Monday, August 26, 2013

Defamation suit against BBB survives anti-SLAPP motion

Budget Van Lines, Inc. v. Better Business Bureau of the Southland, Inc., 2013 WL 4494318 (Cal. Ct. App. Aug. 20, 2013)

Budget is a “relocation services broker”—moving companies do the moves, and Budget arranges for them to do it.  The BBB is a nonprofit that provides information to consumers.  Its Reliability Report for a given company includes a record of consumer complaints made to the company and the company’s responses, any governmental action against the company, any licensing or advertising issues that the BBB has learned about the company, and a BBB Rating, generally “A+” to “F,” “reflecting the extent to which the company is in compliance with the BBB’s standards for operating in a trustworthy manner and making good faith efforts to resolve consumer complaints or concerns filed with the BBB.”

Budget sued for trade libel, libel per se, and a violation of California’s UCL.  It alleged that the BBB damaged it by stating that Budget was “not in compliance with the law’s licensing or registration requirements,” Budget’s advertising was “grossly misleading,” and Budget deserved a grade of “F.” These statements were false and defamatory, Budget alleged, because it was a broker and not a moving company; it was in compliance with all laws and regulations; and its ads weren’t misleading.

The BBB filed a special motion to strike, but Budget argued that it had a reasonable probability of prevailing on the merits.  The Reliability Reports at issue prominently displayed “BBB Rating F” next to the title “Rating Explanation,” which stated:

Company Rating F

Our opinion of what this rating means:

We strongly question the company’s reliability for reasons such as that they have failed to respond to complaints, their advertising is grossly misleading, they are not in compliance with the law’s licensing or registration requirements, their complaints contain especially serious allegations, or the company’s industry is known for its fraudulent business practices.

Another version stated, “Factors that lowered this business’s rating include: Failure to have a required competency license.”  The Report also stated, “This company’s business is providing moving and storage services.” Under the heading “Licensing,” the entries labeled “Agency,” “License Number” and “Status” were blank.  The report advised consumers that the most up-to-date information on license status would come from two government agencies that license or register moving companies.

In the “Complaint Experience” section, the Reliability Report stated: “Bureau Summary and Analysis of customer complaints and company responses: Complaints allege failure to honor moving quotes, failure to notify customers that their move will be subcontracted out to another carrier, damage and loss claims, delivery issues and failure to assist in resolving disputes. The company generally responds to complaints by referring customers to ...,”  A list of the number of complaints “over the last 36 months” totaled 128.

The trial court denied the special motion to strike. The court also found that Budget was not a public figure and that the Reliability Reports on the BBB’s website were commercial speech.  (The court of appeal found that the BBB did not successfully appeal the commercial speech determination.)

The court of appeals affirmed. Though Budget conceded that the BBB’s acts were in furtherance of its right of free speech, Budget showed a probability of prevailing.  This isn’t a likelihood of success on the merits—instead the plaintiff must state and substantiate a legally sufficient claim, more like showing a material issue of fact.  Courts deciding anti-SLAPP motions consider the pleadings and supporting and opposing affidavits, but they don’t weigh credibility or compare the weight of the evidence.  The question is whether the defendant should win as a matter of law; a plaintiff’s minimal showing on the merits is enough.  Once a plaintiff shows a probability of prevailing on any part of its claim, the entire cause of action stays.

Libel/defamation must be assessed in context, as it could have been understood by the average reader in the target context.  An ambiguous statement must be assessed for whether it’s reasonably susceptible to a defamatory interpretation.  The claims here were for libel per se, which doesn’t require proof of special damages.  Libel per se is defamatory language that on its face has a natural tendency to injure reputation—here accusations of dishonesty or questionable business methods.

The court first evaluated the alleged statement that Budget wasn’t in compliance with licensing or registration requirements.  The BBB argued that its statement was part of the explanation of the kinds of things that can earn a business an F rating—part of a list of illustrative examples, prefaced with “such as, “and using “or” before the last example.  But defamatory meaning is judged by the natural and probable effect on the intended audience, in context.  The court agreed that the average consumer could easily overlook the words “such as” and “or” “and focus instead on (1) the statements about noncompliance with licensing laws and (2) “grossly misleading advertising,” with the understanding that each statement applied to Budget and supported Budget’s ‘F’ rating.”  Plus, the Reliability Report stated or strongly implied that Budget wasn’t licensed, with the statement in “Rating Reasons” that the “[f]actors that lowered this business’s rating include: [¶] Failure to have a required competency license....” And there were blank spaces under the “Licensing” heading, and the BBB directed consumers to agencies that wouldn’t have a record for Budget on file, since it wasn’t a moving agency but rather a broker. 

The BBB’s statement “Advertising Review: No questions about the truth of this company’s advertising [have] come to our attention,” didn’t prevent liability on the “grossly misleading” statement.  The average reader could reasonably be expected to focus on the F rating and explanation, which appeared prominently at the top of the web page and which included the “grossly misleading” advertising statement.  Whether the “Advertising Review” statement neutralized the defamatory meaning of the earlier statement was for the trier of fact.

In some contexts, “grossly misleading” might be privileged opinion rather than falsifiable factual statement.  But “[t]he actual or imputed expertise of the defendant regarding the subject matter of a statement may reasonably lead the target audience to understand or believe that the statement is a factual one.”  So here, given that the BBB “holds itself out as an expert on the professionalism and trustworthiness of businesses.”  Among its other claims, its website says that the “BBB is the resource to turn to for objective, unbiased information on businesses. Our network of national and local BBB operations allows us to monitor and take action on thousands of business issues affecting consumers at any given time. BBB is your key advisor, most reliable evaluator and most objective expert on the topic of trust in the marketplace.”  Because of the BBB’s “self-proclaimed expertise in evaluating companies and the claims in their advertising, a consumer reading a statement by the BBB that Budget’s advertising was ‘grossly misleading’ can reasonably be expected to interpret the statement as factual.” 

Budget also provided evidence of falsity: a declaration explaining that Budget is a broker subject to different laws and regulations, and evidence that it was in compliance with licensing requirements for brokers.

The BBB argued that Budget was a limited public figure and that it hadn’t shown actual malice.  But the BBB didn’t meet its burden of showing that Budget was a limited public figure, and Budget’s extensive advertising campaign didn’t in itself make Budget a limited public figure.

Whether the “F” rating was defamatory was a closer question.  Cases evaluating grading and rating systems have generally concluded that they’re nonactionable opinions, including cases about the BBB itself. Castle Rock Remodeling, LLC v. Better Business Bureau of Greater St. Louis, Inc., 354 S.W.3d 234 (Mo. App. 2011) (the “BBB’s ‘C’ rating of [the plaintiff] is not sufficiently factual to be susceptible of being proved true or false,” and “[a]lthough one may disagree with BBB’s evaluation of the underlying objective facts, the rating itself cannot be proved true or false”); Better Business Bureau of Metropolitan Houston, Inc. v. John Moore Services, Inc. ___ S.W.3d ___ 2013 WL 3716693 (Tex. Ct. App. July 16, 2013) (“the ‘F’ rating itself cannot be defamatory because it is the Bureau’s self-described ‘opinion’ of the quality of [the plaintiff’s] services, which lacks a high degree of verifiability”).  But that didn’t matter because Budget showed a probability of prevailing on part of its cause of action for libel, so the whole cause of action survived. 
Likewise, the UCL claim survived because the UCL incorporates violations of other laws, here libel.

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