Monday, April 15, 2013

Libel lawsuit against Watchdog by GreenTech is troubling; does a harsh statement about a business model "defame" a company that uses it?


There is a disturbing libel case in a state court right now, against an “activist” (not quite “whistleblower”) website.  Perhaps it amounts to a SLAPP lawsuit, but it is the legal principle underneath that is disturbing.
  
The Washington Post reported Saturday, April 13, 2013,  about a lawsuit by GreenTech Automotive against a website called “Watchdog”, filed April 8 in Mississippi, over articles published there on April 1 and 3.  It also reports that the democratic Virginia gubernatorial candidate Terry McAuliffe had founded the company but resigned in December and had withdrawn from involvement with the company.
  
The Post story is by Frederick Kunkle and has link here.
   
Green Tech Automotive has employees in Tysons Corner, Va and Mississippi and has link here.
   
One of the Watchdog articles was critical of the way the business model for Green Tech allegedly uses the EB-5 investment program, in which the federal government allows more visas to well-educated immigrants who invest in particular US industries, such as “green” energy and transportation.  One of the articles apparently used some inappropriate language.  But Watchdog maintains it was critical of the abstract business model (used my many companies), not of Green Tech itself.  EB-5 has come under scrutiny by state regulators in Illinois and now Virginia, and probably other states.  On the other hand, many policymakers consider it a good idea, and Mark Zuckerberg of Facebook wrote about the concept favorably in a recent Washington Post op-ed.  Watchdog maintains that it is not libel to report unfavorable on a business strategy or government policy that supports the strategy, and it certainly sounds like it is not.  It would be a serious matter for all small websites reporting on public policy if this could be “libel”.  (In another recent story Monday morning, Congress is reportedly considering a “point system” in immigration policy that includes both family dependencies and education, and probably stricter oversight.) 
  
Apparently there was also some controversy over a report involving the company’s handling of property taxes.  In fairness, it should be noted that many businesses and individuals question property taxes carefully before paying them.
  
Green Tech maintains that the Watchdog articles made investors skittish quickly, and is claiming $85 million in damages.  However, it is plausible that the criticism of a business model in a visible website or even blog could get around to investors and hamper funding.
  
Watchdog’s account of the lawsuit is here.   Watchdog has an eight-article series on McAuliffe and his business connections.  The consequences are political as much as they are financial.
  
This whole story brings up an “Imagine Me Naked” scenario.  Suppose I was trying to get funding for my movie.  A defamatory story about me in a blog or even on Facebook could hamper investors (or even Kickstarter).  But suppose the criticism was more abstract, about the fact I had inherited money rather than earned it.  (That is, as an Army buddy said, “Put it in “The Proles’!”)  It could be harmful and unpleasant but it is not defamatory.  Or maybe someone doesn’t like something about the whole business arrangement – although the SEC would regulate that.   The business metaphor implied by Dylan’s  spirited comic song from “Modern Family” seems to apply. You can’t “fake it”. 

Of course, another angle for the case would be “truth”.  Even if the criticisms were specific to the company, “truth is an absolute defense to libel’.  In the United States, that is.  (According to Kitty Kelly [“The Royals”] that isn’t so in Britain.)

The following video ("Free Advice Law") explains some of the important concepts.  There is also an "Opinion Rule", which would seem to apply to abstract statements about how a company or person operates.  It means "Imagine Me Fully Dressed".   The lack of a formal subjunctive mood in the English language by verb conjugation (compared to other languages like French) makes it more likely that a reader (or potential plaintiff) can misinterpret a conjectural assertion as if it were intended to be viewed as fact. 
In any cases, businesses may be quick to jump against websites that they believe may cause them do lose funding (perhaps lose a public filing) or even suffer securities price loss.  It’s the old SLAPP problem, smaller publishers don’t have the pockets to defend themselves against even questionable allegations.  

Picture: Mississippi Gulf Coast, near Bay St. Louis, after Katrina (my picture, Feb. 2006)

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