NEWS MEDIA UPDATE · CALIFORNIA · Libel · June 4, 2007
Overstock.com can proceed with libel suit
June 4, 2007 · A panel of judges from a California appeals court ruled last week that online retailer Overstock.com can continue with its libel lawsuit against a subscription-based service that issues reports on publicly traded companies.
Gradient Analytics Inc. issued several negative reports between June 2003 and December 2005 regarding Overstock’s business and accounting practices.
In August 2005, Overstock sued Gradient and alleged that both Gradient and another financial analysis company knowingly disseminated false information. Overstock further alleged that “these false assertions damaged the corporation” by driving down the stock price, according to the court’s opinion.
Gradient argued that the financial analysis should be viewed as protected opinion and moved to have the lawsuit dismissed under a California statute that prevents companies from using costly lawsuits to silence and punish those who legitimately criticize their activities and practices. California’s statute and similar laws in other states are commonly referred to as “anti-SLAPP statutes” for “strategic lawsuits against public participation.”
The trial court refused to dismiss the lawsuit under the anti-SLAPP statute, and Gradient appealed that decision.
A group of California news organizations and The Reporters Committee for Freedom of the Press filed a friend-of-the-court brief on behalf of Gradient saying a decision in favor of Overstock could chill reporting because “the work done by Gradient and other such independent forecasters is nearly identical to the work done by financial reporters at working at major magazines and newspapers.”
The appeals court panel agreed unanimously with the trial court and ruled that because Overstock had established “a probability of prevailing on the merits” at trial, the anti-SLAPP statute did not apply.
In a statement issued upon the court’s ruling, Gradient President and Chief Executive Brad Forst said that the “ruling is strictly procedural. It simply holds that this is too early a stage in the case to dismiss the action, but it is not a ruling on the merits of the case nor a confirmation of the allegations made in the lawsuit.”
“From the start we have said the charges were baseless and served only as an attempt to shut us up,” Forst said.
Forst also noted that a U.S. Securities and Exchange Commission investigation into the matter resulted in a recommendation “that no enforcement action be taken” against Gradient. “As we move through the judicial system we are confident that the courts will agree with the SEC conclusion,” Forst said in the statement.
(Overstock.com, Inc. v. Gradient Analytics, Inc.) — ES