New York – Hertz Global Holdings have dropped a lawsuit against small independent research firm Audit Integrity, which had warned that Hertz was one of 20 U.S. companies “likely to go bankrupt or suffer severe financial distress.”
In mid-September, Audit Integrity published a research report listing Hertz as being under threat of bankruptcy within the next 12 months, along with other companies including Continental Airlines, CBS, Macy’s, Sirius XM, and Sprint Nextel. Two weeks later, Hertz General Counsel Jeffrey Zimmerman wrote a letter to the chief executive of Audit Integrity, accusing the firm of reaching “incomplete and misleading conclusions” in the report. Audit Integrity stood by its work. The letter was copied to the GCs of the other 19 firms named in the report.
Then, on September 25, Zimmerman and Hertz sued Audit Integrity for defamation and trade libel in the Superior Court of New Jersey. The suit also sought undetermined financial damages, a retraction and an apology, and attorneys’ fees and costs.
Audit Integrity Chairman and Founder James Kaplan fired back with a letter to the SEC, arguing that Hertz was trying to silence an attempt to call attention “to the company’s real and material financial risk” and charging that there may have been “collusion and improper discussion” among the other companies copied on Zimmerman’s letter.
The libel suit seems to have been based on shaky grounds regardless of the underlying merits of the report. Audit Integrity’s report was an expression of opinion based on publicly available research material, and as such would normally be protected under the First Amendment. In addition, the lawsuit would have enabled lawyers for Audit Integrity to question Hertz under oath during discovery. This could have been an excruciating and unpleasant experience indeed for Hertz. In addition, Hertz’s profitable third quarter may have allayed some investor fears; finally, as part of a public relations battle against Audit Integrity’s research, the suit may have been successful, even if it was never seriously intended to be fought out in court.
In a statement, Jack Zwingli, CEO of Audit Integrity, said, “The lawsuit was completely without foundation, and we look forward to continuing our efforts to provide objective, insightful research.”