Case Tests Limits of Law Protecting Journalists’ Sources

Case Tests Limits of Law Protecting Journalists’ Sources

By ALAN FEUER JUNE 21, 2017

In 1970, when Gov. Nelson A. Rockefeller signed legislation protecting New York journalists from being forced to reveal their anonymous sources, he issued a memo describing freedom of the press as “one of the foundations upon which our form of government is based.”

As “the nation’s principal center of news gathering,” he wrote, New York would become under the statute — known as the Shield Law — “the only state that clearly protects the public’s right to know.”

But as any newshound knows, media outfits have changed enormously in the past half-century, with some adopting innovative — and more obviously commercial — tactics for charging customers for information. And now a civil case pending in a state appeals court is testing the limits of the Shield Law by posing the question of whether small, subscriber-based news organizations can avail themselves of its protections.

The case began in August when Reorg Research Inc., a Manhattan-based corporate intelligence company, sent two news alerts to its subscribers — many of them hedge fund managers and professional investors — with breaking articles about Murray Energy Corporation, one of the country’s largest coal mining operations. The alerts, both of which were based on information from anonymous sources, claimed that Murray had recently reached an important collective bargaining agreement with its workers and described some details of internal negotiations that the company had held with its debt holders.

According to court filings, executives at Murray suspected that the unnamed sources were some of its own investors who, the executives believed, had revealed the information despite having signed confidentiality agreements. And in September, the company sought an order from a New York State Supreme Court judge to force Reorg to disclose the investors’ identities so that Murray could sue them for breach of contract.

Murray Energy has a history of waging legal battles against media organizations.

Last month, Murray Energy sued The New York Times over two statements: one saying the company’s founder, Robert Murray, falsely insisted that a fatal mine collapse had been caused by an earthquake and a second saying Murray Energy was a serial violator of mining regulations. The Times has moved to dismiss. Murray Energy also sent a cease and desist letter to the comedian John Oliver this month as Mr. Oliver was preparing to air a mocking segment on the company.

Reorg Research was begun in 2013 by its chief executive, Kent Collier, who said in his own court filings that the company had about 375 subscribers who “manage trillions of dollars in assets” and pay him handsomely for his services. Subscriptions to the company’s reports cost between $30,000 and $120,000 a year, Mr. Collier said in the papers, depending on the size of the organization that buys them. Subscribers are not allowed to share the information they get from Reorg with anyone, even after their subscriptions end.

Despite this narrow business model, Reorg claimed that it was a traditional media organization and argued that the Shield Law protected it from having to divulge the names of its sources. To bolster its case, it filed an affidavit from Paul Steiger, a former top editor at The Wall Street Journal who went on to found ProPublica, an investigative news organization. In his affidavit, Mr. Steiger said he was concerned about the precedent that might be set by compelling Reorg to reveal its sources.

“To force disclosure of confidential sources would seriously harm the ability of Reorg Research — and by fear of precedent, all journalistic organizations — to produce and unearth information of great value to the public interest,” Mr. Steiger wrote.

In February, Justice Carol R. Edmead ruled in Murray’s favor, ordering Reorg to disclose its sources. In her decision, Justice Edmead wrote that while “extraordinary protections are afforded to the press by our laws,” companies like Reorg, which cater to select, wealthy clients, “do not carry out the vital function of informing the public.” Indeed, she added, Reorg’s business model “deliberately keeps its information from reaching the general public.”

When Reorg filed an appeal in March, it was joined by several media outfits, like Reuters, Politico and The Economist, all of which argued that the news business had changed and now includes organizations — themselves, among them — that provide different tiers of information, some of which is available to the public free or at low cost but some of which is sold at a premium. Politico, for example, runs both its website, Politico.com, and Politico Pro, which is for paid subscribers only.

“Journalism comes in all shapes and sizes, with the universal goal of publishing truthful, newsworthy information,” the companies wrote. “All are deserving of the application of the Shield Law.”

Jude Gorman, Reorg’s general counsel, said on Tuesday that if the appeals court rules in Murray’s favor, companies like his own will face “massive uncertainty” about how to cover news with anonymous sources. “This would be another tool for powerful entities that don’t want people covering what they do,” Mr. Gorman said.

“Reorg Research has repeatedly obtained and profited from the distribution of Murray Energy Corporation’s confidential financial information, in breach of Murray Energy’s legally enforceable confidentiality agreements,” the company said in a statement on Tuesday. “We are pleased that the New York Supreme Court agreed that Reorg does not disseminate this information to the public, but rather sells it in confidence to an exclusive subscriber base and is, therefore, not entitled to the protections of the Shield Law.”


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