09 Oct Using State Law to Counter a Business Defamation Claim
by Jay Marshall Wolman
Readers of this blog know that Marc is giddy that the Federal Trade Commission has sued Roca Labs. One of the more interesting features of the suit is that the FTC argues that legal action arising from negative reviews, which the FTC terms “gag clause practices”:
not only injure the purchasers threatened for complaining or expressing negative opinions; they adversely affect the information available to the public at large and distort the marketplace. Consumers will, because of this practice, be more likely to spend substantial sums on Roca Labs products that they would not otherwise buy. Prospective consumers searching online for information on Roca Labs products prior to purchasing likely did not see much truthful negative commentary on the price, side effects, return policy, or other aspects of Roca Labs products, because those comments were suppressed via the gag clause and related threats or enforcement.
FTC v. Roca, Motion for Temporary Restraining Order (Doc. 6 at pp. 14-15). Pages 22 to 28 of the motion delve into this in detail, noting in part “Defendants’ use of gag clause, including notices, threats, and legal actions to prevent their customers from making truthful negative comments about them or their products, thwarts informed consumer decision making, corrodes the marketplace, and is unfair under Section 5[of the FTC Act].” Id. at pp. 22-23.
The FTC Act, however, does not contain a private right of action. People cannot sue a business for violating the FTC Act; only the Federal Trade Commission can.
However, many states, such as Florida, Massachusetts, and Connecticut, contain statutes that make unfair and deceptive business practices unlawful under state law. And those statutes frequently contain what is known as a private right of action. Many such statutes permit the recovery of punitive or double or treble damages, plus attorneys’ fees.
Conduct that constitutes a “deceptive act or practice” or an “unfair act or practice” under the FTC Act is a violation of the Florida Deceptive and Unfair Trade Practices Act (FDUPTA). FTC v. Alcoholism Cure Corp., 2011 U.S. Dist. LEXIS 155574, 2011 WL 8190540, at *6-7 (M.D. Fla. Dec. 5, 2011) (citing Fla. Stat. §§ 501.202-204).
The FTC Act serves as a “lodestar” for determining what is an unfair trade practice under the Connecticut Unfair Trade Practices Act (CUTPA). Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 179, 510 A.2d 972, 976 (Conn. 1986)(citing Conn.Gen.Stat., sec. 42-110b.
Similarly, Massachusetts General Laws, Chapter 93A “defines unfair acts or practices by reference to interpretations of those terms in the Federal Trade Commission Act”. Kraft Power Corp. v. Merrill, 981 N.E.2d 671, 683, 464 Mass. 145, 156 (Mass. 2013).
The implications, then, of FTC v. Roca, are that where a business (either a company or person) sues a person or entity for defamation or on other theories to silence negative comment, in order that consumer information is suppressed, the defendant may be able to bring a claim or counterclaim that the lawsuit itself violates the state unfair trade practice statute. This may not help the defendant facing a defamation claim for statements about an individual unrelated to trade or commerce, and it does not stop a case in its tracks like a strong Anti-SLAPP law, but it may prove to be a useful tool for the defense, before, during, and after litigation.