MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Calderwood & Harkness LLP Matter File
FROM: Francesca Morano, Responsible Partner
DATE: January 2025
RE: Matter Closing Memorandum — Redstone Gaming Corp. v. Grizzly Peak Research LLC, et al., Superior Court of California, County of Los Angeles, Case No. 24STCV-01892
MATTER NUMBER: 1033-00004
OFFICE: Calderwood & Harkness LLP, 333 South Grand Avenue, Suite 4800, Los Angeles, CA 90071
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I. PURPOSE
This memorandum is prepared for the permanent file of Calderwood & Harkness LLP to provide a comprehensive record of the firm's representation of Redstone Gaming Corp. ("RGC" or the "Client") in the above-captioned trade-libel action, styled Redstone Gaming Corp. v. Grizzly Peak Research LLC, et al., Superior Court of California, County of Los Angeles, Case No. 24STCV-01892. The representation extended from the opening of the engagement on February 5, 2024, through execution of the Settlement Agreement and Mutual Release on January 6, 2025 (the "Effective Date").
This memorandum is intended to serve as the definitive internal record for file-closing purposes, future reference, conflict-checking, and compliance with the firm's document-retention policies as set forth in the Calderwood & Harkness LLP Records Management Policy (revised August 2023). The memorandum is protected by the attorney-client privilege, the work-product doctrine, and all other applicable protections. It is not intended for distribution to any person or entity outside the firm without the express written authorization of the Responsible Partner.
All facts, analyses, and assessments contained herein are based upon the information available to the engagement team as of the date of this memorandum. Unless otherwise noted, all dollar figures are approximate and subject to final reconciliation through the firm's billing department.
II. ENGAGEMENT SUMMARY
A. Client and Contact Information
The firm represented Redstone Gaming Corp. ("RGC"), a Nevada corporation publicly traded on the Nasdaq Global Select Market under the ticker symbol "RDGM." RGC's corporate headquarters are located at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. The company's Employer Identification Number is 88-0412793. RGC's registered agent in the State of Nevada is National Statutory Agents, Inc., located at 701 S. Carson Street, Suite 200, Carson City, Nevada 89701.
RGC is the owner and operator of eleven casino-resort properties located across Nevada, New Jersey, and Mississippi. In addition to its brick-and-mortar gaming operations, RGC licenses proprietary electronic gaming platforms to third-party operators, operates a growing iGaming division marketed under the brand "Redstone Digital," and maintains a media-entertainment arm known as "Crimson Studios," which produces original content for the company's resort entertainment venues and streaming platforms. For its fiscal year ended December 31, 2023, RGC reported consolidated revenues of approximately $3.42 billion and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $812 million, reflecting an EBITDA margin of approximately 23.7%.
The primary client contacts throughout the engagement were as follows:
• Derek Olafson — General Counsel, Redstone Gaming Corp. Mr. Olafson served as the principal legal liaison for the engagement and authorized all significant litigation decisions on behalf of the Client. All formal communications regarding the matter were directed to or through Mr. Olafson unless otherwise noted.
• Marcus J. Calloway — Chief Executive Officer, Redstone Gaming Corp. Mr. Calloway was directly involved in strategic discussions concerning the lawsuit, given that one of the defendants' defamatory allegations specifically targeted him by name. He participated in pre-mediation strategy sessions and authorized the final settlement.
• Priya Ramaswaran — Chief Financial Officer, Redstone Gaming Corp. Ms. Ramaswaran provided financial data and documentation in connection with the forensic audit and damages analysis, and coordinated with the firm on the financial dimensions of the settlement.
• Janelle Hu — Vice President, Investor Relations, Redstone Gaming Corp. Ms. Hu was the firm's point of contact for matters relating to investor communications, market-impact data, and coordination with the Client's crisis-communications consultant.
B. Engagement Team
The following Calderwood & Harkness LLP attorneys comprised the core engagement team for this matter:
• Francesca Morano — Responsible Partner, Litigation (General). Ms. Morano maintained overall supervision of the engagement, directed case strategy, conducted the mediation on behalf of the Client, and served as the primary point of contact with the Client's General Counsel.
• Samuel Eklund — Billing Partner, Litigation (General). Mr. Eklund oversaw billing and budgeting for the engagement, participated in key strategic decisions, and managed the expert retention process.
• Carlos Espinoza — Lead Associate, Litigation (General). Mr. Espinoza was responsible for the day-to-day management of the litigation, including preparation of all pleadings, management of discovery, conduct of depositions, preparation of motion papers, and coordination with outside experts and consultants.
• Hannah Brinkley — Working Associate, Litigation (General). Ms. Brinkley provided research and drafting support throughout the engagement, assisted with deposition preparation and document review, and prepared the internal memorandum analyzing the tax treatment of the settlement proceeds.
In addition to the core team, the engagement drew upon the firm's litigation-support staff, including paralegals, document-review contract attorneys, and the firm's in-house e-discovery team. Time entries for support personnel were billed at standard paralegal rates, which are reflected in the cost-advancement figures discussed in Section VIII below.
C. Fee Arrangement
The engagement was governed by a modified hourly fee arrangement, the material terms of which were set forth in the Engagement Letter dated February 5, 2024. The Engagement Letter was executed by Francesca Morano on behalf of the firm and countersigned by Derek Olafson on behalf of RGC.
Under the fee arrangement, the firm agreed to bill at 85% of standard hourly rates during the pendency of the litigation. The applicable rates, both standard and discounted, were as follows:
The Engagement Letter further provided for a 15% success premium on aggregate discounted fees, triggered upon the occurrence of a "successful outcome," defined therein as either (i) a settlement on terms acceptable to the Client or (ii) a final judgment in favor of the Client. The settlement executed on January 6, 2025, constitutes a successful outcome under the terms of the Engagement Letter, and the success premium has accordingly been calculated and invoiced as described in Section VIII below.
D. Engagement Period
The engagement was formally opened on February 5, 2024, the date of execution of the Engagement Letter, which coincided with the filing of the original Complaint in the Superior Court of California, County of Los Angeles. The Settlement Agreement and Mutual Release was executed on January 6, 2025 (the "Effective Date"). The approximate duration of the engagement, from opening through execution of the settlement, was eleven months. The matter will be coded as fully closed upon completion of all remaining open items identified in Section XI of this memorandum.
III. PARTIES AND ADVERSE PARTIES
A. Plaintiff. Redstone Gaming Corp. ("RGC"), a Nevada corporation, as described more fully in Section II.A above. RGC was the sole plaintiff in this action.
B. Defendants. The following parties were named as defendants in the First Amended Complaint:
1. Grizzly Peak Research LLC ("GPR") — A Delaware limited liability company with its principal office located at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR's registered agent in the State of Delaware is Pacific Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. GPR's Employer Identification Number is 85-3291064. GPR is a self-described "independent research firm" that publishes reports on publicly traded companies, typically in connection with short-selling strategies. GPR was the entity that authored and published the three defamatory research reports at issue in this litigation.
2. Grizzly Peak Capital Partners LP ("GPCP") — A Delaware limited partnership sharing the same principal office as GPR at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. The general partner of GPCP is Grizzly Peak Capital GP LLC, a Delaware limited liability company, the sole managing member of which is Tobias Fenchurch. GPCP's Employer Identification Number is 85-3291078. GPCP is an investment fund with estimated assets under management of approximately $185 million. GPCP held the short position in RDGM securities that formed the basis of the profit-motive allegations central to this case. GPCP was added as a defendant in the First Amended Complaint filed on March 18, 2024.
3. Tobias "Toby" Fenchurch, individually — Mr. Fenchurch is the Managing Member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, which serves as the general partner of GPCP. Mr. Fenchurch co-authored all three defamatory reports and exercised editorial and operational control over GPR's publications. He was added as a defendant in his individual capacity in the First Amended Complaint filed on March 18, 2024.
C. Defense Counsel
The defendants were represented throughout the litigation by Caldwell, Tseng & Barrow LLP ("CTB"), located at 555 California Street, Suite 3100, San Francisco, California 94104. The lead partner on the matter was Raymond Caldwell, who served as the defendants' principal strategist and lead advocate. Natalie Orenstein served as the senior associate on the CTB team and was the primary day-to-day contact for settlement papering and discovery matters. Throughout the litigation, CTB acted as counsel to all three defendants jointly. No conflicts among the defendants were identified or asserted during the course of the representation.
IV. FACTUAL BACKGROUND
A. The Defamatory Publications
The claims asserted in this action arose from three research reports published by GPR on its website, grizzlypeakresearch.com, and disseminated via GPR's social media account, @GrizzlyPeakRes, which at the time of publication had approximately 142,000 followers across platforms. The reports were published in rapid succession over a three-week period in February 2024, a pattern consistent with a coordinated short-selling campaign:
Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" — Published February 7, 2024. This report comprised 48 pages and alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through a series of fictitious intercompany transactions designed to inflate the company's reported financial results. The report purported to identify specific transactions that it characterized as lacking economic substance, and asserted that the company's independent auditors had failed to detect the alleged fraud.
Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" — Published February 14, 2024. This 36-page report alleged that RGC had manipulated the random-number-generator ("RNG") software embedded in its proprietary electronic gaming platforms to inflate payout statistics reported to the Nevada Gaming Control Board. The report further alleged that the manipulation created a discrepancy between the payout rates experienced by players and the rates reported to regulators, and suggested that this discrepancy could jeopardize RGC's gaming licenses.
Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" — Published February 21, 2024. This 29-page report alleged the existence of undisclosed related-party dealings between CEO Marcus J. Calloway and a purported shell entity identified as "Vermilion Holdings LLC." The report asserted that Calloway had a personal financial interest in Vermilion Holdings, that RGC had entered into material transactions with the entity without proper disclosure, and that the arrangement constituted a breach of fiduciary duty and a violation of securities-disclosure obligations.
Each of the three reports included standard disclaimers disclosing that GPR and its affiliates held short positions in RDGM securities and would profit from a decline in the price of RDGM stock. These disclaimers, while present, did not mitigate the defamatory character of the substantive allegations contained in the reports. Ava Lin, identified as a Senior Analyst at GPR, was credited as a co-author of all three reports alongside Tobias Fenchurch.
B. Substance of False Allegations
The three reports collectively advanced three principal categories of false allegations against RGC:
(a) Revenue Fabrication: GPR alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report asserted that specific revenue line items, primarily within the Redstone Digital iGaming division, lacked supporting documentation and economic substance, and that the company's consolidated financial statements were materially misstated.
(b) RNG Software Manipulation: GPR alleged that RGC had manipulated the random-number-generator software in its proprietary electronic gaming platforms to inflate payout statistics reported to the Nevada Gaming Control Board. The report asserted that the manipulation allowed RGC to operate gaming machines with actual payout rates that were lower than those represented to regulators, thereby deceiving both the regulatory authorities and the gaming public.
(c) Undisclosed Related-Party Transactions: GPR alleged that CEO Marcus J. Calloway maintained a concealed financial interest in "Vermilion Holdings LLC," a purported shell entity, and that RGC had entered into material transactions with Vermilion Holdings without making the requisite public disclosures. The report characterized this arrangement as a "self-dealing scheme" designed to siphon corporate value for Calloway's personal benefit.
As detailed in Section IV.C below, all three categories of allegations were investigated by independent third parties and found to be without factual basis.
C. Vindication of RGC
Each of the three principal allegations advanced in GPR's reports was independently investigated and definitively refuted:
Revenue Fabrication Allegation: Pinnacle Audit & Advisory LLP ("Pinnacle"), RGC's independent auditor, had issued clean, unqualified audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. The engagement partner was Walter Ng, CPA, based in Pinnacle's Las Vegas office at 400 South 4th Street, Suite 600, Las Vegas, Nevada 89101. Following the publication of the GPR reports, Pinnacle conducted a supplemental forensic audit focused specifically on the intercompany transactions identified by GPR. The supplemental audit confirmed the validity and economic substance of the transactions in question and reaffirmed the accuracy of RGC's reported revenue figures. The results of the forensic audit were communicated to the market through RGC's Form 8-K filed on April 15, 2024.
RNG Software Manipulation Allegation: The Nevada Gaming Control Board, acting upon its own initiative and upon referral from RGC's gaming counsel, conducted an independent audit of the RNG software deployed across RGC's electronic gaming platforms. The audit was completed on March 29, 2024, and the Board issued a formal determination clearing RGC of any irregularity. The Board's findings confirmed that the RNG software operated in compliance with all applicable regulations and that payout statistics reported to the Board were accurate and consistent with actual machine performance.
Undisclosed Related-Party Transactions Allegation: The U.S. Securities and Exchange Commission ("SEC") opened an informal inquiry in March 2024, prompted in part by the GPR reports and related media coverage. The SEC's inquiry examined the alleged related-party transactions involving Vermilion Holdings LLC and CEO Marcus J. Calloway. After a thorough investigation spanning approximately five months, the SEC closed the inquiry on August 16, 2024, with no enforcement action. The closure was confirmed in a letter from the SEC's Division of Enforcement to RGC's securities counsel.
The complete vindication of RGC across all three investigatory tracks was a significant factor in the litigation and ultimately contributed to the favorable settlement outcome.
D. GPR's Short Position and Profit Motive
Central to RGC's claims was evidence that GPR and its affiliated fund, GPCP, maintained a substantial short position in RDGM securities at the time of the publications and stood to profit directly from the decline in RGC's stock price that the defamatory reports were designed to precipitate.
Based on trading records obtained through third-party subpoenas to brokerage firms during the discovery phase of the litigation, GPR and GPCP held a short position of approximately 680,000 shares of RDGM common stock at the time of publication. At the pre-publication closing price of $92.14 per share (as of February 6, 2024), the notional value of the short position was approximately $62.66 million.
The evidence established that the defendants closed the short position by mid-March 2024, after the stock had reached its trough following the publication of the three reports. Based on available trading data, the estimated average price at which the position was covered was approximately $72.80 per share. The estimated gross profit on the short sale was therefore:
($92.14 − $72.80) × 680,000 shares ≈ $13.15 million
This profit-motive evidence was central to the establishment of actual malice and to the calculation of damages. It also served as a powerful component of the narrative presented at mediation.
E. Market Impact
The publication of the three GPR reports had an immediate and severe impact on the market price of RDGM securities:
• Pre-publication closing price (February 6, 2024): $92.14 per share; pre-publication market capitalization approximately $6.8 billion (based on approximately 73.8 million shares outstanding).
• Post-Report 1 closing price (February 7, 2024): $84.37 per share, representing a single-day decline of $7.77 per share, or approximately 8.4%.
• Post-Report 2 closing price (February 14, 2024): $78.52 per share, representing a cumulative decline of $13.62 per share from the pre-publication price, or approximately 14.8%.
• Post-Report 3 closing price / trough (February 21, 2024): $72.80 per share, representing a cumulative decline of $19.34 per share from the pre-publication price, or approximately 21.0%.
• Aggregate market-capitalization loss at trough: $19.34 × 73.8 million shares ≈ $1.427 billion.
• Trough market capitalization: approximately $4.95 billion.
• Current market capitalization (January 2025): approximately $6.1 billion, reflecting a partial recovery from the trough but still below the pre-publication level.
The timing and magnitude of the stock-price declines, and their correlation to each successive report, were analyzed in detail by RGC's damages expert, Dr. Elena Vostrikova of Meridian Forensic Economics LLC, as described in Section V.E below.
F. RGC's Out-of-Pocket Costs
In addition to the market-capitalization losses described above, RGC incurred substantial out-of-pocket costs in responding to the GPR reports and the cascading regulatory and reputational consequences that followed:
These out-of-pocket costs were documented and presented as a component of RGC's damages claim, separate and apart from the event-study-adjusted market-impact damages calculated by Dr. Vostrikova.
V. LITIGATION HISTORY — CHRONOLOGICAL SUMMARY
A. Case Filing and Initial Pleadings
On February 5, 2024, the firm filed the original Complaint on behalf of RGC in the Superior Court of California, County of Los Angeles, where it was assigned Case No. 24STCV-01892 and assigned to the Honorable Patricia Yamamoto for all purposes. The original Complaint named Grizzly Peak Research LLC as the sole defendant.
The Complaint asserted three causes of action:
(1) Trade Libel (Cal. Civ. Code § 46(3)), alleging that GPR published false and disparaging statements about RGC's business, products, and financial condition that were not privileged and that were published with knowledge of their falsity or reckless disregard for the truth;
(2) Intentional Interference with Prospective Economic Advantage, alleging that GPR's publications were intended to, and did, disrupt RGC's existing and prospective business relationships with investors, gaming regulators, and business partners; and
(3) Unfair Business Practices (Cal. Bus. & Prof. Code § 17200), alleging that GPR's conduct constituted an unlawful, unfair, and fraudulent business practice within the meaning of California's Unfair Competition Law.
The governing law for all claims was California law, and the case was litigated entirely within the Los Angeles County Superior Court. Venue in Los Angeles was proper based on the substantial effects of the defamatory publications in that jurisdiction, where RGC maintains significant business operations and a substantial portion of its investor base is located.
B. First Amended Complaint
On March 18, 2024, the firm filed the First Amended Complaint ("FAC"), which made two significant modifications to the original pleading:
First, the FAC added two defendants: Grizzly Peak Capital Partners LP ("GPCP") and Tobias "Toby" Fenchurch, individually. The addition of GPCP was supported by evidence establishing that the fund held the short position from which GPR and Fenchurch profited, and that GPCP and GPR operated as a coordinated enterprise. The addition of Fenchurch in his individual capacity was supported by evidence of his personal involvement in the authorship, editorial control, and dissemination of all three reports, as well as his role as the sole managing member of the entities controlling both GPR and GPCP.
Second, the FAC added a fourth cause of action for Negligent Misrepresentation, alleging that, to the extent any of the defendants' false statements were not made with actual malice, they were made negligently and without reasonable grounds for believing them to be true. This claim was added as an alternative theory to further strengthen RGC's position against a potential anti-SLAPP motion by providing a lower-intent pathway to liability.
The FAC also substantially enhanced the factual allegations, detailing all three reports, the cumulative stock-price decline, the aggregate market-capitalization loss, GPR's estimated short-sale profit, and RGC's out-of-pocket costs incurred in responding to the false allegations.
C. Anti-SLAPP Motion
On April 12, 2024, defendants filed a Special Motion to Strike the First Amended Complaint pursuant to California Code of Civil Procedure § 425.16 (the "anti-SLAPP statute"). The motion argued that the GPR reports constituted protected activity under the anti-SLAPP statute because they were published in connection with a public issue — the financial integrity and regulatory compliance of a publicly traded company — and that RGC could not demonstrate a probability of prevailing on the merits because the reports were protected opinion or fair comment on a matter of public interest.
On April 15, 2024, Carlos Espinoza prepared an internal strategy memorandum analyzing the defendants' arguments, identifying the evidentiary showing required to defeat the motion, and outlining the evidence to be marshaled in opposition. The memorandum concluded that the anti-SLAPP motion was vulnerable on both prongs: the commercial-speech exception to the anti-SLAPP statute applied because the reports were made in connection with the defendants' commercial enterprise of short selling, and, alternatively, RGC could demonstrate a probability of prevailing on the merits by presenting prima facie evidence of actual malice.
On May 10, 2024, the firm filed RGC's Opposition to the Special Motion to Strike. The opposition argued that the commercial-speech exception under Section 425.17(c) applied because GPR's reports were published primarily to promote the sale of securities (i.e., to drive down RDGM's stock price for the benefit of the defendants' short position) and were made in the course of GPR's regular business of publishing research for profit. In the alternative, the opposition presented prima facie evidence of actual malice, including: (i) the defendants' substantial financial motive (the 680,000-share short position and estimated $13.15 million profit); (ii) internal communications suggesting awareness that certain allegations were unverified; and (iii) preliminary admissions by Ava Lin, GPR's co-author, expressing doubts about the related-party allegations.
On June 7, 2024, Judge Yamamoto denied the anti-SLAPP motion. The Court's Minute Order cited the sufficiency of RGC's evidence of actual malice to defeat the motion at the first-prong stage, noting in particular the strength of the financial-motive evidence and the internal communications produced in connection with the motion. The denial of the anti-SLAPP motion was a significant early victory that set the stage for full discovery and ultimately contributed to the defendants' willingness to engage in meaningful settlement discussions.
D. Discovery Phase
Discovery commenced following the denial of the anti-SLAPP motion and continued from approximately June through November 2024. On June 10, 2024, Carlos Espinoza prepared a discovery Plan Memorandum outlining the scope, sequence, and anticipated cost of written and deposition discovery.
The discovery effort was extensive and encompassed the following:
Depositions: A total of fourteen depositions were conducted during the discovery phase. The two most significant depositions were those of Tobias Fenchurch and Ava Lin, summarized below:
Deposition of Tobias Fenchurch (August 20, 2024): Mr. Fenchurch's deposition yielded several key admissions that proved critical to the prosecution of the case and, later, to settlement negotiations. Among other things, Mr. Fenchurch acknowledged: (i) that GPR's research methodology did not include direct contact with RGC's management prior to publication of any of the three reports; (ii) that he was aware of Pinnacle's clean, unqualified audit opinions for fiscal years 2021–2023 at the time of publication but chose not to address them in the reports; and (iii) that he gave instructions to publish the third report (concerning the Vermilion Holdings related-party allegation) before the GPR research team had completed verification of the allegation. A deposition summary was prepared by Espinoza on August 22, 2024.
Deposition of Ava Lin (August 29, 2024): Ms. Lin's testimony further undermined the defendants' position. She acknowledged: (i) that her analysis supporting the RNG-manipulation allegation relied on incomplete data, specifically a single year of payout-ratio data that was compared against an unrepresentative benchmark; (ii) that neither she nor anyone else at GPR contacted the Nevada Gaming Control Board before publication to inquire about RGC's regulatory standing; and (iii) that internal Meridian Solutions messages between herself and Fenchurch, produced during discovery, contained statements expressing her personal doubts about the factual basis for the related-party allegation in Report 3. A deposition summary was prepared by Espinoza on September 2, 2024.
Document Production: The parties exchanged approximately 87,000 documents during the discovery period. These documents included GPR's internal research files, draft versions of the three reports, communications between Fenchurch and Lin, communications with outside financial advisors and brokerage firms, and trading records related to the RDGM short position. The volume and sensitivity of the document production required the use of an outside e-discovery vendor, the costs of which are included in the $187,450 in costs advanced as described in Section VIII below.
discovery Motions: Three discovery motions were filed and resolved during the discovery phase. These motions related to disputes over the scope of production of internal trading records, the applicability of the journalist's privilege to GPR's research materials, and the enforceability of certain third-party subpoenas. All three motions were resolved in RGC's favor, either by court order or by stipulation following the court's indication of its likely ruling.
Third-Party Subpoenas: Third-party subpoenas were issued to brokerage firms holding the defendants' trading accounts in order to obtain comprehensive records of the short position in RDGM securities, including the timing and prices of short sales and covering purchases. Subpoenas were also issued to social media platforms hosting the @GrizzlyPeakRes account to obtain engagement analytics, impression data, and account-management records, which were relevant to the scope and reach of the defamatory publications.
E. Expert Engagement and Reports
On July 1, 2024, Francesca Morano transmitted a retention letter to Dr. Elena Vostrikova of Meridian Forensic Economics LLC, located at 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067. Dr. Vostrikova is a recognized expert in securities economics and forensic damages analysis, with particular expertise in event-study methodology. The scope of her engagement encompassed: (i) an event-study analysis of the impact of the GPR reports on the market price of RDGM securities; (ii) quantification of trade-libel damages attributable to the defendants' false statements; (iii) analysis of GPR's short-sale profits; and (iv) assessment of RGC's documented out-of-pocket costs.
Expert reports were exchanged on September 9, 2024. Dr. Vostrikova's report concluded that, after removing market-wide and sector-specific beta effects through a rigorous event-study analysis, the three GPR reports were directly responsible for a decline of approximately $327.6 million in RDGM shareholder value. This figure represented the estimated damages attributable specifically to the false and defamatory content of the reports, as distinguished from broader market or industry movements occurring during the same period.
Dr. Vostrikova's report also confirmed the estimated $13.15 million in gross profit realized by GPR/GPCP on the short position and verified the $4.627 million in documented out-of-pocket costs incurred by RGC.
The defendants' expert submitted a competing report that challenged aspects of Dr. Vostrikova's event-study methodology and argued for a significantly lower damages figure. However, Dr. Vostrikova's methodology was well-supported by the academic literature and by the weight of judicial authority, and the defendants' challenges did not materially undermine the reliability of her conclusions. The strength of the expert evidence was a significant factor in the ultimate settlement outcome.
F. Motion for Summary Judgment
On October 22, 2024, defendants filed a Motion for Summary Judgment ("MSJ"), arguing that RGC could not establish the elements of any of its four causes of action as a matter of law. The MSJ focused primarily on the alleged absence of actual malice, the purported First Amendment protections applicable to the reports, and challenges to the causation and damages evidence.
On November 5, 2024, the firm filed RGC's Opposition to the MSJ. The opposition relied on Dr. Vostrikova's expert report, the deposition testimony of Fenchurch and Lin, and the extensive documentary evidence obtained during discovery to demonstrate the existence of triable issues of material fact on all four causes of action. The opposition emphasized the compelling evidence of actual malice — including the financial motive, the internal communications, and the pre-publication awareness of the unverified nature of the allegations — as well as the robust causation and damages evidence established through the event-study analysis.
On November 15, 2024, Judge Yamamoto denied the MSJ in its entirety. The Court found triable issues of material fact on each cause of action, citing the strength of the actual-malice evidence and the reliability of the event-study damages methodology. The denial of the MSJ, coming on the heels of the earlier denial of the anti-SLAPP motion, further solidified RGC's litigation position and set the stage for the mediation that followed.
G. Mediation and Settlement
Pre-Mediation Preparation: In advance of mediation, the engagement team prepared the following documents:
• Pre-Mediation Strategy Memorandum — Prepared by Francesca Morano and transmitted to Derek Olafson and Marcus J. Calloway on November 20, 2024. This memorandum analyzed the strengths and weaknesses of RGC's claims, assessed the range of likely trial outcomes, identified the Client's priorities (monetary recovery, corrective statements, and injunctive relief), and recommended settlement parameters.
• Settlement Authority Memorandum — Prepared by Francesca Morano and transmitted to Derek Olafson on November 25, 2024. This memorandum set forth the engagement team's recommended opening demand, target settlement range, and walk-away floor, together with the analytical basis for each figure. The memorandum was reviewed and approved by Mr. Olafson on behalf of the Client.
• Confidential Mediation Brief — Prepared by Carlos Espinoza under the supervision of Francesca Morano and submitted to the mediator, the Honorable Gerald K. Matsuda (Ret.), on November 27, 2024. The mediation brief presented a comprehensive summary of the factual record, the legal claims, the damages evidence, and RGC's non-monetary objectives for the settlement.
Mediation: A two-day mediation was conducted on December 3–4, 2024, before the Honorable Gerald K. Matsuda (Ret.) at the Westside Mediation Center, located at 11601 Wilshire Boulevard, Suite 1200, Los Angeles, California 90025. Judge Matsuda is a widely respected former Superior Court judge with extensive experience mediating complex commercial disputes. The mediation was attended by Francesca Morano and Carlos Espinoza on behalf of RGC, with Derek Olafson and Marcus J. Calloway participating in person for the Client. Raymond Caldwell and Natalie Orenstein attended on behalf of the defendants, with Tobias Fenchurch participating in person.
The first day of mediation involved opening joint sessions, separate caucuses, and preliminary exchanges of demands and offers. The second day involved intensive shuttle diplomacy facilitated by Judge Matsuda, focused on both the monetary and non-monetary terms of a potential settlement. By the afternoon of December 4, 2024, the parties reached a settlement-in-principle, the essential terms of which were memorialized in a binding Mediator's Term Sheet signed by all parties and their counsel.
Post-Mediation and Settlement Documentation: Following the mediation, the engagement team undertook the following steps to memorialize and implement the settlement:
• December 5, 2024: Post-mediation report transmitted by Francesca Morano to Derek Olafson, summarizing the terms of the settlement-in-principle and identifying the steps necessary to finalize the settlement documentation.
• December 9, 2024: Letter from Francesca Morano to CTB (attention: Natalie Orenstein) proposing a timeline for preparation and execution of the definitive Settlement Agreement, including target dates for exchanging drafts, negotiating terms, and executing the final documents.
• December 10, 2024: Letter from Francesca Morano to Judge Yamamoto advising the Court of the settlement and requesting that pending trial and pre-trial dates be vacated.
• December 12, 2024: Letter from Francesca Morano to Ironclad Surety & Insurance Co. (attention: Daniel Royce, Claims Adjuster) confirming the settlement terms and requesting confirmation that Ironclad would fund its $10.25 million share of the settlement payment within the timeframes specified in the Mediator's Term Sheet.
• December 18, 2024: Carlos Espinoza transmitted a redline of the proposed Settlement Agreement and Mutual Release, together with a detailed comment letter, to Natalie Orenstein at CTB. The parties engaged in a focused negotiation of the settlement terms over the following weeks.
• January 6, 2025: The Settlement Agreement and Mutual Release was executed by all parties (the "Effective Date"). The executed Settlement Agreement included Exhibits A through D: (A) the Corrective Publication; (B) the Social Media Corrective Statement; (C) the Stipulation and [Proposed] Order for Dismissal with Prejudice; and (D) the Stipulation and [Proposed] Order for Entry of Permanent Injunction.
VI. SETTLEMENT TERMS
The following is a summary of the material terms of the Settlement Agreement and Mutual Release executed on January 6, 2025 (the "Settlement Agreement"). This summary is intended for internal reference only and does not supersede or modify the terms of the Settlement Agreement itself, which is maintained in the matter file.
A. Monetary Payment
The Settlement Agreement provides for a total monetary payment of $14,750,000 to RGC, funded from two sources:
(i) $10,250,000 from Ironclad Surety & Insurance Co. ("Ironclad"), contributed under Policy No. ML-2023-07714, a claims-made directors-and-officers / media-liability insurance policy providing coverage to GPR. Ironclad's contribution was confirmed by Daniel Royce, Claims Adjuster, following the December 12, 2024 correspondence described above.
(ii) $4,500,000 from Grizzly Peak Research LLC and Grizzly Peak Capital Partners LP, jointly and severally. This amount represents the defendants' out-of-pocket contribution to the settlement, exclusive of insurance proceeds.
The aggregate settlement payment is to be deposited within thirty (30) calendar days of the Effective Date — i.e., by no later than February 5, 2025 — into an escrow account established at Great Basin Trust Company, N.A., located at 3960 Howard Hughes Parkway, Suite 500, Las Vegas, Nevada 89169. Wire transfer instructions were transmitted to Great Basin Trust Company, N.A. by letter dated January 3, 2025, identifying the two funding sources and providing ABA routing numbers and account details for the escrow account.
B. Corrective Statements
The Settlement Agreement requires the defendants to publish the following corrective statements:
Corrective Publication: A written statement of not fewer than 1,500 words is to be posted on the website grizzlypeakresearch.com within five (5) business days of the Effective Date (target date: January 13, 2025). The Corrective Publication must remain posted and accessible on the website for a minimum period of twenty-four (24) months following the Effective Date — i.e., through no earlier than January 6, 2027. The Corrective Publication acknowledges that the three GPR reports contained material inaccuracies; states that the revenue-fabrication allegation in Report 1 was unfounded; states that the RNG-manipulation allegation in Report 2 was disproven by the Nevada Gaming Control Board; and states that the related-party allegation in Report 3 was based on incomplete information and was misleading. The exact text of the Corrective Publication was mutually approved by the parties and is attached as Exhibit A to the Settlement Agreement.
Social Media Corrective: A statement of not fewer than 280 characters is to be posted on the @GrizzlyPeakRes social media account within the same five-business-day deadline, including a hyperlink to the full Corrective Publication on grizzlypeakresearch.com. The exact text of the Social Media Corrective was mutually approved by the parties and is attached as Exhibit B to the Settlement Agreement.
C. Permanent Injunction (Stipulated)
The Settlement Agreement includes a stipulated permanent injunction containing two components:
(i) Republication Injunction: The defendants are permanently enjoined from republishing the three GPR reports identified in the litigation, or any substantially similar statements concerning RGC. This injunction is not subject to a time limitation and operates in perpetuity.
(ii) Securities Trading Bar: The defendants are permanently enjoined from trading in RDGM securities, including any derivatives thereof, for a period of five (5) years from the Effective Date — i.e., through January 6, 2030. This provision was a key priority for the Client, as it eliminates the risk that the defendants could engage in a similar short-and-distort campaign targeting RDGM during the five-year restricted period.
The stipulated permanent injunction is to be submitted to Judge Yamamoto for entry concurrently with the filing of the Stipulation and [Proposed] Order for Dismissal with Prejudice, as described in Section VI.G below. The form of the stipulated injunction is attached as Exhibit D to the Settlement Agreement.
D. Mutual Releases
The Settlement Agreement includes broad mutual releases pursuant to which each party releases the other from all claims, demands, causes of action, liabilities, and obligations of any kind, whether known or unknown, arising from or related to the GPR publications and the litigation. The releases extend to each party's respective affiliates, officers, directors, employees, agents, and representatives.
The mutual releases include a specific waiver of the protections of California Civil Code § 1542, which provides that a general release does not extend to claims that the releasing party does not know or suspect to exist at the time of the release.
The releases contain carve-outs preserving each party's rights to enforce the terms and obligations of the Settlement Agreement itself.
E. Non-Disparagement. The Settlement Agreement includes a mutual non-disparagement clause prohibiting each party from making or publishing any statement that disparages, defames, or casts in a negative light the other party or its officers, directors, employees, or agents. The non-disparagement obligation has a term of three (3) years from the Effective Date — i.e., through January 6, 2027.
F. Confidentiality. The parties agreed that the specific amount of the monetary settlement payment shall be treated as confidential and shall not be disclosed to any third party except as required by law, regulation, or legal process. However, the existence of the settlement and the content of the corrective statements are expressly excluded from the confidentiality restriction, permitting the parties to acknowledge publicly that the matter was resolved by settlement and to reference the corrective statements.
G. Stipulated Dismissal
Pursuant to the Settlement Agreement, the entire action is to be dismissed with prejudice within ten (10) business days of the Effective Date (target date: February 19, 2025). The Stipulation and [Proposed] Order for Dismissal with Prejudice was prepared and is attached as Exhibit C to the Settlement Agreement. The Court shall retain jurisdiction to enforce the terms of the Settlement Agreement pursuant to California Code of Civil Procedure § 664.6, as expressly provided in the stipulated dismissal.
H. Attorneys' Fees
Each party shall bear its own attorneys' fees and costs incurred in connection with the litigation and the settlement.
VII. THIRD-PARTY INVOLVEMENT SUMMARY
The following table summarizes the material third-party involvements during the engagement:
VIII. FEE AND COST SUMMARY
A. Hours and Fees by Timekeeper
The following table sets forth the approximate hours worked and fees billed at discounted rates for each timekeeper on the engagement:
All figures are approximate and subject to final reconciliation through the firm's billing department.
B. Fee Totals
• Total billed at discounted rates (85% of standard): approximately $2,800,623
• Success premium (15% of aggregate discounted fees): approximately $420,093
• Total engagement fees (Discounted fees + success premium): approximately $3,220,716
The success premium was triggered by the execution of the Settlement Agreement on January 6, 2025, which constitutes a "successful outcome" as defined in the Engagement Letter.
C. Costs Advanced
Costs advanced by the firm during the engagement totaled approximately $187,450, encompassing expert fees (Dr. Vostrikova / Meridian Forensic Economics), deposition transcripts and videography, court reporter services, e-discovery vendor charges, filing fees, and related litigation expenses.
The grand total of fees and costs for the engagement is therefore approximately:
$3,220,716 (fees) + $187,450 (costs) = approximately $3,408,166
D. Final Billing
A final billing memorandum and a separate success premium calculation memorandum were prepared by Samuel Eklund in January 2025 and transmitted to Derek Olafson at RGC for review and approval. The final billing memorandum sets forth all outstanding charges, including the success premium, and requests payment in accordance with the payment terms specified in the Engagement Letter. As of the date of this memorandum, the final billing is in process.
IX. INSURANCE MATTERS
Two insurance carriers were involved in or relevant to this matter:
Ironclad Surety & Insurance Co. (200 Park Avenue South, 14th Floor, New York, New York 10003): Ironclad provides directors-and-officers and media-liability coverage to GPR under a claims-made policy, Policy No. ML-2023-07714. Following the settlement, Ironclad agreed to contribute $10,250,000 toward the aggregate settlement payment of $14,750,000. Confirmation of Ironclad's funding commitment was requested in a letter from Francesca Morano to Daniel Royce, Claims Adjuster, dated December 12, 2024. Ironclad's contribution represents the single largest component of the settlement funding. Pursuant to the escrow arrangement, Ironclad's payment is to be wired directly to the escrow account at Great Basin Trust Company, N.A. by the February 5, 2025 deadline.
Atlas National Insurance Group (777 South Figueroa Street, Suite 2800, Los Angeles, California 90017): Atlas National is RGC's primary directors-and-officers insurer. RGC provided notice of the litigation to Atlas National as a matter of standard corporate practice and prudent risk management. However, because RGC was the plaintiff in this action and did not face any counterclaims or cross-claims, no claim was triggered under the Atlas National policy, and no coverage determination was required. No further action is needed with respect to Atlas National in connection with this matter.
X. TAX CONSIDERATIONS
Hannah Brinkley prepared an internal memorandum dated December 20, 2024, analyzing the federal income tax treatment of the $14,750,000 settlement proceeds to be received by RGC. The memorandum addressed the following key issues:
Characterization of Settlement Proceeds: Under general principles of federal income taxation, the characterization of settlement proceeds is determined by the "origin of the claim" doctrine, under which the tax treatment of a recovery follows the nature of the underlying claim that gave rise to the payment. The memorandum analyzed the allocation of the $14,750,000 settlement payment between (i) compensatory damages for lost shareholder value and out-of-pocket costs, which are potentially taxable as ordinary income under Internal Revenue Code § 61 to the extent they represent a recovery of amounts that would otherwise constitute taxable income, and (ii) the reputational and injunctive relief components of the settlement, the tax treatment of which requires further analysis.
Origin-of-the-Claim Doctrine: The memorandum applied the origin-of-the-claim doctrine to the specific causes of action asserted in this litigation — trade libel, intentional interference with prospective economic advantage, unfair business practices, and negligent misrepresentation — and analyzed the extent to which the settlement proceeds may be allocated among these claims for purposes of determining their tax character.
Deductibility of Litigation Costs: The memorandum also addressed the deductibility of RGC's litigation costs, including the firm's fees and the out-of-pocket costs incurred for crisis communications, forensic auditing, and regulatory response. Under IRC § 162, such costs may be deductible as ordinary and necessary business expenses to the extent they are related to the conduct of RGC's trade or business.
Recommendation: The memorandum concluded with a recommendation that RGC coordinate with its own tax advisors and with Pinnacle Audit & Advisory LLP to ensure proper reporting and treatment of the settlement proceeds in RGC's fiscal year 2025 tax returns, and to determine whether any portion of the settlement should be allocated to specific categories of damages for tax-reporting purposes.
The firm did not render formal tax advice to the Client in connection with this matter, and the internal memorandum was prepared for informational purposes to facilitate the Client's discussions with its tax professionals.
XI. OPEN ITEMS AND POST-CLOSING OBLIGATIONS
A. Immediate Action Items
The following action items remain to be completed following execution of the Settlement Agreement:
1. Monitor Posting of Corrective Publication. The Corrective Publication is to be posted on grizzlypeakresearch.com within five (5) business days of the Effective Date. The target posting date is January 13, 2025. The engagement team should verify that the Corrective Publication appears on the website on or before that date and that the content conforms to the approved text set forth in Exhibit A to the Settlement Agreement.
2. Monitor Posting of Social Media Corrective. The Social Media Corrective is to be posted on the @GrizzlyPeakRes account within the same five-business-day deadline (target: January 13, 2025). The team should verify posting and confirm that the statement includes the required hyperlink to the full Corrective Publication.
3. Confirm Receipt of Settlement Funds in Escrow. The aggregate settlement payment of $14,750,000 is to be deposited in escrow at Great Basin Trust Company, N.A. within thirty (30) calendar days of the Effective Date — i.e., by no later than February 5, 2025. The engagement team should confirm receipt of both wire transfers (the $10,250,000 from Ironclad and the $4,500,000 from GPR/GPCP) and coordinate with the escrow agent and the Client's treasury department to facilitate disbursement.
4. File Stipulated Dismissal. The Stipulation and [Proposed] Order for Dismissal with Prejudice is to be filed with the Los Angeles County Superior Court within ten (10) business days of the Effective Date (target: February 19, 2025). Carlos Espinoza should coordinate the filing with CTB and ensure that the stipulation includes the requisite language preserving the Court's jurisdiction under California Code of Civil Procedure § 664.6.
5. File Stipulated Permanent Injunction. The Stipulation and [Proposed] Order for Entry of Permanent Injunction is to be filed with Judge Yamamoto concurrently with the stipulated dismissal. The proposed order should be submitted in conformance with the Court's local rules and lodged for signature by the Court.
B. Ongoing Monitoring
The following settlement obligations extend beyond the immediate post-closing period and require periodic monitoring:
• Corrective Publication: The Corrective Publication must remain posted on grizzlypeakresearch.com for a minimum of twenty-four (24) months from the Effective Date, through January 6, 2027. Periodic checks of the website should be conducted — at a minimum, quarterly — to confirm continued compliance with this obligation.
• Non-Disparagement: The mutual non-disparagement clause remains in effect for three (3) years from the Effective Date, through January 6, 2027. While active monitoring is not required under normal circumstances, the Client should be advised to notify the firm promptly if any potentially disparaging statements by the defendants come to its attention during this period.
• Securities Trading Injunction: The defendants' prohibition on trading in RDGM securities (including derivatives) extends for five (5) years from the Effective Date, through January 6, 2030. Monitoring of compliance with this provision is primarily the responsibility of the Client's investor-relations team and securities counsel, but the firm should be available to advise in the event of a suspected violation.
• Court Jurisdiction: The Court retains jurisdiction to enforce the settlement terms pursuant to California Code of Civil Procedure § 664.6. This jurisdictional retention remains effective for the duration of the settlement obligations and provides RGC with a mechanism to seek judicial enforcement in the event of any breach.
C. Coordination with Client