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Dominion’s defamation trial against Fox News is set to begin, with Rupert and Lachlan Murdoch forced to take the stand as their media empire is sued for $US1.6 billion. By Paddy Manning.

Dominion versus the Murdochs

An activist protests outside Fox News headquarters last month.
An activist protests outside Fox News headquarters last month.
Credit: Erik McGregor / LightRicket via Getty Images

Barring a last-minute settlement, the media trial of the century will begin this week in courtroom 7E of the nondescript Leonard L. Williams Justice Center in Wilmington, Delaware, barely a two-hour drive from Manhattan.

Both Rupert Murdoch and his son Lachlan are set to appear in the $US1.6 billion defamation case, brought by the Canadian voting machine manufacturer Dominion Voting Systems against Fox Corporation, Fox News and some of the network’s key on-air talent.

Fox argued the Murdochs and other senior office-bearers were not directly responsible for Fox News’s allegedly defamatory coverage of Dominion’s role in the 2020 presidential election, and should not be forced to testify. Presiding Superior Court judge Eric Davis rejected that argument a fortnight ago, even citing Rupert’s extensive travel plans with former fiancée Ann Lesley Smith.

Before breaking off their engagement, and cancelling what would have been Murdoch’s fifth wedding, the 92-year-old mogul had canvassed plans to divide his time with Smith between California, Britain, Montana and New York. “That doesn’t sound like someone who can’t go from New York to Wilmington,” Davis ruled.

Sensational evidence obtained by Dominion during discovery – including sworn depositions by both Murdoch men, senior Fox executives and hosts, and thousands of internal emails and text messages – has been released publicly over the past two months.

The Dominion case is that almost everyone at Fox, from the very top down, knew Donald Trump’s stolen-election claims were baseless. The claims were put to air on Fox News anyway, as the network scrambled to regain favour among Trump loyalists, who were enraged by the network’s early call on Arizona.

In the days after the election, Trump’s base deserted Fox in droves for far-right networks Newsmax and One America News (OAN). After a long meeting with Rupert and Lachlan Murdoch, Fox News chief executive Suzanne Scott messaged her boss, saying the election-night coverage “was damaging but we will highlight our stars and plant flags letting the viewers know we hear them and respect them”. Lachlan replied: “Yes. But needs constant rebuilding without any missteps.”

From that point onwards, Fox’s leadership was careful not to antagonise Trump’s base. According to Rupert Murdoch’s own deposition, prime-time anchors Sean Hannity, Jeanine Pirro, Maria Bartiromo and Lou Dobbs all endorsed the stolen-election claims – in which Dominion was blamed for flipping votes from Biden to Trump – although privately they knew those claims were baseless. “I would have liked us to be stronger in denouncing it in hindsight,” Rupert said.

Adding to the pain, news broke on Wednesday that shareholder Robert Schwarz had brought what may be the first of several mooted lawsuits against the board of Fox Corp, arguing that they violated their fiduciary duty to the company when they allowed Fox News to broadcast election conspiracy theories.

Pundits have described the Dominion case as the worst crisis faced by the Murdochs since the British phone-hacking scandal broke in 2011, when Rupert was called before the British parliament’s culture, media and sport select committee in what he called the “most humble day of my life”. The phone-hacking crisis divided the Murdoch family and split the empire into film and television business 21st Century Fox – forerunner of present-day Fox before the entertainment business was sold to Disney in 2019 – and the legacy print media business of News Corporation.

Although the headlines surrounding the Dominion case have been overwhelmingly negative for Fox, it is very difficult for defamation cases to succeed under US law established in the landmark 1964 case of New York Times Co. v Sullivan, which requires the plaintiff to prove that the defendant showed “actual malice” towards it, evidenced by “reckless disregard” for the truth of the allegedly defamatory statements.

Fox shares slumped by 13 per cent from a closing price of $US37.12 on February 15, the day before the Dominion evidence was released, to a low of $US32.28 in mid-March, before recovering somewhat to $US33.73 this week – a level suggesting the market does not expect Fox to be wiped out by the case. The company has cash of more than $US4 billion on its balance sheet, as well as defamation insurance.

Ratings for Fox News have held up in the eight weeks since the depositions were first released, with no loss of audience in total daytime viewing. The prime-time audience has risen 11 per cent. Fox News remains the No. 1 cable television channel in America, and its rusted-on audience remains largely unaware of the controversy surrounding Dominion, which is hardly mentioned on the network.

Australian broker Angus Aitken, partner at Aitken Mount Capital Partners, is a long-term supporter of Fox Corp and attended the company’s annual meeting in Los Angeles in November. He told The Saturday Paper this week that Fox’s core businesses are still generating enormous amounts of cash.

“In our view,” Aitken said, “the multibillion-dollar payout that headline commentators seem to worry about is very unlikely and you could settle for $US250 million to $US300 million and have the case cease. We see Fox generating north of $US2 billion of free cash flow, they have minimal net debt and the balance sheet is well set up for opportunistic M&A [mergers and acquisitions] where asset prices have come back significantly and could be interesting businesses for Fox to add on to their business. In the end we think Lachlan Murdoch and his team have done a great job running Fox and growing it. The court case will get peak airplay in coming months and we think the stock remains great buying and we retain our $US80 long-term price target.”

Even in the worst-case scenario, Fox does not expect to pay anything like $US1.6 billion in damages – a claim that Fox has argued is based not on financial records but on Dominion’s testimony that it will experience a total loss of customers by 2031 as a result of the alleged defamation by Fox News.

According to evidence brought by Fox, Dominion renewed several major contracts following the 2020 election, including with Vermont in 2021 and with Republican-held Kern County in California. In 2018, says Fox, when a 75 per cent stake in Dominion was sold to New York hedge fund Staple Street Capital, the entire enterprise was valued at just $US80 million. Fox will challenge Dominion’s estimate that the company was worth $US740 million just two years later.

Regardless of the financial impact, Fox can expect a media frenzy for the next six weeks of hearings in the trial. Under an elaborate protocol issued by Judge Davis, there will be no cameras allowed inside the courtroom, and journalists inside will not be able to connect to the internet – although many might prefer to crowd into the overflow room, where closed-circuit video will be screening and they can post up a storm. Interstate and international media will have to dial in to the proceedings.

In a slew of pretrial rulings this week, Davis has appeared even-handed. On Tuesday he chided Fox’s lawyers, saying they had a “credibility problem” for only belatedly disclosing that Rupert had a company officer role as executive chairman at subsidiary Fox News, as well as being non-executive co-chairman of parent company Fox Corp, alongside Lachlan, who is executive chair and chief. The judge said on Wednesday he was imposing a sanction on the network and was likely to start an investigation into whether Fox’s legal team had deliberately withheld evidence. At the same time, Davis ruled that Dominion could not bring evidence relating to the January 6, 2021 insurrection, which he said would be too prejudicial with the jury. Whether Fox had influenced the insurrection, Davis decided, was not relevant to the Dominion case. He said that evidence “may be for another court at another time, but it’s not for this court at this time”.

Davis’s ruling regarding January 6 could prove significant for Australian news site Crikey, which is seeking to add evidence from the Dominion case to its own defence of defamation proceedings brought by Lachlan Murdoch. Murdoch alleges he was defamed by an article that described him as an “unindicted co-conspirator” with Trump in the insurrection. In an updated filing this week, Crikey argued Lachlan Murdoch was “morally and ethically culpable for the illegal January 6 attack because Fox News, under his control and management, promoted and peddled Trump’s lie of the stolen election despite Lachlan Murdoch knowing it was false”. The case is scheduled to go to trial in the Federal Court in Sydney in October.

If Fox loses to Dominion at trial, the company is determined to appeal: in the first instance to the Delaware Supreme Court, and if necessary to the US Supreme Court – on the grounds that the First Amendment to the US constitution protects freedom of the press. The conservative supermajority on the US Supreme Court might be thought to be sympathetic to Fox’s cause, but there are recent signs of an appetite from right-leaning judges, including Clarence Thomas and Neil Gorsuch, to revisit New York Times Co. v Sullivan, the most important First Amendment US Supreme Court decision of the past century, and limit free-press protections as Florida governor Ron DeSantis has proposed.

“Fox will continue to advocate for the First Amendment and the media’s absolute right to cover the news,” a spokesman told The Saturday Paper, warning an adverse ruling would have a chilling effect on all media: “The outcome of this case will have far-reaching consequences on every news organisation in this country.”

On that point, conservative and liberal commentators alike agree.

This article was first published in the print edition of The Saturday Paper on April 15, 2023 as "A matter of Dominion".

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