Defamation is the communication of a statement that makes a false claim, expressly stated or implied to be factual, that may give an individual, business, product, group, government or nation a negative image.  Generally, spoken defamation is slander and written defamation is libel.

 Because an essential element of defamation is 'making a false claim' the truth has generally been an absolute defense against a defamation tort cause of action.

NOONAN V. STAPLES

Staples manager Alan S. Noonan was fired for violating the firm's travel and expense policy.  During an investigation a team of certified accountants and a former police investigator found numerous errors in Noonan's expense reports.

For example, a meal at McDonald's for $1,129 or entries where the amounts were exactly $100 more than the actual amount.  The sly Noonan also committed errors in Staple's favor.  During the investigation Noonan admitted to 'pre-populating' expense reports with inflated false figures and failing to revise them when actual expenses were known.

The audit team concluded that Noonan had deliberately falsified the audited expense report and then Staples fired him.  The following day Executive Vice-President Jay Baitler sent a memorandum to about 1,500 employees which included the following:

It is with sincere regret that I must inform you of the termination of Alan Noonan’s employment with Staples. A thorough investigation determined that Alan was not in compliance with our [travel and expenses] policies. As always, our policies are consistently applied to everyone and compliance is mandatory on everyone’s part.

It is incumbent on all managers to understand Staples['s] policies and to consistently communicate, educate and monitor compliance every single day. Compliance with company policies is not subject to personal discretion and is not optional. In addition to ensuring compliance, the approver’s responsibility to monitor and question is a critical factor in effective management of this and all policies.

Because this is a motion for summary judgment the United States District Court 'accord[ed] plenary review to summary judgment and view[ed] the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor.'

'Under Massachusetts law, a plaintiff alleging libel must ordinarily establish five elements: (1) that the defendant published a written statement; (2) of and concerning the plaintiff; that was both (3) defamatory, and (4) false; and (5) either caused economic loss, or is actionable without proof of economic loss.'

However, Massachusetts law 'recognizes a narrow exception to this defense: the truth or falsity of the statement is immaterial, and the libel action may proceed, if the plaintiff can show that the defendant acted with "actual malice" in publishing the statement.'  In regards to Noonan's kleptomania behavior the reviewing court has held that 'there is no triable issue of fact on the question of truth.'  

The court determined that the 'actual malice' definition referred to common-law malice and not First Amendment defamation malice under the landmark 1964 NYT v. Sullivan.

The court finds persuasive the facts that (1) during Baitler's 12 years with the company he never previously referred to a fired employee by name, (2) Baitler had supervised James Dorman and did not send a similar email when his malfeasance with embezzlement and fraudulent expense report claims was discovered, and (3) the email was sent to about 1,500 employees who did not share a common interest in the communication.  The court held that 'the presence of these three pieces of evidence support inferences upon which a jury could base a verdict for Noonan.'

COMMUNITY ANALYSIS

Robert J. Ambrogi, a Massachusetts lawyer and journalist and operator of Media Law Blog, has commented, "For the time being, however, be afraid -- be very, very afraid -- of this precedent. If ill will is all that is needed to turn a truthful statement into libel, then everyone is a potential defendant."

Entertainment lawyer Gordon Firemark, an entertainment lawyer, "It will certainly have a chilling effect on important forms of speech, such as documentary films and many forms of investigative journalism."

Robert Bertsche, an attorney with Prince Lobel Glovsky & Tye who focuses on First Amendment issues, wrote in an email to Media Nation:

With this decision, the First Amendment has been replaced by the maxim, "If you don't have anything nice to say, don't say it."

Consider the irony: The Supreme Court has said that there is constitutional protection for false statements on matters of public concern, but now the First Circuit says there is no constitutional protection for true statements on matters of private concern. What's worse, the court offers no guidance about how to distinguish what is of "public concern" from what is of "private concern."

It is mind-boggling that the Court of Appeals offered so little analysis, and gave so little explanation, for a decision that arguably makes Massachusetts the least speech-protective state in the nation. Why didn't this federal court (in a diversity case, no less) ask the Massachusetts SJC [the state's Supreme Judicial Court] to opine on the validity and interpretation of this statute passed in the days of the buggy whip?

It's a bit like the state police descending on Fenway Park to handcuff Terry Francona for violating state law against public spitting.

Talk about a chilling effect on speech! Lawyers across the state should advise their clients simply not to say negative comments about people. Even if what you say is true, you will be made to pay damages if a judge decides that what you said is not of "public concern" and a jury decides you were motivated by ill will.

APPLICATION TO INVESTIGATIVE FINANCIAL JOURNALISM

The great credit contraction, what some call a Kondratieff Winter, continues shredding portfolios and vaporizing firms like the single digit midgets Citigroup, Bank of America, etc.  While these worthless firms receive multiples of their market capitalization in public assistance corporate welfare bailout funds the Federal Reserve dodges Freedom of Information Act requests regarding where the public taxpayer funds go.

For example, in their response to a Bloomberg FOIA request the Federal Reserve responded:

While the Board strongly supports transparency (as evidenced, in part, by its publication of extensive information on discount window and emergency operations of the Federal Reserve Banks), the Board also has a legal obligation under the FOIA to consider the significant adverse consequences that release of responsive information would have on the effectiveness of Federal Reserve Bank lending activity in addressing liquidity strains of financial markets and institutions and the potential adverse effects on the economy now and in the future.

The Board also has to be and is mindful of the commercial and financial interests of borrowers, the institutions whose collateral secures the borrowings, and the financial integrity of the Federal Reserve Banks.

Will sites such as BailoutSleuth which attempts to publicize important information the Federal Reserve Bank attempts to make a matter of private concern be hailed into court under defamation charges for true statements?  Transparency is an essential element for investors yet the SEC and Federal Reserve are massive failures in this regard despite their hollow suggestions to the contrary.

How can there be any trust ad mist such murkiness?  If there is no trust then why continue owing any of those types of murky assets?  It is only to be expected that as the great credit contraction grinds on that the flow of information will be further restricted for the good of the Federal Reserve cause.  

Gold and silver, a distinguished from the problematic GLD and SLV ETFs, do not require trust as they are sovereign wealth.

On the bright side, the Maryland Court of Appeals has issued a significant ruling in Independent Newspapers v. Brodie underscoring the First Amendment's protection of anonymous comments posted online' so please contribute your opinions on these important issues in the comments.

Disclosures:  Long physical gold with positions in no positions in the worthless financials C or BAC nor the GLD and SLV ETFs.