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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Francesca Morano, Partner, Calderwood & Harkness LLP

FROM: Carlos Espinoza, Associate; Hannah Brinkley, Associate

DATE: February 12, 2024

RE: Legal Analysis — Trade Libel and Related Claims Against Grizzly Peak Research LLC; Anti-SLAPP Risk Assessment; Actual-Malice Standard

CLIENT: Redstone Gaming Corp.

MATTER: Redstone Gaming Corp. v. Grizzly Peak Research LLC, Case No. 24STCV-01892, Superior Court of California, County of Los Angeles

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I. Executive Summary

This memorandum presents a comprehensive legal research analysis of the viability of trade libel and related claims brought by our client, Redstone Gaming Corp. ("RGC"), against Grizzly Peak Research LLC ("GPR") and potential additional defendants—Grizzly Peak Capital Partners LP ("GPCP") and Tobias Fenchurch individually—arising from the publication of a series of short-seller research reports containing materially false allegations concerning RGC's financial integrity, gaming operations, and corporate governance. The memorandum addresses each cause of action, assesses the heightened actual-malice standard, evaluates the significant but surmountable risk of an anti-SLAPP motion, analyzes applicable privilege defenses and First Amendment considerations, outlines the damages framework, and provides strategic recommendations for the prosecution of these claims.

Our principal conclusions are as follows:

Trade Libel (Cal. Civ. Code § 46(3)). RGC's trade libel claim is viable and well-supported by the factual record. GPR published three separate research reports containing materially false statements of fact—not mere opinion—that specifically targeted and disparaged RGC's business operations, financial reporting, gaming software, and management. The falsity of GPR's core allegations has been confirmed or is expected to be confirmed by independent sources, including RGC's independent auditor, the Nevada Gaming Control Board, and the U.S. Securities and Exchange Commission.

Actual-Malice Standard. Because RGC is a publicly traded company listed on the Nasdaq Stock Market (ticker: RDGM) with a pre-publication market capitalization of approximately $6.8 billion, GPR will contend that RGC is a public figure or limited-purpose public figure, thereby invoking the actual-malice standard established in New York Times Co. v. Sullivan (1964) 376 U.S. 254. We conclude that the actual-malice standard likely applies but can be met through compelling evidence of GPR's substantial financial motive—a 680,000-share short position with a notional value of approximately $62.66 million—coupled with GPR's reckless disregard for the truth of its allegations, including its failure to contact RGC's independent auditor, the relevant gaming regulator, or other readily available sources before publication.

Anti-SLAPP Risk. The risk that GPR will file a special motion to strike under California's anti-SLAPP statute (Cal. Code Civ. Proc. § 425.16) is significant and, indeed, nearly certain. However, we believe this risk is surmountable. Under the first prong of the anti-SLAPP analysis, the commercial-speech exception codified in Section 425.17(c) may exempt RGC's claims from the statute's reach entirely, given that GPR's publications are integral to its for-profit short-selling business model. Even if GPR satisfies the first prong, RGC can readily demonstrate a probability of prevailing on the merits under the second prong through robust evidentiary declarations and documentary proof of falsity, motive, and damages.

Additional Claims. Claims for intentional interference with prospective economic advantage and unfair business practices under California Business and Professions Code Section 17200 are supportable and complement the trade libel cause of action. A negligent misrepresentation cause of action should be added in the First Amended Complaint.

Privilege Defenses and First Amendment. GPR will raise privilege defenses—including the common-interest privilege and the fair-comment privilege—and will invoke First Amendment protections. These defenses are unlikely to defeat RGC's claims given the profit-motivated, factually false nature of the publications and the evidence supporting actual malice. The First Amendment does not shield knowingly or recklessly false statements of fact made for commercial gain.

As of the date of this memorandum, GPR's Report 1 was published on February 7, 2024, and Report 2 was published on February 14, 2024. Report 3, which was published on February 21, 2024, had not yet been issued at the time of the original complaint but was anticipated based on GPR's stated publication schedule and pre-publication intelligence obtained by RGC. The complaint was filed on February 5, 2024, in anticipation of the publications, based on pre-publication information received by RGC. For completeness, and as subsequently supplemented, the analysis below incorporates all three reports.

II. Factual Background

A. The Parties

1. Redstone Gaming Corp. (RGC)

Redstone Gaming Corp. is a Nevada corporation with its principal executive offices located at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. RGC's common stock is publicly traded on the Nasdaq Stock Market under the ticker symbol "RDGM." The company owns and operates eleven casino-resort properties across three jurisdictions—Nevada, New Jersey, and Mississippi—and is one of the largest regional gaming operators in the United States by revenue.

In addition to its brick-and-mortar gaming operations, RGC licenses proprietary electronic gaming platforms to third-party operators, operates a growing iGaming division branded as "Redstone Digital," and maintains a media and entertainment arm known as "Crimson Studios" that produces original programming and live entertainment content for RGC's resort properties and streaming platforms.

For fiscal year 2023, RGC reported total revenue of approximately $3.42 billion and adjusted EBITDA of approximately $812 million, representing an EBITDA margin of approximately 23.7%. Prior to the publication of GPR's first report, RGC's common stock was trading at a closing price of $92.14 per share on February 6, 2024, representing a market capitalization of approximately $6.8 billion based on 73.8 million shares outstanding.

RGC's senior management team includes Marcus J. Calloway (Chief Executive Officer), Priya Ramaswaran (Chief Financial Officer), Derek Olafson (General Counsel), and Janelle Hu (Vice President, Investor Relations). RGC's independent auditor is Pinnacle Audit & Advisory LLP, with engagement partner Walter Ng, CPA. Pinnacle has issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023.

2. Grizzly Peak Research LLC (GPR)

Grizzly Peak Research LLC is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR is a short-seller research firm that publishes investigative reports on publicly traded companies, typically in conjunction with short positions taken by its affiliated hedge fund, Grizzly Peak Capital Partners LP. GPR's managing member is Tobias "Toby" Fenchurch. Its senior analyst and co-author of the reports at issue is Ava Lin.

GPR distributes its research reports through its subscription website, grizzlypeakresearch.com, and simultaneously through a social media account (@GrizzlyPeakRes) that maintained approximately 142,000 followers at the time the reports concerning RGC were published. GPR itself holds relatively modest assets—approximately $22 million in cash and receivables—making the affiliated hedge fund and Fenchurch individually important targets for recovery purposes, as discussed further in Section XI below.

3. Grizzly Peak Capital Partners LP (GPCP)

Grizzly Peak Capital Partners LP is a Delaware limited partnership and the affiliated hedge fund through which GPR's trading activities are conducted. GPCP has estimated assets under management of approximately $185 million. Its general partner is Grizzly Peak Capital GP LLC, a Delaware limited liability company whose sole managing member is Tobias Fenchurch. GPCP held the short position in RDGM common stock at issue—approximately 680,000 shares—which, at the pre-publication price of $92.14 per share, represented a notional value of approximately $62.66 million.

4. Defense Counsel

GPR and its affiliates are represented by Caldwell, Tseng & Barrow LLP, with offices at 555 California Street, Suite 3100, San Francisco, California 94104. The lead partner is Raymond Caldwell, assisted by senior associate Natalie Orenstein. Caldwell, Tseng & Barrow is well-known in the Northern California legal community for its First Amendment and media-defense practice, and we should expect vigorous and sophisticated advocacy on the anti-SLAPP and privilege issues discussed below.

B. The Publications

GPR has published, or plans to publish, three research reports targeting RGC. The reports are detailed below in chronological order.

Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings." This report was published on February 7, 2024, and spans approximately 48 pages. Its central allegation is that RGC fabricated approximately $410 million of its reported FY 2023 revenue through fictitious intercompany transactions. The report purports to identify specific subsidiary entities through which the alleged revenue fabrication was accomplished and includes charts, tables, and excerpts from public filings that GPR contends demonstrate discrepancies in RGC's reported financial results. Report 1 characterizes RGC's senior management as complicit in the alleged scheme and suggests that Pinnacle Audit & Advisory LLP either failed to detect or was complicit in the alleged fabrication.

Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators." This report was published on February 14, 2024, and spans approximately 36 pages. It alleges that RGC manipulated the random-number-generator ("RNG") software embedded in its proprietary electronic gaming platforms to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB"). The report claims that RGC's RNG software was programmed to operate in two modes—one for actual player gaming sessions and another for regulatory testing—and that this dual-mode configuration enabled RGC to report artificially favorable payout ratios to regulators while operating gaming machines with lower actual payouts. The report cites purported interviews with unnamed former RGC software engineers and includes excerpts of what GPR represents to be internal RGC source code.

Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game." This report was published on February 21, 2024, and spans approximately 29 pages. It alleges that RGC's CEO, Marcus J. Calloway, maintained undisclosed related-party dealings with a purported shell entity called "Vermilion Holdings LLC," through which Calloway allegedly diverted company funds and received undisclosed personal benefits. The report claims that Vermilion Holdings LLC was secretly controlled by Calloway and used to channel payments from RGC vendors in exchange for favorable contract terms. The report identifies Vermilion Holdings LLC by its Nevada Secretary of State filing number and includes screen captures of corporate registration records and property records that GPR contends link the entity to Calloway.

All three reports were published on GPR's subscription website, grizzlypeakresearch.com, and were simultaneously distributed via the @GrizzlyPeakRes social media account to approximately 142,000 followers. Each report contained a standard disclaimer disclosing GPR's short positions in RDGM and stating that the views expressed represent GPR's "opinions" based on publicly available information and proprietary analysis.

In aggregate, the three reports advance three core allegations: (a) revenue fabrication of approximately $410 million through fictitious intercompany transactions; (b) manipulation of RNG software to deceive gaming regulators regarding payout statistics; and (c) undisclosed related-party transactions through a shell company controlled by RGC's CEO.

C. Stock-Price Impact

The publication of GPR's reports had a dramatic and measurable impact on the trading price of RDGM common stock. The relevant price data is as follows:

The aggregate market-capitalization loss at the trough was approximately $1.427 billion, calculated as $19.34 per share multiplied by 73.8 million shares outstanding. This represents a 21.0% decline from the pre-publication market capitalization of approximately $6.8 billion.

With respect to GPR's and GPCP's trading profits, GPCP's short position of approximately 680,000 shares was established prior to the publication of Report 1 and closed by mid-March 2024 at an average price of approximately $72.80 per share. The estimated gross profit on the short-sale trade is approximately $13.15 million, calculated as ($92.14 − $72.80) × 680,000 shares.

D. Falsity of the Allegations

Each of GPR's three core allegations has been demonstrated to be baseless through independent verification:

Revenue Fabrication Allegation (Report 1). Pinnacle Audit & Advisory LLP, RGC's independent auditor, has confirmed the accuracy of RGC's FY 2023 revenue of $3.42 billion through its independent audit. Pinnacle issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021 through 2023. The engagement partner, Walter Ng, CPA, has reviewed the specific intercompany transactions identified in GPR's Report 1 and has confirmed that all such transactions were properly recorded, appropriately eliminated in consolidation, and fully disclosed in accordance with generally accepted accounting principles. There is no basis for GPR's allegation that approximately $410 million in FY 2023 revenue was fabricated.

RNG Manipulation Allegation (Report 2). The Nevada Gaming Control Board completed an independent audit of RGC's RNG software on March 29, 2024. The NGCB's technical compliance division tested the RNG software across all of RGC's Nevada gaming operations, including both the hardware-based random number generators and the software-based pseudorandom number generators used in RGC's proprietary electronic gaming platforms. The NGCB cleared RGC entirely, finding no evidence of dual-mode operation, payout manipulation, or any other irregularity in RGC's gaming software. The NGCB's findings directly contradict GPR's Report 2 allegations.

Related-Party Allegation (Report 3). GPR's allegation that CEO Marcus J. Calloway maintained undisclosed related-party dealings through Vermilion Holdings LLC was based on incomplete information and was materially misleading. Following the publication of Report 3, the U.S. Securities and Exchange Commission opened an informal inquiry in March 2024. After a thorough review of the relevant documents and circumstances, the SEC closed the inquiry with no action on August 16, 2024. The SEC's closure of its inquiry without enforcement action confirms that GPR's related-party allegations were unfounded.

In sum, all three core allegations advanced in GPR's reports have been demonstrated to be baseless by independent regulatory and auditing authorities.

E. Procedural Posture

RGC filed its complaint on February 5, 2024, in the Superior Court of California, County of Los Angeles, Case No. 24STCV-01892. The complaint was filed in anticipation of GPR's publications, based on pre-publication information received by RGC through market intelligence sources indicating that GPR intended to release a series of negative reports targeting RGC. Jurisdiction and venue are proper in Los Angeles County because the reports were disseminated to and read by investors, analysts, and other market participants located in Los Angeles County, and because the effects of the publications were felt throughout California and the United States, with a substantial nexus to Los Angeles County.

The original complaint asserts three causes of action: (1) Trade Libel under California Civil Code Section 46(3); (2) Intentional Interference with Prospective Economic Advantage; and (3) Unfair Business Practices under California Business and Professions Code Section 17200.

RGC intends to file a First Amended Complaint to add GPCP and Tobias Fenchurch individually as defendants and to add a fourth cause of action for Negligent Misrepresentation. The First Amended Complaint was subsequently filed on March 18, 2024.

GPR was expected to, and subsequently did, file an anti-SLAPP special motion to strike on April 12, 2024. The anti-SLAPP analysis set forth below anticipates and addresses the arguments GPR was expected to raise.

III. Trade Libel Under California Civil Code § 46(3)

A. Elements of the Claim

Under California law, a claim for trade libel—also referred to as injurious falsehood or disparagement—requires the plaintiff to establish five elements: (1) publication of a statement; (2) the statement was false; (3) the statement was made with knowledge of its falsity or reckless disregard for the truth (i.e., actual malice); (4) the statement was specifically directed at the plaintiff's business, product, or economic interests; and (5) the statement caused special damages to the plaintiff.

Trade libel is codified in California Civil Code Section 46(3), which identifies as actionable slander any statement that "tends directly to injure [the plaintiff] in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits." While Section 46 addresses slander specifically, California courts have applied analogous principles to written (published) statements under the rubric of trade libel or commercial disparagement. See ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010–1011; Erlich v. Etner (1964) 224 Cal.App.2d 69, 73–74.

It is important to distinguish trade libel from personal defamation. A trade libel claim protects a plaintiff's economic interests in its products, services, and business operations. It does not protect personal reputation per se, although the same set of facts may give rise to both a personal defamation claim and a trade libel claim when the false statements impugn both the individual's character and the business's integrity. See Mann v. Quality Old Time Service, Inc. (2006) 139 Cal.App.4th 328, 340 (distinguishing personal defamation from trade libel in the context of statements targeting a plaintiff's business operations).

The requirement of actual malice in trade libel actions—which is more stringent than the negligence standard applicable to private-figure personal defamation—is discussed in detail in Section IV below. The requirement of special damages—which distinguishes trade libel from certain personal defamation claims where general damages may be presumed—is addressed in Section X.

B. Application to GPR's Reports

We analyze below each element of the trade libel claim as applied to the facts of this case.

Publication. The publication element is easily satisfied. GPR published three separate research reports on its subscription website, grizzlypeakresearch.com, and simultaneously distributed each report via its social media account, @GrizzlyPeakRes, to approximately 142,000 followers. The reports were further disseminated through financial news outlets, analyst commentary, and investor discussion forums. The wide dissemination of these reports to the investing public, financial media, regulators, and other market participants is undisputed and, indeed, was integral to GPR's business model—the reports' impact on RDGM's stock price depended on their reaching the broadest possible audience of market participants.

Falsity. Each of the three reports contains materially false statements of fact. The falsity of the core allegations has been confirmed by independent authorities:

Report 1 — Revenue Fabrication. GPR alleged that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions. This allegation has been disproven by Pinnacle Audit & Advisory LLP, which independently audited RGC's FY 2023 consolidated financial statements and issued an unqualified opinion confirming the accuracy of RGC's reported revenue of $3.42 billion. The engagement partner, Walter Ng, CPA, has specifically reviewed the intercompany transactions identified by GPR and confirmed their propriety.

Report 2 — RNG Manipulation. GPR alleged that RGC manipulated the RNG software in its proprietary electronic gaming platforms to inflate payout statistics reported to the Nevada Gaming Control Board. This allegation was disproven by the NGCB's independent RNG audit, completed on March 29, 2024, which cleared RGC entirely and found no evidence of software manipulation, dual-mode operation, or regulatory deception.

Report 3 — Undisclosed Related-Party Transactions. GPR alleged that CEO Marcus J. Calloway maintained undisclosed related-party dealings through a purported shell entity, Vermilion Holdings LLC. This allegation was based on incomplete information and was materially misleading. The SEC opened an informal inquiry in March 2024 and closed it with no action on August 16, 2024, confirming that the related-party allegations were unfounded.

Directed at Plaintiff's Business. All three reports are specifically and exclusively directed at RGC's business operations, financial integrity, gaming software, and corporate governance. The reports identify RGC by name, reference its Nasdaq ticker symbol, discuss specific RGC business units and subsidiaries, and target the core aspects of RGC's operations—its reported revenue, its gaming technology, and the conduct of its CEO. There is no question that the statements are "specifically directed at plaintiff's business, product, or economic interests."

Special Damages. RGC has suffered substantial and quantifiable special damages as a direct result of GPR's false publications. The aggregate decline in RDGM's market capitalization from the pre-publication close on February 6, 2024, through the post-Report 3 trough on February 21, 2024, was approximately $1.427 billion. In addition, RGC has incurred out-of-pocket costs totaling $4.627 million in direct response to GPR's reports, broken down as follows:

• Crisis communications and public relations services provided by Crestline Equity Partners Group Inc.: $2.18 million;

• Supplemental forensic audit conducted by Pinnacle Audit & Advisory LLP to address and rebut GPR's revenue-fabrication allegations: $1.46 million;

• Regulatory-response legal fees paid to Hargrove & Sato LLP in connection with the NGCB's RNG audit and the SEC's informal inquiry: $987,000.

The quantification of special damages is discussed further in Section X below.

C. The Fact-Versus-Opinion Distinction

A critical threshold question in any trade libel (or defamation) action is whether the challenged statements constitute actionable statements of fact or constitute protected opinion. Under the governing framework established by the United States Supreme Court in Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1, a statement is actionable if, viewed in the totality of the circumstances, a reasonable reader would understand it as implying provably false assertions of fact. The question is not whether the publisher labels its statements as "fact" or "opinion," but whether the substance of the statements conveys or implies objectively verifiable factual propositions.

GPR's reports present their allegations as factual findings supported by purported documentary evidence, detailed financial analysis, and source interviews—not merely as opinions, predictions, or speculation. The reports cite specific dollar figures (approximately $410 million in alleged fabricated revenue), make technical claims about identifiable software systems (RNG manipulation), and identify specific entities and individuals by name (Vermilion Holdings LLC, Marcus J. Calloway). These are quintessentially verifiable factual claims. Either RGC fabricated $410 million in revenue or it did not. Either RGC's RNG software was manipulated to deceive regulators or it was not. Either Calloway maintained undisclosed related-party dealings through Vermilion Holdings LLC or he did not. Each of these propositions is capable of being proved true or false—and each has, in fact, been demonstrated to be false.

GPR will undoubtedly point to the standard disclaimer appended to each of its reports, which states that the reports represent GPR's "opinions" based on publicly available information and proprietary analysis. However, such boilerplate disclaimers are not dispositive. A publisher cannot insulate actionable false statements of fact by labeling them "opinions." See Milkovich, 497 U.S. at 18–19 (rejecting the contention that the use of the word "opinion" creates a blanket First Amendment shield); see also Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 700 (holding that short-seller research reports containing false factual assertions are not insulated from liability by opinion disclaimers). When the substance of a publication presents verifiable factual claims couched in the language of factual findings—as GPR's reports plainly do—a disclaimer does not convert those claims into non-actionable opinion.

Moreover, the context in which GPR's reports were published reinforces their factual character. The reports were distributed to investors and market participants who were expected to—and did—rely on them as factual exposés of corporate wrongdoing. The reports were styled as investigative research, not as editorial commentary or speculative analysis. They were accompanied by charts, tables, purported source code excerpts, and references to documentary evidence, all designed to convey an impression of factual rigor. A reasonable investor reading these reports would understand them as asserting facts—not merely expressing subjective opinions—about RGC's financial reporting, gaming software, and corporate governance.

We are therefore confident that GPR's reports contain actionable statements of fact, not protected opinion, and that the fact-versus-opinion distinction does not pose a material obstacle to RGC's trade libel claim.

IV. The Actual-Malice Standard

A. Applicability to RGC

Under New York Times Co. v. Sullivan (1964) 376 U.S. 254, a public official or public figure must prove that a defamatory statement was made with "actual malice"—that is, with knowledge that the statement was false or with reckless disregard as to its falsity—in order to recover for defamation. This heightened standard has been extended to trade libel claims involving public figures. See Bose Corp. v. Consumers Union of United States, Inc. (1984) 466 U.S. 485, 513.

GPR will argue that RGC qualifies as a public figure or, at minimum, a limited-purpose public figure in the context of its financial performance and regulatory compliance. The public-figure doctrine, as applied to corporations, holds that a corporation that is prominent in its industry, regularly engages with regulators and investors, and receives significant media attention may be deemed a limited-purpose public figure with respect to matters within the sphere of its public prominence. See Vegod Corp. v. ABC (1979) 25 Cal.3d 763, 769 (corporate plaintiff held to be a limited-purpose public figure in the context of claims about its business practices); Reader's Digest Ass'n v. Superior Court (1984) 37 Cal.3d 244, 253–254.

RGC is a publicly traded company listed on Nasdaq with a market capitalization of approximately $6.8 billion. It files regular reports with the SEC, holds quarterly earnings calls, issues press releases, and engages extensively with the investing public, financial analysts, and media. Its CEO, Marcus J. Calloway, has appeared on financial news programs and at investor conferences. RGC operates in a highly regulated industry and interacts regularly with the Nevada Gaming Control Board and gaming regulators in New Jersey and Mississippi.

Under these circumstances, we conclude that RGC likely qualifies as at least a limited-purpose public figure with respect to matters concerning its financial performance, regulatory compliance, and corporate governance—the precise subjects addressed in GPR's reports. Accordingly, the actual-malice standard likely applies to RGC's trade libel and related claims.

However, even under this heightened standard, RGC has a strong case. As set forth below, the evidence of GPR's financial motive, reckless disregard for the truth, and deliberate avoidance of readily available information that would have revealed the falsity of its allegations is compelling.

B. Evidence of Actual Malice

Actual malice may be proved through direct evidence of knowledge of falsity, through circumstantial evidence of reckless disregard for the truth, or through a combination of both. See Harte-Hanks Communications, Inc. v. Connaughton (1989) 491 U.S. 657, 668. In this case, RGC has access to substantial circumstantial evidence—and may develop direct evidence through discovery—supporting a finding of actual malice.

Financial Motive as Circumstantial Evidence. GPR and its affiliated hedge fund, GPCP, held a short position of approximately 680,000 shares of RDGM common stock at the time the reports were published. At the pre-publication closing price of $92.14 per share, this short position had a notional value of approximately $62.66 million. The short position was disclosed in each of GPR's reports. GPCP closed the position by mid-March 2024 at an average price of approximately $72.80 per share, generating an estimated gross profit of approximately $13.15 million, calculated as ($92.14 − $72.80) × 680,000 shares.

This substantial profit motive constitutes strong circumstantial evidence that GPR was motivated to publish false or misleading statements in order to drive down the price of RDGM stock and generate profits on GPCP's short position. While financial motive alone is insufficient to establish actual malice, it is a significant factor that, combined with other evidence of reckless disregard for the truth, can support a finding of actual malice. See Reader's Digest Ass'n v. Superior Court, 37 Cal.3d at 257 (financial incentive is relevant to the actual-malice inquiry).

Reckless Disregard for Truth. Reckless disregard for the truth may be demonstrated by evidence that the publisher "entertained serious doubts as to the truth of his publication" or engaged in "purposeful avoidance of the truth." Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. at 688, 692. The following indicators of recklessness are present in this case:

Failure to contact Pinnacle Audit & Advisory LLP. GPR published its revenue-fabrication allegation (Report 1) without contacting Pinnacle Audit & Advisory LLP to verify its claims against audited financial statements. Pinnacle had issued clean audit opinions on RGC's consolidated financial statements for FY 2021 through FY 2023. A basic inquiry to Pinnacle—or even a careful review of Pinnacle's publicly available audit reports—would have revealed that the intercompany transactions identified by GPR had been properly audited, recorded, and eliminated in consolidation. GPR's failure to take this elementary step is indicative of purposeful avoidance of the truth.

Failure to contact the Nevada Gaming Control Board. GPR published its RNG-manipulation allegation (Report 2) without contacting the Nevada Gaming Control Board, the primary regulatory body responsible for overseeing RGC's gaming operations and approving its gaming software. The NGCB maintains detailed records of its RNG testing and certification processes. A simple inquiry to the NGCB would have cast significant doubt on GPR's allegations. GPR's failure to consult the relevant regulator before publishing an allegation of regulatory fraud is further evidence of reckless disregard.

Publication based on incomplete information. GPR published its related-party allegation (Report 3) based on what appears to have been incomplete and misleading information regarding Vermilion Holdings LLC. As demonstrated by the SEC's subsequent informal inquiry and its closure with no action, the factual predicate for GPR's related-party allegations was insufficient to support the serious accusations contained in the report. GPR failed to conduct adequate due diligence before publishing these allegations.

Internal communications and testimony of Ava Lin. Ava Lin, GPR's senior analyst and co-author of all three reports, may possess knowledge of internal communications reflecting awareness that the allegations were unsupported by reliable evidence or that the reports presented speculations and inferences as established facts. Discovery of GPR's internal documents and Ms. Lin's deposition testimony will be critical to establishing actual malice.

Tobias Fenchurch's dual role. Tobias Fenchurch serves as the managing member of GPR (the publisher) and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP (the entity holding the short position). Fenchurch's dual role creates an acute financial conflict of interest: he stood to benefit personally from the decline in RDGM's stock price caused by GPR's publications. This conflict of interest is relevant to the actual-malice inquiry and, at minimum, provides strong circumstantial evidence of motive.

Timing of Publication Relative to Short-Position Establishment. The sequence of events is itself probative of actual malice. GPCP established a large short position in RDGM stock, and GPR then published a series of reports containing false allegations designed to drive down the stock price. GPCP closed its short position shortly after the stock price reached its trough, locking in a profit of approximately $13.15 million. This sequence—establish short position, publish damaging reports, close position at a profit—is consistent with a scheme to manipulate the market through false publications and provides further circumstantial support for a finding of actual malice.

C. GPR's Short-Position Disclosure Does Not Negate Actual Malice

GPR will undoubtedly argue that its voluntary disclosure of short positions in RDGM in each of its reports demonstrates transparency and good faith, negating any inference of actual malice. This argument fails for several reasons.

First, disclosure of a financial interest does not immunize a publisher from liability for knowingly or recklessly publishing false statements. The disclosure requirement under securities regulations and the legal standard for trade libel serve entirely different purposes. Disclosure goes to transparency—it informs readers that the publisher has a financial interest in the subject company's stock. It does not go to the truth or falsity of the statements published, nor does it excuse a failure to verify those statements before publication.

Second, the short-position disclosure actually reinforces the motive evidence by confirming, in GPR's own words, that GPR and its affiliates had a direct financial interest in the decline of RDGM's stock price. The disclosure thus provides documentary corroboration of the very financial motive that supports a finding of actual malice.

Third, by analogy, a securities analyst who discloses a conflict of interest is still liable for securities fraud if the analyst knowingly publishes false information. See, e.g., SEC enforcement actions involving research analysts who disclosed conflicts of interest but nonetheless published fraudulent reports. The same principle applies in the trade libel context: disclosure of a financial interest does not provide a license to publish false statements.

We therefore conclude that GPR's short-position disclosure does not negate the evidence of actual malice and, indeed, strengthens RGC's case on this element.

V. Anti-SLAPP Analysis Under Cal. Code Civ. Proc. § 425.16

A. Overview of the Anti-SLAPP Framework

California's anti-SLAPP statute, California Code of Civil Procedure Section 425.16, provides a procedural mechanism for the early dismissal of lawsuits that arise from acts in furtherance of the defendant's right of petition or free speech in connection with a public issue. The statute is designed to prevent "Strategic Lawsuits Against Public Participation"—i.e., lawsuits brought primarily to chill the exercise of First Amendment rights. The statute provides for a special motion to strike, which, if granted, results in dismissal of the challenged claims and an award of the defendant's attorneys' fees and costs.

The anti-SLAPP analysis proceeds in two prongs:

Prong One (Arising-From). The defendant bears the burden of demonstrating that the challenged claims arise from protected activity—i.e., acts in furtherance of the right of petition or free speech in connection with a public issue or an issue of public interest. Cal. Code Civ. Proc. § 425.16(b)(1), (e).

Prong Two (Probability of Prevailing). If the defendant satisfies Prong One, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the claims. The plaintiff must state and substantiate a legally sufficient claim. The standard at this stage is minimal—the plaintiff need not prove its case, but must show that the claim has "minimal merit." Navellier v. Sletten (2002) 29 Cal.4th 82, 93.

We assess the risk that GPR will file an anti-SLAPP motion as near-certain. GPR's defense counsel, Caldwell, Tseng & Barrow LLP, is well-known for its anti-SLAPP practice, and the anti-SLAPP statute is a standard defensive weapon in cases involving published reports and commentary. Indeed, GPR subsequently filed its anti-SLAPP motion on April 12, 2024, as anticipated.

B. Prong One: Does GPR's Conduct Constitute Protected Activity?

Under Prong One, GPR bears the burden of showing that RGC's claims arise from GPR's exercise of the right of free speech in connection with a public issue or an issue of public interest. Cal. Code Civ. Proc. § 425.16(e)(3)–(4). GPR will argue that its reports constitute speech on a "public issue" within the meaning of the statute—specifically, the financial integrity and regulatory compliance of a publicly traded company in which millions of dollars of public investment are at stake. This argument has surface appeal, as the financial performance of publicly traded companies is undeniably a matter of public interest.

However, RGC has strong counter-arguments that may defeat GPR's showing on Prong One or, alternatively, exempt RGC's claims from the anti-SLAPP statute entirely.

The Commercial-Speech Exception (Cal. Code Civ. Proc. § 425.17(c)). Section 425.17(c) provides that the anti-SLAPP statute "does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or furnishing services ... arising from any statement or conduct by that person if both of the following conditions exist: (1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services ... and (2) The statement or conduct was made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services, or the statement or conduct was made in the course of delivering the person's goods or services."

We submit that GPR's publications fall within the scope of this exception. GPR is primarily engaged in the business of publishing short-seller research reports in conjunction with the trading activities of its affiliated hedge fund, GPCP. GPR's reports are integral to GPR's and GPCP's business model—they are the mechanism through which GPR and GPCP generate trading profits. The reports are not disinterested journalism, academic research, or public-interest advocacy. They are commercially motivated publications made in the course of conducting GPR's and GPCP's for-profit business.

While the commercial-speech exception has been construed narrowly by some courts, its application to the short-seller research context is supported by the logic of the exception and by the California Supreme Court's guidance in FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133. In FilmOn.com, the California Supreme Court narrowed the scope of "public issue" under the anti-SLAPP statute, holding that commercial communications that do not contribute to public debate on an issue of public significance may not qualify as protected activity under Section 425.16(e). The Court emphasized that the anti-SLAPP statute is intended to protect participation in public discourse, not to shield commercially motivated speech from accountability.

GPR's reports, while touching on matters that may be of public interest in the abstract, are fundamentally commercial in nature. GPR targets specific companies for financial gain—not to contribute to public discourse or to advance the public interest. The primary purpose of the reports is to generate trading profits for GPCP, not to inform the public or to promote policy debate. Under FilmOn.com and the commercial-speech exception, GPR's publications may well fall outside the scope of anti-SLAPP protection.

Even if GPR Satisfies Prong One. We note that even if the court were to find that GPR's reports constitute protected activity under Prong One, the analysis would then proceed to Prong Two, where we believe RGC can readily demonstrate a probability of prevailing. The Prong One determination is therefore not dispositive of the anti-SLAPP motion.

C. Prong Two: Probability of Prevailing

Even if GPR satisfies its burden under Prong One, RGC needs only demonstrate a "probability of prevailing" on its claims to defeat the anti-SLAPP motion. This is a relatively low threshold: the plaintiff must show that its claim has "minimal merit" by presenting sufficient evidence to sustain a favorable judgment if the evidence is credited. Navellier v. Sletten (2002) 29 Cal.4th 82, 93. The plaintiff is not required to prove its case at this stage; it need only make a prima facie showing of facts that, if credited, would support a judgment in its favor. See Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.

RGC can make this showing through the following evidentiary submissions:

Declarations from RGC executives. Declarations from Derek Olafson (General Counsel) and Priya Ramaswaran (CFO) can establish the falsity of the revenue-fabrication allegations by attesting to the accuracy of RGC's FY 2023 financial statements, the integrity of RGC's intercompany accounting, and RGC's reliance on Pinnacle's independent audit. These declarations can also address the stock-price impact, the disruption to RGC's investor relations and business operations, and the out-of-pocket costs incurred in response to GPR's publications.

Declaration from Walter Ng, CPA. A declaration from Walter Ng, the Pinnacle engagement partner, can confirm Pinnacle's clean audit opinions for FY 2021 through FY 2023, the scope and nature of Pinnacle's audit procedures, and the accuracy of RGC's reported revenue of $3.42 billion. Mr. Ng's declaration can specifically address the intercompany transactions identified in GPR's Report 1 and confirm that those transactions were properly audited and found to be appropriately recorded.

Expert declarations on damages. An expert declaration from a qualified forensic economist—we recommend Dr. Elena Vostrikova of Meridian Forensic Economics LLC, who was subsequently retained on July 1, 2024—can address the stock-price impact of GPR's publications and quantify the special damages attributable to the false reports through event-study methodology.

Evidence of GPR's financial motive. Documentary evidence of GPCP's 680,000-share short position in RDGM, the timing of the position's establishment and closure, and the estimated profit of approximately $13.15 million will be submitted to establish the financial motive supporting actual malice.

The falsity of GPR's core allegations is demonstrable through independent, authoritative sources: Pinnacle's clean audit opinions (FY 2021–2023), the Nevada Gaming Control Board's RNG clearance (March 29, 2024), and the SEC's closure of its informal inquiry with no action (August 16, 2024). This evidence, combined with the evidence of GPR's financial motive and reckless disregard for the truth, is more than sufficient to demonstrate a probability of prevailing on the trade libel claim and the related causes of action.

We recommend that RGC aggressively oppose any anti-SLAPP motion with a robust evidentiary showing and that the evidentiary opposition package be prepared well in advance of the anticipated motion so as to minimize delay.

D. Strategic Considerations for Anti-SLAPP Defense

Several strategic considerations bear on RGC's anti-SLAPP defense:

Timing. Under Section 425.16(f), a special motion to strike must be filed within 60 days of service of the complaint unless the court allows a later filing for good cause. The hearing on the motion must be set within 30 days of filing, unless the docket does not permit and the court sets a later date. Importantly, all discovery proceedings in the action are automatically stayed upon the filing of the anti-SLAPP motion (§ 425.16(g)), unless the court, upon noticed motion and for good cause shown, orders that specified discovery be conducted. This discovery stay is a significant procedural obstacle, as it may delay RGC's ability to obtain GPR's internal communications and other evidence bearing on actual malice. We should consider filing a targeted discovery motion seeking limited discovery on the actual-malice issue as soon as the anti-SLAPP motion is filed.

Immediate Appealability. If the trial court denies GPR's anti-SLAPP motion, GPR has the right to take an immediate appeal. Cal. Code Civ. Proc. § 425.16(i). While an interlocutory appeal could delay the litigation, it is unlikely to derail the case meaningfully, particularly if the trial court's denial is well-supported by the evidentiary record and the appellate court applies the appropriate standard of review.

Attorneys' Fees Risk. The anti-SLAPP statute contains a mandatory fee-shifting provision. If GPR's anti-SLAPP motion is granted, RGC would be liable for GPR's attorneys' fees and costs incurred in connection with the motion. § 425.16(c)(1). Conversely, if the motion is denied and the court finds that the motion was "frivolous or is solely intended to cause unnecessary delay," the court shall award RGC its costs and reasonable attorneys' fees. § 425.16(c)(2). Given the strength of RGC's evidentiary showing, we believe the fee risk is manageable. However, if the motion were granted—an outcome we view as unlikely but not impossible—the fee exposure could be significant, given the caliber of GPR's defense counsel.

Preparation of Evidentiary Package. We recommend that the team immediately begin assembling the declarations, expert reports, and documentary evidence necessary for a comprehensive anti-SLAPP opposition. The declarations from Olafson, Ramaswaran, and Ng should be drafted and circulated for review promptly. The engagement of Dr. Vostrikova or a similarly qualified forensic economist should be expedited. All documentary evidence relating to GPR's short position, publication timeline, and financial motive should be organized and indexed.

VI. Intentional Interference with Prospective Economic Advantage

A. Elements

Under California law, a claim for intentional interference with prospective economic advantage requires the plaintiff to establish five elements: (1) the existence of an economic relationship between the plaintiff and a third party, with a probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) the defendant's intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) resulting damages. Glenrock Corporation (2003) 29 Cal.4th 1134, 1153–1154.

Critically, the interference must be accomplished through "independently wrongful" conduct—i.e., conduct that is unlawful, unethical, or constitutes a recognized tort apart from the interference itself. Id. at 1158. This independently wrongful conduct requirement distinguishes intentional interference with prospective economic advantage from intentional interference with existing contractual relations (where the existence of a valid contract provides the predicate for liability without a separate showing of independently wrongful conduct).

B. Application

Economic Relationships. RGC maintains well-established economic relationships with a wide range of third parties, including institutional and retail investors, securities analysts, lenders and credit facility counterparties, gaming regulators in Nevada, New Jersey, and Mississippi, vendors and suppliers, entertainment talent, and business partners. These relationships entail a probability of future economic benefit to RGC, as they support RGC's access to capital markets, its ability to maintain gaming licenses, its operational supply chain, and its revenue-generating activities.

Defendant's Knowledge. GPR was well aware of RGC's relationships with investors, regulators, and other market participants. Indeed, GPR's reports specifically addressed RGC's relationships with the Nevada Gaming Control Board (alleging RNG manipulation designed to deceive the regulator) and with investors (alleging revenue fabrication designed to inflate RGC's stock price). GPR knew—and intended—that its publications would be read by market participants, regulators, financial analysts, and other third parties with whom RGC maintained economic relationships.

Wrongful Conduct. GPR's publication of knowingly or recklessly false reports to profit from short positions constitutes independently wrongful conduct. Specifically, the trade libel itself—the knowing or reckless publication of false statements disparaging RGC's business—satisfies the independently wrongful conduct requirement. See Korea Supply Co., 29 Cal.4th at 1158–1159 (trade libel qualifies as independently wrongful conduct for purposes of the interference tort). Additionally, GPR's conduct may constitute an unfair business practice under Business and Professions Code Section 17200, providing a separate predicate for independently wrongful conduct.

Actual Disruption. The disruption to RGC's economic relationships is demonstrable and severe. The 21.0% decline in RDGM's stock price—from $92.14 per share to a trough of $72.80 per share—represents a massive disruption to RGC's relationship with investors and the capital markets. The aggregate market-capitalization loss of approximately $1.427 billion reflects the market's reaction to GPR's false allegations. Beyond the stock-price impact, GPR's reports triggered regulatory scrutiny (the NGCB's RNG audit and the SEC's informal inquiry), required RGC to divert significant management attention and resources to crisis response, and damaged RGC's reputation with investors, analysts, and regulators.

Damages. The damages for the intentional interference claim overlap substantially with the special damages identified in the trade libel analysis: the market-capitalization decline, the out-of-pocket costs of $4.627 million (crisis communications, supplemental forensic audit, and regulatory-response legal fees), and the disruption to RGC's business operations and relationships. The trade libel and interference claims are complementary, and pursuing both provides RGC with maximum flexibility in proving its damages.

VII. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200)

A. Elements

California Business and Professions Code Section 17200, commonly known as the Unfair Competition Law ("UCL"), provides a broad remedy for unfair business practices. The UCL defines "unfair competition" to include "any unlawful, unfair or fraudulent business act or practice." The statute is remedial in nature and is to be liberally construed. Standing under the UCL requires that the plaintiff "has suffered injury in fact and has lost money or property as a result of the unfair competition." Cal. Bus. & Prof. Code § 17204.

The UCL operates on three independent prongs—unlawful, unfair, and fraudulent—each of which provides an independent basis for liability.

B. Application

Unlawful Prong. The unlawful prong of the UCL borrows violations of other laws and treats them as independently actionable unfair business practices. Here, GPR's conduct constitutes trade libel under California Civil Code Section 46(3), which serves as the predicate unlawful act. GPR's knowing or reckless publication of false statements disparaging RGC's business operations, financial integrity, and gaming software violates Section 46(3) and, through the unlawful prong of the UCL, gives rise to an independent cause of action under Section 17200.

Unfair Prong. Under the unfair prong, a business practice is actionable if it is "unfair" in the sense that it offends an established public policy or is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers or competitors. GPR's business model—establishing short positions through its affiliated hedge fund and then publishing false reports designed to drive down the target company's stock price—is an unfair business practice that harms competition, the integrity of the capital markets, and the investing public. GPR's model is predatory in nature: it exploits the public trust in financial research to generate private trading profits at the expense of the target company's shareholders, employees, and business partners.

Fraudulent Prong. Under the fraudulent prong, a business practice is actionable if it is "likely to deceive" reasonable members of the public. GPR's reports are plainly likely to deceive reasonable investors, regulators, and media consumers into believing that RGC engaged in revenue fabrication, RNG software manipulation, and undisclosed related-party dealings through a shell company. The reports' detailed factual allegations, purported documentary evidence, and authoritative tone are calculated to persuade readers that GPR's allegations are true—when, in fact, they are demonstrably false.

Remedies. The remedies available under Section 17200 include restitution, disgorgement, and injunctive relief. Cal. Bus. & Prof. Code §§ 17203, 17206. While damages per se are not available under the UCL, restitution and disgorgement provide meaningful monetary recovery. Specifically, RGC may seek disgorgement of GPR's and GPCP's short-sale profits of approximately $13.15 million on the theory that those profits represent unjust enrichment derived from GPR's unfair business practices. In addition, RGC may seek injunctive relief, including orders requiring GPR to remove the false reports from its website, to issue corrective statements, and to refrain from publishing similar false reports about RGC in the future.

VIII. Negligent Misrepresentation (Proposed Additional Cause of Action)

A. Elements

Under California law, a cause of action for negligent misrepresentation requires the plaintiff to establish: (1) a misrepresentation of a past or existing material fact; (2) made without reasonable ground for believing it to be true; (3) with the intent to induce reliance by the plaintiff or third parties; (4) justifiable reliance by the plaintiff or third parties; and (5) resulting damage. Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407–408; Fox v. Pollack (1986) 181 Cal.App.3d 954, 962.

Unlike intentional misrepresentation (fraud), negligent misrepresentation does not require proof that the defendant knew the statement was false. Rather, the claim is established by showing that the defendant made a material misrepresentation without a reasonable basis for believing it to be true. This lower scienter requirement provides an alternative theory of liability in the event that RGC is unable to prove actual malice for purposes of the trade libel claim, although we believe actual malice is provable on this record.

B. Application

Misrepresentation of Material Fact. GPR's reports contain false statements of material fact: the allegation that RGC fabricated approximately $410 million in FY 2023 revenue, the allegation that RGC manipulated its RNG software to deceive gaming regulators, and the allegation that CEO Marcus J. Calloway maintained undisclosed related-party dealings through Vermilion Holdings LLC. Each of these is a statement of past or existing fact that is provably false.

Without Reasonable Ground. GPR published these false statements without reasonable ground for believing them to be true. As discussed in Section IV.B above, GPR failed to contact Pinnacle Audit & Advisory LLP, the Nevada Gaming Control Board, or other readily available sources before publishing allegations of revenue fabrication, RNG manipulation, and undisclosed related-party transactions. GPR's failure to conduct basic due diligence before publishing serious allegations of corporate fraud demonstrates the absence of any reasonable ground for believing the allegations to be true.

Intent to Induce Reliance. GPR intended investors and the market to rely on its reports. The reports were published on GPR's website and distributed to approximately 142,000 social media followers for the express purpose of influencing investor sentiment and driving trading activity in RDGM stock. GPR's business model depends on market participants relying on its reports and trading accordingly, thereby moving the stock price and enabling GPR's affiliated fund to profit from its short positions.

Justifiable Reliance. Investors and market participants relied on GPR's reports, as demonstrated by the immediate and substantial decline in RDGM's stock price following each publication. The 21.0% cumulative decline from $92.14 to $72.80 reflects the market's reliance on GPR's allegations. This reliance was justifiable in the context: GPR's reports were presented as the product of detailed research and analysis, supported by purported documentary evidence, and distributed through a platform with a significant following in the financial community.

Resulting Damage. RGC suffered resulting damages in the form of the market-capitalization decline and the out-of-pocket costs detailed elsewhere in this memorandum.

Recommendation. We recommend including the negligent misrepresentation cause of action in the First Amended Complaint. The negligent misrepresentation claim provides an alternative theory of recovery that does not require proof of actual malice, thereby hedging against the possibility—which we view as unlikely but cannot entirely exclude—that the court concludes RGC has not met the actual-malice standard. The First Amended Complaint should add this cause of action alongside the addition of GPCP and Fenchurch as individual defendants.

IX. Privilege Defenses and First Amendment Considerations

A. Common-Interest and Fair-Comment Privileges

GPR may assert the common-interest privilege under California Civil Code Section 47(c), which provides a qualified privilege for communications made without malice on a subject of mutual interest to the communicator and the recipient. In the short-seller research context, GPR might argue that its reports were communications of mutual interest to GPR and the investing public regarding the financial integri

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Francesca Morano, Partner, Calderwood & Harkness LLP
FROM: Carlos Espinoza, Associate; Hannah Brinkley, Associate
DATE: February 12, 2024
RE: Legal Analysis — Trade Libel and Related Claims Against Grizzly Peak Research LLC; Anti-SLAPP Risk Assessment; Actual-Malice Standard
CLIENT: Redstone Gaming Corp.
MATTER: Redstone Gaming Corp. v. Grizzly Peak Research LLC, Case No. 24STCV-01892, Superior Court of California, County of Los Angeles
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I. Executive Summary
This memorandum presents a comprehensive legal research analysis of the viability of trade libel and related claims brought by our client, Redstone Gaming Corp. ("RGC"), against Grizzly Peak Research LLC ("GPR") and potential additional defendants—Grizzly Peak Capital Partners LP ("GPCP") and Tobias Fenchurch individually—arising from the publication of a series of short-seller research reports containing materially false allegations concerning RGC's financial integrity, gaming operations, and corporate governance. The memorandum addresses each cause of action, assesses the heightened actual-malice standard, evaluates the significant but surmountable risk of an anti-SLAPP motion, analyzes applicable privilege defenses and First Amendment considerations, outlines the damages framework, and provides strategic recommendations for the prosecution of these claims.
Our principal conclusions are as follows:
Trade Libel (Cal. Civ. Code § 46(3)). RGC's trade libel claim is viable and well-supported by the factual record. GPR published three separate research reports containing materially false statements of fact—not mere opinion—that specifically targeted and disparaged RGC's business operations, financial reporting, gaming software, and management. The falsity of GPR's core allegations has been confirmed or is expected to be confirmed by independent sources, including RGC's independent auditor, the Nevada Gaming Control Board, and the U.S. Securities and Exchange Commission.
Actual-Malice Standard. Because RGC is a publicly traded company listed on the Nasdaq Stock Market (ticker: RDGM) with a pre-publication market capitalization of approximately $6.8 billion, GPR will contend that RGC is a public figure or limited-purpose public figure, thereby invoking the actual-malice standard established in New York Times Co. v. Sullivan (1964) 376 U.S. 254. We conclude that the actual-malice standard likely applies but can be met through compelling evidence of GPR's substantial financial motive—a 680,000-share short position with a notional value of approximately $62.66 million—coupled with GPR's reckless disregard for the truth of its allegations, including its failure to contact RGC's independent auditor, the relevant gaming regulator, or other readily available sources before publication.
Anti-SLAPP Risk. The risk that GPR will file a special motion to strike under California's anti-SLAPP statute (Cal. Code Civ. Proc. § 425.16) is significant and, indeed, nearly certain. However, we believe this risk is surmountable. Under the first prong of the anti-SLAPP analysis, the commercial-speech exception codified in Section 425.17(c) may exempt RGC's claims from the statute's reach entirely, given that GPR's publications are integral to its for-profit short-selling business model. Even if GPR satisfies the first prong, RGC can readily demonstrate a probability of prevailing on the merits under the second prong through robust evidentiary declarations and documentary proof of falsity, motive, and damages.
Additional Claims. Claims for intentional interference with prospective economic advantage and unfair business practices under California Business and Professions Code Section 17200 are supportable and complement the trade libel cause of action. A negligent misrepresentation cause of action should be added in the First Amended Complaint.
Privilege Defenses and First Amendment. GPR will raise privilege defenses—including the common-interest privilege and the fair-comment privilege—and will invoke First Amendment protections. These defenses are unlikely to defeat RGC's claims given the profit-motivated, factually false nature of the publications and the evidence supporting actual malice. The First Amendment does not shield knowingly or recklessly false statements of fact made for commercial gain.
As of the date of this memorandum, GPR's Report 1 was published on February 7, 2024, and Report 2 was published on February 14, 2024. Report 3, which was published on February 21, 2024, had not yet been issued at the time of the original complaint but was anticipated based on GPR's stated publication schedule and pre-publication intelligence obtained by RGC. The complaint was filed on February 5, 2024, in anticipation of the publications, based on pre-publication information received by RGC. For completeness, and as subsequently supplemented, the analysis below incorporates all three reports.
II. Factual Background
A. The Parties
1. Redstone Gaming Corp. (RGC)
Redstone Gaming Corp. is a Nevada corporation with its principal executive offices located at 8800 Crimson Ridge Parkway, Suite 1200, Las Vegas, Nevada 89113. RGC's common stock is publicly traded on the Nasdaq Stock Market under the ticker symbol "RDGM." The company owns and operates eleven casino-resort properties across three jurisdictions—Nevada, New Jersey, and Mississippi—and is one of the largest regional gaming operators in the United States by revenue.
In addition to its brick-and-mortar gaming operations, RGC licenses proprietary electronic gaming platforms to third-party operators, operates a growing iGaming division branded as "Redstone Digital," and maintains a media and entertainment arm known as "Crimson Studios" that produces original programming and live entertainment content for RGC's resort properties and streaming platforms.
For fiscal year 2023, RGC reported total revenue of approximately $3.42 billion and adjusted EBITDA of approximately $812 million, representing an EBITDA margin of approximately 23.7%. Prior to the publication of GPR's first report, RGC's common stock was trading at a closing price of $92.14 per share on February 6, 2024, representing a market capitalization of approximately $6.8 billion based on 73.8 million shares outstanding.
RGC's senior management team includes Marcus J. Calloway (Chief Executive Officer), Priya Ramaswaran (Chief Financial Officer), Derek Olafson (General Counsel), and Janelle Hu (Vice President, Investor Relations). RGC's independent auditor is Pinnacle Audit & Advisory LLP, with engagement partner Walter Ng, CPA. Pinnacle has issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023.
2. Grizzly Peak Research LLC (GPR)
Grizzly Peak Research LLC is a Delaware limited liability company with its principal office at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR is a short-seller research firm that publishes investigative reports on publicly traded companies, typically in conjunction with short positions taken by its affiliated hedge fund, Grizzly Peak Capital Partners LP. GPR's managing member is Tobias "Toby" Fenchurch. Its senior analyst and co-author of the reports at issue is Ava Lin.
GPR distributes its research reports through its subscription website, grizzlypeakresearch.com, and simultaneously through a social media account (@GrizzlyPeakRes) that maintained approximately 142,000 followers at the time the reports concerning RGC were published. GPR itself holds relatively modest assets—approximately $22 million in cash and receivables—making the affiliated hedge fund and Fenchurch individually important targets for recovery purposes, as discussed further in Section XI below.
3. Grizzly Peak Capital Partners LP (GPCP)
Grizzly Peak Capital Partners LP is a Delaware limited partnership and the affiliated hedge fund through which GPR's trading activities are conducted. GPCP has estimated assets under management of approximately $185 million. Its general partner is Grizzly Peak Capital GP LLC, a Delaware limited liability company whose sole managing member is Tobias Fenchurch. GPCP held the short position in RDGM common stock at issue—approximately 680,000 shares—which, at the pre-publication price of $92.14 per share, represented a notional value of approximately $62.66 million.
4. Defense Counsel
GPR and its affiliates are represented by Caldwell, Tseng & Barrow LLP, with offices at 555 California Street, Suite 3100, San Francisco, California 94104. The lead partner is Raymond Caldwell, assisted by senior associate Natalie Orenstein. Caldwell, Tseng & Barrow is well-known in the Northern California legal community for its First Amendment and media-defense practice, and we should expect vigorous and sophisticated advocacy on the anti-SLAPP and privilege issues discussed below.
B. The Publications
GPR has published, or plans to publish, three research reports targeting RGC. The reports are detailed below in chronological order.
Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings." This report was published on February 7, 2024, and spans approximately 48 pages. Its central allegation is that RGC fabricated approximately $410 million of its reported FY 2023 revenue through fictitious intercompany transactions. The report purports to identify specific subsidiary entities through which the alleged revenue fabrication was accomplished and includes charts, tables, and excerpts from public filings that GPR contends demonstrate discrepancies in RGC's reported financial results. Report 1 characterizes RGC's senior management as complicit in the alleged scheme and suggests that Pinnacle Audit & Advisory LLP either failed to detect or was complicit in the alleged fabrication.
Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators." This report was published on February 14, 2024, and spans approximately 36 pages. It alleges that RGC manipulated the random-number-generator ("RNG") software embedded in its proprietary electronic gaming platforms to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB"). The report claims that RGC's RNG software was programmed to operate in two modes—one for actual player gaming sessions and another for regulatory testing—and that this dual-mode configuration enabled RGC to report artificially favorable payout ratios to regulators while operating gaming machines with lower actual payouts. The report cites purported interviews with unnamed former RGC software engineers and includes excerpts of what GPR represents to be internal RGC source code.
Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game." This report was published on February 21, 2024, and spans approximately 29 pages. It alleges that RGC's CEO, Marcus J. Calloway, maintained undisclosed related-party dealings with a purported shell entity called "Vermilion Holdings LLC," through which Calloway allegedly diverted company funds and received undisclosed personal benefits. The report claims that Vermilion Holdings LLC was secretly controlled by Calloway and used to channel payments from RGC vendors in exchange for favorable contract terms. The report identifies Vermilion Holdings LLC by its Nevada Secretary of State filing number and includes screen captures of corporate registration records and property records that GPR contends link the entity to Calloway.
All three reports were published on GPR's subscription website, grizzlypeakresearch.com, and were simultaneously distributed via the @GrizzlyPeakRes social media account to approximately 142,000 followers. Each report contained a standard disclaimer disclosing GPR's short positions in RDGM and stating that the views expressed represent GPR's "opinions" based on publicly available information and proprietary analysis.
In aggregate, the three reports advance three core allegations: (a) revenue fabrication of approximately $410 million through fictitious intercompany transactions; (b) manipulation of RNG software to deceive gaming regulators regarding payout statistics; and (c) undisclosed related-party transactions through a shell company controlled by RGC's CEO.
C. Stock-Price Impact
The publication of GPR's reports had a dramatic and measurable impact on the trading price of RDGM common stock. The relevant price data is as follows:
The aggregate market-capitalization loss at the trough was approximately $1.427 billion, calculated as $19.34 per share multiplied by 73.8 million shares outstanding. This represents a 21.0% decline from the pre-publication market capitalization of approximately $6.8 billion.
With respect to GPR's and GPCP's trading profits, GPCP's short position of approximately 680,000 shares was established prior to the publication of Report 1 and closed by mid-March 2024 at an average price of approximately $72.80 per share. The estimated gross profit on the short-sale trade is approximately $13.15 million, calculated as ($92.14 − $72.80) × 680,000 shares.
D. Falsity of the Allegations
Each of GPR's three core allegations has been demonstrated to be baseless through independent verification:
Revenue Fabrication Allegation (Report 1). Pinnacle Audit & Advisory LLP, RGC's independent auditor, has confirmed the accuracy of RGC's FY 2023 revenue of $3.42 billion through its independent audit. Pinnacle issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021 through 2023. The engagement partner, Walter Ng, CPA, has reviewed the specific intercompany transactions identified in GPR's Report 1 and has confirmed that all such transactions were properly recorded, appropriately eliminated in consolidation, and fully disclosed in accordance with generally accepted accounting principles. There is no basis for GPR's allegation that approximately $410 million in FY 2023 revenue was fabricated.
RNG Manipulation Allegation (Report 2). The Nevada Gaming Control Board completed an independent audit of RGC's RNG software on March 29, 2024. The NGCB's technical compliance division tested the RNG software across all of RGC's Nevada gaming operations, including both the hardware-based random number generators and the software-based pseudorandom number generators used in RGC's proprietary electronic gaming platforms. The NGCB cleared RGC entirely, finding no evidence of dual-mode operation, payout manipulation, or any other irregularity in RGC's gaming software. The NGCB's findings directly contradict GPR's Report 2 allegations.
Related-Party Allegation (Report 3). GPR's allegation that CEO Marcus J. Calloway maintained undisclosed related-party dealings through Vermilion Holdings LLC was based on incomplete information and was materially misleading. Following the publication of Report 3, the U.S. Securities and Exchange Commission opened an informal inquiry in March 2024. After a thorough review of the relevant documents and circumstances, the SEC closed the inquiry with no action on August 16, 2024. The SEC's closure of its inquiry without enforcement action confirms that GPR's related-party allegations were unfounded.
In sum, all three core allegations advanced in GPR's reports have been demonstrated to be baseless by independent regulatory and auditing authorities.
E. Procedural Posture
RGC filed its complaint on February 5, 2024, in the Superior Court of California, County of Los Angeles, Case No. 24STCV-01892. The complaint was filed in anticipation of GPR's publications, based on pre-publication information received by RGC through market intelligence sources indicating that GPR intended to release a series of negative reports targeting RGC. Jurisdiction and venue are proper in Los Angeles County because the reports were disseminated to and read by investors, analysts, and other market participants located in Los Angeles County, and because the effects of the publications were felt throughout California and the United States, with a substantial nexus to Los Angeles County.
The original complaint asserts three causes of action: (1) Trade Libel under California Civil Code Section 46(3); (2) Intentional Interference with Prospective Economic Advantage; and (3) Unfair Business Practices under California Business and Professions Code Section 17200.
RGC intends to file a First Amended Complaint to add GPCP and Tobias Fenchurch individually as defendants and to add a fourth cause of action for Negligent Misrepresentation. The First Amended Complaint was subsequently filed on March 18, 2024.
GPR was expected to, and subsequently did, file an anti-SLAPP special motion to strike on April 12, 2024. The anti-SLAPP analysis set forth below anticipates and addresses the arguments GPR was expected to raise.
III. Trade Libel Under California Civil Code § 46(3)
A. Elements of the Claim
Under California law, a claim for trade libel—also referred to as injurious falsehood or disparagement—requires the plaintiff to establish five elements: (1) publication of a statement; (2) the statement was false; (3) the statement was made with knowledge of its falsity or reckless disregard for the truth (i.e., actual malice); (4) the statement was specifically directed at the plaintiff's business, product, or economic interests; and (5) the statement caused special damages to the plaintiff.
Trade libel is codified in California Civil Code Section 46(3), which identifies as actionable slander any statement that "tends directly to injure [the plaintiff] in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits." While Section 46 addresses slander specifically, California courts have applied analogous principles to written (published) statements under the rubric of trade libel or commercial disparagement. See ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010–1011; Erlich v. Etner (1964) 224 Cal.App.2d 69, 73–74.
It is important to distinguish trade libel from personal defamation. A trade libel claim protects a plaintiff's economic interests in its products, services, and business operations. It does not protect personal reputation per se, although the same set of facts may give rise to both a personal defamation claim and a trade libel claim when the false statements impugn both the individual's character and the business's integrity. See Mann v. Quality Old Time Service, Inc. (2006) 139 Cal.App.4th 328, 340 (distinguishing personal defamation from trade libel in the context of statements targeting a plaintiff's business operations).
The requirement of actual malice in trade libel actions—which is more stringent than the negligence standard applicable to private-figure personal defamation—is discussed in detail in Section IV below. The requirement of special damages—which distinguishes trade libel from certain personal defamation claims where general damages may be presumed—is addressed in Section X.
B. Application to GPR's Reports
We analyze below each element of the trade libel claim as applied to the facts of this case.
Publication. The publication element is easily satisfied. GPR published three separate research reports on its subscription website, grizzlypeakresearch.com, and simultaneously distributed each report via its social media account, @GrizzlyPeakRes, to approximately 142,000 followers. The reports were further disseminated through financial news outlets, analyst commentary, and investor discussion forums. The wide dissemination of these reports to the investing public, financial media, regulators, and other market participants is undisputed and, indeed, was integral to GPR's business model—the reports' impact on RDGM's stock price depended on their reaching the broadest possible audience of market participants.
Falsity. Each of the three reports contains materially false statements of fact. The falsity of the core allegations has been confirmed by independent authorities:
Report 1 — Revenue Fabrication. GPR alleged that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions. This allegation has been disproven by Pinnacle Audit & Advisory LLP, which independently audited RGC's FY 2023 consolidated financial statements and issued an unqualified opinion confirming the accuracy of RGC's reported revenue of $3.42 billion. The engagement partner, Walter Ng, CPA, has specifically reviewed the intercompany transactions identified by GPR and confirmed their propriety.
Report 2 — RNG Manipulation. GPR alleged that RGC manipulated the RNG software in its proprietary electronic gaming platforms to inflate payout statistics reported to the Nevada Gaming Control Board. This allegation was disproven by the NGCB's independent RNG audit, completed on March 29, 2024, which cleared RGC entirely and found no evidence of software manipulation, dual-mode operation, or regulatory deception.
Report 3 — Undisclosed Related-Party Transactions. GPR alleged that CEO Marcus J. Calloway maintained undisclosed related-party dealings through a purported shell entity, Vermilion Holdings LLC. This allegation was based on incomplete information and was materially misleading. The SEC opened an informal inquiry in March 2024 and closed it with no action on August 16, 2024, confirming that the related-party allegations were unfounded.
Directed at Plaintiff's Business. All three reports are specifically and exclusively directed at RGC's business operations, financial integrity, gaming software, and corporate governance. The reports identify RGC by name, reference its Nasdaq ticker symbol, discuss specific RGC business units and subsidiaries, and target the core aspects of RGC's operations—its reported revenue, its gaming technology, and the conduct of its CEO. There is no question that the statements are "specifically directed at plaintiff's business, product, or economic interests."
Special Damages. RGC has suffered substantial and quantifiable special damages as a direct result of GPR's false publications. The aggregate decline in RDGM's market capitalization from the pre-publication close on February 6, 2024, through the post-Report 3 trough on February 21, 2024, was approximately $1.427 billion. In addition, RGC has incurred out-of-pocket costs totaling $4.627 million in direct response to GPR's reports, broken down as follows:
• Crisis communications and public relations services provided by Crestline Equity Partners Group Inc.: $2.18 million;
• Supplemental forensic audit conducted by Pinnacle Audit & Advisory LLP to address and rebut GPR's revenue-fabrication allegations: $1.46 million;
• Regulatory-response legal fees paid to Hargrove & Sato LLP in connection with the NGCB's RNG audit and the SEC's informal inquiry: $987,000.
The quantification of special damages is discussed further in Section X below.
C. The Fact-Versus-Opinion Distinction
A critical threshold question in any trade libel (or defamation) action is whether the challenged statements constitute actionable statements of fact or constitute protected opinion. Under the governing framework established by the United States Supreme Court in Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1, a statement is actionable if, viewed in the totality of the circumstances, a reasonable reader would understand it as implying provably false assertions of fact. The question is not whether the publisher labels its statements as "fact" or "opinion," but whether the substance of the statements conveys or implies objectively verifiable factual propositions.
GPR's reports present their allegations as factual findings supported by purported documentary evidence, detailed financial analysis, and source interviews—not merely as opinions, predictions, or speculation. The reports cite specific dollar figures (approximately $410 million in alleged fabricated revenue), make technical claims about identifiable software systems (RNG manipulation), and identify specific entities and individuals by name (Vermilion Holdings LLC, Marcus J. Calloway). These are quintessentially verifiable factual claims. Either RGC fabricated $410 million in revenue or it did not. Either RGC's RNG software was manipulated to deceive regulators or it was not. Either Calloway maintained undisclosed related-party dealings through Vermilion Holdings LLC or he did not. Each of these propositions is capable of being proved true or false—and each has, in fact, been demonstrated to be false.
GPR will undoubtedly point to the standard disclaimer appended to each of its reports, which states that the reports represent GPR's "opinions" based on publicly available information and proprietary analysis. However, such boilerplate disclaimers are not dispositive. A publisher cannot insulate actionable false statements of fact by labeling them "opinions." See Milkovich, 497 U.S. at 18–19 (rejecting the contention that the use of the word "opinion" creates a blanket First Amendment shield); see also Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 700 (holding that short-seller research reports containing false factual assertions are not insulated from liability by opinion disclaimers). When the substance of a publication presents verifiable factual claims couched in the language of factual findings—as GPR's reports plainly do—a disclaimer does not convert those claims into non-actionable opinion.
Moreover, the context in which GPR's reports were published reinforces their factual character. The reports were distributed to investors and market participants who were expected to—and did—rely on them as factual exposés of corporate wrongdoing. The reports were styled as investigative research, not as editorial commentary or speculative analysis. They were accompanied by charts, tables, purported source code excerpts, and references to documentary evidence, all designed to convey an impression of factual rigor. A reasonable investor reading these reports would understand them as asserting facts—not merely expressing subjective opinions—about RGC's financial reporting, gaming software, and corporate governance.
We are therefore confident that GPR's reports contain actionable statements of fact, not protected opinion, and that the fact-versus-opinion distinction does not pose a material obstacle to RGC's trade libel claim.
IV. The Actual-Malice Standard
A. Applicability to RGC
Under New York Times Co. v. Sullivan (1964) 376 U.S. 254, a public official or public figure must prove that a defamatory statement was made with "actual malice"—that is, with knowledge that the statement was false or with reckless disregard as to its falsity—in order to recover for defamation. This heightened standard has been extended to trade libel claims involving public figures. See Bose Corp. v. Consumers Union of United States, Inc. (1984) 466 U.S. 485, 513.
GPR will argue that RGC qualifies as a public figure or, at minimum, a limited-purpose public figure in the context of its financial performance and regulatory compliance. The public-figure doctrine, as applied to corporations, holds that a corporation that is prominent in its industry, regularly engages with regulators and investors, and receives significant media attention may be deemed a limited-purpose public figure with respect to matters within the sphere of its public prominence. See Vegod Corp. v. ABC (1979) 25 Cal.3d 763, 769 (corporate plaintiff held to be a limited-purpose public figure in the context of claims about its business practices); Reader's Digest Ass'n v. Superior Court (1984) 37 Cal.3d 244, 253–254.
RGC is a publicly traded company listed on Nasdaq with a market capitalization of approximately $6.8 billion. It files regular reports with the SEC, holds quarterly earnings calls, issues press releases, and engages extensively with the investing public, financial analysts, and media. Its CEO, Marcus J. Calloway, has appeared on financial news programs and at investor conferences. RGC operates in a highly regulated industry and interacts regularly with the Nevada Gaming Control Board and gaming regulators in New Jersey and Mississippi.
Under these circumstances, we conclude that RGC likely qualifies as at least a limited-purpose public figure with respect to matters concerning its financial performance, regulatory compliance, and corporate governance—the precise subjects addressed in GPR's reports. Accordingly, the actual-malice standard likely applies to RGC's trade libel and related claims.
However, even under this heightened standard, RGC has a strong case. As set forth below, the evidence of GPR's financial motive, reckless disregard for the truth, and deliberate avoidance of readily available information that would have revealed the falsity of its allegations is compelling.
B. Evidence of Actual Malice
Actual malice may be proved through direct evidence of knowledge of falsity, through circumstantial evidence of reckless disregard for the truth, or through a combination of both. See Harte-Hanks Communications, Inc. v. Connaughton (1989) 491 U.S. 657, 668. In this case, RGC has access to substantial circumstantial evidence—and may develop direct evidence through discovery—supporting a finding of actual malice.
Financial Motive as Circumstantial Evidence. GPR and its affiliated hedge fund, GPCP, held a short position of approximately 680,000 shares of RDGM common stock at the time the reports were published. At the pre-publication closing price of $92.14 per share, this short position had a notional value of approximately $62.66 million. The short position was disclosed in each of GPR's reports. GPCP closed the position by mid-March 2024 at an average price of approximately $72.80 per share, generating an estimated gross profit of approximately $13.15 million, calculated as ($92.14 − $72.80) × 680,000 shares.
This substantial profit motive constitutes strong circumstantial evidence that GPR was motivated to publish false or misleading statements in order to drive down the price of RDGM stock and generate profits on GPCP's short position. While financial motive alone is insufficient to establish actual malice, it is a significant factor that, combined with other evidence of reckless disregard for the truth, can support a finding of actual malice. See Reader's Digest Ass'n v. Superior Court, 37 Cal.3d at 257 (financial incentive is relevant to the actual-malice inquiry).
Reckless Disregard for Truth. Reckless disregard for the truth may be demonstrated by evidence that the publisher "entertained serious doubts as to the truth of his publication" or engaged in "purposeful avoidance of the truth." Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. at 688, 692. The following indicators of recklessness are present in this case:
Failure to contact Pinnacle Audit & Advisory LLP. GPR published its revenue-fabrication allegation (Report 1) without contacting Pinnacle Audit & Advisory LLP to verify its claims against audited financial statements. Pinnacle had issued clean audit opinions on RGC's consolidated financial statements for FY 2021 through FY 2023. A basic inquiry to Pinnacle—or even a careful review of Pinnacle's publicly available audit reports—would have revealed that the intercompany transactions identified by GPR had been properly audited, recorded, and eliminated in consolidation. GPR's failure to take this elementary step is indicative of purposeful avoidance of the truth.
Failure to contact the Nevada Gaming Control Board. GPR published its RNG-manipulation allegation (Report 2) without contacting the Nevada Gaming Control Board, the primary regulatory body responsible for overseeing RGC's gaming operations and approving its gaming software. The NGCB maintains detailed records of its RNG testing and certification processes. A simple inquiry to the NGCB would have cast significant doubt on GPR's allegations. GPR's failure to consult the relevant regulator before publishing an allegation of regulatory fraud is further evidence of reckless disregard.
Publication based on incomplete information. GPR published its related-party allegation (Report 3) based on what appears to have been incomplete and misleading information regarding Vermilion Holdings LLC. As demonstrated by the SEC's subsequent informal inquiry and its closure with no action, the factual predicate for GPR's related-party allegations was insufficient to support the serious accusations contained in the report. GPR failed to conduct adequate due diligence before publishing these allegations.
Internal communications and testimony of Ava Lin. Ava Lin, GPR's senior analyst and co-author of all three reports, may possess knowledge of internal communications reflecting awareness that the allegations were unsupported by reliable evidence or that the reports presented speculations and inferences as established facts. Discovery of GPR's internal documents and Ms. Lin's deposition testimony will be critical to establishing actual malice.
Tobias Fenchurch's dual role. Tobias Fenchurch serves as the managing member of GPR (the publisher) and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP (the entity holding the short position). Fenchurch's dual role creates an acute financial conflict of interest: he stood to benefit personally from the decline in RDGM's stock price caused by GPR's publications. This conflict of interest is relevant to the actual-malice inquiry and, at minimum, provides strong circumstantial evidence of motive.
Timing of Publication Relative to Short-Position Establishment. The sequence of events is itself probative of actual malice. GPCP established a large short position in RDGM stock, and GPR then published a series of reports containing false allegations designed to drive down the stock price. GPCP closed its short position shortly after the stock price reached its trough, locking in a profit of approximately $13.15 million. This sequence—establish short position, publish damaging reports, close position at a profit—is consistent with a scheme to manipulate the market through false publications and provides further circumstantial support for a finding of actual malice.
C. GPR's Short-Position Disclosure Does Not Negate Actual Malice
GPR will undoubtedly argue that its voluntary disclosure of short positions in RDGM in each of its reports demonstrates transparency and good faith, negating any inference of actual malice. This argument fails for several reasons.
First, disclosure of a financial interest does not immunize a publisher from liability for knowingly or recklessly publishing false statements. The disclosure requirement under securities regulations and the legal standard for trade libel serve entirely different purposes. Disclosure goes to transparency—it informs readers that the publisher has a financial interest in the subject company's stock. It does not go to the truth or falsity of the statements published, nor does it excuse a failure to verify those statements before publication.
Second, the short-position disclosure actually reinforces the motive evidence by confirming, in GPR's own words, that GPR and its affiliates had a direct financial interest in the decline of RDGM's stock price. The disclosure thus provides documentary corroboration of the very financial motive that supports a finding of actual malice.
Third, by analogy, a securities analyst who discloses a conflict of interest is still liable for securities fraud if the analyst knowingly publishes false information. See, e.g., SEC enforcement actions involving research analysts who disclosed conflicts of interest but nonetheless published fraudulent reports. The same principle applies in the trade libel context: disclosure of a financial interest does not provide a license to publish false statements.
We therefore conclude that GPR's short-position disclosure does not negate the evidence of actual malice and, indeed, strengthens RGC's case on this element.
V. Anti-SLAPP Analysis Under Cal. Code Civ. Proc. § 425.16
A. Overview of the Anti-SLAPP Framework
California's anti-SLAPP statute, California Code of Civil Procedure Section 425.16, provides a procedural mechanism for the early dismissal of lawsuits that arise from acts in furtherance of the defendant's right of petition or free speech in connection with a public issue. The statute is designed to prevent "Strategic Lawsuits Against Public Participation"—i.e., lawsuits brought primarily to chill the exercise of First Amendment rights. The statute provides for a special motion to strike, which, if granted, results in dismissal of the challenged claims and an award of the defendant's attorneys' fees and costs.
The anti-SLAPP analysis proceeds in two prongs:
Prong One (Arising-From). The defendant bears the burden of demonstrating that the challenged claims arise from protected activity—i.e., acts in furtherance of the right of petition or free speech in connection with a public issue or an issue of public interest. Cal. Code Civ. Proc. § 425.16(b)(1), (e).
Prong Two (Probability of Prevailing). If the defendant satisfies Prong One, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the claims. The plaintiff must state and substantiate a legally sufficient claim. The standard at this stage is minimal—the plaintiff need not prove its case, but must show that the claim has "minimal merit." Navellier v. Sletten (2002) 29 Cal.4th 82, 93.
We assess the risk that GPR will file an anti-SLAPP motion as near-certain. GPR's defense counsel, Caldwell, Tseng & Barrow LLP, is well-known for its anti-SLAPP practice, and the anti-SLAPP statute is a standard defensive weapon in cases involving published reports and commentary. Indeed, GPR subsequently filed its anti-SLAPP motion on April 12, 2024, as anticipated.
B. Prong One: Does GPR's Conduct Constitute Protected Activity?
Under Prong One, GPR bears the burden of showing that RGC's claims arise from GPR's exercise of the right of free speech in connection with a public issue or an issue of public interest. Cal. Code Civ. Proc. § 425.16(e)(3)–(4). GPR will argue that its reports constitute speech on a "public issue" within the meaning of the statute—specifically, the financial integrity and regulatory compliance of a publicly traded company in which millions of dollars of public investment are at stake. This argument has surface appeal, as the financial performance of publicly traded companies is undeniably a matter of public interest.
However, RGC has strong counter-arguments that may defeat GPR's showing on Prong One or, alternatively, exempt RGC's claims from the anti-SLAPP statute entirely.
The Commercial-Speech Exception (Cal. Code Civ. Proc. § 425.17(c)). Section 425.17(c) provides that the anti-SLAPP statute "does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or furnishing services ... arising from any statement or conduct by that person if both of the following conditions exist: (1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services ... and (2) The statement or conduct was made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services, or the statement or conduct was made in the course of delivering the person's goods or services."
We submit that GPR's publications fall within the scope of this exception. GPR is primarily engaged in the business of publishing short-seller research reports in conjunction with the trading activities of its affiliated hedge fund, GPCP. GPR's reports are integral to GPR's and GPCP's business model—they are the mechanism through which GPR and GPCP generate trading profits. The reports are not disinterested journalism, academic research, or public-interest advocacy. They are commercially motivated publications made in the course of conducting GPR's and GPCP's for-profit business.
While the commercial-speech exception has been construed narrowly by some courts, its application to the short-seller research context is supported by the logic of the exception and by the California Supreme Court's guidance in FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133. In FilmOn.com, the California Supreme Court narrowed the scope of "public issue" under the anti-SLAPP statute, holding that commercial communications that do not contribute to public debate on an issue of public significance may not qualify as protected activity under Section 425.16(e). The Court emphasized that the anti-SLAPP statute is intended to protect participation in public discourse, not to shield commercially motivated speech from accountability.
GPR's reports, while touching on matters that may be of public interest in the abstract, are fundamentally commercial in nature. GPR targets specific companies for financial gain—not to contribute to public discourse or to advance the public interest. The primary purpose of the reports is to generate trading profits for GPCP, not to inform the public or to promote policy debate. Under FilmOn.com and the commercial-speech exception, GPR's publications may well fall outside the scope of anti-SLAPP protection.
Even if GPR Satisfies Prong One. We note that even if the court were to find that GPR's reports constitute protected activity under Prong One, the analysis would then proceed to Prong Two, where we believe RGC can readily demonstrate a probability of prevailing. The Prong One determination is therefore not dispositive of the anti-SLAPP motion.
C. Prong Two: Probability of Prevailing
Even if GPR satisfies its burden under Prong One, RGC needs only demonstrate a "probability of prevailing" on its claims to defeat the anti-SLAPP motion. This is a relatively low threshold: the plaintiff must show that its claim has "minimal merit" by presenting sufficient evidence to sustain a favorable judgment if the evidence is credited. Navellier v. Sletten (2002) 29 Cal.4th 82, 93. The plaintiff is not required to prove its case at this stage; it need only make a prima facie showing of facts that, if credited, would support a judgment in its favor. See Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.
RGC can make this showing through the following evidentiary submissions:
Declarations from RGC executives. Declarations from Derek Olafson (General Counsel) and Priya Ramaswaran (CFO) can establish the falsity of the revenue-fabrication allegations by attesting to the accuracy of RGC's FY 2023 financial statements, the integrity of RGC's intercompany accounting, and RGC's reliance on Pinnacle's independent audit. These declarations can also address the stock-price impact, the disruption to RGC's investor relations and business operations, and the out-of-pocket costs incurred in response to GPR's publications.
Declaration from Walter Ng, CPA. A declaration from Walter Ng, the Pinnacle engagement partner, can confirm Pinnacle's clean audit opinions for FY 2021 through FY 2023, the scope and nature of Pinnacle's audit procedures, and the accuracy of RGC's reported revenue of $3.42 billion. Mr. Ng's declaration can specifically address the intercompany transactions identified in GPR's Report 1 and confirm that those transactions were properly audited and found to be appropriately recorded.
Expert declarations on damages. An expert declaration from a qualified forensic economist—we recommend Dr. Elena Vostrikova of Meridian Forensic Economics LLC, who was subsequently retained on July 1, 2024—can address the stock-price impact of GPR's publications and quantify the special damages attributable to the false reports through event-study methodology.
Evidence of GPR's financial motive. Documentary evidence of GPCP's 680,000-share short position in RDGM, the timing of the position's establishment and closure, and the estimated profit of approximately $13.15 million will be submitted to establish the financial motive supporting actual malice.
The falsity of GPR's core allegations is demonstrable through independent, authoritative sources: Pinnacle's clean audit opinions (FY 2021–2023), the Nevada Gaming Control Board's RNG clearance (March 29, 2024), and the SEC's closure of its informal inquiry with no action (August 16, 2024). This evidence, combined with the evidence of GPR's financial motive and reckless disregard for the truth, is more than sufficient to demonstrate a probability of prevailing on the trade libel claim and the related causes of action.
We recommend that RGC aggressively oppose any anti-SLAPP motion with a robust evidentiary showing and that the evidentiary opposition package be prepared well in advance of the anticipated motion so as to minimize delay.
D. Strategic Considerations for Anti-SLAPP Defense
Several strategic considerations bear on RGC's anti-SLAPP defense:
Timing. Under Section 425.16(f), a special motion to strike must be filed within 60 days of service of the complaint unless the court allows a later filing for good cause. The hearing on the motion must be set within 30 days of filing, unless the docket does not permit and the court sets a later date. Importantly, all discovery proceedings in the action are automatically stayed upon the filing of the anti-SLAPP motion (§ 425.16(g)), unless the court, upon noticed motion and for good cause shown, orders that specified discovery be conducted. This discovery stay is a significant procedural obstacle, as it may delay RGC's ability to obtain GPR's internal communications and other evidence bearing on actual malice. We should consider filing a targeted discovery motion seeking limited discovery on the actual-malice issue as soon as the anti-SLAPP motion is filed.
Immediate Appealability. If the trial court denies GPR's anti-SLAPP motion, GPR has the right to take an immediate appeal. Cal. Code Civ. Proc. § 425.16(i). While an interlocutory appeal could delay the litigation, it is unlikely to derail the case meaningfully, particularly if the trial court's denial is well-supported by the evidentiary record and the appellate court applies the appropriate standard of review.
Attorneys' Fees Risk. The anti-SLAPP statute contains a mandatory fee-shifting provision. If GPR's anti-SLAPP motion is granted, RGC would be liable for GPR's attorneys' fees and costs incurred in connection with the motion. § 425.16(c)(1). Conversely, if the motion is denied and the court finds that the motion was "frivolous or is solely intended to cause unnecessary delay," the court shall award RGC its costs and reasonable attorneys' fees. § 425.16(c)(2). Given the strength of RGC's evidentiary showing, we believe the fee risk is manageable. However, if the motion were granted—an outcome we view as unlikely but not impossible—the fee exposure could be significant, given the caliber of GPR's defense counsel.
Preparation of Evidentiary Package. We recommend that the team immediately begin assembling the declarations, expert reports, and documentary evidence necessary for a comprehensive anti-SLAPP opposition. The declarations from Olafson, Ramaswaran, and Ng should be drafted and circulated for review promptly. The engagement of Dr. Vostrikova or a similarly qualified forensic economist should be expedited. All documentary evidence relating to GPR's short position, publication timeline, and financial motive should be organized and indexed.
VI. Intentional Interference with Prospective Economic Advantage
A. Elements
Under California law, a claim for intentional interference with prospective economic advantage requires the plaintiff to establish five elements: (1) the existence of an economic relationship between the plaintiff and a third party, with a probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) the defendant's intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) resulting damages. Glenrock Corporation (2003) 29 Cal.4th 1134, 1153–1154.
Critically, the interference must be accomplished through "independently wrongful" conduct—i.e., conduct that is unlawful, unethical, or constitutes a recognized tort apart from the interference itself. Id. at 1158. This independently wrongful conduct requirement distinguishes intentional interference with prospective economic advantage from intentional interference with existing contractual relations (where the existence of a valid contract provides the predicate for liability without a separate showing of independently wrongful conduct).
B. Application
Economic Relationships. RGC maintains well-established economic relationships with a wide range of third parties, including institutional and retail investors, securities analysts, lenders and credit facility counterparties, gaming regulators in Nevada, New Jersey, and Mississippi, vendors and suppliers, entertainment talent, and business partners. These relationships entail a probability of future economic benefit to RGC, as they support RGC's access to capital markets, its ability to maintain gaming licenses, its operational supply chain, and its revenue-generating activities.
Defendant's Knowledge. GPR was well aware of RGC's relationships with investors, regulators, and other market participants. Indeed, GPR's reports specifically addressed RGC's relationships with the Nevada Gaming Control Board (alleging RNG manipulation designed to deceive the regulator) and with investors (alleging revenue fabrication designed to inflate RGC's stock price). GPR knew—and intended—that its publications would be read by market participants, regulators, financial analysts, and other third parties with whom RGC maintained economic relationships.
Wrongful Conduct. GPR's publication of knowingly or recklessly false reports to profit from short positions constitutes independently wrongful conduct. Specifically, the trade libel itself—the knowing or reckless publication of false statements disparaging RGC's business—satisfies the independently wrongful conduct requirement. See Korea Supply Co., 29 Cal.4th at 1158–1159 (trade libel qualifies as independently wrongful conduct for purposes of the interference tort). Additionally, GPR's conduct may constitute an unfair business practice under Business and Professions Code Section 17200, providing a separate predicate for independently wrongful conduct.
Actual Disruption. The disruption to RGC's economic relationships is demonstrable and severe. The 21.0% decline in RDGM's stock price—from $92.14 per share to a trough of $72.80 per share—represents a massive disruption to RGC's relationship with investors and the capital markets. The aggregate market-capitalization loss of approximately $1.427 billion reflects the market's reaction to GPR's false allegations. Beyond the stock-price impact, GPR's reports triggered regulatory scrutiny (the NGCB's RNG audit and the SEC's informal inquiry), required RGC to divert significant management attention and resources to crisis response, and damaged RGC's reputation with investors, analysts, and regulators.
Damages. The damages for the intentional interference claim overlap substantially with the special damages identified in the trade libel analysis: the market-capitalization decline, the out-of-pocket costs of $4.627 million (crisis communications, supplemental forensic audit, and regulatory-response legal fees), and the disruption to RGC's business operations and relationships. The trade libel and interference claims are complementary, and pursuing both provides RGC with maximum flexibility in proving its damages.
VII. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200)
A. Elements
California Business and Professions Code Section 17200, commonly known as the Unfair Competition Law ("UCL"), provides a broad remedy for unfair business practices. The UCL defines "unfair competition" to include "any unlawful, unfair or fraudulent business act or practice." The statute is remedial in nature and is to be liberally construed. Standing under the UCL requires that the plaintiff "has suffered injury in fact and has lost money or property as a result of the unfair competition." Cal. Bus. & Prof. Code § 17204.
The UCL operates on three independent prongs—unlawful, unfair, and fraudulent—each of which provides an independent basis for liability.
B. Application
Unlawful Prong. The unlawful prong of the UCL borrows violations of other laws and treats them as independently actionable unfair business practices. Here, GPR's conduct constitutes trade libel under California Civil Code Section 46(3), which serves as the predicate unlawful act. GPR's knowing or reckless publication of false statements disparaging RGC's business operations, financial integrity, and gaming software violates Section 46(3) and, through the unlawful prong of the UCL, gives rise to an independent cause of action under Section 17200.
Unfair Prong. Under the unfair prong, a business practice is actionable if it is "unfair" in the sense that it offends an established public policy or is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers or competitors. GPR's business model—establishing short positions through its affiliated hedge fund and then publishing false reports designed to drive down the target company's stock price—is an unfair business practice that harms competition, the integrity of the capital markets, and the investing public. GPR's model is predatory in nature: it exploits the public trust in financial research to generate private trading profits at the expense of the target company's shareholders, employees, and business partners.
Fraudulent Prong. Under the fraudulent prong, a business practice is actionable if it is "likely to deceive" reasonable members of the public. GPR's reports are plainly likely to deceive reasonable investors, regulators, and media consumers into believing that RGC engaged in revenue fabrication, RNG software manipulation, and undisclosed related-party dealings through a shell company. The reports' detailed factual allegations, purported documentary evidence, and authoritative tone are calculated to persuade readers that GPR's allegations are true—when, in fact, they are demonstrably false.
Remedies. The remedies available under Section 17200 include restitution, disgorgement, and injunctive relief. Cal. Bus. & Prof. Code §§ 17203, 17206. While damages per se are not available under the UCL, restitution and disgorgement provide meaningful monetary recovery. Specifically, RGC may seek disgorgement of GPR's and GPCP's short-sale profits of approximately $13.15 million on the theory that those profits represent unjust enrichment derived from GPR's unfair business practices. In addition, RGC may seek injunctive relief, including orders requiring GPR to remove the false reports from its website, to issue corrective statements, and to refrain from publishing similar false reports about RGC in the future.
VIII. Negligent Misrepresentation (Proposed Additional Cause of Action)
A. Elements
Under California law, a cause of action for negligent misrepresentation requires the plaintiff to establish: (1) a misrepresentation of a past or existing material fact; (2) made without reasonable ground for believing it to be true; (3) with the intent to induce reliance by the plaintiff or third parties; (4) justifiable reliance by the plaintiff or third parties; and (5) resulting damage. Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407–408; Fox v. Pollack (1986) 181 Cal.App.3d 954, 962.
Unlike intentional misrepresentation (fraud), negligent misrepresentation does not require proof that the defendant knew the statement was false. Rather, the claim is established by showing that the defendant made a material misrepresentation without a reasonable basis for believing it to be true. This lower scienter requirement provides an alternative theory of liability in the event that RGC is unable to prove actual malice for purposes of the trade libel claim, although we believe actual malice is provable on this record.
B. Application
Misrepresentation of Material Fact. GPR's reports contain false statements of material fact: the allegation that RGC fabricated approximately $410 million in FY 2023 revenue, the allegation that RGC manipulated its RNG software to deceive gaming regulators, and the allegation that CEO Marcus J. Calloway maintained undisclosed related-party dealings through Vermilion Holdings LLC. Each of these is a statement of past or existing fact that is provably false.
Without Reasonable Ground. GPR published these false statements without reasonable ground for believing them to be true. As discussed in Section IV.B above, GPR failed to contact Pinnacle Audit & Advisory LLP, the Nevada Gaming Control Board, or other readily available sources before publishing allegations of revenue fabrication, RNG manipulation, and undisclosed related-party transactions. GPR's failure to conduct basic due diligence before publishing serious allegations of corporate fraud demonstrates the absence of any reasonable ground for believing the allegations to be true.
Intent to Induce Reliance. GPR intended investors and the market to rely on its reports. The reports were published on GPR's website and distributed to approximately 142,000 social media followers for the express purpose of influencing investor sentiment and driving trading activity in RDGM stock. GPR's business model depends on market participants relying on its reports and trading accordingly, thereby moving the stock price and enabling GPR's affiliated fund to profit from its short positions.
Justifiable Reliance. Investors and market participants relied on GPR's reports, as demonstrated by the immediate and substantial decline in RDGM's stock price following each publication. The 21.0% cumulative decline from $92.14 to $72.80 reflects the market's reliance on GPR's allegations. This reliance was justifiable in the context: GPR's reports were presented as the product of detailed research and analysis, supported by purported documentary evidence, and distributed through a platform with a significant following in the financial community.
Resulting Damage. RGC suffered resulting damages in the form of the market-capitalization decline and the out-of-pocket costs detailed elsewhere in this memorandum.
Recommendation. We recommend including the negligent misrepresentation cause of action in the First Amended Complaint. The negligent misrepresentation claim provides an alternative theory of recovery that does not require proof of actual malice, thereby hedging against the possibility—which we view as unlikely but cannot entirely exclude—that the court concludes RGC has not met the actual-malice standard. The First Amended Complaint should add this cause of action alongside the addition of GPCP and Fenchurch as individual defendants.
IX. Privilege Defenses and First Amendment Considerations
A. Common-Interest and Fair-Comment Privileges
GPR may assert the common-interest privilege under California Civil Code Section 47(c), which provides a qualified privilege for communications made without malice on a subject of mutual interest to the communicator and the recipient. In the short-seller research context, GPR might argue that its reports were communications of mutual interest to GPR and the investing public regarding the financial integri

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