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The Better Business Bureau is entitled to a “conditional privilege” in its publication of reports that criticize businesses, and libel suits against it are therefore subjected to an actual malice standard instead of mere negligence, the Pennsylvania Superior Court has ruled. In its 23-page opinion in American Future Systems Inc. v. Better Business Bureau of Eastern Pennsylvania, a unanimous three-judge panel upheld an October 2003 verdict in which a Philadelphia jury rejected a defamation claim brought by Progressive Business Publications, a Malvern-based business newsletter company, that said it was unfairly assigned an “unsatisfactory” business rating. In the suit, PBP claimed that the Better Business Bureau never investigated the alleged consumer complaints that led it to downgrade PBP’s longtime “satisfactory” rating to “unsatisfactory.” The negative report caused some customers to cancel their subscriptions, the suit said. But the Better Business Bureau insisted at trial that its report on PBP was literally true because it had received more than 300 customer complaints about the company’s telemarketing and business practices. According to the suit, the report said PBP “has an unsatisfactory business performance record due to a pattern of customer complaints alleging billing for unordered merchandise. Some customers have claimed that they canceled their subscriptions but their cancellations were not honored.” According to court papers, the Better Business Bureau later amended the report to include PBP’s rebuttal: “The company claims it has a liberal cancellation policy permitting the customer to cancel anytime within the first three months of the telephone order and receive a refund on all unsent issues.” The rebuttal also said that the number of customer complaints about PBP was “negligible compared to its volume of business.” But PBP insisted that the alleged customer complaints did not represent a “pattern” because they represented “a minuscule percentage of PBP’s business.” The suit said the complaints related to “less than .005 percent of all orders received by PBP,” and that the company had less than two complaints per office per year, and less than one complaint for every 15 telemarketing representatives. PBP has 15 offices in Pennsylvania and New Jersey and employs more than 600 workers. Among its newsletter publications are: CFO & Controller Alert, What’s Working in Credit & Collection, Keep Up to Date on Accounts Payable, Information Technology Adviser and Internet Marketing Report. Defense attorney Paul D. Weller of Morgan Lewis & Bockius said the suit was the first defamation case against a Better Business Bureau anywhere in the United States in more than 10 years that went to a jury trial. The jury deliberated less than three hours, he said. On appeal, plaintiff’s attorney Wayne Mack of Duane Morris argued that PBP was entitled to a new trial because the trial judge incorrectly instructed the jury to apply an “actual malice” standard despite finding that PBP was a “private figure.” Mack also argued that Philadelphia Common Pleas Judge Sheldon C. Jelin erred by barring PBP from presenting some of its most compelling evidence. Now the Superior Court has rejected all of PBP’s arguments. Writing for the court, Judge Susan P. Gantman found that the jury was properly instructed that the Better Business Bureau is entitled to a conditional privilege. “A conditional privilege arises when a recognized interest of the public is involved,” Gantman wrote in an opinion joined by Judges John T.J. Kelly Jr. and Correale F. Stevens. Because the statements related to consumer complaints, Gantman found, they “touched upon a matter of public concern.” As a result, Gantman said, PBP was “required to show more than mere negligence in the publication of the statements to defeat the conditional privilege.” PBP also argued in the appeal that Jelin erred by allowing defense lawyers to present 108 consumer complaints. At trial, Mack had argued that the documents were hearsay and therefore should have been excluded. But Weller argued that he was offering the documents not for the truth of their contents, but only to show that the Better Business Bureau had, in fact, received complaints. Gantman found that since Jelin gave the jury a proper limiting instruction, the documents were properly admitted. Mack also complained that Jelin barred him from presenting evidence of an investigation by the Council of Better Business Bureaus of alleged inappropriate actions by the Eastern Pennsylvania office. But Gantman found that Jelin properly barred the evidence as irrelevant because the Eastern Pennsylvania office was acquired by the Better Business Bureau of Metropolitan Washington, D.C., several months before the report on PBP was issued. Since the Washington office issued the report, and since the Eastern Pennsylvania office was defunct at the time, Gantman said, “we fail to see the relevance of the proposed evidence to the issues raised at trial.” (Copies of the 23-page opinion in American Future Systems v. Better Business Bureau of Eastern Pennsylvania , PICS No. 05-0417, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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