Opinion ID: 204121
Heading Depth: 2
Heading Rank: 1

Heading: VSI's Claim to the Widespread Dissemination Exception

Text: VSI asserts entitlement to the widespread dissemination exception because the challenged statements were communicated through MPT's twenty-five sales agents and key executives to many potential customers who would be impossible to identify. In response, MPT emphasizes that this case does not involve a general-circulation publication, and it argues that the limited universe of customers potentially affected by its statements renders the widespread dissemination exception inapplicable. [9] MPT is correct that the circumstances here differ in a significant way from those typically associated with the widespread dissemination exception. MPT's twenty-five sales agents presumably know which customers they visited during the relevant time period. In addition, VSI claims that MPT's aggressive marketing wrested away some of its existing customers in addition to discouraging new purchases, and it would therefore seem feasible for VSI to have contacted the customers it lost during that period to inquire whether MPT's statements were a substantial factor in their decision. See Restatement (Second) of Torts § 632 (stating that publication of an injurious falsehood causes pecuniary loss if it is a substantial factor in bringing about the loss). VSI asserts that it is more complicated than it may at first seem to retrieve information from specific customers. It states that, as a general matter, information about the loss of specific sales to catheterization labs is not reasonably obtainable because there are myriad individuals at each lab to whom an MPT representative might speak and [t]he purchasing decisions are sometimes made by committees. There appears to be no reason, however, why multiple individuals in the same lab could not be asked about their interactions with MPT's sales agents. Indeed, VSI's CEO, Howard Root, testified that VSI's representatives speak to doctors every day. Anyone who is in the lab using products, we ask them what are they using and why. We talk to them about what information they have on that product, what they believe about that product, what they like or don't like about the product. The ability to question specific customers is suggested as well in the testimony of MPT expert Eugene Ericksen, who contacted more than thirty SyvekPatch customers who had switched, at least partially, to the D-Stat Dry. At the same time, it is apparent that, even if the statements' impact on a number of specific customers should have been ascertainable, many potential lost sales would have been extremely difficult, if not impossible, to confirm. For example, it would be impractical to expect VSI to contact every one of MPT's longstanding customers in search of those who had considered switching to VSI, but did not do so because of the statements. It would be similarly challenging to determine whether potential customers who ultimately purchased from a competitor other than MPT had excluded VSI from contention based on what they heard from MPT's sales agents. The circumstances here thus appear to involve a cause of action that embraces both a traditional claim that particular sales were lost and the exceptional claim that many other impossible-to-identify customers were likely affected by the defendant's disparaging statements. If in factas VSI claimsvirtually no evidence of specific lost sales is accessible, the widespread dissemination exception would seem fully applicable and generalized proof of lost profits could be legally sufficient. If evidence of a number of specific losses should exist and is reasonably obtainable, however, the plaintiff should be required to produce proof of such losses in conjunction with the generalized proof of lost profits. This is so because the proof of specific losses under such circumstances is strong evidence of the causal link between the defendant's statements and the plaintiff's harm, and such specific proof justifies reliance on the generalized proof of lost profits to establish the dollar value of the loss of market. Moreover, requiring the plaintiff to offer that customer-specific evidence, where it is reasonably available, is consistent with both the traditional strict standard of proof for product disparagement claims and the policy of flexibility underlying the widespread dissemination exception. The widespread dissemination exception is rooted in principles of fairness, meant to accommodate plaintiffs who lack one-to-one contact with their own customers and are therefore unable to identify individual recipients of the defendant's message. In such instances, evidence of lower-than-anticipated sales based on past performance and market conditionswhere `other possible causes [for the decline] are eliminated,' Advanced Training Sys., Inc., 352 N.W.2d at 7is realistically the only way the plaintiff can prove that the challenged statements caused it to lose customers. Where the record shows that a plaintiff has the means to prove a link between the allegedly defamatory communication and some identifiable set of lost customers, however, the rationale for allowing a plaintiff to rely solely on the general, more speculative evidence of lost sales is considerably weakened. If the plaintiff shows cause-and-effect between the defendant's statements and the loss of identifiable customers, the jury reasonably can draw the inference that such harm happened more widely. When such exemplar evidence should be available but is not producedor, put another way, if the plaintiff cannot show that its identifiable customers were influenced by the defendant's statementsthe inference of causation becomes unduly speculative. The plaintiff should not be able to satisfy its burden of proof by omitting what is logically the best evidence of the harm it alleges. In effect, that omission renders the plaintiff's proof of causation insufficient as a matter of law. Cf. Verizon Directories Corp. v. Yellow Book USA, Inc., 309 F.Supp.2d 401, 408 (E.D.N.Y. 2004) (Verizon makes no representation that it is in the nature of its business not to have direct contact with its customers.... It would be striking if such a large organization would be unable to identify even one customer it had allegedly lost as a result of [the defendant's] commercials.); Fashion Boutique, 75 F.Supp.2d at 240 (rejecting applicability of the widespread dissemination exception where the plaintiff store could have interviewed customers from its list of more than 8,000 names to determine why they stopped shopping at the store). Moreover, in an age of increasingly widespread communication of information, many companies could plausibly claim that disparaging statements about their products were widely disseminated, with the harm extending far beyond the particular customers they can reasonably identify. If every plaintiff that could show some widespread dissemination were able to avoid the requirement to prove particular losses, the exception would swallow the traditional special damage rule. On the other hand, the exception would be severely diminished if it were unavailable to a plaintiff whose losses extended far beyond the specific lost customers it could identify. Applying the widespread dissemination exception to plaintiff's who can identify some, but not all, of the customers who might have reacted to the defendant's disparaging remarks is consistent with the Restatement's description of the exception as applicable to instances where it is impossible to identify individuals affected by the disparagement. Restatement (Second) of Torts § 633(2); see also Sack on Defamation § 13.1.4, at 13-22. Impossibility in this context is not an all or nothing proposition. Where the extent of a plaintiff's loss is not fairly reflected in the evidence of specific lost customers because many other customers are impossible to identify, it is appropriate to allow a plaintiff to prove its damages with generalized evidence of loss of the market, Restatement (Second) of Torts § 633 cmt. h, so long as the plaintiff also produces the best available evidence of causation. The best evidence of causation, where it is reasonably obtainable, is the proof that specific customers rejected the plaintiff's product because of the defendant's disparaging statements. Certainly, that approach reflects Massachusetts' pragmatic attitude toward proof of damages. See, e.g., Knightsbridge Mktg. Servs., Inc. v. Promociones Y Proyectos, S.A., 728 F.2d 572, 575-76 (1st Cir.1984) (noting in a breach of contract case that [a]ll that is required to prove lost profits with reasonable certainty is a reasonable basis of computation and the best evidence obtainable ) (citing Agoos Leather Cos. v. American Foreign Ins. Co., 342 Mass. 603, 174 N.E.2d 652, 655 (1961)) (emphasis added). I would therefore construe the Restatement and Massachusetts law to allow reliance on the widespread dissemination exception where widely published statements were also disseminated to customers whose identities are reasonably obtainable. In that circumstance, however, a plaintiff asserting product disparagement must offer evidence that the challenged statements caused the loss of some of these identifiable customers as a prerequisite to claiming damages based on a more generalized showing of lost profits. This approach is in keeping with the modern tendency to requir[e] the plaintiff to be particular only where it is reasonable to expect him to do so. See Prosser & Keeton § 128, at 972. To apply the widespread dissemination exception as thus construed, the trial court would need to make pretrial determinations on whether evidence of specific customer losses is reasonably obtainable and how much such evidence should be presented in conjunction with the generalized proof of lost profits evidence that the widespread dissemination exception permits. [10] That evidence must be sufficient, in the particular circumstances of the case, to permit the jury to find causation. If the court decides that such evidence of specific customer losses is necessary, it will then be up to the jury to decide if the plaintiff's evidence, including the proof of specific lost sales, shows that the defendant's statements caused all of the plaintiff's claimed losses.