Blogger loses defamation suit

Doesn’t have same protections as bona fide media member

By Sheila G. Miller
The Bulletin

December 08. 2011

A local financial adviser has won a defamation suit against a self-described investigative blogger. A federal jury recently decided that the blogger made unfounded claims against Kevin Padrick and his business, Obsidian Financial Group LLC, and awarded them $2.5 million.

A federal judge, meanwhile, said the blogger was not a member of the media and, therefore, does not enjoy the same legal protections as bona fide journalists do.

Padrick, a senior principal for Obsidian Financial Group LLC, was appointed in 2009 to serve as the bankruptcy trustee for Summit 1031 Exchange, a local company that had specialized in tax-sheltered land deals. Summit’s owners allegedly used much of their customers’ money for their own purposes and have been charged with fraud and other crimes in federal court.

Crystal Cox, a Montana blogger and real estate agent, posted extensively about Padrick and his company, alleging among other things that he committed tax fraud in his role as trustee.

Padrick filed the complaint in January, alleging Cox published false and defamatory statements, among them that Padrick had defrauded the government, that he’d engaged in illegal, fraudulent activities (including tax fraud and solar tax credit crimes), and that he’d paid off the media and politicians.

One blog post asks, “Did Oregon Attorney Kevin Padrick hire a hitman to kill me?”

Among Cox’s blogs is one called www.obsidianfinancesucks.com.

In her response, Cox, who represented herself in the court case, said she was a member of the media and that her coverage of the Summit 1031 bankruptcy and Padrick’s conduct as bankruptcy trustee was in the public interest. She claimed that her sources were protected by media shield laws, that she had the right to publish the information because Padrick and his company were public figures, and that she did not knowingly write anything false or defamatory.

U.S. District Court Judge Marco Hernandez disagreed.

“Based on the evidence presented at the time of trial,” he wrote in an opinion, “I conclude that plaintiffs are not public figures, defendant is not ‘media,’ and the statements at issue were not made on an issue of public concern.”

Cox did not testify during the trial, and Hernandez noted in his opinion that Cox presented no cases “indicating that a self-proclaimed ‘investigative blogger’ is considered ‘media.’ ”

Duane Bosworth, a First Amendment attorney for Davis Wright Tremaine LLP in Portland, said the 13-page opinion was in some places unclear. But the message itself was clear: “This is not a traditional established media person,” he said of Cox, and therefore doesn’t get all the benefits a member of the media would.

“The most interesting part is that (the judge ruled) she is not entitled to an elevated standard of fault, so she was not entitled to require the plaintiff to prove she was negligent or had actual malice,” Bosworth said. “Instead, (the judge) said she was strictly liable if she got the facts wrong and what she wrote was false and defamatory, then she is liable even if she wasn’t negligent.”

If Cox had been a recognized member of the media, proving the defamation would have been more difficult. The jury would have had to find she was negligent in what she posted on her site, or that she knew the material was wrong, but posted it anyway out of malice.

“It was a tremendous relief to have eight people hear the story and unanimously find that her statement was false and unanimously find that the damage was significant,” Padrick said. “I can tell you the damage is probably many times that, but we will never be compensated and could never be compensated for all the damage that will be caused, because unfortunately the Internet is permanent.”

Blogger plans to appeal

Cox said in an interview Wednesday that she will appeal the verdict. She also said she’s considering contacting the Department of Justice about possible violations of the Racketeer Influenced and Corrupt Organizations Act.

“This is a case that affects everybody who does anything online,” she said, adding she’s had attorneys contact her to offer free representation. “At this point I have a responsibility to the blogging community to make sure this does not set a precedent.”

Cox said she blogs full-time and maintains more than 400 blogs. Thus, she argues, she should be considered a member of the media.

Cox said she first learned of the Summit 1031 case from the local news station in Montana, then wrote a short post on one of her blogs. Eventually, said Cox, she came in contact with Stephanie DeYoung - the daughter of former Summit CEO Mark Neuman - and learned more about the case. When she began reading DeYoung’s blog about Summit 1031, she took an interest in the company’s bankruptcy.

She estimated she wrote thousands of posts on Summit’s bankruptcy, including some alleging that Padrick was an insider who had worked for Summit 1031 Exchange before its bankruptcy and, therefore, shouldn’t have been involved as a trustee.

Cox said she doesn’t care if anyone believes her. She wants people to read the documents and decide for themselves.

“I’m not asking anybody to believe me. I’m quite vulgar and over the top, and I was very passionate about this,” she said.

To Padrick, the case isn’t about the media. It’s about how Cox affected his life.

“This story is truly about how somebody who can sit in front of a computer can take our normal human reactions - we believe what’s written, that’s the way we’ve been conditioned - and ruin my life and my company,” he said.

He said his company sent Cox a cease-and-desist letter, then brought the case when her posts didn’t stop. Cox alleges the letter didn’t explain which specific post Padrick wanted retracted.

Padrick provided an email in which Cox offers “PR Services and Search Engine Management Services” starting at $2,500 a month to promote and protect the online reputations of law firms and financial companies. Cox said she sent that email thinking the bankruptcy was finished and that she never offered to remove her posts for payment.

“We brought the case because that’s the only way that I know, in terms of the law, to establish the falsity of her statements and to obtain some form of at least partial compensation for the horrendous damage she has caused,” Padrick said.

Padrick said his advisory business was “decimated” by Cox’s blog posts.

“We will never know all the people that are reading what she has written,” he said. “Unfortunately, if you Google my name or my firm’s name, you are confronted with page after page of Cox’s Web sites.”

— Reporter: 541-617-7831, smiller@bendbulletin.com

Copyright 2011