The reputations of businesspeople and of businesses matter. Someone spreading nasty rumors about a businessperson or business can have a drastic effect on performance, client relations, and employee morale, among other things. How can businesspeople and businesses protect themselves? Each state has had to grapple with this question. In Michigan, however, there is a curious twist: unlike some other states, businesspeople and businesses must prove a causal connection between the allegedly defamatory statements and the damage incurred.
Under Michigan law, a plaintiff alleging defamation must prove four elements:
(1) a false and defamatory statement concerning the plaintiff, (2) an unprivileged communication to a third party, (3) fault amounting at least to negligence on the part of the publisher, and (4) either actionability of the statement irrespective of special harm (defamation per se) or the existence of special harm caused by publication. ((Marks One Car Rental, Inc. v. Auto Club Grp. Ins. Co., No. 18-1386, 2019 WL 259733, at *4 (6th Cir. Jan. 18, 2019) (citing Mitan v. Campbell, 474 Mich. 21, 706 N.W.2d 420, 421 (2005) ). )) A statement that is defamatory per se, therefore, need only prove the first three elements, and need not prove actual damages to be actionable: “[I]njury to the reputation of the person defamed is presumed to the extent that the failure to prove damages is not a ground for dismissal.” ((Burden v. Elias Bros. Big Boy Restaurants, 240 Mich. App. 723, 727–28, 613 N.W.2d 378, 381 (2000). )) A statement being defamatory per se is obviously a great benefit to a plaintiff’s case because it means one less thing the plaintiff is required to prove.
The Michigan legislature and the Michigan courts seem to differ on just when a statement is defamatory per se, however, at least with respect to a person. With respect to a business, Michigan law is relatively clear. A business must be able to allege and prove a causal connection between allegedly defamatory statements and the actual economic damages incurred as a result. ((Cofessco Fire Prot., L.L.C. v. Bruce Steele, Vanguard Fire & Supply Co., No. 290959, 2010 WL 3928724, at *3 (Mich. Ct. App. Oct. 7, 2010).)) A business may certainly be defamed. ((Heritage Optical Ctr., Inc. v. Levine, 137 Mich. App. 793, 797–98, 359 N.W.2d 210, 212–13 (1984).))
If the business is for-profit, the business can be defamed if the statements tend to “prejudice it in the conduct of its business or to deter others from dealing with it.” ((Id.)) A business’s reputation in a personal sense, however, cannot be defamed. ((Id.)) On the other hand, “language which casts an aspersion upon [a business’s] honesty, credit, efficiency or other business character may be actionable.” ((Northland Wheels Roller Skating Ctr., Inc. v. Detroit Free Press, Inc., 213 Mich. App. 317, 328, 539 N.W.2d 774, 780 (1995).)) Essentially, a business must be able to allege and prove a causal connection between allegedly defamatory statements and the actual economic damages incurred as a result. ((Cofessco, 2010 WL 3928724 at *3.))
In Cofessco Fire Prot., L.L.C. v. Steele, No. 290959, 2010 WL 3928724, at *3 (Mich. Ct. App. Oct. 7, 2010), an employee made allegedly defamatory statements about his former employer. The business was therefore required to prove a causal connection between the statements and the damages incurred. ((Id.)) The business was able to do so in that case, however. ((Id.))
With respect to a businessperson, the situation was murkier. At common law, “Michigan used to recognize ‘words . . . injurious to a person in his business’ as actionable per se.” ((Marks One Car Rental, Inc. v. Auto Club Grp. Ins. Co., No. 18-1386, 2019 WL 259733, at *5 (6th Cir. Jan. 18, 2019); see, e.g., Henkle v. Schaub, 94 Mich. 542, 54 N.W. 293, 295 (1893); Mains v. Whiting, 87 Mich. 172, 49 N.W. 559, 562 (1891). )) The Michigan legislature passed legislation that appeared to abrogate this holding. ((See Mich. Comp. Laws § 600.2911(2)(a) (“[I]n actions based on libel or slander the plaintiff is entitled to recover only for the actual damages which he or she has suffered in respect to his or her property, business, trade, profession, occupation, or feelings.”).)) In 1961, the legislature passed the Revised Judicature Act, which had provisions regarding defamation per se, it was later revised in 1989 to state “[w]ords imputing a lack of chastity to any female or male are actionable in themselves and subject the person who uttered or published them to a civil action for the slander in the same manner as the uttering or publishing of words imputing the commission of a criminal offense.” ((Mich. Comp. Laws § 600.2911.)). The statute then stated specifically that “in actions based on libel or slander the plaintiff is entitled to recover only for the actual damages which he or she has suffered in respect to his or her property, business, trade, profession, occupation, or feelings.” ((Id.))
But even after that legislation was passed, Michigan courts continued to recognize the exception: “[S]ome Michigan courts still apply Henkle.” Marks One Car Rental, Inc. v. Auto Club Grp. Ins. Co., No. 18-1386, 2019 WL 259733, at *5 (6th Cir. Jan. 18, 2019). However, other courts have stopped applying Henkle and followed the statute instead with respect to businesspeople. In Pierson v. Ahern, No. 260661, 2005 WL 1685103, (Mich. Ct. App. July 19, 2005), the court found that “plaintiffs [who were businesspeople] were required to show actual damages.” ((2005 WL 1685103, at *2)).
Given the confusion, persons and businesses who are contemplating bringing a defamation action in Michigan after someone has spread nasty rumors about their work should consult with an experienced attorney in order to preserve evidence that may increase their odds of proving actual damages.
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