Corporate Public Figures

Defamation, also known as libel or slander, occurs when false statements are made about a person that damages that person’s reputation. The law of defamation recognizes the right of individuals to protect their reputations from wrongful injury. But what of corporations? Should a corporation be treated as an individual for the purposes of defamation law? A corporation certainly has a reputation and can suffer damage as a result of defamatory statements made about it, but unlike an individual, corporations have no personality and can suffer no emotional harm as a result of being defamed.

Historically, courts in the United States treated corporate and individual plaintiffs the same way. But in the late 1960s and early 1970s, the Supreme Court created three categories of defamation plaintiffs: (1) public official, (2) public figure, and (3) private person. That categorization made it more difficult to apply the law to corporations. This entry first discusses the categories of plaintiffs in defamation law. It then explores how courts classify corporate defamation plaintiffs.

Plaintiff Categories

Until the 1960s, all defamation plaintiffs were treated alike. But in 1964, the Supreme Court held that public officials—those elected to public office or nonelected government employees with significant public policy influence—had to do more than simply prove that defamatory statements had been published about them. They had to establish fault—specifically that the statements had been made with actual malice—which the Court defined as knowledge of falsity or willful disregard for the truth of the statements. In other words, public officials were given the added burden of proving that the defendant had deliberately lied about them. The Court reasoned that public officials should have thick skins when it comes to public scrutiny and that the First Amendment protects some false statements because they are inevitable in a debate. The decision gave the news media in particular greater latitude to scrutinize the activities of public officials without fear of retribution via large jury damage awards.

Three years later, the Court extended the definition of public officials to include “public figures,” although to whom that category applied was left unclear. In the 1971 case of Rosenbloom v. Metromedia, Inc., the Court attempted to settle the issue by holding that the actual malice standard applied to any defamation plaintiff if the defamatory statements concerned an issue of public interest. But the Court subsequently rejected that approach in Gertz v. Robert Welch, Inc. This time, the Court divided the public figure status into two categories: (1) all-purpose public figures (individuals who have such pervasive power and influence that they are considered public figures for all purposes) and (2) limited public figures (individuals who voluntarily thrust themselves into a public controversy to influence its resolution and who are public figures only for defamations related to that controversy).

In practical terms, plaintiffs who are classified as public figures, either all-purpose or limited, have a more difficult time winning a defamation lawsuit than do private person plaintiffs. Public figure plaintiffs, like public officials, must prove that the defendant knew the statement was false or recklessly disregarded its truth. Private person plaintiffs usually only have to show that the defendant was negligent or careless when the statement was made. The belief is that the higher burden of proof does not unduly disadvantage public figure plaintiffs because they have invited or welcomed public scrutiny and have access to media channels to refute the defamatory statements. While the law is relatively settled when it comes to its application to individuals, the Court has not dealt with the issue of how to treat corporate defamation plaintiffs. Thus, state courts have been left to their own devices.

Corporate Defamation Plaintiffs

Until 1964, the question of whether a corporation should be treated as an individual for the purposes of libel law was answered by American courts in the affirmative for the most part, a recognition of the fact that corporate reputation could be damaged. But when the Court created the different categories of plaintiffs, it complicated matters. Corporations obviously cannot be public officials, but they could be public figures, especially given the Court’s emphasis on public scrutiny and media access.

Limited Public Figures

The Gertz ruling’s categorization of limited public figures was met with some trepidation by the lower courts. At first, some were not convinced that Gertz applied to corporate plaintiffs at all. In the 1976 case of Martin Marietta Corp. v. The Evening Star Newspaper Company, a federal district court argued that the values enunciated in Gertz applied only to individual reputations. In Gertz, the Supreme Court sought to determine whether private individuals had become “public” with respect to a particular issue because of their own actions. Because corporations do not have private lives to lose, the standards set out in Gertz made no sense when a corporate plaintiff was involved, the Court reasoned. The Rosenbloom public interest test was more appropriate when dealing with a corporate plaintiff.

Some scholars support the Martin Marietta approach to dealing with corporate plaintiffs, arguing that Gertz’s public controversy standard is inadequate to protect the flow of information to the public about businesses. The concept of “controversy” is too narrow and is not a good fit in most cases involving companies. Corporate activities and involvement in issues may not rise to the level of a controversy, but they are still matters of public interest. Corporations are powerful entities in society, and oversight of their behavior is needed, it is argued. The appropriate test for all corporate libel plaintiffs to meet, according to these scholars, is actual malice. But other scholars note that a blanket approach to corporate libel plaintiffs ignores the differences among corporate entities. Not all corporations are large enterprises that warrant public figure status, and for the most part, the courts agree.

A year after the Martin Marietta decision, a California court specifically adopted the Gertz standard in a case involving a debt collection agency. The court applied Gertz because it believed that no real distinction exists between the protectable reputation interests of corporations and individuals.

The majority of lower courts have adopted the Gertz standard, although its application has been inconsistent. Under Gertz, the courts must first determine whether there is a preexisting public controversy and then whether the plaintiff voluntarily thrust itself into the debate to influence the outcome. But what amounts to a public controversy and the actions needed on the part of an organization to voluntarily insert itself into that controversy vary widely in the lower courts.

Public Controversy

For the most part, courts have held that news reports alleging unethical or illegal conduct on the part of a corporate plaintiff do not necessarily make the conduct a public controversy. For example, in a 1980 case involving a newspaper article about alleged defects in the work of a boat manufacturer, the court found that the simple act of selling products did not amount to a public controversy. The plaintiff was simply a successful business, and if it were considered a public figure, virtually every business would be too. Other courts have taken a similar approach, holding that organized crime is not a controversy, nor is the use of triple-walled chimneys.

In Steaks Unlimited, Inc. v. Deaner, however, the court found the opposite—that the mere act of doing business can be controversial. The corporate plaintiff had spent $16,000 on an advertising campaign to promote a four-day sale of beef at several Pittsburgh department stores. A television news report charged the plaintiff with misrepresenting the quality of its product and of deceptive sales tactics. In a decision that was later upheld by a federal appeals court, the lower court found the plaintiff to be a public figure for the purposes of the “controversy” surrounding the sale. Through the advertising campaign, the company had invited public scrutiny and proved that it had access to the media, the court held.

Similarly, in a lawsuit filed by the National Foundation for Cancer Research (NFCR) against the Better Business Bureau for a report alleging that the NFCR did not meet the bureau’s standards for charitable institutions because of inaccurate and misleading statements in its fund-raising, the court held that the NFCR’s use of funds was a controversy even though the NFCR had created it.

Voluntarily Thrust Itself

The Supreme Court has said that individuals who are drawn into criminal or civil litigation by the government or other parties do not automatically become public figures, but when it comes to corporations, the lower courts tend to focus on the public’s interest in the allegations. Thus, a company became a public figure by virtue of a Federal Trade Commission complaint into its activities because, the Court held, the Federal Trade Commission is responsible for protecting the public from deception. The complaint was the result of the company’s own actions. An insurance company was also held to be a public figure because it voluntarily operated in a highly regulated industry; therefore, it was not dragged into a controversy when it became the subject of an investigation.

Doing one’s job, even if the job is related to a public controversy, does not necessarily make one a public figure. For example, a survey company did not thrust itself into a land-use controversy. It merely performed a professional service. Similarly, a liquidator involved in the closeout of a well-known San Francisco department store was found not to be a public figure. The action arose out of a local television broadcast alleging that the department store and the plaintiff had engaged in deceptive merchandising practices. The court found that just doing business with a company involved in a public controversy did not mean that the plaintiff had thrust itself into the debate.

But issuing news releases, distributing media kits, and submitting material to a congressional committee have all been considered indications that the plaintiff voluntarily thrust itself into a controversy. In the case of the NFCR, the court held that the foundation had thrust itself into the public eye through its fund-raising efforts, including the 68 million pieces of direct mail solicitation it had distributed and the $25 million it had raised.

All-Purpose Public Figures

Occasionally, a corporate defamation plaintiff has been found to be an all-purpose public figure. A corporation is more likely to be considered an all-purpose public figure if it is in a highly regulated industry, such as banking and insurance; has large assets; is publicly traded; operates on an international scale; or is a powerful presence in the community, such as a town’s major employer. Examples of corporations that have been held to be all-purpose public figures for the purposes of defamation include Reliance Insurance Company, Coronado Credit Union, the Church of Scientology, and Ithaca College.

Private Figure

If a corporation is neither an all-purpose nor a limited public figure, it falls into the private person category. Although some scholars take issue with whether a corporation should ever be considered private, the courts have found corporate defamation plaintiffs to fit this category. In fact, an examination of the cases involving the status of corporate libel plaintiffs over the past four decades reveals that corporate plaintiffs were found to be private figures almost half the time.

Conclusion

As the foregoing suggests, the status of corporate defamation plaintiffs remains unclear. Courts tend to evaluate a number of factors in deciding whether a corporation is a public figure, and thus carries the burden of proving actual malice on the part of the defendant, or is a private figure, with a lesser burden of fault. Many courts today use an approach similar to that set out in the 1993 case Snead v. Redland Aggregates, Ltd. First, the court considers the notoriety of the corporation to the average person in the relevant geographical area. Second, the court looks at the amount of media attention and scrutiny that the corporation normally receives. And finally, the court decides whether the corporation was directly involved in a public controversy that existed prior to the defamation.