Negative PR against a management board member or finance director: Does it concern the company? | In Principle

Can a statement concerning an individual employed by or affiliated with a company infringe not only the reputation of the individual, but also the reputation of the company? What sort of connection with the company, and what sort of comment, can have such results? What can be the practical consequences for example in litigation? The analysis below is devoted to companies, but the remarks are universal and may generally apply to any legal person (such as a cooperative, foundation, local government entity, and so on).

Company and individual: Separate entities and their personality rights

Under Polish law, the personality rights of a legal person must be distinguished from those of individuals serving on the authorities of the legal person or affiliated with the legal person. Each of these entities have their own personality rights. (The personality rights of an individual are governed by Civil Code Art. 23, while the regulations governing personality rights apply as relevant to legal persons pursuant to Civil Code Art. 43.) One of the fundamental personality rights of both natural persons and legal persons is their reputation. In the case of an individual, this is known as the “external aspect” (as opposed to the internal aspect, i.e. personal dignity), and in the case of a company, it may be referred to as reputation or goodwill.

The treatment of offensive or false statements as infringing the reputation of a company is clear if they concern the company itself. Such a statement about a company may take a direct form (such as “company X is breaking the law”) or an indirect form (where the company is not named, but it is obvious from the circumstances, market situation or context which company is meant).

But we are interested here in a somewhat more complicated situation, where the negative statements are aimed not at the company itself, but at:

• The authorities of legal persons or their members, i.e. the natural persons belonging to the authorities (version 1), or
• Other natural persons who are not members of the corporate authorities but are factually or legally affiliated with the legal person (such as employees, shareholders, contractors, proxies or attorneys) (version 2).

Undoubtedly a statement targeting such individuals may infringe their personality rights as natural persons (e.g. their dignity or reputation). But can they at the same time infringe the personality rights of the legal person they are affiliated with?

Version 1: Statements targeting corporate bodies or their members

To start, we should draw an important distinction. If a statement concerns a corporate body as such (e.g. “the management board committed fraud”), there is no doubt that the infringement also directly infringes the personality rights of the company. This is because the corporate body cannot be regarded as holding its own personality rights.

The issue is harder when the statement targets a specific member of a corporate body. Most courts recognise that a statement concerning members of the corporate authorities may infringe the reputation of the legal person.

In one case the court considered whether a publication in which an individual who was a shareholder and the CEO of a company was called “an exceptionally unreliable and irresponsible partner” constituted a statement about the company. The publication revealed the name of the company and the role performed in the company by the individual described. The court held that such criticism of the behaviour of an individual in commercial dealings infringes not only his reputation as a natural person, but also the company’s reputation. This was because the accusation referred to the activity with which the company was identified, as understood by readers (Kraków Court of Appeal judgment of 28 September 1994, case no. I ACa 464/99).

In another case the court examined whether dissemination of information that the CEO was guilty of mobbing of employees infringes the reputation of the company or only of the CEO as an individual. The court held that the statement did not concern the sphere of the CEO’s private life, but his activity as the person managing the company and referred to relations between the CEO as a manager and the company’s staff. Thus it harmed the company’s reputation (Warsaw Court of Appeal judgment of 2 February 2011, case no. I ACa 909/10).

In yet another dispute, the defendant had disseminated information that during a reception at a restaurant, members of a company’s management board had subjected the defendant to hooliganism by throwing glasses at the defendant. The context of the defendant’s statement overlapped with the business of the company whose management board members were involved, because the defendant pursued activity competitive with the plaintiff company. The court held that allegations of this type directed against members of the company’s management board, with an indication that they concern managers of a legal person’s enterprise, and raised in the context of a publication concerning the competitive activity of the company and the instigator of the allegations, infringes the reputation of the legal person (Kraków Court of Appeal judgment of 22 January 2016, case no. I ACa 1599/15).

Thus, as a rule, the courts recognise that because a legal person acts through its corporate bodies, allegations against members of such bodies are allegations directed against the legal person as such. It appears that this position in the case law follows from the role and importance of the corporate bodies of a legal person. But the connection is not automatic, and a defamatory statement concerning a member of a corporate body does not necessarily infringe the reputation of the company. The judgments so far show that the courts will make a careful case-by-case analysis of the wording and context of the statement, and primarily whether or not it concerns the sphere of the individual’s activity as a representative of the legal person.

Although this line of decisions appears to predominate, there are also judgments where the courts stress the separateness of the legal person as a legal entity and indicate the impossibility of merging the company’s personality rights with the individuals serving on the company’s authorities. They hold that the personality rights of a legal person cannot be infringed by infringing the personality rights of the members of its authorities, because they do not form part of the “substratum” of the company as an entity. “The essence of a legal person is that it is a separate legal entity, and thus infringement of the reputation of the legal person concerns the entirety of its substratum as an entity, rather than certain individuals who are only members of it” (Supreme Court of Poland judgment of 11 January 2007, case no. II CSK 392/06).

Version 2: Statements targeting other persons affiliated with the company but not members of the corporate authorities

The case law to date does not provide a clear answer to whether statements targeting other natural persons who are related to the company but are not members of the corporate authorities can infringe the personality rights of the company. There are some rulings where the courts have held that the reputation of a legal person has been infringed by statements about its employees, but these rulings have referred to the “collective” and not specific, identifiable individuals. For example, in one case the court held that a company’s reputation was injured by dissemination of the allegation that “unbalanced people work for the company” (Świdnica Regional Court judgment of 7 April 2017, case no. IC 2237/16). In another case the court held that a suggestion of dishonest activity by unnamed commune officials infringed the personality rights of the commune, which after all functions through its employees (Supreme Court judgment of 9 May 2002, case no. II CKN 740/00). But these rulings concerned statements about staff as a collective. In individual instances, i.e. where the statements in question concern named employees, other criteria would have to be applied and the result could be different.

It appears that the possibility of infringement of the personality rights of a legal person through a statement about an individual affiliated with the company but not a member of the corporate authorities cannot be excluded a priori. Much will depend on the nature of the individual’s affiliation with the legal person, the perception of this affiliation in external dealings, and the wording and context of the statement.

What to consider when assessing whether a comment about an individual infringes a company’s reputation?

Under either version 1 or version 2 above, the determination of whether the reputation of the legal person has been infringed should be preceded by a thorough examination of the specific situation.

First, the nature of the individual’s connection to the legal person should be examined. The stronger the connection, the more the individual influences the legal person and the greater the probability that statements about the individual will impact the company’s reputation. In the case of members of the management board, the connection to the company is generally strong in the eyes of the average person exposed to the statement. This applies particularly to single-member bodies. The situation may look different for example in the case of members of the supervisory board, whose link with the company need not be so noticeable. While, as a rule, in the case of members of corporate bodies the connection and impact on the company appears fairly natural and dictated by the role such bodies perform, it is more difficult to find such a connection in the case of individuals who are not members of the corporate authorities. But it cannot be ruled out. The impact on an innovative biotech company of an employee who, while not a member of the board, is regarded due to his function as the “face” or “mouthpiece” of the company, may be much stronger than in the case of a member of the office support staff of the same company. The impact on the company may also differ between different shareholders of the company.

Second, the wording and context of the allegedly defamatory statement must also be considered. Only a statement targeting an individual that concerns the individual’s sphere of activity as someone performing a certain function within the company could infringe the company’s personality rights. A comment about the CEO of a media company will not infringe the company’s reputation if the comment concerns the CEO’s personal life and does not reveal his ties to the company.

Practical consequences

The issue raised here is not of merely theoretical importance. First, the answer to the question of whether a statement about individuals can infringe the reputation of a legal person has a fundamental impact on standing to bring a suit alleging defamation. Before filing a defamation action on behalf of a company alleging that its reputation was infringed as a result of a statement about a board member or shareholder, it must be carefully examined whether the company should really be a plaintiff in the case. Otherwise, the case may be dismissed.

Second, if it is determined that the company’s reputation was injured as a result of statements about individuals, the argumentation should be carefully chosen, stressing the encroachment on the sphere of the company’s own interests. This is particularly relevant if the company files suit after a separate case has been filed by the individual directly named in the allegedly defamatory statement. After all, the result in the two proceedings may not be the same, and each of the entities is seeking protection of entirely different interests.

Third, when alleging infringement of a company’s reputation as a result of statements about individuals, we must pay attention to the wording of the claims. Although the libellous statements concerned an individual, the claim should reflect the injury to the company’s reputation. Sometimes the relief sought is erroneously worded, particularly when seeking an order to publish a retraction or apology in the press. In the worst case, the way the claims are phrased could lead to denial of the claim.

Lena Marcinoska, adwokat, Intellectual Property practice, Wardyński & Partners