Re: 8/31/05 - [OSTK] Fool.com: Is Overstock a SLAPP suit?
Author: Bob78164 Number: of 915
Subject: Re: Some Thoughts On Byrne Response Date: 8/31/05 6:50 PM
Recommendations: 24
JamesWAllen writes (in part):
OSTK is not paying the legal expenses. The lawyer(s) representing Patrick and the other plaintiffs has taken the case on contingency.
I reply:
Let me introduce myself. I have no dog in this fight. Neither I nor (as far as I know) any member of my household holds any position in OSTK. Neither I nor any member of my firm represents OSTK in any capacity. And as far as I know (I have not run a conflicts check to verify this), my law firm does not represent anyone affiliated with any of the defendants. If similar lawsuits were to be filed, I could easily see our law firm representing either side. In short, I believe that I'm about as neutral as it's possible to be.
I've read the Complaint. I'm a California attorney with twelve years of litigation experience. My first case resulted in a jury verdict for my client against Microsoft for $120 million. This is a long-winded way of saying that I know, from experience, what it takes to wage a fight of this magnitude.
I have serious concerns about Overstock's position in this lawsuit, as currently framed in the Complaint. The unfair competition claim has a serious flaw -- you can't get restitution unless the miscreants got money directly from you. (Korea Supply Co.) I don't see any allegation that either Overstock.com or the individual plaintiff ever paid any of the defendants a dime. That limits the potential relief to injunctive relief and possibly attorneys' fees -- no monetary recovery will be possible.
But the news is much worse than that. Plaintiffs' standing is in serious jeopardy as a result of the passage of Proposition 64. That proposition amended section 17200 (the unfair competition statute) to require that anyone asserting such a claim be able to demonstrate injury. I believe that amendment will be fatal to Overstock's claim in its entirety. Overstock's shareholders may well have been damaged by the alleged misdeeds (assuming they can be proved at trial), but Overstock itself was not.
The negligence claim also strikes me as quite weak. Simply put, I don't see any basis for alleging that any of the defendants owe any of the plaintiffs a duty, and duty is an essential element of a negligence claim.
Finally, I would be seriously concerned that the defendants will file an anti-SLAPP motion. Fundamentally, the lawsuit appears to be about what defendants are saying on a matter that is at least arguably of public concern. In other words, plaintiffs are suing defendants because they don't like the way in which defendants are exercising their First Amendment rights. Those are precisely the circumstances in which an anti-SLAPP motion is appropriate. If an anti-SLAPP motion is successful, (a) the lawsuit is over, then and there, with no opportunity for amendment or further discovery, and (b) plaintiffs will owe defendants their attorneys' fees. Even if the motion is unsuccessful in the trial court, the denial would be an appealable order, and the case is stayed until the appeal is resolved. So add at least six months to any estimate of time to trial.
Notice that this analysis would hold even if the Court were completely convinced that every fact alleged in the Complaint were true and wrongful. Under these facts, I don't see that the Complaint alleges a remedy that's available to Overstock. Its stockholders may have recourse, but the company itself does not. --Bob
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Author: Bob78164 Number: of 915
Subject: Re: Some Thoughts On Byrne Response Date: 8/31/05 7:24 PM
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Har1en writes (in part):
Isn't there a precedent for when multiple members of a class could bring a suit, but it is impractical to do so because the cost to each is so small, then a group they belong to can bring it for them (I remember something about some conservation society representing its members who would be affected if they lost some national park space).
I reply:
Such a doctrine exists, but it wouldn't apply in this circumstance, and was not alleged in any event. A class action would have the same effect, but that has other disadvantages and wasn't alleged. --Bob
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Author: Bob78164 Number: of 915
Subject: Re: Some Thoughts On Byrne Response Date: 8/31/05 8:10 PM
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vexas1 writes (in part):
Could that be why Overstock added Mary Helburn to the lawsuit?
As a single shareholder she record a loss on August 5th, 2005 for 500 shares at $15.00 a share.
I reply:
I'm pretty confident that the attorneys did not accept this case on a contingency basis in order to recover a few thousand dollars for Mary Helburn. This simply does not strike me as a well thought out pleading. --Bob
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Author: JamesWAllen Number: 907 of 915
Subject: Re: Some Thoughts On Byrne Response Date: 9/1/05 10:02 AM
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givemeabreak,
On contingency, meaning the lawyer gets paid only if they suit's outcome produces a cash award?
Yes.
So, if there is no direct expense to the company, why is everyone so fired up that this is costing OSTK money (and the shareholders) to fight this battle? I assume they mean the indirect cost of being distracted by the lawsuit?
I think a lot of people jump to conclusions and assumed that OSTK was paying the litigation costs.
Jim
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Author: TMFTomG Number: of 915
Subject: Re: Some Thoughts On Byrne Response Date: 9/1/05 10:07 AM
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James,
Unless I'm mistaken -- and I may well be -- I think Overstock did fund the initial aspects of this. I am going on recall here, because I'm off to catch a flight. But I believe that it has been transitioned to contigency but that Patrick said the "initial costs were high" and I believe that came from Overstock. Finally, I think one has to attempt to factor in the costs to the organization in human/creative capital. There will be a certain time spent on a legal battle that will be lost to a) improving the competitive stance against eBay and Amazon.com, b) preparing for the broadband revolution, c) fashioning a brand that communicates domination of online closeout retailing. I don't what that intellectual capital cost is to shareholders, but I don't think it's zero.
Again, this does not say to me that there is no upside for Overstock shareholders. I just haven't heard any estimate -- wild or otherwise -- about the actual costs versus the actual potential rewards for the outside owners of OSTK.
Foolish best,
Tom Gardner
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Author: JamesWAllen Number: 909 of 915
Subject: Re: Some Thoughts On Byrne Response Date: 9/1/05 10:17 AM
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Tom,
Unless I'm mistaken -- and I may well be -- I think Overstock did fund the initial aspects of this...
Yes, that was Patrick's answer to one of the dozen questions.
The law suit will be a burden on Overstock management, but I think it is a productive way to respond to the negative publicity and to defend the share price.
Jim
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