OBSIDIAN FINANCE GROUP, LLC; Kevin D. Padrick, Plaintiffs-Appellees,
Crystal COX, Defendant-Appellant. Obsidian Finance Group, LLC; Kevin D. Padrick, Plaintiffs-Appellants,
Crystal Cox, Defendant-Appellee.
Argued and Submitted Nov. 6, 2013.
[Copyrighted Material Omitted]
Eugene Volokh (argued), Mayer Brown LLP, Los Angeles, CA, for Defendant-Appellant/Cross-Appellee.
Robyn Ridler Aoyagi, Steven M. Wilker (argued), and David S. Aman, Tonkon Torp LLP, Portland, OR, for Plaintiffs-Appellees/Cross-Appellants.
Bruce D. Brown, Gregg P. Leslie, and Jack S. Komperda, Arlington, VA, for Amicus Curiae The Reporters Committee for Freedom of the Press.
Thomas C. Goldstein, Goldstein & Russell, P.C., Washington, D.C., for Amicus Curiae SCOTUSblog.com.
Appeal from the United States District Court for the District of Oregon, Marco A. Hernandez, District Judge, Presiding. D.C. No. 3:11-cv-00057-HZ.
Before: ARTHUR L. ALARCÓ N, MILAN D. SMITH, JR., and ANDREW D. HURWITZ, Circuit Judges.
HURWITZ, Circuit Judge:
This case requires us to address a question of first impression: What First Amendment protections are afforded a blogger sued for defamation? 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.
Kevin Padrick is a principal of Obsidian Finance Group, LLC (Obsidian), a firm that provides advice to financially distressed businesses. In December 2008, Summit Accommodators, Inc. (Summit), retained Obsidian in connection with a contemplated bankruptcy. After Summit filed for reorganization, the bankruptcy court appointed Padrick as the Chapter 11 trustee. Because Summit had misappropriated funds from clients, Padrick's principal task was to marshal the firm's assets for the benefit of those clients.
After Padrick's appointment, Crystal Cox published blog posts on several websites that she created, accusing Padrick and Obsidian of fraud, corruption, money-laundering, and other illegal activities in connection with the Summit bankruptcy. Cox apparently has a history of making similar allegations and seeking payoffs in exchange for retraction. See David Carr, W hen Truth Survives Free Speech, N.Y. Times, Dec. 11, 2011, at B1. Padrick and Obsidian sent Cox a cease-and-desist letter, but she continued posting allegations. This defamation suit ensued.
The district court held that all but one of Cox's blog posts were constitutionally protected opinions because they employed figurative and hyperbolic language and could not be proved true or false. Obsidian Fin. Grp., LLC v. Cox, 812 F.Supp.2d 1220, 1232-34 (D.Or.2011). The court held, however, that a December 25, 2010 blog post on bankruptcycorruption.com made " fairly specific allegations [that] a reasonable reader could understand ... to imply a provable fact assertion" — i.e., that Padrick, in his capacity as bankruptcy trustee, failed to pay $174,000 in taxes owed by Summit. Id. at 1238. The district judge therefore allowed that single defamation claim to proceed to a jury trial. The jury found in favor of Padrick and Obsidian, awarding the former $1.5 million and the latter $1 million in compensatory damages.
In a pretrial memorandum, Cox— then representing herself— raised two First Amendment arguments concerning the liability standards that should govern this case. First, Cox argued that ...