• Advanced Engineered Products, Inc.
  • Asset sale to Curtiss Wright Flow Control Services Corporation
  • RKW SE
  • Purchase of capital stock of Danafilms from founder and ESOP
  • Frazer Capital & Co.
  • Sale of Back Bay portfolio

Managing Corporate Defamation: A Case Study as to How Employers Can Fight Back

Nancy Puleo November 14, 2012


You are a principal, director, officer, or in-house counsel of a business (XYZ Corporation) in a highly competitive industry.  Your company is seeking to expand its web presence and surpass its competitors in attracting clients on the Internet.  The company has just embarked on a comprehensive marketing campaign on social media websites such as Facebook, Twitter, LinkedIn, and YouTube.

During a Google search for XYZ Corporation, you come across a Twitter account with the user name “XYZ_dude.”  As you scroll through the “tweets” by XYX_dude, you see that he has tweeted “XYZ’s billing practices are fudged” and “XYZ is developing a new solar powered widget that is loaded with bugs,” with a tag to XYZ Corporation’s largest purchaser of widgets.  Has anyone else seen this?  Your worst fears are confirmed when you see that the company’s largest widget purchaser and other clients have become followers of XYZ_dude’s Twitter account, which exists solely to undermine your company.  Although the name of the Twitter account and posted content imply that XYZ_dude is an employee, the account holder is anonymous.

What Do You Do?

The first step is to contact Twitter concerning the account.  Twitter’s policies prohibit, among other things, impersonating another person and trademark infringement.  However, Twitter construes such violations narrowly.  Twitter will not remove user names that are merely similar to other user names.  Moreover, Twitter allows parody, commentary, and fan accounts to post comments about companies and individuals.  Twitter and other social media websites enjoy a federal statutory privilege that provides immunity from tort liability for statements made by third-parties.  Thus, websites that host social media forums have little incentive to police potentially defamatory comments.  

Internal Investigation

By virtue of the content posted on Twitter, you suspect, but are not certain, that XYZ_dude is an employee.  Your company has a social media policy against employees defaming the company and depicting the company on the Internet without the company’s permission.  Furthermore, all employees sign a confidentiality agreement upon hire prohibiting them from disclosing the company’s confidential information during employment and thereafter.   If you can determine the identity of the Twitter account holder through review of internal company records, can you then fire the employee for violating company policy?  Surprisingly, the answer is not as obvious as it might seem. 

In a series of decisions by the National Labor Relations Board (“NLRB”) concerning social media, the NLRB has weighed in on the permissible content of employers’ social media policies and the extent to which employers may discipline employees for social media activities.  For example, the NLRB has determined that disciplining employees for “inappropriate discussions,” “offensive conduct,” and “rude or discourteous behavior” constitutes an unfair labor practice under Section 7 the National Labor Relations Act (“NLRA”).  Section 7 protects certain activities of both union and non-union employees, including their rights to discuss the terms and conditions of their employment.

Notwithstanding whether the company’s social media policy is permissible, XYZ_dude’s tweets may lose Section 7 protection because they are reckless and defamatory.   In addition, a disgruntled employee’s social media comments may not be protected NLRA activity if not done in concert with other employees, though the NLRB considers even a “like” on Facebook by a fellow employee to constitute concerted activity.  The short answer is that implementing a social media policy and disciplining an employee for social media activity should be done in consultation with legal counsel, particularly since the NLRB is continually updating its position on these issues.

Procedure for Legal Action  

Assume that the internal investigation does not identify XYZ_dude.  It is unlikely that Twitter will voluntarily turn over information that can identify the person behind the anonymous user name.  Typically, social media websites only respond to a subpoena or a court order compelling them to produce this information.

The company must commence a lawsuit to obtain a subpoena or court order.  The defendant in the lawsuit is “John Doe I.”  The identity of the Twitter account may be obtained in one of two ways through a subpoena or court order.  First, the user may have provided Twitter with an email address or other information that identifies him or her.  Second, the Internet Protocol (IP) address of the user is recorded when that person makes a post on Twitter.  An IP address, which is assigned by an Internet Service Provider (ISP), such as Comcast or Verizon, can be used like a phone number to identify the physical location to which the IP address was assigned.  If the anonymous poster needs to be identified through his or her IP address, two subpoenas will be required: one to Twitter, which will yield the IP address, and a second subpoena to the ISP, which will usually identify the physical address and the person to whom the account for Internet services is registered.  Where the two-step process is necessary, time is of the essence because most ISPs only retain IP address information for a limited period of time, typically 60 to 90 days.   

Unmasking the Anonymous Tweeter

Once Twitter is served with the subpoena, Twitter will notify the account holder that his or her account information will be revealed unless he or she intervenes in the court action to  oppose disclosure of the Twitter account information.   In considering whether to allow an anonymous account holder’s motion to quash the subpoena, which would effectively end the company’s case as the account holder’s identity would not be revealed, the court in the jurisdiction where the subpoena issued balances the First Amendment right of the author to speak anonymously against the right of the plaintiff to pursue its claims.

Legal Claims Against XYZ_dude

An anonymous individual has made disparaging comments about the company’s business practices and products in development and disclosed confidential information.   What legal claims does the company have?

In this hypothetical, because XYZ Corporation requires each employee to sign a confidentiality agreement to protect the company’s confidential information, the company has a claim for XYZ_dude’s breach of this agreement.

Another claim is for defamation (also known as libel, where the statement is made in writing).  To prove a claim for defamation under Massachusetts law, the company must show that Twitter user made a false and defamatory statement (or a true statement with actual malice),  “of and concerning” the company; that the statement was published to a third party; that the author was at fault in making the statement; and that the statement caused the company economic loss or was the type of statement that is actionable without proof of economic loss.  Some of these elements are easy to prove.  In our example, there is no doubt that the statements refer to the company.  Other elements, such as damage to the company’s reputation, may be more difficult.

A related claim to defamation is commercial or product disparagement.  This legal theory applies only to tangible and direct pecuniary loss and does not provide damages for reputational injury.  Similarly, tortious interference with contractual and/or prospective business relations is a tort designed to remedy an actual loss of a contract or a reasonably-certain business deal.  In this example, if XYZ Corporation’s largest purchaser of widgets  reduced its annual contract for widgets from $2 million to $200,000 because of XYZ_dude’s post about the quality of the widgets, the $1.8 million loss of sales is likely recoverable under the tortious interference theory.

Final Thoughts on Defamation Actions 

When a company discovers defamatory comments on the Internet and chooses to respond, there are a variety of questions concerning the motivations of the company and the author as well as the likely impact on clients.  Some incidents end with a simple cease and desist letter.  Others result in protracted litigation, particularly where the anonymous commenter is well-funded or has a lot at stake in disclosing his or her identity.  The best defense for potentially damaging online commentary is a good offense, including establishing a positive web presence on social media that can effectively drown out any negative comments.

If you have any questions or need additional information regarding this, please contact Nancy J. Puleo or James E. Kruzer.

This Alert is provided for information purposes only, and does not constitute legal advice.  According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2012 Posternak Blankstein & Lund LLP.  All rights reserved.

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