Fox Corporation’s Legal Troubles Over Election Reporting: What’s at Stake?

Introduction

Fox Corporation, the media powerhouse behind Fox News, has been at the center of legal and financial controversies following its coverage of the 2020 U.S. presidential election. The company's handling of election-related reporting has led to defamation lawsuits, a massive financial settlement, and now shareholder litigation that questions the leadership’s ability to manage legal risks effectively.

As legal challenges mount, the implications for Fox Corporation, its shareholders, and the media industry as a whole are significant. This article explores the recent lawsuits, the potential consequences for Fox News and its parent company, and what investors should watch for in the coming months.

Dominion Lawsuit: A $787 Million Lesson

One of the most high-profile legal challenges Fox Corporation has faced in recent years is the defamation lawsuit filed by Dominion Voting Systems. The lawsuit stemmed from Fox News' repeated airing of unfounded claims that Dominion’s voting machines were rigged to manipulate the results of the 2020 election. These claims, spread by prominent Fox hosts and guests, lacked credible evidence but were widely circulated among viewers.

Dominion sought $1.6 billion in damages, arguing that Fox’s deliberate spread of misinformation harmed the company’s reputation and business. In April 2023, Fox Corporation agreed to settle the case for $787 million—one of the largest defamation settlements in U.S. history. The settlement avoided a high-profile trial, but the damage to Fox’s credibility and financial standing was already done.

Shareholder Lawsuit: A Fight Over Corporate Responsibility

Following the Dominion settlement, a group of Fox Corporation shareholders, including public employee pension funds from New York and Oregon, filed lawsuits against the company’s leadership. The plaintiffs argue that Fox executives, including Rupert Murdoch, failed to mitigate legal and reputational risks associated with broadcasting false election claims.

The shareholders claim that Fox’s leadership prioritized viewership ratings over legal responsibility, leading to costly litigation that ultimately harmed the company’s stock value. If the lawsuit is successful, Fox could face significant governance changes, including leadership shake-ups and increased oversight on editorial decision-making.

This case raises an important question: Should media executives be held accountable by investors when their decisions lead to major legal and financial risks? The outcome could set a precedent for how shareholder lawsuits influence corporate governance in media organizations.

Smartmatic Lawsuit: Another Billion-Dollar Legal Battle

Fox’s legal troubles are far from over. Another voting technology company, Smartmatic, has filed a separate defamation lawsuit seeking a staggering $2.7 billion in damages. The lawsuit, similar to Dominion’s, alleges that Fox News knowingly spread false information about Smartmatic’s involvement in the 2020 election fraud conspiracy.

Unlike the Dominion case, Smartmatic’s lawsuit is still ongoing, and legal experts believe Fox may once again attempt to settle to avoid further reputational damage. However, given the higher damages sought, this case could prove even more costly for the media giant.

Impact on Fox News and the Media Industry

The legal challenges facing Fox Corporation highlight a growing issue in the media industry: the balance between editorial independence, corporate responsibility, and financial consequences. Fox’s willingness to amplify election fraud claims appears to have been a strategic decision to maintain its viewership base, which largely consists of conservative audiences. However, the financial penalties and lawsuits indicate that such strategies come with significant risks.

Potential consequences include:

• Increased Regulatory Oversight: The lawsuits could lead to calls for stricter media regulations to combat misinformation, particularly in election reporting.
• Reputational Damage: While Fox News remains popular among its core audience, legal troubles may erode trust among advertisers, investors, and broader audiences.
• Editorial Policy Changes: Fox may be forced to implement more rigorous fact-checking measures to prevent similar legal issues in the future.
• Financial Burden: If the Smartmatic lawsuit results in another substantial settlement, it could place further financial strain on the company.

Investor Takeaways: Is Fox Corporation Still a Safe Bet?

For investors, Fox Corporation’s legal troubles raise concerns about risk management and corporate governance. The company has demonstrated strong viewership numbers and remains a dominant force in cable news, but the cost of litigation could impact long-term profitability.

Key factors investors should watch:

1. Outcome of the Smartmatic Lawsuit: A large settlement or court ruling against Fox could further strain finances and credibility.
2. Shareholder Lawsuit Developments: If shareholders succeed in forcing governance changes, it could affect Fox’s strategic direction.
3. Advertiser Reactions: Major advertisers distancing themselves from Fox News due to legal controversies could hurt revenue.
4. Stock Performance: Continued legal issues may lead to stock volatility as investors react to new developments.

Conclusion

Fox Corporation’s legal troubles are far from over, and the consequences of its election coverage are still unfolding. The Dominion settlement was a costly lesson, and with additional lawsuits pending, the media giant faces ongoing risks.

For investors, the situation presents both cautionary and strategic considerations. While Fox News continues to dominate conservative media, legal battles and reputational damage could reshape its future. As the cases progress, the media industry as a whole may need to rethink its approach to fact-checking, liability, and the consequences of prioritizing audience engagement over journalistic integrity.

‍