Articles Posted in Commercial Defamation

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Super Lawyers named Illinois commercial law trial attorneys Peter Lubin and Vincent DiTommaso Super Lawyers and Illinois business dispute attorneys Patrick Austermuehle and Andrew Murphy Rising Stars in the Categories of Class Action, Business Litigation and Consumer Rights Litigation. DiTommaso Lubin Austermuehle’s Illinois business trial lawyers have over a quarter of century of experience in litigating complex class action, copyright, non-compete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.  Our Schaumburg and Des Plaines business dispute lawyers, civil litigation lawyers and copyright attorneys handle emergency business law suits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0000 or our toll free number (877) 990-4990.  You can also contact us online here.

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In order to file a lawsuit against an individual or organization alleging violation of the law, the plaintiff must be able to allege specific and clear violations of the law, as well as actual damages the plaintiff suffered as a result of the alleged violation. This is as true of defamation lawsuits as it is of any other law.

Although the First Amendment protects every citizen’s right to free speech, it does not allow public statements about other people who are public figures that are intentionally or deliberately false and accuse of them of certain types of misconduct and prohibits false statements against ordinary people that wrongly accuse them of certain types of misconduct. In order to be considered defamatory, a statement has to be made publicly, and with the result that the target suffered damage to their public reputation and/or career. Opinions and general rhetoric do not qualify as defamation. Continue reading

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Facebook has long been an issue in the domain of free speech. People post whatever they want in view of the whole world. This time, an attorney was ordered by a judge to stop posting information about a case on his Facebook page even though he was addressing important public concerns regarding what he perceived to be an unfair class action settlement. This type of issue of public concern should receive the highest First Amendment Protection. Judges like any other public official should not be free to squelch criticism just because they don’t like it and believe it is inaccurate. Vigorous debate on issues of public concern in a community should be encouraged.

The case involves two McDonald’s locations in Detroit which serve McChicken sandwiches and Chicken McNuggets which are advertised as being halal. Halal is a form of preparing food in order to meet Islamic requirements. It includes invoking God’s name before slaughtering an animal which is to provide meat for consumption.

Two McDonald’s locations (13158 Ford Road and 14860 Michigan Ave.) are believed to be the only two McDonald’s locations to serve halal chicken. According to the suit, McDonald’s served non-halal chicken when it ran out of halal and failed to tell this to their customers. The class-action lawsuit, filed by Ahmed Ahmed of Dearborn Heights, includes anyone who ate non-halal chicken at one of the two McDonald’s locations since September 2005. The defendants are McDonald’s and franchise owner Finley’s Management Co.

On January 18, Wayne County Circuit Court Judge Kathleen Macdonald approved a settlement where McDonald’s and Finley must pay $700,000 to settle the suit. Ahmed was to receive about $20,000; the Health Unit on Davison Ave. in Detroit, also known as HUDA, was to get around $274,000; the Arab National Museum in Dearborn was to get about $150,000; and the attorneys were to get around $230,000.

Majed Moughni, an attorney who was not involved in the case before the settlement, posted on the Dearborn Area Community members Facebook page, which he runs, that he believed it was unfair that most of the money would go to those who ate the non-halal chicken. He asked for page members who had eaten the haram (or forbidden) chicken to leave contact information for themselves as well as for others who had eaten the meat
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Kassem Dakhlallah, Ahmed’s lead attorney, filed a motion for injunctive relief against Moughni. Judge Macdonald ruled in Dakhlallah’s favor and order Moughni to remove information about the case from the Facebook page and to put her original class settlement and order against him on the page, which he did. She also forbade him to discuss the case with class members or the media without written permission from her and Jaafar & Mahdi Law Group, the firm representing Ahmed.

Moughni filed a motion to overturn the judge’s ruling against him, which she dismissed.
Paul Alan Levy of the Public Citizen’s Litigation Group of Washington D.C. filed a motion on behalf of Moughni to lift the order against him. They claimed that he was not acting as an attorney, but merely soliciting feedback and that his First Amendment rights had been violated.
Although the allegation that Moughni was soliciting clients through his Facebook page was never an issue when initially seeking the injunction, McDonald’s used it as a reason for the injunction to remain, as well as allegations that the comments about the case which he posted on the Facebook page were misleading.

Levy argued that Moughni was not soliciting clients, but merely speaking as a concerned member of the community. He pointed out that there was no evidence that Moughni looked to be paid for gathering the feedback, but was merely rallying the community against what he perceived to be an injustice.

Judge Macdonald said that Moughni can’t separate the fact that he’s an attorney but she did agree to dissolve the injunction and extend the settlement period. She said that Moughni can continue to identify himself as a class member, but not an attorney in the case.
While McDonald’s agreed to the removal of the injunction (having been satisfied that Moughni was not, in fact, soliciting new clients) they claimed that his misleading statements about the settlement were cause for reopening negotiations.

Levy is concerned however, that the fight may not yet be over. McDonald’s has been complaining about the added cost of reopening the settlement period. They estimate that around $30,000 will be lost from the Arab National Museum’s portion of the settlement, money which could finance ten scholarships through the charity. Levy worries that McDonald’s may be leveraging to sue Moughni for damages after the current case has settled.
This may not be the smartest move for McDonald’s, though. While Moughni’s comments might have gone largely unnoticed if left alone, McDonald’s has given the issue light by filing for the injunction. In the end, the company’s image may be damaged by flaunting their dirty laundry and airing the fact that they are trying to preclude a member of the community from someone speaking out against a settlement that gives money to charity but not to the damaged class members. Judges should not be shutting down valuable speech rights. There has been a long tradition in this country that the First Amendment precludes public officials including judges from silencing criticism they don’t like. It is particularly troublesome that the Court attempted to shut off criticism on a matter of public interest. Moughni should have been permitted to freely voice his criticism of the settlement. That could never have interfered with the Court rendering a fair decision to approve or disapprove the settlement. Having already preliminarily approved the settlement, the Court appears to have had an interest in having its ruling upheld and let that concern over ride the public’s right to vigorously debate the settlement and even make material errors in that debate. The remedy to cure any false or erroneous statements in the debate is more rather than less speech.

The settlement period has been extended for another 28 days, which all sides agree with.

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As Chicago Internet product disparagement litigation attorneys, we were interested to see reports about a product disparagement lawsuit filed in early April against financial publication TheStreet.com and one of its reporters. Fierce Biotech reported April 7 that Canadian drug maker Generex has sued TheStreet and columnist Adam Feuerstein for libel, product disparagement and injurious falsehood. The lawsuit, filed in New York state court, seeks $250 million in damages for what Generex called “numerous defamatory statements” about the company, its leaders and its flagship product, an insulin delivery system allowing the hormone to be absorbed through the lining of the mouth, obviating the need for injections. In its filing (PDF), Generex said the statements caused its stock to drop nearly 8%, losing the company $12 million in market capitalization and the goodwill of third parties like investors.

Product disparagement laws prohibit outright false claims about another company or person’s products or services. In its April 6 press release announcing the lawsuit, Generex claims TheStreet and Feuerstein made such false claims, with the company’s general counsel saying they “[spread] categorical falsehoods” in articles “that go well beyond the expression of disparaging opinion or fair comment.” The company is referring to two articles authored by Feuerstein in March of 2010. In the first, he wrote that the company’s stock “is a total bust” because its product “is more fiction than science,” has not been tested sufficiently and would not be in demand. He also claimed the product had not been discussed in medical journals or presented at medical conferences, but TheStreet later retracted that statement when the company contacted it.

In the second article, Feuerstein went further and said the company’s work is “a ruse to perpetuate a 15 year-long stock promotion scheme.” He said the studies on its product, Oral-lyn, were extremely small and poorly designed. A Phase III trial in the United States, the first step toward FDA approval, was underenrolled and insufficient for FDA approval, he added, saying this showed that “Generex isn’t interested in seriously developing an oral insulin spray.” On the day Generex announced its lawsuit, TheStreet published a third Feuerstein article noting that approval of Oral-lyn was revoked by regulators in India — the largest country where it had been approved — about a year earlier, but that Generex had failed to notify investors. A fourth article dated April 29 faulted the company for mischaracterizing the FDA’s permission to use Oral-lyn experimentally as a “mini-approval.”
As Illinois online business libel lawyers, we believe winning this claim will be an uphill battle for Generex. To win, the company must convince a jury that Feuerstein’s articles were intended as statements of fact, not opinion. This could be difficult with the first article, because Feuerstein was responding in that piece to a direct question from a reader asking “What are your thoughts?” about Generex stock. The next sentence started with the phrase “I think…”, which seems to indicate that the following information was an opinion. The second article may offer more hope for Generex, because it doesn’t seem to contain any such clear statements indicating opinion. However, Generex would still have to show that the articles, which are intended as stock-picking advice, are not inherently opinion. It may also have to show “actual malice” by Feuerstein and TheStreet, which means reckless disregard of the truth or knowledge of falsity.

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Our Chicago online business libel attorneys were interested to see a series of articles about several ongoing lawsuits against online review website Yelp.com. According to a March 19 article from the Associated Press, multiple businesses allege the site demanded advertising dollars from them in exchange for control over negative and positive reviews. When potential advertisers declined, the lawsuits say, negative reviews appear or reappear. At least ten small businesses are part of a putative class action lawsuit filed in Los Angeles federal court — among them a Chicago bakery and a Washington, D.C. restaurant. At least two similar claims have been filed, both in California.

The ten-plaintiff lawsuit alleges extortion and attempted extortion by Yelp, saying it gained money “by means of wrongful acts and practices.” For example, the owner of Chicago’s Bleeding Heart Bakery said Yelp employees told her they would push bad reviews to the end of the list of reviews on the bakery’s Yelp page, in exchange for a paid sponsorship. The owner of a Long Beach, Calif. animal hospital said when he declined to pay for a sponsorship, a bad review that had previously disappeared from the page reappeared. A second bad review appeared later. Yelp CEO Jeremy Stoppelman said reviews come and go because the company uses a computer program to automatically remove reviews flagged as suspicious, such as negative reviews by a direct competitor. He claimed the only manipulation Yelp does is allowing companies to pick a positive review to place at the top of the site.

On April 6, Yelp called a news conference to announce changes it made to its site in response to the allegations. The site removed its “favorite review” feature that allowed business owners to choose a positive review for the top of the site. It will also allow users to see which reviews were filtered out, either because they were suspicious or because they violated review guidelines or terms of service. At the conference, Yelp announced future plans to form a Small Business Advisory Council to address these issues. Attorneys involved in the Yelp lawsuits said these were a step in the right direction, but declined to drop their claims.

As Highland Park, Ill. Internet product disparagement attorneys and Chicago business law lawyers, we’re not surprised that these businesses are claiming extortion rather than product disparagement. Under the federal Communications Decency Act, websites that host content provided by third-party users are not legally responsible for any content that is defamatory, negligent or otherwise legally actionable. That means Yelp is not responsible for defamatory postings by its users, even if it exercises editorial control over those postings. However, it may be responsible for content it provides itself. For that reason, small businesses like these plaintiffs have limited recourse in mnay instances to recover for online trade libel, even if they otherwise have strong cases. The extortion claims offer no such legal problem.

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The below article on internet defamation appeared in the New York Times:

Venting Online, Consumers Can Find Themselves in Court
Stephen McGee for The New York Times
Justin Kurtz with his car, which was towed from his apartment complex parking lot near Western Michigan University.

By DAN FROSCH
Published: May 31, 2010

After a towing company hauled Justin Kurtz’s car from his apartment complex parking lot, despite his permit to park there, Mr. Kurtz, 21, a college student in Kalamazoo, Mich., went to the Internet for revenge.

Outraged at having to pay $118 to get his car back, Mr. Kurtz created a Facebook page called “Kalamazoo Residents against T&J Towing.” Within two days, 800 people had joined the group, some posting comments about their own maddening experiences with the company.

T&J filed a defamation suit against Mr. Kurtz, claiming the site was hurting business and seeking $750,000 in damages.

Web sites like Facebook, Twitter and Yelp have given individuals a global platform on which to air their grievances with companies. But legal experts say the soaring popularity of such sites has also given rise to more cases like Mr. Kurtz’s, in which a business sues an individual for posting critical comments online.

The towing company’s lawyer said that it was justified in removing Mr. Kurtz’s car because the permit was not visible, and that the Facebook page was costing it business and had unfairly damaged its reputation.

Some First Amendment lawyers see the case differently. They consider the lawsuit an example of the latest incarnation of a decades-old legal maneuver known as a strategic lawsuit against public participation, or Slapp.

The label has traditionally referred to meritless defamation suits filed by businesses or government officials against citizens who speak out against them. The plaintiffs are not necessarily expecting to succeed — most do not — but rather to intimidate critics who are inclined to back down when faced with the prospect of a long, expensive court battle.

“I didn’t do anything wrong,” said Mr. Kurtz, who recently finished his junior year at Western Michigan University. “The only thing I posted is what happened to me.”
Many states have anti-Slapp laws, and Congress is considering legislation to make it harder to file such a suit. The bill, sponsored by Representatives Steve Cohen of Tennessee and Charlie Gonzalez of Texas, both Democrats, would create a federal anti-Slapp law, modeled largely on California’s statute.

Because state laws vary in scope, many suits are still filed every year, according to legal experts. Now, with people musing publicly online and businesses feeling defenseless against these critics, the debate over the suits is shifting to the Web.

“We are beyond the low-tech era of people getting Slapped because of letters they wrote to politicians or testimony they gave at a City Council meeting,” said George W. Pring, a University of Denver law professor who co-wrote the 1996 book “Slapps: Getting Sued For Speaking Out.”
Marc Randazza, a First Amendment lawyer who has defended clients against suits stemming from online comments, said he helped one client, Thomas Alascio, avoid a lawsuit last year after he posted negative remarks about a Florida car dealership on his Twitter account.

“There is not a worse dealership on the planet,” read one post, which also named the dealership.

The dealership threatened to sue Mr. Alascio if he did not remove the posts. Mr. Randazza responded in a letter that although Mr. Alascio admitted that the dealership might not be the worst in the world, his comments constituted protected speech because they were his opinion.

While the dealership did not sue, that outcome is unusual, said Mr. Randazza, who conceded that sometimes the most pragmatic approach for a Slapp defendant is to take back the offending comments in lieu of a lawsuit.

In the past, Mr. Randazza said, if you criticized a business while standing around in a bar, it went “no further than the sound of your voice.”
Now, however, “there’s a potentially permanent record of it as soon as you hit ‘publish’ on the computer,” he said. “It goes global within minutes.”
Laurence Wilson, general counsel for the user review site Yelp, said a handful of lawsuits in recent years had been filed against people who posted critical reviews on the site, including a San Francisco chiropractor who sued a former patient in 2008 over a negative review about a billing dispute. The suit was settled before going to court.

“Businesses, unfortunately, have a greater incentive to remove a negative review than the reviewer has in writing the review in the first place,” Mr. Wilson said.

Recognizing that lawsuits can bring more unwanted attention, one organization has taken a different tack. The group Medical Justice, which helps protect doctors from meritless malpractice suits, advises its members to have patients sign an agreement that gives doctors more control over what patients post online.

Dr. Jeffrey Segal, chief executive of Medical Justice, said about half of the group’s 2,500 members use the agreement.

“I, like everyone else, like to hear two sides of the story,” he said. “The problem is that physicians are foreclosed from ever responding because of state and federal privacy laws. In the rare circumstance that a posting is false, fictional or fraudulent, the doctor now has the tool to get that post taken down.”
The federal bill, in the House Subcommittee on Courts and Competition Policy, would enable a defendant who believes he is being sued for speaking out or petitioning on a public matter to seek to have the suit dismissed.

“Just as petition and free speech rights are so important that they require specific constitutional protections, they are also important enough to justify uniform national protections against Slapps,” said Mark Goldowitz, director of the California Anti-Slapp Project, which helped draft the bill.

Under the proposed federal law, if a case is dismissed for being a Slapp, the plaintiff would have to pay the defendant’s legal fees. Mr. Randazza would not disclose specifics on the legal fees he has charged his clients, but he said the cost of defending a single Slapp suit “could easily wipe out the average person’s savings before the case is half done.”
Currently, 27 states have anti-Slapp laws, and in two, Colorado and West Virginia, the judiciary has adopted a system to protect against such suits. But the federal bill would create a law in states that do not have one and offer additional protections in those that do, Mr. Goldowitz said.

In Michigan, which does not have an anti-Slapp measure, Mr. Kurtz’s legal battle has made him a local celebrity. His Facebook page has now grown to more than 12,000 members.

“This case raises interesting questions,” said the towing company’s lawyer, Richard Burnham. “What are the rights to free speech? And even if what he said is false, which I am convinced, is his conduct the proximate cause of our loss?”
On April 30, Mr. Kurtz and his lawyers asked a judge to dismiss the suit by T&J, which has received a failing grade from the local Better Business Bureau for complaints over towing legally parked cars. Mr. Kurtz is also countersuing, claiming that T&J is abusing the legal process.

“There’s no reason I should have to shut up because some guy doesn’t want his dirty laundry out,” Mr. Kurtz said. “It’s the power of the Internet, man.”

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As Illinois and Chicago business law attorneys, we were interested to see a recent Seventh U.S. Circuit Court of Appeals opinion in an antitrust and trade libel lawsuit filed here in the Northern District of Illinois. In Tamburo v. Dworkin, 2010 WL 1387299 (C.A.7 April 8, 2010), John Tamburo and his software business filed suit against multiple defendants in the United States, Canada and Australia. Tamburo sought to pursue federal and state antitrust claims, as well as state tort claims for defamation, tortious interference with his business and civil conspiracy. He also wanted a declaratory judgment that he did not violate any federal laws. The district court dismissed all of the claims, but the Seventh reinstated some of the tort claims, reinforcing the rules for personal jurisdiction over foreign defendants, but applied to Internet-related claims.

Tamburo and his business make dog-breeding software, including an online database full of dog pedigree information. To get data for this database, he used publicly available information found on the websites of four of the defendants, dog pedigree enthusiasts in Ohio, Colorado, Michigan and Canada. These defendants reacted critically, launching a campaign of email “blasts” and website postings accusing Tamburo of theft, hacking and selling stolen goods. They urged readers to boycott his products. The Australian defendant, a software company with a similar pedigree software company, received some of these messages and reposted them to a private mailing list of dog breeders who had bought its software. Tamburo sued all of them in Chicago federal court, where the defendants moved to dismiss for lack of personal jurisdiction. The trial court granted this motion as to all claims and Tamburo appealed.

The Seventh Circuit only partially agreed. Right away, it upheld the dismissal of the antitrust claims, which it said were “woefully inadequate” under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 2007), which heightened the requirements for stating a claim in a Sherman Act case. Under that decision, plaintiffs must plead believable antitrust injuries that show an anticompetitive effect, which the court said Tamburo failed to do. Tamburo’s federal pleadings are conclusory, the court wrote, failing to give any evidence of a specific antitrust injury or even what kind of violation he alleges. The state law claims have the same failings, the majority said, so both should be dismissed, but for failure to state a claim rather than lack of personal jurisdiction.

This removed the only federal claim in the case, which meant personal jurisdiction must be decided under Illinois’ long-arm statute. None of the defendants had enough contact with Illinois to create general personal jurisdiction, the majority said; in fact, the Canadian and Australian defendants had never been there. However, the court did find evidence of personal jurisdiction specific to this case. The court applied Calder v. Jones, 465 U.S. 783 (1984), in which the Supreme Court said actress Shirley Jones could assert personal jurisdiction in California over a Florida-based magazine and its writers, whom Jones accused of libel. That case gave a test to find personal jurisdiction: intentional and allegedly tortious conduct, expressly aimed at the foreign state, with the defendant’s knowledge that the plaintiff would be injured there.

The bulk of the Seventh’s analysis was aimed at the second prong — “expressly aimed.”
The court said personal jurisdiction was appropriate for the U.S. and Canadian defendants because they were accused of disseminating information about Tamburo widely through websites and emails. In fact, the majority wrote, some of the messages gave Tamburo’s address and urged readers to harass him and boycott his product. This is enough for personal jurisdiction under the “express aiming” test. This wasn’t true of the Australian defendant, however, because the owner of the company was alleged only to have sent the information to a private mailing list — not enough to show “express aiming” at Tamburo in Illinois.

Finally, the court examined whether jurisdiction over the individuals would “offend traditional notions of fair play and substantive justice.” It found that hearing the case in Illinois would not be unfair. The defendants have diverse citizenship, the court noted, and it would be unreasonable to ask Tamburo to sue them all separately. Illinois has a strong interest in providing a forum for residents like Tamburo to settle disputes, whereas other states have no substantial interest in the case. Thus, jurisdiction in Illinois is fair. For all of these reasons, the Seventh Circuit upheld the dismissal of the antitrust claims, upheld the dismissal of the claims against the Australian defendant and reversed the dismissal of the tort-law claims against the U.S. and Canadian defendants.

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Statements in an advertisement for a men’s clothing retailer may have been in poor taste, but they are still protected by the First Amendment to the U.S. Constitution, the Illinois Supreme Court has ruled. In Imperial Apparel Ltd. v. Cosmo’s Designer Direct Inc., Ill., No. 103331 (Feb. 7, 2008), retailer Imperial Apparel sued Cosmo’s after the latter retailer ran an advertisement insulting a competitor that was widely understood to be Imperial. Objecting to Imperial’s appropriation of Cosmo’s signature “3 for 1” sales policy, the Cosmo’s ad disparaged Imperial’s quality and business practices. The ad also used references to the Jewish heritage of the family that owned Imperial, the Rosengartens.

The Rosengartens and Imperial sued Cosmo’s and the Chicago Sun-Times, the newspaper that ran the advertisement. They made claims against both defendants for defamation per se, defamation per quod, false light invasion of privacy, commercial disparagement and violations of the Illinois Consumer Fraud Act. The Cook County trial court in the case dismissed all of their complaints, with prejudice, on the grounds that the advertisement was protected free speech under the First Amendment to the U.S. Constitution. That court used a fact versus opinion test — were the statements intended as opinion? It concluded yes.

The Rosengartens appealed and had better luck with the appellate court, which reversed the false light, consumer fraud and commercial disparagement claims as to all plaintiffs. It also reversed the defamation per quod claim as to the Rosengartens personally, but not Imperial, because the Rosengartens could not show that they personally were financially harmed. However, it upheld the dismissal of the defamation per se count. Citing a paragraph in which Cosmo’s accused Imperial and the Rosengartens of “inflat[ing] prices and compromis[ing] quality,” it found that a reasonable reader could interpret those statements as facts. Cosmo’s and the Sun-Times then made the instant appeal.