Barely Legally

Confessions of a Moot Court Bailiff

Have Blog, Will Trouble

From the wonderful folks at ShortFormBlog, whose site you should read daily:

Blogger told she’s not a journalist, fined $2.5 million: This is an important case. The Oregon blogger, Crystal Cox, runs a number of legal sites that play whistleblower to various firms. One of those firms, Obsidian Finance Group (they of obsidianfinancesucks.com), sued over defamatory postings.

Whoa, whoa, whoa. Let’s back this up a little bit and figure out what happened.

So essentially, a person connected with Obsidian was giving Cox information about the allegedly shady things Obsidian does. I’m not certain what exactly the shady things were, but she blogs about the things that she says Obsidian does. Or, put another way, she makes claims about shady things that Obsidian does. There’s a word for that: defamation.

Of course, it’s not defamation if these things are true. That’s one of my favorite quirks in the law. If I publicly accuse you of being a kitten thief, and we go to court to fight about it, the best thing I can do for myself is to prove to the whole world (in the public record) that you are, in fact, a kitten thief.

What She Said

Sadly for me, (I studied Law of Kittens extensively in law school) Cox’s statements about the head of Obsidian, Kevin Padrick, had nothing to do with kitten thievery. According to Judge Hernandez’s opinion (PDF), she claims Padrick failed “to pay taxes on taxable gain obtained by the bankruptcy estate.”

The judge actually found that most of Cox’s blog posts weren’t defamatory statements. From the excellent Seattle Weekly article, Cox

argued that her writing was a mixture of facts, commentary and opinion (like a million other blogs on the web) and moved to have the case dismissed. Dismissed it wasn’t, however, and after throwing out all but one of the blog posts cited by Obsidian Financial, the judge ruled that this single post was indeed defamatory because it was presented, essentially, as more factual in tone than her other posts, and therefore a reasonable person could conclude it was factual.

Emphasis added. For context, I’ll repost some of the sentiments on Cox’s blog post.

But first, an aside

In the interest of protecting myself from a defamation lawsuit, I will preface these quotes by saying that these statements are all false. They are presented here in the interest of scholarship and educational commentary.

Further, the New York State Court of Appeals has recently ruled in Shiamili v. The Real Estate Group of New York, Inc., that the federal Communications Decency Act shields interactive computer service providers (me) from liability for publishing defamatory statements on their blogs that were originally authored by a third party (Cox). I will again remind readers that these statements are false, and that the person that made these statements failed to prove their truth in court. (Yes, this is a two paragraph disclaimer. What do you want? I’m a lawyer.)

The Statements

That being said, Cox’s blog reads (in relevant part):

Kevin Padrick of Obsidian Finance Group - Tax Fraud? Fraud Against the Government? Gee ya Think?

When Kevin Padrick as Chapter 11 trustee did a turnover of all the assets to his liquidating trust, these deferred gains became tax liabilities to the liquidating trust. However, Obsidian Finance’s accounting staff is conveniently leaving these deferred gains out of their tax returns.

They make plugs to the capital accounts of the Summit Shareholders to get rid of the deferred gain upon the sale or disposition of the property. For an example, Kevin Padrick just gave away the Summit Shareholders’ interest in Century Drive Mobile Home Park to another owner named Jim Hull.

Upon Disposition, the trust should have recognized around $600,000 of taxable gain on behalf of the interest owned by Mark Neuman and Brian Stevens. No such gain was reported on this tax return and the tax of $174,000 (20% to IRS and 9% to Oregon ) was never paid by the liquidating trust. Why would Kevin Padrick of Obsidian Finance Group pay the tax when no one is monitoring his work?

It sounds like you could take those statements as factual, all right. But why does it even matter whether or not the statement is factual?

What Defamation Is

In Oregon, courts have held that defamatory statements are statements which expose their subject to hatred or ridicule, or ones that diminish the public’s esteem or respect held for the subject, or ones that excite adverse opinions about the subject.

However, any statement could conceivably have that effect on a person. Why, some really crazy people would just hate finding out that President Obama doesn’t wear plaid socks when he goes golfing! So just about every court has imposed a “reasonable person” test; only statements that would expose subjects to hatred by a reasonable person can be considered defamatory.

The educational organization Open Oregon notes that there are some statements that, as a matter of law, cannot create those feelings in a reasonable person. Specifically, opinions.

Opinions — defined as statements that cannot reasonably be interpreted as stating actual facts — are protected by the United States and Oregon constitutions and are therefore not defamatory. Nevertheless, when an “opinion” implies the existence of undisclosed defamatory facts, it is actionable as a defamatory statement. Statements that are not defamatory per se nor capable of a defamatory meaning are considered reasonably capable of a defamatory meaning and are almost always resolved by the jury.

So I can say that in my opinion, Kevin Padrick is no better than a kitten thief, and that’s probably not defamatory. But if I say that in my opinion, Kevin Padrick should really stop stealing kittens, that implies undisclosed defamatory facts. So the “in my opinion” defense is hardly ironclad, especially when you say things like “Why would Kevin Padrick of Obsidian Finance Group pay the tax when no one is monitoring his work?” Once your statements are ruled “factual” and not “opinion,” then you have to start thinking of other ways to defeat defamation. Like proving the truth of your statements.

Bloggers As Not Journalists

Let’s put that on hold for a second. The really troubling fallout of this decision, and the one ShortFormBlog is most concerned about, is the denial of the media shield law’s protection to a blogger. Cox was trying to claim its protection in a roundabout way. She claimed her statements were true, because she had an inside source. She also claimed that she didn’t have to name the inside source under the media shield law. However, without naming the source and verifying what the source said, she couldn’t otherwise prove the truth of her statement that Padrick was committing tax fraud.

Of course, telling a judge what some other guy told you is usually hearsay. Cox has to get the source into court herself – but she wants to protect her source. So, the media shield law comes in. (Well, almost.)

The media shield law protects members of the media from having to turn over their sources, but Judge Hernandez pointed out that according to state law, the definition of media includes but is not limited to:

“any newspaper, magazine or other periodical, book, pamphlet, news service, wire service, news or feature syndicate, broadcast station or network, or cable television system.”

Cox’s blog doesn’t fall under this definition. The Oregon state legislature simply lets its citizens-journalists down here. If I were her lawyer (and so, so, so much more on this later), I’d have framed blogs as a kind of “wire service” that provides news reports to traditional news agencies. I’m not sure if that argument was tried or not, but Judge Hernandez definitely didn’t buy it if it was.

Frankly, I think the judge interpreted the law correctly. The definition of media as cited by Judge Hernandez is state law, published in O.R.S. 44.510(2), and last updated in 2005. Blogs existed in 2005. If the state legislature had intended to protect its bloggers, it could have added that language in 2005. It could have taken up an amendment in 2006. It could have followed Washington’s lead when the latter passed its media shield law in 2007. Washington’s law explicitly protects bloggers, and the guy that drafted the law has written a nice comparison of the two for the Seattle Weekly.

Then Judge Hernandez points out that the media shield law doesn’t apply to defamation actions, so even if Cox were a journalist, she’d still be out of luck. So framing this decision as if it were an attack on bloggers is dishonest at best. Even if Judge Hernandez ruled that Cox was a journalist for the purposes of this law, she’d still be liable because she’s being sued for defamation.

No Way Pro Se

Pro se is the term for a party representing themselves in court, acting as their own lawyer. Crystal Cox doesn’t have a lawyer, and Judge Hernandez’s opinion is riddled with references to the elementary errors she’s committed that even a first-year attorney would know to avoid.

For instance, Oregon has passed Anti-SLAPP legislation; any defendant may:

make a special motion to strike a claim in a civil action that arises out of a written statement presented in a place open to the public or a public forum in connection with an issue of public interest.

Let’s run this down element by element.

This lawsuit is a civil action; the defamatory statements were written; Cox’s blog is almost certainly a public forum; and cutting down on tax fraud and bankruptcy fraud are both in the public interest. Even better: nowhere does it require the defendant to be a member of the media. This special motion is available to citizens-journalists as well as regular journalists.

She’s home free, right? Just move to dismiss and you can be home in time to watch the holiday episode of Community, right? (#SaveGreendale)

Well, no. Defendants are required to move to dismiss with their first response to the complaint, sixty days after receiving the complaint. If Cox raised it at trial, she waited waaay too long. In fact, she raised it back in July, but Judge Hernandez noted that it was too late even then. Five months later, it’s … well, it’s even later.

Broken Record

Judge Hernandez repeatedly notes that the record doesn’t support Cox’s arguments, which is judge-ese for “you cited no law, no case, and no legislative history in favor of your argument.” He says things like

The record does not support a conclusion that Obsidian Finance or Padrick are limited public figures…

and

…defendant cites no cases indicating that a self-proclaimed “investigative blogger” is considered “media.”

and

[the handling of this bankruptcy] had not, at least on the record in this case, generated public concern, controversy, or interest…

And so on. I’m sure Cox had great reasons why the law should be this way or that way, and I would probably agree with most of those reasons. But in the absence of case law agreeing with her, she can’t expect a judge to rule in her favor. A lawyer would know this and would have put something – anything – in the record to let the judge get on her side.

Shield Is Not For Defamation

Earlier, I discussed why Judge Hernandez was probably right to conclude, under Oregon state law, that bloggers are not protected by the media law.

I just want to bring this up again to mention that the section right after the section on the media shield law points out that it doesn’t protect journalists against defamation claims. Literally, the next one in the sequence of statutes. How bad a lawyer would you have to be to miss that?

Well, you know the old saying about being foolish enough to represent yourself.

In Conclusion

Cox isn’t a lawyer, clearly, and that’s okay. Some of my best friends aren’t lawyers. Most of them don’t even steal a lot of kittens. But for lawsuits where you’re staring down a $2.5 million dollar judgment, I can’t imagine not getting a lawyer. I hear there are a lot of us looking for work – you could probably get a really good deal on low-cost lawyers.

And Oregon – what’s the hold up? Why this antiquated media shield law that hangs bloggers out to dry? A judge just straight-up told you that he wouldn’t let defamatory statements be shielded by it if bloggers were media. Get on that! There are probably investigative bloggers in your state that need some shielding for non-defamation lawsuits!

Lastly, I think Judge Hernandez did a good job in this case. The state legislature hasn’t protected bloggers. Even if it did, the law wouldn’t protect bloggers who published defamatory statements.

I think it’s unnecessarily alarmist to say that this is a case that spells doom for bloggers everywhere. For one, not all states leave their bloggers out to dry like this, and the ones that do probably don’t protect defamatory statements against private figures made by journalists, whether they’re bloggers or dead-tree journalists.

Update: Yeah, this looks really bad for Ms. Cox.