CACI 1731 Trade Libel—Essential Factual Elements

New December 2013; Revised June 2015, May 2018

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The tort of trade libel is a form of injurious falsehood similar to slander of title. (See Polygram Records, Inc. v. Superior Court (1985) 170 Cal.App.3d 543, 548 [216 Cal.Rptr. 252]; Erlich v. Etner (1964) 224 Cal.App.2d 69, 74 [36 Cal.Rptr. 256].) The tort has not often reached the attention of California’s appellate courts (see Polygram Records, Inc., supra, 170 Cal.App.3d at p. 548), perhaps because of the difficulty in proving damages. (See Erlich, supra, 224 Cal.App.2d at pp. 73–74.)

Include the optional language in element 1 if the plaintiff alleges that disparagement may be reasonably implied from the defendant’s words. Disparagement by reasonable implication requires more than a statement that may conceivably or plausibly be construed as derogatory. A “reasonable implication” means a clear or necessary inference. (Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 295 [172 Cal.Rptr.3d 653, 326 P.3d 253].)

Elements 4 and 5 are supported by section 623A of the Restatement 2d of Torts, which has been accepted in California. (See Melaleuca, Inc. v. Clark (1998) 66 Cal.App.4th 1344, 1360–1361 [78 Cal.Rptr.2d 627].) There is some authority, however, for the proposition that no intent or reckless disregard is required (element 4) if the statement was understood in its disparaging sense and if the understanding is a reasonable construction of the language used or the acts done by the publisher. (See Nichols v. Great Am. Ins. Cos. (1985) 169 Cal.App.3d 766, 773 [215 Cal.Rptr. 416].)

The privileges of Civil Code section 47 almost certainly apply to actions for trade libel. (See Albertson v. Raboff (1956) 46 Cal.2d 375, 378–379 [295 P.2d 405] [slander-of-title case]; 117 Sales Corp. v. Olsen (1978) 80 Cal.App.3d 645, 651 [145 Cal.Rptr. 778] [publication by filing small claims suit is absolutely privileged].) If a privilege is claimed, additional instructions will be necessary to frame the privilege.

Under the common-interest privilege of Civil Code section 47(c), the defendant bears the initial burden of showing facts to bring the communication within the privilege. The plaintiff then must prove that the statement was made with malice. (Lundquist v. Reusser (1994) 7 Cal.4th 1193, 1203 [31 Cal.Rptr.2d 776, 875 P.2d 1279].) If the common-interest privilege is at issue, give CACI No. 1723, Common Interest Privilege—Malice. The elements of CACI No. 1723 constitute the “unprivileged” element of this basic claim.

If the privilege of Civil Code section 47(d) for a privileged publication or broadcast is at issue, give CACI No. 1724, Fair and True Reporting Privilege. (See J-M Manufacturing Co., Inc. v. Phillips & Cohen LLP (2016) 247 Cal.App.4th 87 [201 Cal.Rptr.3d 782].) If some other privilege is at issue, an additional element or instruction targeting that privilege will be required.

Limitations on liability arising from the First Amendment apply. (Hofmann Co. v. E. I. du Pont de Nemours & Co. (1988) 202 Cal.App.3d 390, 397 [248 Cal.Rptr. 384]; see CACI Nos. 1700–1703, instructions on public figures and matters of public concern.) See also CACI No. 1707, Fact Versus Opinion.

•“Trade libel is the publication of matter disparaging the quality of another’s property, which the publisher should recognize is likely to cause pecuniary loss to the owner. [Citation.] The tort encompasses ‘all false statements concerning the quality of services or product of a business which are intended to cause that business financial harm and in fact do so.’ [Citation.] [¶] To constitute trade libel, a statement must be false.” (City of Costa Mesa v. D’Alessio Investments, LLC (2013) 214 Cal.App.4th 358, 376 [154 Cal.Rptr.3d 698].)

•“To constitute trade libel the statement must be made with actual malice, that is, with knowledge it was false or with reckless disregard for whether it was true or false.” (J-M Manufacturing Co., Inc. v. Phillips & Cohen LLP (2016) 247 Cal.App.4th 87, 97 [201 Cal.Rptr.3d 782].)

•“The distinction between libel and trade libel is that the former concerns the person or reputation of plaintiff and the latter relates to his goods.” (Shores v. Chip Steak Co. (1955) 130 Cal.App.2d 627, 630 [279 P.2d 595].)

•“[A]n action for ‘slander of title’ … is a form of action somewhat related to trade libel … .” (Erlich, supra, 224 Cal.App.2d at p. 74.)

•“Confusion surrounds the tort of ‘commercial disparagement’ because not only is its content blurred and uncertain, so also is its very name. The tort has received various labels, such as ‘commercial disparagement,’ ‘injurious falsehood,’ ‘product disparagement,’ ‘trade libel,’ ‘disparagement of property,’ and ‘slander of goods.’ These shifting names have led counsel and the courts into confusion, thinking that they were dealing with different bodies of law. In fact, all these labels denominate the same basic legal claim.” (Hartford Casualty Ins. Co., supra, 59 Cal.4th at p. 289.)

•“The protection the common law provides statements which disparage products as opposed to reputations is set forth in the Restatement Second of Torts sections 623A and 626. Section 623A provides: ‘One who publishes a false statement harmful to the interests of another is subject to liability for pecuniary loss resulting to the other if [P] (a) he intends for publication of the statement to result in harm to interests of the other having a pecuniary value, or either recognizes or should recognize that it is likely to do so, and [P](b) he knows that the statement is false or acts in reckless disregard of its truth or falsity.’ [¶] Section 626 of Restatement Second of Torts in turn states: ‘The rules on liability for the publication of an injurious falsehood stated in § 623A apply to the publication of matter disparaging the quality of another’s land, chattels or intangible things, that the publisher should recognize as likely to result in pecuniary loss to the other through the conduct of a third person in respect to the other’s interests in the property.’ ” (Melaleuca, Inc., supra, 66 Cal.App.4th at pp. 1360–1361, original italics.)

•“According to section 629 of the Restatement Second of Torts (1977), ‘[a] statement is disparaging if it is understood to cast doubt upon the quality of another’s land, chattels or intangible things, or upon the existence or extent of his property in them, and [¶] (a) the publisher intends the statement to cast the doubt, or [¶] (b) the recipient’s understanding of it as casting the doubt was reasonable.’ ” (Hartford Casualty Ins. Co., supra, 59 Cal.4th at p. 288.)

•“What distinguishes a claim of disparagement is that an injurious falsehood has been directed specifically at the plaintiff’s business or product, derogating that business or product and thereby causing that plaintiff special damages.” (Hartford Casualty Ins. Co., supra, 59 Cal.4th at p. 294, original italics.)

•“The Restatement [2d Torts] view is that, like slander of title, what is commonly called ‘trade libel’ is a particular form of the tort of injurious falsehood and need not be in writing.” (Polygram Records, Inc., supra, 170 Cal.App.3d at p. 548.)

•“While … general damages are presumed in a libel of a businessman, this is not so in action for trade libel. Dean Prosser has discussed the problems in such actions as follows: ‘Injurious falsehood, or disparagement, then, may consist of the publication of matter derogatory to the plaintiff’s title to his property, or its quality, or to his business in general, … The cause of action founded upon it resembles that for defamation, but differs from it materially in the greater burden of proof resting on the plaintiff, and the necessity for special damage in all cases. … [The] plaintiff must prove in all cases that the publication has played a material and substantial part in inducing others not to deal with him, and that as a result he has suffered special damages. … Usually, … the damages claimed have consisted of loss of prospective contracts with the plaintiff’s customers. Here the remedy has been so hedged about with limitations that its usefulness to the plaintiff has been seriously impaired. It is nearly always held that it is not enough to show a general decline in his business resulting from the falsehood, even where no other cause for it is apparent, and that it is only the loss of specific sales that can be recovered. This means, in the usual case, that the plaintiff must identify the particular purchasers who have refrained from dealing with him, and specify the transactions of which he claims to have been deprived.’ ” (Erlich, supra, 224 Cal.App. 2d at pp. 73–74.)

•“Because the gravamen of the complaint is the allegation that respondents made false statements of fact that injured appellant’s business, the ‘limitations that define the First Amendment’s zone of protection’ are applicable. ‘[It] is immaterial for First Amendment purposes whether the statement in question relates to the plaintiff himself or merely to his property … .’ ” (Hofmann Co., supra, 202 Cal.App.3d at p. 397, internal citation omitted.)

•“If respondents’ statements about appellant are opinions, the cause of action for trade libel must of course fail. ‘Under the First Amendment there is no such thing as a false idea. However pernicious an opinion may seem, we depend for its correction not on the conscience of judges and juries but on the competition of other ideas. But there is no constitutional value in false statements of fact.’ Statements of fact can be true or false, but an opinion—‘a view, judgment, or appraisal formed in the mind … [a] belief stronger than impression and less strong than positive knowledge’—is the result of a mental process and not capable of proof in terms of truth or falsity.” (Hofmann Co., supra, 202 Cal.App.3d at p. 397, footnote and internal citation omitted.)

•“[I]t is not absolutely necessary that the disparaging publication be intentionally designed to injure. If the statement was understood in its disparaging sense and if the understanding is a reasonable construction of the language used or the acts done by the publisher, it is not material that the publisher did not intend the disparaging statement to be so understood.” (Nichols, supra, 169 Cal.App.3d at p. 773.)

•“Disparagement by ‘reasonable implication’ requires more than a statement that may conceivably or plausibly be construed as derogatory to a specific product or business. A ‘reasonable implication’ in this context means a clear or necessary inference.” (Hartford Casualty Ins. Co., supra, 59 Cal.4th at p. 295, internal citations omitted.)