Fox Shareholders Sue Board For Allegedly Embracing Election Falsehoods in Pursuit of Profits

The shareholder action is at least the third since Fox reached a $787.5 million deal with Dominion Voting Systems to settle a defamation lawsuit.

September 13, 2023 12:31pm

Rupert Murdoch and Lachlan Murdoch

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Fox Corp.’s board of directors has been sued in a lawsuit accusing the company’s directors of adopting an illegal business model centered on chasing profits by intentionally broadcasting falsehoods about the 2020 presidential election.

New York City’s pension funds filed on Tuesday in the Delaware Court of Chancery a lawsuit that says Fox’s board members and other executives “consciously disregarded” the risk of exposing itself to defamation claims “with potentially huge financial liability and potentially larger business repercussions.”

The shareholder action is at least the third since Fox settled a defamation lawsuit brought by Dominion Voting Systems in April for $787.5 million minutes before the trial was set to start. Defendants named in the lawsuit, which will stay under seal until at least Friday to allow for redactions, include media mogul Rupert Murdoch, Fox Corp. chief executive Lachlan Murdoch, former chief legal officer Viet Dinh and Fox News chief executive Suzanne Scott, among others.

Shareholders allege that Fox’s board made an intentional decision to prioritize profits over legal compliance. They claim the company’s directors knew the risk of amplifying false claims that Dominion and Smartmatic rigged votes but continued to do so anyway after receiving backlash from viewers for initially failing to back former President Donald Trump’s position that he won the election.

According to the complaint, Fox News did not respond to letters from Dominion demanding retractions and threatening litigation. Network hosts continued to promote the defamatory narrative.

Lawsuits from the voting technology companies followed. As evidence that Fox was not on solid legal footing when it continued broadcast claims that election was rigged, shareholders point to an order from the judge overseeing the case eviscerating Fox’s legal defense. In the opinion, Delaware Superior Court Judge Eric Davis took the issue of whether Fox’s statements were false out of the jury’s hands, ruling that the “evidence developed in this civil proceeding demonstrates that [it] is crystal clear that none of the statements relating to Dominion about the 2020 election are true.” The trial would only decide damages.

“Fox News had broadcast factual assertions of criminal election fraud that were indisputably false,” states the complaint, which argues that the network “lacked a viable legal defense to the defamation claims.”

Shareholders also cite defamation actions from Smartmatic, Venezuelan businessman Majed Khalil, who was accused by Fox News host Lou Dobbs of being a “liaison of Hezbollah” responsible for election rigging, and a murdered Democratic National Committee staffer’s parents, who sued Fox over a false story that their son was murdered because he hacked DNC emails and provided them to WikiLeaks. The case settled for millions of dollars in 2020 shortly before the depositions of Dobbs and Sean Hannity.

“Fox has now entered the pantheon of companies that have incurred massive cost from tort litigation,” the complaint states.

The lawsuit also advances claims that Fox’s board failed to undertake efforts to establish a framework for minimizing legal exposure. The allegation is based on the “complete absence of any Board-level reporting mechanisms respecting defamation risk, despite the lack of any written editorial standards at Fox News and despite the Board being on clear notice of Fox’s defamation problem.”

After the Dominion settlement, Lachlan reaffirmed Fox’s business model. “There’s no change in programming strategy at Fox News,” he said in May during an earnings call. “It’s obviously a successful strategy.” According to the complaint, Fox hosts continue to spread false narratives. This includes claims from hosts that Trump supporter Ray Epps orchestrated the Jan. 6 insurrection and that former director of disinformation governance board Nina Jankowicz edited the tweets of private citizens on behalf of the government.

Boards for media companies do not regularly oversee editorial policies. This case could potentially raise the standards to which they should be involved.

Ann Lipton, associate dean for faculty research at Tulane University’s law school, says that the so-called Massey claim accusing the company’s board of intentionally ignoring defamation risks in pursuit of profits is a high bar to clear since company directors are typically afforded deference when making business decision. She observes that the board was likely acting in the best interest of the company, and that it’s a “question of whether they went too far.”

Lipton notes that this lawsuit ventures into unexplored legal territory since Massey claims are usually advanced by shareholders in bank regulations cases for violations of statutory law, which are written laws enacted by legislative bodies, and not common law, which is created through court cases.

If the case advances far enough, it has the potential to reveal the degree to which Fox’s board knew that the network’s claims that the election was rigged were false.

Fox declined to comment.