Fox Corporation and its board of directors have been named in a new lawsuit filed by New York City’s comptroller office on behalf of its public pension funds.
The lawsuit was filed in Delaware’s Court of Chancery this week, and accuses Fox and its executives of allowing conspiracy theories related to the outcome of the 2020 presidential election to proliferate on its two cable news channels, which opened the door for defamation lawsuits that cost the network and its shareholders.
“The network’s blatant disregard of journalistic standards and repeated promotion of false political narratives, resulting in defamation lawsuits, presents a very clear risk to shareholder value,” Brad Lander, the comptroller for New York City, said in a statement posted to a social media profile on Tuesday. His statement included a link to a story published by the New York Times, which was first to report on the lawsuit.
The New York City pension funds are long-term shareholders of Fox Corporation, the New York Times reported, adding that it held around 857,000 shares valued at just over $28 million as of late July. The public employees retirement fund operated by the State of Oregon has also joined the lawsuit, the Times said.
It wasn’t clear if officials at Fox Corporation had an opportunity to review the lawsuit before the Times story was published, which was followed by public comment from Lander’s office. Spokespersons for Fox have not returned an email message seeking comment as of Tuesday evening.
The lawsuit accuses Fox and its directors of allowing election-related misinformation to proliferate on the Fox News Channel and Fox Business Network, despite their personal knowledge and beliefs that the conspiracy theories were unsubstantiated.
The complaint filed by the pension groups said the decision to allow Fox hosts and guests to float conspiracy theories on the two channels was intended to appease the cable networks’ core audience of right-of-center viewers — a strategy that the pension funds say was not in line with Fox’s obligation to its shareholders.
Fox’s board of directors includes Rupert Murdoch, the founder and majority-owner of Fox Corporation and its predecessor, 21st Century Fox (also 20th Century Fox), and son Lachlan Murdoch, who serves as Fox’s executive chairman and CEO.
Revelations that the Murdochs harbored differing perspectives from the conspiracies aired on Fox News and Fox Business were unearthed after the network was sued by Dominion Voting Systems, whose voting machines were at the heart of some of the election-related controversies. Among other things, Fox hosts and guests suggested machines made by Dominion and used during the 2020 presidential election in some key states improperly switched votes from the incumbent president, Donald Trump. No proof has ever substantiated these claims.
During the deposition phase of the case, emails and other records showed the elder Murdoch and some key Fox executives knew the statements made about Dominion’s voting machines were not substantiated by evidence, but allowed them to be broadcast on Fox’s two cable channels anyway.
In April, Fox settled the lawsuit for $787.5 million.
The payout sent shockwaves through the media world, both for the sizable amount Fox would cough up to resolve the defamation case and because it was viewed as an apparent admission of wrongdoing by a network who is frequently the target of its peers.
But the settlement did not have much of an effect on Fox’s top line, which showed the network pulled in $3.032 billion in net revenue during its fourth financial quarter that ended June 30. That period covered both the settlement and the dismissal of Tucker Carlson, a Fox News commentator whose opinion program, “Tucker Carlson Tonight,” was the highest-rated in prime-time across all cable news channels.
The bulk of Fox’s gross income for the quarter was attributed to its broadcast television business, which included the free streaming service Tubi, with $1.587 billion earned during the quarter. Cable network revenue came in at $1.41 billion for the quarter, a 10 percent drop on a year-over basis, though the lower income was mainly attributed to lower affiliate fees caused by continuing headwinds in the cable and satellite television industry.
The Dominion settlement was briefly discussed in Fox’s quarterly earnings report, but the network still had enough cash on hand to cover it and other legal and operational expenses. Net income during the quarter was reported at $375 million, a 22.5 percent increase compared to 2022.
While the settlement did not have a material effect on Fox’s financials, it had more of an impact on its headcount, with several key executives and other employees leaving the network over the last few months.
Raj Shah, a senior vice president at Fox, left the company about a month after Carlson’s exit, according to reports. In August, Fox said its chief legal officer, Viet Dinh, was stepping down by the end of December. Both had worked on some aspects of the Dominion case.
The Dominion settlement is also fodder in an ongoing challenge at the Federal Communications Commission (FCC) in which an upstart media watchdog group is asking the agency to block the renewal of a broadcast license for a Fox-owned television station in Philadelphia.
The group, called the Media and Democracy (MAD) Project, is backed by several former Fox executives and at least one former FCC official, and says the evidence made public in the deposition phase of the Dominion case was proof that Fox and its executives could not pass a key character test that is weighed by the FCC when awarding or renewing broadcast licenses.
Despite sharing common ownership, Fox asserts its cable news channels and local broadcast stations are operated as separate businesses. The station in question, WTXF (Channel 29), produces local news on its own, and no evidence has been shown that the station ever re-broadcast any of the controversial segments from the two Fox-owned news channels that were at the center of the Dominion case.