The Times now faces massive exposure in the Steven Hatfill libel case against columnist Nicholas ‘I Might Have Gotten it Right’ Kristof.
This feels like a massive overstatement to me. I can’t find any good analysis on the ‘net of the Times’ exposure: because it is a federal case, there was no ad damnum. A quick look around suggests that libel verdicts don’t get to be much more than $50 M (at least, those that stand up don’t). Moreover, Virginia (I believe) caps punitives at $350,000. I suppose such a cap would apply in this diversity case if VA law applied (the extent it does instead of NY law is yet to be resolved.) Putting that aside, and assuming a high damage award, the Times’ expected liability has to be discounted by the probability of its losing at trial in a traditionally pro-defendant jurisdiction. Just a guess, but I’d put the resulting probable exposure at less than $10,000,000. (I may be missing many parts to this analysis. Readers are free to chime in).
If I’m nearly right, in light of the corporation’s $250 million 2005 net income, do you think this case is keeping the CFO up at night? I don’t. I tried without luck to find any mention of a Hatfill reserve in the Times’ recent SEC filings. The only discussion of pending litigation contains “no material adverse impact” language, which is surprisingly general. If you want to know the risks that the Times thinks its shareholders should care about, check out this scary page. Bottom line: litigation isn’t the problem, the web is.