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Chancery Explains the Rule “Equity will not Enjoin a Libel” – and its Limited Exception

Preston Hollow Capital LLC v. Nuveen LLC, C.A. No. 2019-0169-SG (Del. Ch. Aug. 13, 2019).

The Court of Chancery in several recent decisions has addressed the limited circumstances in which it may have jurisdiction to enjoin future speech.  See, e.g., Perlman v. Vox Media, Inc., 2019 WL 2647520 (Del. Ch. Jun. 27, 2019); Organovo Hldgs., Inc. v. Dimitrov, 162 A. 3d 102 (Del. Ch. 2017).  Here, Vice Chancellor Glasscock explains the maxim “[e]quity will not enjoin a libel” and the limited potential exceptions.  In particular, and subject to constitutional free speech limitations, Chancery may enjoin future speech in the nature of “trade libel” as a remedy for a separate “non-speech” business tort over which it has jurisdiction.

By way of background, Preston Hollow, an investor in high-yield municipal yield bonds, alleged that Nuveen used its market power to derogate Preston Hollow to Deutsche Bank and other financial institutions, and that Nuveen threatened retaliation against those institutions if they continued to do business with Preston Hollow.  This campaign was allegedly in retaliation for Nuveen missing out on a public offering structured by Preston Hollow.  Preston Hollow asserted claims for tortious interference with contract, interference with prospective business advantage, a New York state antitrust claim, and defamation. 

Reviewing the available precedent, the Court of Chancery dismissed the defamation claim, which sought only to enjoin future slanderous or libelous statements by Nuveen.  The Court did not find the historical “trade libel” exception to the general maxim broad enough to allow for the possibility of a stand-alone cause of action for defamation in the Court of Chancery where the sole remedy sought was an injunction.  In other circumstances, it reasoned, the Court could consider an injunction of future speech in the nature of trade libel if necessitated by the “threatened continuance of a separate non-speech tort” such as unfair competition (or modern variants like tortious interference or claims for unfair and deceptive business practices), but the Court could not issue such an injunction solely on the basis of a defamation claim.  The Court also noted that, because it lacked jurisdiction to consider the alleged slander, it “need not address the additional United States and Delaware constitutional concerns that would accompany consideration of the broad injunction sought here.”