The Economics of Weaponized Defamation Lawsuits
(2018) 47(2) Southwestern Law Review 335-383.
49 Pages Posted: 3 Jul 2018
Date Written: February 1, 2018
Defamation law exists primarily to protect the plaintiff’s reputation. It does so by providing a remedy for reputational harm caused by the defendant’s publication of false and defamatory imputations about the plaintiff. However, although the law of defamation seeks to remedy and prevent reputational harm caused by the publication of false statements, across the common law world it has been acknowledged that, in practice, its operation also deters the publication of true speech. This phenomenon is known as the “chilling effect”. Public figures are able to take advantage of this chilling effect by threatening or instigating lawsuits against those who are critical of their activities. These “weaponized” defamation lawsuits leverage the large cost of defending a defamation action, and the defendant’s uncertainty regarding the outcome, to stifle criticism of the public figure that may be legitimate.
The purpose of this paper is to use existing economic analyses of defamation law, along with insights from our own original model, to discuss and compare the law in the United States and England. Our focus in particular is on the effects of the two different legal regimes on abusive lawsuits and the chilling effect. Existing literature on the economic theory of defamation law suggests that, because of errors and inefficiencies in the litigation process, there may be an unavoidable trade-off in the incentives produced by the law: either the media will be overly cautious because of the threat of costly lawsuits, or public figures will be at risk of being wrongly defamed by media organizations with little need to fear the consequences.
The key insight contributed by our model is that this trade-off is reinforced by the fact that public figures are repeat players whose previous litigation activity is known to media organizations. This gives them an incentive to pursue negative-value lawsuits against the media in order to appear litigious, and thereby to discourage future publications about them. Treating plaintiffs as repeat players in litigation games, an approach that has not previously been taken in the economics literature on defamation law, allows us to generate new insights into the problem of weaponized defamation lawsuits and how it might be addressed.
Keywords: defamation, libel, chilling effect, economics, law and economics
JEL Classification: K13, K41
Suggested Citation: Suggested Citation