By Alison Frankel
(Reuters) - (The opinions expressed here are those of the author, a columnist for Reuters.) The voting technology company Smartmatic USA Corp is up against a phalanx of Fox lawyers in its $2.7 billion defamation suit over debunked election fraud claims.
Fox News Network LLC and Fox Corp are shelling out for the services of at least three law firms, including top appellate counsel from Clement & Murphy and a vast team from Kirkland & Ellis, one of the biggest and most expensive law firms in the country.
How is Smartmatic — the David to Fox's Goliath in this case — coming up with the money to litigate against Fox’s high-priced onslaught?
Fox has long suspected that Smartmatic was receiving funding from an outside source. Its lawyers have repeatedly argued in filings to New York State Supreme Court Justice David Cohen that Smartmatic has no money to spare, citing a report from its expert economist that the voting tech company lost $100 million between 2016 and 2020 and hasn’t turned a profit in years. (Smartmatic refutes that contention, insisting that Fox’s false reporting squelched its billion-dollar prospects.)
Fox litigated for more than a year to find out who is funding Smartmatic’s case, arguing that the funder’s motives were relevant to its counterclaim accusing the election tech company of filing a baseless lawsuit. As I’ll explain, Fox won that fight: Cohen ruled last month that Smartmatic has to disclose any agreement to pay its litigation costs and expenses.
But it turns out that Fox was apparently wrong all along about Smartmatic’s funding: No outsider is paying Smartmatic’s litigation costs, according to Smartmatic counsel Erik Connolly of Benesch, Friedlander, Coplan & Aronoff.
“Smartmatic does not have any third-party funding for the cases, and never has had such funding,” Connolly said in an email statement to me.
He and a Smartmatic spokesperson did not respond to my follow-up question about whether Benesch Friedlander is handling the case on a contingency fee basis, in which the law firm fronts the cost of litigation in exchange for a percentage of the client’s ultimate recovery. As my Reuters colleague Andrew Goudsward reported earlier this week, Dominion’s lead counsel in its parallel defamation suit against Fox, Susman Godfrey, handled Dominion’s case on a discounted contingency fee basis, which means the law firm should have quite a payday thanks to Dominion’s $787.5 million settlement with Fox.
I’m not sure why Smartmatic fought so hard against Fox’s demand for disclosure of a funding agreement that, according to the company’s new statement to me, does not even exist. But I’m sure Smartmatic and its lawyers had a bit of a laugh along the way at what now seems to have been a wild goose chase by Fox.
Spokespeople for Fox News and Fox Corp did not respond to my email query about Smartmatic’s denial of outside funding or to a previous query about what Smartmatic disclosed to Fox after Cohen ordered the voting tech company to disclose funding agreements.
New York state courts generally frown on demands for the disclosure of litigation funding agreements. As Smartmatic argued in a Feb. 24 brief asking Cohen to overrule a hearing judge’s order that it turn over any funding documents to Fox, defendants are only entitled to see such agreements if they can show outside funding is directly relevant to claims or defenses in the case. Smartmatic said that Fox’s purported justification – that the identity of any funder would shed light on Smartmatic’s motives for suing Fox – was not sufficient because Fox was merely speculating.
Smartmatic was a bit cagey in its brief, arguing vehemently against the disclosure of any litigation funding agreement without saying whether the company had actually entered into any such agreement. “To the extent that they exist,” it argued, “Smartmatic should not have to produce these agreements.”
Fox responded that any litigation funding agreement was directly relevant to its counterclaim under New York’s so-called anti-SLAPP law, which was enacted to discourage meritless litigation designed to chill public debate. Fox argued that Smartmatic’s “deeply implausible” demand for nearly $3 billion in damages was the “very definition of trying to chill speech.”
According to Fox, the disclosure of Smartmatic’s backers would show “whether Smartmatic’s aggressive claims are being driven by other individuals or entities who have a proverbial axe to grind.”
Cohen sided with Fox in his March 24 ruling, holding that the identity of any Smartmatic funder could be relevant to Fox's arguments about Smartmatic's improper motives for suing.
Given the judge's ruling, I was eager to read the counterclaims Fox filed this week to find out what it had learned about Smartmatic’s funding. Would Fox assert that some liberal activist was backing Smartmatic's big-money defamation suit in the hopes of tarring the network? Such a scenario would resemble assertions by former President Donald Trump, who claimed in a court filing earlier this month that a prominent Democratic donor is funding a defamation suit over his denial of rape claims by New York writer E. Jean Carroll.
Or maybe Fox would allege that Smartmatic was being bankrolled by a competitor on Fox’s right flank. Even the Fox filing revealed only that the voting tech company had made a deal with a traditional litigation financier, I figured it would be interesting to know which funder had a stake in Smartmatic’s case.
But to my surprise, Fox’s filing was silent on the matter of litigation funding. Its counterclaim, demanding that Smartmatic pay Fox’s fees and costs for defending a baseless lawsuit, simply re-iterated Fox’s arguments that Smartmatic could not possibly have suffered billions of dollars of harm from the network's reporting of newsworthy allegations of election fraud by Trump and his allies.
So far, those arguments have not succeeded in ending the Smartmatic suit. Cohen denied Fox’s dismissal motion last March. An intermediate state appellate court affirmed that ruling in February, despite Fox arguments that it was entitled to immunity for reporting on newsworthy allegations.
I'm sure Fox was hoping to cast additional doubt on Smartmatic’s motives by ascribing ill intentions to a litigation funder. But it looks like that's a dead end.
Read more:
Fox resolves Dominion case, but $2.7 billion Smartmatic lawsuit looms
No delay for Trump in rape accuser's trial, more discovery allowed
Fox News must face Smartmatic's lawsuit over election-rigging claims
(Reporting By Alison Frankel; editing by Leigh Jones)
