By Helen Coster

WILMINGTON, Delaware (Reuters) -The start of Dominion Voting Systems' $1.6 billion defamation trial against Fox has been pushed back by a day, the judge said on Sunday, with a source familiar with the matter saying the media giant was pursuing settlement talks.

The source, who was not authorized to speak publicly, told Reuters that Fox was seeking a possible settlement. The Washington Post and the Wall Street Journal also reported that Fox was pursuing settlement talks, citing sources.

Dominion is suing Fox Corp and Fox News in a defamation lawsuit over the network's coverage of the 2020 U.S. presidential election.

"The Court has decided to continue the start of the trial, including jury selection, until Tuesday, April 18, 2023 at 9:00 a.m.," Judge Eric Davis said in a statement, without providing a reason for the delay.

"I will make such an announcement tomorrow at 9:00 a.m. in Courtroom 7E," he added.

Davis had said on Thursday he expected to conclude jury selection on Monday and to proceed to opening statements.

Dominion and Fox declined to comment on the delay.

Davis on Wednesday sanctioned Fox News, handing Dominion a fresh chance to gather evidence after Fox withheld records until the eve of the trial.

The evidence includes recordings of Rudy Giuliani, former President Donald Trump's lawyer, saying in pre-taped Fox appearances that he did not have any evidence to back up the false allegations of election rigging by Dominion in the 2020 race that are at the heart of the lawsuit.

The recordings were made by a former Fox employee who is currently suing the network.

Davis said he would also very likely tap an outside investigator to probe Fox's late disclosure of the evidence and take whatever steps necessary to remedy the situation, which he described as troubling.

Fox said in a statement on Wednesday that it "produced the supplemental information" to Dominion "when we first learned it."

Most Closely Watched

The trial is one of the most closely-watched U.S. defamation cases in years, involving a leading cable outlet with numerous conservative commentators.

Murdoch is set to testify, along with a parade of Fox executives and on-air hosts, including Tucker Carlson, Sean Hannity, and Jeanine Pirro.

The trial is considered a test of whether Fox's coverage crossed the line between ethical journalism and the pursuit of ratings, as Dominion alleges and Fox denies.

Dominion has accused Fox of ruining its reputation by airing baseless and conspiracy-based claims that its machines secretly changed votes in favor of Democrat Joe Biden, who defeated then-President Trump, a Republican, in the 2020 presidential election.

Dominion is asking for $1.6 billion in damages, a figure Fox has said is unrealistic and based on flawed economic modeling.

An expert report commissioned by Dominion attributed scores of lost contracts to Fox's coverage, though much of the report remains under seal.

Fox Corp reported nearly $14 billion in annual revenue last year.

Dominion has said Fox's conduct was damaging to American democracy and that the network must be held accountable, while Fox said on Friday that Dominion's lawsuit is a threat to press freedom.

"While Dominion has pushed irrelevant and misleading information to generate headlines, Fox News remains steadfast in protecting the rights of a free press," the network said in a statement.

The primary question for jurors is whether Fox knowingly spread false information or recklessly disregarded the truth, the standard of "actual malice" that Dominion must show to prevail in a defamation case.

Dominion says defamatory statements were aired without correction on Fox shows including Sunday Morning Futures, Lou Dobbs Tonight and Justice with Judge Jeanine.

Dominion alleges that Fox staff, ranging from members of the newsroom to the board of directors, knew the statements were false but continued to air them to avoid losing viewers to even more far-right outlets.

Dominion also cites evidence that some hosts and producers thought the guests spreading the false statements, including former Trump attorneys Rudy Giuliani and Sidney Powell, could not back up their allegations or were even demented.

Fox had argued that coverage of the vote-rigging claims was inherently newsworthy and protected by the U.S. Constitution's First Amendment guarantee of press freedom.

Davis rejected that argument in a ruling last month on both parties' competing motions for summary judgment.

Fox has also said that Dominion cannot pin actual malice on the individuals whom the plaintiff says were responsible for the defamatory statements.

Fox has said Dominion must prove that a "superior officer" at the network or its parent company "ordered, participated in, or ratified" wrongdoing. The network has argued that doubts about the claims among certain individuals cannot be attributed to the organization as a whole.

(Reporting by Helen Coster and Dan Whitcomb; additional reporting by Leela de Kretser and Jack Queen; Editing by Noeleen Walder and Jamie Freed)