Mont. blogger ordered to pay $2.5 million for defamation

A Montana blogger has been ordered to pay $2.5 million in defamation damages after a federal judge said she would have to be working for a mainstream media organization in order to qualify for protections afforded journalists.

The judgment against Crystal Cox, a self-proclaimed investigative blogger, arose from an allegedly defamatory statement about Obsidian Finance Group, LLC, and its senior principal, Kevin D. Padrick. The statement was posted on Cox's website bankruptcycorruption.com.

U.S. District Judge Marco Hernandez of Portland, Ore., threw out most of the claims in August, but found that one blog post was not protected by the First Amendment, paving the way for last week's trial and jury verdict.

Based on the evidence presented at the trial, Hernandez issued an opinion ruling that Cox did not qualify as a member of the media. Specifically, there was no evidence that Cox: had any journalism education; was affiliated with a recognized news entity; adhered to journalistic standards such as editing and fact-checking; kept notes of conversations and interviews; had a mutual understanding or agreement of confidentiality with her sources; created an independent work product rather than assembling writing and postings of others; or contacted both sides of a story, the judge ruled.

The finding is significant because under Oregon law, a private defamation plaintiff must prove that a media defendant published the allegedly defamatory material negligently in order to receive damages.

"Whether the negligence standard would have made a difference [in the jury's verdict], I don't know. It was simply: if it's false, she's liable," said Duane Bosworth, a media lawyer with Davis Wright Tremaine in Portland. "I think the biggest issue here is that bloggers are going to be strictly liable."

Cox, who represented herself, then argued that she was covered by Oregon's shield law for journalists, but the judge disagreed, writing that "the record fails to show that she is affiliated with any newspaper, magazine, periodical, book, pamphlet, news service, wire service, news or feature syndicate, broadcast station or network, or cable television system. Thus, she is not entitled to the protections of the law" as it defines "journalist."

Cox asserted she should be protected from having to reveal the source of her information, which led her to refer to Padrick as a "liar" and a "thug" committing "illegal activity." Hernandez wrote that even if Cox were covered, she would not be privileged "because this case is a civil action for defamation." The statute does not state, however, that defamation defendants are prohibited entirely from relying on it in claims against them -- rather, they cannot assert a defense based on the content or source of the confidential information if they don't disclose the source.

Bosworth took issue with the judge's broad ruling on that point, noting that he routinely uses the shield law in defamation suits. "But you can't shield the very thing that is the essence of your defense," he said. "That's what she was attempting to shield. She was seeking to shield something that most professional journalists couldn't shield."

Hernandez also ruled that Padrick and Obsidian Finance, a firm specializing in unique and difficult business transactions, were not public figures, nor did Cox's posts concern a matter of public importance. As such, the plaintiffs did not have to prove that Cox published them with actual malice.

"Although the statements were available to the public at large by being posted on the Internet, the content of the statements does not implicate a matter of public concern," the judge wrote.

Hernandez also rejected Cox's claim that she was protected because the plaintiffs did not comply with Oregon's retraction statutes, which require defamation plaintiffs to seek a correction or retraction in order to receive damages. Although Hernandez said he agreed in principle,"the Oregon Legislature has not expanded the list of publications or broadcasts to include Internet blogs," he noted.

Padrick and Obsidian Finance originally sued Cox for 10 different posts she made on the two blogs she operates. In August, Hernandez dismissed -- on First Amendment grounds -- the counts stemming from posts on her blog titled "obsidianfinancesucks.com," in large part because the strong bias exhibited by the blog's title indicated Cox was stating her own opinion rather than verifiable facts.

In that sense, being viewed as a blogger instead of a journalist might have been a good development for Cox, Bosworth said.

"It cuts both ways," he said. "She got nine out of 10 dismissed because she was a blogger."