Co-authored by Gregory C. Johnson

The U.S. Court of Appeals for the Fifth Circuit affirmed a damages award levied against an education company that defamed its competitor by making comments about the competitor’s business prospects to potential customers.

The College Network, Inc. (TCN), which sells study guides to nursing students, told about 40 sales agents during a 2006 regional training session that there was no need to worry about smaller competitor Moore Educational Publishers, Inc. (MEP), because that firm was “out of business” or was “going out of business.” A TCN regional director encouraged agents to repeat these statements to potential customers to secure sales. In a subsequent lawsuit, MEP asserted a defamation claim against TCN predicated on the statements, and the jury—among other things—found the statements were defamatory and awarded $49,386 in reputational damages.

TCN appealed, arguing that there was insufficient evidence to award MEP reputational damages. The court rejected TCN’s argument, however, as evidence introduced at trial showed that several of MEP’s potential customers had declined purchases based on their perception that the company was failing, and that a correlation existed between the timing of TCN’s statements and an unexplained drop in MEP’s sales. This evidence sufficiently connected the defamatory statements to reputational harm to MEP and supported the jury’s verdict. (College Network Inc. v. Moore Educational Pub. Inc., 2010 WL 1923763 (5th Cir. May 12, 2010))