By applying an early state statute instead of the U.S. Supreme Court’s decision regarding what constitutes actual malice, the 1^st Circuit U.S. Court of Appeals in Boston is allowing a libel lawsuit brought by a terminated employee against his employer to proceed. Since the content in question is an email that no one disputes is true, the ruling is creating a stir regarding the impact on the First Amendment.

As previously blogged, the Supreme Court precedent for actual malice requires knowledge of falsity or reckless disregard for the truth. In this case, the Circuit Court has applied an earlier state statute that provides for true statements to be deemed libelous if the plaintiff can prove actual malice. With this state statute, the Circuit Court is not using the Supreme Court’s definition of actual malice but instead is using the looser definition of ill will as the standard.

The effects of this ruling on free speech remain to be seen; however, given this ruling, it seems possible more lawsuits of this type could be brought, at least until the case is finally resolved. It’s important to note that the defendant is not a news organization but a retailer. And the alleged libelous content is not a public news item but an internal employee communication. While the defense of this particular case could fall under an employment practices liability policy, if the plaintiff were not an employee but a vendor, customer or other third party, then the defendant’s professional liability policy could come into play. If the professional liability policy only covers defamation arising out of covered services, then it’s unlikely any coverage would exist as internal email communications are not likely to be considered a covered service. But if the defamation protection extends to all business operations, then it’s more likely that the professional liability policy would be triggered.