Is Dominion’s case against Fox News really worth as much as $1.6 billion?

As Fox Corp defends itself against a high-profile defamation lawsuit brought by Dominion Voting Systems, the network is questioning how the once-obscure company could claim it deserves to be awarded more than $1.6 billion in damages.

Dominion was thrust into the national spotlight in the wake of the 2020 election, when Fox hosts aired debunked conspiracy theories claiming that Dominion’s voting machines were used to rig the outcome against Republican former President Donald Trump and in favor of the winner, Democrat Joe Biden.

The voting technology company made the eye-popping damages claim as part of its 2021 lawsuit, which alleges Fox destroyed its reputation by airing falsehoods. Fox says its statements were inherently newsworthy and protected by the First Amendment of the U.S. Constitution.

Fox has said in legal filings that Dominion’s damages request is “untethered from reality” and designed to enrich the company’s investors, who according to Fox purchased the company for $80 million in 2018.

A five-week trial is set for April 17 in Delaware, though the case could still settle.

Some experts not involved in the litigation said Dominion appears to have a strong case that it was defamed, and suggested Fox is raising the damages issue in an attempt to reduce the amount it would have to pay if it loses.

“It could be a Pyrrhic victory here, where there’s a declaration that there was false information published or broadcast, but damages will be a nominal award,” said Roy Gutterman, director of the Tully Center for Free Speech at Syracuse University’s Newhouse School for Public Communications.

A Dominion spokesperson said in a statement that the evidence will show Dominion was a “valuable, rapidly growing business” when Fox began “endorsing baseless lies” about its machines.

“Following Fox’s defamatory statements, Dominion´s business suffered enormously, and its claim for compensatory damages is based on industry-standard valuation metrics and conservative methodologies,” the statement read.

A Fox representative referred Reuters to the company’s legal filings and prior public statements on the matter, in which it has claimed that evidence obtained during discovery “thoroughly debunked” Dominion´s damages claim.

Troves of documents recently unsealed in the case contain statements by Fox Corp Chair Rupert Murdoch and other Fox executives and hosts that Dominion says prove that Fox knowingly spread lies about it to bolster ratings. Fox has accused Dominion of cherry-picking statements and taking them out of context.

Dominion, a Denver-based private company, does not make its finances public. In an expert report commissioned by the company and unsealed on March 7, Dominion says it sustained $921 million in damage to its overall value as a business, in addition to $88 million in lost profits. Dominion is also seeking $600 million in lost future profits and an unspecified amount of punitive damages to be determined by a jury.

To support its numbers, Dominion claims that at least 20 customers terminated or declined to renew their contracts with Dominion after the 2020 election, and the company says it lost business opportunities with another 39 election jurisdictions as a result of Fox’s coverage.

Dominion employees said they believed that all customers that cut ties with the company were reacting to false vote-rigging claims, according to the report, only portions of which have been made public.

Reuters could not independently verify Dominion’s claims.

Fox has argued in court filings that Dominion’s damages estimate is “fanciful” and based on “faulty assumptions,” including that Dominion will “cease to exist after 2031” due to lost business. The network asserts the impact of election coverage on Dominion´s business was minimal, citing a December 2020 email in which the company´s CEO said, “No customer cares about the media.”

A Fox filing also claims that Dominion´s independent auditor said in 2022 it had not seen “any indicators to suggest the market value/price of the business has decreased.” The underlying evidence for this claim is sealed.

Dominion was acquired by private equity group Staple Street Capital at a roughly $80 million valuation in 2018, according to a Fox filing. Four different pre-election valuations of Dominion in 2020 averaged $226 million, Fox said, citing exhibits that have not been made public.

In court filings, Fox cites a December 2020 text from a former Staple Street employee to a current executive saying, “Would be pretty unreal if you guys like 20x’ed your Dominion investment with these lawsuits.”

One expert said a jury is likely to look at the business a company lost when assessing past damages, but calculating future reputational harm is trickier.

“That’s where you’ll probably have a battle of the experts trying to quantify reputational harm going forward, but it should be at least in part based on business modeling,” said Mary-Rose Papandrea, professor of constitutional law at the UNC School of Law.

If the jury concluded that Fox defamed Dominion but decided Dominion’s business losses were minimal, it could still hit the company with significant punitive damages.

“Even if Dominion shows that the actual damages are not traceable to their publication specifically, if you get punitives, that can multiply the amount dramatically,” Papandrea said.