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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