An ex-employee is taking out her grudges by poisoning my existing and prospective clients. Can I sue her? Will defamation work in this case?

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yes, defamation for sure. Especially if it's harming your business reputation. Consult with a defamation or personal injury attorney with all the details and discuss about the case. Also ask about 'tortious interference with business relations'. But, do you think it's worth the effort (and your expenses too)? I mean, does she have assets enough for you to collect? Just reminding you, since issues often arise with collectibility.

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