May a company get an injunction to block a defendant from invoking the Streisand Effect?

by Paul Alan Levy

The United States Court of Appeals for the Third Circuit recently upheld the rights of litigants to use public pressure to discourage companies from suing them. The issue arose in Bank of Hope v. Chon, when a bank sued one of its departed founders, after an employee who was fired for embezzlement implicated him in her crimes. The founder proclaimed his innocence and urged the CEO to drop the case, and when he did not, he warned that he would take his complaint to the bank’s shareholders. After he wrote letters to “dozens of institutional shareholders,” suggesting that the bank’s litigation strategy was doing to hurt the bank’s value. The bank then asked the district court to enjoin further such communications on the theory that the defendant was interfering with the "fairness and integrity” of the litigation process by “attempting wrongfully and unlawfully to coerce Bank of Hope into making a settlement payment.” After the trial court granted such an injunction, the defendant appealed.

The Third Circuit reversed. It held that there was no evidence that the gag order was needed, and that the blanket injunction was an impermissible restraint on the defendant's speech.  The defendant had argued that the injunction was an impermissible prior restraint; the bank argued that the founder's speech was "commercial" (because he had the economic motive of securing a better financial outcome from the litigation).  The panel expressed skepticism of that argument, but found it unnecessary to address that point because, it held, the order failed even under the Central Hudson scrutiny applied to constraints on commercial speech.

Some commentary on the case has suggested that it stands generally for the “rule . . .  that if somebody wants to talk about their case, it’s not for the courts to restrain them simply to protect the decorum or integrity of the litigation.”

I like that rule, but I am worried that it overstates the opinion,which was written narrowly. The Third Circuit panel described protecting the fairness and integrity of the litigation process as a sufficiently substantial government interest that could, in some circumstances, support a gag order directed to civil litigants; it even hinted, in dictum, that evidence such coercion was likely might be enough to justify an injunction against speech (that is, it faulted the trial court for issuing an injunction on this ground without evidence that the speech was being effective). And it faulted the trial judge for failing to consider a less restrictive injunction, such as barring specific criticisms.

So the result is the right one but some of the reasoning is troublesome. When a company pursues an individual, the defendant has every right to appeal to the court of public opinion to condemn the company for its litigation strategy – invoking the Streisand Effect, as it were- and thus give the company reasons to drop the litigation. Protecting the jury pool against tampering through overwhelming local publicity is one thing, but increasing the social and political costs of being a bullying plaintiff is a technique that ought to be available to unfairly sued defendants.  It is going to take further litigation in the Third Circuit to ensure that this is the governing rule.

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