Opinion ID: 2972009
Heading Depth: 2
Heading Rank: 5

Heading: Trade defamation.

Text: The basis of ATC’s defamation claim in the district court was a series of statements made by North Carolina Defendants Leech and Litchfield in letters to prospective customers, such as the explanation of their departure from ATC, and Hester’s formation of WITT, as being prompted by “seeing and hearing all of his customers and ex-employees complain and suffer over things that should never have happened.” In Kentucky, defamation is divided into two categories, defamation per se and defamation per quod. CMI, Inc. v. Intoximeters, Inc., 918 F. Supp. 1068, 1083 (W.D. Ky. 1995). The district court correctly concluded that ATC could not recover for defamation per quod, because it presented no evidence of any pecuniary loss as a direct and proximate result of the defamation. Ibid. (citing Sweeney & Co. v. Brown, 60 S.W.2d 381, 383 (Ky. 1933)). The district court was also correct in holding that Appellees’ statements did not rise to the level of libel per se, because they did not expose ATC to “public hatred, ridicule, contempt or disgrace, or [] induce an evil opinion of [ATC] in the minds of right-thinking people,” as is required under Kentucky defamation law. Columbia Sussex, Inc. v. Hay, 627 S.W.2d 279, 274 (Ky. Ct. App. 1981). Furthermore, “[i]f a business is damaged, the damage is usually reflected in the loss of revenues or profits,” and thus “courts should be very cautious about labeling as defamation per se comments made about a corporation or its products.” CMI, 918 F. Supp. at 1084. Therefore, we will not disturb the district court’s findings on the issue of trade defamation. 10 On appeal, ATC alleges that the North Carolina Defendants committed other breaches along with Hester, including planning the opening of the Charlotte branch of WITT while they were still employed by ATC, soliciting ATC employees on behalf of WITT, and securing a building for WITT, but these allegations were previously directed only at Hester. These claims may not be directed towards the North Carolina Defendants for the first time on appeal. See St. Marys Foundry, 332 F.3d at 99596. No. 03-6505 ATC Distribution Group, Inc. v. Whatever It Takes, et al. Page 13 F. Intentional interference with business relations. ATC claims that all of the Appellees interfered with actual and prospective contracts between ATC and other companies. The district court applied the seven-factor test of improper interference set forth in the Restatement (Second) of Torts, and found that none of the Appellees’ behavior had risen to the level of intentional interference with business relations. See Nat’l Collegiate Athletic Ass’n v. Hornung, 754 S.W.2d 855, 857-58 (Ky. 1988) (holding that Restatement factors fairly reflect Kentucky law regarding interference with prospective contract).11 ATC appeals this decision with regard to the North Carolina Defendants and Hester. In Steelvest, the Kentucky Supreme Court stated that: Under Kentucky law, tort liability exists for the interference with a known contractual relationship, if the interference is malicious or without justification, or is accomplished by some unlawful means such as fraud, deceit, or coercion. We would presume to place the breach of fiduciary relationship on an equal par with fraud and deceit. Accordingly, we determine, as a matter of law, that a breach of a fiduciary duty is equivalent to fraud. 807 S.W.2d at 487. The district court properly granted summary judgment on this claim in favor of the North Carolina Defendants, because there is no evidence in the record of either the malice or unjustified conduct required to prove intentional interference. As the district court correctly noted, simply attempting to advance one’s own legitimate economic interests at the expense of another’s interests does not constitute malice. See Hornung, 754 S.W.2d at 859. In light of Steelvest, the district court’s holding that any interference with business relations committed by Hester did not rise to the level of an intentional tort cannot be reconciled with the district court’s refusal to find for summary judgment purposes that Hester did not breach a fiduciary duty to ATC. Insofar as there remains a material issue of fact about Hester’s breach of duty, there must also exist a material question of fact as to whether any inference with ATC’s contracts ascribed to Hester was intentional. This is not to say, though, that summary judgment was inappropriate. Because the district court concluded that neither party’s conduct rose to the level of an intentional tort, it did not address whether Hester actually interfered with ATC’s business relationships in the first place. In fact, ATC has not produced any evidence of such interference. The only conduct by Hester that ATC has consistently alleged to constitute interference is his misappropriation of trade secrets.12 ATC has not produced any evidence that Hester’s appropriation and use of those secrets adversely affected its relationships with any actual or potential customers. Therefore, we affirm the district court’s grant of summary judgment in favor of Hester.