Judge's Ruling on Montana Blogger's Case Has Been Widely Misinterpreted

Crystal L. Cox

A federal judge recently found that a Montana blogger could not claim protections afforded mainstream journalists, and that ruling led to a $2.5-million defamation judgment against the blogger.

News outlets have reported that the ruling, by U.S. District Judge Marco Hernandez of Oregon, has  implications for bloggers across the country. In fact, the story hit close to home here recently when I had an e-conversation with a prominent figure in the progressive blogosphere. This was a gentleman I do not know well, but I have admired his work from afar for years, and he stated that his organization now might be at heightened risk because of the Montana blogger's case.

That's when I decided Legal Schnauzer needed to provide clarification on this issue. It's true that Judge Hernandez' ruling might set off a chain of events that someday could have broad implications for non-traditional journalists. But that process could take 10 years or more, and Hernandez' finding could be completely overturned along the way. For now, the ruling has implications for only one blogger--and that's Crystal L. Cox, the Montana woman who was on the wrong end of the $2.5-million judgment.

In fact, the outcome might not even have much impact on Cox. She has stated that she doesn't have the necessary funds to pay the judgment. And Kevin Padrick, the Oregon lawyer who sued Cox, acknowledges that he is not likely to receive much, if any, of the judgment.

So what should the public make of the Crystal L. Cox ruling? In my judgment, not a whole lot. Should people pay attention to Crystal L. Cox and her work as a citizen journalist? In my judgment, they should.

Cox, a feisty resident of Eureka, Montana, bills herself as an investigative blogger, real estate broker/owner, and real estate whistleblower, among other things. She blogs at a host of sites, including crystallcox.com, crystalcox.com, investigativeblogger.com, industrywhistleblower.com, and obsidianfinancesucks.com.

Reporting on Obsidian Finance Group landed Cox in legal hot water. Obsidian is based in Lake Oswego, Oregon, and according to its Web site, the firm "is particularly adept at finding unique financial and structuring solutions to the most difficult problems." Kevin Padrick, a lawyer by training, is a senior principal and co-founder of Obsidian.

Padrick served as a trustee in a bankruptcy case involving Summit Accommodators, a company that "helped property owners conduct real estate transactions in a way to limit taxes." Summit apparently was not above board in its activities. Three executives face federal fraud and money laundering indictments.

Cox determined that Padrick was not above board either. In a post dated December 22, 2010, she referred to Padrick as a "corrupt thug, thief, and a dirty lawyer"--and that was just in the headline. This is from the body of the post:

Kevin Padrick of Obsidian Finance LLC is a Criminal, he has broken many laws in the last 2 years to do with the Summit 1031 case and regardless of the guilt of the Summit 1031 principals, Kevin Padrick is a THUG and a Thief hiding behind the Skirt tails of a corrupt un-monitored bankruptcy court system and protected by Corrupt Bend DA and Corrupt Bend Oregon Judges.

Was Cox' reporting on target? I'm not sure, but I've read enough public documents from bankruptcy court here in Birmingham to make me think these proceedings often are rife with corruption.

Did Cox get careless with her reporting? Did she come to sweeping conclusions that she could not back up? That's possible. Cox writes on so many different Web sites that it's difficult to make an assessment of her reporting. She appears to have some ability as a researcher, but she makes frequent use of inflammatory language and some of her work is written in a disjointed style, on a complicated topic, making it hard to determine what she has or has not proven.

Kevin Padrick

This much is clear: Padrick and his colleagues at Obsidian did not appreciate Cox' reporting efforts. They claimed her posts were false and defamatory, that she had hurt their business. A federal jury in Oregon wound up agreeing with them.

What's my take? Cox might have made some missteps in her reporting, but I'm guessing she was poking around in some seriously dark corners. I'm also guessing that the jury verdict might not hold up if Cox is able to mount an appeal.

Why do I say that? Judge Hernandez made two key conclusions that appellate judges might not agree with--(1) That Cox was not protected by shield laws that keep mainstream reporters from having to reveal their sources; and (2) That Cox was not protected by an Oregon law that requires a party to demand a retraction before seeking damages for defamation in court.

How did the judge reach these conclusions? From a report at Raw Story:

U.S. District Judge Marco A. Hernandez ruled that Cox was not protected by Oregon’s shield law, which allows journalists to protect their sources.

“Although the defendant is a self-proclaimed ‘investigative blogger’ and defines herself as ‘media,’ 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,” he wrote in his decision. “Thus, she is not entitled to the protections of the law.”

Hernandez also argued there was no proof that Cox adhered to journalistic standards and noted that she had no professional qualifications as a journalist. He also noted that the shield law does not apply to defamation cases and that the bankruptcy case was not in the public interest.

The post was defamation, Hernandez said, because a reasonable person would be led to believe the blog post was factual. But Cox refused to reveal her source and could not back up her facts.

How is a bankruptcy case, conducted in a court that is financed with taxpayer dollars, not in the public interest? I have no idea where the judge came up with that one.

I intend to follow Crystal L. Cox' work. She appears to base much of her reporting on public documents, as we do here at Legal Schnauzer. I have a bachelor's degree in journalism and 30-plus years of professional experience in the field, and Cox does not have those sorts of credentials. But I think it's important to avoid "news elitism," to avoid assuming that people like Crystal Cox can't do serious journalism. Cox' experiences seem to have taught her that the real-estate industry has set up rules to protect its own interests, at the expense of the public interest. I have come to similar conclusions about the legal industry.

Ms. Cox probably could use the guidance of a seasoned editor. But she has stated that she does not intend to let the $2.5 million judgment stand in the way of her reporting. Is that a good thing for the cause of transparency? I suspect that it is.

As for the findings of the federal judge in Oregon, the public should keep this point in mind:

Marco Hernandez is a district judge, and his rulings have absolutely no precedential value. Legal precedent can only be set by appellate courts, and even then, different circuits do not always incorporate the findings in other circuits.

If Crystal Cox is able to appeal the jury verdict to the Ninth Circuit, which covers Oregon, it might be upheld or it might be overturned. Either way, there is no guarantee that other circuits will follow the Ninth's lead on similar cases. Issues raised in the Crystal Cox case might someday land before the U.S. Supreme Court. But who knows if any of us will live long enough to see that.

The Associated Press has reported that the Cox case has "implications" for bloggers around the country. But that is not true. It has implications, as of now, for one blogger, in one case, in one federal district court.

And Crystal Cox, to her credit, does not plan to go away quietly.

Here is a video of Cox discussing the real-estate industry and some of the potential pitfalls of buying a house. To my ears, she makes a lot of sense--and her voice needs to be heard, not silenced: