Obsidian Finance Group, LLC v. Cox
D.C. No. 3:11-cv-00057-HZ (2014)
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Rule of Law:
The First Amendment's protections in defamation cases concerning matters of public concern apply equally to individual speakers, such as bloggers, and the institutional media. Consequently, a private plaintiff cannot recover damages for a defamatory statement on a matter of public concern without showing that the defendant was at least negligent and that the plaintiff suffered actual damages.
Facts:
- Obsidian Finance Group, LLC (Obsidian), a financial advisory firm, was retained by Summit Accommodators, Inc. (Summit) in connection with its bankruptcy.
- After Summit filed for Chapter 11 bankruptcy, the court appointed Kevin Padrick, a principal of Obsidian, as the trustee.
- Padrick's main role as trustee was to manage Summit's assets for the benefit of clients whose funds Summit had misappropriated.
- Crystal Cox published posts on several blogs she created, accusing Padrick and Obsidian of illegal activities, including fraud and money laundering, related to the Summit bankruptcy.
- A specific blog post on December 25, 2010, alleged that Padrick, in his capacity as trustee, had failed to pay taxes owed by Summit.
- Padrick and Obsidian sent Cox a cease-and-desist letter, but she continued to publish her allegations.
Procedural Posture:
- Kevin Padrick and Obsidian Finance Group, LLC sued Crystal Cox for defamation in the U.S. District Court for the District of Oregon (a federal trial court).
- The district court granted summary judgment for Cox on most of her blog posts, ruling they were constitutionally protected opinions.
- One defamation claim, concerning a single blog post from December 25, 2010, was allowed to proceed to a jury trial.
- The district court rejected Cox's pretrial argument that she was entitled to First Amendment protections because she was not a 'journalist.'
- The jury was instructed that it could find Cox liable without any showing of fault and could award damages even without proof of actual harm.
- The jury returned a verdict for the plaintiffs, awarding them a total of $2.5 million in compensatory damages.
- Cox's subsequent motion for a new trial was denied by the district court.
- Cox, the defendant, appealed the denial of her motion to the U.S. Court of Appeals for the Ninth Circuit. Padrick and Obsidian, the plaintiffs, cross-appealed the summary judgment ruling on the other blog posts.
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Issue:
Does the First Amendment's requirement that a plaintiff prove fault (at least negligence) in a defamation suit involving a matter of public concern apply to an individual blogger who is not a member of the institutional media?
Opinions:
Majority - Hurwitz, Circuit Judge
Yes, the First Amendment requirement to show fault applies. First Amendment protections for speech on matters of public concern are not limited to the institutional press. Citing Supreme Court precedent like Citizens United, the court reasoned that there is no constitutional basis for affording greater protection to established media outlets than to other speakers, especially given the rise of the internet which blurs the line between them. The court determined that Cox's blog post, which alleged misconduct by a court-appointed bankruptcy trustee, was a matter of public concern. Therefore, the district court erred by not instructing the jury that Padrick and Obsidian had to prove Cox was at least negligent and that they could not recover presumed damages without a showing of actual malice. The court also held that Padrick was not a public official, as a bankruptcy trustee does not exercise substantial control over governmental affairs.
Analysis:
This case is significant for extending the constitutional protections established in Gertz v. Robert Welch, Inc. to bloggers and other non-traditional media speakers. The ruling clarifies that in defamation law, the First Amendment analysis focuses on the content of the speech (i.e., whether it involves a matter of public concern), not the status or identity of the speaker. This decision provides critical protection for online speech, ensuring that individuals commenting on public issues receive the same safeguards against strict liability defamation claims as established news organizations. It sets a precedent that will be crucial in future cases involving online publishers, social media users, and citizen journalists.
