Winners and Losers in the Dominion Defamation Suit

Right Wing Biz Watch

By David Lieberman, April 20, 2023

Dominion Voting Systems’ decision on Tuesday to accept $787.5 million to settle its $1.6 billion defamation suit against Fox deprived us of the satisfaction of a jury verdict. But the case still had winners and losers who are poised to reshape Fox and other right wing media companies.

Fox waived the white flag after the judge in Delaware said claims on Fox News that Dominion manipulated its voting machines to throw the 2020 presidential election to Joe Biden were bogus, and Fox could not argue they were newsworthy. Fox said after the settlement that it acknowledges “the Court’s rulings finding certain claims about Dominion to be false.”

Here’s a look at some of the people who benefitted and suffered most from the judgements and settlement:

WINNERS

Staple Street Capital Group

The private equity firm that owns Dominion made far more from the $787.5 million settlement than the $38.3 million it paid in 2018 for a 76.2 percent stake in the voting systems firm. The cash from Fox will probably flow to Staple’s investors which include the University of Arizona, Travelers Insurance and fund-of-funds manager Hauser Private Equity, Reuters reports.

Penta Group

Who do you think is responsible for the many pre-trial news stories that embarrassed Fox officials and on-air performers by showing – from their emails and deposition statements – that they knew they were peddling nonsense about the 2020 election? Reporters, sure. But they had help from Penta Group – Dominion’s public relations advisors, who clearly won the publicity war vs. Fox’s famously sharp-elbowed flaks. Penta’s work distributing court documents and highlighting the juicy parts “formed the basis of the hundreds of stories that have been published ahead of the trial,” Australia’s Financial Review said.

Smartmatic

If Fox couldn’t take the heat from a trial in Delaware, just imagine how it might swoon as it approaches Smartmatic’s $2.7 billion defamation suit at the New York State Supreme Court. Smartmatic’s case might be stronger than Dominion’s was. Fox News hosts Lou Dobbs and Maria Bartiromo and guests including Sidney Powell and Rudy Giuliani alleged that Smartmatic is close to Venezuelan dictator Hugo Chavez and helped to throw the 2020 election to Pres. Biden, the company says in its powerfully written suit. The Chavez charge “lacks any support,” according to FactCheck.org. And as for throwing the election: Smartmatic’s voting system was only used in Los Angeles County in 2020.  The case is still in the discovery stage, but Smartmatic is preparing to play tough. Smartmatic says that it is determined to receive compensatory and punitive damages as well as something Dominion didn’t get: “a full and complete retraction of the disinformation on all of Fox’s platforms.”

LOSERS

Newsmax and One America News

Dominion’s success in Delaware should frighten these small right wing networks as they prepare to defend themselves in similar defamation cases. Dominion sued Newsmax for $1.6 billion in Delaware, where it faces the same judge who presided over the short-lived Fox case. The $1.6 billion one against One America News Network is in the District of Columbia. Newsmax, for its part, said that the facts in its case “are materially different from those that may have driven Fox to settle and no conclusion about Newsmax should be drawn from that settlement.”

Fox Board of Directors

Some Fox shareholders will probably tag directors for failing them in at least two ways.

The board flopped in its duty of care to shareholders when it didn’t stop Fox News anchors and guests from spreading the falsehoods about the 2020 election. One investor, Robert Schwartz, sued Fox early this month. And other unnamed investors have asked Fox for “board minutes, emails and texts that may contain evidence that Fox directors and executives were derelict by allowing the network to air the false claims,” Reuters says.

Shareholders also might allege that the company misled them about the financial risks in the Dominion case in an effort to keep the stock price high.

First Amendment scholars said (for example here and here) that Fox was the underdog in Delaware. Yet the company’s financial statements, including its most recent quarterly report, insisted that Dominion’s suit as well as Smartmatic’s are “without merit” and that Fox would “defend against them vigorously, including through any appeals.”

That’s important because the Securities and Exchange Commission requires companies to create an accounting reserve — called a “contingent liability” — when there’s a significant chance they will have to make a big outlay like the one with Dominion. Fox said in February that there was no need to do so because it “does not currently anticipate that the ultimate resolution” of the Dominion or Smartmatic cases “will have a material adverse effect on its business, financial condition, results of operations or cash flows.”

To be sure, Fox can afford the $787.5 million settlement, possibly with help from liability insurance. SVB MoffettNathanson analyst Robert Fishman says it shouldn’t interfere with the company’s planned $1 billion accelerated stock repurchase that benefits shareholders.

Still, Fox would be hard-pressed to argue that the settlement is not material. The amount is equal to about 43 percent of the $1.83 billion in net profits that RBC Capital Markets analyst Kutgun Maral estimates Fox will generate in the fiscal year that ends in June.

Paul Ryan

The Dominion case and settlement have shredded the former House Speaker’s rationale for staying on the Fox board. He told The Bulwark’s Charlie Sykes in a Feb. 23 public interview that his efforts there can help “to make sure that we get the conservative movement in a good place in America again” – which he hoped to do by privately offering “my opinion and perspective” to Fox Chair Rupert Murdoch and his son, CEO Lachlan Murdoch.

Ryan tried. Dominion disclosed Ryan’s January 12, 2021 email to the Murdochs telling them that Donald Trump’s effort to delegitimize the election was “a key inflection point for Fox” that required “solid pushback.” He believed, he said later, that the channel had to “stop spouting election lies.”

But the 2012 GOP candidate for Vice President didn’t seem to make a difference, and may have helped to make things worse.

He’s one of four members of the Compensation Committee, but there’s no evidence that he used his position to create incentives for Fox News to be more honest. It spread lies and fired those who told the truth because the company rewards executives for generating ratings and sales, not responsible journalism.

Meanwhile, Ryan rubber-stamped huge compensation packages that landed Lachlan in As You Sow’s latest list of the most overpaid CEOs.

Ryan also dutifully put his name on the company proxy, including the most recent one in September, which includes whoppers that contradict his concerns about Fox News.

He and the board call Fox executives “defenders of the U.S. Constitution and its rule of law” who are determined to build “a culture of trust, integrity and ethical behavior.” The proxy also calls the company “uncompromisingly committed to being neutral arbiters of timely news, and we consider journalistic independence and editorial integrity to be sacrosanct.”

What about Fox News’ prime-time hosts including Tucker Carlson, Laura Ingraham, and Sean Hannity? With the Dominion and Smartmatic cases bearing down, the company’s latest proxy used new language to describe them.

“Through our opinion programming,” it said, “we contribute to the marketplace of ideas by providing our audiences with engaging entertainment about virtually everything people care about” (emphasis added).

Previously, the company simply said that its shows “contribute to the marketplace of ideas by providing our audiences with the timely news, clear opinion and engaging entertainment they care about.”

Right Wing Biz Watch is a ongoing series of articles examining the business and finances of right wing media. Its author, David Lieberman, covered the media business full time for 30 years at USA Today and other publications before joining The New School as an Associate Professor in its  graduate Media Management program.