Missteps and Miscalculations: Inside Fox’s Legal and Business Debacle

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Fox executives overlooked warning signs about the damage they and their network would sustain. They failed to recognize how far their cable news networks had strayed into defamatory territory by promoting President Trump’s election conspiracy theories.

In August 2021, the Fox Corp. board of directors gathered on the company’s movie studio lot in Los Angeles. Among the topics on the agenda: Dominion Voting Systems’ $1.6 billion defamation lawsuit against its cable news network, Fox News.

And for all of that, Fox still faces a lawsuit seeking even more in damages, $2.7 billion, filed by another subject of the stolen election theory, voting software company Smartmatic, which can now build on the evidence produced in the Dominion case to press its own considerable claims. Defenders of Dinh, a high-level Justice Department official under President George W. Bush, say his initial position was sound. Because of the strength of American free speech protections, Dominion needed to clear a high bar. And unfavorable rulings from the Delaware judge who oversaw the case hurt Fox’s chances, they argue.

In the days after, Trump’s fans switched off in droves. Ratings surged at the smaller right-wing rival Newsmax, which, unlike Fox, was refusing to recognize Joe Biden’s victory. As Fox noted in its court papers, its hosts did begin including company denials. But as they continued to give oxygen to the false allegations, Dominion sent a letter to Fox News general counsel Lily Fu Claffee, demanding that Fox cease and correct the record. “Dominion is prepared to do what is necessary to protect its reputation and the safety of its employees,” the letter warned.

Dinh was saying as much inside Fox, too, according to several people familiar with his actions at the time. His words mattered. By then, Dinh was fashioning the legal team more in his own image, having brought in a longtime colleague from the Bush administration, former Solicitor General Paul Clement.

“If the president of the United States is alleging that there was fraud in an election, that’s newsworthy, whether or not there’s fraud in the election,” Clement told Jim Geraghty, a writer for National Review and The Washington Post. “It’s the most newsworthy thing imaginable.” An early warning came in late 2021. The judge in the case, Eric M. Davis, rejected Fox’s attempt to use the neutral reportage defense to get the suit thrown out altogether, determining that it was not recognized under New York law, which he was applying to the case. Even if it was recognized, Fox would have to show it reported on the allegations “accurately and dispassionately,” and Dominion had made a strong argument that Fox’s reporting was neither, the judge wrote in a ruling.

The messages led to even more damaging revelations during depositions. After Dominion’s lawyers confronted Rupert Murdoch with his own messages showing he knew Trump’s stolen election claims were false, he admitted that some Fox hosts appeared to have endorsed stolen election claims. With prominent First Amendment lawyers declaring that Dominion had an exceptionally strong case, a siege mentality appeared to set in.

Webb, who had already drafted much of his opening statement and tested it with a focus group, had to remove key parts of his remarks, he said in the post-trial discussion with Clare.But the judge’s pretrial decisions began to change the board’s thinking. Also, in those final days before the trial, Fox was hit with new lawsuits. One, from former Fox producer Abby Grossberg, accused Carlson of promoting a hostile work environment.

Over that same weekend, Lachlan Murdoch told his settlement negotiators to offer Dominion more than the $550 million for which he had already received board approval.

 

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