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Sunday, September 12, 2004

Beldar backs Bainbridge: Rathergate not a good candidate for a shareholder lawsuit against CBS

Via InstaPundit, I came upon this thoughtful and detailed (hey, he's longwinded like me when he gets wound up!) post from blogger-Prof. Stephen Bainbridge of UCLA Law School (new addition to the prosecutorial team! and I realize now I left out Prof. Volokh!), who concludes that the chances of shareholder derivative/stockholder litigation against CBS is unlikely to go anywhere, and certainly not any time soon.  Prof. Bainbridge is a genuine expert on this area of the law, but my own distant dabbling in it (mostly in the tender-offer/corporate takeover context in the go-go early 1980s) leads me to agree with him.

Many of my emailers and commenters have asked me about other possible litigation alternatives.  I can't claim to have thought through all this thoroughly yet — and certainly not with the care or consideration I'd give a living and breathing client consulting me on such matters before giving even a preliminary opinion!  But for a variety of reasons, I just don't see a lawsuit by anyone against anyone being likely to produce much of even temporary value in the Rathergate drama. 

Dubya might have a decent defamation claim — depending on what continues to turn up, I think there's a decent argument that he could get past the incredibly high hurdle of showing "actual malice" under New York Times v. Sullivan, and if anyone's reputation (other than CBS News' and Rather's own) has been seriously damaged, it's Dubya's — but he's the least likely guy in the United States to file a lawsuit right now, for reasons having nothing to do with the merits of any potential claims he might bring, and everything to do with his own character and situation.

Yes, I'm a trial lawyer and my current practice oftentimes includes representing individuals and small businesses.  But entirely apart from my political philosophy, I take very seriously my obligation to be not just an advocate, but also a counsellor.  That requires telling prospective clients when I don't think a prospective lawsuit is likely to have much merit.  If an actual prospective client were to show up seeking my advice on something related to this — and I'm not, repeat not soliciting any such clients! — I'd look at it more methodically, of course, based on that prospective client's specific situation.

I should also add that I haven't researched, and don't have the background or training to know off the top of my head, any criminal law issues that are involved.  I've used the term "prosecutor" here inaptly, in fact, in referring to the lawyer-bloggers who've been writing about this issue.  Some of them (for instance, Andrew C. McCarthy, who who led the 1995 terrorism prosecution against Sheik Omar Abdel Rahman and eleven others and who blogs on NRO's The Corner) may have the bona fides to give a real prosecutor-type opinion, but I don't.

But at least on the civil-law side, my strong gut hunch is that this entire debate is one that should be, and will be, fought out in the court of public opinion — with the voters/viewers/consumers-of-CBS'-advertisers'-products casting their ballots indirectly.

Posted by Beldar at 07:28 PM in Law (2006 & earlier), Mainstream Media, Politics (2006 & earlier) | Permalink

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Comments

(1) Steven Jens made the following comment | Sep 12, 2004 8:55:01 PM | Permalink

Part of the reason Bush would be ill-advised to bring suit would be the political effect; even if he had a very good legal case, he probably wants to be reelected more than he wants a judgment against CBS.

If you were Bush's lawyer, in your role as councellor, would you be required to take that into account? I assume that if you did, you'd have to acknowledge the limits of your political expertise, but I'm wondering whether you are supposed to limit your advice to the legal issues at hand, providing enough legal information for your client to balance possible legal effects of his actions against other effects, or whether you're supposed to provide the best comprehensive advice that you can offer.

(2) John Bigenwald made the following comment | Sep 12, 2004 9:13:39 PM | Permalink

This may be heresy on a blog run by a lawyer, but not everything is a legal case. I'm more of a free market kind of guy. As such I believe that the market corrects when it is given the proper information. Well, we certainly have been given information in this case, and I think we will see CBS' credibility being severly discounted in the marketplace of ideas....

(3) Manny Alvarez made the following comment | Sep 12, 2004 9:14:38 PM | Permalink

Wouldnt it be much easier to simply produce all of Killian's contemporaneous memo's and typed documents that are not related to GWB's guard service and compare them to the CBS copies? If all of Killians typed documents from the same time period have the exact same spacing, font, etc then the forgery issue for the Bush memos has to go away. If on the other hand the CBS copies of Killian's Bush memos do not "match" the rest of his typed documents then it seems to me that no further expert testimony is needed.

(4) J_Crater made the following comment | Sep 12, 2004 9:32:56 PM | Permalink

My guess is that you would start with DONALD SEGRETTI, the mastermind of Nixon's "dirty tricks" campaign for the Committee for the Re-election of the President.

In 1974, he served 4 1/2 months in prison after pleading guilty to three misdemeanor counts of distributing illegal campaign literature. A major part of this was a faked letter on Edmund Muskie's letterhead falsely alleging that senator Henry "Scoop" Jackson had had an illegitimate child with a 17-year-old.

Segretti was a lawyer — initially a prosecutor for the military and later as a civilian. However, his license was suspended for two years following his conviction. In 1995, he briefly ran for a local judgeship in Orange County, California. He withdrew from the race shortly after his campign received publicity, which awakened lingering anger over his involvement in the scandal.

In the life is stranger than fiction department, in 2000, Segretti served as co-chair of John McCain's campaign in Orange County, California.

Misdemeanor counts of distributing illegal campaign literature doesn't seem like much of a deterent. It is becoming more and more obvious that politicians hold elections in very poor regard.

(5) Wayne Moore made the following comment | Sep 12, 2004 9:55:28 PM | Permalink

I'm not a lawyer, but if this fiasco results in significant loss of Viacom share value, you can expect shareholder suits against Viacom. Viacom's share value may be the primary reason for the CBS delay in constructive response. The corporate attorneys are probably meeting around the clock preparing a response for management approval.

The best response from a sharholder value perspective includes coming clean, firing Rather and the producers involved without severance (their contracts likely allow firing for cause without pay), placing specific safeguards to avoid a repeat, and apologizing to the public.

Alternately they could continue to stonewall digging up nut case "experts" to support the validity of the documents, hoping to ride out the storm. To be successful with this tactic they have to trust the other MSM not to be too aggressive.

It will be interesting to see if Viacom lets Les Moonves handle the issue or forces him to kick it upstairs.

(6) J_Crater made the following comment | Sep 12, 2004 10:22:26 PM | Permalink

From looking at documents on the DOD site, the most like criminal offenses committed are mail fraud, wire fraud, false impersonation with intent to defraud, or false official statement.
I doubt any of these would apply to CBS, but rather the source of the documents. Although CBS could have exposure with Accessory after the fact or Conspiracy.

(7) ieddyi made the following comment | Sep 12, 2004 10:34:49 PM | Permalink

I still think the actions that will have the swiftest and most powerful effect is getting together a list of CBS" biggest sponsors and getting together an email/letter campaign if CBS continues to stonewall and refuses to submit the docs to expert analysis

(8) Al made the following comment | Sep 12, 2004 11:25:27 PM | Permalink

Killian's son alledges Mary Mapes was the producer that asked for his, and his mother's opinion (and dismissed it when it was 'fraud').

Just to have a name on the list of potential scapegoats.

(9) Beldar made the following comment | Sep 13, 2004 1:14:02 AM | Permalink

Steven, if asked, I'll gladly opine on any subject my client asks me to, including rocket science and paleontology. But for each client, in my counsellor's role, I try to offer my best evaluation of how the law and the facts of his/her particular situation fit together and what the likely outcomes will be if we test the situation in court. I can try to predict things such as likely press reactions, the likelihood of getting confidentiality orders, the likelihood that pretrial discovery will be ordered or restricted, and so forth — all of which may affect my client's larger issues. Ultimately, however, it's always up to the client to make the significant strategic decisions, and my job is to help the client make those decisions in a well-informed fashion to the extent I'm able.

John, I agree. If I didn't make that clear, 'twas my fault.

Wayne, I'm sure you're right about the CBS legal team (including inside and probably outside counsel) meeting 'round the clock on this. Part of what they're doing is laying the defensive groundwork for any anticipated civil litigation, and possibly (if they're smart) criminal or quasi-criminal action as well. An ounce of prevention, etc. My impression is that the recent reform litigation has cut back significantly on "strike suits" that are based on little more than precipitous share price drops; and Viacom has a lot of businesses, and it wouldn't surprise me if its CBS News division is probably running at a net loss anyway (what with all the money they're obviously spending on factchecking, document experts, etc.).

Which reminds me: Further (trivial) disclosure: I believe that a law firm I was of counsel to about four years ago represented Viacom on some non-CBS-related matters, and I may even have billed a few hours to some of them.

(10) teethgrinder made the following comment | Sep 13, 2004 8:50:56 AM | Permalink

Anyone care to comment on the mission of the FCC and FEC vis-a-vis the CBS story?

(11) Wayne Moore made the following comment | Sep 13, 2004 11:21:24 AM | Permalink

Beldar, Viacom, like most conglomerates, offers little useful info on its subs. In its 10K's and annual reports it lists revenue and income for "TV" including CBS, UPN, and the network owned stations. See beginning on page 57. It is possible/likely that the only profitable area in all of Viacom TV is syndication. I am aware that there is great pressure on CBS News to generate profits. Are they there? I do not know.

Viacom TV contributes 29% of total Viacom revenue and 33% of profits. CBS News likely contributes less than 3% of revenue and essentially none of the profits. The company's stock is currently at a P/E ratio of 35. Company reputation can be more important than current/projected earnings in justifying such a premium. The market is irrational in the short and medium term. A scandal could cause a significant price drop without regard to earnings impact.

As a retired manager of a publiclly traded company, I'm well aware of the pressure on senior management to keep share price up. Both earnings and public perception are important; equally important. A poorly managed public relations issue can be as serious a blow as share price.

Even with recent changes in laws, class action sharholder suits for share price reductions due to mis-handled scandal are likely to be successful. Viacom, IMHO - as a non-lawyer, has no significant legal liability until/unless RatherGate results in a large share price reduction based on public relations issues.


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