June 10, 2023 12:37 am

In August 2021, the Fox Corporation board of directors gathered on the company’s film studio lot in Los Angeles. Amongst the subjects on the agenda: Dominion Voting Systems’ $1.six billion defamation lawsuit against its cable news network, Fox News.

The suit posed a threat to the company’s finances and reputation. But Fox’s chief legal officer, Viet Dinh, reassured the board: Even if the corporation lost at trial, it would in the end prevail. The Initially Amendment was on Fox’s side, he explained, even if proving so could need going to the Supreme Court.

Mr. Dinh told other folks inside the corporation that Fox’s probable legal charges, at tens of millions of dollars, could outstrip any damages the corporation would have to spend to Dominion.

That determination informed a series of missteps and miscalculations more than the subsequent 20 months, according to a New York Instances evaluation of court and business enterprise records, and interviews with roughly a dozen individuals straight involved in or briefed on the company’s choice-generating.

The case resulted in 1 of the most significant legal and business enterprise debacles in the history of Rupert Murdoch’s media empire: an avalanche of embarrassing disclosures from internal messages released in court filings the biggest recognized settlement in a defamation suit, $787.five million two shareholder lawsuits and the benching of Fox’s top rated prime-time star, Tucker Carlson.

And for all of that, Fox nevertheless faces a lawsuit looking for even a lot more in damages, $two.7 billion, filed by a different topic of the stolen-election theory, the voting computer software corporation Smartmatic, which can now develop on the proof created in the Dominion case to press its personal considerable claims.

In the month considering the fact that the settlement, Fox has refused to comment in detail on the case or the lots of subsequent setbacks. That has left a string of unanswered concerns: Why did the corporation not settle earlier and stay clear of the release of private emails and texts from executives and hosts? How did 1 of the most potentially prejudicial pieces of proof — a text from Mr. Carlson about race and violence — escape higher-level notice till the eve of the trial? How did Fox’s pretrial assessment so spectacularly miss the mark?

Repeatedly, Fox executives overlooked warning indicators about the harm they and their network would sustain, The Instances identified. They also failed to recognize how far their cable news networks, Fox News and Fox Company, had strayed into defamatory territory by advertising President Donald J. Trump’s election conspiracy theories — the central situation in the case. (Fox maintains it did not defame Dominion.)

When pretrial rulings went against the corporation, Fox did not pursue a settlement in any actual way. Executives have been then caught flat-footed as Dominion’s court filings incorporated internal Fox messages that produced clear how the corporation chased a Trump-loving audience that preferred his election lies — the similar lies that helped feed the Jan. six Capitol riots — to the truth.

It was only in February, with the overwhelming adverse public reaction to these disclosures, that Mr. Murdoch and his son with whom he runs the corporation, Lachlan Murdoch, started seriously thinking of settling. However they produced no significant try to do so till the eve of the trial in April, immediately after nevertheless a lot more damaging public disclosures.

At the center of the action was Mr. Dinh and his overly rosy situation.

Mr. Dinh declined quite a few requests for comment, and the corporation declined to respond to concerns about his overall performance or his legal choices. “Discussions of particular legal approach are privileged and confidential,” a corporation representative mentioned in a statement.

Defenders of Mr. Dinh, a higher-level Justice Division official below President George W. Bush, say his initial position was sound. Since of the strength of American free of charge speech protections, Dominion required to clear a higher bar. And unfavorable rulings from the Delaware judge who oversaw the case hurt Fox’s possibilities, they argue.

“I believe Viet and Fox carried out just the appropriate approach by moving down two paths simultaneously — initial, mounting a robust legal defense, 1 that I believe would have ultimately won at the appellate stage, and, second, constantly assessing settlement possibilities at every single stage,” mentioned William P. Barr, the former lawyer basic below Mr. Trump who worked with Mr. Dinh earlier in his profession.

Of course, the case would have been tricky for any lawyer. As the internal records showed, executives knew conspiracy theories about Dominion have been false but did not cease hosts and guests from airing them.

That placed Fox in the ultimate danger zone, exactly where Initially Amendment rights give way to the legal liability that comes from knowingly advertising false statements, referred to in legalese as “actual malice.”

The fall of 2020 brought Fox News to a crisis point. The Fox audience had come to anticipate favorable news about President Trump. But Fox could not deliver that on election evening, when its choice desk group was initial to declare that Mr. Trump had lost the vital state of Arizona.

In the days immediately after, Mr. Trump’s fans switched off in droves. Ratings surged at the smaller sized appropriate-wing rival Newsmax, which, in contrast to Fox, was refusing to recognize Joseph R. Biden’s victory.

The Fox host who was the initial to come across a way to draw the audience back was Maria Bartiromo. 5 days immediately after the election, she invited a guest, the Trump-aligned lawyer Sidney Powell, to share information about the false accusations that Dominion, an elections technologies corporation, had switched votes from Mr. Trump to Mr. Biden.

Quickly, wild claims about Dominion appeared elsewhere on Fox, like references to the election company’s supposed (but imagined) ties to the Smartmatic election computer software corporation Hugo Chávez, the Venezuelan dictator who died in 2013 George Soros, the billionaire investor and Democratic donor and China.

On Nov. 12, a Dominion spokesman complained to the Fox News Media chief executive, Suzanne Scott, and the Fox News Media executive editor, Jay Wallace, begging them to make it cease. “We seriously weren’t pondering about developing a litigation record as a lot as we have been attempting to cease the bleeding,” Thomas A. Clare, 1 of Dominion’s lawyers, mentioned lately at a post-mortem discussion of the case held by a Initially Amendment advocacy group, the Foundation for Person Rights and Expression.

As the hosts continued to give oxygen to the conspiracy theories, Dominion sent a letter to the Fox News basic counsel, Lily Fu Claffee, demanding that Fox cease and right the record. “Dominion is ready to do what is vital to defend its reputation and the security of its workers,” the letter warned.

It came amid a lot more than three,600 messages that Dominion sent debunking the conspiracy theories to network hosts, producers and executives in the weeks immediately after the election.

Such letters usually set off internal testimonials at news organizations. Fox’s lawyers did not conduct 1. Had they carried out so, they could have discovered of an e mail that Ms. Bartiromo received in November about 1 of Ms. Powell’s original sources on Dominion.

The supply intimated that her data had come from a mixture of dreams and time travel. (“The wind tells me I’m a ghost but I do not think it,” she had written Ms. Powell.)

Dan Novack, a Initially Amendment lawyer, mentioned that if he ever stumbled upon such an e mail in a client’s files, he would “physically wrest my client’s checkbook from them and settle ahead of the police arrive.”

Fox, on the other hand, did not respond to the Dominion letter or comply with its requests — now a important situation in a shareholder suit filed in April, which maintains that performing so would have “materially mitigated” Fox’s legal exposure.

3 months immediately after the election, a different voting technologies corporation tied to the Dominion conspiracy, Smartmatic, filed its personal defamation suit against Fox, looking for $two.7 billion in damages. Dominion told reporters that it was preparing to file 1, as well.

Mr. Dinh was publicly dismissive.

“The newsworthy nature of the contested presidential election deserved complete and fair coverage from all journalists, Fox News did its job, and this is what the Initially Amendment protects,” Mr. Dinh mentioned at the time in a uncommon interview with the legal writer David Lat. “I’m not at all concerned about such lawsuits, actual or imagined.”

Mr. Dinh was saying as a lot inside Fox, as well, according to quite a few individuals familiar with his actions at the time. His words mattered.

A refugee of Vietnam who fled the Communist regime and landed with his loved ones in the United States practically penniless, he graduated from Harvard and Harvard Law and was a clerk for Justice Sandra Day O’Connor. As an assistant lawyer basic for George W. Bush, he helped draft the Patriot Act expanding government surveillance powers. He and Lachlan Murdoch later became so close that Mr. Dinh, 55, is godfather to 1 of Mr. Murdoch’s sons.

Mr. Dinh took a hands-on strategy to the Dominion case, and ultimately split with a important member of the outdoors group, Charles L. Babcock of Jackson Walker, according to quite a few individuals with expertise of the internal discussions.

Immediately after disagreement more than the very best way to formulate Fox’s defense, Jackson Walker and Fox parted methods. George Freeman, executive director of the Media Law Resource Center and a former assistant basic counsel for The Instances, mentioned Mr. Babcock’s exit had left Fox down a seasoned defamation defense lawyer. “He’s possibly the very best trial lawyer in the media bar,” Mr. Freeman mentioned.

By then, Mr. Dinh was fashioning the legal group a lot more in his personal image, obtaining brought in a longtime colleague from the Bush administration, the former solicitor basic Paul Clement.

Mr. Clement’s presence on the Fox group was itself an indication of Mr. Dinh’s willingness to take the case all the way to the Supreme Court — couple of members of the conservative legal bar had a lot more practical experience there.

Mr. Dinh hired Dan Webb, a former U.S. lawyer, for the function of lead litigator, succeeding Mr. Babcock. Mr. Webb was recognized for representing a beef manufacturer that sued ABC News more than reports about a solution in some cases referred to as “pink slime.” The case was settled in 2017 for a lot more than $170 million.

The Fox legal group primarily based a lot of the defense on a doctrine recognized as the neutral reportage privilege. It holds that news organizations can’t be held financially liable for damages when reporting on false allegations produced by significant public figures as extended as they do not embrace or endorse them.

“If the president of the United States is alleging that there was fraud in an election, that is newsworthy, regardless of whether or not there’s fraud in the election,” Mr. Clement told Jim Geraghty, a writer for National Critique and The Washington Post. “It’s the most newsworthy factor imaginable.”

Fox remained so confident, the corporation mentioned in reports to investors that it did not anticipate the suit would have “a material adverse impact.”

But the neutral reportage privilege is not universally recognized. Longtime Initially Amendment lawyers who agree with the principle in theory had their doubts that it would operate, offered that judges have increasingly rejected it.

“Most astute media defamation defense lawyers would not, and have not for a extremely extended time, relied on neutral reportage — undoubtedly as a key line of defense, simply because the likelihood that a court would accept it as a matter of Initially Amendment law has continued to diminish more than time,” mentioned Lee Levine, a veteran media lawyer.

An early warning came in late 2021. The judge in the case, Eric M. Davis, rejected Fox’s try to use the neutral reportage defense to get the suit thrown out altogether, figuring out that it was not recognized below New York law, which he was applying to the case. Even if it was recognized, Fox would have to show it reported on the allegations “accurately and dispassionately,” and Dominion had produced a robust argument that Fox’s reporting was neither, the judge wrote in a ruling.

That ruling meant that Dominion, in preparing its arguments, could have access to Fox’s internal communications in discovery.

That was a organic time to settle. But Fox stuck with its defense and its strategy, which often foresaw a prospective loss at trial. “There was a robust belief that the appeal could extremely effectively be as crucial, or a lot more crucial, than the trial itself,” Mr. Webb mentioned at the post-mortem discussion of the case with Mr. Clare.

Fox executives did not foresee how daunting the discovery method would grow to be.

At practically every single step, the court overruled Fox’s attempts to limit Dominion’s access to private communications exchanged amongst hosts, producers and executives. The most significant blow came final summer season, immediately after a ruling stating that Dominion could evaluation messages from the private phones of Fox workers, like each Murdochs.

The outcome was a treasure trove of proof for Dominion: text messages and emails that revealed the doubts that Rupert Murdoch had about the coverage airing on his network, and assertions by lots of inside Fox, like Mr. Carlson, that fraud could not have produced a material distinction in the election.

The messages led to even a lot more damaging revelations throughout depositions. Immediately after Dominion’s lawyers confronted Mr. Murdoch with his personal messages displaying he knew Mr. Trump’s stolen election claims have been false, he admitted that some Fox hosts appeared to have endorsed stolen election claims.

That appeared to have undermined Fox’s defense. But Mr. Dinh told Mr. Murdoch afterward that he believed the deposition had gone effectively, according to a particular person who witnessed the exchange. Mr. Murdoch then pointed a finger in the path of the Dominion lawyer who had just completed questioning him and mentioned, “I believe he would strongly disagree with that.”

For the duration of Mr. Carlson’s deposition final year, Dominion’s lawyers asked about his use of a crude word to describe girls — like a ranking Fox executive. They also talked about a text in which he discussed watching a group of males, who he mentioned have been Trump supporters, attack “an Antifa kid.” He lamented in the text, “It’s not how white males fight,” and shared a momentary want that the group would kill the particular person. He then mentioned he regretted that instinct.

Mr. Carlson felt blindsided by the extent of the concerns, according to associates and confirmed by a video leaked to the left-leaning group Media Matters: “Ten hours,” he exclaimed to individuals on the set of his show, referring to how extended he was questioned. “It was so unhealthy, the hate I felt for that guy,” he mentioned about the Dominion lawyer who had questioned him.

There is no indication that Mr. Carlson’s texts tripped alarms at the top rated of Fox at that point.

The alarms rang in February, when reams of other internal Fox communications became public. The public’s reaction was so adverse that some individuals at the corporation believed that a jury in Delaware — which was probably to be left-leaning — could award Dominion more than a billion dollars. However the corporation produced no critical bid to settle.

With prominent Initially Amendment lawyers declaring that Dominion had an exceptionally robust case, a siege mentality appeared to set in.

In the interview with Mr. Geraghty, Mr. Clement mentioned Fox was becoming singled out for its politics. In contrast to mainstream media, which have a tendency to report on significant events the similar way and have energy in numbers, he mentioned, “conservative media, or somebody like Fox, is in a a lot a lot more vulnerable position.” He added, “If they report it, and the underlying allegations are not accurate, they’re a lot a lot more out there on an island.”

Reflecting the view of Mr. Dinh’s supporters even now, Mr. Barr, the former lawyer basic, mentioned the “mainstream media stupidly cheered on Dominion’s case,” which he mentioned they would come to regret simply because it would weaken their Initially Amendment protections. (He produced a comparable argument in March in The Wall Street Journal.)

But Judge Davis had determined that Fox had set itself apart by failing to conduct “good-faith, disinterested reporting” in the segments at situation in the suit. That was in significant component why, just ahead of opening statements, he ruled that Fox could not make neutral reportage claims that the conspiracy theory was newsworthy at the trial, knocking out a pillar of Fox’s approach. (He also ruled that Fox had, certainly, defamed the corporation in airing the false statements.)

Mr. Webb, who had currently drafted a lot of his opening statement and tested it with a concentrate group, had to take away important components of his remarks, he mentioned in the post-trial discussion with Mr. Clare.

All along, the Fox board had been taking a wait-and-see strategy.

But the judge’s pretrial choices started to adjust the board’s pondering. Also, in these final days ahead of the trial, Fox was hit with new lawsuits. One particular, from the former Fox producer Abby Grossberg, accused Mr. Carlson of advertising a hostile operate atmosphere. Yet another, filed by a shareholder, accused the Murdochs and quite a few directors of failing to cease the practices that produced Fox vulnerable to legal claims.

The weekend ahead of trial was to start, with jury choice currently underway, the board asked Fox to see the internal Fox communications that have been not but public but that could nevertheless come out in the courtroom.

That Sunday, the board discovered for the initial time of the Carlson text that referred to “how white males fight.” Mr. Dinh did not know about the message till that weekend, according to two individuals familiar with the matter. Fox’s lawyers believed it would not come out at trial, simply because it was not relevant to the legal arguments at hand. The board, on the other hand, was concerned that Dominion was ready to use the message to additional undermine the corporation with the jury.

In an emergency meeting that Sunday evening, the board — with an eye on future lawsuits, like these from Smartmatic and Ms. Grossberg — decided to employ the law firm Wachtell, Lipton Rosen &amp Katz to investigate regardless of whether any other problematic texts from Mr. Carlson or other folks existed.

More than that similar weekend, Lachlan Murdoch told his settlement negotiators to supply Dominion a lot more than the $550 million for which he had currently received board approval.

In interviews, individuals with expertise of the deliberations disagreed about how a lot Mr. Carlson’s text contributed to the final $787.five million settlement value.

By the time the board discovered of the message, the Murdochs had currently determined that a trial loss could be far a lot more damaging than they have been initially told to anticipate. A substantial jury award could weigh on the company’s stock for years as the appeals method played out.

“The distraction to our corporation, the distraction to our development plans — our management — would have been extraordinarily pricey, which is why we decided to settle,” Lachlan Murdoch mentioned at an investment conference this month.

But there was broad agreement amongst individuals with expertise of the discussions that the Carlson text, and the board’s initiation of an investigation, added to the stress to stay clear of trial.

The text also helped lead to the Murdochs’ choice a couple of days later to abruptly pull Mr. Carlson off the air. Their view had hardened that their top rated-rated star wasn’t worth all the downsides he brought with him.

Fox’s difficulty has not ended. In the weeks considering the fact that the settlement and Mr. Carlson’s ouster, prime-time ratings have dropped (even though Fox remains No. 1 in cable news), and new plaintiffs sued the network, most lately a former Homeland Safety official, Nina Jankowicz.

As 1 of Ms. Jankowicz’s lawyers mentioned in an interview, the Dominion case “signals that there is a path.”

Nonetheless pending is the Smartmatic suit. In late April, Fox agreed to hand more than extra internal documents relating to quite a few executives, like the Murdochs and Mr. Dinh. In a statement reminiscent of Mr. Dinh’s early view of the Dominion case, the network mentioned that the $two.7 billion in damages sought by Smartmatic — operating in only 1 county in 2020 — have been implausible and that Fox was protected by the Initially Amendment.

“We will be prepared to defend this case surrounding very newsworthy events when it goes to trial, probably in 2025,” the statement mentioned.

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