Contract analysis

I. INTRODUCTION Defendants Grizzly Peak Research LLC ("GPR"), Grizzly Peak Capital Partners LP ("GPCP"), and Tobias "Toby" Fenchurch (collectively, "Defendants") have moved for summary judgment on all four causes of action in the First Amended Complaint ("FAC"), which was filed on March 18, 2024. (Defs.' Mot. for Summ. J. ("MSJ"), filed Oct. 22, 2024.) Defendants' motion should be denied in its entirety. Far from est

II. STATEMENT OF FACTS The following facts are drawn from the declarations, deposition testimony, documentary evidence, and expert reports filed herewith and cited in the accompanying Separate Statement of Undisputed and Disputed Material Facts. A. The Parties

1. Plaintiff Redstone Gaming Corp. Plaintiff Redstone Gaming Corp. ("RGC") is a Nevada corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol RDGM. (Declaration of Marcus J. Calloway ("Calloway Decl."), ¶ 3; Declaration of Priya Ramaswaran ("Ramaswaran Decl."), ¶ 4.) RGC is headquartered at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. (Calloway Decl., ¶ 3.) Its registered

2. Defendant Grizzly Peak Research LLC Defendant Grizzly Peak Research LLC ("GPR") is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. (Deposition of Tobias Fenchurch ("Fenchurch Dep."), Aug. 20, 2024, at 27:3–14.) GPR is in the business of publishing short-seller research reports—reports that make negative allegations about publicly traded

3. Defendant Grizzly Peak Capital Partners LP Defendant Grizzly Peak Capital Partners LP ("GPCP") is a Delaware limited partnership whose general partner is Grizzly Peak Capital GP LLC. (Fenchurch Dep. at 33:4–16.) The sole managing member of Grizzly Peak Capital GP LLC is defendant Tobias Fenchurch. (Id. at 33:17–21.) GPCP is an affiliated hedge fund that held the short position in RDGM at issue in this litigation.

4. Defendant Tobias Fenchurch Defendant Tobias Fenchurch ("Fenchurch") is an individual who serves as the Managing Member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP. (Fenchurch Dep. at 27:18–20, 33:17–21.) Fenchurch personally directed the publication of all three reports at issue and personally directed the timing of GPCP's short position in RDGM. (Id. at

1. Report 1 — "House of Cards: Redstone Gaming's Manufactured Earnings" (February 7, 2024) The first report, running approximately 48 pages, was published on February 7, 2024. (Ex. 1.) Report 1 alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. (Id. at 3, 7–12, 22–31.) The report purported to identify specific transactions and accountin

2. Report 2 — "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (February 14, 2024) The second report, running approximately 36 pages, was published one week later on February 14, 2024. (Ex. 2.) Report 2 alleged that RGC had manipulated its proprietary random-number-generator ("RNG") software to inflate payout statistics reported to the Nevada Gaming Control Board. (Id. at 4, 8–16.) The report claime

3. Report 3 — "Double Down on Fraud: Redstone's Related-Party Shell Game" (February 21, 2024) The third and final report, running approximately 29 pages, was published on February 21, 2024. (Ex. 3.) Report 3 alleged that CEO Marcus J. Calloway had engaged in undisclosed related-party transactions with a purported shell entity called "Vermilion Holdings LLC." (Id. at 3, 6–14.) The report claimed that Calloway secretly

4. Short-Position Disclosure Each of the three reports contained a standard disclaimer, typically located on the final page, disclosing that GPR and its affiliates maintained short positions in RDGM common stock. (Exs. 1, 2, 3 [disclaimer pages].) discovery has confirmed that GPCP held approximately 680,000 shares of RDGM short at the time of the first report's publication. (Ex. 13 [GPCP Trading Records]; Fenchurch D

1. Revenue-Fabrication Allegation Disproven The central allegation in Report 1—that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions—is demonstrably false. Pinnacle Audit & Advisory LLP, RGC's independent auditor under the direction of engagement partner Walter Ng, CPA, issued clean, unqualified audit opinions on RGC's consolidated financial statements for fisc

2. RNG-Manipulation Allegation Disproven The central allegation in Report 2—that RGC manipulated its RNG software to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB")—is also demonstrably false. The NGCB completed an independent audit of RGC's RNG systems on March 29, 2024, and issued a clearance letter confirming that RGC's systems complied fully with all applicable regulatory requiremen

3. Related-Party Allegation Disproven The central allegation in Report 3—that CEO Marcus J. Calloway engaged in undisclosed related-party transactions with Vermilion Holdings LLC—has likewise been disproven. Following the publication of Report 3, the SEC opened an informal inquiry in March 2024 to investigate the Vermilion Holdings allegations. (Declaration of Derek Olafson ("Olafson Decl."), ¶ 11.) After several mon

4. RGC's Regulatory-Response Costs As a direct result of Defendants' publications, RGC was forced to incur substantial out-of-pocket costs to defend its reputation, respond to regulatory inquiries, and reassure investors, customers, and business partners. These costs are documented as follows: • Crisis Communications: RGC retained Crestline Equity Partners Group Inc. (lead contact: Simone Arecchi) to manage the crisi

III. LEGAL STANDARD Summary judgment is appropriate only when "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Cal. Code Civ. Proc. § 437c(c).) Summary judgment "is a drastic measure which deprives the losing party of a trial on the merits," and the procedure "should be used with caution so that it does not

IV. ARGUMENT A. Triable Issues of Material Fact Exist on the First Cause of Action: Trade Libel (Cal. Civ. Code § 46(3)) Trade libel—also known as injurious falsehood—occurs when a defendant publishes a false statement of fact that is harmful to the interests of another, with knowledge of the statement's falsity or reckless disregard for its truth or falsity, and the publication results in special damages. (Rest.2d T

1. Defendants' Statements Were Statements of Fact, Not Protected Opinion Defendants devote substantial portions of their moving papers to the argument that their reports are "expressions of opinion" or "commentary" protected by the First Amendment and Article I, section 2 of the California Constitution. (MSJ at 12–17.) This argument is both legally deficient and factually unsupported. The distinction between actionab

2. The Statements Were False Defendants next argue that their statements were "substantially true" or based on "reasonable interpretations of publicly available data." (MSJ at 18–22.) This argument is belied by the evidence. The doctrine of substantial truth provides a defense only where "the substance, the gist, the sting" of the allegedly defamatory statement is true. (Masson v. New Yorker Magazine, Inc. (1991) 501

3. Defendants Published with Actual Malice RGC acknowledges that, as a publicly traded company that is arguably a public figure for limited purposes, the actual-malice standard applies to its trade-libel claim. (See New York Times Co. v. Sullivan (1964) 376 U.S. 254, 279–280; Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 342.) Under this standard, RGC must demonstrate that Defendants published the false statements

4. Defendants' Statements Caused Special Damages Trade libel requires proof of special damages—that is, pecuniary loss directly attributable to the defendant's false statements. (Rest.2d Torts § 623A; ComputerXpress, 93 Cal.App.4th at 1010–1011.) Defendants argue that any decline in RDGM's stock price was attributable to general market conditions rather than to their reports. (MSJ at 28–32.) This argument is refuted

1. Economic Relationships RGC has extensive existing and prospective economic relationships with gaming patrons, technology licensees, institutional and retail investors, joint-venture partners, entertainment-industry counterparties, and numerous other business entities and individuals across its eleven casino-resort properties and three business divisions. (Calloway Decl., ¶¶ 28–34.) The FAC identifies specific disr

2. Knowledge and Intent Defendants knew that publishing allegations of criminal fraud against a publicly traded gaming company—allegations including revenue fabrication, RNG manipulation, and undisclosed related-party transactions—would disrupt RGC's existing and prospective business relationships. This knowledge is virtually self-evident from the nature of the allegations. Accusations of this kind strike at the very

3. Wrongful Conduct The "independently wrongful" act is the publication of false statements with actual malice—that is, trade libel, as established in Section IV.A above. (Overstock.com, 151 Cal.App.4th at 717 [holding that trade libel constitutes an independently wrongful act sufficient to support an interference claim].) As discussed at length above, the evidence of actual malice is overwhelming and creates—at the

4. Actual Disruption and Damages The evidence of actual disruption and resulting damages includes: • The precipitous decline in RDGM's stock price, from $92.14 to $72.80, representing a market-capitalization loss of approximately $1.427 billion and event-study-adjusted damages of $327.6 million. (Vostrikova Decl., ¶ 16.) • The disruption of RGC's investor relations, which required the retention of Crestline Equity Pa

1. Unlawful Prong The "unlawful" prong of the UCL "borrows" violations of other laws and treats them as independently actionable unfair business practices. (Id. at 180.) Here, Defendants' conduct constitutes trade libel under California Civil Code section 46(3), as established in Section IV.A above. The trade-libel violation provides the predicate unlawful act under the UCL's unlawful prong. (Overstock.com, 151 Cal.A

2. Unfair Prong Under the "unfair" prong, a business practice is unfair when the harm it causes to the plaintiff or the public substantially outweighs any utility of the practice. (Cel-Tech, 20 Cal.4th at 186–187.) Here, the harm is manifest: Defendants published three reports containing demonstrably false allegations of criminal fraud against a publicly traded company, causing $327.6 million in event-study-adjusted

3. Fraudulent Prong Under the "fraudulent" prong, a business practice is fraudulent if it is "likely to deceive members of the public." (Id. at 180.) RGC need not show that any individual was actually deceived—only that Defendants' conduct was "likely to deceive a reasonable consumer." (Id.) Defendants' three reports were disseminated to the investing public via grizzlypeakresearch.com and the @GrizzlyPeakRes social