One of the oldest American fact-checking projects has regained control of its hosting and majority control of its parent company. But an ongoing legal battle over its ownership isn’t likely to resolve anytime soon.
That’s according to David Mikkelson, founder and editor of Snopes.com. He told Poynter that a trial date for its ongoing legal dispute with the digital services company Proper Media has been set for August — exactly one year after the lawsuit’s first hearing.
But let’s back up. Over the summer, a legal skirmish began when Proper Media, which initially did some development work for Snopes on contract, filed a complaint against Bardav Inc. — the company behind the debunking site — for what it called “a lengthy scheme of concealment and subterfuge to gain control of the company and to drain its profits.” Bardav filed a cross-complaint alleging that Proper Media was keeping its site hostage.
In August, Poynter reported that the heart of the messy legal fight resided in three questions: “Who owns Snopes? Did Bardav CEO David Mikkelson have the right to cancel the company's contract with Proper Media? And is Mikkelson fit to own the company?” And it seems that Bardav has already won at least two of the three questions.
In an update last week, Snopes published a timeline of its alleged legal victories against Proper Media over the past several months. From being granted a temporary restraining order against Proper Media in July to regaining control of its advertising platform and hosting in October, things have generally played out in Bardav’s favor.
Here’s the timeline, as portrayed by Snopes. Proper Media's attorney confirmed the basic details, while disputing the outlook of the last two bullets:
- On 12 July 2017, the Superior Court of California, County of San Diego, granted our request for a Temporary Restraining Order in favor of Bardav, Inc. (Snopes.com’s parent corporation) and against Proper Media. As a result, Proper Media released $100,000 in revenue procured from the placement of advertisement on the Snopes.com website that they had been withholding. The court’s order provided much-needed funds that allowed Snopes.com to continue operating without having to lay off any staff.
- On 22 August 2017, the Superior Court granted our request for a Preliminary Injunction against Proper Media and its principals. The injunction required Proper Media to transfer hosting of the Snopes.com web site back to our control and to cease withholding from us revenues procured from the placement of advertisements on the Snopes.com website. On the same day that our motion for preliminary injunction was granted, the court denied Proper Media’s request for an order that would have forced Bardav to continue a business relationship with Proper Media, and denied Proper Media’s request to remove David Mikkelson from Bardav’s board of directors.
- On 18 October 2017, we successfully migrated Snopes.com to a new hosting provider and regained control of our advertising revenue stream.
- On 15 February 2018, the Superior Court ruled that Proper Media is not a Bardav shareholder, and upheld the appointment of Brad Westbrook to Bardav’s board of directors.
- On 22 February 2018, the Superior Court entered a judgment in favor of David Mikkelson dismissing all causes of action brought against him by Proper Media.
The post was also published to Snopes’ GoFundMe page, which launched in July in an effort to raise $500,000 for legal fees and operating costs the fact-checker said it needed while Proper Media was withholding advertising revenue. It raised the money in one day.
Now, Snopes is asking its readers to contribute $2 million so it can stay afloat.
“We still face significant challenges,” the explanation reads. “As our efforts continue, so does our need for funding to sustain our ongoing operations, cover our legal fees and help us expand to stem the rising tide of misinformation.”
Contributions to Snopes’ GoFundMe, which had stagnated around August and had grown to a little more than $740,000 as of publication, will be used to pay its ongoing legal fees, Mikkelson said. While it’s an eye-popping figure, $2 million is not necessarily an unlikely cost of legal counsel in private suits.
Michael Chasalow, director of the Small Business Clinic at the University of Southern California's Gould School of Law, told Poynter that, assuming Bardav is working with some of the best corporate defense lawyers, it’s not unlikely that the company’s fees could cost millions.
“If someone is threatening your very existence, you want the best lawyers,” he said. “I’m sure Snopes is using every legal resource available to them because it involves their survival. And for that to cost millions of dollars is shocking but not surprising.”
But despite the update’s air of hopefulness, and Snopes’ fundraising success, Proper Media’s attorney disputes its outlook entirely.
“David Mikkelson’s recent update to the GoFundMe page is highly misleading, and it is disheartening to see David and (Vice President of Operations) Vinny Green abuse the Snopes brand by raising funds under false pretenses, without releasing all the facts,” Karl Kronenberger told Poynter in an email.
Among the update’s misleading claims is the notion that the court dismissed all “causes of action” by Proper Media against Mikkelson, Kronenberger said. In fact, it replaced Proper Media as a plaintiff in the case with individual Bardav shareholders Chris Richmond and Drew Schoentrup — who both work at Proper Media — as part of a technical move.
Richmond and Schoentrup became partial owners of Bardav after purchasing portions of a 50 percent share from former Bardav co-owner Barbara Mikkelson, David’s ex-wife. Green purchased another portion of that share and later left Proper Media for Snopes, pushing Bardav into majority control of the company.
Kronenberger said Richmond and Schoentrup's claims of corporate waste, breach of fiduciary duty, intentional interference with contract and removal of director against Mikkelson — whom he compared to an elephant with a coprophagous condition — still stand. His clients’ goal is to limit his influence at Bardav because they feel like he’s “hurting the brand.”
“I think the position has stayed the same with what Proper Media wants — it wants to protect its investment,” Kronenberger said.
And Chasalow said that, while it appears the court has ruled in favor of Bardav when it comes to the ownership part of the lawsuit, Richmond and Schoentrup could still have a case against Mikkelson.
“Basically they’re saying that, as shareholders, they don’t like how he has been acting as someone on the board of directors. And shareholders do have a right to bring a claim,” Chasalow said.
Stemming from Proper Media’s claims against Mikkelson is an argument that he is unfit to run the company — the third question that could help determine the lawsuit’s outcome. Kronenberger told Poynter that was Proper Media’s primary argument, and that the court’s rulings in favor of Bardav could potentially be reversed by a later finding in their favor.
“These rulings are only preliminary, and as discovery continues more evidence is surfacing that may well change these early decisions and additionally result in David reimbursing Bardav for various expenses,” he said. “There are also important questions to ask about the viability of Bardav under its current management.”
That primary argument rests upon accusations about Mikkelson’s past behavior, particularly as it relates to a Daily Mail article from December 2016 that reported he had used company money to pay for his honeymoon, fund his divorce expenses and buy prostitutes. A September profile of Snopes in Wired also shed light on David and Barbara’s messy divorce.
Barbara Mikkelson declined to comment for this story.
David Mikkelson has disputed the allegations and — in addition to August’s ruling against removing him as Bardav director — it’s unlikely they’ll have a major effect on the suit.
“I think those claims arose before the Proper people became shareholders,” Chasalow said. “So I’m not even sure that those are the strongest of claims.”
Ultimately, he doubts that Proper Media will successfully show that Mikkelson is unfit to run Bardav.
“Those standards are relatively high. So as long as David is acting in the best interests of the company and in good faith, his position is relatively strong,” Chasalow said. “Nothing is jumping out at me that this is a significant claim that this is going to fell Snopes.”
Clarification: A previous version of this story stated that some of Proper Media’s claims against Mikkelson still stand. It's more accurate to say that the claims of individual Proper Media employees Richmond and Schoentrup still stand, as they're now the primary plaintiffs on the case.