Obsidian Finance Group, LLC v. Cox

740 F.3d 1284 (9th Cir. 2014)

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Nature of the Case

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Facts

Padrick is a principal of Obsidian Finance Group, LLC (Obsidian). They provide advice to financially distressed businesses. Summit Accommodators, Inc. (Summit), retained Obsidian in connection with a contemplated bankruptcy. After Summit filed for reorganization, the bankruptcy court appointed Padrick as the Chapter 11 trustee. Summit had misappropriated funds from clients. Padrick's principal task was to marshal the firm's assets for the benefit of those clients. Cox published blog posts on several websites that she created, accusing Padrick and Obsidian of fraud, corruption, money-laundering, and other illegal activities in connection with the Summit bankruptcy. Padrick and Obsidian sent Cox a cease-and-desist letter, but she continued posting allegations. This defamation suit ensued. Padrick and Obsidian (Ps) sued Cox (D) for defamation. The court held that all but one of P's blog posts were constitutionally protected opinions because they employed figurative and hyperbolic language and could not be proved true or false. A post that Padrick, in his capacity as bankruptcy trustee, failed to pay $174,000 in taxes owed by Summit was held to be actionable. The district judge, therefore, allowed that single defamation claim to proceed to a jury trial. D argued that because the blog post involved a matter of public concern, Ps had the burden of proving her negligence in order to recover for defamation, and that they could not recover presumed damages absent proof that she acted with 'actual malice'-that is, that she knew the post was false or acted with reckless disregard of its truth or falsity. D alternatively argued that Ps were public figures, and thus were required to prove that D made the statements against them with actual malice. The court rejected both arguments; Ps were not required to prove either negligence or actual damages because D had failed to submit 'evidence suggestive of her status as a journalist.' The court found Ps were not all-purpose public figures nor limited public figures based upon Padrick's role as a bankruptcy trustee, finding that they had not injected themselves into a public controversy, but rather that D had created the controversy. The jury found in favor of Ps, awarding the former $2.5 million total in compensatory damages. D moved for a new trial.