Chicago Business Litigation Lawyer Blog
In a decision dealing with prior restraints on speech, the First District Appellate Court recently held that the trial court overstepped federal and state constitutional bounds when it ordered a company and its president to refrain from making any future online statements about a vendor the company had hired. The First District vacated the order entered by Cook County Circuit Judge Diane M. Shelley and issued an opinion explaining why the trial court’s order violated longstanding constitutional principles of free speech.
The plaintiff, Same Condition, LLC is a company that sought to create a web-based, medical patient-centered software application. Same Condition’s president, Munish Kumar, was a counter-defendant in the suit. Same Condition hired the defendant, Codal, Inc., to develop its software application. Codal allegedly failed to deliver the software application on time and when it did, Same Condition found the software to be unacceptable.
In May 2019, Same Condition sued Codal for breach of contract, among other claims. Codal then countersued Same Condition and Kumar for defamation per se, defamation per quod, violation of the Uniform Deceptive Trade Practices Act and commercial disparagement based on critical comments and reviews that Same Condition and Kumar had posted online.
Codal attached to its counterclaim the allegedly defamatory statements the counter-defendants had published. One such allegedly defamatory statement came from a post from Codal’s LinkedIn page, where Kumar stated that he hired Codal to build an “ambitious” software platform and “gave them a huge sum” but that it was “more than clear that Codal lacks the technical expertise to build the software or our specifications. It was not a small platform (technically, but then we hired Codal because they assured that have the required skill sets to accomplish the kind of work it requires. And they asked is premium cost, which we kept paying as bills kept coming). But Codal has not been able to hand over the platform to us now. Harassed and frustrated by Codal’s highly unethical business practices, we had to drag them to court in Chicago in 2019.”
As the litigation progressed, Same Condition and Kumar allegedly continued posting critical comments and reviews online about Codal and its chief executive officer, Keval Baxi. Another exhibit showed that Same Condition’s Twitter account wrote in July 2019 in various tweets that Codal had “cheated” Same Condition, delivered a “half-cooked buggy platform,” provided a “nightmare experience,” and overall exhibited “very unethical business practices.” Codal also attached similarly negative reviews that Kumar allegedly left on Codal’s Google page, its Better Business Bureau page, and its Clutch page.
Same Condition allegedly changed its Twitter biography to state that it was “[a] Global Health Community that failed to start because @GoCodal messed up our software product. Seeking justice from Chicago-based #Codal and its CEO @kevalbaxi.” Codal also alleged that in a two-day stretch from February 17 to February 18, 2020, Same Condition tweeted no fewer than six tweets accusing Codal of being ‘technically incompetent” and “usurping our money.” Additionally, Codal accused Same Condition of creating a website—codalsucks.blogspot.com—wherein Same Condition and Kumar further posted defamatory content about Codal and Baxi.
As a result, Codal filed a series of motions for a preliminary injunction and temporary restraining order to have Same Condition and Kumar cease their online campaign. Following a hearing on Codal’s motion for a preliminary injunction, the court struck the motion without prejudice but supposedly instructed Same Condition and Kumar’s attorney “to request that they refrain from their defamatory and disparaging practices.”
Two weeks after its motion for preliminary injunction was denied, Codal filed a motion for a temporary restraining order against Same Condition and Kumar alleging that no more than two hours after the judge’s warning to Same Condition and Kumar, Kumar posted another defamatory tweet about Codal. The trial court later denied Codal’s TRO motion but its order denying the motion included a paragraph stating that “Pursuant to the Court’s inherent authority to manage its cases, Counter-Defendant, Same Condition and Munish Kumar, are prohibited from making any additional posts online regarding Codal.” The order noted that it was “final and appealable pursuant to [Illinois Supreme Court Rule 304(a)].”
On appeal the Court sought to determine whether the circuit court’s order that prohibited Same Condition and Kumar from posting anything online about Codal constituted a prior restraint in violation of their right to free speech under the United States and Illinois Constitutions. The Court defined a prior restraint on speech as a “judicial order forbidding certain communications when issued in advance of the time that such communications are to occur.”
Relying on prior state and federal decisions, the Court explained that prior restraints of speech have long been condemned as “the most serious and the least tolerable infringement on First Amendment rights.” Though the Court noted that “prior restraints are not unconstitutional per se,” it noted that, “there is a heavy presumption against their constitutional validity.” Importantly, the Court also clarified that although “this case involves the Internet and social media, the principles of the first amendment remain the same.”
To pass constitutional muster, a prior restraint on speech “must either contain certain specified procedural safeguards” or it “must fall within one of several narrowly defined exceptions to the doctrine.” The Court ultimately found that the trial court’s order lacked such safeguards and did not fall into any of the recognized exceptions. As such the Court vacated the order.
The Court first found that the restraint was content-based and as such was subject to strict scrutiny. However, the Court noted that content-based restrictions are permitted by the First Amendment under recognized exceptions including for obscenity, defamation, advocacy intended and likely to incite imminent criminal conduct, speech essential to criminal conduct, fighting words, child pornography and true threats, provided that “the restraint must be narrowly drawn to achieve that end.” In other words, the Court explained, content-based restriction must be “the least restrictive means consistent with the attainment of its goal.”
The Court concluded that the trial court’s blanket order that same Condition and Kumar indefinitely refrain from making any additional posts online about Codal was not narrowly tailored to achieve the court’s identified compelling interest. Though defamation is a recognized exception to the prior restraint doctrine, the Court explained that “the general rule is that an injunction is not available to prevent actual or threatened publications of a defamatory character.” The Court noted that the general rule applies “even if the allegedly defamatory statements could cause a business to suffer financially” because “the private litigants’ interest in protecting their vanity or their commercial self-interest simply does not qualify as grounds for imposing a prior restraint.” The recognized defamation that can be the subject of a prior restraint were not present.
Because the trial court entered its injunctive order against Same Condition and Kumar before it even had adjudicated the truth or falsity of their online posts, the Court concluded that there was no basis for the circuit court to enter such a blanket order prohibiting Same Condition and Kumar from any further online postings about Codal based only on allegations of defamation, commercial disparagement and the like.
The Court’s full opinion is available online here.
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