Legal News

Broad Tossers? A Cook?s Tour? Overstock.com Settles With Gradient

By Jennifer Forsyth

Overstock.com CEO Patrick Byrne travels down an aisle on his Go-ped scooter at his company

Long before John Mack and Dick Fuld thought short sellers were destroying every company, Patrick Byrne thought short sellers were destroying his, aided by the research firm Gradient Analytics. In 2005, Mr. Byrne, Overstock.com’s founder and president, claimed that Gradient’s negative reports on the online retailer drove down the stock and benefited short sellers. Here’s the CNN/Money story. Byrne, after issuing a series of blistering criticisms of Gradient, sued in Marin County Superior Court in California, alleging libel, unfair business practices and tortious interference.

Today, however, Overstock.com issued a news release saying the company had settled all claims against Gradient. Terms of the settlement were not available.

You don’t have to turn the clock back very far to recall the parties in full-scale war mode. Take this, from Byrne in February, 2008: “These broad-tossers have given us a two-and-a-half year cook’s tour of the California appellate process. They engage in such legal posturing because they know this case will expose a widespread, illegal Wall Street practice that harms American companies and makes money at the expense of American investors. I look forward to the day when the scofflaws are no longer in a backroom seeing their orthodoxies supped by biddable regulators and tractable New York financial journalists, but are instead sitting in a California courtroom trying to rationalize their schemes to twelve citizens.”

[LB NB: The reference to a “cook’s tour of the California appellate process” likely refers to the anti-SLAPP suit that Gradient brought against Overstock last year. California’s anti-SLAPP statute is designed to allow for the dismissal of lawsuits that attempt to silence legitimate speech. Click here, here and here for prior posts on the anti-SLAPP statute, starring Britney, Borat and Ethan Hawke. As for Byrne’s last bit about tractable journos, we take no offense.]

When last we heard from Gradient Analytics, the firm was “looking forward” to the upcoming jury trials, saying it welcomed the opportunity for a jury “to reject the unsupported theories” espoused by Byrne.

Seems Gradient decided a jury trial wasn’t the best route after all. In its release, Overstock quotes a statement from Gradient as follows: “Having reviewed all SEC filings, relevant accounting literature, and all other information available to it, Gradient now believes that, to the best of its knowledge, Overstock’s stated accounting policies did in fact conform with Generally Accepted Accounting Principles (GAAP) and regrets any prior statements to the contrary.”

The terms of the settlement were not disclosed.

Full post as published by Law Blog - WSJ.com on October 13, 2008 (boomark / email).