April 14, 2024




© Mike Segar/Reuters
Rupert Murdoch in New York in 2017.

Over a tumultuous decade, Rupert Murdoch’s sprawling media empire wrote more than a few big checks to stave off nasty court battles and negative headlines.

There was the more than $100 million paid to celebrities and crime victims whose phone messages were hacked by his British tabloids. The $50 million paid in a single fiscal year to several women who alleged sexual harassment at Fox News, and the $15 million to a former host who complained that she and other women were paid far less than male colleagues. And after the parents of a slain Democratic political staffer sued Fox for promoting a false conspiracy theory about his death, the cable-news giant settled the case with a high seven-figure payment.

Which has left many observers puzzled over why Murdoch hasn’t yet settled his highest-stakes legal battle to date: a $1.6 billion defamation lawsuit over bogus claims that an election-technology company rigged the 2020 presidential vote.

In fact, there have been at least some attempts in that direction.

Late last year, lawyers for Dominion Voting Systems sat down with lawyers for Fox News to try to settle their clients’ differences. The meeting was ordered by a Delaware court in a last-ditch attempt to avoid a long and costly trial, scheduled to start in April.

The talks broke down almost immediately, each side scoffing at the other’s position and quickly walking away, according to three people familiar with the conversation, who spoke on the condition of anonymity to discuss a sensitive meeting.

But with a trial looming, that might not be the end of the story. Legal experts say it’s still possible the two sides could work out a deal that could cut Fox’s potential losses — and avoid weeks of embarrassing testimony about Fox and its famed personalities. Some damaging details have already spilled out in court documents, indicating that Fox executives knew that the allegations of election fraud floated on its airwaves were false but feared that they would lose conservative viewers if they contradicted them.

“For Fox, there are real risks in proceeding to trial,” said Timothy Zick, a First Amendment scholar at William & Mary Law School. But Dominion, in mulling a settlement, would have to decide whether to accept less money “or to fight on, based on principle, and to more fully restore its reputation.”

It’s unusual for any defamation suit to go to trial. Judges, protective of journalists’ First Amendment rights, reject many claims outright. Media companies are often willing to settle claims that survive early legal hurdles, to avoid a trial by jury. And plaintiffs are often open to compromise on the dollar amount they feel is owed to them.

A storm of competing dynamics, however, appears to have brought this blockbuster case to the brink of a courtroom showdown. On one side is Dominion’s insistence that Fox-fueled conspiracy theories have all but destroyed its future business prospects — hence the 10-figure demand. On the other is Fox’s internal conviction that Dominion’s private-equity backers are trying to fleece the network for their own financial gain.

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Fox has cited its First Amendment rights and its newsgathering mission to defend itself against Dominion’s charges. While Dominion argues that Fox unfairly smeared it by allowing Donald Trump’s allies to air unfounded claims of election fraud, Fox says it was merely covering the newsworthy actions of a sitting president.

“There will be a lot of noise and confusion generated by Dominion,” Fox representatives said in a statement, “ … but the core of this case remains about freedom of the press and freedom of speech, which are fundamental rights afforded by the Constitution.”

But companies, and their corporate bosses, sometimes have emotional reasons for deciding whether to fight or settle a legal challenge as well.

Some current and former Fox employees, who spoke on the condition of anonymity to discuss sensitive internal conversations, say the company’s initial inclination to fight the Dominion suit was forged partly in reaction to all the settlements Fox News and other Murdoch-controlled companies paid out over the past decade, particularly in cases in which the late network co-founder, Roger Ailes, and erstwhile prime-time star Bill O’Reilly were accused of sexual harassment.

One executive described a belief inside the network that its adversaries came to see Fox News as an easy mark, willing to hand out settlements to mitigate its PR headaches.

As with most litigation, money also appears to be a key point of contention.

In public statements, Fox representatives have bristled at Dominion’s claim of $1.6 billion in damages, calling it “grossly disproportionate” and noting that the firm’s primary investor, private-equity firm Staple Street Capital, paid a mere $38.3 million to acquire 76 percent of Dominion in 2018.

For its part, Dominion says it was a “valuable, rapidly growing business” until Fox began “endorsing baseless lies,” causing it to rack up millions in legal, public-relations and security costs, and lose valuable government contracts. Dominion discussed trying to change its name to escape the bad publicity but determined that it wouldn’t work.

Another sticking point to a potential settlement: Dominion officials would want to require that Fox make a full-throated apology — probably on air and probably more than once — according to two people familiar with the company’s thinking.

Fox’s legal strategy is being spearheaded by Viet Dinh, the highest-ranking legal officer at Fox Corp. and a close ally of the Murdoch family. He has taken the view — which he has laid out in detail to both Rupert and his son Lachlan, executive chairman and CEO of Fox Corp. — that although Dominion has been able to score points in the court of public opinion, Fox can eventually prevail.

Last year, the New York Times also opted to fight a high-profile defamation claim in court rather than settle. The Times won in that case, after it persuaded both a judge and jury that an editorial with erroneous information about Sarah Palin was not published with “actual malice” — the high standard required to prove defamation.

But the Times case, involving a single article that was quickly corrected, was far simpler than the Fox matter, which involves many statements by Trump allies and Fox hosts over several weeks of broadcasts.

Meanwhile, media lawyers have seen Gawker Media’s experience before a jury as a cautionary tale. The gossip blog took its shot in court in 2016 after professional wrestler Hulk Hogan accused it of invasion of privacy by publishing a sex tape he was involved in. Gawker lost — and the $140 million verdict against it drove the company into bankruptcy.

More recently, The Washington Post, CNN and NBC settled lawsuits with the family of a Kentucky teen who alleged that coverage of his 2019 encounter with a Native American protester at the Lincoln Memorial was libelous. Yet a judge dismissed the family’s similar claims against the New York Times, Gannett, ABC, CBS and Rolling Stone last year.

In another prominent case, ABC News went to court to fight a lawsuit from a meat producer that accused it of libel for raising safety questions about a beef product known as “pink slime” — but moved to settle after three weeks of testimony. Parent company Disney later disclosed that it paid $177 million, a figure that did not include its insurers’ share, to make the matter go away.

A settlement before trial — especially one that allows a defendant to walk away without admitting culpability or failure — would be in character for Murdoch, whose cumulative settlements over the past 13 years now approach three-quarters of a billion dollars. (The most costly was a $500 million payout to a Michigan company that claimed employees of Murdoch-run News Corp. broke into its computers to steal trade secrets in the supermarket coupon business.)

Nancy Erika Smith, the attorney who represented former Fox host Gretchen Carlson in her sexual harassment suit against Ailes, said a trial in the Dominion case would be a “lose-lose proposition” for Murdoch and Fox — a high-risk gamble that might be their best route to avoid a big payout, but also a scenario where they could alienate the many MAGA fans in its audience by publicly acknowledging that Trump’s claims of a stolen election were lies.

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For all the revelations that the Dominion suit has already triggered — stories of infighting, tension and backbiting at Fox News, as well as private messages in which network personnel criticized Trump, their colleagues and their own audience — Zick said “there is real risk of further ‘harming the brand’ at trial,” when more such details could spill out in a trial that will be widely covered.

Fox could also be motivated to settle to sidestep the spectacle of the 92-year-old Murdoch taking the stand or to avoid a jury drawn from Delaware residents, about 60 percent of whom voted for native son Joe Biden. (Like many companies, Dominion is incorporated in Delaware, which has advantageous corporate income tax loopholes.)

Yet all calculations about a settlement with Dominion could be complicated by the fact that Fox still faces a second defamation suit from another voting-tech company, Smartmatic, which is seeking $2.7 billion in damages. Smartmatic’s allegations are similar to Dominion’s.

If the two sides rethink their current stance on settling, it almost certainly won’t happen until after Judge Eric M. Davis rules on both sides’ motions for summary judgment in coming days.

If, as expected, he rejects Fox’s final bid to have the case tossed out of court, or if he narrows the case in a way that shrinks Dominion’s claim to a massive damages payout, that could nudge both parties back to the negotiating table, legal experts said.