Obsidian Fin. Grp., LLC v. Cox

• Decision Date: 17 January 2014
• Docket Number: 12–35319.,Nos. 12–35238,s. 12–35238
• Citation: 740 F.3d 1284
• Parties: OBSIDIAN FINANCE GROUP, LLC; Kevin D. Padrick, Plaintiffs–Appellees, v. Crystal COX, Defendant–Appellant. Obsidian Finance Group, LLC; Kevin D. Padrick, Plaintiffs–Appellants, v. Crystal Cox, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

740 F.3d 1284

OBSIDIAN FINANCE GROUP, LLC; Kevin D. Padrick, Plaintiffs–Appellees,

v.Crystal COX, Defendant–Appellant.

Obsidian Finance Group, LLC; Kevin D. Padrick, Plaintiffs–Appellants,

v.Crystal Cox, Defendant–Appellee.

Nos. 12–35238, 12–35319.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 6, 2013.

Filed Jan. 17, 2014.

Eugene Volokh (argued), Mayer Brown LLP, Los Angeles, CA, for Defendant–Appellant/Cross–Appellee.

Robyn Ridler Aoyagi, Steven M. Wilker (argued), and David S. Aman, Tonkon Torp LLP, Portland, OR, for Plaintiffs–Appellees/Cross–Appellants.

Bruce D. Brown, Gregg P. Leslie, and Jack S. Komperda, Arlington, VA, for Amicus Curiae The Reporters Committee for Freedom of the Press.

Thomas C. Goldstein, Goldstein & Russell, P.C., Washington, D.C., for Amicus Curiae SCOTUSblog.com.

Appeal from the United States District Court for the District of Oregon, Marco A. Hernandez, District Judge, Presiding. D.C. No. 3:11–cv–00057–HZ.

Before: ARTHUR L. ALARCÓN, MILAN D. SMITH, JR., and ANDREW D. HURWITZ, Circuit Judges.

OPINION

HURWITZ, Circuit Judge:

This case requires us to address a question of first impression: What First Amendment protections are afforded a blogger sued for defamation? We hold that liability for a defamatory blog post involving a matter of public concern cannot be imposed without proof of fault and actual damages.

I.

Kevin Padrick is a principal of Obsidian Finance Group, LLC (Obsidian), a firm that provides advice to financially distressed businesses. In December 2008, 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. Because Summit had misappropriated funds from clients, Padrick's principal task was to marshal the firm's assets for the benefit of those clients.

After Padrick's appointment, Crystal 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. Cox apparently has a history of making similar allegations and seeking payoffs in exchange for retraction. See David Carr, W hen Truth Survives Free Speech, N.Y. Times, Dec. 11, 2011, at B1. Padrick and Obsidian sent Cox a cease-and-desist letter, but she continued posting allegations. This defamation suit ensued.

A.

The district court held that all but one of Cox's blog posts were constitutionally protected opinions because they employed figurative and hyperbolic language and could not be proved true or false. Obsidian Fin. Grp., LLC v. Cox, 812 F.Supp.2d 1220, 1232–34 (D.Or.2011). The court held, however, that a December 25, 2010 blog post on bankruptcycorruption.com made “fairly specific allegations [that] a reasonable reader could understand ... to imply a provable fact assertion”—i.e., that Padrick, in his capacity as bankruptcy trustee, failed to pay $174,000 in taxes owed by Summit. Id. at 1238. The district judge therefore allowed that single defamation claim to proceed to a jury trial. The jury found in favor of Padrick and Obsidian, awarding the former $1.5 million and the latter $1 million in compensatory damages.

B.

In a pretrial memorandum, Cox—then representing herself—raised two First Amendment arguments concerning the liability standards that should govern this case. First, Cox argued that because the December 25 blog post involved a matter of public concern, Padrick and Obsidian 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 New York Times Co. v. Sullivan “actual malice”—that is, that she knew the post was false or acted with reckless disregard of its truth or falsity. See376 U.S. 254, 280, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Cox alternatively argued that Padrick and Obsidian were public figures, and thus were required to prove that Cox made the statements against them with actual malice. Id.

On the day before trial, the district court rejected both arguments in an oral decision. In a written decision, issued two days later, the judge explained that Padrick and Obsidian were not required to prove either negligence or actual damages because Cox had failed to submit “evidence suggestive of her status as a journalist.” Obsidian Fin. Grp., LLC v. Cox, No. cv–11–57–HZ, 2011 WL 5999334, at *5 (D.Or. Nov. 30, 2011). The district court also ruled that neither Padrick nor Obsidian was an all-purpose public figure or a limited public figure based upon Padrick's role as a bankruptcy trustee, finding that they had not injected themselves into a public controversy, but rather that Cox had “created the controversy....” Id. at *4.

After closing arguments, the district court instructed the jury that under Oregon law, “Defendant's knowledge of whether the statements at issue were true or false and defendant's intent or purpose in publishing those statements are not elements of the claim and are not relevant to the determination of liability.” The court further instructed that the “plaintiffs are entitled to receive reasonable compensation for harm to reputation, humiliation, or mental suffering even if plaintiff does not present evidence that proves actual damages ... because the law presumes that the plaintiffs suffered these damages.” The jury verdicts in favor of Padrick and Obsidian followed.

Cox—now represented by counsel—moved for a new trial. In its order denying that motion, the district court acknowledged that Cox had argued that “she was entitled to certain First Amendment protections, including requiring plaintiffs to establish liability by proving that [she] acted with some degree of fault, whether it be negligence or ‘actual malice.’ ” Obsidian Fin. Grp., LLC v. Cox, No. 3:11–cv–57–HZ, 2012 WL 1065484, at *7 (D.Or. Mar. 27, 2012). But, the judge again rejected Cox's arguments that Padrick and Obsidian “were public figures, and that the blog post referred to a matter of public concern,” and thus concluded that a showing of fault was not required to establish liability, and that presumed damages could be awarded. Id. at *4.

Cox appeals from the denial of her motion for a new trial. Obsidian and Padrick cross-appeal, contending that their defamation claims about the other blog posts should have gone to the jury. We have jurisdiction over both appeals pursuant to 28 U.S.C. § 1291. We reverse the denial of a motion for a new trial if the district court has made a mistake of law. Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir.2007). We “review de novo whether a jury instruction misstates the law.” Dream Games of Ariz., Inc. v. PC Onsite, 561 F.3d 983, 988 (9th Cir.2009) (quotation marks and citation omitted). And we review a grant of summary judgment de novo. Doe No. 1 v. Reed, 697 F.3d 1235, 1238 (9th Cir.2012).

II.

Cox does not contest on appeal the district court's finding that the December 25 blog post contained an assertion of fact; nor does she contest the jury's conclusions that the post was false and defamatory. She challenges only the district court's rulings that (a) liability could be imposed without a showing of fault or actual damages and (b) Padrick and Obsidian were not public officials.

A.

After the district court's orders on the issues raised in her pretrial memorandum, Cox—then still representing herself—did not propose specific jury instructions. When asked by the district court whether she wished to do so, she stated that she had no objection to the court's proposed jury instructions, which were consistent with its earlier First Amendment rulings. Padrick and Obsidian argue that Cox therefore waived any First Amendment objections to the jury instructions.

We disagree. To preserve an argument about a jury instruction for appeal, a party generally must make a specific contemporaneous objection to the instruction “on the record, stating distinctly the matter objected to and the grounds for the objection.” Fed.R.Civ.P. 51(c)(1). But, “when the trial court has rejected plaintiff's posted objection and is aware of the plaintiff's position, further objection by the plaintiff is unnecessary.” Loya v. Desert Sands Unified Sch. Dist., 721 F.2d 279, 282 (9th Cir.1983) (citing Brown v. AVEMCO Inv. Corp., 603 F.2d 1367 (9th Cir.1979)); see also Dorn v. Burlington N. Santa Fe R.R. Co., 397 F.3d 1183, 1189 (9th Cir.2005) (“In light of its definitive ruling on a motion in limine and subsequent warning about rehashing the issue, the district court was fully informed of Burlington's position on the jury instructions....”).

The district court here was fully informed before trial of Cox's First Amendment arguments and had rejected them definitively before the close of evidence. “[A]ny further objection would have been superfluous and futile....” Dorn, 397 F.3d at 1189. Indeed, in denying Cox's new trial motion, the district judge specifically noted that he had instructed the defendant to raise her legal arguments in her trial memorandum, and that he understood those arguments to be that “she was entitled to certain First Amendment protections, including requiring plaintiffs to establish liability by proving that defendant acted with some degree of fault, whether it be negligence or ‘actual malice.’ ” Obsidian Fin. Grp., LLC v. Cox, 2012 WL 1065484, at *7. In ruling on the new trial motion, the district court initially suggested that Cox had waived those arguments by not objecting to the jury instructions, but in the end again treated them on the merits and rejected them. Under the facts of this case, Cox preserved the issues raised in her motion for new trial for review.

B.

The Supreme Court's landmark opinion in New York Times Co. v. Sullivan began the construction of a First Amendment framework concerning the level of fault required for defamation liability. 376 U.S. 254, 84...