Managing Negative Reviews: Legal Risks and Solutions

Your company’s Google score may be the first thing customers see when they search for your goods or services. So what should you do when your business receives a negative review that’s not fair? The short answer is—except for the most egregious outliers—you should probably ignore them. There certainly are causes of action for defamation and business disparagement, but these are difficult to prove and have a high potential of backfiring. Nobody likes a bully, and when businesses go after their customers or others reviewing their products, that action can create its own controversy.

The Streisand Effect and Its Implications

First, you need to be aware of what’s known as the “Streisand effect.” Back in 2003, Barbra Streisand sued a photographer for publishing an aerial photograph of her mansion as part of the California Coastal Records Project. She probably thought her lawsuit for invasion of privacy with an alleged $50 million in damages would have intimidated the project into removing the picture. But the result is the best example of the unintended consequence of creating a new controversy. Prior to the controversy, only four people not associated with Streisand had downloaded the image. But shortly after the lawsuit was filed, nearly half a million people had downloaded the image. On top of that, her lawsuit was dismissed and she was ordered to pay the other side’s attorney’s fees. The same thing can happen with a defamation suit.

Understanding Defamation and Business Disparagement

Many businesses don’t understand the difficulty of proving a defamation case and may mistakenly believe that the First Amendment only applies to the government and not to private individuals or businesses. But this distinction breaks down when private parties ask the government (the courts) to intervene in speech based claims. There is always a balance between free speech and defamation, but that balance weighs heavily in favor of free speech. The Constitutional limitations of the First Amendment set a very high threshold for what speech is actionable as defamation.

Courts often decide if the statements were actually defamatory as a threshold matter. Generally a statement is defamatory if it tends to impeach any person’s honesty, integrity, virtue, or reputation. But to qualify as defamation, a statement needs to be derogatory, degrading, somewhat shocking, and contain elements of disgrace. In contrast, statements that are merely unflattering, abusive, annoying, or embarrassing are not actionable. Courts also look to the specific language used, the general context of the statements and the broader context in which the statements appear.

If the statements in controversy are legally capable of being defamatory and the plaintiff is a private individual or entity, the plaintiff must prove that the defendant published a false statement while acting with negligence regarding the truth of the statement. If the plaintiff is a public official, or generally in the public eye, the statement must have been made with malice to make out a claim.

Under the negligence standard, a plaintiff must show the defendant knew or should have known the defamatory statement was false. But establishing the falsity of an allegedly defamatory statement is not as simple as showing that the article contains a statement that is not literally true. There is a good bit of leeway and the courts overlook minor inaccuracies and concentrate on substantial truth. Under the malice standard, the plaintiff must prove that the defendant either knew that the statement was false, or demonstrated a reckless disregard for the truth.

Finally, in most circumstances, the plaintiff must show that it was actually damaged by the alleged defamatory statements. This is not a simple task and will likely require much more than simply showing a drop in sales after a negative review is published. Moreover, if publicity from the controversy has a negative impact—the Streisand effect—it could make proving damages even more difficult. Public outcry caused by the public seeing your company as the bully is not part of any damages caused by the defamatory statement. Those losses will need to be segregated.

Anti-SLAPP Laws and Legal Considerations

Most states have adopted some form of anti-SLAPP law. “SLAPP” stand for Strategic Lawsuits Against Public Participation. These laws generally provide an expedited dismissal procedure and penalties against using lawsuits to silence speech. The Uniform Law Commission created the Uniform Public Expression Protection Act that many states have adopted, but many states have also adopted their own. Approximately two thirds of the states have some form of anti-SLAPP law. Some are narrow and only apply to cases brought against citizens in retaliation for petitioning the government, but many of these laws are very expansive and specifically apply to online reviews of products and services.

Under these laws, the defendant’s initial burden is only to show that the case was brought in response to—or sometimes just related to—the party’s exercise of the right of free speech. Once the defendant satisfies this burden, the burden shifts to the plaintiff to establish the essential elements of its claims, and may place a heightened burden of proof on the plaintiff. This often forces a plaintiff to make its case quickly and without the benefit of discovery. Unlike a motion to dismiss in federal court, these laws require the plaintiff to present actual evidence at this early stage and not just demonstrate that they have sufficient allegations. If the plaintiff cannot meets its burden of proof, the case is quickly dismissed and these laws often award the defendant its attorneys’ fees and some even provide harsh sanctions. The award of attorneys’ fees and sanctions is usually asymmetric, meaning that they are awarded to a successful defendant, but not a plaintiff who survives this procedure. And it’s worth noting that some studies have found that the defendants prevail in these cases as much as 77% of the time.

These laws often permit an expedited appeal so even if the plaintiff gets past the motion to dismiss phase, the case might be considered on appeal before it progresses at the trial court. The timeframe for this appellate review is going to vary widely from state-to-state, but even if the plaintiff is successful, it could be a year before the case is sent back to the trial court and can progress beyond this procedure. Thus, a business must consider that it could be tied up in a year-long legal battle just to get to the point where it can get to the beginning of a difficult case—one that could take years to resolve. That represents a significant time and expense that could be better spent addressing the customer concerns and improving products.

Strategies for Handling Negative Reviews

These considerations do not mean that a business should never consider filing a defamation or business disparagement action. If you have actual evidence that a competitor is posting fraudulent reviews and deliberately lying to customers about your business, and that these actions have actually driven some customers away, it may be time to ask the courts to intervene. But the same concerns over evidence and proof a damages apply. Be sure that the malicious competitor is presenting false facts and not just disparaging opinions. Consider whether an anti-SLAPP law might apply. In some states, these laws will not apply to statements by a businesses about a competitor or by a business to prospective customers. The scope of the exceptions will vary from state to state. Also consider the costs involved in conjunction with the actual amount of lost sales or the financial realities of a damaged reputation. If your products sell for $50,000 a piece and those sales are now going to a competitor who negligently misrepresented facts about your company, it may be worthwhile if the number of lost sales is significant.

Overall, there is a substantial and asymmetric risk associated with filing a defamation suit against someone who writes a negative review. It could be dismissed early on and your business could be required to pay the defendant’s legal bills and might even be hit with monetary sanctions. And wining could be even worse. Aside from the delays and expenses added by the ant-SLAPP dismissal procedure, winning a defamation suit is expensive and time consuming. Moreover, the negative publicity associated with bringing such a suit could be worse that the original defamatory statements. And if the controversy created by the suit results in poor sales, it would make proving damages resulting from the defamatory statements even more difficult.

If your business has been the victim of a damaging review, you should consult an attorney with experience in this area of law before you take any actions such as sending out a cease and desist letter, and keep these points in mind:

• Consider the Streisand effect—don’t call attention to a negative review that might otherwise go unnoticed.

• Consider whether there is an anti-SLAPP law in you state and understand the scope of any exemptions. Also, consider whether the case could be transferred to another jurisdiction and have your legal team evaluate which state’s law will apply.

• If you must file suit, muster your evidence before you file—do not count on the discovery phase to get the evidence you need to prove your case.

For more information about business litigation and commercial litigation, see the Klemchuk PLLC Industry Focused Legal Solutions pages.

Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.

This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.

© 2024 Klemchuk PLLC | Explore our services