Fox Corp.’s $787.5 million settlement with Dominion Voting Systems over defamation charges is eye-popping, but the ultimate cost to the media company is likely to be much lower.
On Tuesday, Fox settled with Dominion over charges that Fox News baselessly accused the company of rigging its voting machines against former President Donald Trump in 2020. It was the most-watched media libel case in decades.
A man walks past the News Corp. and Fox News headquarters April 19 in New York.
Mary Altaffer, Associated Press
Fox had about $4 billion cash on hand as of December 2022, and MoffettNathanson analyst Robert Fishman expects the company to pay the settlement during the current quarter.
How much the lawsuit will actually end up costing Fox is unclear because there are ways it can defray some of the expense, primarily through insurance and the use of tax deductions.
Fox can deduct the Dominion settlement from its income taxes as an expense necessary for the cost of doing business. Fox Chief Communications Officer Brian Nick has confirmed the deductibility of the settlement.
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Big companies often deduct large settlements to help offset some of the cost, but since settlement amounts are usually confidential, it’s difficult to pin down exactly how much they benefit. Payments that are seen as restitution or compensation can be deducted, while payments made to the government or in the direction of a government are usually not deductible.
Robert Willens, a tax professor at the Columbia University School of Business, estimates that after the tax write-off, Fox will incur about three-fourths of the settlement amount, about $590 million.
“The key is that if the payments are being made to private parties and not at the best of the government then you can pretty much conclude without any fear of contradiction that the payments will be deductible,” he said.
A study by the Government Accountability Office in 2005 found that of 34 settlements totaling over $1 billion, 20 companies reported deducting some portion or all of their settlement payments. Big banks such as Bank of America and JPMorgan Chase reportedly also deducted portions of their settlements of charges tied to the financial crisis of 2008.
Also, if Fox is insured, insurance is likely to cover some of the settlement. Chad Milton, a partner at Media Risk Consultants, said a large media company such as Fox could have anywhere between $100 million to $500 million in coverage, including media liability insurance and other types of insurance.
“It’s not hard to stack up $100 million but as you go higher than that, it gets harder and harder,” Milton said.
Usually, there’s a certain amount a media company has to pay, which could be in the millions, before insurance kicks in. However, the deductible incudes attorney fees, which in a high-profile case like Fox-Dominion could be tens of millions of dollars or higher, so the deductible could be swallowed up just by attorney fees.
One wrinkle: even if an insurance company pays a substantial part of the settlement, there could be an annual aggregate limit of liability, which could mean that insurers wouldn’t cover another big-money settlement.
And media companies and insurers don’t always agree on who should cover what, since there are caveats written into contracts that allow insurers to avoid paying under certain circumstances. In 2012, Disney settled a defamation suit after ABC aired a segment that questioned the safety of a meat producer’s products that critics dubbed “pink slime.” But one of its insurers, AIG, ended up suing Disney so they wouldn’t have to pay part of the settlement, although AIG eventually lost.
Fox has also said it doesn’t expect the settlement to affect its operations.
“We don’t expect significant operational effects or changes to our business given our cash flow, strong balance sheet and the health of our business,” the company said in a statement after the settlement was announced.
Moffett Nathanson’s Fishman said everything indicated the company would be able to run its business as usual.
“It isn’t clear there has been much, if any, impact of these lawsuits on Fox News’ views and business,” he said.
Fishman said he didn’t expect the settlement to hamper Fox’s ability to return money to shareholders, including a $1 billion accelerated share repurchase program announced in February.
Fox has a similar lawsuit looming with another voting machine company, Smartmatic, but no date has been set and the case might not go to court for a couple of years.
Here’s what to know about the Fox News defamation trial — election lies, libel law and a judge’s ire
intro
A major defamation lawsuit against Fox News goes to trial Tuesday, carrying the potential to shed additional light on former President Donald Trump’s election lies, reveal more about how the right-leaning network operates and even redefine libel law in the US Here are some things to know about the case.
The case
Dominion Voting Systems is suing Fox for $1.6 billion, claiming the news outlet repeatedly aired allegations that the company’s voting machines were rigged to doom Trump’s 2020 election campaign while knowing they were untrue. Fox contends that it was reporting newsworthy charges made by supporters of the Republican then-president and is supported legally by libel standards. After a one-day delay that raised the possibility of a last-minute settlement between the litigants, the seating of the jury was scheduled to start Tuesday, followed immediately by opening statements.
AP Photo/Yuki Iwamura, File
Election disconnect
Denver-based Dominion has produced evidence that prominent people at Fox didn’t believe the fraud allegations, even as the network gave Trump’s allies airtime to repeat them. Multiple staffers texted and emailed in disbelief as Trump latched onto increasingly tenuous claims of being robbed by voter fraud. Fox’s Sean Hannity said in a deposition that he did not believe the fraud claims “for one second” but wanted to give accusers the chance to produce evidence. Fox founder Rupert Murdoch (pictured), questioned under oath, agreed the 2020 election, won by Democrat Joe Biden, was free and fair: “The election was not stolen,” he said. Murdoch even wrote on Jan. 5, 2021, to a top executive urging that prominent Fox personalities issue a statement acknowledging Biden’s legitimate win. At the same time, Murdoch acknowledged that Fox hosts such as Lou Dobbs and Jeanine Pirro at times endorsed false claims of election fraud.
AP Photo/Mary Altaffer, File
Fox’s fear
The court papers have laid out a deep concern at Fox over the impact of its election night call that Biden had beaten Trump in the battleground state of Arizona — a call that was accurate. Fox scooped its rivals on the call, but it infuriated Trump and many Fox viewers, who expressed their anger and began tuning in to rival conservative media outlets such as Newsmax. Emails and memos released in the case show Fox executives were highly aware of a drop-off in their network’s viewership at the same time that Newsmax was gaining viewers, and the executives viewed that dynamic as a potential threat.
AP Photo/Yuki Iwamura, File
Libel law
In its defense, Fox has relied on a doctrine of libel law, in place since a 1964 US Supreme Court ruling, which has made it difficult for some plaintiffs to prove defamation by news outlets. Public figures, and Dominion fits that standard in this case, have to prove not only that the information reported was incorrect but that the news organization acted with “reckless disregard” about whether it was true or not. Fox says Dominion can’t prove its case, but some First Amendment advocates suggest the voting machine company has a strong argument. Their worry is that a prolonged legal battle would give the Supreme Court a chance to change libel laws that would weaken protection for all the media.
AP Photo/Ben Gray, File
Judge’s ire
The run up to the trial has been rocky for Fox, and not just because the public got a look at such private chatter as primetime host Tucker Carlson saying he “passionately” hates Trump. The trial judge has scolded the network for 11th-hour disclosures about Murdoch’s role at Fox News and about some evidence involving Fox Business host Maria Bartiromo, including recordings of her talking off-camera with Trump’s lawyers. (Fox lawyers later apologized to the judge about the Murdoch matter, saying it was a misunderstanding not intended to deceive.) Fox, meanwhile, won some legal fights over limiting what jurors can hear, including a ruling that bars testimony about the Jan. 6, 2021, insurrection at the US Capitol.
AP Photo/Matt Rourke
Trump’s interest
Trump has taken a keen interest in the case, judging by his social media posts. Always concerned about loyalty, and nursing a grudge about the Arizona call, he has expressed anger at revelations in the case that many people at Fox not only did not support his fraud allegations but privately disdained them. Trump had stepped up his criticism of Fox as the 2024 Republican presidential primary gained steam, but he recently has given interviews to Carlson and Hannity.
AP Photo/Michael Conroy
the election
Federal and state election officials, exhaustive reviews in multiple battleground states where Trump challenged his loss, and Trump’s attorney general found no widespread fraud that could have changed the outcome of the 2020 election. Nor did they uncover any credible evidence that the vote was tainted. Trump’s allegations of fraud have also been roundly rejected by dozens of courts, including by judges he appointed.
AP Photo/Andres Leighton, File