Agents: Even On The Internet, False Negative Comments May Constitute Defamation

The Web site Ripoffreport.com currently lists 3,217 postings regarding real estate agents and companies. Most of them are not what you would call complimentary. Charges are made of forgery, false advertising, acting without a license, and illegally taking (and keeping) advance fees - to name just a few. While Yelp.com postings tend to be more on the positive side, a fair share of negative comments can be found there too. And then there are the blogs and various social media sites. What's said isn't always nice.

What about negative critiques posted on the Internet? Do any of these meet the legal standard of defamation, or are they constitutionally-protected free speech?

A recent California Appellate Court decision (Sanders v. Walsh, Fourth Appellate District, Sept. 16, 2013) is instructive in this regard. The case does not concern a real estate transaction, but the principles laid out in the decision can be directly applied to the negative commentary about real estate agents that sometimes can be found on the Internet.

In June of 2009, the plaintiff's mother purchased a wig from a store, Wiggin Out, owned by defendant Walsh. According to the plaintiff (Sanders), the wig was represented as being custom made. When it was discovered that the wig was not custom made, the plaintiff's mother attempted to return it, and the plaintiff stopped payment on the check she had written. Subsequently, Wiggin Out filed a small claims action; but Sanders' mother prevailed.

An Internet battle ensued. The small claims action was posted on Ripoffreport.com. Subsequently, Walsh and Wiggin Out posted a "rebuttal". According to the Appellate Court discussion, "the rebuttal consists of a series of paragraphs prefaced by 'Fact:' explaining defendants' version of the facts, with editorial commentary interspersed throughout. There were, essentially, two allegedly defamatory statements made: first, that plaintiff used an 'unauthorized' check to purchase the wig, and, second, that plaintiff fabricated a letter from Fedex to try to prove plaintiff's mother attempted to return the wig..."

It didn't stop there. Several months later an anonymous posting on Yelp.com alleged that Cheryl Sanders worked in the planning department of the City of Anaheim and implied that she was receiving money "under the table." On the same day, an anonymous posting on MerchantCircle.com said, "Thank you Cheryl Sanders for hurting the community by giving all the construction business in Anaheim for a under the table bribe." Expert testimony at a subsequent defamation trial tied the email address used in the two postings to the defendant Walsh.

The trial court found the statements to be false and defamatory. Walsh appealed. At the Appellate Court the defendants contested that "the various Web postings did not constitute factual claims, but instead nonactionable opinion." The Appellate Court disagreed.

The Appellate Court noted that a successful defamation claim must show a falsehood. "Because the statement must contain a provable falsehood, courts distinguish between statements of fact and statements of opinion for purposes of defamation liability." But, "That does not mean that statements of opinion enjoy blanket protection. On the contrary, where an expression of opinion implies a false assertion of fact, the opinion can constitute actionable defamation." [my emphasis]

The Appellate Court noted that the defendant's position rested largely on the fact that the statements in question appeared on the Internet. Defense said that the postings on Yelp and MerchantCircle were "posted on an internet review site where most readers expect to see strongly worded opinions rather than facts." Earlier court opinions were quoted suggesting, among other things, that "…many Internet speakers employ online pseudonyms [thus tending] to heighten this sense that 'anything goes', and some commentators have likened cyberspace to a frontier society free from the conventions and constraints that limit discourse in the real world."

Nonetheless, in the Sanders case, the Appellate Court stated, "Here, however, we are not confronted with vague implication of fact, but with specific factual claims. Defendants' post on Ripoffreport.com prefaced most of its many paragraphs with 'fact:' and then recited alleged historical facts detailing perjury and fraud..." "While courts have recognized that online posters often 'play fast and loose with facts'... this should not be taken to mean online commentators are immune from defamation liability." The trial court's defamation finding was upheld.

The point is, Internet or not, if you make (to a third party) factual claims that are false and damaging, you may be found liable for defamation. By those standards, many of the real estate-related critiques that can be found on sites such as Ripoffreports.com may be defamatory. IF they are false. If they are true, though… well, that's another matter.