Investor Sues Murdoch Over Fox’s 2020 Election Coverage
Investor Sues Murdoch Over Fox’s 2020 Election Coverage
Written By: Leslie A. Pappas
Re-Posted from Law360 (April 11, 2023, 4:45 PM EDT) — Media mogul Rupert Murdoch, his son Lachlan and other Fox Corp. directors knowingly allowed Fox News Network to “broadcast, promote and perpetuate” a false 2020 election fraud story to maintain the network’s ratings, a company shareholder alleged in a Delaware Chancery Court suit filed Tuesday.
The 59-page derivative complaint from Robert Schwarz raises breach of fiduciary duty claims against Fox Corp. Chair Rupert Murdoch, Fox director and Co-Chair of Fox News Corp. Lachlan K. Murdoch and board directors Chase Carey, Roland A. Hernandez and Jacques Nasser.
“FOX allowed the false claims to air because it was fearful of losing viewers if it reported the truth about the election — that President Trump lost,” the complaint says, noting that the network’s viewers “were known to be supporters of Donald Trump.”
The case comes as Fox Corp. and Fox News Network LLC prepare for a jury trial starting April 17 on a $1.6 billion defamation claim filed by Denver-based Dominion Voting Systems in Delaware Superior Court.
Schwarz’s complaint draws heavily from court filings and testimony recently made public in the Dominion case, as well as a $2.6 billion defamation suit that voting technology provider Smartmatic USA Corp. filed against Fox in New York, where Fox is headquartered.
The court filings reveal that Fox executives and hosts knew that the election fraud claims were “really crazy stuff,” but allowed Fox News to broadcast them anyway, the shareholder complaint says.
The board’s decision to “chase viewers” by promoting the false stolen election claims has negatively impacted the news outlet’s credibility, and the company is now facing combined damages in the defamation cases that could exceed $4 billion, the complaint says.
The board breached its fiduciary duties to the corporation by failing to implement a system of internal controls and consciously ignoring “numerous red flags” that its election fraud reporting was entirely false, the complaint says.
Fox chose to perpetuate the false election fraud claims in an effort to reclaim viewers who fled the network after Fox News became the first news outlet to project that Trump had lost the state of Arizona.
Fox News’ prime time audience fell by 37% in the days following the election after Trump called for a boycott of the network, the complaint says.
Fox responded by bringing on guests such as Trump lawyers Sidney Powell and Rudy Giuliani, who claimed the election had been stolen by vote-flipping algorithms in Dominion and Smartmatic’s voting machines, according to the complaint.
As it became clearer in the days following the election that the vote-rigging stories were false, some Fox board members such as former U.S. House Speaker Paul Ryan and corporate governance committee member Anne Dias took steps to put an end to the false reporting, the complaint says. Ryan and Dias are not named as defendants.
But “Rupert, Lachlan, Carey, Hernandez and Nasser appear to have failed to act despite the red flags,” according to the complaint.
Rupert and Lachlan Murdoch “worked closely” with Fox News CEO Suzanne Scott and knew about the ongoing false broadcasts, but did nothing to remedy the situation, the complaint asserts.
By continuing to allow the false broadcasts, the Murdochs and the other directors failed in their duties to the company and its stockholders and violated company policies concerning corporate governance, standards of business conduct, risk and compliance, according to the complaint.
“Defendants’ failure of oversight reflects a conscious and deliberate disregard of their fiduciary duties — namely, inaction in the face of circumstances that plainly called for immediate action,” the complaint says.
The three-count complaint raises claims of breach of fiduciary duty against all the defendants in their capacity as directors, against Rupert and Lachlan Murdoch in their capacity as officers and against Rupert Murdoch in his capacity as controlling stockholder of Fox.
Fox did not immediately respond to a request for comment Tuesday.
Counsel for Schwarz declined to comment beyond the complaint.
Schwarz is represented by James S. Notis and Meagan A. Farmer of Gardy & Notis LLP and Kurt M. Heyman and Gillian L. Andrews of Heyman Enerio Gattuso & Hirzel LLP.
The case is Robert Schwarz v. K. Rupert Murdoch et al., case number 2023-0418, in the Court of Chancery of the State of Delaware.