Source: https://www.scribd.com/doc/259286/Eagle-23
Timestamp: 2019-04-26 01:01:51+00:00

Document:
) Date: February 23, 2006 ) Time: 9:00 a.m.
discovery prior to any final ruling on this motion.
I To avoid duplication, Plaintiff is submitting a consolidated opposition for the convenience of the Court and the parties. By doing so, Plaintiff is not exceeding the page limit requirement as it is entitled to thirty pages.
2 For purposes of this opposition, Defendants shall mean DOES 2-5.
damage the value of Eagle Broadband stock. See generally RJN at Ex. A.
objections were resolved. Khachatourian Decl. Ex. B.
appearance in this action. ld. at ~7.
B. Eagle Broadband, The Market Manipulation Scheme And Its Effect On Shareholders.
generation entertainment, communications, Internet and security services to their subscribers.
needs. Id. Eagle Broadband was founded in 1996 and is publicly traded on the American Stock Exchange under the ticker symbol EAG. Id.
Eagle Broadband's legal action was prompted by inquiries from shareholders who complained to the company about falling share price and the difficulty in buying and selling Eagle Broadband stock. Reynolds Decl. ~5. In fact, several shareholders remarked to the company that they have observed unusual trading patterns with Eagle Broadband's stock and have urged the company to investigate. Id. Eagle Broadband forwarded many of these shareholder complaints to the SEC and its investigation is currently pending. Id.
Opposition to Anti-SLAPP Motions ("Flaherty Decl.") at ~11.
information posted on those same boards can not be readily found by investors. Id. The result of this scheme is that the investors who initially bought the stock at higher prices sell at a loss in the mistaken belief that the stock is worth less and that the price is likely to continue to fall. Id.
3 "Selling Short" is the sale of a stock that the buyer does not yet own; the seller having to buy the equity in the future to meet delivery obligations. This transaction is made in the hope that the stock price will fall; the opposite of the more usual "going long", or purchasing a stock in the hope that the stock price will rise. In a typical short selling position the investor sells borrowed stock in the hopes that the stock price will fall allowing the investor to buy the stock back for a profit. The action of the investor buying the stock and realizing their profit on a short position is known as "covering". Flaherty Decl. ~7; Ex. A.
shareholders have suffered significant financial losses.
in a place open to the public or a public forum in connection with an issue of public interest."
DOES 4-5 Mot. at 6:9-11; DOES 2-3 Mot. at 2-9-12.
In ruling on a special motion to strike, the trial court engages in a "two-step" analysis.
upon which the liability or defense is based." Cal. Civ. Proc.Code§425.l6(b)(2).
has demonstrated a probability of prevailing on the claim." Cal. Civ. Proc. Code §§ 425. 16(b).
Plaintiff meet its burden, Defendants' Anti-SLAPP motions must be denied.
2. The Complaint Is Exempt From The Anti-SLAPP Statute Pursuant to Section 425.17(c).
The Legislature finds and declares that there has been a disturbing abuse of Section 425.16, the California Anti-SLAPP Law, which has undermined the exercise of the constitutional rights of freedom of speech and petition for redress of grievances, contrary to the purpose and intent of Section 425.16. The Legislature finds and declares that it is in the public interest to encourage continued participation in matters of public significance, and that this participation should not be chilled through abuse of the judicial process or Section 425.16.
(1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations ... that is made for the purpose of obtaining approval for, promoting, or securing ... commercial transactions in, the person's goods or services, or ... was made in the course of delivering the person's goods or services.
(2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer ... notwithstanding that the conduct or statement concerning an important public issue.
425.16." See Cal. Civ. Proc. Code § 425. 17(a)(West 2005).
28 amicus brief. See Barrett v. Rosenthal, Case No. S122953.
ComputerXpress case. Unlike the websites in ComputerXpress, which accepted postings from anyone, here, Yahoo! places controls and restrictions on who may post and what content may be posted. See generally ComputerXpress, Inc. v. Jackson, 93 Calp.App. 4th 993 (2001).
Decl. ~18. Users also have the ability to filter profanity and report abuses to Yahoo!. Id.
• Yahoo! mayor may not pre-screen Content, but that Yahoo! and its designees shall have the right (but not the obligation) in their sole discretion to pre-screen, refuse, or move any Content that is available via the Service. Reynolds Decl. Ex. H at~6.
• Yahoo! may establish general practices and limits concerning use of the Service, including without limitation the maximum number of days that email messages, message board postings or other uploaded Content will be retained by the Service, the maximum number of email messages that may be sent from or received by an account on the Service, the maximum size of any email message that may be sent from or received by an account on the Service, the maximum disk space that will be allotted on Yahoo! 's servers on your behalf, and the maximum number of times (and the maximum duration for which) you may access the Service in a given period of time. Reynolds Decl. Ex. H at ~12.
28 regulations promulgated by the U.S. Securities and Exchange Commission, any rules of any national or other securities exchange, including, without limitation, the New York Stock Exchange, the American Stock Exchange or the NASDAQ, and any regulations having the force of law. Reynolds Decl. Ex. H at ~6.
the po stings at issue are a matter of public interest.
28 Center v. Golden Gateway Tenants Assoc., 26 Cal.4th 1013, 1033-1034 (2001). Thus, the AntiSLAPP statute does not apply here.
B. Even If The Anti-SLAPP Statute Applies, Plaintiff Has Presented Sufficient Evidence That It Is Likely To Prevail On The Merits Of Its Claim.
Even if the Anti-SLAPP statute applies in this case, Plaintiff has presented sufficient admissible evidence to establish a probability of prevailing on its claims.
probable effect of the statement, considering both the language and the context. Id. As is discussed more fully below, Defendants' postings are false and therefore, actionable as a matter of law.
28 1 about Eagle Broadband's business to cause Eagle Broadband financial harm.
8 products. RJN Ex. A at F-G. This, too, is false. Reynolds Decl, ~11-13. Around the same time 9 as these po stings, Eagle Broadband had actually announced its partnership with On Command.
10 fd. Accordingly, like the other DOE postings, DOE 2's po stings are also false.
and are actionable on their face.
action were deliberately constructed to mimic official corporate documents.
construed to be an opinion.
of a true report of a Form 144 filing but no such filing exists on that date exists. Reynolds Decl.
rather than fact. Accordingly, Defendants' motions should be denied.
Corp. v. American Broadcasting Companies, 25 Cal.3d 763, 769-770 (1979).
emails and SEC filings. Unlike Ampex, where the po stings were critical of a company's management, here, the postings are deliberately false and misleading and appear to be designed to instill fear in the investing public.
make sense to say that Eagle Broadband invites public comment when it is simply complying with its legal obligations. Since Defendants have failed to meet their burden, the additional malice requirement for limited public figures should notbe applied here.
e. Even if Eagle Is A Limited Public Figure, There Is Sufficient Evidence To Support Malicious Intent.
misinformation about Eagle Broadband's financial condition and products to the investing public. Accordingly, Plaintiff can easily meet the "malice' requirement and the Court should deny Defendants' motion in its entirety.
2. Eagle Broadband's Section 17200 Claim Is Not Preempted By The Holding In Bowen.
merits of its claim at trial. DOES 2-3 Mot. at 5:17-6:5. DOES 2-3's argument illustrates a misunderstanding of Eagle Broadband's allegations and California law.
disagree concerns whether all securities transactions are exempt from the reach of Section 17200.
are somehow implicated but not purchased or sold by the plaintiff.
28 the DOES have engaged in unfair and fraudulent business acts including defamation which has resulted in considerable financial loss to Eagle Broadband and the depletion of the value of its stock. RJN Ex. A Second, the lawsuit alleges that DOES have engaged in a market manipulation scheme, which Eagle Broadband's independent expert has identified as a "short and distort scheme" to drive Eagle Broadband's stock price down allowing the traders to close their positions at a profit. Flaherty Decl. ~~11-27.
The conduct at issue in this case is more akin to the facts alleged in Strigliabotti v.
action against a brokerage firm engaging in a "trading ahead scheme," - i.e. not executing stock sales orders by its customers immediately and instead trading ahead for its own benefit before processing those sales-was not preempted by the federal securities laws. 80 Cal. App. 4th at 353-354. Bowen, on the other hand, dealt with two plaintiff investors who brought suit against a corporation alleging that they were defrauded by a pyramid scheme orchestrated by foreign brokerage houses from which they purchased stock. 116 Cal.App.d'" at 778.
assess the impact of the false statements and the financial damage Eagle Broadband has suffered. Even if Bowen did apply, Eagle Broadband could still pursue its Section 17200 based on its defamation allegations. Accordingly, Eagle Broadband's Section 17200 is viable as a matter of law, and therefore, Defendants' Anti-SLAPP motions should be denied.
28 Defendants' efforts. Id. at ~21-26, 28.
• January and February 2005: Eagle Broadband stock went through a period where the stock price lost in excess of 46% of its value, the largest largest loss in value experienced by Eagle Broadband in any sixty day period. DOES 2 and 5 made their po stings during this time period. See Flaherty Decl. ~18-20; 24.
• DOE 5 posting occurred in the middle of this time period and during the afternoon of a day that ultimately represented the largest loss in EAG share value in anyone day during this period (a loss in excess of 10%). Id.
4 Defendants also ignore well established California precedent that in libel per se cases, Plaintiff does not have to establish special damages, because damage is presumed. See Barnes-Hind, 181 Cal. App. 3d at 382; see also BAH 7.10.
28 approximately 6.4 million at June 15, 2005. During the 30 days ended July 15, 2005, over 4 million short interest positions were covered or closed. The high cover volume in June/July 2005 is of interest since short traders make profits when short positions are covered and this 30-day period has the highest volume of covered positions. Id.
• The short interest pattern for the period after July 15, 2005 differs in that it is more indicative of a "churn" scenario where a relatively consistent number of short positions are opened and closed within the same month. Id.
• Another potential indicator of stock price manipulation is a stock's beta. As of January 5, 2006, the Beta for Eagle Broadband is 3.27 and indicates that is it a highly volatile stock and subject to a much greater degree of fluctuation in stock price than the market as a whole.i Id.
• Eagle Broadband experiences a high volume of postings on its message board, significantly higher than that experienced by the comparable companies. See Flaherty Decl. Ex. B, ~14.
• Eagle Broadband is subj ect to a much greater volume of short trades than that which would be expected for a comparable stock. See Flaherty Decl. ~16, Ex. C.
Broadband does not have a probability of success on the merits.
5 A beta is a measure of the volatility of a company's stock price as compared with the market as a whole and an indication of how the stock's price fluctuates in comparison with the rest of the market. A beta of 1 indicates that the stock's price will generally move with the market. A beta of less than one indicates that the stock is less volatile than the market as a whole while a beta of more than one indicates that the stock is more volatile (i.e. subject to greater price fluctuation) than the market. Flaherty Decl. ~20.
obtain this information should the Court require supplemental briefing.
By ~e1lachatourian~ Attorneys for Plaintiff EAGLE BROADBAND, INC.

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