Defamation Judgment Against Montana Blogger Reflects the Messy Nature of U.S. Courts

Crystal L. Cox

Many citizens probably think American courts are orderly places, where questions of facts are reasonably decided and the actual law is scrupulously applied. Those citizens almost certainly have never been involved in a legal case.

I know, from first-hand experience, that our courts are anything but neat and tidy. Everyone involved in the process--parties, lawyers, clerks, judges--is prone to mistakes. Even a case where the judge is competent and honest is likely to involve numerous rulings that are based on mistaken interpretations of fact or law.

Actually, I'm just guessing about that last sentence because I've never been involved in a case where the judge was either competent or honest. I can only assume that such judges do, in fact, exist somewhere.

With all of that in mind, let's examine the case of Crystal L. Cox, the Montana blogger who recently was hit with a $2.5-million judgment in a defamation case. Were mistakes made in the Cox case? I think you can bet on it.

Key documents from the case are available at the Web site for the Citizen Media Law Project.

God only knows how many Americans have been wrongly convicted for "crimes" that were not lawfully proven in a court of law. God also only knows how many Americans have been held liable in civil proceedings that were butchered from start to finish.

I know all about the official ineptness that accompanies all too many lawsuits in U.S. courts. Mrs. Schnauzer and I have a bogus sheriff's deed on our house because of a judgment in a case against me that, by law, could not go to trial. Sherry Carroll Rollins, the subject of numerous posts here at Legal Schnauzer, is living under a divorce decree that was issued by an Alabama judge--even though he had no jurisdiction to hear the case. That's because the case had already been litigated for roughly three years in South Carolina, where Ms. Rollins properly filed it. Ted Rollins, Ms. Rollins' ex husband, belongs to one of America's wealthiest family--and he apparently had the kind of financial clout that can get a divorce case unlawfully shifted from one venue to another. Some people call that "judge shopping." To make matters even worse, Ted Rollins has been a fugitive from justice for failure to pay child support.

With that as a back drop, let's look at the Crystal L. Cox case. My research indicates that both parties probably made mistakes, both before and during the legal action. More importantly, we see clear signs that the judge made mistakes--and that means the judgment against Cox almost certainly should be overturned on appeal. Here are the leading characters and some mistakes they appear to have made:

Crystal L. Cox
Cox has been the subject of two unflattering pieces in the mainstream press. One is titled "When Truth Survives Free Speech," by David Carr, of The New York Times. The other is titled "Why An Investment Firm Was Awarded $2.5 Million After Being Defamed By A Blogger," by Kashmir Hill, of Forbes.

Carr and Hill level a number of criticisms at Cox, but here are two that jump out at me:

(1) Cox was practicing search engine optimization (SEO), not journalism--Cox states in court documents that she holds some 400 Web-site domains. Why? Hill hints that it is an intentional effort to dominate search results for her targets. And in the case that wound up in court, Cox' target was Obsidian Finance Group and one of its principals, Kevin Padrick. Writes Hill:

Obsidian’s tech team found dozens of sites that appeared to have been created by Cox to write about Obsidian, says Padrick, and over 1,900 others that she had created to write about other people and companies. This is not the work of a journalist, but the work of someone intent on destroying reputations.

I don't know why Cox creates so many sites; I haven't spent much time studying search-engine optimization. But I think she would be better served to focus her reporting on a handful of sites, perhaps two or three. If nothing else, it would make it easier to follow her work.

(2) Cox offered her services to Obsidian and its law firm--Hill published an e-mail in which Cox offers an Obsidian lawyer her services to protect online reputations and promote business--for a handsome monthly fee. Hill apparently views this as an attempted shakedown.

Hill, however, does not report the whole story. Court documents indicate that Cox' e-mail was a response to a cease-and-desist letter from the attorney--and I have not seen the contents of that letter. The tone of Cox' e-mail does call her motivations into questions. But records show it did not come out of the blue; it was a response to a communication she had received. Either way, Cox would have been wise not to mix journalism with her business pursuits. This e-mail might have helped swing a jury against her, even though it has nothing to do with whether her reports on Obsidian and Padrick were defamatory or not.

Kevin Padrick
Forbes and The Times portray Padrick as an innocent figure, an attorney who nobly served as trustee in a bankruptcy case involving an Oregon firm called Summit Accommodators. A close look at the record indicates that is not the full story.

In various blog posts, Cox had called Padrick a "thug" and a "thief." The Times' David Carr said he could find nothing to substantiate that. Here's what Carr wrote about Padrick:

Mr. Padrick, a lawyer who is a member of the bar in four states and has never been disciplined or investigated from anything I could find, said he spent a lot of sleepless nights wondering how he ended up as Ms. Cox’s bête noire.

I had to laugh at that one. I've been screwed repeatedly by lawyers who have clean disciplinary records. A lawyer who is with the right firm, or has enough financial or political clout, almost certainly will never be investigated for anything. A clean record does not mean a lawyer is a paragon of virtue.

Cox presented a substantial number of documents on her Web sites that indicate something smelled about the Summit Accommodators bankruptcy. In the following post, Cox presents links to about 20 documents that strongly hint at wrongdoing in the bankruptcy case--and these come from individuals closely connected to the case, not Cox herself. Two issues stand out:

(1) Padrick and his firm had worked for Summit Accommodators--Records show that Padrick and his firm, Obsidian, had signed a consulting contract with Summit Accommodators. Summit agreed to pay Obsidian a $100,000 retainer. How could Padrick serve as an impartial trustee when he had worked for one of the parties involved?

(2) Numerous parties in the bankruptcy case had objected to Padrick's fees--Records show that various parties to the Summit bankruptcy had filed an objection to the fees being charged by Padrick, Obsidian, and their law firm, Tonkon Torp. At the time the objection was filed, Padrick and associates had charged $992,231.22 for his services as trustee. The objection states this was an average of $185,000 a month and could wind up with a total of $11.1 million over the expected five-year term of the case.

The reporters from Forbes and The Times interviewed Padrick, but neither apparently asked him about the fees he was charging in the Summit bankruptcy. Neither asked about his clear conflict of interest. Were Forbes and The Times mainly interested in knocking a citizen journalist for investigating the kind of touchy subjects that the mainstream press largely has abandoned? In other words, do the mainstream critiques of Cox' work come with a heavy dose of sour grapes?

U.S. District Judge Marco A. Hernandez
Judge Hernandez made numerous questionable rulings leading up to the jury verdict against Cox, and these stand out:

(1) Cox role as a journalist--Hernandez found that Cox was not protected by Oregon's shield law because she did not qualify as a journalist under the law. Specifically, Hernandez found that Cox, as a blogger, was not engaged in a "medium of communication," as defined by the law. Here is what the Oregon shield law says on the subject:

"Medium of communication" has its ordinary meaning and includes, but is not limited to, any newspaper, magazine or other periodical, book, pamphlet, news service, wire service, news or feature syndicate, broadcast station or network, or cable television system.

Hernandez ruled that Cox was not engaged in any of the listed media. But the law clearly states that the definition of media "is not limited to" those that are listed. The judge almost certainly screwed up here.

(2) The bankruptcy case was not a matter of public concern--Cox raised First Amendment protections by asserting the Summit bankruptcy was a matter of public concern. In a finding that defies all logic, Hernandez ruled against her. Wrote the judge:

Padrick was not a public employee or a public official. Summit Accommodators was not a public body or public corporation. Thus . . . , the statements here did not relate to the evaluation of the performance of a public agency or official.

Hernandez' finding makes zero sense. Bankruptcy courts are public forums, generating public documents, funded with public (taxpayer) dollars. Padrick was appointed trustee by a judge, who is a public official. Hernandez almost certainly got this wrong, and the judgment against Cox should be overturned on First Amendment grounds, if nothing else.

A summary of our findings: (1) Crystal Cox should focus more on journalism and less on search-engine optimization--and she should be careful in her communications with opposing counsel; (2) Kevin Padrick, given his clear conflict of interest, never should have accepted the appointment as trustee in the Summit bankruptcy. If Padrick is going to charge outlandish fees for his services, he should expect harsh scrutiny; (3) Judge Hernandez' faulty rulings allowed a case to go to a jury when, under the law, summary judgment probably should have been granted in Cox' favor.

Many court cases in the U.S. are comedies of error. The Crystal L. Cox case is no exception.