Business disparagement in Texas — defamation's harder cousin

Business disparagement and defamation look like the same claim and are not. The Texas Supreme Court drew the line in Waste Management of Texas, Inc. v. Texas Disposal Systems Landfill, Inc., 434 S.W.3d 142 (Tex. 2014): defamation protects reputation interests, while business disparagement protects economic interests against pecuniary loss.

That difference changes the elements, the burden of proof, and the damages — in every case against the plaintiff.

What the claim is

Someone published false statements about your business, its products, its services or its property, and you lost identifiable money because of it.

Where the right comes from

Common law. The elements are stated in Waste Management: the defendant published false and disparaging information, with malice, without privilege, resulting in special damages to the plaintiff.

What a plaintiff has to prove

1. Publication of false and disparaging words about the plaintiff's economic interests;
2. Malice;
3. The absence of privilege; and
4. Special damages — pecuniary loss caused by the publication.

The three ways it is harder than defamation

The plaintiff proves falsity. In defamation, truth is a defence the defendant carries. Here, falsity is an element of the plaintiff's case.

Malice is always required. Defamation can be established on negligence where the plaintiff is a private figure and the matter is not of public concern. Business disparagement requires malice in every case — knowledge of falsity, reckless disregard for the truth, or ill will and intent to interfere with the plaintiff's economic interests.

Damages are never presumed. Defamation per se presumes reputational damages. Business disparagement requires proof of pecuniary loss, and Texas asks for it with specificity: the customer who cancelled, the contract that was lost, the sale that did not close.

A general drop in revenue after a bad review will not do it, because the plaintiff has to connect the loss to the statement.

A company can bring both

Waste Management did not require corporations to choose. A business may sue for defamation to recover for injury to its reputation and for disparagement to recover its pecuniary loss, and the two claims coexist because they redress different injuries.

The practical division:

The different deadlines are a trap. A statement attacking both a company's reputation and its products generates a defamation claim that expires in a year and a disparagement claim that lasts two.

How long you have to file

Two years under CPRC § 16.003(a), running from publication.

What has to happen before you file

Nothing. But a disparagement claim is a claim based on a communication, and it draws TCPA motions as a matter of routine. A defendant who succeeds under CPRC § 27.009 recovers court costs and reasonable attorney's fees, so the downside of a thin claim is real.

What the claim pays

Special damages — the pecuniary loss the publication caused. Lost sales, cancelled contracts, severed supplier or distributor relationships, the cost of a corrective advertising campaign.

Exemplary damages. Malice is already an element here, and the exemplary award needs it proved by clear and convincing evidence under CPRC § 41.003, within the § 41.008 cap.

No presumed damages, and no attorney's fees.

Who can be sued

The publisher of the statement — a competitor, a former employee, a supplier, a customer, a reviewer, a trade publication.

Not an interactive computer service for content another person provided.

Proving special damages

This is where these cases are won and lost, and the proof has to be built early.

What works: testimony from the customer who cancelled and will say why; a contract terminated within days of the publication with the statement named in the termination letter; a distributor's correspondence citing the accusation; a bid rejected on the stated basis.

What does not: a revenue chart with a downward slope; an expert extrapolating lost profits from industry averages; the assertion that the market must have reacted.

The requirement is one of causation as much as amount. Texas will not infer that a decline followed from a statement because it followed after it.

Common defenses

• Truth, which defeats the claim although the plaintiff carries falsity.
• Opinion — a statement not capable of being proved false.
• No malice, which is fatal because negligence never suffices.
• Privilege, including the judicial-proceedings privilege for statements made in litigation and the qualified privilege for communications on a subject of common interest.
• No special damages, or none traceable to the statement.
• The TCPA, with mandatory fees to a defendant who prevails.
• Limitations.

What people get wrong

It is not "defamation for companies." A corporation can sue for defamation in its own right. Disparagement is the claim for the money, and it carries a heavier burden.

A bad review is rarely enough. Opinion is protected, malice must be proved, and the lost sales must be identified.

The deadlines differ. One year for defamation, two for disparagement, off the same publication.

Malice is not spite alone. It means knowledge of falsity or reckless disregard for the truth, or ill will coupled with intent to interfere.

Filing invites a fee-shifting motion. The TCPA gives a prevailing movant costs and fees, and a disparagement claim is squarely within its reach.

Where it came from

The tort descends from slander of title, an action about false statements clouding an owner's claim to property, and it kept that shape: an economic tort about a false statement affecting the value of something a person owns. Extended to goods and services, it became trade libel, and then business disparagement.

The requirements that make it hard are inherited from that origin. Because the claim protects property value rather than personal dignity, the law never presumed damage from the words alone, and it has always demanded that the plaintiff show the loss.

Waste Management in 2014 confirmed that Texas keeps both claims and keeps them separate. A corporation's reputation is protected by defamation, with presumed damages available in a per se case. A corporation's revenue is protected by disparagement, and the revenue has to be traced.

Common questions

How long do I have to sue for business disparagement in Texas?

Two years from publication. A defamation claim on the same statement expires in one.

What is the difference between this and defamation?

Defamation protects reputation and can presume damages; disparagement protects economic interests and requires proof of specific pecuniary loss, plus proof of falsity and malice by the plaintiff.

Can I sue over a bad online review?

Only if it contains false statements of fact, was published with malice, and caused identifiable lost business. Opinion is not actionable, and the defendant may move under the TCPA with fees at stake.

Do I have to prove exactly how much I lost?

You have to prove pecuniary loss caused by the statement, with the customers, contracts or sales identified. A general decline in revenue is not enough.

Can I recover attorney's fees?

No.

Can my company sue for both defamation and disparagement?

Yes. They redress different injuries and may be pleaded together, subject to their different deadlines.

Where these rules live

• CPRC § 16.003 — Two-year limitations period
• CPRC § 16.002 — One-year period for libel and slander
• CPRC § 27.003 — TCPA motion to dismiss
• CPRC § 27.009 — Court costs and attorney's fees under the TCPA
• CPRC § 41.003 — Standards for recovery of exemplary damages
• CPRC § 41.008 — Limitation on amount of recovery