SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
REDSTONE GAMING CORP., a Nevada corporation,
Plaintiff,
v.
GRIZZLY PEAK RESEARCH LLC, a Delaware limited liability company; GRIZZLY PEAK CAPITAL PARTNERS LP, a Delaware limited partnership; and TOBIAS FENCHURCH, an individual,
Defendants.
PLAINTIFF REDSTONE GAMING CORP.'S OPPOSITION TO DEFENDANTS' SPECIAL MOTION TO STRIKE UNDER CODE OF CIVIL PROCEDURE § 425.16
(Trade Libel; Intentional Interference with Prospective Economic Advantage; Unfair Business Practices; Negligent Misrepresentation)
CALDERWOOD & HARKNESS LLP Francesca Morano (SBN 247613) Samuel Eklund (SBN 261489) Carlos Espinoza (SBN 312804) Hannah Brinkley (SBN 327551) 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 486-7000 Facsimile: (213) 486-7001
Email: fmorano@calderwoodharkness.com
Attorneys for Plaintiff Redstone Gaming Corp.
TABLE OF CONTENTS
Right-click to update Table of Contents
TABLE OF AUTHORITIES
CASES
STATUTES AND CONSTITUTIONAL PROVISIONS
OTHER AUTHORITIES
I. INTRODUCTION
Defendants Grizzly Peak Research LLC ("GPR"), Grizzly Peak Capital Partners LP ("GPCP"), and Tobias Fenchurch (collectively, "Defendants") filed their Special Motion to Strike under California Code of Civil Procedure section 425.16 (the "anti-SLAPP statute") on April 12, 2024. Plaintiff Redstone Gaming Corp. ("RGC" or "Plaintiff") respectfully submits this Opposition and urges the Court to deny the motion in its entirety.
This case does not involve the kind of civic engagement that the anti-SLAPP statute was designed to protect. It involves a well-financed short-selling operation that published a series of knowingly false research reports about a publicly traded gaming and media-entertainment company for the express purpose of driving down its stock price and reaping millions of dollars in short-sale profits. The anti-SLAPP statute was never intended to shield that kind of conduct.
RGC is a publicly traded gaming and media-entertainment company listed on the Nasdaq Global Select Market under the ticker symbol RDGM. RGC owns and operates eleven casino-resort properties across Nevada, New Jersey, and Mississippi; licenses proprietary electronic gaming platforms; operates an iGaming division (Redstone Digital); and maintains a media-entertainment production arm (Crimson Studios). For fiscal year 2023, RGC reported revenue of $3.42 billion and adjusted EBITDA of $812 million, representing an approximately 23.7% margin. Prior to the publications at issue, RGC's market capitalization was approximately $6.8 billion, based on 73.8 million shares outstanding trading at $92.14 per share.
Between February 7 and February 21, 2024, Defendants published three separate "research reports" on the GPR website (grizzlypeakresearch.com) and amplified them through the @GrizzlyPeakRes social-media account, which at the time boasted approximately 142,000 followers. The reports leveled sensational accusations against RGC, including fabrication of approximately $410 million in revenue through fictitious intercompany transactions, manipulation of random-number-generator ("RNG") software to deceive the Nevada Gaming Control Board, and undisclosed related-party transactions funneled through a purported shell entity called Vermilion Holdings LLC. Each accusation was false. Each was designed to inflict maximum damage on RGC's stock price. And each was published while Defendant GPCP held a massive short position of 680,000 shares of RDGM, with a notional value of approximately $62.66 million at the pre-publication price of $92.14 per share.
The results were devastating. Over the course of the three publications, RDGM stock declined from $92.14 to a trough of $72.80 — a cumulative decline of $19.34 per share, or 21.0%. With 73.8 million shares outstanding, this represented an aggregate market-capitalization loss of approximately $1.427 billion. Meanwhile, Defendants quietly closed their short position by mid-March 2024, pocketing estimated gross profits of approximately $13.15 million. The reports were not disinterested analysis published for the public good. They were the weapons of a profit-driven scheme to manipulate the market for Defendants' financial gain.
Every material allegation in the reports has since been independently disproven. RGC's independent auditor, Pinnacle Audit & Advisory LLP, has confirmed the accuracy of RGC's reported revenue and issued clean audit opinions for fiscal years 2021 through 2023. The Nevada Gaming Control Board completed an independent audit of RGC's RNG systems on March 29, 2024, and cleared RGC of any manipulation. The United States Securities and Exchange Commission ("SEC") opened an informal inquiry into the related-party allegations in March 2024 and closed it with no action on August 16, 2024. Not a single allegation in Defendants' reports has been substantiated by any regulatory body, independent auditor, or law enforcement agency.
Defendants' anti-SLAPP motion fails at both prongs of the statutory analysis.
First, the motion fails at Prong One because Defendants' publications constitute commercial speech within the meaning of Code of Civil Procedure section 425.17, subdivision (c). GPR is primarily engaged in the business of publishing short-seller research reports to profit from short sales in targeted companies. The three reports were published as part of that business model, while GPCP held a 680,000-share short position, for the purpose of promoting Defendants' financial interest — namely, driving down RDGM's stock price so that Defendants could profit from their pre-existing short positions. The intended audience was RDGM investors, market participants, and potential customers of GPR's subscription research service. Because section 425.17(c) applies, the anti-SLAPP statute does not protect Defendants' publications, and the motion should be denied without the need to reach Prong Two.
Second, even if the Court were to reach Prong Two, Plaintiff has demonstrated a probability of prevailing on the merits of each of its four causes of action. The evidence — including independent verification of the falsity of each of Defendants' core allegations, internal Meridian Solutions messages and emails showing Defendants' awareness that their revenue-fabrication allegations lacked adequate factual support, evidence of Defendants' failure to contact either the Nevada Gaming Control Board or RGC before publication, evidence of Defendants' awareness of contrary evidence (the Pinnacle clean audit opinions), and the powerful circumstantial evidence of actual malice provided by the $62.66 million short position and $13.15 million in profits — is more than sufficient to establish a prima facie case of trade libel, intentional interference with prospective economic advantage, unfair business practices, and negligent misrepresentation.
Accordingly, RGC respectfully requests that the Court deny Defendants' anti-SLAPP motion in its entirety and permit this case to proceed to discovery on the merits.
II. STATEMENT OF FACTS
A. The Parties
1. Plaintiff Redstone Gaming Corp.
Plaintiff Redstone Gaming Corp. is a Nevada corporation with its principal executive offices located at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. (Declaration of Derek Olafson ("Olafson Decl."), ¶ 3.) RGC is publicly traded on the Nasdaq Global Select Market under the ticker symbol RDGM. (Id. ¶ 4.) RGC's registered agent in Nevada is National Statutory Agents, Inc., 701 S. Carson Street, Suite 200, Carson City, Nevada 89701. (Id. ¶ 3.)
RGC is a diversified gaming and media-entertainment company. It owns and operates eleven casino-resort properties across three states: Nevada, New Jersey, and Mississippi. (Olafson Decl. ¶ 5.) In addition to its brick-and-mortar casino-resort operations, RGC licenses proprietary electronic gaming platforms to third-party casino operators, operates a growing iGaming division known as Redstone Digital, and maintains a media-entertainment production arm known as Crimson Studios, which produces original content for streaming and theatrical release. (Id. ¶¶ 6–8.)
For fiscal year 2023, RGC reported total revenue of $3.42 billion and adjusted EBITDA of $812 million, representing an approximately 23.7% adjusted EBITDA margin. (Declaration of Priya Ramaswaran ("Ramaswaran Decl."), ¶ 4.) RGC's financial statements have been audited by Pinnacle Audit & Advisory LLP, one of the nation's leading independent audit firms. (Declaration of Walter Ng ("Ng Decl."), ¶ 3.) Walter Ng, CPA, has served as the engagement partner for Pinnacle's audit of RGC since fiscal year 2020. (Id. ¶ 4.) Pinnacle issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. (Id. ¶ 5; Exhibit 8.)
Prior to the publications at issue in this case, RGC had a market capitalization of approximately $6.8 billion, based on 73.8 million shares of common stock outstanding and a closing share price of $92.14 on February 6, 2024 — the last trading day before the publication of Defendants' first report. (Olafson Decl. ¶ 10; Exhibit 4; Exhibit 5.)
RGC's senior leadership includes Marcus J. Calloway (Chief Executive Officer), Priya Ramaswaran (Chief Financial Officer), Derek Olafson (General Counsel), and Janelle Hu (Vice President, Investor Relations). (Olafson Decl. ¶ 9.) Each of these individuals has submitted a declaration in support of this Opposition, attesting to the facts set forth herein.
2. Defendant Grizzly Peak Research LLC
Defendant Grizzly Peak Research LLC is a Delaware limited liability company with its principal office located at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. (Olafson Decl. ¶ 12; Exhibit 6.) GPR's registered agent in Delaware is Pacific Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. (Id.) GPR publishes short-seller research reports targeting publicly traded companies in which its principals and affiliated entities maintain short positions. (Olafson Decl. ¶ 13.)
GPR distributes its reports through its subscription website, grizzlypeakresearch.com, and through social media, principally via the @GrizzlyPeakRes account on the X platform (formerly known as Fenmore Solutions). (Id. ¶ 14.) At the time of the publications at issue, the @GrizzlyPeakRes account had approximately 142,000 followers. (Id.; Exhibit 13.)
GPR's Managing Member is Defendant Tobias "Toby" Fenchurch. (Olafson Decl. ¶ 15.) Ava Lin serves as GPR's Senior Analyst and is the co-author of the three reports at issue. (Id. ¶ 16.) As of year-end 2024, GPR had modest assets of approximately $22 million in cash and receivables. (Id. ¶ 17.)
GPR's business model is straightforward: GPR identifies publicly traded companies that it believes to be overvalued or potentially fraudulent, its affiliated hedge fund — Defendant GPCP — establishes a short position in the target company's stock, and GPR then publishes a sensational "research report" attacking the target company. The report's publication drives down the target company's stock price, and GPCP closes its short position at a profit. (Olafson Decl. ¶ 18.) The reports are thus the functional equivalent of marketing materials — they are the mechanism by which Defendants generate revenue. Each report includes a boilerplate disclaimer disclosing GPR's short position in the target company, but the disclaimer does not disclose the size of the position, the timing of its establishment, or the affiliated fund's intention to close the position after publication. (Id. ¶ 19.)
3. Defendant Grizzly Peak Capital Partners LP
Defendant Grizzly Peak Capital Partners LP is a Delaware limited partnership with its principal office at the same address as GPR: 44 Maiden Lane, 7th Floor, San Francisco, California 94108. (Olafson Decl. ¶ 20.) GPCP is an affiliated hedge fund with estimated assets under management of approximately $185 million. (Id. ¶ 21.)
GPCP's General Partner is Grizzly Peak Capital GP LLC, a Delaware limited liability company whose sole managing member is Defendant Tobias Fenchurch. (Olafson Decl. ¶ 22.) It was GPCP that held the 680,000-share short position in RDGM at the time GPR published the three reports at issue. (Id. ¶ 23; Exhibit 7.) GPCP was added as a co-defendant in the First Amended Complaint filed on March 18, 2024. (Id. ¶ 24; Exhibit 12.)
4. Defendant Tobias Fenchurch
Defendant Tobias Fenchurch is an individual who, upon information and belief, resides in San Francisco, California. (Olafson Decl. ¶ 25.) Fenchurch is the Managing Member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, the general partner of GPCP. (Id. ¶ 26.) In both capacities, Fenchurch exercises sole and exclusive control over the publication of GPR's research reports and the establishment, maintenance, and closing of GPCP's short positions. (Id. ¶ 27.)
The evidence demonstrates that Fenchurch personally directed the timing and publication of all three reports at issue and personally directed the establishment and closing of the 680,000-share short position in RDGM. (Olafson Decl. ¶ 28; Exhibit 6.) Fenchurch was added as an individual defendant in the First Amended Complaint filed on March 18, 2024. (Olafson Decl. ¶ 29; Exhibit 12.)
B. The Defamatory Publications
Between February 7 and February 21, 2024, GPR published three separate "research reports" targeting RGC. Each report was published simultaneously on GPR's subscription website, grizzlypeakresearch.com, and amplified via the @GrizzlyPeakRes social-media account. (Olafson Decl. ¶ 30; Exhibits 1–3, 13.) Each report contained sensational, headline-grabbing allegations of financial fraud and regulatory malfeasance. Each report was published while GPCP held its 680,000-share short position in RDGM. (Olafson Decl. ¶ 31; Exhibit 7.) And each report was followed by a significant decline in RDGM's stock price, enriching Defendants at the expense of RGC and its shareholders. (Olafson Decl. ¶ 32; Exhibit 4.)
1. Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings"
GPR published its first report on February 7, 2024. (Exhibit 1.) The report, entitled "House of Cards: Redstone Gaming's Manufactured Earnings," was approximately 48 pages in length. (Id.) The report alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions between RGC's operating subsidiaries. (Id. at 3–4.) The report was published simultaneously on grizzlypeakresearch.com and promoted via the @GrizzlyPeakRes social-media account. (Olafson Decl. ¶ 34; Exhibit 13.)
The report included GPR's standard boilerplate disclaimer, which stated, in relevant part, that "Grizzly Peak Research LLC and its affiliates currently hold a short position in shares of Redstone Gaming Corp. (Nasdaq: RDGM) and may profit from a decline in the price of RDGM shares." (Exhibit 1 at 48.) The disclaimer did not disclose the size of the short position (680,000 shares), the notional value of the position (approximately $62.66 million), or the identity of the affiliated entity holding the position (GPCP).
Following the publication of Report 1, RDGM stock declined from $92.14 to $84.37 on February 7, 2024 — a decline of $7.77 per share, or approximately 8.4%, on heavy trading volume. (Olafson Decl. ¶ 35; Exhibit 4.)
2. Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators"
GPR published its second report on February 14, 2024 — exactly one week after Report 1. (Exhibit 2.) The report, entitled "Rigged Reels: How Redstone's Slot Software Cheats the Regulators," was approximately 36 pages in length. (Id.) The 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. (Id. at 2–3.) The report claimed that RGC's gaming software was rigged to produce artificially favorable payout ratios during regulatory testing periods, while reverting to lower payout ratios during normal operations. (Id. at 14–18.)
The report was published and distributed through the same channels as Report 1. (Olafson Decl. ¶ 37; Exhibit 13.) It contained the same boilerplate short-position disclaimer. (Exhibit 2 at 36.)
Following the publication of Report 2, RDGM stock declined further to $78.52 on February 14, 2024. (Olafson Decl. ¶ 38; Exhibit 4.) From the pre-publication price of $92.14, this represented a cumulative decline of $13.62 per share, or approximately 14.8%.
3. Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game"
GPR published its third and final report on February 21, 2024 — again, exactly one week after the previous report. (Exhibit 3.) The report, entitled "Double Down on Fraud: Redstone's Related-Party Shell Game," was approximately 29 pages in length. (Id.) The report alleged that RGC's CEO, Marcus J. Calloway, had engaged in undisclosed related-party dealings with a purported shell entity called "Vermilion Holdings LLC," through which Calloway had allegedly diverted company assets and received improper personal benefits. (Id. at 2–5.) The report alleged that these transactions were not disclosed in RGC's SEC filings, as required under applicable securities regulations and Generally Accepted Accounting Principles. (Id. at 6–12.)
The report was published and distributed through the same channels as the prior two reports. (Olafson Decl. ¶ 40; Exhibit 13.) It contained the same boilerplate short-position disclaimer. (Exhibit 3 at 29.)
Following the publication of Report 3, RDGM stock hit its trough of $72.80 on February 21, 2024. (Olafson Decl. ¶ 41; Exhibit 4.) From the pre-publication price of $92.14, this represented a cumulative decline of $19.34 per share, or approximately 21.0%. With 73.8 million shares outstanding, the aggregate market-capitalization loss at the trough was approximately $1.427 billion ($19.34 × 73.8 million shares). (Id. ¶ 42.)
C. The Falsity of the Reports' Allegations
Each of the three core allegations in Defendants' reports — revenue fabrication, RNG manipulation, and undisclosed related-party transactions — has been independently investigated and disproven.
1. Revenue-Fabrication Allegation Disproven
The allegation that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions is false. RGC's independent auditor, Pinnacle Audit & Advisory LLP, has confirmed the accuracy of RGC's reported revenue of $3.42 billion for fiscal year 2023. (Ng Decl. ¶¶ 6–8.) Pinnacle issued clean (unqualified) audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023, each of which stated that RGC's financial statements were presented fairly, in all material respects, in conformity with Generally Accepted Accounting Principles. (Id. ¶ 5; Exhibit 8.)
In addition, following the publication of the GPR reports, Pinnacle conducted a supplemental forensic audit specifically focused on the intercompany transactions identified in Report 1. (Ng Decl. ¶¶ 9–11.) The supplemental forensic audit confirmed that all intercompany transactions were legitimate, properly documented, and appropriately eliminated in consolidation. (Id. ¶ 11.) The supplemental engagement was completed on April 8, 2024, and its findings fully corroborated Pinnacle's prior audit opinions. (Id. ¶ 12.)
2. RNG-Manipulation Allegation Disproven
The allegation that RGC manipulated its RNG software to inflate payout statistics reported to the Nevada Gaming Control Board is false. Following the publication of Report 2, the Nevada Gaming Control Board initiated an independent audit of RGC's RNG systems. (Olafson Decl. ¶ 47.) On March 29, 2024, the Board completed its audit and issued a letter clearing RGC of any manipulation. (Id. ¶ 48; Exhibit 9.) The Board's letter stated that RGC's gaming software complied with all applicable regulatory standards and that the Board's testing found no evidence of any irregularity in RGC's RNG systems, payout ratios, or regulatory reporting. (Exhibit 9.)
RGC's gaming software is subject to regular testing by the Nevada Gaming Control Board's Technology Division, and RGC has maintained a clean compliance record throughout its operating history. (Olafson Decl. ¶ 49.) The Board's March 29 letter confirmed that this clean record was unbroken. (Id.; Exhibit 9.)
3. Related-Party Allegation Disproven / Misleading
The allegation regarding undisclosed related-party transactions involving Vermilion Holdings LLC was based on incomplete information and was materially misleading. Following the publication of Report 3, the SEC opened an informal inquiry into the allegations in March 2024. (Olafson Decl. ¶ 50.) RGC cooperated fully with the SEC's inquiry, producing all requested documents and making its officers available for interviews. (Id. ¶ 51.)
On August 16, 2024, the SEC closed its informal inquiry with no action. (Olafson Decl. ¶ 52.) The SEC's staff issued a closing letter confirming that the Division of Enforcement had concluded its investigation and that, based on the information obtained, the staff did not intend to recommend any enforcement action against RGC or any of its officers. (Id.)
No evidence of undisclosed related-party transactions was found by the SEC, by RGC's internal investigation, or by any other investigating body. (Olafson Decl. ¶ 53.) The limited connections between CEO Calloway and Vermilion Holdings LLC referenced in Report 3 were fully disclosed in RGC's prior SEC filings and were consistent with all applicable disclosure requirements. (Id. ¶ 54.)
D. Defendants' Short-Selling Profit Motive
The evidence demonstrates that Defendants' publications were driven by a singular financial motive: to profit from the decline in RDGM's stock price caused by the reports themselves.
GPCP held a short position of 680,000 shares of RDGM at the time the reports were published. (Olafson Decl. ¶ 55; Exhibit 7.) At the pre-publication closing price of $92.14 per share, this short position had a notional value of approximately $62.66 million ($92.14 × 680,000 shares). (Id. ¶ 56.)
Following the publication of the three reports and the resulting decline in RDGM's stock price, GPCP closed its short position by mid-March 2024. (Olafson Decl. ¶ 57; Exhibit 7.) Based on available trading records, GPCP closed its position at an estimated average price of approximately $72.80 per share. (Id. ¶ 58.) The estimated gross profit on the short position was therefore approximately $13.15 million, calculated as follows: ($92.14 − $72.80) × 680,000 shares = $13,151,200. (Id. ¶ 59.)
The timing of the three publications — spaced exactly one week apart, from February 7 through February 21, 2024 — was carefully orchestrated to maximize the reputational damage to RGC and the resulting decline in RDGM's stock price. (Olafson Decl. ¶ 60.) The cadence of publication ensured that RDGM's stock price had insufficient time to recover between reports, creating a sustained downward pressure that prevented any corrective market response. (Id. ¶ 61.) The short position was then closed during the weeks immediately following the final report, while the market was still digesting the false information and before RGC's corrective disclosures could fully take effect. (Id. ¶ 62.)
GPR publicly disclosed its short position in each report via its boilerplate disclaimer, but this disclosure does not negate the commercial motivation for the publications or the falsity of the statements contained therein. (Olafson Decl. ¶ 63.) The disclaimer is a standard regulatory practice; it is not evidence of good faith. To the contrary, the very fact that Defendants disclosed their financial interest in a decline in RDGM's stock price while simultaneously publishing false allegations designed to cause that decline strengthens, rather than weakens, the inference of commercial motivation and actual malice. (Id. ¶ 64.)
E. Procedural History
RGC filed its original Complaint on February 5, 2024, two days before the publication of the first GPR report, based on pre-publication communications that put RGC on notice of the impending attack. (Olafson Decl. ¶ 65.) The original Complaint asserted three causes of action: (1) Trade Libel under California Civil Code section 46, subdivision (3); (2) Intentional Interference with Prospective Economic Advantage; and (3) Unfair Business Practices under California Business and Professions Code section 17200. (Id. ¶ 66.)
On March 18, 2024, following the publication of all three reports and the identification of GPCP and Tobias Fenchurch as key participants in the scheme, RGC filed its First Amended Complaint, adding GPCP and Fenchurch as defendants and adding a fourth cause of action for Negligent Misrepresentation. (Olafson Decl. ¶ 67; Exhibit 12.)
Defendants filed their Special Motion to Strike under Code of Civil Procedure section 425.16 on April 12, 2024. (Olafson Decl. ¶ 68.) This Opposition is timely filed pursuant to the Court's briefing schedule.
III. LEGAL STANDARD
A. The Two-Prong Anti-SLAPP Framework Under § 425.16
California's anti-SLAPP statute, Code of Civil Procedure section 425.16, provides a procedural mechanism for the early dismissal of meritless lawsuits that arise from acts in furtherance of the constitutional rights of petition and free speech. (§ 425.16, subd. (a); Navellier v. Sletten (2002) 29 Cal.4th 82, 85; Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009.) The statute is designed to address the "disturbing increase" in lawsuits "brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." (§ 425.16, subd. (a).)
Courts evaluate anti-SLAPP motions under a well-established two-prong framework. (Equilon Enterprises, LLC v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67; Park v. Board of Trustees (2017) 2 Cal.5th 1057, 1061.)
Prong One — Protected Activity. The moving party bears the threshold burden of demonstrating that the challenged claims arise from acts in furtherance of the right of petition or free speech in connection with a public issue or an issue of public interest. (§ 425.16, subd. (b)(1); City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76.) The statute defines four categories of protected activity:
(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law;
(2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law;
(3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; and
(4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.
(§ 425.16, subd. (e)(1)–(4).)
If the moving party fails to demonstrate that the challenged claims arise from protected activity, the motion must be denied without reaching the second prong. (Navellier, supra, 29 Cal.4th at p. 88; Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.)
Prong Two — Probability of Prevailing. If the moving party meets its burden on Prong One, the burden shifts to the plaintiff to demonstrate a probability of prevailing on its claims. (§ 425.16, subd. (b)(1); Baral v. Schnitt (2016) 1 Cal.5th 376, 384–385.) To meet this burden, the plaintiff must "demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291, quoting Wilson, supra, 28 Cal.4th at p. 821.)
At the second prong, the court does not weigh the evidence or determine credibility. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.) Instead, the court accepts the plaintiff's evidence as true and evaluates the defendant's evidence only to determine whether it defeats the plaintiff's showing as a matter of law. (Id.) The plaintiff need only demonstrate that its claim has "minimal merit." (Navellier, supra, 29 Cal.4th at p. 89.)
This standard is deliberately plaintiff-friendly. As the Supreme Court has emphasized, the anti-SLAPP statute's purpose is to filter out only those cases that "lack even minimal merit." (FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133, 145.) Claims supported by competent evidence of each element survive an anti-SLAPP motion and proceed to discovery and trial.
B. The Commercial Speech Exemption Under § 425.17
In 2003, the Legislature enacted Code of Civil Procedure section 425.17 to address concerns that the anti-SLAPP statute was being misused as a shield by commercial enterprises seeking to avoid liability for harmful business conduct. (Veltason Strong-Tie Co. v. Gore (2010) 49 Cal.4th 12, 22; Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735, fn. 6.)
Section 425.17, subdivision (c), provides a critical exemption from the anti-SLAPP statute. It states:
"Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services, including, but not limited to, insurance, securities, or financial instruments, arising from any statement or conduct by that person if both of the following conditions exist:
(1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services, or the statement or conduct was made in the course of delivering the person's goods or services.
(2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer, or the statement or conduct arose out of or within the context of a regulatory approval process, proceeding, or investigation . . . ."
(§ 425.17, subd. (c).)
The Supreme Court has confirmed that section 425.17(c) is to be construed broadly to effectuate its remedial purpose of preventing the abuse of the anti-SLAPP statute by commercial actors. (Jarrow Formulas, supra, 31 Cal.4th at pp. 741–742; Veltason Strong-Tie, supra, 49 Cal.4th at p. 30.) The exemption applies when three conditions are met: (1) the defendant is primarily engaged in the business of selling or leasing goods or services; (2) the challenged statement or conduct arises from commercial speech — i.e., it consists of representations of fact made for the purpose of promoting or securing commercial transactions in the defendant's goods or services; and (3) the intended audience is an actual or potential buyer or customer. (Jarrow Formulas, supra, 31 Cal.4th at pp. 741–742.)
Critically, in the context of short-seller research, the Court of Appeal in Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688 held that the commercial-speech exemption can apply to entities that publish research reports in connection with securities trading activities. The court recognized that when a research publisher has a direct financial interest in the market impact of its reports — such as a short position in the stock of the target company — the reports may constitute commercial speech designed to promote the publisher's commercial interests, rather than disinterested public-interest commentary. (Id. at pp. 711–715; see also Bel Air Internet, LLC v. Morales (2018) 20 Cal.App.5th 924, 937 [broadly construing the commercial-speech exemption to include non-traditional commercial enterprises].)
When the commercial-speech exemption of section 425.17(c) applies, the anti-SLAPP motion must be denied without reaching the second prong. (Veltason Strong-Tie, supra, 49 Cal.4th at p. 22.)
IV. ARGUMENT
A. Prong One: Defendants' Reports Do Not Arise from Protected Activity
1. The Commercial-Speech Exemption of § 425.17(c) Applies
The threshold question in this case is whether the anti-SLAPP statute applies at all, or whether Defendants' publications fall within the commercial-speech exemption of Code of Civil Procedure section 425.17, subdivision (c). The answer is clear: the exemption applies, and the anti-SLAPP motion should be denied without reaching Prong Two.
a. GPR Is Primarily Engaged in the Business of Selling or Leasing Goods or Services.
Section 425.17(c) applies to persons "primarily engaged in the business of selling or leasing goods or services, including, but not limited to, insurance, securities, or financial instruments." GPR is primarily — indeed, exclusively — engaged in the business of publishing short-seller research reports. (Olafson Decl. ¶ 13.) GPR's business model is to generate revenue through two channels: (i) subscription fees from its research publication, grizzlypeakresearch.com; and (ii) the profits its affiliated hedge fund, GPCP, generates from short-selling the stocks of companies targeted in GPR's reports. (Id. ¶ 18.)
GPR's reports are its products. They are the "goods" that GPR sells to its subscriber base, and they are the vehicle through which GPR creates the market conditions that generate profits for its affiliated fund. GPR is not a newspaper, a civic organization, or a public-interest advocacy group. It is a commercial enterprise whose sole function is to publish research reports in connection with securities trading activities. This places GPR squarely within the class of entities to which the commercial-speech exemption applies.
The Court of Appeal's decision in Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688 is directly on point. In Overstock.com, the plaintiff — a publicly traded company — brought claims against a research firm that had published negative reports about the plaintiff while maintaining a financial interest in the decline of the plaintiff's stock price. The Court of Appeal held that the commercial-speech exemption of section 425.17(c) applied because the research firm was "primarily engaged in the business of selling" research reports and related financial services. (Id. at pp. 711–713.) The court emphasized that the research firm's reports were commercial products, not disinterested public commentary, and that the firm's financial interest in the market impact of its reports confirmed the commercial nature of the publications. (Id. at pp. 713–715.)
The same analysis applies here. Like the research firm in Overstock.com, GPR is primarily engaged in the business of publishing research reports in connection with securities trading. GPR's reports are commercial products sold to subscribers and used to generate trading profits for its affiliated hedge fund. GPR falls squarely within the scope of section 425.17(c).
b. The Reports Were Published for the Purpose of Promoting Defendants' Commercial Interests.
The second condition of section 425.17(c) requires that the challenged statements were "made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services." (§ 425.17, subd. (c)(1).)
The three reports published by GPR between February 7 and February 21, 2024, were published for the express purpose of promoting Defendants' commercial interests. At the time of publication, GPCP held a short position of 680,000 shares of RDGM, with a notional value of approximately $62.66 million. (Olafson Decl. ¶ 55; Exhibit 7.) The reports were designed to drive down RDGM's stock price so that GPCP could close its short position at a profit. And that is precisely what happened. RDGM's stock price declined from $92.14 to $72.80 — a 21.0% decline — and GPCP closed its short position by mid-March 2024, realizing estimated gross profits of approximately $13.15 million. (Olafson Decl. ¶¶ 57–59; Exhibit 7.)
The reports thus functioned as the equivalent of commercial marketing materials. Just as an advertisement is designed to increase demand for a product and thereby generate revenue for the advertiser, Defendants' reports were designed to decrease demand for RDGM stock and thereby generate revenue for Defendants. The mechanism is different — selling rather than buying pressure — but the commercial purpose is the same. The reports are not disinterested analysis; they are profit-driven publications integral to Defendants' business model.
The boilerplate disclaimers in each report reinforce this conclusion. Each disclaimer expressly acknowledged that "Grizzly Peak Research LLC and its affiliates currently hold a short position in shares of Redstone Gaming Corp. (Nasdaq: RDGM) and may profit from a decline in the price of RDGM shares." (Exhibits 1–3.) This is an admission, in Defendants' own words, that the publications were motivated by Defendants' financial interest in the decline of RDGM's stock price.
Defendants' estimated $13.15 million in short-sale profits further confirms that the publications were profit-driven, not public-interest-driven. (Olafson Decl. ¶ 59; Exhibit 7.) The magnitude of the profit — more than half of GPR's total assets — underscores the extent to which the publications were integral to Defendants' commercial enterprise.
c. The Intended Audience Was Actual or Potential Buyers or Customers.
The third condition of section 425.17(c) requires that "the intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer." (§ 425.17, subd. (c)(2).)
GPR's reports were published on grizzlypeakresearch.com, a subscription service whose customers are investors and market participants who pay for access to GPR's research. (Olafson Decl. ¶ 14.) The reports were also distributed via the @GrizzlyPeakRes social-media account, which has approximately 142,000 followers who are, by definition, interested in GPR's research output and are actual or potential customers of GPR's subscription service. (Id.; Exhibit 13.)
More broadly, the reports were specifically targeted at RDGM investors and market participants — i.e., persons who hold or might trade in RDGM stock. These individuals are "actual or potential buyer[s] or customer[s]" within the meaning of section 425.17(c)(2) because they are the persons most likely to act on the information contained in the reports by selling their RDGM shares, thereby driving down the stock price and generating profits for Defendants.
The intended audience also included financial journalists, sell-side analysts, and other market intermediaries who are "person[s] likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer." (§ 425.17, subd. (c)(2).) The reports were designed to generate media coverage and analyst commentary that would amplify the negative information and accelerate the decline in RDGM's stock price.
d. Conclusion on the Commercial-Speech Exemption.
All three conditions of section 425.17(c) are satisfied. GPR is primarily engaged in the business of selling research reports and related financial services. The three reports were published for the purpose of promoting Defendants' commercial interests — specifically, to drive down RDGM's stock price and generate profits from GPCP's 680,000-share short position. And the intended audience was actual or potential customers of GPR's subscription service and market participants likely to trade in RDGM stock.
Because the commercial-speech exemption applies, the anti-SLAPP statute does not protect Defendants' publications, and the motion should be denied without reaching Prong Two. (Veltason Strong-Tie Co. v. Gore, supra, 49 Cal.4th at p. 22; Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at pp. 741–742; Overstock.com, Inc. v. Gradient Analytics, Inc., supra, 151 Cal.App.4th at pp. 711–715.)
2. Even Absent the Commercial-Speech Exemption, the Reports Are Not Protected Activity Under § 425.16(e)
Even if the Court were to conclude that the commercial-speech exemption of section 425.17(c) does not apply — which Plaintiff respectfully submits would be error — the anti-SLAPP motion should still be denied at Prong One because Defendants' reports do not constitute protected activity under section 425.16(e).
Defendants will likely argue that their reports concern a "public issue" — namely, the financial integrity of a publicly traded company — and therefore fall within the scope of section 425.16(e)(4), which protects "any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." While it is true that the financial condition of a publicly traded company may, in certain circumstances, qualify as an issue of public interest, that conclusion does not follow automatically. The court must examine the context and nature of the challenged statements to determine whether they genuinely implicate a public issue or are merely private disputes dressed in public-interest clothing. (FilmOn.com Inc. v. DoubleVerify Inc., supra, 7 Cal.5th at pp. 149–150.)
Here, the reports were not genuine public-interest commentary. They were manufactured to manipulate the market for Defendants' private financial gain. The false and commercially motivated nature of the statements removes them from the protective ambit of the statute. As the Supreme Court recognized in Flatley v. Mauro (2006) 39 Cal.4th 299, 317, when the defendant's conduct is "illegal as a matter of law," the defendant cannot invoke the anti-SLAPP statute's protection. While Plaintiff does not contend that the Flatley exception — which requires illegality as a matter of law based on uncontroverted evidence — necessarily applies here, the principle underlying Flatley is instructive: the anti-SLAPP statute was not designed to protect conduct that is unlawful on its face and motivated by commercial self-interest rather than by any genuine concern for the public welfare.
Moreover, the factual record before this Court demonstrates that Defendants' reports were not the product of good-faith investigative research. They were the product of a coordinated scheme to publish false allegations, drive down a company's stock price, and profit from the resulting decline. The internal communications between Fenchurch and Lin reveal that Defendants were aware that their revenue-fabrication allegations lacked adequate factual support before publication. (Exhibit 6.) Ava Lin did not contact the Nevada Gaming Control Board or seek comment from RGC before publishing the RNG-manipulation allegations. Fenchurch instructed the publication of Report 3 before completing verification of the underlying claims. This is not the kind of speech the anti-SLAPP statute was enacted to protect.
The Court of Appeal's analysis in ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993 is instructive. In ComputerXpress, the court recognized that statements posted on internet message boards about a publicly traded company could constitute protected speech under the anti-SLAPP statute, but emphasized that the protection does not extend to knowingly false statements made for commercial gain. (Id. at pp. 1007–1009.) The court noted that "[s]tatements that are demonstrably false, as opposed to merely critical, enjoy less protection under the First Amendment." (Id. at p. 1008.) Similarly, in Overstock.com, the Court of Appeal declined to extend anti-SLAPP protection to research reports published by a financially interested party, concluding that the commercial-speech exemption applied. (Overstock.com, supra, 151 Cal.App.4th at pp. 711–715.)
The same result should obtain here. Defendants' reports were not disinterested public commentary. They were commercially motivated, knowingly false publications designed to manipulate the market for Defendants' financial benefit. They do not constitute protected activity under section 425.16(e), and the anti-SLAPP motion should be denied at Prong One.
B. Prong Two: Plaintiff Has Demonstrated a Probability of Prevailing on the Merits
Even if the Court were to find that Defendants have met their burden at Prong One — which Plaintiff disputes — the anti-SLAPP motion should nonetheless be denied because Plaintiff has demonstrated a probability of prevailing on each of its four causes of action. Under the second prong of the anti-SLAPP analysis, the plaintiff need only demonstrate "minimal merit" — that is, the complaint must be "both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." (Soukup, supra, 39 Cal.4th at p. 291; Taus v. Loftus (2007) 40 Cal.4th 683, 713–714.)
RGC has more than met this standard. The evidence, taken as true, establishes every element of each cause of action.
1. Trade Libel (First Cause of Action — Cal. Civ. Code § 46(3))
Trade libel, also known as injurious falsehood or disparagement, is defined as "a publication of matter derogatory to the plaintiff's business in general, or to its quality or character, made with knowledge of its falsity or with reckless disregard as to its truth." (Cal. Civ. Code, § 46, subd. (3); see also Restatement (Second) of Torts, § 623A (1977); 5 Witkin, Summary of Cal. Law (11th ed. 2017) Torts, § 637.) The elements of a trade-libel claim are: (1) a publication; (2) that is false; (3) that is "of and concerning" the plaintiff's business; (4) made with the requisite degree of fault; and (5) special damages. (Nygard, Inc. v. Uusi-Kerttula (2008) 159 Cal.App.4th 1027, 1047–1048; Bikkina v. Mahadevan (2015) 241 Cal.App.4th 70, 92.)
RGC has presented prima facie evidence establishing each of these elements.
a. Publication of False Statements of Fact. Defendants published three reports between February 7 and February 21, 2024, each of which was distributed widely through GPR's subscription website and social-media account to an audience of approximately 142,000 followers. (Olafson Decl. ¶¶ 30, 34, 37, 40; Exhibits 1–3, 13.) The reports contained specific, objectively verifiable statements of fact — not mere opinions or rhetorical hyperbole — including:
(i) That RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions (Report 1, Exhibit 1 at 3–4);
(ii) That RGC manipulated its random-number-generator software to inflate payout statistics reported to the Nevada Gaming Control Board (Report 2, Exhibit 2 at 2–3, 14–18); and
(iii) That RGC's CEO, Marcus J. Calloway, engaged in undisclosed related-party transactions through a purported shell entity called Vermilion Holdings LLC (Report 3, Exhibit 3 at 2–5).
Each of these allegations has been independently investigated and disproven:
• The revenue-fabrication allegation was disproven by Pinnacle Audit & Advisory LLP's clean audit opinions for FY 2021–2023 and by Pinnacle's supplemental forensic audit, completed on April 8, 2024, which confirmed the accuracy of all intercompany transactions. (Ng Decl. ¶¶ 5, 9–12; Exhibit 8.)
• The RNG-manipulation allegation was disproven by the Nevada Gaming Control Board's independent audit, completed on March 29, 2024, which cleared RGC of any manipulation and confirmed that RGC's gaming software complied with all applicable regulatory standards. (Olafson Decl. ¶¶ 47–49; Exhibit 9.)
• The related-party allegation was based on incomplete information and was materially misleading. The SEC opened an informal inquiry in March 2024 and closed it with no action on August 16, 2024. No evidence of undisclosed related-party transactions was found by the SEC, by RGC's internal investigation, or by any other body. (Olafson Decl. ¶¶ 50–54.)
This evidence is more than sufficient to establish a prima facie showing of publication and falsity.
b. The Statements Were "Of and Concerning" Plaintiff's Business. There is no dispute that the challenged statements were "of and concerning" RGC's business. All three reports specifically named Redstone Gaming Corp. in their titles and throughout their texts. (Exhibits 1–3.) The reports targeted RGC's financial statements, its gaming software, its regulatory compliance, and the integrity of its CEO. The statements directly impugned the quality, integrity, and lawfulness of RGC's business operations and were plainly understood by their audience to refer to RGC. (Declaration of Janelle Hu ("Hu Decl."), ¶¶ 6–8.)
This element is satisfied as a matter of law.
c. Actual Malice. Because RGC is a publicly traded corporation, it is treated as a public figure for purposes of the First Amendment and must satisfy the actual-malice standard to prevail on 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; Reader's Digest Ass'n v. Superior Court (1984) 37 Cal.3d 244, 256; Curtis Publishing Co. v. Butts (1967) 388 U.S. 130, 155.) Under the actual-malice standard, the plaintiff must show that the defendant published the false statement with "knowledge that it was false or with reckless disregard of whether it was false or not." (Sullivan, supra, 376 U.S. at p. 280.)
The actual-malice inquiry focuses on the defendant's subjective state of mind at the time of publication. (Harte-Hanks Communications, Inc. v. Connaughton (1989) 491 U.S. 657, 667.) "[R]eckless disregard" means that "the defendant in fact entertained serious doubts as to the truth of his publication." (Id. at p. 667, quoting St. Amant v. Thompson (1968) 390 U.S. 727, 731.) Actual malice may be proven by circumstantial evidence, including evidence of motive, failure to investigate, reliance on unreliable sources, and the inherent improbability of the published allegations. (Harte-Hanks, supra, 491 U.S. at p. 668; enlifelife Int'l, Inc. v. Wornick (9th Cir. 2001) 264 F.3d 832, 846.)
RGC need not prove actual malice at this stage; it need only present prima facie evidence sufficient to support a finding of actual malice. The evidence before this Court is compelling.
Financial motive. At the time of publication, GPCP held a short position of 680,000 shares of RDGM, with a notional value of approximately $62.66 million. (Olafson Decl. ¶ 55; Exhibit 7.) Defendants stood to profit — and did profit — from the very decline in RGC's stock price that the false reports were designed to cause. GPCP realized estimated gross profits of approximately $13.15 million from closing the short position after the reports drove RDGM's stock price down by 21.0%. (Olafson Decl. ¶¶ 57–59; Exhibit 7.) This financial motive is powerful circumstantial evidence of actual malice. When a defendant has a direct financial interest in the falsity of its own publications, the inference of malice is particularly strong. (See Overstock.com, supra, 151 Cal.App.4th at pp. 714–715 [financial motive relevant to actual-malice inquiry]; Harte-Hanks, supra, 491 U.S. at p. 668 [motive relevant to actual-malice determination].)
Internal communications revealing awareness of insufficient factual support. Through informal discovery, RGC has obtained excerpts of GPR's internal Brightmoor Data Systems between Tobias Fenchurch and Ava Lin, GPR's Senior Analyst and co-author of the reports. (Declaration of Carlos Espinoza ("Espinoza Decl."), ¶¶ 4–7; Exhibit 6.) These communications, which pre-date the publication of Report 1, reveal that Fenchurch and Lin were aware that the revenue-fabrication allegations lacked adequate factual support. In one exchange dated February 4, 2024, Lin wrote to Fenchurch: "I'm not sure we can prove the intercompany revenue is fake — the consolidation workpapers we have are incomplete and the numbers don't clearly show what we're saying they show." (Exhibit 6 at GPR-Meridian Solutions-0047.) Fenchurch responded: "We don't need to prove it. We need to raise enough questions to tank the stock. The market will do the rest." (Exhibit 6 at GPR-Meridian Solutions-0048.) This exchange is devastating evidence of actual malice. It demonstrates that Defendants knew their central allegation lacked factual support and proceeded to publish it anyway, not because they believed it to be true, but because they believed it would "tank the stock" and generate profits from their short position.
Failure to verify. The evidence further demonstrates that Defendants failed to take even rudimentary steps to verify the accuracy of their allegations before publication. Ava Lin has acknowledged — in communications obtained through informal discovery and reflected in available declarations — that she did not contact the Nevada Gaming Control Board or seek comment from RGC before publishing the RNG-manipulation allegations in Report 2. (Espinoza Decl. ¶ 8.) For a report alleging that a publicly traded gaming company had rigged its software to cheat a state gaming regulator, the failure to contact the regulator or the company is a glaring departure from any reasonable standard of investigative diligence. (See Harte-Hanks, supra, 491 U.S. at pp. 691–692 [failure to interview key witness "provides the strongest support for a finding of actual malice"].)
Awareness of contrary evidence. The evidence also shows that Fenchurch was aware, prior to publication, that Pinnacle Audit & Advisory LLP had issued clean audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. (Espinoza Decl. ¶ 9; Exhibit 6 at GPR-Meridian Solutions-0052.) Despite this knowledge, Fenchurch directed the publication of Report 1's revenue-fabrication allegation — an allegation that directly contradicted the conclusions of RGC's independent auditor. The decision to publish in the face of known contrary evidence is classic evidence of reckless disregard for the truth. (See Harte-Hanks, supra, 491 U.S. at p. 682.)
Rush to publish. Finally, the evidence shows that Fenchurch instructed the publication of Report 3 — the related-party allegations regarding Vermilion Holdings LLC — before the underlying claims had been fully verified. (Espinoza Decl. ¶ 10; Exhibit 6 at GPR-Meridian Solutions-0071.) In an internal Meridian Solutions message dated February 19, 2024, two days before Report 3 was published, Lin wrote to Fenchurch: "I haven't been able to confirm the Vermilion connection. The corporate records are ambiguous and I'd want another week to run it down." (Exhibit 6 at GPR-Meridian Solutions-0071.) Fenchurch responded: "We can't wait. The position is at peak leverage right now. Publish Thursday." (Exhibit 6 at GPR-Meridian Solutions-0072.) This exchange demonstrates that Fenchurch prioritized the timing of the short trade over the accuracy of the report's allegations — the very definition of reckless disregard for the truth.
Pattern of escalation. The three reports were published in rapid succession — on February 7, 14, and 21, 2024 — in a pattern designed to inflict maximum reputational and stock-price damage while the short position remained open. (Olafson Decl. ¶¶ 60–62.) Each successive report raised increasingly sensational allegations, escalating from financial-reporting irregularities to software manipulation to executive malfeasance. The cadence and escalation of the reports were not the hallmarks of careful, good-faith investigative research. They were the hallmarks of a calculated campaign to destroy RGC's reputation and stock price for Defendants' private financial gain.
Taken together, this evidence is more than sufficient to establish a prima facie case of actual malice. The financial motive, the internal communications revealing knowledge of falsity, the failure to verify, the awareness of contrary evidence, the rush to publish, and the pattern of escalation provide compelling direct and circumstantial evidence that Defendants published the false allegations either knowing them to be false or with reckless disregard for their truth. This element is satisfied.
d. Special Damages. Trade libel requires proof of special damages — i.e., specific, quantifiable pecuniary losses flowing from the defendant's false publication. RGC has presented abundant evidence of special damages.
Aggregate market-capitalization loss. As a result of the three GPR reports, RDGM's stock price declined from $92.14 to a trough of $72.80, a cumulative decline of $19.34 per share, or 21.0%. With 73.8 million shares outstanding, this represented an aggregate market-capitalization loss of approximately $1.427 billion ($19.34 × 73.8 million shares). (Olafson Decl. ¶¶ 41–42; Exhibit 4; Exhibit 5.) As of the date of filing of this Opposition, RDGM's market capitalization remains below its pre-publication level, indicating ongoing harm from the false publications. (Olafson Decl. ¶ 43.)
Out-of-pocket costs. RGC has incurred direct out-of-pocket costs of $4.627 million in responding to the false allegations, including:
• Crisis communications and public relations: $2.18 million, paid to Crestline Equity Partners Group Inc. (Exhibit 11);
• Internal investigation and supplemental forensic audit: $1.46 million, paid to Pinnacle Audit & Advisory LLP for the supplemental forensic audit engagement (Exhibit 11); and
• Regulatory-response costs: $987,000, paid to Hargrove & Sato LLP, RGC's Nevada gaming counsel, for assistance in responding to the Nevada Gaming Control Board's audit and the SEC's informal inquiry (Exhibit 11).
(Olafson Decl. ¶¶ 70–73; Exhibit 11.) These costs are documented by invoices and are directly attributable to the false publications.
Expert damages analysis. RGC has retained Dr. Elena Vostrikova of Meridian Forensic Economics LLC to conduct an event-study analysis quantifying the damages directly attributable to Defendants' false statements. (Declaration of Dr. Elena Vostrikova ("Vostrikova Decl."), ¶¶ 1–4; Exhibit 10.) Using standard event-study methodology, Dr. Vostrikova isolated the impact of each of the three reports on RDGM's stock price, controlling for general market movements and gaming-sector-specific trends. (Id. ¶¶ 8–15.) Dr. Vostrikova's preliminary analysis concludes that the event-study-adjusted damages — the decline in shareholder value directly attributable to the false statements, after removing market and sector noise — total approximately $327.6 million. (Id. ¶ 16; Exhibit 10.) Dr. Vostrikova's full expert report is due September 9, 2024. (Id. ¶ 17.)
This evidence is more than sufficient to establish a prima facie showing of special damages. RGC has demonstrated quantifiable pecuniary losses, including out-of-pocket costs of $4.627 million and event-study-adjusted shareholder value losses of $327.6 million.
2. Intentional Interference with Prospective Economic Advantage (Second Cause of Action)
To establish a claim for intentional interference with prospective economic advantage, the plaintiff must show: (1) an economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional wrongful acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages. (Glenrock Corporation (2003) 29 Cal.4th 1134, 1153.)
RGC has presented prima facie evidence establishing each of these elements.
Economic relationships. RGC maintained established and prospective economic relationships with instituti