Fox Corp., Murdoch Must Face Election Defamation Payout Suit (1)

Rupert Murdoch and other Fox Corp. senior leaders must face investor claims that they’re personally responsible for the economic fallout of false conspiracy theories Fox News aired about the 2020 election.

Fox lost its motion to dismiss the case, according to an opinion from Vice Chancellor J. Travis Laster, of Delaware’s Chancery Court, finding that the investors sufficiently pleaded that Fox Chairman Rupert Murdoch faces a “substantial likelihood” of liability for consciously causing or willfully allowing Fox News to broadcast defamatory content.

“That does not mean that the plaintiffs will prevail at trial. It rather recognizes that a plaintiff need only ‘make a threshold showing, through the allegation of particularized facts, that their claims have some merit,’” said Laster in his Dec. 27 opinion, denying Fox’s motion.

The billionaire news tycoon, his son Lachlan, and other Fox executives sought the dismissal of litigation brought by a group of pension funds over the network’s role in spreading lies about the 2020 presidential election being rigged by voting machine makers. The board members named as defendants include former US House Speaker Paul Ryan.

On the eve of a 2023 trial in Delaware, Fox agreed to pay $787.5 million to Dominion Voting Systems Inc.—the largest settlement ever in a defamation case. In a separate, ongoing defamation case, Smartmatic USA Inc. seeks over $2 billion from the conservative media giant. Statements that surfaced during the Dominion case also led to the ouster of high-profile Fox News host Tucker Carlson.

Fox’s stockholders seek to shift the company’s losses onto senior officers—including Rupert and Lachlan Murdoch and Fox’s board of directors—who they say caused it to violate the law and suffer harm by having Fox News defame Dominion and Smartmatic.

The plaintiffs allege the defendants knew Fox News was breaking the law by defaming Dominion and Smartmatic, “but consciously prioritized profits over legal compliance,” Laster said.

Fox’s leadership argued there was no evidence its directors and executives actually saw the 13 segments on which Dominion and Smartmatic based their defamation cases. They also said the board didn’t ignore red flags such as an earlier defamation lawsuit over Fox’s false stories about Seth Rich, a Democratic National Committee staffer slain in 2016.

In their motion to dismiss, the defendants said that even if the plaintiffs identified valid corporate claims, they do not have standing to bring them.

Yet Laster found that none of the arguments the defendants put forth to undermine the inference that Rupert Murdoch acted in bad faith was persuasive. They included assertions that none of the directors watched the Dominion- and Smartmatic-related Fox broadcasts at any point before the companies sued; that knowledge the voting fraud allegations were false would not “translate to notice of defamation liability;" or that “a pseudo-reliance-on-counsel defense” existed.

The plaintiffs’ allegations that Lachlan Murdoch cannot make an “independent and disinterested” decision about whether to assert the claims in the complaint are “right,” Laster said. He’s not independent because he’s Rupert Murdoch’s son—and he’s not disinterested because he also faces “substantial likelihood of liability” for the same reasons as his father, the judge said.

“If anything, the claim against Lachlan is stronger,” Laster said, because he engaged in more frequent communication with Fox News CEO Suzanne Scott, his direct report, about Fox News and its content, and attended twice-daily editorial leadership team meetings.

Fox and its leadership are represented by Richards, Layton & Finger PA and Wachtell, Lipton, Rosen & Katz. Friedlander & Gorris PA, Cohen Milstein Sellers & Toll PLLC, and Lieff Cabraser Heimann & Bernstein LLP are lead counsel for the pension funds.

The case is In re Fox Corp. Derivative Litig., Del. Ch., No. 2023-0418, opinion 12/27/24.