A tip of The Audit’s green eyeshade to Aaron Elstein and Crain’s New York, which seems to have gotten some results after shining a light on the hardball legal tactics of Hertz Global Holdings Inc. and other financially troubled corporations that sue stock analysts in response to negative financial reports.
In October Crain’s reported that Hertz, based in Park Ridge, New Jersey, had sued Audit Integrity Inc. in New Jersey state court, alleging the New York research firm committed commercial libel and defamation when it listed Hertz among big companies facing the “greatest bankruptcy risk” in the twelve months following the analysts’ September report.
Now, Crain’s reports, Hertz has dropped the suit.
The Hertz spokesman said the suit would have cost “a lot of time and money” and hence was “not worth pursuing now.
It isn’t clear what caused Hertz to change its mind. In the suit filed two months ago, it contended that Audit Integrity published findings that contained false accusations and were made with “a reckless disregard for the truth.” Hertz even reached out to other companies identified by Audit Integrity as possible bankruptcy risks, including Macy’s and CBS, to see if they would join the fight. None appear to have taken the bait.
That libel suits in and of themselves chill speech is a long-accepted legal principle. They are an extreme response to criticism, including financial criticism, and ought to be regarded as such. To quote ourselves:
Except in the most blatant cases of reckless and irresponsible speech, such suits, in and of themselves, are bad for markets, bad for financial journalism, bad for expression generally, and bad for the public, which lately has ended up has ended up bailing out firms, (Bear, Lehman, etc.) that dissenters tried to warn about.
Markets and the public need more dissenting opinions, not less. There are limits and exceptions, of course.
But as a rule, Hertz and other public companies under attack would be better served by fighting negative reports with reports of their own.
As Crain’s shows, a good report can get results.Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.