Legal eagle take on Sinclair situation

Michael C. Dorf, writing in "FindLaw's legal commentary," has made a lawyerly analysis of the shareholder lawsuit being directed at Sinclair by Lerach Coughlin Stoia Geller Rudman Robbins LLP (10/20/04 RBR Daily Epaper #205). He contends that a content analysis of the program is necessary to determine if the Lerach case holds water.

He points out that a bona fide news organization will occasionally be compelled to air controversial material which may well offend and drive away a segment of the organization's audience - - in the long run, this is necessary to maintain the firm's reputation for journalistic competence, if not excellence, and in that regard is an appropriate long-term business decision even if it hurts in the short-term.

If, on the other hand, the damage suffered by Sinclair was due to its management's insistence on airing the program for their own personal political reasons, absent sufficient news value, then it would perhaps constitute a breach of management's fiduciary duty to its shareholders.

He says Maryland law assumes that corporate managers exercise business judgment in good faith, and cannot be held responsible for the business's ups and downs based on those decisions unless a breach of good faith can be demonstrated.

Thus, Lerach has to operate in a gray area. Whether "A POW Story" was a bona fide news program or a vehicle for the Smith family to pursue its own political ends is a matter on which there are many opinions.

Dorf concludes that if it can be shown that Sinclair "...made a reasonable journalistic decision...management should not be held liable for the financial fallout of the decision." On the other hand, if Lerach can show that it "...was such a departure from the standards of reasonable journalists that it can only be explained as a political rather than a journalistic judgment...recovery should be allowed."