Don’t Bank On Defamation Law To Help

November 9, 2008

This week the Eighth Circuit Court of Appeals released a decision demonstrating how tough it can be to invoke defamation law when the person alleging defamation was the one who asked for the allegedly false information in the first place.

The federal case from Minnesota involved a loan dispute between a small business and one of Minnesota’s largest banks.  Court cases were pending in both Hennepin and Ramsey County courts, one involving an alleged $35,000 loan default and the other involved alleged bank overdraft charges.  The business defended against and settled the first lawsuit involving the loan.  But the business did not defend against the second suit involving the overdraft charges, which prompted the bank to seek a default judgment and to begin garnishing the business’ other bank accounts.

Then, in reponse to the business owner’s request, the bank sent a fax suggesting that the $35,000 loan was unpaid.  The business owner filed a defamation case containing a variety of allegations, including that the fax contained false information that was communicated to potential investors and caused the business to lose $4.2 million in profits

The Eighth Circuit rejected the defamation claims one by one.  Most importantly, the court concluded that the fax was “absolutely privileged”–in other words, it could not provide a basis for a defamation claim even if the information was false–because the business owner had consented to it being sent.

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