Big Lie Continues to Plague Fox Corporation in Smartmatic Defamation Case

The court found that the parent company, Fox Corporation, could not dodge potential liability for defamatory statements made by its subsidiary, Fox News, because Smartmatic had alleged that Fox Corporation participated in publication of those statements and had wholly dominated its subsidiary.

Background

Smartmatic is an election technology and software company that provided services to Los Angeles County, California, in connection with the 2020 presidential election. Following the 2020 presidential election, Fox News and its employees and guests made a number of false statements in which they claimed that Smartmatic and its software “stole” the election from Donald Trump. For example, Fox News employees and guests claimed on air that Smartmatic machines had been used by several swing states in the 2020 election, that Smartmatic had been founded “for the specific purpose of fixing elections,” that Smartmatic had previously fixed numerous elections in Venezuela and Argentina, and that Smartmatic software had “dumped” votes for Trump and “flipped” those votes to Joe Biden.

In March 2022, a New York court denied motions to dismiss from Fox Corporation and Fox News, allowing Smartmatic’s case to proceed to discovery. Following that dismissal, a New York appeals court found that Smartmatic’s complaint did not sufficiently allege that Fox Corporation played an affirmative role in the publication of the defamatory statements or that it wholly dominated Fox News so as to be liable for its acts. In response, Smartmatic amended its complaint, which Fox Corporation again moved to dismiss.

The Court’s Ruling

In denying Fox Corporation’s motion to dismiss, the court found that Smartmatic’s amended complaint contains examples of “specific, non-conclusory acts and conduct” taken by employees of Fox Corporation “at its highest level of ownership and management.” These examples demonstrated that Fox Corporation played an affirmative role in the publication of the defamatory statements. The court also found that the amended complaint alleged that “no programming, messaging, or employment decisions were made at [Fox News] without [Fox Corporation’s] knowledge, approval, and direction.” These allegations were sufficient to establish, for purposes of a motion to dismiss, that Fox Corporation wholly dominated Fox News.

In its decision, the court also found that Smartmatic had sufficiently alleged that Fox Corporation had acted with actual malice by “purposefully and deliberately publishing knowingly false stories about plaintiffs in order to benefit” Fox Corporation’s financial interests.

The court’s decision illustrates simple but important principles in defamation law. First, as we’ve previously written, media companies should endeavor to tell the truth. Second, parent companies cannot avoid liability for defamation simply because it was the subsidiary and not the parent that published the defamatory statements. Finally, defamation is bad for business. While Smartmatic’s lawsuit against Fox Corporation has not yet reached settlement or a final judgment, the court’s ruling is still problematic for Fox Corporation. The court’s ruling means that Smartmatic’s case against Fox Corporation may proceed to discovery, which may be invasive and costly — not to mention embarrassing.

Fox News’s Anti-SLAPP Counterclaim Survives Motion to Dismiss

Following the court’s prior decision denying Fox News’s motion to dismiss, Fox News brought a counterclaim against Smartmatic under New York’s Anti-SLAPP (Strategic Lawsuit Against Public Participation) Law. Anti-SLAPP laws seek to deter, and enable early dismissal of, lawsuits that were filed to burden parties with expensive litigation and therefore chill their free speech rights rather than to assert good-faith legal claims.

Fox News’s counterclaim asserts that Smartmatic’s request for over $2.7 billion in damages is an attempt to chill its free speech rights because, as Fox News contends, the damages calculation is not related to Smartmatic’s worth or future profits, and Smartmatic’s defamation claim is meritless. In declining to dismiss the counterclaim, the court explained that neither Fox News’s Anti-SLAPP argument nor the issue of whether Fox News acted with actual malice (required for Smartmatic’s defamation claim) had been adjudicated in any court. Therefore, the court reasoned, triable issues of fact remain and dismissal would be improper.