"Imperial Apparel, Ltd. v. Cosmo's Designer Direct, Inc.: Reexamining The First Amendments Effect on Defamation"

Imperial Apparel, Ltd. v. Cosmo's Designer Direct, Inc.: Reexamining The First Amendment's Effect On Defamation

The United States Supreme Court first addressed the First Amendment's effect on defamation in 1964. Since that time, courts have grappled with balancing the protection of speech through the First Amendment and the protection of one's reputation through defamation claims. In its recent opinion, Imperial Apparel, Ltd. v. Cosmo's Designer Direct, Inc., No. 103331, 2008 WL 351675 (Feb. 7, 2008), the Illinois Supreme Court revisited this balancing act and provided guidance to all practitioners regarding the relationship between the First Amendment and defamation claims.

In Imperial Apparel, a clothing store and its owner filed suit against a competitor-clothing store and a newspaper, alleging claims of defamation per se, defamation per quod, false light, commercial disparagement, and violation of the consumer fraud act. 2008 WL 351675, at *1. Defendant competitor's full-page ad placed in the local newspaper was the basis for all five claims. Id. There, Defendant promoted its eight-day sale while at the same time it criticized Plaintiff for copying its "3 for 1" suit offerings and generally insulted Plaintiff. Id. at 2. In particular, the ad included numerous racial slurs, demanding Plaintiff to "Start being kosher" and "Stop openly copying and coveting your neighbor's concepts or a hail storm of frozen matzo balls shall deluge your flea market style warehouse." Id. The ad also called Plaintiff a "plagiarist" and a "rags" seller and exclaimed that "[i]t is laughable how with all the integrity of the 'Iraq Information Minister,' they brazenly attempt pulling polyester over your eyes by conjuring up a hookers come on." Id.

Defendant competitor and Defendant newspaper filed motions to dismiss pursuant to 2-615, arguing that the ad constituted nonactionable speech protected by the First Amendment. The trial court agreed and dismissed all claims. Id. at 4. On appeal, the appellate court found that certain statements within the ad were constitutionally protected, but viewed certain sections of the ad as outside of the First Amendment's realm. Id. The appellate court therefore rejected the wholesale dismissal of the complaint based on the First Amendment and instead reviewed the viability of each claim individually. Id. In so doing, the appellate court reversed the dismissal of Plaintiff's false light, commercial disparagement, and consumer fraud act claims, but affirmed the dismissal of the defamation claims. 4-5. But this ruling did not withstand the Illinois Supreme Court's scrutiny upon review.

The Illinois Supreme Court began its analysis by noting that the law does not protect competition accomplished though improper means such as fraud, intimidation, and deliberate disparagement. Id. at 6. The Court thus found that an examination of the First Amendment was necessary to determine the extent the ad "crossed the line" from legitimate competition to actionable defamation and other claims. Id.

At the onset, the Court explained that there are two major considerations governing the First Amendment's effect on defamation. Id. at 7. First, one must determine whether the plaintiff is a public figure or official or simply a private individual. Id. This determination effects the standard of liability, as plaintiffs who are public figures or officials must prove that the defendant made the defamatory statement with actual malice. Id. Second, one must determine whether the statement relates to a public concern. Id. If the statement relates to a matter of public concern, punitive damages are recoverable only with a showing of actual malice. Id. Moreover, if the plaintiff asserts the defamation claim against a media defendant, the plaintiff bears the burden of proving that the statement is false. Id.

The Court then stressed that there is no separate constitutional privilege for opinion statements, stating that "even when presented as apparent opinion or rhetorical hyperbole, a statement may constitute actionable defamation." Id. at 8. The type of statement nevertheless does effect the First Amendment analysis. Id. In particular, the First Amendment precludes defamation claims based on "loose, figurative language that no reasonable person would believe presented facts." Id. To determine whether the statement "can reasonably be interpreted as stating actual fact," courts must examine three factors: "(1) whether the statement has a precise and readily understood meaning, (2) whether the statement is verifiable, and (3) whether the statement's literary or social context signals that it has factual content." Id. at 9.

The Illinois Supreme Court explained that this reasonably-stating-facts analysis applies to actions brought by public officials, brought by public figures, and brought by private individuals against media defendants. Id. The Court stated however that whether First Amendment protects non-factual statements made by one private person about another private person is unsettled law. Id. The Court noted that there are benefits to extending the First Amendment's protections to such private-private statements, for it would reduce ambiguity regarding whether a particular statement was actionable and apply the same standards to actions brought by private persons. Id. at 10. But the Illinois Supreme Court did not rule on whether the First Amendment's protections extended to such statements because no one had challenged the assumption of the lower courts that the First Amendment protected the private-private statements. Id.

Instead, the Illinois Supreme Court examined whether Defendant competitor's statements about Plaintiff "can reasonably be interpreted as stating actual fact." Id. at 9-10. The Court stated that the "text is artless, ungrammatical, sophomoric and sometimes nonsensical. It is also a shameless appeal to ethnic prejudice, extolling, as it does, the supposed superiority of Italians over those of Jewish ancestry." Id. at 10. The Court additionally observed that the ad used terms like "rags" "flea market style warehouse," and "a hookers come on." Id. With all of this in mind and "in the context of a discount clothing sales" ad, the Court ruled that no reasonable person could view the statements as stating actual facts and thus the ad constituted constitutionally-protected speech. Id. And because the same speech formed the basis for all five claims, the Court held that the trial court properly had dismissed the complaint as a whole. Id. at 11. The Court thus reversed and affirmed in part the appellate court. Id.

In short, Imperial Apparel provides practitioners with a useful summary of the First Amendment's effect on defamation. This balancing act is subject to change, of course. Indeed, it is only a matter of time before someone accepts the Court's invitation to question whether the First Amendment protects non-factual statements made by private persons about private persons.