Eugene wrote a little bit about Martha Stewart's legal predicament, and points out some errors in a Slate piece about the issue. What's of real interest to me, however, is that he writes near the end that:
Finally, it turns out that the core issue -- whether false statements of fact are unprotected when they're not fraudulent attempts to make money, defamation of particular people, or false statements to the government (e.g., perjury) -- is indeed not fully resolved. ...So, I'm not clear on the issue. Does the 1st Amendment protect "harmless" lies, or would a federal law prohibiting all lies (in a content-neutral manner) be constitutional? It would be unenforcable, sure, and bad policy, but even aside from those issues I would be astounded if such a law would be allowable.Rather, the strongest First Amendment argument for some protection even of knowing lies is that in some contexts (a) courts shouldn't be trusted to decide what's true and what's false, and (b) the risk of error in such decisions might be enough to deter even true speech. See New York Times v. Sullivan, which suggested that even knowing lies about the goverment can't be punished at all; compare State v. Davis, 27 Ohio App.3d 65 (1985) (affirming conviction for knowingly making false statements in a political campaign) with State ex rel. Public Disclosure Comm'n v. 119 Vote No! Committee, 135 Wash. 2d 618 (1998) (striking down a law banning false statements said with actual malice in election campaigns).
You have to be careful to understand the context in these situations. In general, lies are protected by the First Amendment. I can, for example, lie all I want about all kinds of things with impunity - I can lie about President Bush, the War in Iraq, for instance, and call it journalism.
On the other hand, if I lie to you to get you to part with something of value, we call it "fraud," which is not protected speech.
Martha's problem is that her putative lies come in connection with her business which is involved with selling securities. Lying about a business by a business (or third parties) can be secuities fraud if done with the intent to affect the market. A Wall Street Journal columnist who wrote "Heard on the Street" was held liable for publishing false "news" stories where he tipped confederates before hand.
If Martha lied and her lies were motivated by a desire or goals to protect the value of her company - which thereby could influence the market in her company's securities - she might have committed securities fraud which would be unprotected speech.
The nicer point is framed in the case of Nike v. Krasky which essentially allows leftists to lie about corporations, but puts corporations at the risk of Unfair Competition suits, even if the subject is one that the polity should recognize as being a matter of robust public discourse.
Right, I generally understand the difference between legally harmful lies (I saw Joe Smith eat a baby last night.), and legally harmless lies (The sky is plaid.), but my understanding of what Eugene wrote is that whether harmless lies are constitutionally protected or not is undetermined.
No, it has to do with the broader conceptual area. Different activities are afforded different levels of protection. Political speech is generally recognized as "core speech" within the First Amendment. One can lie one's ass off in the context of political speech even if other people rely on it to their detriment and the liar is benefitted. (Albeit Eugene cites a Washington case that suggests contra.) Similarly, speech against public figures is entitled to heightened but not absolute protection such that the standard involves "actual malice." The least protected area is "commercial speech." The Cal Supreme Court in Nike v. Krasky allowed a B&P 17200 suit aginst Nike for its purported misrepresentations which responded to leftist activists claims that Nike engaged in slavery. To me it looked like an area of political/public discussion, but the Supremes felt it was "commercial speech" which would survive just fine without Constitutional protection because of the profit motive. Tough luck for Nike, and to a certain extent Marth Stewart as well. I frankly doubt that her intent was to manipulate the value of Marth, Inc's stock. I suspect that her motive was to protect her reputation in a matter of some public interest, but, frankly, her case is more classically an example of stock manipulation than Nike's.