In the years before the Civil War, the Beardsley brothers were two of the most respectable citizens in Norwalk, Ohio.

John Beardsley and his brother Horace owned a major dry goods store. They rented pews at St. Paul's Episcopal Church. Descended from the founders of Fairfield County, Conn., they had moved west to make their fortunes, and showed every sign that they were prospering.

But soon, their livelihoods -- and more importantly, their reputations -- would be threatened, and they would end up at the center of one of America's landmark court cases in business law, a lawsuit that went all the way to the Supreme Court.

It all started because of a difficult marriage and a mysterious rival who was working as an informant for a credit rating company, according to Scott Sandage's book, "Born Losers: A History of Failure in America."

In 1848, the Mercantile Agency's informant in Norwalk, which is about 50 miles southwest of Cleveland, turned in a report that John Beardsley's wife was about to divorce him, and that Beardsley "has put his [property] out of his hands; if so, their store will probably be closed at once."

Beardsley's wife, it turned out, had left him, but had not filed a divorce petition.

Like other prosperous merchants of the time, the Beardsleys did much of their business in New York, so the credit agency's report was a real threat to their well-being.

In late 1848, John Beardsley confronted Mercantile Agency owner Lewis Tappan over the damaging reports. Tappan refused to budge -- and so Beardsley sued the agency for libel.

It took three years for the case to go to trial. In the meantime, a divorce petition was indeed filed against John Beardsley, accusing him of affairs with seven women. But his wife, Mary, never pursued the action, and most of the witnesses -- including her siblings -- said any faults in the marriage lay with her. As the trial in New York progressed, the evidence suggested that Mary may not have been behind the divorce petition. Her divorce attorney said he had not been approached by her, but by another man in Norwalk whom he refused to name.

It now appears that man was the agency's own informant, who may have been trying to guarantee that the divorce would actually come about.

His name was Jairus Kennan, and he too was a leading citizen -- lawyer, mayor of Norwalk and senior deacon at the First Presbyterian Church.

Kennan had failed in the dry goods business just as the Beardsleys were succeeding, and his brother had gone broke investing in a silkworm venture endorsed by John Beardsley, Sandage found.

While Kennan's name never emerged in the libel trial, a jury concluded in 1851 that the harm to the Beardsleys' reputation outweighed the Mercantile Agency's right to maintain reports on their business affairs, and awarded the Beardsleys $10,000 in damages.

The agency appealed the decision. Eventually, a full 20 years later, the U.S. Supreme Court threw out the ruling on a technicality, and the damages were never paid.

Though for many years it appeared the law might find credit agencies illegal, federal courts ruled in the late 1800s that credit reports were privileged communications whose value to the economy outweighed potential damage to private reputations. Jairus Kennan died at the age of 59. Despite questions about his role in the Beardsley case, his nephew remembered Jairus as a man "of strict honesty and integrity," and when the nephew himself became an old man, he taught those values to his grandson.

The grandson, George F. Kennan, would go on to become a renowned diplomat, and his grandson, Kevin McClatchy, is now owner of the Pittsburgh Pirates.

-- Mark Roth