An international finance firm, Hayman Private Equity LLC, won a $5 million defamation award from Environmental Service Professionals, Inc. (ESP). A unique business-on-business Internet libel lawsuit, Hayman v. ESP proves that it cab be worth filing a defamation claim – even if the case doesn’t seem to be a slam dunk – at first.
Many Years Ago, A Loan Fell Through And The Would-Be Loanees Filed A Lawsuit
Several years ago, ESP and two other parties sued Hayman Private Equity after a $1.5 billion loan deal tanked in the eleventh hour. As a result, ESP executives argued that Hayman “defrauded the plaintiffs in connection with failed financing transactions from which the plaintiffs had hoped to secure loans totaling $1.5 billion.”
Ultimately, the case was dismissed with prejudice – meaning the suit could not be filed again.
…And A Few Years After That, The Loanees Uploaded Lawsuit Docs To The SEC Website
Fast forward a few years.
Ostensibly still peeved about their dealings with Hayman, ESP – as part of a Current Report on Form 8-K — uploaded documents related to their failed Hayman lawsuit to the Securities and Exchange Commission’s EDGAR system. Diligent journalists and bloggers noticed the submission; within days, opinion pieces about the case were sprinkled over several corners of the Internet.
Outraged over the online publication of the already declared dead claim, Hayman filed a business defamation lawsuit.
“But the documents Hayman is griping about were connected to a lawsuit and are, therefore, privileged!” protested the lawyers for ESP and company. (We’re paraphrasing, of course.)
Oh contraire mon frere, retorted legal counsel for the finance firm, arguing that while the EDGAR submission may have been on the up-and-up, publishing (submitting) it on the Internet crossed the privilege protection line and landed squarely in defamation row.
Finance Firm for the Defamation Win
With whom did the judge side in this business-on-business defamation lawsuit? The Finance Firm. To the turn of $5 million — $2 million in compensatory damages and $3 million in punitive damages.
So, why did Hayman emerge victorious in this business-on-business defamation debacle, when privilege works as a successful defense in many finance libel and slander lawsuits? One of Hayman’s attorneys explained:
“Many people, including attorneys, believe that just because you file something or say something in judicial proceedings you are free to make the same statements or publish the same court documents outside the courthouse with impunity. The judicial privilege, however, is not so broad.”
A Hayman spokesman added:
“ESP’s admission through its own default in the case that its claims were frivolous and that its publication of the defamatory complaint over the Internet in an SEC filing was just part of its plan to pressure us into paying money that we simply did not owe proves the point. It also shows the reckless irresponsibility of those, like David Marchant, who allow to be published on their own websites defamatory statements made by others without any reasonable investigation regarding the truth of the statements made. Our prosecution of the defamation lawsuit against ESP and our ultimate $5 million judgment should provide fair warning to others that we will not stand idly by when false and damaging statements are made about us.”
Let this business-on-business defamation case serve as an example: don’t talk yourself out of moving forward with a claim because of the U.S.’s notoriously defendant-friendly defamation laws. They may be “defendant-friendly,” but they exist; slander and libel are illegal. As has been said time and again,
THERE ARE LIMITS TO FREE SPEECH!
And spreading false information about a business competitor – no matter how innocuous – is against the law.