OBSIDIAN FINANCE GROUP, LLC V. COX
Background/Facts
Obsidian Finance Group, LLC, and its senior principal Kevin Padrick filed a defamation action against Crystal Cox in the Oregon Federal Court. The complaint accused the defendant, Cox, of making several defamatory statements in an online blog about criminal conduct in their business. Obsidian is an organization that offers advisory services to other companies, especially those in distress (Balasubramani, 2014). 1n 2008, the company provided services for Summit; a bankruptcy estate, which made Padrick Summit's Chapter 11 trustee of its liquidating trust. The principal task for Padrick was to recover and reorganize the firm`s assets to benefit the Summit`s creditors. Crystal Cox, an Internet blogger accused Obsidian and Padrick, in her blog posts, of committing money laundering, government deceit, harassment, corruption, tax fraud, and other crimes in relation to the Summit bankruptcy. The defendant and the plaintiff had no prior relationship. In 2010, the plaintiff sent Cox a cease-and-desist letter demanding that she stops writing false statements about the company (Volokh, 2011). Cox; however, did not listen or adhere to the letter and continued to expose the alleged crimes committed by the company in websites like bankruptcycorruption.com and obsidianfincancesucks.com.
Obsidian called for a partial summary judgement stating that Cox`s accusations on her blogs were cause for defamation in the eyes of the law. Additionally, Obsidian claimed that Cox did not have any evidence to support her statements and that there were no truths to them (Mandell, 2014). Therefore, Obsidian wanted the judge to award summary judgement based on the issue of liability and further seek for damages in a trial. Padrick provided a declaration refuting the existence of any truths to the statements made by Cox, as well as, provided copies of the blog posts to support his denial. In 2011, Cox also filed an opposing statement to the declaration made by Padrick and Obsidian, especially their call for summary judgement by providing numerous counterclaims that proved the crimes committed, including the defamation suit against her, harassment, threats against her and conspiracy (Volokh, 2011). The jury ruled in favor of the plaintiff, Obsidian, and granted damages. However, the defendant appealed, claiming that the plaintiff needed to provide evidence to confirm their fault and that the plaintiffs were public officials in the effort to constitute a defamation liability. In the end, the ruling was in favor of the plaintiffs where Padrick received $1.5 million, while Obsidian Finance was awarded $1 million in compensatory damages.
Legal issues raised from the case.
The Obsidian Finance Group, LLC, v. Cox court case raises the issue of the freedom of the press, specifically whether the negligence standards for private defamation suits only applies to defendants from institutional media (Balasubramani, 2014). Another issue is whether a bankruptcy trustee appointed by the court is a public official.
The negligence issue.
The defendant`s arguments were based on the fact that she considered herself to be “media” and thus, was eligible to some First Amendment protections, such as requiring the plaintiff to prove that she acted with a certain degree of fault by proving actual malice and negligence (Gleason, 2015). Cox, as the defendant, brought up two First Amendment claims relating to the liability standards governing the case of Obsidian Finance Group, LLC, v. Cox. First, she argued that the blog posts she wrote in December constituted to be issues of public concern. She claimed that Obsidian and Padrick had the responsibility of proving the negligence in her part for them to recover and get damages for the alleged defamation. Additionally, she continues to argue that Padrick and Obsidian were not to recover any presumed damages without proof that the defendant operated with New York Times Co. v. Sullivan “actual malice” meaning she was aware that the posts and statements she made were false and made the accusations with reckless disregard of the statements’ truth or falsity (Balasubramani, 2014). Cox also claimed that Obsidian and Padrick were public officials and therefore, they were to prove that she acted with actual malice. Before the trial, the district court made an oral decision that disallowed both claims made by Cox. A written decision that was made days later by the judge emphasized that Obsidian and Patrick did not need to prove actual damages made or negligence because the defendant failed to present evidence to determine her status as a journalist.
Issue of Public official, Matter of Public Concern
The defendant claims error in the jury instructions because to her Padrick and Obsidian were a public official and public figure respectively. Also, the actual malice represented in the New York Times is a suitable standard for liability. She further claims that even if Padrick and the Obsidian Company were private figures, her statements addressed issues of public concern requiring her to act in malice and even if the issue was a private one then a standard liability for negligence was required. The district court established that neither the Obsidian Company nor Padrick were all purpose or limited public figures because of the role that Padrick played as Summit`s bankruptcy trustee (Balasubramani, 2014). The court rejected the defendant`s claim characterizing it as unpersuasive and argued that status as a court officer does not constitute or make a person like Padrick become a public official and the fact that he had not previously held any lucrative position in government. Therefore, Obsidian Finance and Padrick were not public figures.
The court argued that if Cox`s claims were to stand then the meaning behind 'public official' would be distorted. Padrick and the Obsidian Company were not employed by the government and were not appointed to any position in government therefore, they do not get to be public figures. It differs with the appointed of the United States Trustees by the Attorney General through the private bankruptcy trustee proceedings that argue that they are compensated from the money recovered in a case from holders of secured claims a part from the debtor. The salaries of these trustees are determined by the Attorney General who appoints them for the specific role of undertaking jurisdiction cases in district level. Also, the United States trustees who are appointed into their roles by the Attorney General engage in several activities including manage the administration of cases involving bankruptcy and private trustees (Judge, 2014). Therefore, the claims made by the defendant in her statements concerning the alleged crimes committed by the plaintiff were not issues that could raise public concern.
Application of existing law.
The application of the First Amendment governing the freedom of the press to express themselves and their concerns is evident in the case. In particular, the defendant presents herself as a journalist entitled to say whatever she wants because of the protection offered by the First Amendment to the media (Volokh, 2011). However, Cox did not realize that she did not constitute as media personnel and was not favored by the ruling of the court. The court ultimately rejected the defendants claims that the blogs explained issues that constituted a public concern. The digital media law supported the fact that Obsidian and Padrick did not constitute to be public figures as explained in the Gertz v. Robert Welch, Inc. Also, it argued that the court`s jury did not have to establish whether Cox acted with negligence when writing her blog because under New York Times v. Sullivan she was not constituted as a ‘media’ defendant and the statements she made were not of public concern (Balasubramani, 2014). The court further defended its decision that Cox did not qualify to be a media defendant because she did not have a journalism degree, acted in manner that did not adhere to journalistic standards and no association with other media outlets.
Oregon’s shield law and retraction statues also played a crucial role in the determination of this case`s verdict by the court. Cox claimed her allegations about Obsidian and Padrick were established based on evidence from a protected anonymous source. She refused to name her source quoting media shield protection. Under Oregon's media shield laws, it states anyone involved with medium of communication, a list of traditional media, to the public does not have to disclose their source of information. The court determined the holding based on the facts of the case, Cox was not affiliated with any forms of medium with a respectable reputation of reliability as journalists.
Furthermore, the court held that even if Cox was considered to be “media," she would still not qualify for the shield protection. Oregon's media shield law does not apply to civil defamation lawsuits, where the defendant has asserted a defense based an anonymous source of supposed defamatory information.
Cox also attempted to claim immunity under Oregon's retraction statutes, which clarify that general damages for defamation can solely be granted if the plaintiffs request a retraction, which Padrick didn’t However, the court again held that Cox could not qualify for the protection because her blogs did not fall under traditional media, specifically those listed in the statute.
The district court explained to its jury that under the Oregon law the following issues do not stand and are not relevant when determining liability: defendant`s knowledge to the truth or falsity of her statements and her intent to making the statement public. The District court made it obvious to the jury that the intent and the knowledge of Cox of the statements’ falsity were irrelevant to the claims made by Obsidian and that under the law the statement provided harm to Obsidian (Volokh, 2011). Evidently, Obsidian and Padrick claimed that the defamatory statements made by Cox resulted in substantial damages. Therefore, the district court made the decision that the plaintiffs be offered reasonable compensation for the damages caused to their reputation and humiliation, even if they do not submit evidence to show actual damages. In essence, the law presumes that actual damages were suffered by the plaintiffs.
The ruling made by the court has faced a lot of backlash concerning several aspects that constitute the case. The most discussed issue is whether bloggers should be considered journalists (Gleason, 2015). The plaintiff and the defendant made their views about the case. The defendant argued that blogging is part of the media that the case should be of concern to all who use the internet to express their opinion and if she loses everyone loses. The plaintiff provided a response to the argument made by Cox, reasoning that if any individual self-proclaims and insists that he or she qualify to be “media” then the concept would risk being rendered worthless.
The perspectives from key stakeholders.
The Electronic Frontier Foundation (EFF) provided their contributions to the case by arguing that the court needs to reconsider its decision that Cox did not qualify to be a “media” defendant. The EFF further state that the law needs to be changed to include the internet publishers as part of the media because internet publication does not differ from the other broad publication mediums that the statute identifies (Balasubramani, 2014). The EFF claims that since she used a medium of communication to covey her message to the public, it constitutes journalism and hence, require the shield laws` protection. Obsidian Finance and Padrick do not have to prove the defendant’s negligence when posting the statements because the case does not constitute to be of public concern. Therefore, the EFF maintain and insist that the ruling made by the court against Cox resulted in “unnecessarily hostile” atmosphere for Internet speech (Lucianek, 2014).
The jury needs to rule in favor of the plaintiff to signify that the law presumes damages suffered by Padrick and Obsidian, even if they do not provide evidence for actual damages. This happens because defamation suits do not favor the party that has committed the defamation act and that the rule of law actually works. The ruling provides an insight into a broader question as to whether the First Amendment operated on an equality basis.
The First Amendment protections do not favor defendants who are journalists, formally in relation with other traditional media entities or worked hard to understand the both sides of a story. The Supreme Court further supports this claim by arguing that it is unworkable and difficult to provide a distinction between other speakers and the institutional press under the First Amendment. The evolution of the Internet as a medium for communication resulted in the decline in the use of broadcast and print media for conveying information thus, making it hard to distinguish between online speakers and the media if both provide views and comments on social and political issues.
Obsidian Finance Group, LLC v. Cox establishes the rolling standard and expectations of journalism and directs the principles of mass media and how it will continue to be distinguished in the future.