An unusually high award of damages has been made against a US website because of defamatory comments made on a discussion thread, but what is it really worth?
There is no disputing that a £50,000 award of damages, made against the US website Digital Trends earlier this month for defamatory comments in two online discussion threads, is “unusually high” as Eversheds, the claimant’s lawyers, put it in their press release. But what is the true value of this judgment? The website didn’t acknowledge or defend the proceedings in London’s high court and there is a plump question mark over its enforceability in America.
The fact that the claimant is a company also makes the substantial award worth a second glance because companies, unlike individuals who sue for libel, are not entitled to compensation for hurt and humiliation (they have no feelings) and this usually means lower general damages. Some campaigners for libel reform question whether companies should be allowed to sue for libel at all. However, as the law stands, a company is entitled to compensation for damage to its reputation and for the purpose of vindicating its good name.
The claimant company trades as Train2Game and SkillsTrain providing distance-learning courses in computer games design and IT and book-keeping. It sued Digital Trends over comments on discussion threads in 2006 and 2009 that it operated fraudulently. To make matters worse the words “Train2Game New Scam…” (the title of the later thread) came up in Google searches for the claimant. An attempt to join Google as a defendant failed last year when Mr Justice Eady held that the search engine was not responsible for defamatory statements produced in its search results.
The US defendant in this case fared much worse in the Royal Courts of Justice than it would have done if proceedings had been issued in America where section 230 of the Communications Decency Act provides websites with immunity from liability for comments posted on discussion threads, leaving the, frequently anonymous, user as the only possible defendant in libel litigation. And there’s the rub for the successful British claimant. The recently passed Speech Act prevents US courts from recognising and enforcing foreign defamation judgments against US publishers if they are inconsistent with US laws protecting freedom of expression.
It’s not clear whether the claimant in this case intends to enforce the judgment in the US – no one at Eversheds was available to comment – but it would need to think carefully before doing so. “If the UK claimant came to the US and tried to enforce the default judgment, the US company would have the full benefit of the Speech Act,” says David Heller an attorney at the Media Law Resource Center in New York. “Moreover, even if the UK claimant doesn’t come to the US, the US company can, under the statute, seek a declaration of unenforceability.” He adds: “The Speech Act states that defendants who successfully prevail in opposing enforcement are generally entitled to reasonable attorney fees. So if all the other hurdles don’t deter a foreign claimant, they will face a legal bill if they try to enforce and lose.”
The defamed company may, nevertheless, feel that this damages award, even if it turns out to be unenforceable in the US, is worth every penny. The claimant has in its hand a high court judgment which says that allegations published on the Digital Trends website are false and an award of damages high enough to represent vindication.
Arriving at the figure of £50,000 Mr Justice Tugendhat explained the significance of the training company not relying on the presumptions of falsity and damage as claimants are entitled to do in libel cases: that would have given them an easy win, but possibly low, or even nominal, damages. Instead the company demonstrated to the court that the allegations made in the discussion threads were untrue and it provided evidence about the damage suffered to its trading reputation.
Digital Trends claims on its website to have 2 million unique visitors and more than 10 million page views each month and the judge inferred from this that the defamatory comments had been frequently accessed by web users. The claimant didn’t make any specific claim for loss of business but the company told the court it was still getting questions from potential students about the scam allegations and a number of websites had wrongly reported the earlier judgment relating to Google misrepresenting the allegations as true. This evidence paved the way for a higher award of damages. “I infer that the claimant has suffered actual damage, in the form of students who would have taken their courses but have been put off from doing so,” said Tugendhat.
There are various points for web publishers to note in this decision, among them the suggestion that damages would have been lower if Digital Trends had acted quickly when it was put on notice, in April 2008 and again in March 2009, of the defamatory comments in the two online discussion threads; it failed to remove them until proceedings were issued in May 2009.
Lord Lester’s defamation bill proposes that companies should be required to show that defamatory allegations caused, or are likely to cause, substantial financial loss to them. Train2Game and SkillsTrain might have succeeded under such a provision, but it seems unlikely that the result would have been the same because the compensation would not reflect the need to clear the company’s name – the main reason for the high award here. “The primary purpose of the damages sought in this case is vindication of the claimant’s reputation,” said Tugendhat. “In my judgment the sum necessary to demonstrate the falsity of the allegations complained of in this case is £50,000.”
This post was originally published on Afua Hirsch’s Law Blog on Guardian Law and is reproduced with permission and thanks
Nice article. I am surprised it took the Americans so long to enact the Free Speech Act as they have been outraged since the Dow Jones v Gutnick case and libel tourism in England. It will definitely deter some foreign claimants although there will always be claimants such as Digital Trends who will be satisfied by the ‘vindication’ aspect. I do agree that companies should be required to show that defamatory allegations caused, or are likely to cause, substantial financial loss to them, although proving loss can be difficult when you are talking about potential loss of sales. There is a market out there for people writing fake product scam reviews. In Australia companies can sue for the tort of injurious falsehood.