November 11, 2012
Court Reduces Damages Award if Defendant Honors Injunction – North American Recycling v. Texamet Recycling
[Post by Venkat Balasubramani]
North American Recycling sued Texamet and its principals for defamation. The two parties were involved in a transaction, and Texamet apparently had some gripes as to how things ended. Texamet allegedly went on a posting spree, posting about the transaction, calling North American “scammers” and trying to warn others that were part of a recycling message board community to watch themselves in their dealings with North American. Texamet unfortunately did not appear to defend itself, and the magistrate judge recommends granting North American’s motion for summary judgment. North American alleged it had suffered damages in the amount of $100,000 and incurred fees in the amount of $4,500. Although the judge recommends granting the motion, the judge conditionally remits the bulk of the damage award (all except for $4,500), as long as defendants meet the following two conditions:
Defendants shall cease and desist in perpetuity from making or publishing statements regarding the business practices, dealings, or contracts of any Plaintiff, that are the same, or significantly similar, in nature to the statements this Court has found to be defamatory in this case.
The district judge (almost 21 months after the issuance of the report and recommendation) adopts the recommendation and enters judgement. [I'm one to talk about the timeliness of the court's adoption of the R&R; this post sat in the queue for a couple of months for some inexplicable reason.] Although both the magistrate and district judge mention the issue that the judgment may operate as a prior restraint, they both say that enjoining future defamatory speech is OK in order to prevent the defendant from continuing to make defamatory statements.
Both judges note one obvious objection to the injunction: the fact that it's not limited to statements that have been found to be defamatory--it covers "significantly similar" statements. Another oddity with the injunction is that the court awards damages, but then takes these damages away from the plaintiffs. Either the plaintiffs have been damaged or they haven't. It doesn't make a ton of sense to wipe these damages away if the defendants agree to not post anything further. I guess you could analogize to the contempt scenario, where courts sanction litigants but wipe away monetary sanctions if the litigant complies. I don't think it's a perfect fit, but it's a possible analogy.
I suspect the driving force behind getting an injunction is to take the injunction to third parties (the message boards, and maybe search engines) and try to get content taken down on this basis. Many of the third parties would probably comply, but what happens when someone refuses to take down the content. Blockowicz says that third parties are not bound, and the plaintiffs may end up at square one. A final point worth noting is that all of this took place without defendants' participation. Their failure to appear and defend makes it difficult to be sympathetic towards them, but courts should take care in these situations to make sure their rulings aren't problematic.
Posted by Venkat at November 11, 2012 05:48 PM | Content Regulation