A Texas judge is considering whether she should end the legal battle between Neiman Marcus and Marble Ridge Capital or further entertain the possibility that the hedge fund issued defamatory statements about the luxury retailer that hurt its business.
During a three-hour hearing Thursday morning, Dallas District Judge Tonya Parker seemed mostly interested in lawyers’ arguments on whether press releases issued by Marble Ridge show that it maliciously spread false statements that Neiman Marcus is in default under its indentures or whether the hedge fund was merely exercising its right of free speech.
The hearing comes two days after Judge Parker dismissed with prejudice Marble Ridge’s lawsuit against Neiman that alleged the retailer illegally siphoned $1 billion away from creditors when it fraudulently transferred ownership in European affiliate MyTheresa to Neiman’s private equity owners, Ares Capital Management and Canada Pension Plan Investment Board.
Lawyers for Marble Ridge vehemently denied defamation, asserting the hedge fund’s press releases were based on non-actionable opinions, which are unenforceable under the anti-SLAPP statute. Marble Ridge’s lawyers provided examples that included statements from press releases that Neiman “may have” defaulted under its indentures, or that Marble Ridge expressed “concern” that Neiman had defaulted.
Plus, Marble Ridge lead lawyer Sigmund Wissner-Gross said, the hedge fund was one voice among many – including multiple members of the press – who had “underscored the challenges Neiman was facing.” He said some publications began writing about Neiman’s issues in 2015 – well before the hedge fund began researching the issue.
“Marble Ridge is not out in the wilderness by itself, the concerns it raises are real,” said Wissner-Gross, a partner at Brown Rudnick in New York. “The major publications following this shared the same concerns as Marble Ridge.”
Opinion doesn’t always cut it in the eyes of the Texas courts, countered Neiman lawyer Chisara Ezie-Boncoeur.
“What if those facts that the opinions are rooted in are incorrect, incomplete or based on something erroneous?” she mused before the court.
Ezie-Boncoeur, an associate at Lynn Pinker Cox & Hurst, posed an example: if someone is called a liar versus “in my opinion” someone is a liar, the latter “can have as much damage.”
“Let’s try that here,” she continued. “Marble Ridge has said Neiman Marcus appears to have triggered defaults. That causes as much damage as a statement that Neiman Marcus’ conduct violated [the indentures.] The damage is the same.”
Wissner-Gross also told Judge Parker that Neiman’s countersuit should be dismissed because the retailer’s claims are precluded by judicial proceeding privilege. Essentially, he argued, because the alleged defamatory statements Marble Ridge made were associated with the current litigation, they are protected.
This argument alluded to the letters Marble Ridge wrote to Neiman last fall, which were attached to the press releases the firm sent out. One letter, Wissner-Gross pointed out, explicitly stated that the transfer of MyTheresa “may lead to litigation,” so Marble Ridge urged Neiman, its board members and private equity owners to preserve evidence.
“Marble Ridge concludes that everyone on the other side, everyone who has practiced law, and certainly Neiman, understood this was a demand letter,” Wissner-Gross said.
Wissner-Gross added that last year’s Landry’s v. Animal Legal Defense Fund case in Houston’s 14th Court of Appeals established that press releases can also be protected under the judicial proceeding privilege.
Neiman’s lead lawyer, Mike Lynn, said none of these arguments matter because Neiman has multiple pieces of evidence to meet the minimum burden of proof to further pursue its defamation claims against Marble Ridge.
Lynn said even the limited discovery Neiman has been able to conduct at this point in the case proves that Neiman has met this requirement.
Lynn said that just the suggestion that Neiman may be in default – when Marble Ridge knew that wasn’t the case – sends the message to the world that Neiman is a thief.
“If you accuse a financial officer or a lawyer in this state of theft, it hurts their reputation,” said Lynn, a partner at Lynn Pinker Cox & Hurst. “If you accuse a retailer in the midst of a $2 billion negotiation of its debt of theft, that hurts its reputation.”
One blaring example, Lynn pointed out, is the fact that Marble Ridge stated in a Sept. 18, 2018 letter to Neiman that the retailer was not in compliance with its interest coverage ratio, a metric that determines how easily a company can pay interest on outstanding debt. Lynn said Marble Ridge’s managing partner, Dan Kamensky, made those statements in the letter despite testifying that he had documents that would have proved Neiman was over the minimum requirement ratio had he actually done the calculations.
“He acknowledged he had the documents necessary to make the calculation and that he didn’t do it,” Lynn said. “He did things wrong then went out and distributed to the press willy nilly for [Marble Ridge’s] own financial gain.”
Lynn said Marble Ridge made these false statements so that the hedge fund could reap a large financial gain for itself, which makes its actions malicious.
“We’re not looking at this as a fingernail or a heart, we’re looking at the entire body and trying to determine what it said to us. And what it said to us is defamatory,” Lynn argued. “They were opportunistic investors and – not technically, but in the bond world – they were shorting us.”
The litigation comes in the midst of debt restructuring talks between Neiman and its creditors to extend the maturity of its $4.7 billion in debt to 2023. Marble Ridge is not a party in those talks.