A Fox Corp. shareholder sued Rupert Murdoch, Lachlan Murdoch and other members of the Fox Corp. board of directors in Delaware on Tuesday, according to NBC News.
Robert Schwarz filed a derivative action — a kind of lawsuit brought by shareholders who claim to have been harmed by a corporation — alleging that Fox executives violated their fiduciary duty by allowing Fox News to air debunked election conspiracy theories, according to the report.
"The Board's decision to chase viewers by promoting the false stolen election claims has exposed the Company to public ridicule and negatively impacted the credibility of Fox News as a media organization that is supposed to accurately report newsworthy events. The Company is now the subject of two defamation cases, with combined damages claimed to exceed $4 billion," the lawsuit claims.
The suit cites revelations in Dominion Voting Systems' $1.6 billion defamation lawsuit in which Fox executives and hosts privately trashed the very conspiracy theories they aired. Fox also faces another $2.7 billion lawsuit from the voting tech company Smartmatic over the false election claims.
"FOX knew — from the Board on down — that Fox News was reporting false and dangerous misinformation about the 2020 Presidential election, but FOX was more concerned about short-term ratings and market share than the long-term damages of its failure to tell the truth," the new lawsuit says.
Dominion has argued that Fox executives allowed the network to air false election claims over concerns that they would lose their pro-Trump audience.
Fox News has denied that it defamed the company and claims it was merely reporting on the allegations, which is protected by the First Amendment.
Schwarz's complaint may be the first of several shareholder lawsuits. Several law firms are also eyeing derivative suits against Fox Corp. over the election claims, according to Bloomberg Law.
"They've got evidence that the company suffered economically, therefore the shareholders suffered economically," Doug Chia, a fellow at the Center for Corporate law and Governance at Rutgers Law School, told the outlet. "The board is ultimately accountable for those kinds of things."
Corporate boards tend to be heavily involved in different aspects of the business but media company boards don't tend to get involved in editorial policies.
"If you're a news company, and you become known for distributing blatantly false information, people aren't going to watch your news program or trust it," Sarah Haan, a law professor at Washington and Lee University, told Bloomberg. "A competent board would have some oversight system in place—they would be made aware if there was some major campaign of false news being promoted through their outlets."
At least two law firms are investigating Fox's board of directors for potential breach of fiduciary duty in connection to the Dominion and Smartmatic cases, according to the report. Shareholders would have to prove that a board member failed to provide oversight as hosts made allegedly defamatory statements.
"It would not be a hard sell for the court to say a news organization should avoid intentionally lying about people," Ann Lipton, associate dean for faculty research at Tulane University's law school, told Bloomberg. "This is core to like their identity and obviously presents legal risks."
