Opinion ID: 778327
Heading Depth: 4
Heading Rank: 4

Heading: Property Interest in Goodwill

Text: 35 Med Corp. further asserts that the proposed suspension would deprive it of a protected property interest in its business goodwill. Med Corp. observes that Ohio law recognizes property rights in business goodwill. Med Corp. claims that the proposed suspension would deprive it of its reputation for skill in the ambulance service industry, and therefore constitutes a deprivation of its property interest in its goodwill. Because we find this claim to be indistinguishable from Med Corp.'s liberty interest claim based upon alleged injuries to its reputation, which we have already determined to be without merit, we likewise reject Med Corp.'s claim that it was deprived of its property interest in its business goodwill. 36 Under Ohio law, goodwill is comprehensively defined as 37 the advantage or benefit, which is acquired by an establishment, beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement, which it receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices. 38 Spayd v. Turner, Granzow & Hollenkamp, 19 Ohio St.3d 55, 482 N.E.2d 1232, 1236 (Ohio 1985) (quoting Story, Commentaries on the Law of Partnership § 99, p. 170 (6th Ed. 1868)). The concept of goodwill generally refers to the value of a business as a going concern and is measured by the value of the business over and above the value of its physical property. 38 Am.Jur.2d Good Will § 4 (1999); see also WMX Techs., Inc. v. Miller, 197 F.3d 367, 374 (9th Cir.1999) (en banc) (Essentially, the goodwill of a business is its value as a going concern and is made up of many factors, such as location, patronage of customers, relations with suppliers, experience of employees, effectiveness of management, and many other factors.). Although a business's reputation with the general public affects the value of its goodwill, [r]eputation is not the equivalent of the goodwill of a business. Id. 39 Med Corp.'s property claim based upon injury to goodwill fails for the same reasons discussed in relation to Med Corp.'s asserted liberty interest arising from injury to its reputation. The property deprivation of which Med Corp. complains is merely the reduction in the value of its goodwill resulting from an alleged injury to its business reputation. We have already explained that Med Corp. cannot maintain a liberty interest claim under the legal standards applicable to due process claims based upon defamatory injuries to reputation. The question then becomes whether damage to reputation is to be treated differently because the damage affects the person's business. WMX Techs., 197 F.3d at 374. We think that it should not. Just as injuries to the reputation of an individual, without more, do not establish a deprivation of a constitutionally protected liberty or property right, Siegert, 500 U.S. at 234, 111 S.Ct. 1789, damage to the reputation of a business, without more, does not rise to the level of a constitutionally protected property interest. WMX Techs., 197 F.3d at 376. We therefore agree with those courts that have concluded that property claims based upon alleged deprivations of business goodwill resulting from defamatory statements should be judged according to the standards applicable to liberty interest claims based upon injuries to reputation. See, e.g., id. at 376; Am. Family Life Assurance Co. v. Teasdale, 733 F.2d 559, 565 (8th Cir.1984); Coakley v. Jaffe, 49 F.Supp.2d 615, 625 (S.D.N.Y.1999) (It is well established, however, that the interest on which plaintiffs here primarily rely — `business reputation' — falls outside the protection of the due process clause. (citation omitted)); Wimer v. H.R. Holzapfel, 868 F.Supp. 844, 849 (E.D.Tex.1994). An injury to a business's reputation could always be presented as a claim for lost goodwill, since the latter is partly a function of reputation and public prejudices. See Spayd, 482 N.E.2d at 1236. If we were to recognize injuries to business reputation as a distinct kind of property deprivation, businesses could effectively circumvent the carefully designed doctrines developed to limit due process claims arising from mere defamation. See WMX Techs., Inc., 197 F.3d at 375 ([T]he Supreme Court.... stressed, in the context of Paul v. Davis, the extent to which federal law could subsume state tort law if § 1983 were to be construed to allow damage to personal reputation without more to be brought as a federal action. The same is true if damage to the reputation of a business were to be construed as a `deprivation' of goodwill....). We decline to endorse such a result. 40 Med Corp. has not made the showing required by Supreme Court and Sixth Circuit precedent to state a claim for deprivation of a liberty interest based upon injury to reputation. In particular, Med Corp. has not shown that the City disclosed its allegations publicly, which we think is essential to any claim alleging injury to business reputation, whether couched in terms of a goodwill/property interest or a livelihood/liberty interest. See Wimer, 868 F.Supp. at 849 (Assuming arguendo that Plaintiff is able to demonstrate that loss of goodwill is a property interest within the meaning of the Due Process Clause, he must still offer this Court at least some evidence that the actions of the state served to stigmatize him or his business.). Nor has Med Corp. shown that its future business opportunities would be foreclosed by the proposed suspension. We therefore conclude that summary judgment was appropriate as to Med Corp.'s due process claims alleging injury to its business goodwill.