Bloggers Gain First Amendment Rights

When I started this blog almost three years ago, I wondered what would happen if someone decided to sue me for what I wrote. I’m careful to give sources and not get too radical in my words, but the right wing’s goal is to close down any dissention—and some of the them are millionaires and billionaires. A recent decision by the 9^th Circuit Court of Appeals helped set some of my concerns to rest.

Yesterday, the federal appeals court ruled in Obsidian Finance Group v. Cox that bloggers and the public have the same First Amendment protections as journalists when sued for defamation. Plaintiffs have to prove negligence to win damages if the issue is of public concern.

The lawsuit began when an Oregon bankruptcy trustee got riled when a Montana blogger wrote that the court-appointed trustee criminally mishandled a bankruptcy case. The appeals court ruled that the trustee was not a public figure because they are compensated by assets of the Chapter 11 estate they administer and not the government. Cases invoke a higher standard for public officials, requiring proof that the writer acted with malice. Because of the public concern decision, the negligence standard applied.

Gregg Leslie of the Reporters Committee for the Freedom of the Press said the ruling affirms what many have long argued: Standards set by a 1974 U.S. Supreme Court ruling, Gertz v. Robert Welch Inc., apply to everyone, not just journalists.

Bend attorney Kevin Padrick and his company, Obsidian Finance Group LLC, had sued blogger Crystal L. Cox, now living in Port Townsend (WA), after she accused them of fraud, corruption, money-laundering, and other illegal activities. In 2010 she wrote about one of the firm’s principals who was appointed as a bankruptcy trustee to a company that misappropriated client funds. She accused him of impropriety in advising the bankrupt firm.

A district court ruled that Obsidian did not need to prove malice or negligence on her part because she wasn’t a journalist. Judge Marco Hernandez of United States District Court (Portland, OR) did throw out most of Padrick’s claims of defamation, ruling that Ms. Cox’s posts were so over-the-top that no reasonable reader would conclude that she was making allegations of fact. The court’s jury awarded $2.5 million to Padrick and Obsidian.

According to the appeals court, Padrick and Obsidian were hired by Summit Accommodators to advise them before filing for bankruptcy, and the U.S. Bankruptcy Court later appointed Padrick trustee in the Chapter 11 case. The court added that Summit had defrauded investors in its real estate operations through a Ponzi scheme.

“The district court should have instructed the jury that it could not find Cox liable for defamation unless it found that she acted negligently,” Judge Andrew D. Hurwitz wrote. “We hold that liability for a defamatory blog post involving a matter of public concern cannot be imposed without proof of fault and actual damages.” The appeals court agreed with the District Court that other posts by Cox were constitutionally protected opinion.

Cox originally acted as her own attorney, but UCLA law professor Eugene Volokh offered to represent her in an appeal after he learned of her case. Volokh said such cases usually end up settled without trial, and it was rare for one to reach the federal appeals court level. He said:

“It makes clear that bloggers have the same First Amendment rights as professional journalists. There had been similar precedents before concerning advocacy groups, other writers and book authors. This follows a fairly well established chain of precedents. I believe it is the first federal appeals court level ruling that applies to bloggers.”

Steven M. Wilker, lawyer for Padrick and Obsidian wrote, “We are evaluating our options with respect to the court’s decision.”

Unfortunately, there is a dark side to the story. Cox’s interest in the bankruptcy of Summit Accommodators, an intermediary company that holds cash to complete property exchanges, came from the daughter of one of the four senior executives charged with defraud clients of millions. Padrick went after the woman’s father, and Cox blamed the trustee of using inside information and illegal measures to get rich while he was trying to restore his clients’ investments. According to Padrick, Cox ruined him.

According to David Carr in The New York Times, “there is nothing in Mr. Padrick’s professional history or the public record that I found to suggest he is any of those things. He was appointed as a trustee by the court, he was subjected to an F.B.I. background check, and there have been no criminal investigations into his conduct. About 85 percent of the funds have been returned to the creditors, which seems to be a good result.”

Carr reported that she frequently created a domain with the person’s name, allegations of corruption, or both. Over a year ago, she had at least 500 URLs at her disposal and likes to use them. Although she had sworn to not give up until Padrick was indicted, she did write his lawyer a letter waving a white flag:

“At this Point in my Life it is Time to Think of Me. So I want to Let you know and Obsidian Finance that I am now offering PR Services and Search Engine Management Services starting at $2,500 a month [to promote Law Firms [and] Finance Companies [and ]to protect online reputations and promote businesses.”

The letter was signed, “In Love and Light, Crystal Cox.”

Another blog had far more to tell about the saga of Crystal Cox.

This holding is the first of its kind for the 9^th Circuit Court although other appeals courts have ruled that individuals have the same First Amendment rights as journalists. It is, however, the first case that specifically protects bloggers’ rights.

The bonus of the decision is the ruling that bloggers have the same First Amendment rights as the public and the media. The downside is that it came from a sleazy blogger.