Getting sued if you write bad LoR?

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yes, you do and if you don't it doesn't seem like it's as reliable of a letter. And of course you can sue anyone for slander any time; it doesn't mean it's justified or you'll win. I find it hard to believe (though in America, anything is possible) that someone won such a case; that must have been some slanderous letter and also not true. If it's true and can be proven I don't think the letter holds much weight. Also if it'sd documented by records they won't win a suit. (I've heard this about another situation when asking for job references; that was reviewed by a lawyer before a reference was given)

First, since it is in writing, the claim is going to be libel, not slander. Second, truth is a complete defense to these claims, so by definition it cannot be slanderous and true -- it has to be one or the other (so your bolded clause above is a redundancy). But it is irrelevant, as such letters are rarely based on hard facts but instead are expressed as opinion. You cannot ask someone to provide their opinion and then successfully sue them when they render it. I don't know the details of the lawsuits described by some of the posters above, but can assure you no one in academics is running scared about being sued for what they write about applicants.

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Many adcoms have more experience at this than anyone, as they see hundreds of folks trying to gain admission year after year. Few private sector companies interview as many people for the same job. Thus I wouldn't underestimate the abilities of schools to distinguish who is a good talker and the real deal. But certainly, if a prof goes out of his way to provide a less than stellar LOR, that is pretty telling.
The difference, I think, is that someone like my brother, who is involved in hiring employees for my dad's business, gets to deal with the people he hires on a daily basis. I haven't even seen the two people who interviewed me since the day they interviewed me. They don't really know how I turned out.
 
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