A recent Court of Chancery decision is one of several relatively recent rulings that clarify the limited scope of equitable relief that is available for defamation claims as a narrow exception to the general rule that equity will not enjoin a libel. The opinion in Preston Hollow Capital LLC v. Nuveen LLC, C.A. No. 2019-0169-SG (Del. Ch. Aug. 13, 2019), should be required reading for anyone seeking to include a defamation claim in a complaint filed in the Delaware Court of Chancery.

For purposes of this short blog post, the most useful method to extract the nuggets without providing all the factual details, is to craft bullet points for the important principles that guide the court in determining whether its circumscribed jurisdiction will allow a particular claim to fit within the narrow exception to the general rule that equity lacks jurisdiction over a request to enjoin common-law defamation.

The single issue that this opinion addresses is whether statements made by one business competitor against another to third parties that the plaintiff believes to be slander, allows that party to seek equitable relief by means of an injunction to prevent future potential defamatory utterances.

General Principles Limiting the Jurisdiction of Chancery over Claims Involving Defamation:

  • The court began the opinion with the equitable maxim that “equity will not enjoin a libel.”
  • The court observed that generally speaking, because of the implications on speech of the application of remedies, legal or equitable, to tortious speech, slander and libel “are seen as denizens of the Superior Court, and are subject to the findings made there by juries regarding the speech of their peers.” The principle was recently affirmed in a case in which Chancery dismissed a defamation claim subject to transfer to the Superior Court. See Perlman v. Vox Media, Inc., 2019 WL 2647520 (Del. Ch. June 27, 2019).
  • A single case in Delaware supports the so called “trade-libel exception” to the rule that Chancery will not exercise jurisdiction over a request to enjoin a libel: J.C. Pitman & Sons, Inc. v. Pitman, 47 A.2d 721 (Del. Ch. 1926). That opinion was recently the subject of a scholarly analysis in: Organovo Hldgs., Inc. v. Dimitrov, 162 A.3d 102 (Del. Ch. 2017).
  • The instant Preston Hollow Capital opinion explains that the Pitman case stands for the general rule that equity lacks jurisdiction over a request to enjoin common-law defamation, but an exception applies:

“… in a limited subset of cases, however, when a separate tort (in Pitman, the tort of unfair business competition) is alleged where relief at law is insufficient, and where the equitable remedy sought is, incidentally, an injunction of a ‘trade libel’–that is, a libelous statement to consumers that falsely disparages a plaintiff’s goods or services. In such a case, the matters may be within this Court’s jurisdiction, because the underlying behavior being examined without a jury is not mere speech, but involves other tortious activity where tradition and constitutional considerations do not require the findings of a jury. Further, this Court may enjoin that tortious behavior, even if the injunction incidentally enjoins the trade libel. In other words, under Pitman, where this Court has jurisdiction over business torts, it may, in an appropriate case, enjoin their threatened continuation, even if the injunction suppresses speech. In this case, for instance, the plaintiff has adequately pled tortious interference with business relations; if it proves that claim, it may seek equitable remedies, as appropriate.”

Slip Op. at 3.

  • The Court emphasized that it did not read Pitman to support a separate count of common-law slander, nor does Pitman support the kind of forward-looking suppression of new defamatory statements of the variety sought.
  • The Court dismissed the defamation claim subject to transfer to Superior Court. But cf. n.3 (referring to Chancery’s “clean-up doctrine).

Bonus Quotes that Can Be Used In Almost Any Legal Writing:

  • This opinion includes several “turns of phrases” that qualify as exemplary literature that can be used in almost any legal writing. The Court referred to law, and especially equity, as “a creature of nuance and fine-but-significant gradations, and pithiness, like garlic, may both enhance the savor of a discourse, and at the same time mask its subtle flavors.”
  • The foregoing quote was from the beginning of the opinion, in the context of describing maxims of equity as legendarily pithy expressions of general Chancery practice.