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By Greg Taylor is associate general counsel at the American Bankers Association. You can add to his email inbox at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . This column is taken from his "Legal Issues" column, which appears every other month in ABA Banking Journal. This is the October 2011 column.

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Like the changing of the tides or the annual return of the swallows to San Juan Capistrano, there are certain inquiries from bankers that can be relied upon to make a regular appearance in my e-mail inbox, waiting to be taken up and answered afresh. One of these recurring questions is a bit of a stumper:

What can I do to stop someone from saying bad things about my bank?

Thanks to a fascinating piece of litigation in California involving a disgruntled bank employee; a series of anonymous postings on a Craigslist forum; and a state statute that makes it a crime to spread false statements about a bank that affect its solvency or financial standing, we will soon have a better idea of what can and cannot be said about a bank in a public forum.

Federal law is silent, but seek in state statutes

Most bankers asking the question assume that the federal banking code includes a provision to restrict members of the public from making negative statements-especially intentionally false statements-that could affect the solvency of a federally insured institution. They are surprised to learn that this provision doesn't exist, and that they should look to state law for potential relief in this area.

Indeed, it is state law--Section 756 of the California Financial Code--that is at the heart of the litigation that is pending in California's First Appellate District--Summit Bank v. Rogers. At issue in the case are a series of highly derogatory statements about a bank that were posted on Craigslist's "Rants and Raves" forum by a disgruntled former employee. The bank sued the former employee, arguing that his Craigslist postings, which suggested that the bank was badly mismanaged and urged customers to move their accounts to other institutions, were false and defamatory.

Section 756 makes it a crime--a misdemeanor--for any person to "willfully and knowingly" make a statement or spread a rumor which is "untrue in fact and is directly or by inference derogatory to the financial condition or affects the solvency or financial standing of any bank doing business in this state..."

California isn't unique in this regard: most jurisdictions recognize causes of action for trade defamation or slander--an intentional false statement that harms a business's reputation decreases the respect, regard, or confidence in which a business is held by the public.

Employee strikes back...

The former employee sought to have the case thrown out on the grounds that his comments were 1. true, and 2. constituted speech protected by the First Amendment.

Significantly, the trial court declined to dismiss the case, finding that the statements about the bank's condition-"a kind of evil to which banks are particularly subject"-violated Section 756.

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