What Dominion Really Won

Great piece by @JeffSonnenfeld and Steven Tian on the financial fallout for Fox from the Dominion settlement…way more than meets the eye https://t.co/m2DcHhzZhB

— Asha Rangappa (@AshaRangappa_) April 19, 2023

I’ve been wondering about this:

Such a whopping settlement may not have been awarded by a jury in court and very well could have been tossed on appeal. This small a company would have had a tough time proving concrete economic damage and lost revenues equivalent to $787.5 million let alone the $1.6 billion in damages they were seeking had it gone to trial. There are two types of damages—compensatory and punitive—and the idea that a company that may have been valued by its own investors, according to Fox’s lawyers, at no more than $80 million could get anything close to 10 times that as compensatory damages is blatantly ludicrous, while punitive damages are becoming increasingly pegged to the value of compensatory damages. 

Even if an appellate court concurred with a possible jury verdict that an actual malice standard was met, the financial damages Dominion asked for were excessive. Plus, unlike the Alex Jones award of $1 billion, which is facing years of byzantine appeals and stalling, Dominion gets this money now—without any more hassle, delay, or expense and without having to deal with anxious insurers and litigation finance hedge funds breathing down their neck.

So why did Fox settle?

There’s been some uninformed speculation that the settlement blocks Smartmatic from using the depositions Dominion took. But that testimony is public record, as are the rulings of the court:

The judge wrote, “the evidence does not support that FNN conducted good-faith, disinterested reporting.” 

In another finding, the judge wrote that the “evidence developed in this civil proceeding demonstrates that is CRYSTAL clear that none of the statements relating to Dominion about the 2020 election are true.”

And the problems for Fox don’t stop there:

Other companies, such as Smartmatic, will surely be emboldened in their own defamation suits against Fox, which share basically the same fact patterns as Dominion’s. Furthermore, the condemning depositions of Fox anchors and executives, admitting that they knew their stories were false and sources were ludicrous, opens Fox’s board to serious claims of negligence and breaches of fiduciary duty—violations of a board’s duty of care and duty of loyalty under Delaware corporate law.

Still wondering why Fox settled this case. 

There’s some speculation here, but it’s well informed.

Already two of many law firms queuing up filed suit in Delaware Chancery Court, charging: “Fox knew—from the Board on down—that Fox News was reporting false and dangerous misinformation about the 2020 Presidential election, but Fox was more concerned about short-term ratings and market share than the long-term damages of its failure to tell the truth.” 

While some media commentators have suggested that insurance might cover a large portion of Fox’s Dominion settlement, the company’s breaches of fiduciary duty could absolve insurers from having to cover the payout on top of permitting them to charge the company permanently higher insurance premiums. Even worse for Fox, unless the company reforms its coverage and corporate governance processes, insurers might recoil from underwriting the insurance of Fox’s board directors and officers, much the way Elon Musk was once forced to personally underwrite the insurance of Tesla’s board directors and officers after every insurance company refused to stomach the risk.

We’re getting closer to an answer to the question:

Admissions by Murdoch, Ryan, Fox News CEO Suzanne Scott, and Fox Corp. Chief Legal Officer Viet Dinh demonstrate a failure to act on what they knew to be false—or a failure of their duties of care and duty of loyalty to the shareholders. Their duties were not to protect management or even to please viewers, but to protect the enterprise and shareholder value. Yet, when asked in a January deposition if he could have intervened when falsehoods were being spread on his cable network, Murdoch succinctly replied on the record, “I could have. But I didn’t.”

Fox wanted to staunch the bleeding. They couldn’t afford a trial. It’s not clear they can afford all the consequences of their lies, but they had to stop this trial. Not because they stood to be dunned for $1.6 billion, but because they were going to face a very public trial that would fuel even more shareholder suits.

So maybe the way Fox sees it, they cut their losses. Or hope they did.