Mattresses have long been associated with trickery and underhanded behavior. It’s true! Think of “The Godfather,” when war breaks out among the crime families. Where do Sonny and the boys go? “To the mattresses,” to hide out! That’s where Clemenza teaches Michael how to make old school Sunday gravy. Or think of “The Princess and the Pea,” where the prince’s mother finds her son a bride by slipping a pea into the poor girl’s mattress, which ruins a good night’s sleep.
So it should come as no surprise that the mattress business is apparently cutthroat. I had no idea about that, until I read the Second Circuit’s recent decision in Sleepy’s LLC v. Select Comfort Wholesale Corp. But beyond the seaminess of the mattress industry (see what I did there?), the case is interesting because it defines the parameters of defamation in the business context.
A brief review of the basics of defamation:
First, the plaintiff must prove that the defendant made a false and defamatory statement concerning the plaintiff.
Second, the plaintiff must prove that the defendant made an unprivileged publication to a third party.
Third, the plaintiff must prove that the defendant acted at least negligently in publishing the communication.
Fourth, in some cases, the plaintiff must prove “special damages,” or quantifiable monetary loss.
The facts in this case: Sleepy’s sells mattresses. Select Comfort makes the “Sleep Number” bed, that allows consumers to adjust the firmness of their mattresses on a dial. Sleepy’s and Select Comfort entered into a deal that made Sleepy’s an authorized retailer of certain models of Sleep Number beds (known as the “Personal Preference” line).
Sleepy’s executives became concerned that the “Personal Preference” mattresses weren’t selling as well as they had hoped. Then they received reports that Select Comfort salespeople had been disparaging Sleepy’s and the “Personal Preference” mattresses - presumably so that Select Comfort could sell more of a line of mattresses marketed exclusively in Select Comfort’s stores, known as the “Core” line. That’s when Sleepy’s starting sending undercover “shoppers” into Select Comfort’s stores to find out what was really going on.
The undercover buyers contended that they got an earful. In addition to saying that the products being sold by Sleepy’s were inferior and bug-infested, at least one of the Select Comfort salespeople allegedly said that Sleepy’s routinely breached its product warranties. As a result of this and other alleged transgressions, Sleepy’s brought suit against Select Comfort.
One of the defenses raised by Select Comfort was essentially the civil equivalent of entrapment. Namely, Select Comfort argued that the undercover shoppers had deliberately coaxed the allegedly offending statements from Select Comfort salespeople in order to justify a lawsuit, making the statements insufficient to prove defamation.
The Second Circuit, framing the issue as one of “consent,” wrote as follows: “When a plaintiff sues for defamation based on a statement of the defendant elicited by the plaintiff with some reason to expect that the defendant’s statement might be defamatory, the more the evidence supports the proposition that the plaintiff elicited the statement with a high degree of certainty that it would be defamatory, for the purpose of enabling a lawsuit, the stronger the defendant’s case for deeming the statement consented to, thus barring the claim.” According to the Court, the key question was “whether Sleepy’s inquiries were motivated by a good faith attempt to learn whether the Select Comfort salesforce was carrying on a consistent pattern of slander, or were merely a ruse to decoy Select Comfort into a lawsuit, along with the closely related question what was the degree of Sleepy’s confidence or certainty at the time of each inquiry that a pattern of slander existed.”
The trial court apparently had decided the issue simply based on who initiated the conversation – the undercover shoppers, or the Select Comfort sales staff? If the undercover shoppers initiated the conversation leading to the allegedly defamatory statements, the trial court ruled, then there could be no actionable defamation. But the Second Circuit reversed and remanded the case for further proceedings before the trial court, which I’m sure is just what everyone wanted to hear after a several-month-long (and I’m sure quite expensive) bench trial.
This case illustrates perfectly why litigation is generally a disaster. Significant resources went into trying a case on both sides, but the appeals court decided that the trial court had used the wrong standard, so now everyone has to start again from square one. That’s why, from an economic standpoint, a relatively bad settlement is almost always better than a protracted litigation. Some cases, unfortunately, involve bigger issues than mere economics, and have to be tried. Others have to be tried because at least one side is looking at the case unrealistically. That’s why we always conduct mock trials before any significant evidentiary hearing. (And sometimes our clients don’t like what the mock jurors have to say.)
One thing to keep in mind: If your company ever faces a defamation suit, be sure to check your general liability coverage (focusing on Coverage B, “Personal Injury”). The suit and any resulting damages may be covered by insurance. But that’s a topic for our insurance coverage blog.
The Sleepy’s v. Select Comfort decision discusses a number of other interesting evidence issues (including the applicability of hearsay rules to statements made by unnamed customers as to why they decided not to buy Sleepy’s products). You can read the full decision here.