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Appellate Court reinstates project44’s defamation suit against FourKites

A panel of the Illinois Appellate Court on Tuesday overturned the Circuit Court of Cook County’s dismissal of real-time visibility provider project44’s defamation suit against rival firm FourKites. Now project44 is free to continue its pursuit of the case in Circuit Court, where it will need to prove that it suffered reputational damage.

The defamation allegations stem from a series of May 2019 emails sent from pseudonymous Gmail accounts to project44 board members Kevin Diestel and Jim Baum and incoming Chief Revenue Officer Tim Bertrand. These emails, allegedly connected to FourKites, purported to warn Diestel, Baum and Bertrand of accounting fraud at project44 — one email compared project44 to the bankrupt biotech startup Theranos — and connections to Chicago organized crime.

In a defamation suit, it’s not sufficient that false statements be made to the plaintiff; because defamation concerns reputational damage, defamation requires that the statements be published to a third party. At the Circuit Court of Cook County, Judge James Snyder ruled that because the defamatory claims were only published to officers and agents of project44, the emails essentially “defamed” project44 to itself; that is, project44 board members and executives did not constitute a “third party” who would stand apart from the company’s reputation.

“We do not agree,” wrote Justice David Ellis of the Appellate Court, with Justices Nathaniel Howse and Cynthia Cobbs concurring. “Our law has long recognized that a corporation can have its own reputation and identity, and if that reputation is attacked, it may use defamation actions to defend itself.”

Ellis goes on to explain that the employees of a company are indeed distinct from the reputation of the company, and that falsely harming the reputation of a company in the eyes of its own employees can be defamatory.

“Perhaps the most fitting illustrations of this point would be those involving corporate sabotage,” wrote Ellis. “A competitor might communicate false statements about Corporation A to employees of Corporation A in the hopes of damaging the corporation’s reputation among its workforce — whether to generally sow discontent, throw a wrench in its productivity, cause valuable employees to leave, or even steal away those employees.”

The appellate panel noted a lack of case law dealing with the specific question of whether the transmission of messages to board members and executives from an outside source could be considered “publication,” but it did lean on the concept of “intracorporate publication,” found in a set of cases dealing with defamation entirely within a single corporation. For instance, employee A can defame employee B to a supervisor, who then fires employee B. Employee B then sues the former employer and employee A for defamation.

Citing Popko v. Continental Casualty, the court wrote that “In Illinois, the corporation that is named as the defendant in such an action cannot claim a lack of publication — it cannot defeat the lawsuit by claiming that the interoffice statements were merely “the corporation talking to itself.”

In its appeal to Snyder’s decision, project44 argued that in this case, it’s the corporation which has been defamed to the employees, who constitute a ‘third party’ that hears the defamatory statement, just as in the previous example, the corporation was the third party who heard the defamation against the employee. In other words, project44 argued that the Appellate Court should extend the logic of the intracorporate publication rule: If an employee can be defamed to a corporation, a corporation can be defamed to an employee.

FourKites countered that if someone can’t send an anti-corporate message warning about bad practices to a company’s directors and executives, whom can they send it to? If the Appellate Court allows this suit to proceed, FourKites said, it would be radically undermining the “publication” requirement of defamation, allowing corporations to sue their critics as defamatory. But the Appellate Court disagreed.

“Our disagreement is not on whether defamation law protects sincere, good-faith communications regarding corporate practices but on how the law does so,” Ellis wrote. “FourKites would have us use the ‘publication’ element of a defamation claim to close the door to these defamation claims. But doing so would go too far — it would not only protect sincere, good-faith communicators from defamation liability; it would also protect those who transmit false messages in bad faith.”

“We are extremely pleased to see the appellate court recognize the damage that false information sent to our Board and executives using fake identities and emails can do to a company by ruling that a company can defend itself against this kind of appalling and malicious reputational attack,” said Jennifer Coyne, project44’s general counsel, in a statement to FreightWaves. “We commend the court for finding that this kind of conduct is actionable in Illinois and the courts will take this behavior very seriously and hold companies accountable for such outrageous and inexcusable conduct.”

Media inquiries to FourKites were unanswered as of press time.