It’s been a rocky past several weeks for Marble Ridge Partners.
In early September, the federal government brought two cases — one of them involving criminal charges — against the New York hedge fund’s founder, Dan Kamensky. Shortly before the charges were filed came news that Marble Ridge was winding down in light of that investigation into Kamensky. The feds allege he tried to prevent a competing bid for a piece of Neiman Marcus’ business in the retailer’s Chapter 11 bankruptcy.
Dallas’ Fifth Court of Appeals threw salt into Marble Ridge’s wound Wednesday evening when it affirmed a lower court ruling that declined to dismiss a lawsuit Neiman Marcus brought against the hedge fund in late 2018.
The suit alleges Marble Ridge made several maliciously false statements to the press, including that the retailer was in default of its debt, which Neiman Marcus alleges downgraded its credit ratings, disparaged its business, harmed its relationships and brought down the company’s value.
In addition to paving the way for Neimans’ defamation suit to move forward in a Dallas County trial court, the retailer’s lawyers said it also provides thorough analysis and guidance on when a party can implement judicial proceedings privilege — which protects statements made by parties, lawyers and judges during litigation — as part of a freedom of speech defense. Marble Ridge had argued that Neiman’s defamation suit should be dismissed under the Texas Citizens Participation Act in part because its statements were protected by judicial proceedings privilege.
“We are very proud of this decision, and we are overwhelmed with the scholarship that went into it,” said Dallas attorney Mike Lynn, who represents Neiman Marcus. “This is by far the leading and most sophisticated analysis of a number of issues raised in the case, including by far the most complete analysis of judicial privilege in the state’s history.
“We are also pleased that Neiman’s won against this short seller,” Lynn added. “Neiman’s deserved it and needed this win.”
Marble Ridge and its lawyers from Brown Rudnick declined to comment.
Marble Ridge had also argued that it was clear its statements about Neiman Marcus were opinion, but in a 46-page opinion, Justice Ken Molberg disagreed.
“We conclude that a reasonable person of ordinary intelligence could conclude from Marble Ridge’s statements that Marble Ridge, a sophisticated hedge fund claiming in its communications to hold certain Neiman Marcus interests, had reviewed information from which it had concluded that Neiman Marcus was in default of its indentures,” Justice Molberg wrote. “Whether or not Neiman Marcus was in default of its indentures is verifiable; thus, Marble Ridge’s statements are of fact, not opinion.”
The court rejected Marble Ridge’s argument that judicial privilege applied to its statements since they “bear some relation to a judicial proceeding” that was under consideration at the time the statements were made.
“We conclude Marble Ridge failed to establish that at the time it made the [September 2018] communications, Marble Ridge was contemplating in good faith and seriously considering a judicial proceeding,” the opinion says. “On this record, we agree with Neiman Marcus that applying the privilege to Marble Ridge’s communications would be an unprecedented expansion of the privilege — one we find both unwarranted and not in furtherance of the privilege’s underlying goals.”
The case now goes back to Dallas County District Judge Tonya Parker’s court.