Fox seeks deposition of litigation funder in Smartmatic defamation case

LinkedIn founder Reid Hoffman may become the first litigation funder to sit for a deposition ahead of a potential trial that he has funded, after Fox Corp. lodged a discovery petition in their defense against voting technology company Smartmatic's defamation lawsuit.

Hoffman revealed last July that he funded Smartmatic's defamation case against Fox to the tune of $25 million. Smartmatic seeks damages of $2.7 billion in a case that claims Fox spread a conspiracy theory that the company rigged the 2020 U.S. presidential election.

Fox's petition claims that the "source, amount, and terms" of any litigation-funding agreement may be needed in discovery to support the broadcaster's anti-SLAPP counterclaim.

Douglas Mirell, well known for his representation of wrestler Hulk Hogan in a privacy lawsuit against the Gawker media site that was in part funded by tech billionaire Peter Thiel, said it was unusual for a litigation funder to even be identified, let alone become a third-party witness.

Mirell, a partner at Nolan Heimann LLP in Encino, suggested another reason for the petition could be to create a "chilling effect" on the broader action of litigation funding.

"It's quite unusual for a litigation funder to even be identified, much less become a third-party witness to a lawsuit," said Mirell. "I'm not familiar with any instance in which a third-party funder has sat or been required to sit for a deposition."

Smartmatic filed its defamation claims against Fox and two of President Donald Trump's former attorneys in February 2021 in the New York County Supreme Court, where the appellate division on Jan. 9 rejected Fox's motion to dismiss. Smartmatic USA Corp. V. Fox Corp., 151136/21 (N.Y.C. Supreme Ct., Appeal No. 3439 Case No. 2024-01388).

The petition for Hoffman's deposition filed on Jan. 29 in Santa Clara County - where LinkedIn is headquartered - seeks to compel him to provide discovery information about his funding of the case, Smartmatic's financial position and the strength of the company's claims against Fox. Fox Corporation et al. v Reid Hoffman, 25CV457677 (S.C. Super. Ct., filed Jan. 29, 2025).

"Frankly, I'm somewhat baffled why such a deposition would be necessary in this or any case," Mirell commented.

"It is possible that Fox is doing this to discourage Hoffman from providing further financial support for this litigation. If this deposition is allowed to proceed, it could well have a chilling effect upon individuals who would seek to fund all sorts of litigation in the future.

"The primary rationale that Fox has proffered for this deposition - that Hoffman should produce 'information relating to Smartmatic's financial condition' - doesn't appear particularly persuasive since that is information that Fox can seek directly from Smartmatic."

Fox takes issue with comments made to the Washington Post by Hoffman's adviser, Dmitri Mehlhorn, that "if not for the slander and smears," Smartmatic "could be a $400 million company." Fox claims he said this on behalf of Hoffman. This, Fox claims, is a "far cry" from Smartmatic's claimed damages of $2.7 billion, which the media company has labelled "pure fantasy."

Litigation funding expert and attorney Carol Langford of San Francisco said it was a "thorny" issue because of Mehlhorn's comments about the potential valuation of Smartmatic.

"But Hoffman is not Mehlhorn," Langford said in an email. "Hoffman can invest in anything he wants, for any reason he wants as long as he isn't, for example, acting criminally.

"The court needs to provide definitive and final guidance on the issue before Hoffman should produce (any discovery). Both are making arguments, and they are broad; Fox wants all information and Hoffman will produce none. They did try to resolve it. Now, it is up to the court. 

"Either way the court goes, it will be appealed," she predicted. "This means that the judge will really think about his order. This is good. Now, whether it creates bad or good law is another question. But questions like these need to be answered by courts who are not afraid to touch this electric third rail."

Attorneys for Fox, Brad Masters and Leah Hamlin of Kirkland & Ellis LLP, were contacted for comment but did not respond. Hoffman was also contacted for comment but did not respond.