NYC, Oregon Pension Funds Named Lead Plaintiffs in Fox Lawsuit

The plaintiffs’ claim that Fox News’ business model included knowingly engaging in defamation ‘appears promising,’ a Delaware Chancery Court says.

A Delaware Chancery Court has appointed pension funds from New York City and from Oregon as the lead plaintiffs in a shareholder lawsuit that alleges Fox Corp. breached its fiduciary duty by exposing itself to defamation lawsuits during its coverage of the 2020 U.S. presidential election.

In September 2023, New York City’s five public pension funds, as well as the Oregon Investment Council and the Oregon Public Employees Retirement Fund, filed shareholder derivative lawsuits against Fox for breach of fiduciary duty. The lawsuits allege Fox’s board of directors knew that Fox News was promoting former President Donald Trump’s false claims that he was the true winner of the 2020 election without regard for whether the assertions were true and thus created significant exposure to defamation charges.

In April, Fox settled a $787 million defamation lawsuit brought by the voting machine company Dominion Voting Systems after Fox broadcasters falsely alleged Dominion was involved in altering results during the 2020 presidential election. Fox also faces a $2.7 billion lawsuit from voting machine company Smartmatic USA Corp.

Significantly, the NYC and Oregon lawsuits also allege that Fox News has exhibited a pattern of disregarding the truth and that this was part of an illegal business model to knowingly engage in defamation and assume the associated legal risk in order to appeal to its viewers. This argument swayed the chancery court to name the pension funds as lead plaintiffs, rather than Swedish pension funds AP3 and AP7, which were also seeking lead plaintiff status.

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In its December 2023 ruling, the court cited the claim that Fox operated under an illegal business model as the main reason it found the New York and Oregon arguments more compelling, saying the claim “appears promising” and was not included in the Swedish pension fund’s complaint.

The claim asserts that Fox News operated under an illegal business model both before and after it spun off from its corporate predecessor. The legal team representing both the NYC and Oregon pension funds argues that Fox News is an outlier in the media industry by disregarding fact-checking protocols. To support this argument, the complaint cites multiple incidents in which Fox News came under legal and ethical scrutiny for allegedly false statements, both before and after the Dominion and Smartmatic litigation.

The court’s ruling stated that at this stage of the case, the legal team representing New York City and Oregon “appears to have prepared a stronger complaint,” which “incorporates factual developments and incidents at Fox News that are not included” in AP3 and AP7’s complaint.

It does not augur well for Fox that the court praised the strength of both lawsuits, saying that too often weak claims get filed that never should have been heard, or strong claims get precluded because someone jumped the gun.

“To their credit, plaintiffs’ counsel in this case avoided those dangers,” the court wrote. “Neither team rushed to sue. Both sought and obtained books and records. Both researched public sources. Both took the time to prepare detailed complaints.”

The five New York City pension funds own approximately 572,946 shares of Fox Class A stock and 285,338 shares of Fox Class B stock, valued at $27.7 million as of August 31, 2023, according to the New York City comptroller’s office. The Oregon Public Employees Retirement Fund held more than 226,000 Class A and Class B shares of Fox, worth $5.2 million as of August 31.

“A lack of journalistic standards and a proper strategy to mitigate defamation has clearly harmed Fox’s reputation and threatens their bottom line and long-term profitability,” New York City Comptroller Brad Lander said in a press release when the lawsuits were filed in September. “Clear governance systems are absolutely necessary for the long-term health of a company. As Fox’s board continues to ignore these red flags, we are holding them accountable as long-term shareholders.”