Oregon State Bar Bulletin — APRIL 2012
Legal Issues to Watch as the Case Moves On

Now that we all know the back story and history of Obsidian Finance Group, LLC. v. Cox, what are the key legal issues we should watch for as the case appears headed for appeal?

As the trial judge, U.S. District Court Judge Marco Hernandez, noted in his rulings, the case has both constitutional and statutory issues.

The First Amendment Issues Discussed by Hernandez’s Nov. 30 Ruling

What mental state should the plaintiffs have been required to prove?

Cox argued that the plaintiffs are “public figures,” a designation that would have required them to prove, by clear and convincing evidence, that she had acted with “actual malice.”

“Actual malice” is defined by case law as knowledge that statements were false or reckless disregard of whether they were false.

“Going up the ladder,” says Portland media lawyer Duane Bosworth, “[the relevant mental states] are negligence and actual malice. Negligence would apply to a private citizen. With a private citizen, you must investigate [the truthfulness of the information you report].”

Actual malice, says Bosworth, is proven by showing that, subjectively, the publisher of the statement had a “serious concern about whether the statement was true,” not by his “lack of effort to determine the truth” or by his feelings about the subject of his publication.

“It has nothing to do with ‘malice’ in the sense that you hate somebody,” he explains.

In this case, Hernandez, noting that “Whether a plaintiff is a public figure is question of law for the court,” found that the plaintiffs were not public figures, meaning that they did not met the test of being either a) public figures for all purposes in all contexts or b) persons who had voluntarily injected themselves into, or been drawn into, a particular controversy and therefore became public figures for a limited range of issues.

The latter test is sometimes described as persons who are public figures because they are involved in “a matter of public concern.”

As a result of Hernandez’s ruling, the federal jury that awarded $1 million to Obsidian and $1.5 million to Padrick was directed simply to find whether Cox was “liable” for defaming them.

“It is conceivable that under that [actual malice] standard, the jury might have found the defendant liable, but the jury was not given any standard,” says UCLA School of Law Prof. Eugene Volokh, who — with Portland attorney Benjamin Souede — filed a 23-page memorandum in support of Cox’s motion for new trial or, in the alternative, for remittitur.

In the memorandum, Volokh and Souede argue that Cox is entitled to a new trial for “three independently sufficient reasons,” one of which is that plaintiff Kevin Padrick and Obsidian, the firm in which he is one of two partners, should have been designated as “public figures” because he was a court-appointed bankruptcy trustee and Cox’ blog post concerned his performance of his duties as trustee.

“One of the things Volokh is saying,” says Bosworth, who has written about the case for a national consortium of newspaper publishers, “is, ‘This is a matter of public concern: therefore, there has to be at least negligence.’”

“I don’t think there was any presentation about whether she [Cox]was negligent,” Bosworth says of the trial. “They [the jury] were given instructions that amounted to strict liability.”

Was the defendant “media” and what, if any, effect did that have on the plaintiffs’ burden of proof?

Cox also argued that she is “media” and that, under case law, the plaintiffs had to prove she acted at least negligently to recover proven compensatory damages and with “actual malice” to recover presumed damages.

Hernandez, however, found that she had cited no cases “…indicating that a self-proclaimed ‘blogger’ is considered ‘media’ for the purpose of applying a negligence standard in a defamation claim.”

“Without any controlling or persuasive authority on the issue,” he concluded, “I decline to conclude that defendant in this case is ‘media,’ triggering the negligence standard.”

Hernandez went on to say that “Defendant fails to bring forth any evidence suggestive of her status as a journalist. For example, there is no evidence of (1) any education in journalism; (2) any credentials or proof of any affiliation with any recognized news entity; (3) proof of adherence to journalistic standards such as editing, fact-checking, or disclosures of conflicts of interest; (4) keeping notes of conversations and interviews conducted; (5) mutual understanding or agreement of confidentiality between the defendant and his/her sources; (6) creation of an independent product rather than assembling writings and postings of others; or (7) contacting ‘the other side’ to get both sides of a story. Without evidence of this nature, defendant is not ‘media.’”

It was this paragraph that prompted Forbes Magazine to comment, in December, that “Yes, there are bloggers who are journalists. But just because you have a blog doesn’t mean that what you do is journalism.”

Two of Volokh’s and Souede’s three “independently sufficient reasons” for seeking a new trial relate to this issue. They argue that even if the plaintiffs were treated as private figures, case law required the jury to be instructed that it could hold Cox liable for proven compensatory damages only with proof of negligence, and for presumed damages only with proof of actual malice, and that “a new trial – or at least remittitur – is required because the evidence presented to the jury did not support a conclusion that plaintiffs suffered $2.5 million in damages (whether proven or presumed) from the one post…”

On Jan. 11, the San Francisco-based Electric Frontier Foundation, a nonprofit digital rights organization, filed an amicus curiae brief in support of Cox’ motion, arguing, among other things, that Hernandez should have instructed the jury to apply a negligence standard; that the damage award lacked evidentiary support and that the court should reconsider its finding that Cox was not a “media” defendant.

The Statutory Issues

Who is covered by Oregon’s right-of-retraction statute, ORS 31.200-225?

ORS 31.220-225, “Tort Actions, Rules Governing Particular Claims for Relief,” precludes a plaintiff from obtaining general damages for defamation unless the plaintiff has demanded a correction or retraction and the defendant has failed to correct or retract the statement.

In this case, Cox claimed that because the plaintiffs did not seek a correction or retraction, they could not obtain general damages. Hernandez, however, ruled that “These statutes apply …only to damages on account of a defamatory statement published or broadcast in a newspaper, magazine, other printed periodical, or by radio, television or motion picture. ORS 31.205; 31.210. The Oregon Legislature has not expanded the list of publications or broadcasts to include Internet blogs.”

To Bosworth, the applicability of the retraction statute is one of “two areas of interest in this case,” the other being the First Amendment issue advanced by Volokh and Souede.

“Does the retraction statute apply to this blogger?” he asks rhetorically.

If it applies, says Bosworth, Cox can’t be sued unless the “plaintiffs have jumped through a number of hoops.”

“The plaintiffs did none of those things here, and that would preclude them from any lawsuit for general damages if the retraction statute applied,” Bosworth says.

“Speaking for myself, he continues, “I would have concern about having it apply to everyone. If it’s diluted, then the traditional media might lose its protection. The biggest issue [in the case] is the court’s probable over-breadth re the Internet not being protected by the retraction statute. There’s concern on the part of people who are not quite bloggers but are traditional media making statements on their websites. I think they’re alarmed. It has not been an issue, in state trial courts, whether bloggers are protected by the state retraction statute. What the judge said isn’t binding on any other judge, even in the federal system; it just shows the confusion about these things.”

In its amicus curiae brief, the Electronic Frontier Foundation argued not only that the Oregon “…retraction statute should be interpreted to extend to Internet periodicals such as Defendant’s blogs,” but that Hernandez was wrong in ruling, in part, that Cox could not invoke the state’s so-called Media Shield Law, ORS 44.510-540, because it doesn’t cover anyone who is a defendant in a civil defamation suit.

“…The source of Cox’ statements,” the foundation pointed out, “was not at issue.”

“Taken together with the court’s ruling regarding the appropriate intent requirement and the jury’s excessive verdict,” the brief said strongly, “these findings paint an increasingly and unnecessarily hostile landscape for online speech, one that may discourage such speakers or lead them to engage in the type of ‘intolerable self-censorship’ decried by the Supreme Court…”

“While the scope of the First Amendment protections afforded to Internet journalists is a salient and important question,” the brief concluded, “here the primary question was not whether ‘a self-proclaimed investigative blogger’ is considered ‘media’ for the purposes of applying a negligence standard in a defamation claim but whether all speakers enjoy the same affirmative First Amendment protections regardless of media status.”


—Janine Robben


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