In Smithfield Foods Inc. v. United Food and Commercial Workers Intern. Union, 2008 WL 4724689 (E.D.Va. 2008), the Court addressed a dispute between the parties regarding the standard of proof applicable to Smithfield Food Inc.’s (Smithfield) alleged damages and held that Smithfield could recover reputational damages alleged under its nine counts only if Smithfield met the standard of “actual malice” set forth in New York Times Co. v. Sullivan, 376 U.S. 254 (1964).
Smithfield owns the world’s largest pork processing plant which is located in North Carolina and employs roughly 4,650 hourly employees. The United Food and Commercial Works Union (UFCW) tried unsuccessfully for years to become the bargaining representative for the plant and in June 2006, announced a corporate campaign against Smithfield. The alleged object of the UFCW campaign was to force Smithfield to recognize UFCW as the collective bargaining agent for the plant or to force Smithfield to cease operations due to unprofitability. Smithfield alleged four claims under RICO as well as state law claims for tortious interference, and unfair/deceptive trade practices. Smithfield claimed roughly $900 million in damages including the direct expenses realized by Smithfield as a result of the campaign, customer-specific lost profits, a loss of free advertising on the Oprah Winfrey show, nationwide lost profits, and cumulative abnormal returns on Smithfield’s stock price. The UFCW argued that Smithfield’s damages were reputational and therefore could be recovered only if Smithfield met the applicable First Amendment standard for recovery of such damages.
The dispute between the parties centered on two issues. First, Smithfield claimed that because extortionate speech is not protected by the First Amendment, if UFCW was found liable for extortion, Smithfield did not have to meet the constitutional standard. Second, the parties disagreed as to whether Smithfield’s alleged damages were “reputational” in nature. The Court held that liability could be imposed for extortionate speech and that the First Amendment was no defense to such speech. However, the Court went on to say that “if a particular type of damage is sought, i.e., reputational damage caused by publication, then the prevailing party also must prove that the publication was false and made with actual malice to recover, no matter what label is applied to the underlying claim.” Smithfield, at *6. As to whether the damages were “reputational,” the Court stated that a party’s own characterization is persuasive and found that Smithfield’s complaint alleged mainly reputational damages which therefore had to meet the New York Times standard.
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