Defamed Business Entitled to Presumed Damages, But No Injunction

In Virginia, a statement may constitute defamation per se if it imputes an unfitness to perform the duties of a job or a lack of integrity in the performance of those duties, or if it prejudices the plaintiff in its profession or trade. Corporations, like people, can be defamed in this manner. To prejudice a plaintiff in its profession or trade, the statements must relate to the skills or character required to carry out the particular occupation of the plaintiff. Examples include statements that cast aspersions on the target’s honesty, credit, efficiency, or its prestige or standing in its field of business. The advantages to a plaintiff when the words at issue are declared defamatory per se (as opposed to per quod) are significant: compensatory damages will be presumed and need not be proven, and punitive damages may be awarded even if compensatory damages are not.

The United States District Court for the Eastern District of Virginia applied these principles in JTH Tax, Inc. v. Grabert. JTH Tax (better known as Liberty Tax Service) franchises tax preparation centers throughout the United States. Trisha Grabert had signed four franchise agreements but was terminated by Liberty due to her alleged failure to submit required reports and pay monies owed. A disgruntled Grabert resorted to www.unhappyfranchisee.com and Facebook, where she posted numerous statements asserting, among other things, that (1) Liberty’s quarterly results were “lies and sloppy;” (2) Liberty “bribed” an individual “to testify falsely;” (3) Liberty was engaged in “unlawful actions” that “interfered with [Grabert’s] success;” (4) Liberty “steal[s]” tax stores from franchisees; (5) Liberty is “dirty and getting sloppy so they will take your first born to save their tail right now from crippling losses and a shutdown;” and (6) “Liberty Tax, as a whole” are “crooks.”

Liberty sued Grabert for defamation per se, as well as for breach of the notes and franchise agreements. The court found that the statements imputed a lack of integrity to Liberty, prejudiced Liberty in its profession, and cast aspersions on its honesty, efficiency, prestige and standing in its field. Because Grabert failed to appear and defend the accuracy of her statements, the court held that the exhibits were sufficient to demonstrate defamation taxes.jpgper se. (Note: Oddly, the court did not address whether the statements could be interpreted as mere rhetorical hyperbole or other non-actionable opinion).

The court then moved to the question of whether Liberty was entitled to recover punitive damages. Even in defamation per se cases, a recovery of punitive damages requires a clear and convincing showing that the defendant made the statements with actual malice, i.e. with knowledge of their falsity or with reckless disregard of their truth. A plaintiff can rely on circumstantial evidence and motive to prove actual malice. The court found sufficient evidence of malice.

For one thing, one of Grabert’s online postings read, “I don’t think for a second that they promote anything illegal. Unethical? Maybe if you interpret it that way.” Second, the court found that Grabert published numerous statements on multiple website attributing sinister motives to Liberty’s actions that she could have no way of knowing.

Thus, the court held that Liberty was entitled to both compensatory and punitive damages and set a hearing to establish the amount at a later date. While Liberty had also sought an injunction to compel Grabert to remove her Internet postings, the court declined to award injunctive relief because Liberty failed to demonstrate either that any harm that may have resulted from such postings was “irreparable” or that a monetary award would be inadequate.

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