To avoid legal battle, in bussiness world reference letters are written extremely terse. How do academics get away with this? It seems to be accepted wisdom in the business world that reference letters for former employees should be extremely terse. They should confirm that the employee worked there, and essentially nothing else:


  To whom it may concern: Ellen Ripley was employed by the Weyland-Yutani Corporation from June 2137 to September 2139.  Signed, C. Burke, manager."


The standard reasoning is that if the letter contains something unfavorable and the employee is turned down for a future job, they might sue their former company for libel, claiming the unfavorable statement was a lie which damaged their career.  In order to avoid the possibility of such a legal battle (which, the reasoning goes, could be very expensive, even if the company wins), the company tells its managers to write letters with no content, so that there's no chance of them containing something actionable.

This question on Workplace Stack Exchange, Is there any evidence that giving references for former employees is inherently risky?, attests to this practice, and the answers provide some suggestion that the company's fears are justified.

On the other hand, in academia, detailed and informative recommendation letters are the norm.  They often run to multiple pages, and contain specific information about the candidate's history and activities at the institution, as well as the writer's (supposedly honest) subjective assessment of the candidate's strengths, weaknesses, and potential.  This is not only common but effectively mandatory; a minimal recommendation letter of the kind described above would immediately consign the candidate's application to the nearest wastebasket.  

This would seem to be just the sort of thing that fills corporate counsel with horror, yet we do it every day.  No academic employer of mine has ever told me not to do so; for that matter, I can't say that I've ever received any official guidance, one way or the other, on writing recommendations.  Nobody in academia seems to be concerned that writing a letter that could be construed as less than favorable could result in legal consequences.  So how are we getting away with it?

Are universities treated differently under the law, making them less vulnerable to such threats?  Or do they willingly accept the legal risks in order to make the world a better place by providing actual information about their former students/employees?  Or is everyone ignorant of the risk of trouble?  Or is there something I have not thought of?

To forestall a couple of objections: I know that academics usually try to write only positive letters, and decline to write if they have nothing good to say, but that's evidently not enough in the corporate world.  Anyway, candidates often end up damned by faint praise.  Also, I know that we send letters in confidence, with the understanding that they won't be shown to the candidate, and sometimes this is backed by having the candidate sign a waiver, but I have to believe that a sufficiently determined and litigious candidate could get access anyway.

(I know this question may sound rhetorical, but I ask it in seriousness, and hope to learn something from the answers.  My context is the US, but if things are substantially different in other places, that would be interesting to know as well.)
My impression is that the difference is largely cultural.  The academic community in the U.S. has developed a culture of relying on written letters of recommendation, and this practice has a lot of inherent stability.  Someone considering suing knows that a questionable lawsuit would permanently ruin their career, in a way that wouldn't necessarily happen in the business world.  (For one thing, academia is a much smaller, more tightly knit, and more philosophically coherent group.)  If a student or job applicant did sue frivolously, then it would probably be cheaper to settle, but the university would not do so: proving a point would be a higher priority than saving money.  (By contrast, for-profit businesses are less likely to make unnecessary expenditures to try to defend their principles.)  University attorneys know that if they advised faculty not to write or require letters, everyone would ignore them and it would just hurt the university's reputation.  The culture takes on a life of its own, regardless of the legal context.

However, I believe U.S. legal precedents are actually pretty favorable for academic letters of recommendation.  The key phrase is "academic deference," which as I understand it is the theory that academic judgments are not subject to legal review because the courts aren't even capable of evaluating these judgments.  (Of course I'm not a lawyer and so I'm probably at least overlooking subtleties.)  You can sue for reasons like discrimination, but you can't successfully sue someone who made a good faith effort to judge your academic performance or potential on the grounds that you think they judged it wrong.

The academic deference doctrine is based on a number of precedents, but it's somewhat controversial.  For example, people argue that it makes it too easy to get away with discrimination (since it makes courts reluctant to examine evidence), and that lots of non-academic judgments are equally difficult to evaluate but don't have a special doctrine protecting them from review by the courts.  See this article by Moss for a review of the precedents and an argument against academic deference.

Depending on the circumstances, there may also be other legal issues.  For example, it's much harder to sue someone for libel based on their evaluation of your published scholarly work.  In particular, you have to prove actual malice since publishing the work makes you a public figure for this purpose.  In other words, it's not enough to prove that the evaluation was wrong; instead, you have to prove that they knew it was wrong or at least had reckless disregard for the truth. (See, for example, Posner's wonderful opinion on whether calling someone a crank is defamatory.)  I believe this is much more clear cut and better established than academic deference is, but it is not relevant for unpublished work or other recommendation letter content.

Returning to the cultural theme, it's also worth thinking about psychological factors.  If I run a business, then my ex-employees could be applying for jobs at competitors, partners, or companies that are irrelevant to my interests.  Among these possibilities, partner companies I'm actively working with are only a small fraction.  The generic case is that I won't care about the new employer or will actively harbor ill will towards them.  If a lawyer advises me that it's best not to say anything, I may seize on that excuse even aside from the lawsuit potential.  By contrast, academia is a world in which we're all partners, and that feels very different.  Universities do compete against each other in some ways, of course, but there's a much greater feeling of good will and cooperation than you see between most for-profit companies.  It's no surprise that very different norms and practices have developed in a far less competitive environment.