Opinion ID: 2831368
Heading Depth: 1
Heading Rank: 2

Heading: A Corporation May Recover Reputation Damages

Text: WMT makes three arguments regarding reputation damages: 1. Corporations cannot suffer such damages. 2. Even if they could, reputational harm is a non-economic injury. 16 No. 03-10-00826-CV, 2012 WL 1810215 (Tex. App.—Austin May 18, 2012) (mem. op., not designated for publication). 7 3. Here, the evidence was legally insufficient to sustain the jury’s award of $5 million. WMT argues in its brief that corporations cannot suffer reputation damages because corporations are not people. But WMT’s position has not been entirely consistent. At oral argument WMT urged that corporations can never suffer reputation damages, but its Response Brief concedes that corporations may suffer some types of reputation damages: “lost profits, rehabilitative expenses, and diminished value of the corporation—are the only damages a corporate entity’s reputation can sustain.” In any event, we discern WMT’s contention to be that defamation per se is an inherently personal tort, and that it was designed to address harm that only natural persons may suffer, such as mental anguish, sleeplessness, or embarrassment. We have never adopted such an interpretation. On the contrary, it is well settled that corporations, like people, have reputations and may recover for harm inflicted on them.17 Our 1943 decision in Bell Publishing Co. v. Garrett Engineering Co. concerned similar facts. In that case, the corporate plaintiff, Garrett, sued an individual, Dr. Gober, and Bell Publishing Company for publishing an allegedly libelous article.18 The events leading up to the publication involved the City of Temple’s decision whether it needed a municipally owned electricity provider.19 Garrett executed with the city a contract in which Garrett agreed to provide its engineering services 17 See note 35, infra; see also RESTATEMENT (SECOND) OF TORTS § 561 (1977) (“One who publishes defamatory matter concerning a corporation is subject to liability to it . . . if the corporation is one for profit, and the matter tends to prejudice it in the conduct of its business or to deter others from dealing with it.”); id. § 561 cmt. b (“A corporation for profit has a business reputation and may therefore be defamed in this respect.”). 18 170 S.W.2d 197, 199–200 (Tex. 1943). 19 Id. at 200. 8 if the city decided to build a power plant or purchase the existing privately owned plant.20 Garrett submitted plans and estimates to the city, held conferences with city officials, and prepared drawings of the necessary buildings and equipment.21 The city commission then ordered a bond election to be held on financing the project.22 In response, Dr. Gober wrote an article for the Temple Daily Telegram, published by defendant Bell.23 Dr. Gober addressed his article to the residents of Temple, and generally suggested a call to action to “thresh[] out and definitely determin[e] whether or not Temple really needs this proposed utility.”24 Dr. Gober also proposed a “sit-down strike.”25 The article also stated, “[T]here is no person connected with [Garrett Engineering] who is a practical engineer, or who holds a degree of engineering. I am reliably informed that [Garrett] has never done any similar work, and by that I mean that it has never constructed such plant for any other city.”26 Garrett sued Gober and Bell for libel, alleging that statements in the article were false, made with malice, damaged its reputation, and injured the company financially.27 The jury found that (1) Garrett did employ at least one person who was an engineer, (2) while Garrett had not built a 20 Id. 21 Id. 22 Id. 23 Id. 24 Id. 25 Id. 26 Id. at 201 (italics omitted). 27 Id. 9 similar plant for a city, it had supervised the construction of such a plant, and (3) Garrett’s damages amounted to $15,000.28 The trial court entered judgment against both defendants based on the jury’s findings.29 On appeal, the court of appeals, while agreeing the statements were libelous and unprivileged, reversed and remanded for a new trial because the trial court failed to instruct the jury to consider only the damages that resulted from the false statements.30 We agreed with the court of appeals that the statements were libelous per se.31 We considered the law of defamation: “[L]anguage which concerns a person engaged in a lawful occupation ‘will be actionable, if it affects him therein in a manner that may as a necessary consequence, or does as a natural or proximate consequence, prevent him deriving therefrom that pecuniary reward which probably he might otherwise have obtained.’”32 We held that Garrett’s corporate claims for defamation per se were actionable.33 And after examining whether Dr. Gober’s statements were privileged or truthful, we upheld the jury’s findings and the trial court’s judgment entered against both defendants.34 28 Id. at 202. 29 Id. 30 Bell Publ’g Co. v. Garrett Eng’g Co., 154 S.W.2d 885, 887 (Tex. Civ. App.—Galveston 1941) aff’d, 170 S.W.2d at 197. 31 Bell Publ’g Co., 170 S.W.2d at 202. 32 Id. (quoting Mo. Pac. Ry. v. Richmond, 11 S.W. 555 (Tex. 1889)). 33 Id. 34 Id. at 204–05. However, we also affirmed the court of appeals’s judgment remanding the case to the trial court for a new trial because the trial court should have instructed the jury to award only damages for the statements that it found to be false. Id. at 206–207. 10 We have reaffirmed three times Bell’s holding that a corporation may be libeled,35 including just last year, and see no persuasive reason to abandon that settled precedent. Likewise, we decline to apply our defamation jurisprudence any differently when the statements amount to per se defamation. In such cases, “our law presumes that statements that are defamatory per se injure the victim’s reputation and entitle him to recover general damages, including damages for loss of reputation and mental anguish.”36 If false and disparaging statements injure a corporation’s reputation, it can sue for defamation per se just like flesh-and-blood individuals. III. A Corporation’s Reputation Damages are Non-Economic Damages for Purposes of the Statutory Cap on Exemplary Damages In its sole issue, TDS argues that the trial court erred by categorizing the jury’s award of injury to reputation as non-economic damages instead of economic damages, which would result 35 As noted in our prior line of cases involving corporate defamation, we distinguish between a corporation and a business—only the former may sue for defamation. See, e.g., Neely v. Wilson, 418 S.W.3d 52, 72 (Tex. 2013) (“Our precedent makes clear that corporations may sue to recover damages resulting from defamation.”); Gen. Motors Acceptance Corp. v. Howard, 487 S.W.2d 708, 712 (Tex. 1972) (“[A] corporation, as distinguished from a business, may be libeled.”); Newspapers, Inc. v. Matthews, 339 S.W.2d 890, 893 (Tex. 1960) (citations omitted) (“[T]he very wording of the libel statute precludes its application to a business. It does not alter the situation that a corporation may be libeled or that a partnership may be libeled.”); Bell Publ’g Co., 170 S.W.2d at 203 (“[S]tatements complained of by [Garrett Engineering Co.] impute to it a lack of technical skill and practical experience on its part to perform its contract or to carry on its business and that such inescapable imputations tended to damage plaintiff's business and were actionable.”). We have noted that this type of defamation is one “of the owner of the business and not of the business itself,” and that the damages are “of the owner, whether the owner be an individual, partnership or a corporation.” Matthews, 339 S.W.2d at 893. Our most instructive piece on the distinction between the owner and the business may be found in Matthews in which we analyzed the two in light of the libel statute at issue in that case. There, the libel statute defined defamation as affecting “the memory of the dead,” “one who is alive,” “him,” “any one,” and “such person.” Id. (citation omitted). Relying on our prior precedent and the Restatement, we held that while the very wording of the libel statute precluded its application to a business, it did not change the applicability to a corporation. Id. (citing Bell Publ’g Co., 170 S.W.2d 197; RESTATEMENT OF TORTS § 561 (1938)). We further noted that the defamation specifically injures the reputation of the owner, id.—in other words, not the owner’s business. Thus, applying our prior holdings to this case we discern the publication to be defamatory of TDS (the owner) and not the landfill-services operations (the business), and the resulting damages are those TDS suffered as the owner of the business. 36 Bentley v. Bunton, 94 S.W.3d 561, 604 (Tex. 2002). 11 in a higher allowable statutory cap on exemplary damages. TDS contends that reputation damages of a for-profit corporation are economic damages because the text of the 1995 version of the statutory cap did not specifically define non-economic damages, and because it did not expressly exclude reputation damages from the definition of economic damages. TDS says the Legislature defined economic damages as “compensatory damage for pecuniary loss,” and several courts of appeals have defined pecuniary loss as “including money and everything that can be valued in money.” Even Black’s Law Dictionary defines the term as “[a] loss of money or of something having monetary value.”37 Thus, TDS concludes, a corporation’s reputation damages are economic under the 1995 text, because they are (1) not specifically defined as non-economic damages, (2) not expressly excluded from the definition of economic damages, and (3) can be specifically valued in money. We disagree. Section 41.008(b) states: Exemplary damages awarded against a defendant may not exceed an amount equal to the greater of: (1) (A) two times the amount of economic damages; plus (B) an amount equal to any noneconomic damages found by the jury, not to exceed $750,000; or (2) $200,000.38 37 BLACK’S LAW DICTIONARY 1030 (9th ed. 2009). 38 TEX. CIV. PRAC. & REM. CODE § 41.008(b). 12 Section 41.008(b) remained unchanged as a result of a 2003 amendment.39 Section 41.001(4) was amended. In 1995, Section 41.001(4) read as follows: “Economic damages” means compensatory damages for pecuniary loss; the term does not include exemplary damages or damages for physical pain and mental anguish, loss of consortium, disfigurement, physical impairment, or loss of companionship and society.40 The crux of TDS’s argument is that Section 41.001 did not specifically define “noneconomic damage”—nor did it expressly exclude injury to reputation from economic damage. In 2003, the Legislature amended Section 41.001(4) and added an entirely new subsection: Section 41.001(4) as amended in 2003 “Economic damages” means compensatory damages intended to compensate a claimant for actual economic or pecuniary loss; the term does not include exemplary damages or noneconomic damages.41 Added 2003 subsection “Noneconomic damages” means damages awarded for the purpose of compensating a claimant for physical pain and suffering, mental or emotional pain or anguish, loss of consortium, disfigurement, physical impairment, loss of companionship and society, inconvenience, loss of enjoyment of life, injury to reputation, and all other nonpecuniary losses of any kind other than exemplary damages.42 TDS avers that the 2003 amendment “recharacterized reputation damages as non-economic,” and that we should focus on what the 1995 statute intended—that a for-profit corporation’s injury 39 The 2003 amendment to the Civil Practice and Remedies Code is inapplicable here, given that TDS filed suit in 1997. 40 Act of April 6, 1995, 74th Leg., R.S., ch. 19, § 1, 1995 Tex. Gen. Laws 108, 109 (current version at TEX. CIV. PRAC. & REM. CODE § 41.001(4)). 41 TEX. CIV. PRAC. & REM. CODE § 41.001(4). 42 Id. § 41.001(12) (emphasis added). 13 to reputation must be economic because those damages are pecuniary loss and not expressly excluded by the statute’s text. We decline to adopt such an interpretation. Section 41.001(4) defines “economic damages” as “compensatory damages for pecuniary loss.” Compensatory damages may be divided into two other categories: pecuniary harm and non-pecuniary harm.43 So is injury to reputation a pecuniary loss for purposes of Section 41.001(4)? We think not. Injury to one’s person, by pain or humiliation, is not analogous to pecuniary loss.44 Stated differently, money does not equate to peace of mind.45 However, damages awarded for this class of injury are classified as compensatory damages.46 So the tendency to confuse the character of the harm with that of the remedy is understandable. To be certain, compensatory damages offer a pecuniary remedy for the non-pecuniary harm that a plaintiff has suffered or will likely suffer later.47 Non-pecuniary harm includes damages awarded for bodily harm or emotional distress.48 Similar to general damages, these non-pecuniary damages do not require certainty of actual monetized loss.49 Instead, they are measured by an amount that “a reasonable person could possibly 43 See RESTATEMENT (SECOND) OF TORTS §§ 905, 906 (1979). 44 1 JACOB A. STEIN, STEIN ON PERSONAL INJURY DAMAGES § 1:4 (3d ed. 2004). 45 Id. 46 Id. 47 See id. (citations omitted). 48 RESTATEMENT (SECOND) OF TORTS § 905 (1979). 49 See Gertz v. Robert Welch, Inc., 418 U.S. 323, 373 (1974) (White, J., dissenting); 2 DAN B. DOBBS, LAW OF REMEDIES § 8.1(4) (2d ed. 1993); RESTATEMENT (SECOND) OF TORTS § 621 cmt. a (1977); id. § 905 cmt. i (1979). 14 estimate as fair compensation.”50 Conversely, damages for pecuniary harm do require proof of pecuniary loss for either harm to property, harm to earning capacity, or the creation of liabilities.51 One leading commentator contrasts pecuniary and non-pecuniary harm this way: Plaintiffs prove three basic elements of recovery in personal injury actions. (1) Time losses. The plaintiff can recover loss or [sic] wages or the value of any lost time or earning capacity where injuries prevent work. (2) Expenses incurred by reason of the injury. These are usually medical expenses and kindred items. (3) Pain and suffering in its various forms, including emotional distress and consciousness of loss.52 Professor Dobbs’s first two categories concern pecuniary losses, while his third involves non-pecuniary losses. Applying his categorical delineations for a personal injury to this case, injury to reputation falls into the third category as a non-pecuniary loss, because it is neither time lost nor an expense incurred. The Second Restatement, in defamation per se cases, also considers injury to reputation to be a non-pecuniary harm.53 In cases of ordinary defamation the Restatement requires proof of economic or pecuniary loss that reflects a loss of reputation.54 Said another way, the Restatement generally requires proof of an economic loss that was occasioned by a non-economic injury like 50 See RESTATEMENT (SECOND) OF TORTS § 905 cmt. i. 51 Id. § 906. 52 2 DOBBS, LAW OF REMEDIES § 8.1(1) (footnotes omitted). 53 RESTATEMENT (SECOND) OF TORTS § 905 cmt. a (1979). 54 Id. § 575 cmt. b (1977). 15 slander.55 But the Restatement takes a special position in defamation per se cases, viewing injury to reputation as a general damage, non-pecuniary harm.56 Finally, the draft Third Restatement also classifies injury to reputation as a non-economic harm. The draft Third defines “economic loss” as the “pecuniary damage not arising from injury to the plaintiff’s person. . . .”57 By negative implication, then, non-economic loss is pecuniary damage arising from injury to the plaintiff’s person. Convincingly, the draft Third also recognizes that sometimes an economic loss will actually be considered a personal injury if emotional harm is involved that causes pecuniary loss: Wrongs that might seem to cause only economic loss are sometimes regarded otherwise because the law takes an expansive view of what counts as a personal injury. Defamation, for example, is regarded as inflicting a kind of personal injury: harm to the plaintiff’s reputation. If a defendant inflicts emotional harm on the plaintiff, and causes the plaintiff to suffer consequent pecuniary loss, it is likewise a case of personal injury covered not here but in Restatement Third, Torts: Liability for Physical and Emotional Harm.58 55 See id. 56 Id. § 905 cmt. a (1979). 57 RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR ECONOMIC HARM § 2 (Tentative Draft No. 1, 2012) (emphasis added). Sections 1 through 5 of the draft Restatement Third were approved by the membership of the American Law Institute at the 2012 Annual Meeting, subject to the discussion at the Meeting and to editorial prerogative. Proceedings at 89th Annual Meeting: American Law Institute, 89 A.L.I. PROC. 22–47 (2012). According to the Institute: “Once it is approved by the membership at an Annual Meeting, a Tentative Draft or a Proposed Final Draft represents the most current statement of the American Law Institute’s position on the subject and may be cited in opinions or briefs . . . until the official text is published.” Overview, Project Development, THE AMERICAN LAW INSTITUTE, http://www.ali.org/index.cfm?fuseaction=projects.main (last visited April 25, 2014). Section 2 of the draft Third is consistent with our analysis today. 58 RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR ECONOMIC HARM § 2 cmt. a (Tentative Draft No. 1, 2012). 16 According to the draft Third, if harm to one’s reputation is “a kind of personal injury,” it may not be considered an economic loss “because the law takes an expansive view of what counts as a personal injury.”59 Thus, both the Restatements and commentators recognize the distinction between the non-pecuniary injury and the pecuniary remedy. Our cases likewise treat an individual’s reputation damages as non-economic.60 In Bentley v. Bunton, a local district judge brought a defamation action against a host and co-host of a call-in talk show televised on a public-access television channel.61 For months, the host of the show had accused the local judge of being corrupt.62 The trial court rendered judgment in favor of the judge, finding that the host’s statements were conclusively proven to be false and defamatory.63 The jury awarded $7 million to the judge for mental anguish damages.64 The court of appeals affirmed the judgment against the host but reversed the judgment against the co-host.65 We granted both parties’ petitions for review. Importantly, we noted that mental anguish damages and reputation damages, such as those in Bentley, were non-economic damages.66 59 See id. 60 Bentley, 94 S.W.3d at 605. 61 Id. at 566–67. 62 Id. 63 Id. at 567. 64 Id. at 576. 65 Id. at 577. 66 Id. at 605. 17 Though the plaintiff in Bentley was an individual, our conclusion focused on the nature of the damage suffered, not on whether the plaintiff was an individual or a corporation. We did not strictly cabin our opinion to an individual’s reputation damages. We said generally: “Non-economic damages like these [mental anguish, character, and reputation damages] cannot be determined by mathematical precision; by their nature, they can be determined only by the exercise of sound judgment.”67 Just last year, we reaffirmed that an individual’s reputation damages are non-economic damages in Hancock v. Variyam.68 In that case, Variyam was the Chief of the Gastroenterology Division of the Texas Tech University Health Sciences Center (the “Division”).69 Hancock worked as an associate professor under Variyam’s supervision.70 After a dispute arose between the two about Hancock’s care of patients, Hancock sent a letter to the Chair of the Division, the Dean of the School of Medicine, a Division colleague, and the entity reviewing the Division’s application for accreditation for its gastroenterology fellowship.71 Hancock wrote that Variyam had a “reputation for lack of veracity” and “deals in half truths, which legally is the same as a lie.”72 Subsequently, 67 Id. (emphasis added). 68 400 S.W.3d at 65. 69 Id. at 62. 70 Id. 71 Id. 72 Id. at 62–63. 18 the Division’s fellowship was not accredited and the Chair of the Department removed Variyam as Chief of the Division.73 Variyam sued Hancock for defamation.74 Regarding damages, we held: “Actual or compensatory damages are intended to compensate a plaintiff for the injury she incurred and include general damages (which are non-economic damages such as for loss of reputation or mental anguish) and special damages (which are economic damages such as for lost income).”75 Our decisions in business disparagement cases bolster our conclusion here. We have previously noted the distinction between business disparagement and defamation cases. To recover for business disparagement “a plaintiff must establish that (1) the defendant published false and disparaging information about it, (2) with malice, (3) without privilege, (4) that resulted in special damages to the plaintiff.”76 In Forbes, we noted the similarity between the two claims, but that one difference is that one claim seeks to protect reputation interests and the other seeks to protect economic interests against pecuniary loss.77 That is, a plaintiff seeking damages for business disparagement must prove special damages resulting from the harm;78 to hold otherwise 73 Id. at 63. 74 Id. 75 Id. at 65. 76 Forbes, Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 170 (Tex. 2003) (citing Hurlbut v. Gulf Atl. Life Ins. Co., 749 S.W.2d 762, 766 (Tex. 1987)) (emphasis added). 77 Id. 78 Id. 19 would subvert a fundamental element of the tort. In contrast, in a defamation case a plaintiff may recover for both general and special damages.79 As we explained in Hancock, and reaffirm today, general damages in defamation cases “are non-economic damages such as for loss of reputation” while special damages “are economic damages such as for lost income.”80 These delineations remain constant, too, for business disparagement—a tort that seeks to protect the economic interests and which expressly requires a showing of special damages. To a certain extent, then, a defamation claim allows a plaintiff to recover that which would not be recoverable under business disparagement—namely, for a noneconomic injury such as injury to reputation—because disparagement only seeks to protect the plaintiff’s economic interests while defamation seeks to protect the plaintiff’s reputation.81