Is Murdoch free to destroy tabloid’s records?
After this post was published, News Corp indicated that it did not plan any liquidation of assets in connection with the shutdown of the News of the World newspaper. In the absence of a liquidation, the scenario laid out by Mark Stephens does not apply.
By Alison Frankel
The views expressed are her own.
Here’s some News of the World news to spin the heads of American lawyers. According to British media law star Mark Stephens of Finers Stephens Innocent (whom The Times of London has dubbed “Mr Media”), Rupert Murdoch’s soon-to-be shuttered tabloid may not be obliged to retain documents that could be relevant to civil and criminal claims against the newspaper—even in cases that are already underway. That could mean that dozens of sports, media, and political celebrities who claim News of the World hacked into their telephone accounts won’t be able to find out exactly what the tabloid knew and how it got the information.
If News of the World is to be liquidated, Stephens told Reuters, it “is a stroke of genius—perhaps evil genius.”
Under British law, Stephens explained, all of the assets of the shuttered newspaper, including its records, will be transferred to a professional liquidator (such as a global accounting firm). The liquidator’s obligation is to maximize the estate’s assets and minimize its liabilities. So the liquidator could be well within its discretion to decide News of the World would be best served by defaulting on pending claims rather than defending them. That way, the paper could simply destroy its documents to avoid the cost of warehousing them—and to preclude any other time bombs contained in News of the World’s records from exploding.
“Why would the liquidator want to keep [the records]?” Stephens said. “Minimizing liability is the liquidator’s job.”
That’s a very different scenario, Stephens said, from what would happen if a newspaper in the U.S. went into bankruptcy. In the U.S., a plaintiff (or, for that matter, a criminal investigator) could obtain a court order barring that kind of document destruction. In the U.K., there’s no requirement that the estate retain its records, nor any law granting plaintiffs a right to stop the liquidator from getting rid of them.