Texas Supreme Court: Corporations may suffer reputational damage

The Texas Supreme Court ruled Friday that corporations – and not just individuals – may recover for reputational damage in defamation lawsuits.

Typically, defendants have to prove specific financial damage resulting from the defamatory statements, unless the type of defamation is considered “defamation per se,” in which case damages are presumed. One category of statements that are often considered defamatory per se are statements attacking a person’s job-related abilities or professional stature.

In Waste Management of Texas, Inc. v. Texas Disposal Systems Landfill, Inc., two companies competed for waste-disposal and landfill contracts with city governments. One company allegedly distributed an anonymous communication claiming the other company engaged in environmentally harmful behavior.

Corporations can, and regularly do, sue for defamation. But the question before the court was whether corporations can suffer damage to their reputation. The defendant argued reputational injury is inherently human, as it is typically based on mental anguish, sleeplessness, and embarrassment. The court disagreed.

Because the corporation can suffer reputational injury, it can benefit from the automatic presumption of damages that comes with “defamation per se” and not have to prove particularized financial loss, such as time lost or expenses incurred.

However, the court also held that the plaintiff offered no evidence as to what its reputation was worth or how much it was damaged, so the court vacated the jury’s $5 million award for reputational damage.

Even though reputational injury is noneconomic, and compensation cannot be determined with “mathematical precision,” the jury still needs some measure on which to base its award, the court held.

So, while the court found that a corporation’s damages may be presumed, it also held that “[j]uries cannot simply pick a number and put it in the blank.”

The court separately upheld about $450,000 in remediation costs (time and money spent to “remedy” the negative statements about the business) and exemplary damages (meant to be an example for and to deter others), the amount of which will be determined on remand in the lower court.

The Reporters Committee had joined an amicus brief in this case which argued for the elimination of the concepts of defamation per se and presumed damages.