By Nate Raymond
Last year, after a short seller blogging under the pseudonym
Alfred Little targeted three Chinese companies he accused of
accounting fraud, the companies -- Silvercorp Metals, Sino Clean
Energy and Deer Consumer Financial -- decided to strike back.
All three sued Little and the websites that published his blogs
for defamation. But the lawyer defending Little, who is actually
a man named Jon Carne s , said that rulings this week signal a
possible end to the Chinese companies' accountability campaign
against his client.
In dual decisions Friday and Tuesday, New York State Supreme
Court Justice Carol Edmead of Manhattan pared down Deer's
lawsuit against Carnes's company, EOS Holdings, and Loren
Weinberg, who (under the pseudonym Simon Moore) is the managing
editor of AlfredLittle.com. Edmead has not ruled on Carnes's own
motion to dismiss Deer's claims, but her new rulings, as well as
a previous decision by her in another Chinese company's
defamation suit against Carnes, have led defense counsel Martin
Garbus of Eaton & Van Winkle to predict that the rest of Deer's
claims will soon be dismissed.
Garbus's confidence is based on a ruling in August in a
similar case filed by the Chinese company Silvercorp. The
company had sued AlfredLittle.com and Chinastockwatch.com in New
York State Supreme Court after the websites published negative
reports on the company's production and revenue figures. But
Edmead, who is presiding over both the Silvercorp and Deer
cases, concluded that the short sellers' reports constituted
opinion rather than statements of fact and couldn't be the
subject of a suit.
That decision has broad implications for the suits against
anonymous short-selling bloggers like Carnes, as Edmead
acknowledged. "The court recognizes that this result could be
viewed as a green light to those who could use this kind of
vehicle to manipulate the market," she wrote in the August
opinion. "However, the court is constrained to conclude that the
challenged statements failed to support a claim for defamation."
(Silvercorp counsel Stephen Crimmins of K&L Gates declined to
Soon after that ruling, Sino Clean Energy's counsel, Eugene
Licker of Loeb & Loeb, moved to drop Sino's suit against Carnes
and various co-defendants. That left only Deer's case. There's
been considerable briefing and discovery over how to bring
claims in New York state court against Carnes, which led to Deer
adding co-defendants, including EOS Holdings and Weinberg, to
its case. But in the new rulings, Edmead ventured beyond
jurisdictional questions to give finality to some of Deer's
She rejected Deer's creative argument that it should be able
to sue EOS and Weinberg for allegedly deceiving "consumers," in
this case, Deer shareholders. And she said Deer does not have a
viable claim for tortious interference with its business
relationships since the company provided "insufficient"
allegations about how its relationships were affected. "There is
no indication that plaintiff's alleged loss resulted from
anything other than the harm to plaintiff's reputation due to
defendants' defamatory statements," Edmead wrote.
The rulings suggest she will dismiss similar claims against
Carnes. That brings the case back to the defamation claims and
the Silvercorp ruling from August. Garbus said he was optimistic
Edmead would toss Deer's claims, just as she dismissed
Silvercorp's. "This is an extraordinarily wide protection for
short sellers who identify themselves," Garbus said.
Deer counsel John Bostany of The Bostany Law Firm pointed to
several default judgments he has racked up against defendants in
the case, including International Financial Research & Analysis Group, which he said was the Chinese arm of EOS. Bostany also
said that despite the Silvercorp ruling, Deer's case should not
be dismissed before trial. "The allegations contained in Deer's
amended complaint are far more particularized with respect to
defamation that occurred and why it complies with necessary
criteria," he said.
(An earlier version of this story misspelled Jon Carnes's
first name. The story has also been updated to clarify Edmead's
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