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Court Watch

By Cynthia M. Klaus and Bryan Huntington
May 02, 2015

Circuit Court Reinstates Dealer's Defamation Claims Against Manufacturer

In Sleepy's LLC v. Select Comfort Wholesale Corporation, Bus. Franchise Guide '15,466 (2nd Cir. Feb. 27, 2015), the Second Circuit reinstated a dealer's slander claims against a manufacturer. After the dealer had received reports that the manufacturer's sales staff was making defamatory comments about the dealer and its products, it hired secret shoppers to investigate. The manufacturer's sales staff allegedly then made defamatory comments to the secret shoppers during their investigations. Sleepy's serves as a reminder that manufacturers must properly train their sales staff about the risk of defamation liability, including instruction on the difference between what is permissible puffing/sales talk and what is not.

In June 2005, Sleepy's and Select Comfort executed a written dealer agreement under which Sleepy's was to sell the Personal Preference line of Sleep Number beds manufactured by Select Comfort. Select Comfort would continue to sell its own Core line beds from its company-owned stores. The Personal Preference and Core lines differed in several significant respects, such as their foundations and the types of controls they used to adjust bed firmness.

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