Consequently, the evidence now indicates only that Defendants engaged in the lawful trading of securities. Because USANA did not meet its burden, the court strikes the second claim for relief under California’s anti-SLAPP statute.
A ruling yesterday in the Usana Health Sciences (NASDAQ:USNA) v. Barry Minkow & Fraud Discovery Institute case in United States Court for the District of Utah is a big blow to Usana.
The judge’s order essentially grants FDI’s anti-SLAPP motion and dismisses all but one of Usana’s claims under state law (the bulk of what Usana was claiming in their complaint).
But here’s the best part: Usana cannot pursue money damages under federal securities law (Rule 10B-5). They could seek “injunctive relief”… but there’s really nothing for Usana to ask for an injunction on anymore. Barry has no current positions in Usana stock, so there’s nothing to claim there. And the First Amendment protects free speech, so Usana really can’t shut Barry up… our laws allow him to criticize Usana if he wants. Theoretically, Usana could still pursue a claim of unlawful stock manipulation, but they really have no case in that regard. (As a friend of mine says: NOPE-SORRY!)
Here’s a little more detail on the judge’s opinion/order….
About the anti-SLAPP laws:
The anti-SLAPP statute “is designed to protect the defendant from having to litigate meritless claims aimed at chilling First Amendment expression… The hallmark of a SLAPP suit is that it lacks merit, and is brought with the goals of obtaining an economic advantage over a citizen party by increasing the cost of litigation to the point that the citizen party’s case will be weakened or abandoned, and of deterring future litigation.”
The judge decided that the anti-SLAPP statute can (and does) apply in federal court (where this case was filed).
The judge was also unimpressed by Usana’s claims that the statements by Barry/FDI about Usana were false. Quite simply, Usana has never proven that the claims were false.
Of course, Usana falls back on a couple of minor points in the original FDI report that it says are false. One related to the lab testing of the products, showing no N-Acetyl L-Cysteine. Usana cried because the lab report says the ingredient was “not detected,” but that the FDI report says “found zero amounts.” Somehow, Usana wanted the court to believe that FDI’s statement was misleading to the public. (WEAK!) The judge said that this wasn’t material, and since the actual lab report was attached to the FDI report, there was no basis to believe the FDI report was deceptive.
The other minor point related to the comparison of anti-oxidants in grape juice versus Usana’s TenX bar. The FDI report compared them serving to serving, but Usana later said that the appropriate comparison (and that upon which their anti-oxidant claims were made) was gram to gram. Again, the court said that the FDI report was clear regarding its comparison and that even though there are “differing interpretations of data,” that Usana didn’t prove that FDI’s statements were material.
The judge also criticized Usana’s positions regarding the drop in stock prices. The company says the “misstatements” in FDI’s report caused the stock to plummet. Yet the company made the following statements in court filings which seem to be in opposition to that assertion:
- “Some analysts believed that Usana’s growth could not be sustained, and as a result, Usana was viewed as a potentially lucrative target for short sellers.”
- “Some of the sudden price drops in Usana’s stock have occurred in conjunction with the publication of a Usana report or other elements of the public relations campaign, but took place faster than any possible market reaction.”
Hello, Usana! You’re saying that the FDI report caused the drop, but your other statements contradict that!
The decision goes on to discuss Usana’s naked short selling theory… their idea that somehow Barry/FDI plotted to depress the price of Usana’s shares and then went on to naked short sell them. Just one problem…. there’s no evidence of any naked short selling!
Usana also claimed that Barry/FDI interfered with business relationships and destroyed/harmed those relationships. But… there is no evidence of any such harms.
Usana further claimed that it’s Barry’s fault that Usana has to defend itself in other lawsuits. And again, there is no evidence that proves this.
The only thing left is Usana’s claim that Barry/FDI violated securities law and that the court should stop them from “manipulating” the stock. Barry/FDI wanted this claim thrown out as well, but the judge did not allow it. So that claim is still sitting there, but there doesn’t seem to be much that can be done (see comments about free speech above).
