Iowa Supreme Court lowers damages in libel case by $8 million

The Iowa Supreme Court reduced damages from $11 million to almost $3 million in a libel suit against an Iowan who made accusations against his former employer. A lack of sufficient evidence of lost profits by the employer and today’s social media climate played roles in the court’s reasoning. 

After being fired for alleged workplace misconduct and insubordination, Scott Clark took to Facebook to make repeated accusations against Jerry Hoffmann, CEO of DIY AutoTune, the court said. 

“Clark disseminated his false statements over social media and podcasts to tens of thousands of people,” the court said in its unanimous opinion. “He said that Hoffmann was dishonest and engaged in bribery. He falsely reported that Hoffmann knowingly sold dangerous products out of greed.”

During the case, Clark defied court orders, jail time and a mutual agreement with Hoffmann to not criticize each other outside of litigation, the Iowa Capital Dispatch reported. According to the court’s opinion, Clark’s answer and counterclaims to Hoffmann’s lawsuit were struck, leaving the jury to decide what Hoffmann would receive in damages. The court also found that Clark  repeatedly threatened to harm Hoffmann unless he received payment. 

In the opinion, the participating justices said Clark had engaged in “an intentional, long-term, bad-faith campaign of per se falsehoods that caused emotional harm,” but also that a certain part of the jury’s damages was “flagrantly excessive.” 

The justices said the jury erred when it appeared to charge Clark and his company, RealTuners, $4.1 million in damages based on the amount of revenue that Hoffmann allegedly lost due to the defamation. Instead, they ruled that the jury should have based its decision on lost profits. 

The court found that Hoffmann provided “exceedingly sparse” evidence of lost profits, except for one business relationship that he said he lost because of Clark. Based on this, they lowered the special damages to $100,000, and lowered punitive damages accordingly. 

The court did agree with the jury that people should be able to receive damages for false statements that presumably hurt their reputations, even if they can’t show evidence of the actual damage. This is called libel per se, and it only requires proof of general damages, not special damages, the justices said. 

The justices cited a law article that said this standard is arguably “more necessary than ever” in today’s climate, where accusations can spread quickly on social media. 

The justices noted that in a previous decision, Bierman v. Weier, they rejected the idea that people can respond quickly to defamation on the Internet and not experience much harm. In that decision, the court was “not persuaded… that the Internet’s ability to restore reputations matches its ability to destroy them.”

The justices also agreed with the damages that the jury said Clark should pay for alleged breach of contract, breach of fiduciary duty, civil extortion and an attorney fee.

Hoffmann’s attorneys now may decide whether to accept the reductions in damages or ask for a new trial, the court’s opinion says. During oral arguments, Hoffmann’s attorney said his client prefers to accept changes to the damages, but didn’t specify a particular amount at that time.  

Hoffmann’s attorneys could not be immediately reached for comment.