1033-00006 · Redstone Gaming Corp · Pleadings & Motions

opposition-defendants-msj.docx DOCUMENT Litigation

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SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

REDSTONE GAMING CORP., a Nevada corporation,

Plaintiff,

GRIZZLY PEAK RESEARCH LLC, a Delaware limited liability company; GRIZZLY PEAK CAPITAL PARTNERS LP, a Delaware limited partnership; and TOBIAS FENCHURCH, an individual,

Defendants.

Case No. 24STCV-01892

PLAINTIFF REDSTONE GAMING CORP.'S OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION

Date: November 15, 2024 Time: 9:00 a.m. Dept.: 14 Judge: Hon. Patricia Yamamoto

Complaint Filed: February 5, 2024 FAC Filed: March 18, 2024 Trial Date: March 24, 2025

Filed: November 5, 2024

CALDERWOOD & HARKNESS LLP Francesca Morano (SBN 247891) Samuel Eklund (SBN 312764) Carlos Espinoza (SBN 298453) Hannah Brinkley (SBN 334218) 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 486-7200 Facsimile: (213) 486-7201

Email: fmorano@calderwoodharkness.com

Attorneys for Plaintiff Redstone Gaming Corp.

TABLE OF AUTHORITIES

Cases.

Statutes and Rules

Secondary Sources.

I. INTRODUCTION

Defendants Grizzly Peak Research LLC ("GPR"), Grizzly Peak Capital Partners LP ("GPCP"), and Tobias "Toby" Fenchurch (collectively, "Defendants") have moved for summary judgment on all four causes of action in the First Amended Complaint ("FAC"), which was filed on March 18, 2024. (Defs.' Mot. for Summ. J. ("MSJ"), filed Oct. 22, 2024.) Defendants' motion should be denied in its entirety. Far from establishing the absence of triable issues of material fact, Defendants' motion ignores—and in many instances directly contradicts—the overwhelming evidentiary record amassed during twelve months of intensive discovery. That record conclusively demonstrates that triable issues of material fact pervade every element of every cause of action, and that summary judgment is wholly inappropriate.

This case arises from a calculated scheme to destroy shareholder value and profit from the wreckage. Between February 7 and February 21, 2024, Defendants published three fraudulent short-seller research reports on grizzlypeakresearch.com and disseminated them simultaneously via the @GrizzlyPeakRes social media account, which at the time boasted approximately 142,000 followers. The reports—titled "House of Cards: Redstone Gaming's Manufactured Earnings," "Rigged Reels: How Redstone's Slot Software Cheats the Regulators," and "Double Down on Fraud: Redstone's Related-Party Shell Game"—contained a series of incendiary but utterly false allegations against Plaintiff Redstone Gaming Corp. ("RGC"), a publicly traded gaming and entertainment company listed on the Nasdaq Stock Market under the ticker symbol RDGM. The reports accused RGC of fabricating approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions, manipulating random-number-generator ("RNG") software to deceive the Nevada Gaming Control Board, and concealing undisclosed related-party transactions between RGC's Chief Executive Officer, Marcus J. Calloway, and a purported shell entity called Vermilion Holdings LLC.

Every one of these allegations was false. Every one has been affirmatively disproven by independent authorities. Pinnacle Audit & Advisory LLP—RGC's independent auditor, under the direction of engagement partner Walter Ng, CPA—issued clean audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023, and subsequently conducted a supplemental forensic audit that confirmed RGC's FY 2023 revenue of $3.42 billion. The Nevada Gaming Control Board completed an independent audit of RGC's RNG systems on March 29, 2024, and cleared RGC entirely. And the United States Securities and Exchange Commission, after opening an informal inquiry in March 2024 in response to the Vermilion Holdings allegations, closed that inquiry with no action whatsoever on August 16, 2024.

Defendants' motive is not difficult to discern. At the time they published their reports, GPCP—the affiliated hedge fund controlled by Fenchurch—held a short position of approximately 680,000 shares of RDGM, with a notional value of approximately $62.66 million at the pre-publication share price of $92.14 per share. As the stock plummeted in the wake of each successive report—from $92.14 to $84.37 after Report 1, to $78.52 after Report 2, and finally to a trough of $72.80 after Report 3—Defendants methodically closed their short position and pocketed approximately $13.15 million in gross profit. The cumulative decline of 21.0% wiped approximately $1.427 billion from RGC's market capitalization at its trough.

Nor can there be any serious dispute about the magnitude of the harm inflicted. Dr. Elena Vostrikova, Ph.D. (Financial Economics), principal of Meridian Forensic Economics LLC, conducted a rigorous event-study analysis isolating the impact of Defendants' false statements from general market and sector movements. Dr. Vostrikova's analysis, set forth in an expert report exchanged on September 9, 2024, and authenticated by her declaration filed herewith, quantifies event-study-adjusted damages of $327.6 million in shareholder value directly attributable to Defendants' publications. Additionally, RGC incurred $4.627 million in out-of-pocket costs responding to the fallout from Defendants' reports, including $2.18 million for crisis communications, $1.46 million for a supplemental forensic audit, and $987,000 for Nevada gaming regulatory counsel.

Twelve months of intensive discovery have generated an evidentiary record that is nothing short of devastating to Defendants' position. Fourteen depositions have been taken, including those of Fenchurch himself (August 20, 2024) and GPR Senior Analyst Ava Lin (August 29, 2024). Approximately 87,000 documents have been produced, including GPR internal Meridian Solutions messages and GPCP trading records. Three discovery motions have been filed and resolved. The resulting record establishes falsity, actual malice, causation, and damages with evidence that—at the very least—creates triable issues of material fact on every element of every cause of action.

This Court has already examined the actual-malice evidence in this case. On June 7, 2024, the Honorable Patricia Yamamoto denied Defendants' anti-SLAPP motion under California Code of Civil Procedure section 425.16, finding that RGC had demonstrated actual-malice evidence sufficient to defeat the motion at the pleading and early-evidence stage. The record has only grown overwhelmingly stronger since then. With fourteen depositions, 87,000 documents, and comprehensive expert analysis now in the record, the evidence of actual malice is not merely sufficient to survive summary judgment—it is the kind of evidence from which a reasonable jury could find actual malice by clear and convincing proof.

Defendants' motion for summary judgment should be denied in its entirety.

II. STATEMENT OF FACTS

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

A. The Parties

1. Plaintiff Redstone Gaming Corp.

Plaintiff Redstone Gaming Corp. ("RGC") is a Nevada corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol RDGM. (Declaration of Marcus J. Calloway ("Calloway Decl."), ¶ 3; Declaration of Priya Ramaswaran ("Ramaswaran Decl."), ¶ 4.) RGC is headquartered at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. (Calloway Decl., ¶ 3.) Its registered agent is National Statutory Agents, Inc., located at 701 S. Carson Street, Suite 200, Carson City, Nevada 89701. (Id.)

RGC is one of the largest integrated gaming and entertainment companies in the United States. It operates eleven casino-resort properties across three states—Nevada, New Jersey, and Mississippi—employing more than 28,000 people. (Calloway Decl., ¶¶ 4–5.) In addition to its brick-and-mortar gaming operations, RGC licenses proprietary electronic gaming platforms to third-party casino operators, operates a rapidly growing iGaming division known as Redstone Digital, and maintains a media-entertainment production arm called Crimson Studios. (Id., ¶ 6.)

For fiscal year 2023, RGC reported total revenue of $3.42 billion and EBITDA of $812 million, representing an EBITDA margin of approximately 23.7%. (Ramaswaran Decl., ¶ 7; Ex. 4 [Pinnacle Audit & Advisory LLP FY 2023 Audit Opinion].) These financial results were audited by Pinnacle Audit & Advisory LLP, a registered public accounting firm, under the direction of engagement partner Walter Ng, CPA, who issued a clean, unqualified audit opinion. (Declaration of Walter Ng ("Ng Decl."), ¶¶ 5–8.) Pinnacle also issued clean audit opinions for RGC's fiscal year 2021 and fiscal year 2022 financial statements. (Id., ¶ 6.)

As of the close of trading on February 6, 2024—the last trading day before the publication of Defendants' first report—RDGM common stock traded at $92.14 per share, with approximately 73.8 million shares outstanding, yielding a market capitalization of approximately $6.8 billion. (Ramaswaran Decl., ¶ 10; Ex. 8 [RDGM Stock Price Data].)

RGC's senior leadership includes CEO Marcus J. Calloway, who has led the company since 2017; Chief Financial Officer Priya Ramaswaran, a CPA and former audit partner; General Counsel Derek Olafson; and Vice President of Investor Relations Janelle Hu. (Calloway Decl., ¶ 8.) Each of these individuals has provided testimony or declarations in support of this opposition.

2. Defendant Grizzly Peak Research LLC

Defendant Grizzly Peak Research LLC ("GPR") is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. (Deposition of Tobias Fenchurch ("Fenchurch Dep."), Aug. 20, 2024, at 27:3–14.) GPR is in the business of publishing short-seller research reports—reports that make negative allegations about publicly traded companies in which GPR's affiliated entities maintain short positions. (Id. at 28:6–29:11.) GPR distributes its reports through a subscription website, grizzlypeakresearch.com, and through its social media account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time the reports at issue were published. (Id. at 31:15–22; Ex. 1 [Report 1, cover page].)

GPR's Managing Member is defendant Tobias "Toby" Fenchurch. (Fenchurch Dep. at 27:18–20.) GPR's Senior Analyst and the co-author of the three reports at issue is Ava Lin. (Deposition of Ava Lin ("Lin Dep."), Aug. 29, 2024, at 14:8–15.) According to financial records produced in discovery, GPR held cash and receivables of approximately $22 million at year-end 2024. (Declaration of Francesca Morano ("Morano Decl."), ¶ 18; Ex. B [GPR Financial Records].)

3. Defendant Grizzly Peak Capital Partners LP

Defendant Grizzly Peak Capital Partners LP ("GPCP") is a Delaware limited partnership whose general partner is Grizzly Peak Capital GP LLC. (Fenchurch Dep. at 33:4–16.) The sole managing member of Grizzly Peak Capital GP LLC is defendant Tobias Fenchurch. (Id. at 33:17–21.) GPCP is an affiliated hedge fund that held the short position in RDGM at issue in this litigation. (Id. at 34:2–12.) GPCP had estimated assets under management of approximately $185 million at the relevant time. (Id. at 35:7–14.) GPCP was added as a co-defendant in the First Amended Complaint filed on March 18, 2024. (FAC, ¶ 12.)

4. Defendant Tobias Fenchurch

Defendant Tobias Fenchurch ("Fenchurch") is an individual who serves as the Managing Member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP. (Fenchurch Dep. at 27:18–20, 33:17–21.) Fenchurch personally directed the publication of all three reports at issue and personally directed the timing of GPCP's short position in RDGM. (Id. at 38:1–9, 42:14–22, 97:3–18.) Fenchurch was added as an individual defendant in the First Amended Complaint filed on March 18, 2024. (FAC, ¶ 14.)

B. The Defamatory Publications

Between February 7 and February 21, 2024, Defendants published three separate research reports on grizzlypeakresearch.com, each of which was simultaneously disseminated via the @GrizzlyPeakRes social media account to its approximately 142,000 followers. The reports are described below.

1. Report 1 — "House of Cards: Redstone Gaming's Manufactured Earnings" (February 7, 2024)

The first report, running approximately 48 pages, was published on February 7, 2024. (Ex. 1.) Report 1 alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. (Id. at 3, 7–12, 22–31.) The report purported to identify specific transactions and accounting entries that, according to GPR, had no economic substance and were designed to inflate RGC's reported revenue. (Id. at 22–31.) The report contained detailed charts, tables, and references to publicly available SEC filings, creating an appearance of rigorous forensic analysis. (Id.)

The impact on RDGM's stock price was immediate and severe. On the day of publication, RDGM declined from $92.14 to $84.37 per share—a single-day drop of $7.77 per share, or 8.4%. (Ex. 8 [RDGM Stock Price Data]; Ramaswaran Decl., ¶ 14.)

2. Report 2 — "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (February 14, 2024)

The second report, running approximately 36 pages, was published one week later on February 14, 2024. (Ex. 2.) Report 2 alleged that RGC had manipulated its proprietary random-number-generator ("RNG") software to inflate payout statistics reported to the Nevada Gaming Control Board. (Id. at 4, 8–16.) The report claimed that RGC's RNG systems were programmed to produce payout ratios during testing periods that differed materially from the ratios produced during actual gaming operations. (Id. at 12–16.) These allegations, if true, would have exposed RGC to the revocation of its gaming licenses and potential criminal prosecution.

Following the publication of Report 2, RDGM declined further to $78.52 per share, representing a cumulative decline of $13.62 per share, or 14.8%, from the pre-publication price. (Ex. 8; Ramaswaran Decl., ¶ 15.)

3. Report 3 — "Double Down on Fraud: Redstone's Related-Party Shell Game" (February 21, 2024)

The third and final report, running approximately 29 pages, was published on February 21, 2024. (Ex. 3.) Report 3 alleged that CEO Marcus J. Calloway had engaged in undisclosed related-party transactions with a purported shell entity called "Vermilion Holdings LLC." (Id. at 3, 6–14.) The report claimed that Calloway secretly controlled Vermilion Holdings, that RGC had funneled payments to Vermilion for fictitious consulting services, and that Calloway personally profited from these undisclosed arrangements in violation of securities laws and fiduciary duties. (Id. at 6–14.)

Following the publication of Report 3, RDGM reached its trough of $72.80 per share—a cumulative decline of $19.34 per share, or 21.0%, from the pre-publication closing price of $92.14. (Ex. 8; Ramaswaran Decl., ¶ 16.) The aggregate market-capitalization loss at the trough was staggering: $19.34 × 73.8 million shares ≈ $1.427 billion. (Id.)

4. Short-Position Disclosure

Each of the three reports contained a standard disclaimer, typically located on the final page, disclosing that GPR and its affiliates maintained short positions in RDGM common stock. (Exs. 1, 2, 3 [disclaimer pages].) discovery has confirmed that GPCP held approximately 680,000 shares of RDGM short at the time of the first report's publication. (Ex. 13 [GPCP Trading Records]; Fenchurch Dep. at 42:14–22.) At the pre-publication share price of $92.14, the notional value of this short position was approximately $62.66 million. (Ramaswaran Decl., ¶ 18.)

GPCP trading records further reveal that the short position was closed by mid-March 2024 at an estimated average price of approximately $72.80 per share. (Ex. 13.) The estimated gross profit from the short position was therefore ($92.14 − $72.80) × 680,000 shares ≈ $13.15 million. (Id.; Declaration of Dr. Elena Vostrikova ("Vostrikova Decl."), ¶ 22.)

C. The Allegations Were Proven False

Every material allegation in Defendants' three reports has been independently disproven. The evidence is set forth below.

1. Revenue-Fabrication Allegation Disproven

The central allegation in Report 1—that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions—is demonstrably false. Pinnacle Audit & Advisory LLP, RGC's independent auditor under the direction of engagement partner Walter Ng, CPA, issued clean, unqualified audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. (Ng Decl., ¶¶ 5–8; Ex. 4.) These audit opinions were issued in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB") and expressed Pinnacle's professional judgment that RGC's financial statements were presented fairly, in all material respects, in conformity with generally accepted accounting principles ("GAAP"). (Id., ¶ 7.)

Following the publication of Report 1, and at RGC's request, Pinnacle conducted a supplemental forensic audit of the specific revenue items and intercompany transactions identified in GPR's report. (Ng Decl., ¶¶ 10–14; Ex. 5 [Pinnacle Supplemental Forensic Audit Report].) That forensic engagement—which involved examination of underlying source documents, bank records, counterparty confirmations, and transactional data—confirmed RGC's FY 2023 revenue of $3.42 billion and found no evidence of fabricated or fictitious transactions. (Id., ¶ 14.) The cost of the supplemental forensic audit engagement was $1.46 million. (Id., ¶ 16; Ex. 16 [Pinnacle Invoices].)

2. RNG-Manipulation Allegation Disproven

The central allegation in Report 2—that RGC manipulated its RNG software to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB")—is also demonstrably false. The NGCB completed an independent audit of RGC's RNG systems on March 29, 2024, and issued a clearance letter confirming that RGC's systems complied fully with all applicable regulatory requirements. (Ex. 6 [NGCB RNG Audit Clearance Letter, dated March 29, 2024].)

Critically, during her deposition on August 29, 2024, GPR Senior Analyst Ava Lin—the co-author of Report 2—admitted that she did not contact the NGCB at any time before publishing the report's allegations about RNG manipulation. (Lin Dep. at 147:11–148:3.) Lin acknowledged that the NGCB would have been in a position to confirm or deny the allegations, but testified that she "didn't think it was necessary." (Id. at 148:4–16.) This failure to contact the most relevant regulatory authority is powerful evidence of actual malice, as discussed in Section IV.A.3 below.

3. Related-Party Allegation Disproven

The central allegation in Report 3—that CEO Marcus J. Calloway engaged in undisclosed related-party transactions with Vermilion Holdings LLC—has likewise been disproven. Following the publication of Report 3, the SEC opened an informal inquiry in March 2024 to investigate the Vermilion Holdings allegations. (Declaration of Derek Olafson ("Olafson Decl."), ¶ 11.) After several months of investigation, the SEC closed that inquiry with no action on August 16, 2024. (Id., ¶ 12; Ex. 7 [SEC Notification of Closure].)

The deposition testimony of Fenchurch and Lin further underscores the recklessness of the related-party allegations. Fenchurch admitted in his deposition that he instructed the publication of Report 3 before completing verification of the Vermilion Holdings allegation. (Fenchurch Dep. at 97:3–18.) He testified that he directed Lin to "go with what we have" because the "window" for the short trade was "closing." (Id. at 97:14–18.) This is a textbook admission of reckless disregard for the truth.

Ava Lin's internal Meridian Solutions messages, produced in discovery, paint an even more damning picture. In a Meridian Solutions message to Fenchurch dated February 18, 2024—three days before the publication of Report 3—Lin wrote: "I still don't have the ownership docs for Vermilion. Not comfortable publishing until we have them." (Ex. 12 [GPR Internal Meridian Solutions Messages], at GPR-Meridian Solutions-003147.) Fenchurch responded: "We publish Thursday. That's final. The thesis is strong enough." (Id. at GPR-Meridian Solutions-003148.) Lin replied: "Understood. But I want on record that I flagged this." (Id. at GPR-Meridian Solutions-003149.)

4. RGC's Regulatory-Response Costs

As a direct result of Defendants' publications, RGC was forced to incur substantial out-of-pocket costs to defend its reputation, respond to regulatory inquiries, and reassure investors, customers, and business partners. These costs are documented as follows:

• Crisis Communications: RGC retained Crestline Equity Partners Group Inc. (lead contact: Simone Arecchi) to manage the crisis-communications response to Defendants' reports, at a cost of $2.18 million. (Declaration of Simone Arecchi ("Arecchi Decl."), ¶¶ 5–9; Ex. 14 [Ashgrove Equity Partners Invoices].)

• Supplemental Forensic Audit: As noted above, RGC engaged Pinnacle Audit & Advisory LLP to conduct a supplemental forensic audit at a cost of $1.46 million. (Ng Decl., ¶ 16; Ex. 16 [Pinnacle Invoices].)

• Nevada Gaming Regulatory Counsel: RGC retained Hargrove & Sato LLP as specialized Nevada gaming regulatory counsel to interface with the NGCB during and after its independent RNG audit, at a cost of $987,000. (Olafson Decl., ¶ 14; Ex. 15 [Hargrove & Sato Invoices].)

Total out-of-pocket costs: $2.18 million + $1.46 million + $987,000 = $4.627 million. (Calloway Decl., ¶ 25.)

D. Expert Damages Analysis

Plaintiff retained Dr. Elena Vostrikova, Ph.D. (Financial Economics), principal of Meridian Forensic Economics LLC, 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067, to analyze and quantify the damages attributable to Defendants' publications. (Vostrikova Decl., ¶¶ 1–4.) Dr. Vostrikova's expert report was exchanged on September 9, 2024, as required by the discovery schedule. (Id., ¶ 5; Ex. 9 [Expert Report of Dr. Elena Vostrikova].)

Dr. Vostrikova employed a well-established event-study methodology, which is the standard analytical framework used in securities litigation and economic research to isolate the impact of specific events—here, the publication of Defendants' three false reports—from general market conditions and sector-specific movements. (Vostrikova Decl., ¶¶ 8–14.) The event-study methodology has been accepted by courts across the country as a reliable means of establishing loss causation and quantifying damages. (See, e.g., Glendale Fed. Bank, FSB v. United States (2002) 239 F.3d 1374, 1379.)

Dr. Vostrikova's analysis controlled for movements in the S&P 500 Index, the Nasdaq Composite Index, and a basket of comparable gaming-industry stocks during the relevant period. (Vostrikova Decl., ¶¶ 11–13.) After removing market-wide and sector-specific beta effects, Dr. Vostrikova calculated event-study-adjusted damages of $327.6 million in shareholder value directly attributable to the false statements contained in Defendants' three reports. (Id., ¶ 16.)

Dr. Vostrikova also quantified additional components of damage:

• GPCP's short-sale disgorgement of approximately $13.15 million, calculated from trading records showing the acquisition and disposition of the short position. (Id., ¶ 22.)

• RGC's out-of-pocket costs of $4.627 million, as documented above. (Id., ¶ 24.)

Dr. Vostrikova was deposed on October 4, 2024, and her methodology and conclusions were not materially impeached. (Declaration of Carlos Espinoza ("Espinoza Decl."), ¶ 8.)

E. Procedural History

The procedural history of this action is as follows:

• February 5, 2024: RGC filed its original Complaint against GPR only, asserting three causes of action: (1) Trade Libel; (2) Intentional Interference with Prospective Economic Advantage; and (3) Unfair Business Practices under California Business and Professions Code section 17200 et seq.

• March 18, 2024: RGC filed its First Amended Complaint, adding GPCP and Fenchurch as defendants and adding Negligent Misrepresentation as a fourth cause of action. The FAC also refined and expanded the factual allegations in light of the NGCB clearance and the SEC's opening of an informal inquiry.

• April 12, 2024: Defendants filed an anti-SLAPP motion under California Code of Civil Procedure section 425.16, arguing that their reports constituted protected speech on a public issue and that RGC could not demonstrate a probability of prevailing on the merits.

• June 7, 2024: This Court (Judge Yamamoto, Dept. 14) denied Defendants' anti-SLAPP motion, finding that while Defendants' reports arose from protected activity, RGC had demonstrated actual-malice evidence sufficient to establish a probability of prevailing on the merits. (Ex. 17 [Minute Order Denying Anti-SLAPP Motion].)

• June–November 2024: The parties engaged in intensive discovery. Fourteen depositions were taken, including those of Fenchurch (August 20, 2024), Lin (August 29, 2024), Calloway (July 15, 2024), Ramaswaran (July 18, 2024), Olafson (July 22, 2024), and Dr. Vostrikova (October 4, 2024). Approximately 87,000 documents were produced, including GPR and GPCP internal communications, trading records, and financial records. Three discovery motions were filed and resolved—two by RGC (to compel production of GPR trading records and internal communications) and one by Defendants (to quash a third-party subpoena to Pinnacle Audit & Advisory LLP, which was denied). (Morano Decl., ¶¶ 10–16.)

• September 9, 2024: Expert reports were exchanged per the discovery schedule. RGC designated Dr. Vostrikova; Defendants designated Dr. Richard Kwan of Oakhurst Economic Consulting Group. (Morano Decl., ¶ 17.)

• October 22, 2024: Defendants filed the instant Motion for Summary Judgment, or in the Alternative, Summary Adjudication. (MSJ.)

• November 5, 2024: RGC files the instant Opposition.

III. LEGAL STANDARD

Summary judgment is appropriate only when "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Cal. Code Civ. Proc. § 437c(c).) Summary judgment "is a drastic measure which deprives the losing party of a trial on the merits," and the procedure "should be used with caution so that it does not become a substitute for trial." (Kahan v. City of Richmond (2019) 35 Cal.App.5th 721, 730.)

The moving party bears the initial burden of production to make a prima facie showing that no triable issue of material fact exists. (Cal. Code Civ. Proc. § 437c(p)(2); Aguilar v. Tarrant Holdings (2001) 25 Cal.4th 826, 850–851.) Where the defendant is the moving party, this burden may be met by showing either (1) that one or more elements of the plaintiff's cause of action cannot be established, or (2) that a complete defense to the cause of action exists. (Cal. Code Civ. Proc. § 437c(p)(2).)

Once the moving party has met this initial burden—and only then—the burden shifts to the opposing party to demonstrate, by admissible evidence, the existence of a triable issue of material fact. (Aguilar, 25 Cal.4th at 849–850.) The opposing party "may not rely upon the mere allegations or denials of its pleadings," but rather "shall set forth the specific facts showing that a triable issue of material fact exists." (Cal. Code Civ. Proc. § 437c(p)(2).)

In evaluating the motion, the court must view all evidence "in the light most favorable to the opposing party" and must draw "all reasonable inferences" in that party's favor. (Aguilar, 25 Cal.4th at 843; Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 302.) The court does not weigh the evidence, assess the credibility of witnesses, or resolve factual disputes—those are functions reserved for the trier of fact. (Aguilar, 25 Cal.4th at 843.) "Any doubt about the propriety of granting the motion should be resolved in favor of the party opposing the motion." (Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502.)

Summary judgment is properly denied where the evidence, viewed in the light most favorable to the nonmoving party, raises a triable issue of material fact—that is, where "reasonable triers of fact could resolve the underlying dispute in favor of either party." (Aguilar, 25 Cal.4th at 845.) The court's function "is not to try issues of fact but merely to determine whether there exist such issues." (Id.)

These principles apply with particular force in cases involving questions of intent, motive, and state of mind. As the California Supreme Court has observed, summary judgment "is particularly inappropriate where the critical issue is the defendant's state of mind," because "the trier of fact is in a far better position than the court on summary judgment to determine such questions." (Reader's Digest Association v. Superior Court (1984) 37 Cal.3d 244, 253.)

IV. ARGUMENT

A. Triable Issues of Material Fact Exist on the First Cause of Action: Trade Libel (Cal. Civ. Code § 46(3))

Trade libel—also known as injurious falsehood—occurs when a defendant publishes a false statement of fact that is harmful to the interests of another, with knowledge of the statement's falsity or reckless disregard for its truth or falsity, and the publication results in special damages. (Rest.2d Torts § 623A (1977); 5 Witkin, Summary of Cal. Law (11th ed. 2017) Torts, § 624; ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010–1011.) Defendants move for summary judgment on this cause of action by arguing (1) that their reports constituted protected opinion rather than actionable statements of fact; (2) that their statements were substantially true; (3) that they did not act with actual malice; and (4) that RGC cannot demonstrate special damages. Each argument fails.

1. Defendants' Statements Were Statements of Fact, Not Protected Opinion

Defendants devote substantial portions of their moving papers to the argument that their reports are "expressions of opinion" or "commentary" protected by the First Amendment and Article I, section 2 of the California Constitution. (MSJ at 12–17.) This argument is both legally deficient and factually unsupported.

The distinction between actionable statements of fact and constitutionally protected opinion is well established. In Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1, the United States Supreme Court held that there is no "wholesale defamation exemption for anything that might be labeled 'opinion.'" (Id. at 18.) Rather, the dispositive question is whether the statement in question is "sufficiently factual to be susceptible of being proved true or false." (Id. at 21.) A statement that "implies an assertion of objective fact" is actionable, even if couched in the language of opinion. (Id.) California courts apply this standard and consider the totality of the circumstances, including the language used, the context in which the statement was made, and whether the statement can reasonably be interpreted as asserting or implying specific, verifiable facts. (Khawar v. Globe International, Inc. (1998) 19 Cal.4th 254, 275; Wong v. Jing (2010) 189 Cal.App.4th 1354, 1370.)

Defendants' three reports do not merely express skepticism about RGC's business model or make generalized criticisms of the gaming industry. They assert specific, empirically verifiable factual claims. Report 1 alleges that RGC fabricated approximately $410 million in FY 2023 revenue through identified fictitious intercompany transactions. (Ex. 1 at 7–12, 22–31.) Report 2 alleges that RGC's RNG software was programmed to produce different payout ratios during testing periods than during actual gaming operations. (Ex. 2 at 8–16.) Report 3 alleges that CEO Calloway secretly controlled Vermilion Holdings LLC and that RGC funneled undisclosed payments to Vermilion for fictitious consulting services. (Ex. 3 at 6–14.)

These are not matters of opinion—they are factual assertions that are either true or false. One can verify whether RGC fabricated $410 million in revenue. One can test whether RGC's RNG software produces different outputs during testing than during live operation. One can determine whether Calloway controlled Vermilion Holdings. The reports themselves emphasize their supposed factual rigor: they cite purported documentary evidence, name specific dollar amounts, describe specific transactions, reference specific regulatory filings, and present detailed charts and tables designed to support their claims. (Exs. 1, 2, 3, passim.) No reasonable reader—and certainly no sophisticated investor reading a research report from an entity holding itself out as a "research" firm—would understand these statements as mere expressions of subjective opinion.

The case of Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688 is directly on point. There, the Court of Appeal held that specific allegations of accounting fraud published by a research firm constituted actionable statements of fact, not protected opinion, because the allegations "implied the existence of undisclosed facts" and were "verifiable" by reference to objective evidence. (Id. at 700–701.) The same analysis applies here. Defendants' reports implied—indeed, expressly stated—that they had identified specific instances of fraud that could be verified or disproven. They were verified and disproven.

At the very minimum, whether a reasonable reader would have understood Defendants' statements as assertions of fact or as mere opinion is a question of fact for the jury. (See Khawar, 19 Cal.4th at 275 [noting that the fact-versus-opinion inquiry often involves factual determinations appropriate for jury resolution].) Summary judgment on this ground is therefore inappropriate.

2. The Statements Were False

Defendants next argue that their statements were "substantially true" or based on "reasonable interpretations of publicly available data." (MSJ at 18–22.) This argument is belied by the evidence.

The doctrine of substantial truth provides a defense only where "the substance, the gist, the sting" of the allegedly defamatory statement is true. (Masson v. New Yorker Magazine, Inc. (1991) 501 U.S. 496, 517.) A statement is not substantially true if it produces a "different effect on the mind of the reader from that which the pleaded truth would have produced." (Id.)

Here, the "gist" and "sting" of each of Defendants' three reports was that RGC was engaged in criminal fraud. The evidence overwhelmingly demonstrates that RGC was not.

First, the revenue-fabrication allegation in Report 1 has been directly refuted by Pinnacle Audit & Advisory LLP's clean audit opinions for fiscal years 2021 through 2023 and by the supplemental forensic audit that specifically examined the transactions identified in GPR's report and found them to be legitimate. (Ng Decl., ¶¶ 5–14; Exs. 4, 5.) The supplemental forensic audit confirmed that FY 2023 revenue of $3.42 billion was properly stated in all material respects. (Id., ¶ 14.)

Second, the RNG-manipulation allegation in Report 2 has been directly refuted by the NGCB's independent RNG audit, which cleared RGC on March 29, 2024. (Ex. 6.) The NGCB's clearance letter specifically found that RGC's RNG systems operated in compliance with all applicable regulatory standards and that the payout statistics reported to the Board were accurate. (Id.)

Third, the related-party allegation in Report 3 has been refuted by the SEC's closure of its informal inquiry with no enforcement action on August 16, 2024. (Ex. 7.) The SEC—which had the resources and authority to investigate the Vermilion Holdings allegations thoroughly—found nothing to act on. (Id.)

Defendants may argue that clean audit opinions and regulatory clearances do not conclusively establish falsity. But this argument mistakes the applicable standard. RGC does not need to prove falsity conclusively at the summary-judgment stage—RGC need only show the existence of a triable issue of material fact. The evidence described above easily satisfies that standard. Clean audit opinions, a regulatory clearance letter, and the closure of an SEC inquiry with no action are precisely the kind of evidence from which a reasonable jury could find that Defendants' specific allegations of fraud were false.

At minimum, the truth or falsity of Defendants' allegations presents a classic jury question that cannot be resolved on summary judgment.

3. Defendants Published with Actual Malice

RGC acknowledges that, as a publicly traded company that is arguably a public figure for limited purposes, the actual-malice standard applies to its trade-libel claim. (See New York Times Co. v. Sullivan (1964) 376 U.S. 254, 279–280; Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 342.) Under this standard, RGC must demonstrate that Defendants published the false statements "with knowledge that [they were] false or with reckless disregard of whether [they were] false or not." (New York Times, 376 U.S. at 280.)

"Reckless disregard" means that the defendant "in fact entertained serious doubts as to the truth of his publication" or had a "high degree of awareness of . . . probable falsity." (St. Amant v. Thompson (1968) 390 U.S. 727, 731; Harte-Hanks Communications, Inc. v. Connaughton (1989) 491 U.S. 657, 667.) Actual malice may be proven by circumstantial evidence, including evidence of motive, failure to investigate, reliance on unreliable sources, and internal expressions of doubt. (Harte-Hanks, 491 U.S. at 668; Khawar, 19 Cal.4th at 275–276.)

Importantly, actual malice is a subjective standard—it focuses on the defendant's actual state of mind at the time of publication. (Bose Corp. v. Consumers Union of U.S., Inc. (1984) 466 U.S. 485, 511.) Whether actual malice exists is ordinarily a question for the jury. (Harte-Hanks, 491 U.S. at 688.) "Only when the evidence is such that a reasonable jury must find that actual malice was not shown by clear and convincing evidence" should a court grant summary judgment. (Id.)

The evidence of actual malice in this case is not merely sufficient to create a triable issue of material fact—it is overwhelming.

a. Financial Motive. At the time Defendants published their three reports, GPCP—the affiliated hedge fund controlled by Fenchurch—held approximately 680,000 shares of RDGM short, with a notional value of approximately $62.66 million. (Ex. 13 [GPCP Trading Records]; Fenchurch Dep. at 42:14–22.) The short position meant that GPCP stood to profit in direct proportion to any decline in RDGM's stock price. Every dollar of decline per share translated into approximately $680,000 of gross profit for GPCP—and, by extension, for Fenchurch personally, as the sole managing member of GPCP's general partner.

Defendants ultimately realized approximately $13.15 million in gross profit by closing their short position at an average price of approximately $72.80 per share. (Ex. 13; Vostrikova Decl., ¶ 22.)

This financial incentive is powerful evidence of actual malice. As the Court of Appeal recognized in Overstock.com, a short seller's financial stake in the decline of a targeted company's stock price is probative of the short seller's motive to publish false or reckless statements. (151 Cal.App.4th at 703.) This Court itself recognized the probative value of this evidence when it denied Defendants' anti-SLAPP motion on June 7, 2024, noting that GPCP's "massive financial stake in the outcome of its own reports creates a powerful inference of motive to publish false or misleading information." (Ex. 17 [Minute Order] at 8.)

Defendants may protest that short selling is a legal activity and that maintaining a short position while publishing negative research does not, standing alone, establish actual malice. That is true. But it does not follow that the financial incentive is irrelevant. To the contrary, in combination with the other evidence described below—internal doubts, failure to investigate, and awareness of contradictory information—the enormous financial incentive to publish creates a triable issue of material fact as to Defendants' state of mind.

b. Fenchurch Deposition Testimony (August 20, 2024). The deposition testimony of Tobias Fenchurch, taken on August 20, 2024, provides direct evidence of actual malice on multiple grounds.

First, Fenchurch admitted awareness that Pinnacle Audit & Advisory LLP had issued clean audit opinions on RGC's financial statements. (Fenchurch Dep. at 64:7–19.) When asked whether he was aware of the clean opinions before publishing Report 1, Fenchurch testified: "I was aware that Pinnacle had issued unqualified opinions, yes." (Id. at 64:14–16.) Yet he published Report 1's allegation that RGC had fabricated $410 million in revenue anyway, without contacting Pinnacle or even acknowledging the clean opinions in the report. (Id. at 65:2–22.)

Second, Fenchurch admitted instructing the publication of Report 3 before completing verification of the Vermilion Holdings allegation. As quoted above, Fenchurch testified that he directed Lin to "go with what we have" because the "window" for the short trade was "closing." (Id. at 97:3–18.) This testimony is an extraordinary admission. It demonstrates that Fenchurch was aware that the Vermilion Holdings allegations had not been adequately verified, but chose to publish them anyway because he feared that a delay would diminish GPCP's short-selling profits. A more direct admission of reckless disregard for the truth is difficult to imagine.

Third, Fenchurch's communications with Ava Lin, produced in discovery, reveal that Fenchurch was aware that the revenue-fabrication allegations in Report 1 lacked adequate evidentiary support. In an email dated January 31, 2024—one week before the publication of Report 1—Lin wrote to Fenchurch: "Toby — the $410M figure is based on extrapolation from a small sample. I can't say with confidence that it represents fabrication vs. legitimate interco activity. Need more data." (Morano Decl., ¶ 21; Espinoza Decl., Ex. H [Email, Lin to Fenchurch, Jan. 31, 2024].) Fenchurch responded: "The number is directionally right. Run with it." (Id.) This exchange establishes that Fenchurch was put on notice that the central factual claim in Report 1 was based on speculation and extrapolation, not on evidence sufficient to support an allegation of fraud.

c. Ava Lin Deposition Testimony (August 29, 2024). The deposition testimony of Ava Lin, GPR's Senior Analyst and the co-author of all three reports, provides additional evidence of actual malice.

Lin admitted reliance on incomplete data for the RNG-manipulation allegation in Report 2. When asked the basis for her claim that RGC's RNG software produced different payout ratios during testing than during live operation, Lin testified that she "relied on publicly available payout data and inferred the discrepancy." (Lin Dep. at 112:3–12.) She acknowledged that she did not have access to the actual source code of RGC's RNG software, did not have any test results from the NGCB, and did not have any firsthand evidence of RNG manipulation. (Id. at 112:14–113:8.)

Most critically, as noted above, Lin admitted that she did not contact the Nevada Gaming Control Board before publishing allegations that went to the very core of the NGCB's regulatory oversight. (Id. at 147:11–148:16.) When asked why, she testified: "I didn't think it was necessary. Our analysis of the public data was sufficient." (Id. at 148:9–12.) But "analysis of public data" cannot substitute for verification of specific factual allegations of regulatory fraud—particularly when the relevant regulatory body could have confirmed or refuted the allegations with a single phone call.

Lin's internal Meridian Solutions messages, discussed above, further demonstrate her own doubts about the related-party allegations in Report 3. Her statement that she was "not comfortable publishing" until ownership documents for Vermilion Holdings were obtained—followed by Fenchurch's directive to publish anyway—establishes that Lin herself harbored serious doubts about the truth of the allegations she was disseminating to 142,000 followers. (Ex. 12 [GPR Meridian Solutions Messages], at GPR-Meridian Solutions-003147–003149.)

d. Documentary Evidence from discovery. The approximately 87,000 documents produced in discovery include a trove of GPR internal communications—Meridian Solutions messages, emails, and memoranda—that reveal Defendants' awareness that their allegations were unsupported or speculative.

Beyond the specific communications described above, the discovery record includes:

• Additional Meridian Solutions messages in which Lin and other GPR personnel discuss the weakness of the evidence underlying the revenue-fabrication allegations in Report 1 and the difficulty of supporting the "$410M number." (Morano Decl., ¶ 22; Espinoza Decl., Ex. I [GPR Internal Meridian Solutions Messages, selected excerpts].)

• Emails between Fenchurch and a third-party data vendor in which the vendor cautioned that the data underlying the RNG analysis was "insufficient to draw conclusions about system-level manipulation." (Espinoza Decl., Ex. J [Email correspondence with DataStream Analytics LLC].)

• GPCP trading records confirming that the short position was established in stages beginning in late January 2024—before the first report was published—and was closed in stages beginning immediately after the third report's publication and concluding by mid-March 2024. (Ex. 13 [GPCP Trading Records].) The timing of these trades confirms that the reports and the short position were components of a coordinated strategy to profit from the stock-price decline that Defendants themselves orchestrated.

• Internal memoranda in which Fenchurch discussed the anticipated market reaction to each report and the optimal timing for covering the short position. (Espinoza Decl., Ex. K [Fenchurch Internal Memorandum, dated Feb. 5, 2024].)

This documentary evidence, viewed in the light most favorable to RGC, supports the inference that Defendants were aware that their allegations were unsupported or false, and that they published the reports not to inform the public but to manipulate the stock price and profit from the resulting decline.

e. Failure to Investigate. Perhaps the most striking evidence of actual malice is what Defendants did not do before publishing their explosive fraud allegations. Defendants failed to take even the most basic investigative steps that any responsible journalist or researcher would take before accusing a publicly traded company of criminal fraud:

• Defendants did not contact the Nevada Gaming Control Board to verify the RNG-manipulation allegations. (Lin Dep. at 147:11–148:16.)

• Defendants did not contact Pinnacle Audit & Advisory LLP to discuss the clean audit opinions or the revenue-fabrication allegations. (Fenchurch Dep. at 65:2–22.)

• Defendants did not contact RGC itself—neither its CEO, its CFO, its General Counsel, nor its Investor Relations department—to seek comment or give RGC an opportunity to respond before publication. (Id. at 66:3–18.)

• Defendants relied on publicly available information that they materially mischaracterized, drawing inflammatory conclusions that the underlying data did not support. (Lin Dep. at 112:3–113:8.)

A deliberate or purposeful avoidance of the truth is the functional equivalent of actual malice. As the Supreme Court held in St. Amant v. Thompson, "reckless disregard" includes situations where the defendant had "obvious reasons to doubt the veracity" of the information on which the publication was based but chose not to investigate. (390 U.S. at 732.) In Harte-Hanks, the Supreme Court further held that "a purposeful avoidance of the truth" constitutes actual malice, and that evidence of failure to investigate is "relevant to—and supportive of—a finding of actual malice." (491 U.S. at 692–693.)

Here, Defendants had abundant reasons to doubt the veracity of their allegations. They were aware of clean audit opinions from a reputable audit firm. Their own Senior Analyst expressed doubts about the revenue-fabrication figure and the related-party allegations. A third-party data vendor cautioned that the RNG data was insufficient to support conclusions about system-level manipulation. Yet Defendants deliberately chose not to investigate further—not because investigation was impractical or impossible, but because, as Fenchurch admitted, the "window" for the short trade was "closing." (Fenchurch Dep. at 97:14–18.)

This evidence is more than sufficient to create a triable issue of material fact on actual malice. Indeed, a reasonable jury could find actual malice by clear and convincing evidence on this record.

4. Defendants' Statements Caused Special Damages

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

The temporal correlation between Defendants' publications and the stock-price decline is striking. RDGM traded at $92.14 on February 6, 2024—the last trading day before the first report. After Report 1 was published on February 7, 2024, the stock fell to $84.37—an 8.4% decline. After Report 2 was published on February 14, 2024, the stock fell further to $78.52—a cumulative 14.8% decline. And after Report 3 was published on February 21, 2024, the stock reached its trough of $72.80—a cumulative 21.0% decline. (Ex. 8; Ramaswaran Decl., ¶¶ 14–16.) The aggregate market-capitalization loss at the trough was approximately $1.427 billion. (Id., ¶ 17.)

But temporal correlation alone is not the basis for RGC's damages claim. Dr. Vostrikova's event-study analysis directly addresses Defendants' market-conditions argument by controlling for movements in the S&P 500 Index, the Nasdaq Composite, and a basket of comparable gaming-industry stocks during the relevant period. (Vostrikova Decl., ¶¶ 8–14.) After removing the effects of market-wide and sector-specific movements—isolating the "abnormal return" attributable to each report—Dr. Vostrikova calculated event-study-adjusted damages of $327.6 million in shareholder value directly caused by Defendants' false statements. (Id., ¶ 16.)

Dr. Vostrikova's methodology is the same event-study methodology that is widely accepted by courts as a reliable means of isolating the impact of specific events on stock prices. (See In re Vivendi Universal, S.A. Securities Litigation (S.D.N.Y. 2011) 765 F.Supp.2d 512, 533–535; Halliburton Co. v. Erica P. John Fund, Inc. (2014) 573 U.S. 258, 280.) Defendants have not challenged the reliability of the event-study methodology itself, nor have they offered a competing event study or any other quantitative analysis demonstrating that the stock-price decline was attributable to other factors. Their expert, Dr. Richard Kwan of Oakhurst Economic Consulting Group, criticized certain modeling choices in Dr. Vostrikova's analysis but did not dispute the fundamental validity of the event-study approach. (Espinoza Decl., ¶ 9.)

In addition to the market-capitalization losses, RGC incurred $4.627 million in documented out-of-pocket costs as a direct result of Defendants' publications: $2.18 million for crisis communications (Ex. 14), $1.46 million for a supplemental forensic audit (Ex. 16), and $987,000 for Nevada gaming regulatory counsel (Ex. 15). These out-of-pocket costs are special damages in their own right, and their causal connection to Defendants' publications is undeniable—each expense was incurred specifically to address the allegations in Defendants' reports and their aftermath.

At minimum, the issues of causation and damages present triable questions of fact that must be resolved by a jury, not by this Court on summary judgment.

B. Triable Issues of Material Fact Exist on the Second Cause of Action: Intentional Interference with Prospective Economic Advantage

The elements of intentional interference with prospective economic advantage are: (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 acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant's acts. (della Penna v. Crowne Albany Industries (1995) 11 Cal.4th 376, 389; Glenrock Corporation (2003) 29 Cal.4th 1134, 1153.) Additionally, the defendant's conduct must be "independently wrongful"—that is, wrongful apart from the interference itself. (della Penna, 11 Cal.4th at 393.)

1. Economic Relationships

RGC has extensive existing and prospective economic relationships with gaming patrons, technology licensees, institutional and retail investors, joint-venture partners, entertainment-industry counterparties, and numerous other business entities and individuals across its eleven casino-resort properties and three business divisions. (Calloway Decl., ¶¶ 28–34.) The FAC identifies specific disrupted relationships and lost business opportunities, including negotiations for a technology-licensing agreement with a major international casino operator that stalled following the publication of Defendants' reports, and the withdrawal of a potential joint-venture partner from discussions regarding the expansion of Redstone Digital's iGaming platform. (Id., ¶¶ 32–33.)

2. Knowledge and Intent

Defendants knew that publishing allegations of criminal fraud against a publicly traded gaming company—allegations including revenue fabrication, RNG manipulation, and undisclosed related-party transactions—would disrupt RGC's existing and prospective business relationships. This knowledge is virtually self-evident from the nature of the allegations. Accusations of this kind strike at the very foundation of trust upon which gaming companies depend in their relationships with regulators, investors, patrons, and business partners. (See Erlich v. Etner (1964) 224 Cal.App.2d 69, 75 [knowledge of interference may be inferred from the nature and likely consequences of the defendant's conduct].)

Moreover, disrupting RGC's business relationships was not merely a foreseeable consequence of Defendants' conduct—it was the mechanism by which Defendants intended to profit. GPR's entire business model depends on causing stock-price declines through the publication of negative reports, from which its affiliated entities profit via pre-established short positions. (Fenchurch Dep. at 28:6–29:11; Ex. 13.) The stock-price decline that generates GPCP's profits is itself a function of the disruption of investor confidence and business relationships that follows from the publication of fraud allegations. Defendants' intent to disrupt is inextricable from their intent to profit.

3. Wrongful Conduct

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

4. Actual Disruption and Damages

The evidence of actual disruption and resulting damages includes:

• The precipitous decline in RDGM's stock price, from $92.14 to $72.80, representing a market-capitalization loss of approximately $1.427 billion and event-study-adjusted damages of $327.6 million. (Vostrikova Decl., ¶ 16.)

• The disruption of RGC's investor relations, which required the retention of Crestline Equity Partners Group Inc. for crisis communications at a cost of $2.18 million. (Arecchi Decl., ¶¶ 5–9; Ex. 14.)

• The regulatory scrutiny triggered by Defendants' reports, which required the retention of Hargrove & Sato LLP as Nevada gaming regulatory counsel at a cost of $987,000, and which consumed substantial time and resources of RGC's senior management and in-house legal team during the NGCB's independent RNG audit and the SEC's informal inquiry. (Olafson Decl., ¶¶ 11–14; Exs. 15, 7.)

• The specific disruptions to business relationships identified in the Calloway Declaration, including the stalled technology-licensing negotiation and the withdrawn joint-venture discussions. (Calloway Decl., ¶¶ 32–33.)

This evidence creates triable issues of material fact on every element of the intentional-interference claim. Summary judgment should be denied.

C. Triable Issues of Material Fact Exist on the Third Cause of Action: Unfair Business Practices (Cal. Bus. & Prof. Code § 17200)

California's Unfair Competition Law ("UCL"), codified at Business and Professions Code section 17200 et seq., prohibits "any unlawful, unfair or fraudulent business act or practice." The UCL is written in the disjunctive—a business practice need only be unlawful, or unfair, or fraudulent to be actionable. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Defendants' conduct satisfies all three prongs.

1. Unlawful Prong

The "unlawful" prong of the UCL "borrows" violations of other laws and treats them as independently actionable unfair business practices. (Id. at 180.) Here, Defendants' conduct constitutes trade libel under California Civil Code section 46(3), as established in Section IV.A above. The trade-libel violation provides the predicate unlawful act under the UCL's unlawful prong. (Overstock.com, 151 Cal.App.4th at 716 [trade libel may serve as predicate for UCL unlawful-prong claim].)

2. Unfair Prong

Under the "unfair" prong, a business practice is unfair when the harm it causes to the plaintiff or the public substantially outweighs any utility of the practice. (Cel-Tech, 20 Cal.4th at 186–187.) Here, the harm is manifest: Defendants published three reports containing demonstrably false allegations of criminal fraud against a publicly traded company, causing $327.6 million in event-study-adjusted shareholder losses, $4.627 million in out-of-pocket costs, regulatory scrutiny, and disruption of business relationships. The utility of Defendants' conduct, by contrast, is nonexistent—their reports did not expose any actual wrongdoing, did not serve any legitimate public interest, and served only to manipulate the stock price for Defendants' private financial gain. A reasonable jury could readily conclude that the harm imposed by Defendants' conduct substantially outweighs any conceivable utility.

3. Fraudulent Prong

Under the "fraudulent" prong, a business practice is fraudulent if it is "likely to deceive members of the public." (Id. at 180.) RGC need not show that any individual was actually deceived—only that Defendants' conduct was "likely to deceive a reasonable consumer." (Id.)

Defendants' three reports were disseminated to the investing public via grizzlypeakresearch.com and the @GrizzlyPeakRes social media account, which had approximately 142,000 followers at the time of publication. (Fenchurch Dep. at 31:15–22.) The reports contained specific factual assertions—revenue fabrication, RNG manipulation, undisclosed related-party transactions—presented in the format of a professionally produced research report, complete with charts, tables, citations, and purported documentary evidence. A reasonable investor encountering t

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.
Case No. 24STCV-01892
PLAINTIFF REDSTONE GAMING CORP.'S OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION
Date: November 15, 2024 Time: 9:00 a.m. Dept.: 14 Judge: Hon. Patricia Yamamoto
Complaint Filed: February 5, 2024 FAC Filed: March 18, 2024 Trial Date: March 24, 2025
Filed: November 5, 2024
CALDERWOOD & HARKNESS LLP Francesca Morano (SBN 247891) Samuel Eklund (SBN 312764) Carlos Espinoza (SBN 298453) Hannah Brinkley (SBN 334218) 333 South Grand Avenue, Suite 4800 Los Angeles, California 90071 Telephone: (213) 486-7200 Facsimile: (213) 486-7201
Email: fmorano@calderwoodharkness.com
Attorneys for Plaintiff Redstone Gaming Corp.
TABLE OF AUTHORITIES
Cases.  
Statutes and Rules
Secondary Sources.  
I. INTRODUCTION
Defendants Grizzly Peak Research LLC ("GPR"), Grizzly Peak Capital Partners LP ("GPCP"), and Tobias "Toby" Fenchurch (collectively, "Defendants") have moved for summary judgment on all four causes of action in the First Amended Complaint ("FAC"), which was filed on March 18, 2024. (Defs.' Mot. for Summ. J. ("MSJ"), filed Oct. 22, 2024.) Defendants' motion should be denied in its entirety. Far from establishing the absence of triable issues of material fact, Defendants' motion ignores—and in many instances directly contradicts—the overwhelming evidentiary record amassed during twelve months of intensive discovery. That record conclusively demonstrates that triable issues of material fact pervade every element of every cause of action, and that summary judgment is wholly inappropriate.
This case arises from a calculated scheme to destroy shareholder value and profit from the wreckage. Between February 7 and February 21, 2024, Defendants published three fraudulent short-seller research reports on grizzlypeakresearch.com and disseminated them simultaneously via the @GrizzlyPeakRes social media account, which at the time boasted approximately 142,000 followers. The reports—titled "House of Cards: Redstone Gaming's Manufactured Earnings," "Rigged Reels: How Redstone's Slot Software Cheats the Regulators," and "Double Down on Fraud: Redstone's Related-Party Shell Game"—contained a series of incendiary but utterly false allegations against Plaintiff Redstone Gaming Corp. ("RGC"), a publicly traded gaming and entertainment company listed on the Nasdaq Stock Market under the ticker symbol RDGM. The reports accused RGC of fabricating approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions, manipulating random-number-generator ("RNG") software to deceive the Nevada Gaming Control Board, and concealing undisclosed related-party transactions between RGC's Chief Executive Officer, Marcus J. Calloway, and a purported shell entity called Vermilion Holdings LLC.
Every one of these allegations was false. Every one has been affirmatively disproven by independent authorities. Pinnacle Audit & Advisory LLP—RGC's independent auditor, under the direction of engagement partner Walter Ng, CPA—issued clean audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023, and subsequently conducted a supplemental forensic audit that confirmed RGC's FY 2023 revenue of $3.42 billion. The Nevada Gaming Control Board completed an independent audit of RGC's RNG systems on March 29, 2024, and cleared RGC entirely. And the United States Securities and Exchange Commission, after opening an informal inquiry in March 2024 in response to the Vermilion Holdings allegations, closed that inquiry with no action whatsoever on August 16, 2024.
Defendants' motive is not difficult to discern. At the time they published their reports, GPCP—the affiliated hedge fund controlled by Fenchurch—held a short position of approximately 680,000 shares of RDGM, with a notional value of approximately $62.66 million at the pre-publication share price of $92.14 per share. As the stock plummeted in the wake of each successive report—from $92.14 to $84.37 after Report 1, to $78.52 after Report 2, and finally to a trough of $72.80 after Report 3—Defendants methodically closed their short position and pocketed approximately $13.15 million in gross profit. The cumulative decline of 21.0% wiped approximately $1.427 billion from RGC's market capitalization at its trough.
Nor can there be any serious dispute about the magnitude of the harm inflicted. Dr. Elena Vostrikova, Ph.D. (Financial Economics), principal of Meridian Forensic Economics LLC, conducted a rigorous event-study analysis isolating the impact of Defendants' false statements from general market and sector movements. Dr. Vostrikova's analysis, set forth in an expert report exchanged on September 9, 2024, and authenticated by her declaration filed herewith, quantifies event-study-adjusted damages of $327.6 million in shareholder value directly attributable to Defendants' publications. Additionally, RGC incurred $4.627 million in out-of-pocket costs responding to the fallout from Defendants' reports, including $2.18 million for crisis communications, $1.46 million for a supplemental forensic audit, and $987,000 for Nevada gaming regulatory counsel.
Twelve months of intensive discovery have generated an evidentiary record that is nothing short of devastating to Defendants' position. Fourteen depositions have been taken, including those of Fenchurch himself (August 20, 2024) and GPR Senior Analyst Ava Lin (August 29, 2024). Approximately 87,000 documents have been produced, including GPR internal Meridian Solutions messages and GPCP trading records. Three discovery motions have been filed and resolved. The resulting record establishes falsity, actual malice, causation, and damages with evidence that—at the very least—creates triable issues of material fact on every element of every cause of action.
This Court has already examined the actual-malice evidence in this case. On June 7, 2024, the Honorable Patricia Yamamoto denied Defendants' anti-SLAPP motion under California Code of Civil Procedure section 425.16, finding that RGC had demonstrated actual-malice evidence sufficient to defeat the motion at the pleading and early-evidence stage. The record has only grown overwhelmingly stronger since then. With fourteen depositions, 87,000 documents, and comprehensive expert analysis now in the record, the evidence of actual malice is not merely sufficient to survive summary judgment—it is the kind of evidence from which a reasonable jury could find actual malice by clear and convincing proof.
Defendants' motion for summary judgment should be denied in its entirety.
II. STATEMENT OF FACTS
The following facts are drawn from the declarations, deposition testimony, documentary evidence, and expert reports filed herewith and cited in the accompanying Separate Statement of Undisputed and Disputed Material Facts.
A. The Parties
1. Plaintiff Redstone Gaming Corp.
Plaintiff Redstone Gaming Corp. ("RGC") is a Nevada corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol RDGM. (Declaration of Marcus J. Calloway ("Calloway Decl."), ¶ 3; Declaration of Priya Ramaswaran ("Ramaswaran Decl."), ¶ 4.) RGC is headquartered at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. (Calloway Decl., ¶ 3.) Its registered agent is National Statutory Agents, Inc., located at 701 S. Carson Street, Suite 200, Carson City, Nevada 89701. (Id.)
RGC is one of the largest integrated gaming and entertainment companies in the United States. It operates eleven casino-resort properties across three states—Nevada, New Jersey, and Mississippi—employing more than 28,000 people. (Calloway Decl., ¶¶ 4–5.) In addition to its brick-and-mortar gaming operations, RGC licenses proprietary electronic gaming platforms to third-party casino operators, operates a rapidly growing iGaming division known as Redstone Digital, and maintains a media-entertainment production arm called Crimson Studios. (Id., ¶ 6.)
For fiscal year 2023, RGC reported total revenue of $3.42 billion and EBITDA of $812 million, representing an EBITDA margin of approximately 23.7%. (Ramaswaran Decl., ¶ 7; Ex. 4 [Pinnacle Audit & Advisory LLP FY 2023 Audit Opinion].) These financial results were audited by Pinnacle Audit & Advisory LLP, a registered public accounting firm, under the direction of engagement partner Walter Ng, CPA, who issued a clean, unqualified audit opinion. (Declaration of Walter Ng ("Ng Decl."), ¶¶ 5–8.) Pinnacle also issued clean audit opinions for RGC's fiscal year 2021 and fiscal year 2022 financial statements. (Id., ¶ 6.)
As of the close of trading on February 6, 2024—the last trading day before the publication of Defendants' first report—RDGM common stock traded at $92.14 per share, with approximately 73.8 million shares outstanding, yielding a market capitalization of approximately $6.8 billion. (Ramaswaran Decl., ¶ 10; Ex. 8 [RDGM Stock Price Data].)
RGC's senior leadership includes CEO Marcus J. Calloway, who has led the company since 2017; Chief Financial Officer Priya Ramaswaran, a CPA and former audit partner; General Counsel Derek Olafson; and Vice President of Investor Relations Janelle Hu. (Calloway Decl., ¶ 8.) Each of these individuals has provided testimony or declarations in support of this opposition.
2. Defendant Grizzly Peak Research LLC
Defendant Grizzly Peak Research LLC ("GPR") is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. (Deposition of Tobias Fenchurch ("Fenchurch Dep."), Aug. 20, 2024, at 27:3–14.) GPR is in the business of publishing short-seller research reports—reports that make negative allegations about publicly traded companies in which GPR's affiliated entities maintain short positions. (Id. at 28:6–29:11.) GPR distributes its reports through a subscription website, grizzlypeakresearch.com, and through its social media account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time the reports at issue were published. (Id. at 31:15–22; Ex. 1 [Report 1, cover page].)
GPR's Managing Member is defendant Tobias "Toby" Fenchurch. (Fenchurch Dep. at 27:18–20.) GPR's Senior Analyst and the co-author of the three reports at issue is Ava Lin. (Deposition of Ava Lin ("Lin Dep."), Aug. 29, 2024, at 14:8–15.) According to financial records produced in discovery, GPR held cash and receivables of approximately $22 million at year-end 2024. (Declaration of Francesca Morano ("Morano Decl."), ¶ 18; Ex. B [GPR Financial Records].)
3. Defendant Grizzly Peak Capital Partners LP
Defendant Grizzly Peak Capital Partners LP ("GPCP") is a Delaware limited partnership whose general partner is Grizzly Peak Capital GP LLC. (Fenchurch Dep. at 33:4–16.) The sole managing member of Grizzly Peak Capital GP LLC is defendant Tobias Fenchurch. (Id. at 33:17–21.) GPCP is an affiliated hedge fund that held the short position in RDGM at issue in this litigation. (Id. at 34:2–12.) GPCP had estimated assets under management of approximately $185 million at the relevant time. (Id. at 35:7–14.) GPCP was added as a co-defendant in the First Amended Complaint filed on March 18, 2024. (FAC, ¶ 12.)
4. Defendant Tobias Fenchurch
Defendant Tobias Fenchurch ("Fenchurch") is an individual who serves as the Managing Member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP. (Fenchurch Dep. at 27:18–20, 33:17–21.) Fenchurch personally directed the publication of all three reports at issue and personally directed the timing of GPCP's short position in RDGM. (Id. at 38:1–9, 42:14–22, 97:3–18.) Fenchurch was added as an individual defendant in the First Amended Complaint filed on March 18, 2024. (FAC, ¶ 14.)
B. The Defamatory Publications
Between February 7 and February 21, 2024, Defendants published three separate research reports on grizzlypeakresearch.com, each of which was simultaneously disseminated via the @GrizzlyPeakRes social media account to its approximately 142,000 followers. The reports are described below.
1. Report 1 — "House of Cards: Redstone Gaming's Manufactured Earnings" (February 7, 2024)
The first report, running approximately 48 pages, was published on February 7, 2024. (Ex. 1.) Report 1 alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. (Id. at 3, 7–12, 22–31.) The report purported to identify specific transactions and accounting entries that, according to GPR, had no economic substance and were designed to inflate RGC's reported revenue. (Id. at 22–31.) The report contained detailed charts, tables, and references to publicly available SEC filings, creating an appearance of rigorous forensic analysis. (Id.)
The impact on RDGM's stock price was immediate and severe. On the day of publication, RDGM declined from $92.14 to $84.37 per share—a single-day drop of $7.77 per share, or 8.4%. (Ex. 8 [RDGM Stock Price Data]; Ramaswaran Decl., ¶ 14.)
2. Report 2 — "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (February 14, 2024)
The second report, running approximately 36 pages, was published one week later on February 14, 2024. (Ex. 2.) Report 2 alleged that RGC had manipulated its proprietary random-number-generator ("RNG") software to inflate payout statistics reported to the Nevada Gaming Control Board. (Id. at 4, 8–16.) The report claimed that RGC's RNG systems were programmed to produce payout ratios during testing periods that differed materially from the ratios produced during actual gaming operations. (Id. at 12–16.) These allegations, if true, would have exposed RGC to the revocation of its gaming licenses and potential criminal prosecution.
Following the publication of Report 2, RDGM declined further to $78.52 per share, representing a cumulative decline of $13.62 per share, or 14.8%, from the pre-publication price. (Ex. 8; Ramaswaran Decl., ¶ 15.)
3. Report 3 — "Double Down on Fraud: Redstone's Related-Party Shell Game" (February 21, 2024)
The third and final report, running approximately 29 pages, was published on February 21, 2024. (Ex. 3.) Report 3 alleged that CEO Marcus J. Calloway had engaged in undisclosed related-party transactions with a purported shell entity called "Vermilion Holdings LLC." (Id. at 3, 6–14.) The report claimed that Calloway secretly controlled Vermilion Holdings, that RGC had funneled payments to Vermilion for fictitious consulting services, and that Calloway personally profited from these undisclosed arrangements in violation of securities laws and fiduciary duties. (Id. at 6–14.)
Following the publication of Report 3, RDGM reached its trough of $72.80 per share—a cumulative decline of $19.34 per share, or 21.0%, from the pre-publication closing price of $92.14. (Ex. 8; Ramaswaran Decl., ¶ 16.) The aggregate market-capitalization loss at the trough was staggering: $19.34 × 73.8 million shares ≈ $1.427 billion. (Id.)
4. Short-Position Disclosure
Each of the three reports contained a standard disclaimer, typically located on the final page, disclosing that GPR and its affiliates maintained short positions in RDGM common stock. (Exs. 1, 2, 3 [disclaimer pages].) discovery has confirmed that GPCP held approximately 680,000 shares of RDGM short at the time of the first report's publication. (Ex. 13 [GPCP Trading Records]; Fenchurch Dep. at 42:14–22.) At the pre-publication share price of $92.14, the notional value of this short position was approximately $62.66 million. (Ramaswaran Decl., ¶ 18.)
GPCP trading records further reveal that the short position was closed by mid-March 2024 at an estimated average price of approximately $72.80 per share. (Ex. 13.) The estimated gross profit from the short position was therefore ($92.14 − $72.80) × 680,000 shares ≈ $13.15 million. (Id.; Declaration of Dr. Elena Vostrikova ("Vostrikova Decl."), ¶ 22.)
C. The Allegations Were Proven False
Every material allegation in Defendants' three reports has been independently disproven. The evidence is set forth below.
1. Revenue-Fabrication Allegation Disproven
The central allegation in Report 1—that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions—is demonstrably false. Pinnacle Audit & Advisory LLP, RGC's independent auditor under the direction of engagement partner Walter Ng, CPA, issued clean, unqualified audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. (Ng Decl., ¶¶ 5–8; Ex. 4.) These audit opinions were issued in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB") and expressed Pinnacle's professional judgment that RGC's financial statements were presented fairly, in all material respects, in conformity with generally accepted accounting principles ("GAAP"). (Id., ¶ 7.)
Following the publication of Report 1, and at RGC's request, Pinnacle conducted a supplemental forensic audit of the specific revenue items and intercompany transactions identified in GPR's report. (Ng Decl., ¶¶ 10–14; Ex. 5 [Pinnacle Supplemental Forensic Audit Report].) That forensic engagement—which involved examination of underlying source documents, bank records, counterparty confirmations, and transactional data—confirmed RGC's FY 2023 revenue of $3.42 billion and found no evidence of fabricated or fictitious transactions. (Id., ¶ 14.) The cost of the supplemental forensic audit engagement was $1.46 million. (Id., ¶ 16; Ex. 16 [Pinnacle Invoices].)
2. RNG-Manipulation Allegation Disproven
The central allegation in Report 2—that RGC manipulated its RNG software to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB")—is also demonstrably false. The NGCB completed an independent audit of RGC's RNG systems on March 29, 2024, and issued a clearance letter confirming that RGC's systems complied fully with all applicable regulatory requirements. (Ex. 6 [NGCB RNG Audit Clearance Letter, dated March 29, 2024].)
Critically, during her deposition on August 29, 2024, GPR Senior Analyst Ava Lin—the co-author of Report 2—admitted that she did not contact the NGCB at any time before publishing the report's allegations about RNG manipulation. (Lin Dep. at 147:11–148:3.) Lin acknowledged that the NGCB would have been in a position to confirm or deny the allegations, but testified that she "didn't think it was necessary." (Id. at 148:4–16.) This failure to contact the most relevant regulatory authority is powerful evidence of actual malice, as discussed in Section IV.A.3 below.
3. Related-Party Allegation Disproven
The central allegation in Report 3—that CEO Marcus J. Calloway engaged in undisclosed related-party transactions with Vermilion Holdings LLC—has likewise been disproven. Following the publication of Report 3, the SEC opened an informal inquiry in March 2024 to investigate the Vermilion Holdings allegations. (Declaration of Derek Olafson ("Olafson Decl."), ¶ 11.) After several months of investigation, the SEC closed that inquiry with no action on August 16, 2024. (Id., ¶ 12; Ex. 7 [SEC Notification of Closure].)
The deposition testimony of Fenchurch and Lin further underscores the recklessness of the related-party allegations. Fenchurch admitted in his deposition that he instructed the publication of Report 3 before completing verification of the Vermilion Holdings allegation. (Fenchurch Dep. at 97:3–18.) He testified that he directed Lin to "go with what we have" because the "window" for the short trade was "closing." (Id. at 97:14–18.) This is a textbook admission of reckless disregard for the truth.
Ava Lin's internal Meridian Solutions messages, produced in discovery, paint an even more damning picture. In a Meridian Solutions message to Fenchurch dated February 18, 2024—three days before the publication of Report 3—Lin wrote: "I still don't have the ownership docs for Vermilion. Not comfortable publishing until we have them." (Ex. 12 [GPR Internal Meridian Solutions Messages], at GPR-Meridian Solutions-003147.) Fenchurch responded: "We publish Thursday. That's final. The thesis is strong enough." (Id. at GPR-Meridian Solutions-003148.) Lin replied: "Understood. But I want on record that I flagged this." (Id. at GPR-Meridian Solutions-003149.)
4. RGC's Regulatory-Response Costs
As a direct result of Defendants' publications, RGC was forced to incur substantial out-of-pocket costs to defend its reputation, respond to regulatory inquiries, and reassure investors, customers, and business partners. These costs are documented as follows:
•  Crisis Communications: RGC retained Crestline Equity Partners Group Inc. (lead contact: Simone Arecchi) to manage the crisis-communications response to Defendants' reports, at a cost of $2.18 million. (Declaration of Simone Arecchi ("Arecchi Decl."), ¶¶ 5–9; Ex. 14 [Ashgrove Equity Partners Invoices].)
•  Supplemental Forensic Audit: As noted above, RGC engaged Pinnacle Audit & Advisory LLP to conduct a supplemental forensic audit at a cost of $1.46 million. (Ng Decl., ¶ 16; Ex. 16 [Pinnacle Invoices].)
•  Nevada Gaming Regulatory Counsel: RGC retained Hargrove & Sato LLP as specialized Nevada gaming regulatory counsel to interface with the NGCB during and after its independent RNG audit, at a cost of $987,000. (Olafson Decl., ¶ 14; Ex. 15 [Hargrove & Sato Invoices].)
Total out-of-pocket costs: $2.18 million + $1.46 million + $987,000 = $4.627 million. (Calloway Decl., ¶ 25.)
D. Expert Damages Analysis
Plaintiff retained Dr. Elena Vostrikova, Ph.D. (Financial Economics), principal of Meridian Forensic Economics LLC, 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067, to analyze and quantify the damages attributable to Defendants' publications. (Vostrikova Decl., ¶¶ 1–4.) Dr. Vostrikova's expert report was exchanged on September 9, 2024, as required by the discovery schedule. (Id., ¶ 5; Ex. 9 [Expert Report of Dr. Elena Vostrikova].)
Dr. Vostrikova employed a well-established event-study methodology, which is the standard analytical framework used in securities litigation and economic research to isolate the impact of specific events—here, the publication of Defendants' three false reports—from general market conditions and sector-specific movements. (Vostrikova Decl., ¶¶ 8–14.) The event-study methodology has been accepted by courts across the country as a reliable means of establishing loss causation and quantifying damages. (See, e.g., Glendale Fed. Bank, FSB v. United States (2002) 239 F.3d 1374, 1379.)
Dr. Vostrikova's analysis controlled for movements in the S&P 500 Index, the Nasdaq Composite Index, and a basket of comparable gaming-industry stocks during the relevant period. (Vostrikova Decl., ¶¶ 11–13.) After removing market-wide and sector-specific beta effects, Dr. Vostrikova calculated event-study-adjusted damages of $327.6 million in shareholder value directly attributable to the false statements contained in Defendants' three reports. (Id., ¶ 16.)
Dr. Vostrikova also quantified additional components of damage:
•  GPCP's short-sale disgorgement of approximately $13.15 million, calculated from trading records showing the acquisition and disposition of the short position. (Id., ¶ 22.)
•  RGC's out-of-pocket costs of $4.627 million, as documented above. (Id., ¶ 24.)
Dr. Vostrikova was deposed on October 4, 2024, and her methodology and conclusions were not materially impeached. (Declaration of Carlos Espinoza ("Espinoza Decl."), ¶ 8.)
E. Procedural History
The procedural history of this action is as follows:
•  February 5, 2024: RGC filed its original Complaint against GPR only, asserting three causes of action: (1) Trade Libel; (2) Intentional Interference with Prospective Economic Advantage; and (3) Unfair Business Practices under California Business and Professions Code section 17200 et seq.
•  March 18, 2024: RGC filed its First Amended Complaint, adding GPCP and Fenchurch as defendants and adding Negligent Misrepresentation as a fourth cause of action. The FAC also refined and expanded the factual allegations in light of the NGCB clearance and the SEC's opening of an informal inquiry.
•  April 12, 2024: Defendants filed an anti-SLAPP motion under California Code of Civil Procedure section 425.16, arguing that their reports constituted protected speech on a public issue and that RGC could not demonstrate a probability of prevailing on the merits.
•  June 7, 2024: This Court (Judge Yamamoto, Dept. 14) denied Defendants' anti-SLAPP motion, finding that while Defendants' reports arose from protected activity, RGC had demonstrated actual-malice evidence sufficient to establish a probability of prevailing on the merits. (Ex. 17 [Minute Order Denying Anti-SLAPP Motion].)
•  June–November 2024: The parties engaged in intensive discovery. Fourteen depositions were taken, including those of Fenchurch (August 20, 2024), Lin (August 29, 2024), Calloway (July 15, 2024), Ramaswaran (July 18, 2024), Olafson (July 22, 2024), and Dr. Vostrikova (October 4, 2024). Approximately 87,000 documents were produced, including GPR and GPCP internal communications, trading records, and financial records. Three discovery motions were filed and resolved—two by RGC (to compel production of GPR trading records and internal communications) and one by Defendants (to quash a third-party subpoena to Pinnacle Audit & Advisory LLP, which was denied). (Morano Decl., ¶¶ 10–16.)
•  September 9, 2024: Expert reports were exchanged per the discovery schedule. RGC designated Dr. Vostrikova; Defendants designated Dr. Richard Kwan of Oakhurst Economic Consulting Group. (Morano Decl., ¶ 17.)
•  October 22, 2024: Defendants filed the instant Motion for Summary Judgment, or in the Alternative, Summary Adjudication. (MSJ.)
•  November 5, 2024: RGC files the instant Opposition.
III. LEGAL STANDARD
Summary judgment is appropriate only when "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Cal. Code Civ. Proc. § 437c(c).) Summary judgment "is a drastic measure which deprives the losing party of a trial on the merits," and the procedure "should be used with caution so that it does not become a substitute for trial." (Kahan v. City of Richmond (2019) 35 Cal.App.5th 721, 730.)
The moving party bears the initial burden of production to make a prima facie showing that no triable issue of material fact exists. (Cal. Code Civ. Proc. § 437c(p)(2); Aguilar v. Tarrant Holdings (2001) 25 Cal.4th 826, 850–851.) Where the defendant is the moving party, this burden may be met by showing either (1) that one or more elements of the plaintiff's cause of action cannot be established, or (2) that a complete defense to the cause of action exists. (Cal. Code Civ. Proc. § 437c(p)(2).)
Once the moving party has met this initial burden—and only then—the burden shifts to the opposing party to demonstrate, by admissible evidence, the existence of a triable issue of material fact. (Aguilar, 25 Cal.4th at 849–850.) The opposing party "may not rely upon the mere allegations or denials of its pleadings," but rather "shall set forth the specific facts showing that a triable issue of material fact exists." (Cal. Code Civ. Proc. § 437c(p)(2).)
In evaluating the motion, the court must view all evidence "in the light most favorable to the opposing party" and must draw "all reasonable inferences" in that party's favor. (Aguilar, 25 Cal.4th at 843; Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 302.) The court does not weigh the evidence, assess the credibility of witnesses, or resolve factual disputes—those are functions reserved for the trier of fact. (Aguilar, 25 Cal.4th at 843.) "Any doubt about the propriety of granting the motion should be resolved in favor of the party opposing the motion." (Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502.)
Summary judgment is properly denied where the evidence, viewed in the light most favorable to the nonmoving party, raises a triable issue of material fact—that is, where "reasonable triers of fact could resolve the underlying dispute in favor of either party." (Aguilar, 25 Cal.4th at 845.) The court's function "is not to try issues of fact but merely to determine whether there exist such issues." (Id.)
These principles apply with particular force in cases involving questions of intent, motive, and state of mind. As the California Supreme Court has observed, summary judgment "is particularly inappropriate where the critical issue is the defendant's state of mind," because "the trier of fact is in a far better position than the court on summary judgment to determine such questions." (Reader's Digest Association v. Superior Court (1984) 37 Cal.3d 244, 253.)
IV. ARGUMENT
A. Triable Issues of Material Fact Exist on the First Cause of Action: Trade Libel (Cal. Civ. Code § 46(3))
Trade libel—also known as injurious falsehood—occurs when a defendant publishes a false statement of fact that is harmful to the interests of another, with knowledge of the statement's falsity or reckless disregard for its truth or falsity, and the publication results in special damages. (Rest.2d Torts § 623A (1977); 5 Witkin, Summary of Cal. Law (11th ed. 2017) Torts, § 624; ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010–1011.) Defendants move for summary judgment on this cause of action by arguing (1) that their reports constituted protected opinion rather than actionable statements of fact; (2) that their statements were substantially true; (3) that they did not act with actual malice; and (4) that RGC cannot demonstrate special damages. Each argument fails.
1. Defendants' Statements Were Statements of Fact, Not Protected Opinion
Defendants devote substantial portions of their moving papers to the argument that their reports are "expressions of opinion" or "commentary" protected by the First Amendment and Article I, section 2 of the California Constitution. (MSJ at 12–17.) This argument is both legally deficient and factually unsupported.
The distinction between actionable statements of fact and constitutionally protected opinion is well established. In Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1, the United States Supreme Court held that there is no "wholesale defamation exemption for anything that might be labeled 'opinion.'" (Id. at 18.) Rather, the dispositive question is whether the statement in question is "sufficiently factual to be susceptible of being proved true or false." (Id. at 21.) A statement that "implies an assertion of objective fact" is actionable, even if couched in the language of opinion. (Id.) California courts apply this standard and consider the totality of the circumstances, including the language used, the context in which the statement was made, and whether the statement can reasonably be interpreted as asserting or implying specific, verifiable facts. (Khawar v. Globe International, Inc. (1998) 19 Cal.4th 254, 275; Wong v. Jing (2010) 189 Cal.App.4th 1354, 1370.)
Defendants' three reports do not merely express skepticism about RGC's business model or make generalized criticisms of the gaming industry. They assert specific, empirically verifiable factual claims. Report 1 alleges that RGC fabricated approximately $410 million in FY 2023 revenue through identified fictitious intercompany transactions. (Ex. 1 at 7–12, 22–31.) Report 2 alleges that RGC's RNG software was programmed to produce different payout ratios during testing periods than during actual gaming operations. (Ex. 2 at 8–16.) Report 3 alleges that CEO Calloway secretly controlled Vermilion Holdings LLC and that RGC funneled undisclosed payments to Vermilion for fictitious consulting services. (Ex. 3 at 6–14.)
These are not matters of opinion—they are factual assertions that are either true or false. One can verify whether RGC fabricated $410 million in revenue. One can test whether RGC's RNG software produces different outputs during testing than during live operation. One can determine whether Calloway controlled Vermilion Holdings. The reports themselves emphasize their supposed factual rigor: they cite purported documentary evidence, name specific dollar amounts, describe specific transactions, reference specific regulatory filings, and present detailed charts and tables designed to support their claims. (Exs. 1, 2, 3, passim.) No reasonable reader—and certainly no sophisticated investor reading a research report from an entity holding itself out as a "research" firm—would understand these statements as mere expressions of subjective opinion.
The case of Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688 is directly on point. There, the Court of Appeal held that specific allegations of accounting fraud published by a research firm constituted actionable statements of fact, not protected opinion, because the allegations "implied the existence of undisclosed facts" and were "verifiable" by reference to objective evidence. (Id. at 700–701.) The same analysis applies here. Defendants' reports implied—indeed, expressly stated—that they had identified specific instances of fraud that could be verified or disproven. They were verified and disproven.
At the very minimum, whether a reasonable reader would have understood Defendants' statements as assertions of fact or as mere opinion is a question of fact for the jury. (See Khawar, 19 Cal.4th at 275 [noting that the fact-versus-opinion inquiry often involves factual determinations appropriate for jury resolution].) Summary judgment on this ground is therefore inappropriate.
2. The Statements Were False
Defendants next argue that their statements were "substantially true" or based on "reasonable interpretations of publicly available data." (MSJ at 18–22.) This argument is belied by the evidence.
The doctrine of substantial truth provides a defense only where "the substance, the gist, the sting" of the allegedly defamatory statement is true. (Masson v. New Yorker Magazine, Inc. (1991) 501 U.S. 496, 517.) A statement is not substantially true if it produces a "different effect on the mind of the reader from that which the pleaded truth would have produced." (Id.)
Here, the "gist" and "sting" of each of Defendants' three reports was that RGC was engaged in criminal fraud. The evidence overwhelmingly demonstrates that RGC was not.
First, the revenue-fabrication allegation in Report 1 has been directly refuted by Pinnacle Audit & Advisory LLP's clean audit opinions for fiscal years 2021 through 2023 and by the supplemental forensic audit that specifically examined the transactions identified in GPR's report and found them to be legitimate. (Ng Decl., ¶¶ 5–14; Exs. 4, 5.) The supplemental forensic audit confirmed that FY 2023 revenue of $3.42 billion was properly stated in all material respects. (Id., ¶ 14.)
Second, the RNG-manipulation allegation in Report 2 has been directly refuted by the NGCB's independent RNG audit, which cleared RGC on March 29, 2024. (Ex. 6.) The NGCB's clearance letter specifically found that RGC's RNG systems operated in compliance with all applicable regulatory standards and that the payout statistics reported to the Board were accurate. (Id.)
Third, the related-party allegation in Report 3 has been refuted by the SEC's closure of its informal inquiry with no enforcement action on August 16, 2024. (Ex. 7.) The SEC—which had the resources and authority to investigate the Vermilion Holdings allegations thoroughly—found nothing to act on. (Id.)
Defendants may argue that clean audit opinions and regulatory clearances do not conclusively establish falsity. But this argument mistakes the applicable standard. RGC does not need to prove falsity conclusively at the summary-judgment stage—RGC need only show the existence of a triable issue of material fact. The evidence described above easily satisfies that standard. Clean audit opinions, a regulatory clearance letter, and the closure of an SEC inquiry with no action are precisely the kind of evidence from which a reasonable jury could find that Defendants' specific allegations of fraud were false.
At minimum, the truth or falsity of Defendants' allegations presents a classic jury question that cannot be resolved on summary judgment.
3. Defendants Published with Actual Malice
RGC acknowledges that, as a publicly traded company that is arguably a public figure for limited purposes, the actual-malice standard applies to its trade-libel claim. (See New York Times Co. v. Sullivan (1964) 376 U.S. 254, 279–280; Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 342.) Under this standard, RGC must demonstrate that Defendants published the false statements "with knowledge that [they were] false or with reckless disregard of whether [they were] false or not." (New York Times, 376 U.S. at 280.)
"Reckless disregard" means that the defendant "in fact entertained serious doubts as to the truth of his publication" or had a "high degree of awareness of . . . probable falsity." (St. Amant v. Thompson (1968) 390 U.S. 727, 731; Harte-Hanks Communications, Inc. v. Connaughton (1989) 491 U.S. 657, 667.) Actual malice may be proven by circumstantial evidence, including evidence of motive, failure to investigate, reliance on unreliable sources, and internal expressions of doubt. (Harte-Hanks, 491 U.S. at 668; Khawar, 19 Cal.4th at 275–276.)
Importantly, actual malice is a subjective standard—it focuses on the defendant's actual state of mind at the time of publication. (Bose Corp. v. Consumers Union of U.S., Inc. (1984) 466 U.S. 485, 511.) Whether actual malice exists is ordinarily a question for the jury. (Harte-Hanks, 491 U.S. at 688.) "Only when the evidence is such that a reasonable jury must find that actual malice was not shown by clear and convincing evidence" should a court grant summary judgment. (Id.)
The evidence of actual malice in this case is not merely sufficient to create a triable issue of material fact—it is overwhelming.
a. Financial Motive.  At the time Defendants published their three reports, GPCP—the affiliated hedge fund controlled by Fenchurch—held approximately 680,000 shares of RDGM short, with a notional value of approximately $62.66 million. (Ex. 13 [GPCP Trading Records]; Fenchurch Dep. at 42:14–22.) The short position meant that GPCP stood to profit in direct proportion to any decline in RDGM's stock price. Every dollar of decline per share translated into approximately $680,000 of gross profit for GPCP—and, by extension, for Fenchurch personally, as the sole managing member of GPCP's general partner.
Defendants ultimately realized approximately $13.15 million in gross profit by closing their short position at an average price of approximately $72.80 per share. (Ex. 13; Vostrikova Decl., ¶ 22.)
This financial incentive is powerful evidence of actual malice. As the Court of Appeal recognized in Overstock.com, a short seller's financial stake in the decline of a targeted company's stock price is probative of the short seller's motive to publish false or reckless statements. (151 Cal.App.4th at 703.) This Court itself recognized the probative value of this evidence when it denied Defendants' anti-SLAPP motion on June 7, 2024, noting that GPCP's "massive financial stake in the outcome of its own reports creates a powerful inference of motive to publish false or misleading information." (Ex. 17 [Minute Order] at 8.)
Defendants may protest that short selling is a legal activity and that maintaining a short position while publishing negative research does not, standing alone, establish actual malice. That is true. But it does not follow that the financial incentive is irrelevant. To the contrary, in combination with the other evidence described below—internal doubts, failure to investigate, and awareness of contradictory information—the enormous financial incentive to publish creates a triable issue of material fact as to Defendants' state of mind.
b. Fenchurch Deposition Testimony (August 20, 2024).  The deposition testimony of Tobias Fenchurch, taken on August 20, 2024, provides direct evidence of actual malice on multiple grounds.
First, Fenchurch admitted awareness that Pinnacle Audit & Advisory LLP had issued clean audit opinions on RGC's financial statements. (Fenchurch Dep. at 64:7–19.) When asked whether he was aware of the clean opinions before publishing Report 1, Fenchurch testified: "I was aware that Pinnacle had issued unqualified opinions, yes." (Id. at 64:14–16.) Yet he published Report 1's allegation that RGC had fabricated $410 million in revenue anyway, without contacting Pinnacle or even acknowledging the clean opinions in the report. (Id. at 65:2–22.)
Second, Fenchurch admitted instructing the publication of Report 3 before completing verification of the Vermilion Holdings allegation. As quoted above, Fenchurch testified that he directed Lin to "go with what we have" because the "window" for the short trade was "closing." (Id. at 97:3–18.) This testimony is an extraordinary admission. It demonstrates that Fenchurch was aware that the Vermilion Holdings allegations had not been adequately verified, but chose to publish them anyway because he feared that a delay would diminish GPCP's short-selling profits. A more direct admission of reckless disregard for the truth is difficult to imagine.
Third, Fenchurch's communications with Ava Lin, produced in discovery, reveal that Fenchurch was aware that the revenue-fabrication allegations in Report 1 lacked adequate evidentiary support. In an email dated January 31, 2024—one week before the publication of Report 1—Lin wrote to Fenchurch: "Toby — the $410M figure is based on extrapolation from a small sample. I can't say with confidence that it represents fabrication vs. legitimate interco activity. Need more data." (Morano Decl., ¶ 21; Espinoza Decl., Ex. H [Email, Lin to Fenchurch, Jan. 31, 2024].) Fenchurch responded: "The number is directionally right. Run with it." (Id.) This exchange establishes that Fenchurch was put on notice that the central factual claim in Report 1 was based on speculation and extrapolation, not on evidence sufficient to support an allegation of fraud.
c. Ava Lin Deposition Testimony (August 29, 2024).  The deposition testimony of Ava Lin, GPR's Senior Analyst and the co-author of all three reports, provides additional evidence of actual malice.
Lin admitted reliance on incomplete data for the RNG-manipulation allegation in Report 2. When asked the basis for her claim that RGC's RNG software produced different payout ratios during testing than during live operation, Lin testified that she "relied on publicly available payout data and inferred the discrepancy." (Lin Dep. at 112:3–12.) She acknowledged that she did not have access to the actual source code of RGC's RNG software, did not have any test results from the NGCB, and did not have any firsthand evidence of RNG manipulation. (Id. at 112:14–113:8.)
Most critically, as noted above, Lin admitted that she did not contact the Nevada Gaming Control Board before publishing allegations that went to the very core of the NGCB's regulatory oversight. (Id. at 147:11–148:16.) When asked why, she testified: "I didn't think it was necessary. Our analysis of the public data was sufficient." (Id. at 148:9–12.) But "analysis of public data" cannot substitute for verification of specific factual allegations of regulatory fraud—particularly when the relevant regulatory body could have confirmed or refuted the allegations with a single phone call.
Lin's internal Meridian Solutions messages, discussed above, further demonstrate her own doubts about the related-party allegations in Report 3. Her statement that she was "not comfortable publishing" until ownership documents for Vermilion Holdings were obtained—followed by Fenchurch's directive to publish anyway—establishes that Lin herself harbored serious doubts about the truth of the allegations she was disseminating to 142,000 followers. (Ex. 12 [GPR Meridian Solutions Messages], at GPR-Meridian Solutions-003147–003149.)
d. Documentary Evidence from discovery.  The approximately 87,000 documents produced in discovery include a trove of GPR internal communications—Meridian Solutions messages, emails, and memoranda—that reveal Defendants' awareness that their allegations were unsupported or speculative.
Beyond the specific communications described above, the discovery record includes:
•  Additional Meridian Solutions messages in which Lin and other GPR personnel discuss the weakness of the evidence underlying the revenue-fabrication allegations in Report 1 and the difficulty of supporting the "$410M number." (Morano Decl., ¶ 22; Espinoza Decl., Ex. I [GPR Internal Meridian Solutions Messages, selected excerpts].)
•  Emails between Fenchurch and a third-party data vendor in which the vendor cautioned that the data underlying the RNG analysis was "insufficient to draw conclusions about system-level manipulation." (Espinoza Decl., Ex. J [Email correspondence with DataStream Analytics LLC].)
•  GPCP trading records confirming that the short position was established in stages beginning in late January 2024—before the first report was published—and was closed in stages beginning immediately after the third report's publication and concluding by mid-March 2024. (Ex. 13 [GPCP Trading Records].) The timing of these trades confirms that the reports and the short position were components of a coordinated strategy to profit from the stock-price decline that Defendants themselves orchestrated.
•  Internal memoranda in which Fenchurch discussed the anticipated market reaction to each report and the optimal timing for covering the short position. (Espinoza Decl., Ex. K [Fenchurch Internal Memorandum, dated Feb. 5, 2024].)
This documentary evidence, viewed in the light most favorable to RGC, supports the inference that Defendants were aware that their allegations were unsupported or false, and that they published the reports not to inform the public but to manipulate the stock price and profit from the resulting decline.
e. Failure to Investigate.  Perhaps the most striking evidence of actual malice is what Defendants did not do before publishing their explosive fraud allegations. Defendants failed to take even the most basic investigative steps that any responsible journalist or researcher would take before accusing a publicly traded company of criminal fraud:
•  Defendants did not contact the Nevada Gaming Control Board to verify the RNG-manipulation allegations. (Lin Dep. at 147:11–148:16.)
•  Defendants did not contact Pinnacle Audit & Advisory LLP to discuss the clean audit opinions or the revenue-fabrication allegations. (Fenchurch Dep. at 65:2–22.)
•  Defendants did not contact RGC itself—neither its CEO, its CFO, its General Counsel, nor its Investor Relations department—to seek comment or give RGC an opportunity to respond before publication. (Id. at 66:3–18.)
•  Defendants relied on publicly available information that they materially mischaracterized, drawing inflammatory conclusions that the underlying data did not support. (Lin Dep. at 112:3–113:8.)
A deliberate or purposeful avoidance of the truth is the functional equivalent of actual malice. As the Supreme Court held in St. Amant v. Thompson, "reckless disregard" includes situations where the defendant had "obvious reasons to doubt the veracity" of the information on which the publication was based but chose not to investigate. (390 U.S. at 732.) In Harte-Hanks, the Supreme Court further held that "a purposeful avoidance of the truth" constitutes actual malice, and that evidence of failure to investigate is "relevant to—and supportive of—a finding of actual malice." (491 U.S. at 692–693.)
Here, Defendants had abundant reasons to doubt the veracity of their allegations. They were aware of clean audit opinions from a reputable audit firm. Their own Senior Analyst expressed doubts about the revenue-fabrication figure and the related-party allegations. A third-party data vendor cautioned that the RNG data was insufficient to support conclusions about system-level manipulation. Yet Defendants deliberately chose not to investigate further—not because investigation was impractical or impossible, but because, as Fenchurch admitted, the "window" for the short trade was "closing." (Fenchurch Dep. at 97:14–18.)
This evidence is more than sufficient to create a triable issue of material fact on actual malice. Indeed, a reasonable jury could find actual malice by clear and convincing evidence on this record.
4. Defendants' Statements Caused Special Damages
Trade libel requires proof of special damages—that is, pecuniary loss directly attributable to the defendant's false statements. (Rest.2d Torts § 623A; ComputerXpress, 93 Cal.App.4th at 1010–1011.) Defendants argue that any decline in RDGM's stock price was attributable to general market conditions rather than to their reports. (MSJ at 28–32.) This argument is refuted by the evidence.
The temporal correlation between Defendants' publications and the stock-price decline is striking. RDGM traded at $92.14 on February 6, 2024—the last trading day before the first report. After Report 1 was published on February 7, 2024, the stock fell to $84.37—an 8.4% decline. After Report 2 was published on February 14, 2024, the stock fell further to $78.52—a cumulative 14.8% decline. And after Report 3 was published on February 21, 2024, the stock reached its trough of $72.80—a cumulative 21.0% decline. (Ex. 8; Ramaswaran Decl., ¶¶ 14–16.) The aggregate market-capitalization loss at the trough was approximately $1.427 billion. (Id., ¶ 17.)
But temporal correlation alone is not the basis for RGC's damages claim. Dr. Vostrikova's event-study analysis directly addresses Defendants' market-conditions argument by controlling for movements in the S&P 500 Index, the Nasdaq Composite, and a basket of comparable gaming-industry stocks during the relevant period. (Vostrikova Decl., ¶¶ 8–14.) After removing the effects of market-wide and sector-specific movements—isolating the "abnormal return" attributable to each report—Dr. Vostrikova calculated event-study-adjusted damages of $327.6 million in shareholder value directly caused by Defendants' false statements. (Id., ¶ 16.)
Dr. Vostrikova's methodology is the same event-study methodology that is widely accepted by courts as a reliable means of isolating the impact of specific events on stock prices. (See In re Vivendi Universal, S.A. Securities Litigation (S.D.N.Y. 2011) 765 F.Supp.2d 512, 533–535; Halliburton Co. v. Erica P. John Fund, Inc. (2014) 573 U.S. 258, 280.) Defendants have not challenged the reliability of the event-study methodology itself, nor have they offered a competing event study or any other quantitative analysis demonstrating that the stock-price decline was attributable to other factors. Their expert, Dr. Richard Kwan of Oakhurst Economic Consulting Group, criticized certain modeling choices in Dr. Vostrikova's analysis but did not dispute the fundamental validity of the event-study approach. (Espinoza Decl., ¶ 9.)
In addition to the market-capitalization losses, RGC incurred $4.627 million in documented out-of-pocket costs as a direct result of Defendants' publications: $2.18 million for crisis communications (Ex. 14), $1.46 million for a supplemental forensic audit (Ex. 16), and $987,000 for Nevada gaming regulatory counsel (Ex. 15). These out-of-pocket costs are special damages in their own right, and their causal connection to Defendants' publications is undeniable—each expense was incurred specifically to address the allegations in Defendants' reports and their aftermath.
At minimum, the issues of causation and damages present triable questions of fact that must be resolved by a jury, not by this Court on summary judgment.
B. Triable Issues of Material Fact Exist on the Second Cause of Action: Intentional Interference with Prospective Economic Advantage
The elements of intentional interference with prospective economic advantage are: (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 acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant's acts. (della Penna v. Crowne Albany Industries (1995) 11 Cal.4th 376, 389; Glenrock Corporation (2003) 29 Cal.4th 1134, 1153.) Additionally, the defendant's conduct must be "independently wrongful"—that is, wrongful apart from the interference itself. (della Penna, 11 Cal.4th at 393.)
1. Economic Relationships
RGC has extensive existing and prospective economic relationships with gaming patrons, technology licensees, institutional and retail investors, joint-venture partners, entertainment-industry counterparties, and numerous other business entities and individuals across its eleven casino-resort properties and three business divisions. (Calloway Decl., ¶¶ 28–34.) The FAC identifies specific disrupted relationships and lost business opportunities, including negotiations for a technology-licensing agreement with a major international casino operator that stalled following the publication of Defendants' reports, and the withdrawal of a potential joint-venture partner from discussions regarding the expansion of Redstone Digital's iGaming platform. (Id., ¶¶ 32–33.)
2. Knowledge and Intent
Defendants knew that publishing allegations of criminal fraud against a publicly traded gaming company—allegations including revenue fabrication, RNG manipulation, and undisclosed related-party transactions—would disrupt RGC's existing and prospective business relationships. This knowledge is virtually self-evident from the nature of the allegations. Accusations of this kind strike at the very foundation of trust upon which gaming companies depend in their relationships with regulators, investors, patrons, and business partners. (See Erlich v. Etner (1964) 224 Cal.App.2d 69, 75 [knowledge of interference may be inferred from the nature and likely consequences of the defendant's conduct].)
Moreover, disrupting RGC's business relationships was not merely a foreseeable consequence of Defendants' conduct—it was the mechanism by which Defendants intended to profit. GPR's entire business model depends on causing stock-price declines through the publication of negative reports, from which its affiliated entities profit via pre-established short positions. (Fenchurch Dep. at 28:6–29:11; Ex. 13.) The stock-price decline that generates GPCP's profits is itself a function of the disruption of investor confidence and business relationships that follows from the publication of fraud allegations. Defendants' intent to disrupt is inextricable from their intent to profit.
3. Wrongful Conduct
The "independently wrongful" act is the publication of false statements with actual malice—that is, trade libel, as established in Section IV.A above. (Overstock.com, 151 Cal.App.4th at 717 [holding that trade libel constitutes an independently wrongful act sufficient to support an interference claim].) As discussed at length above, the evidence of actual malice is overwhelming and creates—at the very least—triable issues of material fact.
4. Actual Disruption and Damages
The evidence of actual disruption and resulting damages includes:
•  The precipitous decline in RDGM's stock price, from $92.14 to $72.80, representing a market-capitalization loss of approximately $1.427 billion and event-study-adjusted damages of $327.6 million. (Vostrikova Decl., ¶ 16.)
•  The disruption of RGC's investor relations, which required the retention of Crestline Equity Partners Group Inc. for crisis communications at a cost of $2.18 million. (Arecchi Decl., ¶¶ 5–9; Ex. 14.)
•  The regulatory scrutiny triggered by Defendants' reports, which required the retention of Hargrove & Sato LLP as Nevada gaming regulatory counsel at a cost of $987,000, and which consumed substantial time and resources of RGC's senior management and in-house legal team during the NGCB's independent RNG audit and the SEC's informal inquiry. (Olafson Decl., ¶¶ 11–14; Exs. 15, 7.)
•  The specific disruptions to business relationships identified in the Calloway Declaration, including the stalled technology-licensing negotiation and the withdrawn joint-venture discussions. (Calloway Decl., ¶¶ 32–33.)
This evidence creates triable issues of material fact on every element of the intentional-interference claim. Summary judgment should be denied.
C. Triable Issues of Material Fact Exist on the Third Cause of Action: Unfair Business Practices (Cal. Bus. & Prof. Code § 17200)
California's Unfair Competition Law ("UCL"), codified at Business and Professions Code section 17200 et seq., prohibits "any unlawful, unfair or fraudulent business act or practice." The UCL is written in the disjunctive—a business practice need only be unlawful, or unfair, or fraudulent to be actionable. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Defendants' conduct satisfies all three prongs.
1. Unlawful Prong
The "unlawful" prong of the UCL "borrows" violations of other laws and treats them as independently actionable unfair business practices. (Id. at 180.) Here, Defendants' conduct constitutes trade libel under California Civil Code section 46(3), as established in Section IV.A above. The trade-libel violation provides the predicate unlawful act under the UCL's unlawful prong. (Overstock.com, 151 Cal.App.4th at 716 [trade libel may serve as predicate for UCL unlawful-prong claim].)
2. Unfair Prong
Under the "unfair" prong, a business practice is unfair when the harm it causes to the plaintiff or the public substantially outweighs any utility of the practice. (Cel-Tech, 20 Cal.4th at 186–187.) Here, the harm is manifest: Defendants published three reports containing demonstrably false allegations of criminal fraud against a publicly traded company, causing $327.6 million in event-study-adjusted shareholder losses, $4.627 million in out-of-pocket costs, regulatory scrutiny, and disruption of business relationships. The utility of Defendants' conduct, by contrast, is nonexistent—their reports did not expose any actual wrongdoing, did not serve any legitimate public interest, and served only to manipulate the stock price for Defendants' private financial gain. A reasonable jury could readily conclude that the harm imposed by Defendants' conduct substantially outweighs any conceivable utility.
3. Fraudulent Prong
Under the "fraudulent" prong, a business practice is fraudulent if it is "likely to deceive members of the public." (Id. at 180.) RGC need not show that any individual was actually deceived—only that Defendants' conduct was "likely to deceive a reasonable consumer." (Id.)
Defendants' three reports were disseminated to the investing public via grizzlypeakresearch.com and the @GrizzlyPeakRes social media account, which had approximately 142,000 followers at the time of publication. (Fenchurch Dep. at 31:15–22.) The reports contained specific factual assertions—revenue fabrication, RNG manipulation, undisclosed related-party transactions—presented in the format of a professionally produced research report, complete with charts, tables, citations, and purported documentary evidence. A reasonable investor encountering t

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

TABLE OF AUTHORITIES

I. INTRODUCTION

II. STATEMENT OF FACTS

III. LEGAL STANDARD

IV. ARGUMENT

Record

Parties

Dates

Amounts