Fromm Hoffman v. Clarkin the unanimous opinion of Judge Matthew McDermott:
Awarded jury [“car tuning” company] Hoffmann Innovations, Inc., and its owner Jerry Hoffmann $ 11 million in compensation and punitive damages against fired employee Scott Clark and his new rival company [RealTuners] based mainly on slanderous statements made by Clark on social media, online forums and in podcasts.
During the trial, the district court sanctioned Clark for violating a consent order that prevented both parties from making any statements about each other – especially online statements – outside the trial. But court orders for contempt of court and sanctions for Clark’s violations of the order of consent did not prevent Clark from continuing to belittle Hoffman. After several failed attempts to enforce the growing sanctions, the court rejected Clark’s plea – most importantly, his response and affirmative defenses. Without any protection, which refers to the petition’s requests, the process continued on the only unresolved issue: the amount of damages ….
I omit the complex details of the procedural history and background of the case and turn to the important data of the court on the damages (which in the process will also quickly summarize the defamation):
The jury awarded damages in the amount Hoffman claimed. He personally awarded Hoffman $ 500,000 from Clark and $ 500,000 from RealTuners for defamation per se ($ 1 million in total). The jury awarded Hoffmann Innovations $ 2,060,250 from Clark and the same amount from RealTuners ($ 4,120,500 in total). The other compensatory damages are for Hoffmann Innovations against Scott Clark: $ 27,000 for breach of fiduciary duty, $ 102,500 for breach of contract and $ 250,000 for civil extortion. The jury thus awarded a total of $ 5.5 million in damages. The jury also awarded $ 2 million in damages to Clark and $ 3.5 million to RealTuners. The total sentence is $ 11 million. The district court also granted the plaintiffs’ request for attorney’s fees under customary law (awarded despite the lack of contractual or legal provisions for such fees) for $ 210,743.21 ….
The statement offers a useful way of thinking about the harm of defamation in itself, to reconcile our seemingly different treatments in cases. It describes special damages resulting from “loss of something of economic or property value” and General damages imposed “in order to compensate the plaintiff for the damage caused by the publication to his reputation”, including emotional damages.
In a defamation suit per se, General damages are “alleged” damages. The total damages still have to relate to the actual damage caused by the publication, but the amount of damage to reputation is usually left to the discretion of the jury. Although the plaintiffs are not obliged to prove special Compensation for defamation compensation in itself – as they can recover presumably General damages – the plaintiffs still have to prove special damages if they want to recover special damages. In other words, special damages are not alleged damages, nor are they a necessary element of compensation for defamation per se …
Regarding the award of benefits to Hoffmann Innovations, Hoffmann described what they were special damage to the business in its estimated $ 4.5 million. But Hoffman admitted in cross-examination that the numbers largely reflected those lost income“Don’t get lost.” profits. However, the jury awarded Hoffmann Innovations $ 4.1 million, or 91% of Hoffmann’s gross revenue estimate. Yet Hoffman provided just one example of a business relationship he allegedly lost to Clark’s defamatory statements, and said his company’s profit margin was 40 percent of the expected $ 250,000 in revenue from that relationship, or $ 100,000. He did not offer the company tax returns, profit and loss statements or other similar evidence to prove the claimed damages. As for Hoffmann Innovations’ total profit margin, all we have is Hoffmann’s testimony that Hoffmann Innovations sells “a low-margin product … so we had to sell a lot of them.”
The appropriate measure for special damages – “the loss of something of economic or property value”, as described in the Declaration – is lost profits, not lost profits. Apart from Hoffmann’s testimony about this particular customer’s lost profits, evidence of Hoffmann Innovations’ damage in this record is extremely scarce. Hoffman testified that several employees had to be transferred from their regular duties to respond to customer complaints stemming from Clark’s defamatory statements, but he did not provide evidence of the value of these services. We can change a decision that “lacks evidentiary support”. The award of damages to Hoffmann Innovations on the basis of lost revenue – as the jury did – leads to a judgment for damages in excess of the amount the company would have won if Clark had never published a defamatory statement. We find the verdict on Hoffmann Innovations’ damage clearly excessive in this record.
Hoffman’s personal defamation benefits tell a different story. Again, with defamation in itself, “the jury is allowed to award substantial damages without the need for the claimant to prove actual damage to reputation”. However, although we do not impose normal standards of proof, we have said that the damage must be the “natural and probable consequences” of the statements. In other words, there must be some connection between the actual or potential damage to the claimant and the damage awarded. We also said that there must be evidence of the plaintiff’s good reputation and of the dissemination of defamatory statements. ID.
IN [a 1990 case], we set aside as an excessive sentence of $ 250,000 against a lawyer who publicly accused the plaintiff of extortion … There was no evidence that the plaintiff’s reputation was damaged or that he had suffered significant emotional stress. And yet we decided [this] in 1990, before the instant and large-scale distribution that Clark used to slander Hoffman – social media and podcasts. As one commenter noted: “Given the ease of slandering another person through social media, it can be argued that a means of protection against defamation through alleged harm is now more necessary than ever, even if the plaintiffs are unable to provide evidence of actual damage to reputation in a given case. “…
This case involves defamation for a period of years. Scott Clark uses five different Facebook accounts, two under pseudonyms. Clark spread his false statements on social media and podcasts among tens of thousands of people. He said Hoffman was dishonest and participated in bribes. He falsely reported that Hoffman was deliberately selling dangerous products out of greed.
Clark was involved in unscrupulous behavior, repeatedly threatening to harm Hoffman unless Hoffman paid him. Clark posted a video depicting Hoffman as Adolf Hitler. Hoffman also had to watch his reputation “rip apart online” while being limited in the way he could respond to the consent decree. It took Hoffman years to develop his reputation. As a result of what Clark spent, Hoffman was “stressed to the core.” He had trouble sleeping. It was “striking” and “swallowing.”
In considering whether the award of alleged damages for defamation is in itself within reason as a natural and probable (though necessarily proven) consequence of the defendant’s conduct in this case, several questions help to focus our investigation: (1) What was the plaintiff’s previous reputation? (2) Has the plaintiff suffered emotional stress? (3) What kind of defamatory statements have been made? (4) How many defamatory statements were made? (5) How widespread were they?1 (6) During what period of time were they made and distributed? (7) Have they ever been harvested? (8) Was there evidence of bad faith?2
The answers to these questions support the very significant damage that the jury personally awarded to Hoffman. Hoffman has proven that he has built a reputation in the automotive tuning industry for many years. He proved that he had suffered emotional damage. He proved that there have been repeated allegations that Hoffman was a fraud and thief, circulated in various media and under different faces for years. Clark has never shown remorse for his deliberate, unscrupulous, abusive behavior. On the contrary, he called for more fire …
Finally, with regard to Clark’s challenge to the criminal damages conviction, we remind you that punitive damages “must have some connection with the actual damage, but there is no formula by which this ‘connection’ can be determined.” As we have already found the compensation awarded by the jury to Hoffmann Innovations for excessive and the punitive damages must be linked to the compensatory damages, we find that the compensation awarded for damages is also excessive. The Court of First Instance misused its assessment by finding that the damage was excessive …
The court therefore ordered the so-called “remittitur” – the plaintiff may choose to accept a reduced prize or have a new trial instead:
With regard to the compensation awarded to Hoffmann Innovations, as described above, the jury appears to have used the wrong measure of damages, accepting almost the entire proposed amount of damages from Hoffmann, which used lost revenue instead of lost profits. Hoffmann provided only evidence of one customer that Hoffmann Innovations lost due to Clark’s defamation, which resulted in a loss of about $ 100,000 in net profits. We are thus ordering a return of the defamation award to the jury per se, reducing the prizes from $ 2,060,250 against Clark and RealTuners to $ 100,000 in total, or $ 50,000 against each. We leave undisturbed the damages awarded to Hoffmann Innovations against Scott Clark in the amount of $ 27,000 for breach of fiduciary duty, $ 102,500 for breach of contract and $ 250,000 for civil extortion, as well as the district court’s attorney’s fee. at $ 74,320.
[The court didn’t modify the $1M awarded in general damages to Hoffmann personally. -EV]
As we have ordered the translation of defamation damages per se for Hoffmann Innovations – a large part of the damages awarded in this case – the translation is also suitable for criminal damages. The jury awarded $ 2 million in damages to Clark and $ 3.5 million to RealTuners. Now that we have reduced the total compensatory damages from $ 5,500,000 to $ 1,479,500 – a reduction to 26.9% of the original prize – we believe it is appropriate to maintain the jury’s original ratio of compensatory and punitive damages by ordering the return of the punitive damages. damages with this amount. Therefore, we order the return of the criminal damages personally against Clark from $ 2 million to $ 538,000 and against RealTuners from $ 3.5 million to $ 941,500 ….
IN blog on the lower court’s decision last year.
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