Gartner Sued For $1.7B Over Email Archiving Magic Quadrant

Tomorrow, a $1.7-billion complaint filed by ZL Technologies against leading research analyst firm Gartner, Inc. (ZL Technologies Inc. v. Gartner Group Inc. and Carolyn DiCenzo) goes in front of the U.S. District Court in San Jose, CA.  It alleges that Gartner was spreading libelous reports that failed to position ZL Technologies as a leader in the Magic Quadrant report.  Specifically, the complaint alleges: defamation; trade libel; false advertising; unfair competition; and negligent interference with prospective economic advantage.

Gartner is asking for a dismissal of the suit on First Amendment grounds.

Gartner, Inc.'s Magic Quadrant may be the single most influential evaluation for enterprise buyers.  Companies have been made and reportedly broken based on their position as market leader in a 2 dimensional graphical matrix as to who is a visionary and who has the best ability to execute.  The email archiving magic quadrant has shown Symantec as a leader for years.

"ZL claims that Gartner’s use of their proprietary “Magic Quadrant” is misleading and favors large vendors with large sales and marketing budgets over smaller innovators such as ZL that have developed higher performing products," reads a letter from Kon Leong, President & CEO of ZL Technologies, published on the ZL web site.

Some of the points made by Leong include:

• Fair Disclosure on Conflicts of Interest – Gartner generates its revenues from payments made by the same vendors whose products it evaluates.
• Fair Disclosure on Evaluation Scores – ... Gartner (should be) required to disclose more data in its evaluation process and disclose component scores ... Currently, there is zero disclosure, which can lead to arbitrary placement, with no recourse and no basis for appeal.
• Better Oversight – Gartner currently has an employee act as ombudsman to handle disagreements. The conflict of interest is self-evident in the way ZL’s concerns were summarily dismissed with little supporting evidence.

“Since 2005, Gartner has placed the ZL in the bottom portions of the lower left-hand quadrant in the MQ Reports, as Niche Player (the “MQ Placements”). These MQ Placements were, and are, derogatory because they are understood by technology purchasers as a warning, by Gartner, that ZL and the ZL Products are not good choices for enterprise email archive applications,” reads the complaint.  (Full text of complaint.)

While the First Amendment does allow anyone to express their opinions, the First Amendment does not protect a firm from libel suits.  However, libel laws protect the subjects of the speech from false statements.  It is not libel if it is the truth, even if the truth hurts.  So, could the court case come down to simply stating that when I express my opinion it is by definition true because it is my opinion?  Can ZL show that Gartner had a process that did not use true statements when the scores used to build the Magic Quadrant are cloaked in secrecy.

“It would be nice to know, of the vendors rated, how much money did they spend on Gartner? That factor is very similar to what the SEC enforced on Wall Street ratings agencies," Leond said to Software Development Times. "This way the reader can say, 'I can factor that into my assessment.'"

Whatever happens, ZL Technologies is raising an important issue about the power of rating agencies and the transparency of their operations.  I hope that we get to see some of the inside workings.

In full disclosure, InBoxer is an email archiving product that has never been selected to be reviewed by Gartner.  Our company also does not subscribe to any Gartner services.