Board Lessons From The Fox-Dominion Showdown

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Where to fight is as important as when.

Companies need to pick their battles carefully—but need to be just as careful about where to fight them. In all the ample media commentary following Dominion’s breathtaking $787.5 million settlement from Fox, the largest defamation settlement in history by a factor of six times, one of the more overlooked nuances was how Dominion strategically beat its competitors, most notably Smartmatic, in the race to hold Fox accountable. 

The savvy legal strategy and gamesmanship behind Dominion’s successful gambit deserves attention—and it all starts with location. Both cases began at the same time but Dominion raced through discovery to settlement, while Smartmatic is just beginning discovery.

In any civil litigation, the plaintiff picks a local jurisdiction to try their case. Lawyers call this phenomenon “forum shopping,” as plaintiffs will often try to shop around for the most favorable judges, juries, precedents and rules. Both Dominion and Smartmatic had the option of bringing suit against Fox in Delaware (the domicile of incorporation of all three companies, like with most U.S. companies); New York (where Fox is headquartered) or a local jurisdiction where they each do business.

On this critical step, Dominion and Smartmatic diverged—with big consequences. Smartmatic ostensibly chose to bring suit in New York, where one might reasonably suppose juries and judges would likely be more hostile to Fox News, while Dominion brought suit in Delaware. Perhaps Smartmatic felt like it needed this extra boost—after all, it faces a steeper path to proving sizable financial damages, considering its voting machines were used in very few jurisdictions in 2020, including most prominently parts of Los Angeles County.

In stark contrast, almost every major swing state used Dominion voting machines in 2020, ranging from Georgia to Arizona to parts of Pennsylvania. It had a much easier path to proving both compensatory and punitive damages—even though the company itself is relatively tiny, with revenues of just $98 million last year and the whole business sold for $40 million just five years ago.

Dominion opted to prioritize speed and efficiency rather than cherry-picking the most favorable jury possible. To be sure, a jury of citizens from New Castle County, Delaware, might be less hostile to Fox News than a jury drawn from Manhattan. But the Delaware judicial system is significantly more streamlined than the New York court system, with only two layers at the state level—the Delaware Chancery Court or the Superior Court and the Supreme Court at the state level.

Furthermore, Delaware requires its judges to move relatively quickly in cases like this one—in less than 90 days—or be admonished, with their salaries at risk. Indeed, the streamlined judicial system, well-developed case law, extensive precedents and efficient operations help explain why almost every American corporation is legally domiciled in Delaware.

In contrast, New York’s four-level judicial system is notoriously slow-moving and complex, with layers of overlapping jurisdiction and cases that drag on for years, not to mention serious operational challenges and a history of dysfunction.  Defendants can cleverly slow walk litigation with nearly endless interim appeals of cases still in progress called “interlocutory appeals,” which can tie up cases for years.

Dominion’s bet on speed and efficiency over a more favorable jury was prescient. Dominion now walks away with a record settlement of $787.5 million, reached on the verge of trial—after juries had already been seated and extensive depositions made—while Smartmatic is just moving into discovery.Nevertheless, both Dominion and Smartmatic win. Smartmatic is a massive beneficiary of all the embarrassing disclosures that came out of Dominion’s own discovery and depositions. With those pretrial sworn and certified documents now in the public domain and the judge’s uncontested statement of fact going into settlement, Smartmatic is now well poised to ride the coattails of Dominion’s efforts. 

More important, Fox and its slipping patriarch Rupert Murdoch are likely more incentivized to settle and put this episode behind them now. In that sense, while Dominion and Smartmatic’s initial legal strategies diverged, both converged upon Fox’s soft underbelly and greatest vulnerability. CBM 

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