Tuesday, October 14, 2008

Overstock and Gradient: Friends at Last

Overstock.com Inc., the discount retailer based in Salt Lake City, Utah, has announced the settlement of its lawsuit against Gradient Analytics, of Scottsdale Arizona.

Fans may recall that Gradient is the independent stock analyst formerly known as Camelback Research Alliance Inc. Overstock's complaint, brought in a state court in California, was that in 2005, Camelback conspired with hedge fund Rocker Partners to issue falsely negative reports about Overstock in order to benefit Rocker's short positions.

The settlement comes after an unsuccessful effort on Gradient's part to persuade California's courts to set aside the complaint on first amendment and/or SLAPP grounds. [SLAPP is an acronym for "strategic lawsuits against public participation," and a California law aimed at discouraging the practice of stifling public debate by such means.]

According to the statute: "A cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim."

The word "probability" in that statute appears to mean something different for this court than it means to, say, a casino manager. The court said it isn't making a decision about which side has the better hand, but that for purposes of deciding the motion, it accepts as true all evidence favorable to the plaintiff.

Both the appellate court and the state supreme court have said that Overstock's lawsuit isn't a SLAPP, Gradient responded by filing a cross-complaint this spring, and the parties had been preparing to try the matter on the merits, with a trial date set for this coming April.

Now there's been a sudden outbreak of amity. The terms of the settlement are confidential, though Gradient put out a statement Monday, Christopher Columbus notwithstanding, saying that Overstock's accounting policies "did in fact conform with generally accepted accounting principles (GAAP) and regrets any prior statements to the contrary." Rocker Partners [or, strictly, its progeny, Copper River], remains a party.

The chairman and CEO of Overstock, Patrick Byrne, said in his company's statement: "I wish Gradient Analytics the best in their future endeavors. Overstock.com will now focus on the remaining defendants, Copper River, David Rocker, and Mark Cohodes."

Sports fans can take cheer in that last bit. There will still be a trial. The focus thereof has narrowed a bit.

1 comment:

Janice Lois said...
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