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Lying Blogger Wants New Trial

Posted February 9, 2012 in Internet Law by Courtney Sherwood

Plenty of journalists have blogs these days, but is everyone who blogs a journalist?

Not if they fail to check their facts, post defamatory statements not backed by evidence, and have no connections to any news outlets, an Oregon jury recently ruled.

Now blogger Crystal Cox, who was ordered to pay $2.5 million to an attorney and his business for the damage her website caused, hopes for a second chance to argue her case. And one of the country’s most prominent lawyers, Eugene Volokh, has joined her legal team. Volokh, a professor at the UCLA School of Law whose scholarship has been cited by the U.S. Supreme Court, writes an established and widely read blog

Cox, who calls herself an “investigative blogger,” was behind the website http://obsidianfinancesucks.blogspot.com, created after Obsidian Finance co-founder Kevin D. Padrick was named trustee in a complex real estate bankruptcy case.

Padrick was originally hired as a consultant to Summit Accommodators, an Oregon company that helped investors minimize their capital gains taxes on real estate investments. When Summit entered bankruptcy and Padrick was appointed trustee, he was charged by the court with recovering as much as possible from the company to pay its creditors. He subsequently accused Summit officials of using client money to fund a Ponzi-like scheme that led to millions of dollars in losses to investors.

The fact that the attorney they’d originally hired to help their business was now accusing them of wrongdoing shocked Summit officials, and seems to have inspired Cox’s blog. For more than three years, Cox has been flinging accusations at Padrick and Obsidian Finance, accusing them of committing fraud, charging illegal fees, intimidating witnesses and more.

When Padrick and Obsidian sued for defamation, Cox – who has written frequent diatribes against the legal profession – decided to defend herself without a lawyer’s help.

“I believe I did a better job then (sic) a lawyer could have for this first step,” she wrote in December to Seattle Weekly, after a jury awarded $1 million to Obsidian and $1.5 million to Padrick.

Benjamin N. Souede

But court records suggest that Cox has since changed her stance about legal representation. Benjamin N. Souede, of the Angeli Law Group LLC in Portland, is now defending her. Volokh, with Mayer Brown LLP and UCLA, is awaiting a court ruling on whether he can also represent Cox in the case, even though he’s not licensed to practice law in Oregon. Souede and Cox are seeking a new trial, arguing that the jury’s $2.5 million damage award is not justified by the evidence, and that the jury should only have ruled against Cox if she acted with “actual malice.”

Judge Marco A. Hernandez will rule on whether to give Cox a second chance.

 

High profile case

 

Volokh’s involvement hints at the high profile Cox’s case has taken on, largely because of the blogger vs. journalist debate.

With print publications struggling financially, a growing number of journalists are moving their work online. But laws and courts have not always been ready to make the same leap.

Cox, herself, argued that she was acting as a journalist when she posted to her blog, and that Oregon laws should therefore protect her from divulging sources or paying damages for what she posted. Oregon and 38 other states, along with Washington, D.C., offer special protections to journalists.

But Judge Hernandez ruled that Cox is not a journalist because she has no affiliation with a newspaper, magazine, TV station or other media source defined under state law.

Eugene Volokh

Eugene Volokh

Electronic Frontier Foundation, a San Francisco-based nonprofit that advocates for free speech issues on the Web, has asked the court to reconsider its decisions about Cox’s “media” status.

“By gathering information and directing her analysis and commentary to the public – even if it contained factual assertions that were incorrect, and even if some statements were defamatory – Cox was certainly ‘engaged in [a] medium of communication to the public’ and thus afforded the protection,” Electronic Frontier said on its website

“The First Amendment protects all speakers, not just the press, from strict defamation liability,” the nonprofit argued in a brief it filed with the U.S. District Court. “Moreover, protected-though-critical speech cannot be the basis for a verdict reached by a sympathetic jury.”

First Amendment concerns also inspired Volokh to take on Cox as a pro bono client. “The First Amendment has historically been understood as protecting people who use mass communications technology equally, whether or not they are members of the institutional media,” he wrote on his blog,  The Volokh Conspiracy.

Ironically, the “is she a journalist or isn’t she?” question that’s landed Cox’s blog in the headlines seems to some observers to have more to do with lofty abstract ideals than the real facts of the case.

Many of her accusations suggest Cox does not understand the role of a bankruptcy trustee.

She criticized Padrick for going after the owners of Summit Accommodators when he became bankruptcy trustee. But that was likely Padrick’s legal obligation.

Thomas Gerber, a creditor’s attorney at Bullivant Houser Bailey in Oregon, said in a 2010 interview that bankruptcy trustees are required to pursue any claim or cause of action that could benefit creditors.

Beyond that, even legitimate news organizations can be punished for defamation, which is what Padrick and Obsidian Finance accused Cox of.

Cox called Padrick a thug, a liar and a criminal. And using search engine optimization (SEO) techniques, she landed her blog posts near the top of any Google search for information about Padrick or Obsidian Finance. The problem is, she presented no proof that her statements were true, even in court.

“The ruling on whether she was a journalist in the eyes of the law turned out to be … very much beside the point,” as New York Times media reporter David Carr recently wrote. “She didn’t so much report stories as use blogging, invective and search engine optimization to create an alternative reality.”

Are you a blogger trying to figure out whether your work is covered by First Amendment media protections? Read Lawyers.com’s earlier story about the Cox case, which includes information about shield laws and how best to protect yourself.

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