Citation: Michigan Microtech, Inc. v. Federated Pub., Inc., 466 N.W.2d 717 (Mich. Ct. App. 1991).

Procedural history: This case is on appeal from a verdict for the plaintiff in the trial court.

Issue: Whether a business is defamed when __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Holding: The newspaper article was defamatory as the article contained false information about the business that was communicated to third parties which reduced the business's esteem in the community as shown by the reduced level of sales following the article's publication.

Facts:

Reasoning: Despite defendant's assertions that a corporation can only be defamed by "aspersions about its honesty, credit, efficiency or other business character," the court reasoned that to prove defamation, the plaintiff needed to show that the defendant made a false statement that this false statement was the result of negligence, and as a result, the plaintiff business lost profits. The court noted that the statement in the article was false for the plaintiff never intended to stop selling satellite dishes. The court stated that the statements were a result of negligence because the defendant journalist failed to comply with the Washington Post's Standards of Ethics when he failed to verify or substantiate the quote he used in the article. Last, the plaintiff business lost profits after the publication of the article and the lost profits were directly attributed to the false information published in the article.

Disposition: Affirmed.

Please Brief and fill out rubric after read this case

Court of Appeals of Michigan.

MICHIGAN MICROTECH, INC., a Michigan Corporation, Plaintiff-Appellee, Cross-Appellant,

v.

FEDERATED PUBLICATIONS, INC., a Delaware Corporation, d/b/a Lansing State Journal, Defendant-Appellant, Cross-Appellee.

Docket No. 109934.

Submitted July 18, 1990, at Lansing.

Decided Jan. 22, 1991, at 10:05 a.m.

Released for Publication March 25, 1991.

466 N.W.2d 717 (Mich. Ct. App. 1991).

Syllabus: Satellite antenna service brought action for defamation against newspaper, alleging damages as result of decrease in sales of satellite dishes following article in newspaper that incorrectly stated that service intended to discontinue sale of satellite dishes because of problems associated with scrambling of signals. The Ingham Circuit Court, James T. Kallman, J., entered judgment following jury verdict for service and denied defendant's motion for judgment notwithstanding verdict or for a new trial. Defendant appealed. The Court of Appeals,Marilyn J. Kelly, P.J., held that: (1) statement had potential of adversely affecting service's business reputation and its ability to sell satellite dishes; ... (5) evidence was sufficient to establish damages; and (6) instructions regarding damages were proper.

Affirmed.

...

This is a defamation case in which a jury found liability against defendant, Lansing State Journal, and awarded damages to plaintiff, Michigan Microtech, Inc.

Defendant appeals as of right, claiming plaintiff failed to prove its newspaper article was defamatory. ...Defendant claims the court erred in instructing the jury regarding damages to reputation and for lost profits and good will. We affirm.

On January 18, 1986, defendant published an article describing how the scrambling of satellite signals was having an adverse effect on the sale of satellite dishes. In preparation for the article, defendant's news reporter William Sinnott conducted a telephone survey of local satellite dish dealers to determine if scrambling injured their business.

Sinnott telephoned plaintiff's Lansing area store in Mason. A woman answered with plaintiff's name. When questioned, she told Sinnott that Michigan Microtech was discontinuing the sale of satellite dishes because of "headaches" and poor profits due to scrambling. According to her, Microtech would simply continue to provide service for the dishes they had sold.

The woman refused to identify herself, saying, "You know why." Sinnott testified that he was unsure what she meant, but that it was not unusual for people to refuse to identify themselves when answering telephone surveys. In the belief that his standards of identification, credibility, and hostility had been met, he included the information in his article without further verification. Sinnott testified that he did not follow the Washington Post Standards and Ethics for publishing without attribution, because he used them only when the source needed to be protected.

Michigan Microtech claimed to be the oldest and largest satellite antenna service in Michigan. In anticipation of scrambling, it had obtained a supply of descramblers and had developed an advertising campaign to market them. It had no plans to discontinue selling satellite dishes. Plaintiff's vice president, Bernard Schafer, testified that he investigated and could identify no Mason store employee who had spoken with Sinnott. Defendant published a correction six days later and a follow-up article several weeks later, quoting Schafer regarding the scrambling issue.

At the close of trial, the jury awarded $54,258 to plaintiff as damages for lost profits.

On appeal, defendant ... claims there was no defamation as a matter of law, because a corporation's reputation can be defamed only by aspersions about its honesty, credit, efficiency or other business character.

In order to establish liability for defamation, a plaintiff must prove: (1) a false and defamatory statement concerning the plaintiff, (2) an unprivileged publication to a third party, (3) fault amounting to at least negligence on the part of the publisher, and (4) either actionability of the statement irrespective of special harm or the existence of special harm caused by the publication.Rouch v. Enquirer & News of Battle Creek, 427 Mich. 157, 173-174, 398 N.W.2d 245 (1986).

A defamatory publication tends to harm the reputation of another by lowering that person's estimation within the community or by deterring third persons from associating or dealing with him.Nuyen v. Slater, 372 Mich. 654, 662, 127 N.W.2d 369 (1964);Heritage Optical Center, Inc. v. Levine, 137 Mich.App. 793, 797, 359 N.W.2d 210 (1984). A corporation does not have a reputation in a personal sense; however, it does have a business reputation that can be defamed.

This Court has recognized that an action exists for defamation of a corporation, as described in 3Restatement Torts, 2d, 561, p 159:

One who publishes defamatory matter concerning a corporation is subject to liability to it

(a) 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, or

(b) if, although not for profit, it depends upon financial support from the public, and the matter tends to interfere with its activities by prejudicing it in public estimation. [Heritage Optical, at 797-798, 359 N.W.2d 210.]

The defendant in Heritage Optical telephoned the plaintiff's clients and told them that the plaintiff had closed or moved its office and was unable to furnish goods and services. This Court found defamation, because the statement adversely affected the plaintiff's business reputation and its ability to conduct business.

The statement complained of in this case, that plaintiff had discontinued selling satellite dishes, ... [The article] had the potential of adversely affecting Microtech's business reputation and its ability to sell satellite dishes. ...[I]ntent is not an element of defamation. ...

Where the publication involves a private figure, ...[in] addition to proving that the defendant was negligent, the private plaintiff must prove that the objectionable statement was false. ...

.... The trial court must determine whether a reasonable and prudent editor should have anticipated that the statement contained an imputation necessarily harmful to reputation...

... [H]ere the defamatory potential of the statement was obvious. The article indicates that the sale of satellite dishes was plaintiff's main business. Thus, clearly, the statement that plaintiff planned to no longer sell dishes could substantially damage its sales reputation and deter third parties from dealing with it...

...

In this case, there was sufficient evidence of defendant's negligence for the case to go to the jury. Sinnott did not inquire further or seek corroboration when the woman he interviewed refused to identify herself. He acknowledged that the Washington Post Standards and Ethics stated that before any information is accepted without full attribution the reporter must (1) make every reasonable effort to get it on the record, (2) seek the information elsewhere, or (3) request and publish the reason for restricting the source's identity. Defendant's editor did not have specific guidelines for her reporters to use when conducting telephone surveys. She acknowledged that there could be instances in which further corroboration is necessary, as where sources refuse to identify themselves...

Defendant asserts that plaintiff failed to prove damages. It contends that proof of damage to reputation is required and was not shown...

Plaintiff presented testimony that sales slumped after publication of the objectionable article. Proofs showed the dollar value of plaintiff's lost sales. Defamation of a corporation results in lack of association by third parties. Thus, plaintiff's proofs showed damage to reputation at the same time they established dollar loss.

As to the sufficiency of proofs, plaintiff did not produce the names of individuals who were deterred from buying satellite dishes because of the article. Rather, it relied on a comparison of sales before and after the article appeared. This has been held to be competent evidence of lost profits. ...It would be an unreasonable burden to mandate that plaintiff produce the names of people who did not contact it because of the article. That would force plaintiff to resort to far-fetched methods of discovery, such as contacting numerous competitors, many of whom might be reluctant to divulge the names of their customers.

The proofs which plaintiff provided in this case were sufficient to establish a loss of profits. Reasonable minds could deduce from them that plaintiff suffered the loss claimed. ...

Defendant claims that the admission of a list of people who called to inquire if defendant's article was accurate was hearsay. In the normal course of business, plaintiff kept a log of incoming calls. Thus the list could be considered a business record.... Even if it were not and the admission were error, it was harmless error, since defendant discredited the evidence.

Plaintiff presented evidence ... comparing the sales levels in its Lansing and Mt. Pleasant stores before and after publication of the article. Defendant claims that only an expert can compare market areas. It cites no authority for the proposition. We find that the jury properly could be asked to assess the difference in sales. Moreover, the court did not abuse its discretion in admitting evidence regarding actual lost profits based on the change in sales levels and the accountant's testimony relying on those figures. Plaintiff had operated for several years in Mt. Pleasant and for over a year in Lansing. An adequate sales record existed. We find no error...

...

[L]oss of reputation and loss of profits are intertwined. The loss of both is shown by a diminished number of customers...

... The jury awarded plaintiff the exact amount it claimed for lost profits and apparently did not make a separate award for either loss of good will or loss of reputation.

Affirmed.