Defamation typically involves blatantly false statements portraying someone as criminal or morally corrupt. Yet I often encounter prospective plaintiffs who want to sue over statements that do not so clearly impugn the person’s character. Remember that not all false statements will qualify as defamatory in nature; a sufficient level of defamatory sting is required. Take, for example, a false statement claiming that someone owes money on a debt. Whether a statement like this can support a defamation action will depend on exactly what was said and the context in which the statement was made. Commenting negatively on someone’s indebtedness may constitute defamation under Virginia law if the comments suggest dishonesty or bad faith by the indebted person. Absent such aspersions on the alleged debtor’s character, the statements are unlikely to be sufficient to create a cause of action.
The issue came up this week in the case of Ackerman v. Maximus Education LLC from the Eastern District of Virginia, which wasn’t even a defamation case. The facts (according to the opinion) go something like this: The plaintiff, Ms. Ackerman, had multiple federal student loans serviced by the defendant, Maximus Education. After Ms. Ackerman sought a disability discharge in early 2023, these loans were transferred away from Maximus to another servicer. Despite the transfer, Maximus allegedly continued to report Ms. Ackerman’s loans as carrying outstanding balances, which she claimed was both inaccurate and harmful to her credit profile. Upset that her credit reports still showed around $25,000 of student loan debt owed to Maximus, Ms. Ackerman filed disputes with credit reporting agencies and ultimately sued Maximus under the Fair Credit Reporting Act.
Maximus moved to dismiss for lack of subject-matter jurisdiction. Under Article III of the Constitution, federal courts have subject-matter jurisdiction over “cases” and “controversies,” which require a plaintiff to have standing to sue. Therefore, Ms. Ackerman was required to show that she suffered an injury in fact traceable to the challenged conduct. She tried to make this argument by claiming that the false statement about the amount of her debt caused reputational injury. In the context of reputational injury, the Supreme Court has held that “a person is injured when a defamatory statement ‘that would subject him to hatred, contempt, or ridicule’ is published to a third party.” (See TransUnion LLC v. Ramirez, 594 U.S. 413, 432 (2021)). So that is how the court got into the issue of whether Ms. Ackerman has sufficiently alleged defamatory sting.
The court found that she had not done so and granted the motion to dismiss, reasoning that Ms. Ackerman failed to show a concrete, particularized injury that was fairly traceable to the defendant’s incorrect credit reporting. She could not prove that any specific denial of credit or rental housing was caused by Maximus’ inaccurate reporting. Nor had she shown any cognizable emotional distress or other injury recognized at common law as akin to defamation.
Defamation requires a false statement published to a third party that causes harm to the subject’s reputation, exposing them to hatred, contempt, or ridicule. In the context of debt, courts have historically been reluctant to categorize mere statements of indebtedness as defamatory unless accompanied by accusations of dishonesty or bad faith. The U.S. Supreme Court has stated that defamation arises when a defendant “publishes a statement that would subject [the plaintiff] to hatred, contempt, or ridicule.” (See TransUnion, 594 U.S. at 432). In TransUnion, falsely labeling someone as a terrorist or drug trafficker fell squarely within the kind of reprehensible statement that could cause significant reputational harm.
Here, however, the statement at issue merely asserted that the plaintiff owed money. The court reviewed some old treatises as well as case law from around the country and concluded that it is not libelous merely to publish a statement that a person owes money, absent some additional insinuation of wrongdoing or dishonesty. Citing the Ruling Case Law treatise with approval, the court wrote, “[A] mere statement that the defendant wants the plaintiff to pay his honest debts…has been held not slanderous, on the ground that such a charge imputes no dishonorable conduct to the plaintiff…. A writing containing the mere statement that a person…owes a debt and refuses to pay…does not in a legal sense necessarily expose the person of whom it is said to public hatred, contempt, or ridicule.”
The court noted the result might be different if the statement at issue asserted that the plaintiff was a deadbeat whose debt was delinquent. The key issue is whether the plaintiff is portrayed as delinquent or deceitful, or merely as owing a debt.