of the trial court in favor of Wells. The court held

3. the Report was a product of a careful balance in the investigation and that the statements were opinion-based and could not be categorized as false or misleading and

4. Turner was a public figure and therefore had an even higher hurdle to clear, malice, but that there was no evidence of malice during the investigation or upon publication of the subsequent report.

WORDS OF THE COURT: Fact Versus Opinion “Notably too, the Report included several cautionary statements that inform a reasonable reader that the conclusions contained therein are opinions. For example, the Report stated several times that it sets forth the Defendants’ opinions, based on a lengthy investigation: ‘[t]he opinions set forth in the findings and conclusions below and elsewhere in this Report are our own’; ‘[i]n our opinion, the factual record supports the following findings’ . . . Further, it is well settled in Florida that commentary or opinion based on accurate facts set forth in an article ‘are not the stuff of libel.’ That is precisely the case here.”

WORDS OF THE COURT: Public Figure “‘[S]ports figures are generally considered public figures because of their position as athletes or coaches.’ . . . Here, Coach Turner chose to put himself in the public arena. As the Report noted, Turner was the focus of the 2012 season of Hard Knocks, an HBO television program that ‘showcase[ed] Turner’s coaching style and featur[ed] interviews and footage of him on the field and in the locker room.’ During his coaching career, Turner was the subject of several articles discussing his career and coaching philosophy. Turner was a prominent person on the closely followed Dolphins professional sports team. . . . [Turner] has failed to provide any evidence of malice in this case.”

Case Questions

1. Why is it important that the court concluded that the Report was largely the opinions of Wells and his colleagues?

2. Why is malice an important factor in analyzing this case?

3. Focus on Critical Thinking: Why is there a special standard for public figures? Is that good public policy or does it prevent public figures from pursuing legitimate claims?

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Defenses to Defamation

The second phase of a defamation analysis is an inquiry into whether the defendant may avail themself of a statutory or judicially recognized defense.

Truth

Truth is an absolute defense to a charge of defamation. If the statement made is truthful, no defamation has occurred. To assert truth as a defense, the defendant must prove that the statement was either literally true or substantially true.

Privilege Defenses

If the injured party meets all of the requirements of a defamation claim, the defendant may still avoid liability if the defamatory statement falls into the category of privileged statements. Privilege is a defense that recognizes either a legal or public policy-based immunity from a defamation claim. It is divided into two subcategories: absolute privilege , whereby the defendant need not offer any further evidence to assert the defense, and qualified privilege , whereby the defendant must offer evidence of good faith and be absent of malice to be shielded from liability.

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Absolute Privilege

Courts generally recognize three types of absolute privilege:

· Government officials: The framers of the Constitution recognized the need for free debate among members of Congress and gave immunity in the Constitution via the Speech and Debate Clause, which shields members of Congress from liability for any statement made during a congressional debate, hearing, and so on, while in office. The U.S. Supreme Court later extended that protection to all federal officials. 6

· Judicial officers/proceedings: All states now recognize some protection of participants of a judicial proceeding for statements made during the proceeding. This includes judges, lawyers, and, in some cases, witnesses.

· State legislators: Similar immunity has been extended by the states to protect state legislators for statements made in the course of carrying out their duties.

Qualified Privilege

Courts also recognize certain qualified privileges that are grounded in public policy:

Some states provide statutory or common law immunity from defamation claims for employers providing references for ex-employees, so long as the information is factual.

Flying Colours Ltd/Getty Images

· Media: Employees of media organizations (e.g., television, radio, periodicals) are afforded a qualified protection from defamation liability. So long as the media have acted in good faith, absent of malice, and without a reckless disregard for the truth, the media are protected from liability through privilege as a defense for unintentional mistakes of fact in their reporting.

· Fair report privilege: If one relies on an official public document or a statement made by a public official and cites the document or public statement when making an allegedly defamatory statement, no cause of action for defamation occurs unless the speaker knows the statement is false.

· Employers: An increasing number of states have extended some liability protection for employers who are providing a reference for an ex-employee. In most cases, employers do not have liability if the employee’s defamation claim is connected to a reference check. However, an employer may lose this privilege if it provides false information or acted with malice.

In Case 9.2 , a state appellate court considers an employer reference privilege as a defense to defamation.

CASE 9.2 Nelson v. Tradewind Aviation, 111 A.3d 887 (Conn. App. Ct. 2015)

FACT SUMMARY Tradewind Aviation (TA) employed Nelson as a pilot for a small commercial airline that primarily flew from New York and New Jersey to Martha’s Vineyard and Nantucket. Over the course of the summer of 2007, Nelson copiloted 137 flights without incident or complaint from passengers. Nelson was never removed from flying status for a performance-based reason or disciplinary reason. Although some senior pilots did complain about Nelson, he was never given a written warning, disciplined, or suspended. As the summer ended, TA announced that some pilots would be laid off due to a decrease in demand during the off-season. Nelson committed to working during the first part of the off-season; however, TA informed Nelson it would be unable to continue his employment. TA’s human resources office completed necessary paperwork indicating that Nelson was laid off due to “lack of work.”

In December 2007, Nelson was offered a job by Republic Airways (Republic). As part of his initial interview, Nelson signed authorizations that gave TA permission to verify his employment with TA and to release all of his employment records to Republic. This authorization also required TA to send copies of these records to Nelson so that he had an opportunity to submit written comments to correct any inaccuracies. TA completed the reference forms and indicated that

1. Nelson had been involuntarily terminated from TA and

2. Nelson had been involuntarily removed from flying status based on poor performance.

Responding to Republic’s request for more details, TA faxed Republic a letter stating that Nelson was terminated “after he failed to perform to company standards. Prior to that date, he was given several opportunities to discuss the need for improvement as well as additional training to help him perform at the levels we needed.” TA never sent the records or letter to Nelson. Republic subsequently revoked its job offer. Nelson sued TA for, among other claims, defamation. The jury awarded the plaintiff a total of $307,332.94 in damages. TA appealed, asserting the employer reference privilege.

SYNOPSIS OF DECISION AND OPINION The court affirmed the jury’s verdict in favor of Nelson. The court reasoned that it was well settled that defamation is actionable if it charges improper conduct or lack of skill or integrity in one’s profession or business and is of such a nature that it is calculated to cause injury to one in his profession or business. The court rejected TA’s argument that Nelson had not proven that TA’s statements rose to the level of being malicious. The court held that a qualified privilege in a defamation case may be defeated if it can be established that the holder of the privilege acted with malice in publishing the defamatory material. Based on the facts in this case, the jury’s conclusion that the statements were made with malice was reasonable.

WORDS OF THE COURT: Improper Motive “A review of the evidence reveals that the jury reasonably could have concluded that the defendant’s defamatory statements were made with knowledge that they were false and with an improper motive. The jury reasonably could have found that [Nelson] was laid off due to lack of work, that [TA supervisors] never removed the plaintiff from a flight for performance or professional competency reasons, that [Nelson] was never offered or sent for any additional training. . . . Additionally, the jury reasonably could have found that the statements were made with an improper motive in light of the timing and manner in which the statements were made.”

Case Questions

1. What statements by TA, specifically, do you consider to be malicious? Why?

2. How could TA’s management have prevented the defamation from occurring?

3. Focus on Critical Thinking: What is the public policy behind the employer reference privilege? Is it fair to the employee who may have a different perspective on the circumstances of their termination? Have you ever heard an employer defaming an ex-employee?

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Trade Libel and Product Disparagement Laws

In cases where a competitor has made a false statement that disparages a competing product, an injured party may sue for trade libel . This tort requires that the statement

1. be a clear and specific reference to the disparaged party or product (e.g., using the actual brand name of the product),

2. be made with either knowledge that the statement is false or reckless disregard for the truth, and

3. be communicated to a third party (similar to defamation).

Some states have passed product disparagement statutes intended to protect the interest of a state’s major industries, such as agriculture, dairy, or beef. 7 In perhaps the most famous product disparagement case, the Texas Cattle Ranchers Association sued Oprah Winfrey under a Texas law allowing recovery for any rancher who suffers damages as a result of false disparagement. On her television show, Winfrey agreed with statements made by one of her guests that alleged certain U.S. market hamburger meat could cause mad cow disease, which is fatal to humans. At the end of the segment, Winfrey took the position that she would cease eating any hamburgers. The ranchers showed evidence that beef sales dropped precipitously immediately after the broadcast and alleged that Winfrey’s statements were false and caused the ranchers lost revenue. The jury rejected the cattle ranchers’ claim as too broad and without sufficient evidence that the remarks alone were the cause of the losses. 8

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Fraudulent Misrepresentation

Recall the discussion of misrepresentation and fraudulent misrepresentation in Chapter 7 , “Contract Enforceability and Performance.” It is important to note that there are some important overlapping legal principles of tort and contract law. For example, in some cases contract law allows a contract to be canceled if one party has made false representations concerning a material fact. This means that the misrepresented fact must involve an important aspect of the basis of the contract, such as a change in the value of the contract or an increase in one party’s risk. Fraudulent misrepresentation (sometimes referred to simply as fraud) is also recognized as a tort in cases where the law provides a remedy to recover damages when the innocent party suffers a pecuniary loss as a result of the false representation. In cases of fraudulent misrepresentation, the law allows the innocent party to recover if

1. the misrepresentation was a material fact known to be false by the tortfeasor (or was a reckless disregard for the truth);

2. the tortfeasor intended to persuade the innocent party to rely on the statement, and the innocent party did, in fact, rely on it; and

3. damages were suffered by the innocent party.

For example, Buyer asks Seller whether Seller’s property is properly zoned for a manufacturing facility. In an effort to induce Buyer to purchase the property, Seller misrepresents that the property is zoned for manufacturing. Buyer then enters into a purchase agreement for the property with a 10 percent down payment, balance due in 30 days. Buyer then proceeds to spend money by hiring an architect to visit the site and draw plans for the new facility. The day after the agreement is signed, Seller applies to the zoning board for a change in zoning, hoping that it will be changed before Buyer completes the agreement by paying the balance owed. The zoning board does not change the status. In a case against Seller for fraud, Buyer would be entitled to cancel the contract and recover any losses in tort suffered as a result of Seller’s fraudulent misrepresentation (such as the money spent on hiring the architect).

KEY POINT

Fraudulent misrepresentation (in both contracts and torts) must center on a material fact; that is, a fact that is significant or would impact the parties’ rights or obligations in a transaction as opposed to a minor and inconsequential detail.

LO 9-5

Identify the differences in terms of liability for traditional print defamation and defamation in cyberspace.

Legal Implications in Cyberspace

Protections for Online Content Providers

Along with holding the actual tortfeasor liable in a defamation case, the law imposes certain liability upon the publisher of libelous statements as well. However, the law does not impose liability on the distributor of the publication (such as a bookstore or newsstand). For example, suppose a famous movie star is the subject of a gossip feature in a hypothetical tabloid called the American Tattler. The feature implies that the movie star was seen at a local restaurant and was so intoxicated that she could not control her conduct. In a lawsuit for defamation, the movie star proves that the story was false and that it led to her being fired by her movie studio. In terms of liability, both the author of the defamatory feature and the publication (American Tattler) may be liable for damages.

However, the rules pertaining to publishers of online content in cyberspace are different. In our movie-star example, suppose that instead of the American Tattler publishing the defamatory feature, a gossip columnist hired by America Online (AOL) wrote the article for an AOL entertainment news board. There would be no doubt of the liability of the author, but would AOL be liable as the “publisher”?

As Internet accessibility increases rapidly, courts have struggled with this question. In the 1991 case Cubby Inc. v. CompuServe, Inc., 9 the plaintiffs filed a defamation action against CompuServe as a “publisher” of defamatory materials contained in an online publication called Rumorville, USA. Rumorville was composed, written, and edited by a third party who was not employed by CompuServe. The federal trial court in the southern district of New York held that CompuServe was not a publisher in the context of defamation law but rather was more akin to a bookstore, and thus, Internet service providers (ISPs) such as CompuServe were to be treated as “distributors.” Consequently, CompuServe was not subject to liability for any defamatory statements so long as it did not “edit, review or reformulate” the publication.

However, not all courts have taken that view. A few years later, as the number of ISPs grew, a New York state trial court issued a very different ruling. In Stratton Oakmont v. Prodigy Services Company, decided in 1995, 10 the court ruled that an ISP could be held liable as a publisher of defamatory material. The case involved a Prodigy-maintained electronic bulletin board, available to its subscribers, called “Money Talk.” Although Prodigy did not formally edit the postings, it had a policy that reserved the right to eliminate postings if they were objectionable. The plaintiff filed suit against Prodigy as a publisher of material that was allegedly libelous. In stark contrast to the Cubby court, a state trial court in New York ruled that Prodigy was a publisher in the context of a defamation claim and, therefore, could be liable for damages resulting from defamatory comments in its electronic bulletin board. The court held that Prodigy’s “conscious effort to maintain editorial control” over the content was sufficient to qualify it as a publisher as that term is understood in defamation law.

In an apparent effort to address the pleas of ISPs for a uniform standard, Congress enacted the Communications Decency Act (CDA) of 1996 . 11 This law extended immunity to the ISPs by protecting them from any defamation liability as a “publisher or speaker of any information provided by another information content provider.” In effect, Congress made the policy choice that ISPs were to be treated as newsstand-like distributors.

One of the first cases to interpret this law was Blumenthal v. Drudge and America Online, Inc. 12 Although the case was decided by a trial court, the reasoning is often cited by appellate courts when applying the ISP safe harbor. The case involved a defamation lawsuit filed by a high-profile White House adviser (Blumenthal) against a controversial political journalist (Drudge) and America Online (AOL) because of spousal abuse and cover-up allegations in a column written by Drudge. The column was posted on an AOL news board as part of an agreement between Drudge and America Online. After Drudge posted a retraction and acknowledged that the allegations were false, Blumenthal sued Drudge and AOL for defamation. The trial court dismissed the case against AOL, citing the Communications Decency Act’s safe-harbor provisions for ISPs. The court noted that even if AOL could conceivably be categorized as a publisher of defamatory material under previous cases, Congress specifically exempted ISPs such as AOL from civil suits for defamation.

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Legal Speak >))

Treble Damages

Treble damages are a remedy in fraud cases whereby the victim of fraud can collect triple the amount of actual damages.

Every state has enacted a consumer fraud protection act. These acts severely punish those who commit fraud and, in many instances, allow victims of fraud to sue and collect treble damages.

Courts will also allow recovery for misrepresentations that are not intentional but are negligent misrepresentations. In most cases, the parties have to have some type of business relationship for the innocent party to recover. Any statement made by a party that turns out to be inaccurate may still allow the innocent party to recover if the tortfeasor’s statement was negligent. In the Buyer–Seller case discussed earlier, suppose that Seller had no actual knowledge of the zoning status for the property but made a statement that it was zoned for manufacturing. Buyer would still be able to recover despite the fact that Seller did not know that the statement was false. Seller is still liable because they were negligent in their duty to know such an important fact (negligence is discussed in detail later in this chapter).

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False Imprisonment

The tort of false imprisonment is defined by the Restatements as the “intentional infliction of a confinement upon another party.” In the business context, a merchant most commonly encounters these circumstances in cases of suspected retail theft. While the merchant has the right to briefly detain a suspected shoplifter, she must be cautious about giving rise to a false-imprisonment claim when detaining an individual or attempting to recover the merchandise. The Restatements provide for a merchant’s privilege 13 to shield a merchant from liability for temporarily detaining a party who is reasonably suspected of stealing merchandise. This privilege, however, is very narrow. In order to gain protection under the privilege, the merchant must follow certain guidelines:

· Limited detention: The privilege applies only for a short period of time under the circumstances. Some courts have limited this time period to as few as 15 minutes. However, most courts follow a case-by-case analysis with the general framework that the detention may last the time duration necessary to confront the accused party, recover any goods stolen, and wait for the authorities to arrive (if necessary).

· Limited to premises: Generally, the privilege applies only if the suspected party is confronted on the merchant’s premises or an immediately adjacent area (such as a parking lot).

· Seizure of property: The merchant or merchant’s agent may seize alleged stolen property in plain view but may not search the accused shoplifter.

· Coercion: The merchant or merchant’s agent (such as a store security guard) may not attempt to coerce payment, purport to officially arrest the detained party, or attempt to obtain a confession.

Privacy Torts

The right to privacy is protected by tort law, that is, through private lawsuits for money damages for invasions of privacy. Although the specifics of tort law vary from state to state, broadly speaking there are several  invasion of privacy torts including  public disclosure of private facts, misappropriation, and false light.

Public Disclosure of Private Facts

This tort occurs when a person or business firm discloses without authorization the details of another person’s private life that are not generally known to the public. To establish legal liability for this tort, however, the disclosure of such private facts must be “highly offensive to a reasonable person” and “not of legitimate concern to the public.” 14

Misappropriation

This tort occurs when a person or business firm uses another person’s “name or likeness” for commercial purposes without the other person’s permission. The term likeness here includes the use of another person’s image, voice, or other personal characteristic. By way of example, if a company hires an actor to impersonate an NFL player for a TV ad without the athlete’s permission, they may have a legal cause of action against the company for the commercial misappropriation of their image without authorization. 15

False Light

Another privacy tort, called false light, occurs when someone publishes information about a person or business firm that is either misleading or somehow distorts the truth. The false light must be highly offensive to the average person and must have been published with the knowledge of, or in reckless disregard of, whether the information was false or would place the person in a false light. 16

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Take, for example, a newspaper article about the issue of child molestation in certain churches. If the editor includes a photograph of an innocent priest who has not been accused of or otherwise associated with child molestation, the newspaper could be liable for false light, since the inclusion of the photograph implies that the priest is involved in child molestation.

False light should not be confused with defamation. Defamation laws are designed to protect the victim’s reputation; only false statements about the victim can produce legal liability for defamation. By contrast, the tort of false light is designed to protect the victim’s privacy, as a result, true but embarrassing information about the victim may generate legal liability for false light, so long as that information is highly offensive or embarrassing to a reasonable person of ordinary sensibilities.

Table 9.1 provides an overview of other types of intentional torts and examples of each.

*Based on George v. Jordan Marsh Co., 268 N.E.2d 915 (Mass. 1971).

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Business Competition Torts

LO 9-6

Distinguish business competition torts from other intentional torts and understand their applicability in commercial relationships.

Tort law also provides for the promotion of fairness in business dealings and for the reimbursement of a party that has suffered some damages as a result of a competitor’s tortious acts. These common law torts arise when a tortfeasor (typically a competitor to the harmed party) interferes with an existing contract or hinders a prospective contract between two parties.

Tortious Interference with Existing Contractual Relationship

When one party induces another party to break an existing contract with a third party, the inducing party may be liable for any damages suffered by the innocent party as a result of breaking the contract. For the injured party to recover damages, the tortfeasor must have

1. had specific knowledge of the contract,

2. actively interfered with the contract, and

3. caused some identifiable damages (losses) to the injured party.

Business owners and managers may encounter contract interference torts in the context of employment contract restrictions against working for competitors (known as a restrictive covenant 17 ) or in defending an allegation of interference in the process of hiring a new employee away from a competitor. For example, Lee is a talented software programmer and signs a contract with Computer Researchers Inc. (CRI) for three years. The contract stipulates that Lee will not work for any of CRI’s competitors during that time even if he is terminated or voluntarily resigns from CRI. After one year, one of CRI’s competitors, MultiCom, contacts Lee and attempts to convince him to leave CRI and work for MultiCom. During the negotiations, Lee shows MultiCom his contract with CRI, and MultiCom’s manager then offers a higher salary and a $1,000 signing bonus to Lee. Lee resigns from CRI with two years left on his contract and goes to work for MultiCom. CRI must then spend several thousand dollars recruiting and training a new programmer to finish Lee’s projects. In this case, many courts would consider holding MultiCom liable for CRI’s damages because CRI was injured as a result of MultiCom’s tortious interference with the CRI–Lee contract. Of course, CRI would also be entitled to recover damages from Lee for breaking the contract.

Note that interference does not occur when a competitor merely offers a better price to a competitor’s customer. For example, suppose that Chung is the owner of several self-service car washes and signs a two-year agreement with Mega Distributor for the supplying of snack vending machines in the lobby of each of Chung’s car washes. Under the contract, Chung will receive 30 percent of the sales from the machines. Shortly thereafter, Chung is contacted by a sales rep from Start-Up Snacks and offered the same terms as the Mega contract except that Chung will receive 60 percent of the sales from the machines. Chung crunches the numbers and concludes that the increase in revenue will more than make up for any penalties incurred for breaching the Chung–Mega contract, so he breaks his contract with Mega and enters into a new contract with Start-Up. Despite the fact that Start-Up knew of the Mega contract, the level of interference is not sufficient to constitute a tort. In this case, Chung decided on his own to break the contract with Mega and was not induced to do so by Start-Up. It is important to note, however, that Mega could still sue Chung for failing to perform his obligations as agreed in the contract. 18

Legal Speak >))

Induce

To bring about or give rise to. In the context of tortious interference, liability is triggered if interference causes the harm.

Tortious Interference with Prospective Advantage

In addition to providing protection against interference from third parties in existing contracts, the law also protects interference with potential contract (prospects) or other business relationships. The protections and definition of interference are similar to the existing contractual interference rules discussed earlier. However, because no contract actually exists, courts allow recovery for this tort only under limited circumstances in which the tortfeasor’s conduct was highly anticompetitive. For example, assume that OldCo intends to sabotage NewCo’s efforts to obtain a new customer through a competitive bidding process. An OldCo employee hacks into NewCo’s computer and destroys the proposal forms. NewCo cannot submit the bid before the deadline and, thus, doesn’t get the contract. Assuming that NewCo can prove it suffered damages, OldCo could be held liable for interference with prospective advantage.

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Self-Check Intentional Torts

Which tort, if any, fits each of the following facts?

1. Jason and Elaine are both being considered for a promotion to VP of Sales. Jason starts a false rumor that Elaine doctored the books to make her accounts look better than they actually are. Because of the investigation and the need to fill the position, Elaine is dropped from consideration and Jason gets the promotion.

2. MOT Corporation does all of its banking with Second National Bank. MOT receives a 1 percent interest rate on its savings account and pays a fee of $.02 per check written. A representative of Third National Bank visits MOT’s offices and tells the company that Third National pays 1.25 percent interest and has free corporate checking. MOT closes its accounts with Second National and moves all its banking business to Third National.

3. Wayne gets into his car after work, but it won’t start. He returns to his office, and everyone has gone home. He takes the keys to a company vehicle and drives home, intending to drive it back to the office in the morning. That night, a violent storm causes a tree branch to fall on the car, causing extensive damage.

4. Nancy has triplets attending eighth grade. Every once in a while she takes small quantities of paper, pens, paper clips, and other stationery supplies home from work and gives them to her kids for school use.

5. Frank is a used-car salesman. He is working with a customer who decides to buy a car. The price is agreed to, and the customer tells Frank that he will go to the bank to get a certified check. They shake hands. Frank then says, “You should know that this car used to be owned by Bill Gates!” The customer returns with the certified check, all paperwork is signed, and the customer drives the car home. The next day, the customer discovers that Bill Gates never owned the car.

Answers to this Self-Check are provided at the end of the chapter.

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CONCEPT SUMMARY Business-Related Intentional and Competition Torts

· A tort is a civil wrong and can be classified as intentional, negligent, or strict liability.

· Defamation is a false statement that specifically concerns an individual, company, or product; is communicated to a third party; and results in pecuniary harm to the victim.

· A victim of fraud must show intentional misrepresentation by the tortfeasor of a material fact, reliance on that fact, and damages resulting from that reliance.

· False imprisonment is an intentional tort unless the tortfeasor is a merchant who temporarily and reasonably detains a suspected thief.

· When a business competitor’s actions exceed standard competitive practices, that company may be liable for intentional interference with a contract by a third party if the company has specific knowledge of a contract and intentionally disrupts its proper execution.