Biz vs former consultant. Is it libel, slander, something else, or nothing at all?

[criticalthinker]

What is the name of your state (only U.S. law)? NH

Seven year old NH-based small LLC was in a relationship with a consultant. Business failed to pay consultant on time for a project in accordance with its signed consulting agreement. In fact, the approximate $3k payment was many months late and no reasonable explanation was ever offered to the consultant - just one excuse after another. The business and consultant parted ways and the consultant is now also a direct competitor.

Consultant reveals (to one of the business's current contractors) that he may expose the private details of the events of the late payment on his heavily trafficked blog - a blog read by many of the common clients and prospects of the business and consultant. He also mentions that his not-yet-published blog post is tentatively titled "Company X, Dead or Gone?” with intent to further write that, based on the events surrounding his late payment, he believes the business is in questionable financial shape. That is to say, he intends to make remarks about the owner's behavior and imply that the company is dead or dying.

This situation is conveyed to the managing members of the business, second-hand, by another consultant that spoke with him.

His actions will assuredly harm the business's reputation, the owner's long-term earnings, and the earning potential of the business's dozen or so other consultants who earn income through their relationship with the business. The business has an excellent reputation built over the past seven years with its clients and the other consultants. This incident is allegedly the only one of its kind during that period.

1. What are the repercussions, if any, if the consultant chooses to publish such an article on his blog? Can the business take any action against the consultant?
2. What might the business be able to do, if anything, to prevent such an article from being published (e.g. a cease and desist letter) if it has not been already?

I should mention that the business's consulting agreement signed by all of its consultants does include non-disclosure and confidentiality language. I have no idea if that is relevant to this case.

 

[Mass_Shyster]

What are the repercussions, if any, if the consultant chooses to publish such an article on his blog? Can the business take any action against the consultant?

As has been written many times on these pages, anyone can sue anyone for anything.

The business can sue the consultant for defamation. The consultant can use truth as a defense.

What might the business be able to do, if anything, to prevent such an article from being published (e.g. a cease and desist letter) if it has not been already?

A cease and desist letter has no legal weight. It's really only a threat, but when it arrives on an attorney's letterhead, it is often taken seriously.

I should mention that the business's consulting agreement signed by all of its consultants does include non-disclosure and confidentiality language. I have no idea if that is relevant to this case.

An attorney would have to read the agreement to see if disclosing business practices would constitute a breach of contract.

In my opinion, the mud-slinging would do more to harm the consultant than the business. I wouldn't hire a consultant who will stoop to airing dirty laundry about his customers in public

 

[JETX]

I should mention that the business's consulting agreement signed by all of its consultants does include non-disclosure and confidentiality language. I have no idea if that is relevant to this case.

I agree with 'Stevef' in his responses to the first two questions so will not respond further to them.

However, his response to this one is not accurate. The fact of an unpaid debt is NOT protected by a 'non-disclosure' or 'confidentiality' clause. Those apply only to trade specific information (such as design/development plans, customer lists, marketing concepts, etc.).
The fact that the business had a 'slow paid' bill is NOT a 'business practice' and would not be restricted by the agreement.

HOWEVER, I see no upside to the OP mentioning it and a possible downside. For all we know, the 'slow pay' could be a result of the OP failing to provide support for the bill, the bill could have been misplaced, or any of a hundred other VALID reasons.

 

[Mass_Shyster]

The unpaid bill is NOT a 'business practice'

Thanks for the correction. I did not know that.

The 'consultant' though has to be VERY careful as to how he approaches this. A 'pay me or I tell' threat could be actionable (and possibly criminal).

As I understood it, the bill has been paid, but took a long time. But I've been wrong before (see above)

 

[Yertle8]

It would be unwise for the consultant to extrapolate upon his receiving a late payment, claiming that it is (or may be) due to the company struggling financially. As a competitor he does not know how they are situated financially, and speculation could very easily be untrue, harmful, and actionable.

 

[JETX]

As I understood it, the bill has been paid, but took a long time. But I've been wrong before (see above)

Nope... you're correct. For some reason, I read that the bill was unpaid.

Okay, so with that, I have edited my original post to correct from 'unpaid' to 'slow paid' (and edited contents regarding an unpaid bill).

 

[quincy]

I agree with what everyone has said, but will also note that the consultant has already slandered the company by discussing with one of his current business contractors what he intends to write on the blog. For this discussion alone he can be sued for defamation.

Truth would not work as a defense to his defamatory statements unless he can prove that the company's one late payment to him demonstrates the company's overall financial health (which it doesn't).

 

[criticalthinker]

Thank you all for your responses.

I was partly inaccurate and incomplete in my explanation. I apologize and offer the following clarification.

Not sure if this is relevant, but the original consulting agreement promised payment within 10 days of receipt of payment from the business's clients. On several occasions over a period of 8 months the consultant attempted to collect payment due (calls and emails) only to receive lies/excuses about why the debt was not yet paid.

The business allegedly planned to send a payment of 1/3rd to the consultant this month with intent to pay the balance in-full from its next receivable. Apparently, before receiving the payment, the consultant had the conversation that I had mentioned earlier (with another of the business's contractors). For some reason, the consultant chose not to speak to the owners directly. Perhaps he believed he was getting nowhere, I do not know.

The contractor to whom he had spoken immediately sent an urgent note to the owners with the following information:

"If you haven’t already sent him a payment you need to do it immediately. Fedex for Saturday delivery. Hand-delivered cash. Whatever it takes.

He’s pissed. He’s talking about doing a blog post. His working title is “Company X: Dead or Gone?”

The owners immediately Fedexed the 1/3rd payment but are now concerned that this individual will post the article anyway and potentially kill any chance the business and its other contractors would have to recover from the economic downturn (revenue is allegedly down substantially from years past). It is unclear how soon the consultant will receive the balance due - I would imagine it could easily be another few to several weeks.

Stevef, you mentioned a claim of defamation but it sounds like you are saying that such a claim is worthless since the debt is real and true. Am I correct? I agree with your assessment that airing dirty laundry would be more damaging to the consultant, but there is concern now among the other consultants (who continue to stay on board with the business) that the business might fail as a result.

JETX, you had mentioned blackmail/extortion which I had not previously considered. I was thinking along the lines of libel or defamation. From what I understand, the business never received a direct communication from the consultant regarding his desire to air their dirty laundry, or to imply that the company was dead or dying. The only communication about his intent occurred through one of the business's other contractors. I'm not sure if that makes a difference, does it?

Is this just a case of wait and see what happens? It seems like there's little the business can do preemptively to deter the consultant other than pay him off which I do not see happening right away. And it seems like the consultant, should he choose now to air the dirty laundry on his blog, may open himself up to legal action for blackmail/extortion or defamation for the reasons mentioned by Yertle8 and Quincy.

Thank you all again for the insight that you're taking the time to provide. I appreciate it very much.

 

[criticalthinker]

JETX, it's definitely a valid debt. According to the consulting agreement it should have been paid (to the consultant) within 10 days of the business receiving its payment from its client. Apparently, the consultant was given "the run around" for months with a variety of excuses.

I'm not sure if any of that justifies the consultant's actions, but I thought it worth mentioning.

 

[Zigner]

The fact of an unpaid debt is NOT protected by a 'non-disclosure' or 'confidentiality' clause.

Without having read the actual agreement, you shouldn't state that so categorically. I've seen several NDA's that prohibit the mention of a business relationship of any nature.

 

[criticalthinker]

Zigner,

This might help. It's a copy of the confidentiality and non-disclosure sections of the consulting agreement signed by all contractors. Emphasis added by me.

CONFIDENTIALITY

Consultant, recognizing that the work in which it will be engaged under this Agreement, and that the information and materials to which it may be given access hereunder, may be of a proprietary nature, hereby agrees as follows:

1. "Confidential Information" or “Internal Use Only” means any information developed as a result of work done under this Agreement and relating to the subject matter of this Agreement; and information relating to the Company's products or processes, research, development, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, leasing, servicing, customers, finance, and business systems and techniques, or similar information of a third party who has entrusted such information to Company. All information disclosed to Consultant or to which Consultant obtains access, whether such information was originated by Consultant or others, which is treated by the Company as Confidential Information or which Consultant has a reasonable basis to believe to be Confidential Information, shall be presumed to be Confidential Information.
2. Consultant agrees Consultant and Consultant's employees will never use, disclose or publish any Confidential Information. Any Confidential Information received by Consultant or Consultant's employees shall be the property of the Company and shall be held in trust by Consultant solely for Company's benefit and, except as required by Consultant's duties to Company, Consultant and Consultant's employees shall never, either during the term of this Agreement or at any time thereafter, use or disclose any Confidential Information.
3. Notwithstanding any other provision of this Agreement, however, acknowledges that the following information is not Confidential Information:
   
   a. information that has been published by or otherwise enters the public domain through no fault of Consultant;
   
   b. information that is properly within the legitimate possession of Consultant prior to its disclosure to Consultant by Company;
   
   c. following its disclosure, information that is legally received by Consultant from a third party having rights in the information and the third party wasn't restricted from disclosing the information to Consultant; or
   
   d. information that is approved for disclosure by the Company.
   

And

Nondisclosure

Consultant shall not disclose or advertise in any manner the nature of the Services to be performed under this Agreement or the terms of this Agreement, unless and then only to the extent necessary, to perform the Services or unless, and to the extent, authorized in writing by the Company. Notwithstanding the foregoing, Consultant acknowledges and agrees that it may be necessary for the Company to disclose the fact of the Consultant's retention, the duties performed by Consultant and the compensation paid, should there be proper inquiry from such a source as an authorized U.S. Government agency or should it believe it has a legal obligation to disclose such information, and Consultant hereby authorizes any such disclosure.

That's pretty much it regarding confidentiality and disclosure in the agreement.

 

[quincy]

The consultant has already slandered his former company by implying to the business contractor that the company is having difficulties financially AND the consultant has apparently violated the terms of the Confidentiality agreement by discussing the company's finances (whether accurately stating to another he has not been paid or by inaccurately implying the company is having financial difficulties).

The consultant can be sued by the company, whether the blog is ever written or not.

Had the consultant NOT implied already that the company was experiencing financial difficulties, he could have written a blog stating just the facts of his experience (without drawing his own conclusions from these facts) without risk of losing a defamation action. He could have legally written that there was a delay in payment despite an agreement that he would be paid within 10 days of the company receiving payment from the client. This is the truth and not, as such, actionable.

However, the consultant would STILL be violating the terms of the confidentiality agreement he signed.

So, which ever way you look at it, the consultant has already opened himself up to a lawsuit. A cease and desist from the company's attorney can be sent to the consultant, to hopefully prevent any further damage to the company. But, as Steve noted, a cease and desist is not a court order, and the consultant can choose to ignore it. Or the company can sue for defamation and breach of the confidentiality agreement.

Edit to add: Three additional factors may come into play in the described situation.

One is that New Hampshire recognizes defamation per se, and statements that impugn the financial health and fitness of a company can be judged per se defamation, which would presume injury and damages could be awarded the company on this presumed injury.

However, the consultant could have the defense of, if not truth, then "opinion," based on New Hampshire case law. In Gray v St. M artin's Press, Inc, 221 F.3d (1st Circ. 2000), the Court said that a statement of opinion is not actionable unless it may be reasonably understood to imply the existence of a defamatory fact as the basis for the opinion. If it is plain that the speaker is expressing "a subjective view, an interpretation, a theory, a conjecture, or surmise, rather than claiming to be in possession of objectively verifiable facts," the statements made may be considered opinion.

There could also be for the company a "tortious interference" claim if the company can demonstrate that the consultant induced a third party not to enter into or continue a business relationship with the company, based on published false facts about the company (see Baker v Dennis Brown Realty, 433 A 2d, NH 1981).

 

[Mass_Shyster]

Zigner,
This might help. It's a copy of the confidentiality and non-disclosure sections of the consulting agreement signed by all contractors. Emphasis added by me.

And

That's pretty much it regarding confidentiality and disclosure in the agreement.

You may want to send the consultant a back-channel message, using the same channel you got his message from, stating that you plan to vigorously enforce his contractual obligation to refrain from disclosing confidential information regarding the company's finance processes.

Even if it's not enforceable, it sure sounds like it is to me (a non-lawyer), and probably will to him as well.

With his check in hand, and the threat of a lawsuit, I doubt he would bother with the blog.

 

[quincy]

I don't even think it needs to be a "back-channel message." I think a cease and desist from an attorney, outlining the possible legal actions that will be pursued against the consultant if he does not stop his current conduct and refrain from additional conduct, may be enough to convince the consultant he should knock it off.

Although the consultant may be able to support his statements as being opinion and not implied false fact (thereby potentially defeating a defamation action), he could still be liable for violating the terms of the confidentiality agreement and subject to a tortious interference with a business relationship claim.

The consultant really has little to defend his actions, and a lot to lose from his actions. The company seems to be on pretty solid legal footing here (even if they are, in reality, suffering from financial difficulties).

 

[Mass_Shyster]

I don't even think it needs to be a "back-channel message." I think a cease and desist from an attorney, outlining the possible legal actions that will be pursued against the consultant if he does not stop his current conduct and refrain from additional conduct, may be enough to convince the consultant he should knock it off.

I was taking into consideration that the company was waiting for the "next receivable" to pay the entire bill. It sounds like they are struggling, and may not be able or willing to pay a lawyer to write the C&D letter.

I (remember, I'm not a lawyer) would send the back channel message, and monitor the blog, ready to react quickly with an attorney's letter if the blog appears.