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Kirch v. Liberty Media Corp.

Court of Appeals for the Second Circuit
449 F.3d 388 (2006)
ELI5:

Rule of Law:

To state a claim for defamation, a plaintiff must demonstrate that the allegedly defamatory statements were published "of and concerning" them. A statement about one corporation is not "of and concerning" a separate, economically related entity, such as an agent, even if that entity suffers indirect financial harm as a result.


Facts:

  • Dr. Leo Kirch's company, KirchGroup, was a major German media conglomerate undergoing a complex, multi-phase restructuring plan to become a single publicly traded company.
  • By late 2001, KirchGroup was facing a liquidity crisis but was in negotiations to secure new financing and extend existing loan repayment deadlines with its main lenders.
  • Defendants Liberty Media Corp. and Deutsche Bank AG allegedly had economic motives to see KirchGroup fail and conspired to bring about its collapse.
  • Deutsche Bank's CEO, Dr. Rolf-Ernst Breuer, was aware of both KirchGroup's financial fragility and its ongoing efforts to secure financing.
  • On February 3, 2002, during a German-language interview in New York City with Bloomberg Television, Breuer stated that "the financial sector is not willing to provide further debt or equity under current conditions" to KirchGroup.
  • International Television Trading Corp. (ITTC), a U.S. corporation, served as KirchGroup's exclusive agent in North America.
  • Following the broadcast of Breuer's comments, KirchGroup's lenders and potential investors lost confidence and withdrew their support.
  • Unable to secure necessary financing, KirchGroup sought bankruptcy protection in Germany on April 8, 2002, causing ITTC to lose virtually its entire business.

Procedural Posture:

  • Dr. Leo Kirch filed a complaint against Deutsche Bank and Dr. Breuer in New York State Supreme Court, a state trial court.
  • The complaint was amended to add International Television Trading Corp. (ITTC) as a plaintiff and Liberty Media Corp. and John Malone as defendants.
  • The defendants removed the action to the United States District Court for the Southern District of New York.
  • Defendants filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted, among other grounds.
  • The district court granted the defendants' motion and dismissed the complaint in its entirety.
  • The plaintiffs (appellants) appealed the district court's dismissal to the United States Court of Appeals for the Second Circuit.

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Issue:

Does a defamatory statement about a corporation give rise to a cause of action for a separate, but economically related, corporation that suffers derivative financial harm as a result?


Opinions:

Majority - Sack, J.

No. A defamatory statement about a corporation does not give rise to a cause of action for a separate, economically related entity because the statement is not "of and concerning" the second corporation. The "of and concerning" requirement is an essential element of a prima facie libel case and serves as a significant limitation on who may seek a legal remedy. Here, Breuer's comments were about KirchGroup and its financial problems, not about ITTC, which is a structurally independent corporation. The court rejected the argument that ITTC could sue because of the economic harm it suffered, stating that a false disparaging statement about a large company does not ordinarily defame all of its suppliers, employees, and dealers, however much they may be injured. ITTC's alleged injury is derivative and too attenuated to state a cause of action.



Analysis:

This decision reinforces the strictness of the "of and concerning" requirement in defamation law, preventing the expansion of liability to a wide net of indirectly affected third parties. The court clarifies that a close business relationship, such as that of an exclusive agent, is insufficient to meet this standard without evidence that the statement could be reasonably understood as being substantively about the plaintiff itself. This ruling serves as a barrier against claims from parties who suffer purely economic ripple effects from a defamatory statement directed at another, thereby limiting the scope of potential litigants in corporate defamation cases and upholding a traditional boundary of tort law.

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