In 2011 Crystal Cox lost a defamation trial in 2011 over a blog post she wrote accusing a bankruptcy trustee and Obsidian Finance Group of tax fraud. The lower court judge had found that Obsidian did not have to prove that Cox acted negligently because Cox failed to submit evidence of her status as a journalist. However, the 9th US Circuit Court of Appeals in San Francisco said Cox deserved a new trial, regardless of the fact that she is not a traditional reporter.
Judge Andrew Hurwitz wrote that the Supreme Court has accurately warned, a First Amendment distinction between the institutional press and other speakers is unworkable. Steven Wilker, an attorney for Obsidian said that Cox's false and defamatory statements had caused substantial damage to his clients, and he was evaluating his options with respect to the court's decision. If the case goes to a retrial, which is likely, Wilker will now have to prove that Cox had actual knowledge that her post was false when she published it. The court had no great love of Cox. According to the court's opinion, Cox has a history of making allegations of fraud and other illegal activities "and seeking payoffs in exchange for retraction."
In 2008, Summit Accommodators hired Obsidian, a firm that advises distressed businesses. When Summit filed for bankruptcy, the court appointed an Obsidian principal, Kevin Padrick, as trustee. However Cox claimed that Padrick was guilty of tax fraud in failing to pay $174,000 in taxes owed by Summit. In the original trail, US District Judge Marco Hernandez in Oregon rejected Cox's First Amendment defences, and a jury awarded Padrick and Obsidian a combined $2.5 million.
The 9th Circuit found that the tax fraud allegations were a matter of public concern, which means Obsidian had to show evidence of negligent behaviour by Cox. The allegations against Padrick and his company raised questions about whether they were failing to protect the defrauded investors because they were in league with their original clients, Judge Hurwitz wrote.