It is only a few months shy of 50 years since the Supreme Court first ruled that defamation law was limited by free speech rights. Since then, a series of cases has set up a complicated set of rules detailing how much fault a plaintiff needs to prove to prevail in a defamation claim. At one time, it was thought that journalists may have more protection than other defendants, but this distinction has eroded with the emergence of the Internet as a medium. In a recently decided case that came from Oregon, a federal appeals court has extended journalist’s protections to bloggers and other private speakers.
The plaintiffs were Obsidian Finance Group, LLC, a company that advises distressed businesses, and Kevin Padrick, one of its members. One of Obsidian’s clients filed for Chapter 11 bankruptcy protection, and Padrick was appointed trustee. The bankrupt company had defrauded its clients and misappropriated client funds, and the main part of the bankruptcy would be to organize the company’s assets to repay the clients.
A blogger then posted a series of articles accusing Padrick and Obsidian of fraud. There is no dispute that one of the posts, which included an accusation of tax fraud, contained false and defamatory allegations. (The rest were ruled too hyperbolic to be seen as actually asserting facts and therefore could not be defamatory.) It is likely, given the blogger’s history, that she intended to extort hush money. Instead, Padtrick and Obsidian sued.
The blogger raised two major constitutional defenses. First, she argued that as bankruptcy trustees, Padrick and Obsidian were public figures. Public officials and public figures are required to prove that a defamation defendant knew that the defamatory statement was false, or that the defendant recklessly disregarded the truth. Second, she claimed she was a journalist, which would mean that they would have to prove she was negligent to prevail, and they could not ask the jury to presume that they were damaged unless they proved knowledge of falsity or reckless disregard. The primary reasons the trial court ruled against the blogger was that the judge decided that bloggers not connected with established media were not journalists, and that the blogger had created the controversy upon which she based her argument that Padrick and Obsidian were public figures.
The first, and most important, part of the ruling on appeal was that private speakers have the same protections under the First Amendment as journalists. With this ruling, all seven of the federal appellate rulings that have addressed this question have agreed. I think it is fair to say that, barring a surprise ruling by the Supreme Court, that issue is now resolved.
The second part of the appellate ruling was that the blog post was about a matter of public concern. Allegations of crime, such as the tax fraud alleged in the blog post, are generally considered to raise issues of public concern, and this was underscored by the fact that the bankrupt company had defrauded its clients, who would be entitled to seek reimbursement in the bankruptcy.
Based on these rulings, the appellate court ordered a new trial, at which the jury would be instructed that Padrick and Obsidian had to prove the blogger was negligent to prevail, and to prove knowledge of falsity or reckless disregard for the truth to allow the jury to presume damages. That said, I think that the blogger’s history of bad faith statements in her blog and demands for payoffs suggest that this may be easier to prove than in most defamation cases.
Padrick and Obsidian argued on appeal that a series of general allegations of misconduct by the blogger, including corruption, fraud, and hiring a hit man, alleged facts that could be defamatory, and that the trial court should have allowed those allegations to be ruled on by the jury. The appellate court disagreed noting that the posts were made at http://www.obsidianfinancesucks.com, which suggested that they should be taken with enough grains of salt to not be seriously considered. This, I think may be an incorrect ruling, but I do not think the Supreme Court would take up the question.
Defamation claims are difficult to prove, and this ruling strengthens defendants’ speech rights in the context of matters of public concern. Bloggers who think they may be coming close to a line and have doubts about their facts should be careful to check their research, and may want to get a legal opinion as to the possibility that they may be addressing a matter of public concern. People who think they may have been defamed may want to consult a lawyer for an opinion as to what they may need to prove, and whether it is likely their case can be proven. Unfortunately for plaintiffs, more often than not, if they find themselves in the position of having to prove knowledge of falsity or reckless disregard for the truth, the evidence will usually be in the hands of the defendant unless the plaintiff has provided the defendant with evidence challenging the truth of a statement before the statement is made.