News Corp. Plays Chicken with Plaintiffs

A News Corp. (NWS) unit, News Group Newspapers, has been sued more than two dozen times by actors, athletes, and politicians after allegations that journalists at its News of the World tabloid newspaper illegally accessed mobile-phone voice-mail messages for story tips. Its legal strategy? Apologize, offer plaintiffs generous pretrial settlements that are risky to refuse in the British legal system, and hope the whole episode fades from public view.

On Apr. 8, News International, another unit of News Corp. and publisher of News of the World, issued a statement expressing "genuine regret" and said it would set up a "compensation scheme with a view to dealing with justifiable claims fairly and efficiently." The apology came after the arrest of two reporters and an ex-news editor at the paper. On May 13, News of the World agreed to a £100,000 ($161,000) settlement with actress Sienna Miller of Alfie and G.I. Joe fame. Her ex-fiancé, Jude Law, who starred in Sherlock Holmes, and her stepmother, Kelly Hoppen, tentatively plan to take their lawsuits to trial.

Lawyers following the case say these plaintiffs will have a strong incentive to settle if the media conglomerate makes a generous financial offer. Under British law, if a plaintiff or defendant turns down a pretrial settlement offer and then loses or wins a lower sum in court, he or she is liable for the other party's legal costs. Niri Shan, head of media at London law firm Taylor Wessing, says News Corp.'s legal bill could reach £400,000 in the Law and Hoppen cases.

By offering to settle with Miller and in other earlier cases on "overgenerous, irresistible" terms, News Corp. has effectively shut down the case, says Duncan Lamont, a media lawyer at Charles Russell in London. Even though trials have been scheduled for next year, "it will all be over by Christmas," he says. Mark Thomson, the lawyer who represents both Miller and Law, didn't respond to messages seeking comment. News of the World spokeswoman Hayley Barlow and News International spokesperson Daisy Dunlop declined to comment.

Miller's settlement offer was higher than the record £60,000 privacy verdict won by former Formula 1 Chief Max Mosley following a News of the World story that claimed he took part in a Nazi-themed orgy. Thomson, the lawyer for Miller, said the case might be worth as much as £400,000 at a hearing in early May, prior to settling the case. News Corp. has set up a £20 million fund to compensate victims, according to a person familiar with the matter. A police investigation into the phone hacking continues.

The bottom line: A News Corp. tabloid has settled in a lawsuit tied to its phone-hacking scandal—and more payouts are expected.

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