By Jonathan Stempel
NEW YORK (Reuters) -Fox Corp, the parent of Fox News Network, failed to convince a New York state appeals court to dismiss a defamation claim in electronic voting systems company Smartmatic's $2.7 billion lawsuit over the network's 2020 post-election coverage.
A five-judge panel of the Appellate Division in Manhattan ruled on Thursday that Smartmatic sufficiently alleged the Fox parent was directly liable for on-air statements suggesting Smartmatic helped rig the 2020 U.S. presidential election to favor Democrat Joe Biden over Republican Donald Trump.
Claims that the parent directed on-air talent to undertake a disinformation campaign, and played an active role in coverage, "sufficiently allege Fox Corporation's 'direct liability' for the challenged defamatory statements," the court said.
The appeals court also said Smartmatic's failure to allege that the Fox parent "wholly dominated" Fox News Network meant the parent could not be liable for defamation on that basis.
"We will be ready to defend this case surrounding extremely newsworthy events when it goes to trial," Fox Corp (NASDAQ:FOXA) said in a statement. "Smartmatic's damages claims are implausible, disconnected from reality, and on their face intended to chill First Amendment freedoms."
J. Erik Connolly, a lawyer for Smartmatic, in a statement said the parent company "must now answer for its actions at trial."
Smartmatic claimed that Fox broadcast lies about its technology to boost ratings, and keep Trump supporters from defecting to right-wing networks Newsmax and One America News.
The company has said it provided technology for the 2020 election only to Los Angeles County, which Biden won. Smartmatic has offices in London and in Boca Raton, Florida.
Other defendants include host Maria Bartiromo and the estate of late host Lou Dobbs.
In April 2023, Fox reached a $787.5 million settlement in a similar defamation lawsuit by voting technology company Dominion Voting Systems, as a trial in Delaware was about to begin.
The case is Smartmatic USA Corp et al v Fox Corp et al, New York State Supreme Court, Appellate Division, 1st Department, No. 2024-01388.