Rocker Partners LLC, a New Jersey hedge fund, switched legal counsel and hired David Boies' law firm to defend it in an Overstock.com Inc. suit accusing it of attempting to drive down the company's share price.
A California appeals court in May denied a motion to dismiss the suit, prompting Rocker to change law firms to Boies, Schiller & Flexner, based in Armonk, N.Y., from Los Angeles' Paul, Hastings, Janofsky & Walker, said Gavin Rooney, a New Jersey attorney who's remaining one of Rocker's lead lawyers.
"In regards to Paul Hastings, they were in a support role as local counsel, and with the recent appellate decision, the case is entering a new phase, and the client decided to bring in Boies Schiller instead," Rooney said.
Research firm Gradient Analytics Inc. aided naked short sellers of Overstock.com's shares by issuing false and misleading reports on the company using information from Rocker, according to the 2005 complaint filed in California state court in San Francisco. The hedge fund also profited from shorting Overstock shares, according to the complaint.
Overstock.com, a Salt Lake-based Internet retailer, sued both Gradient and Rocker, accusing them of libel and unfair business practices. The research and hedge-fund firms deny wrongdoing and say the lawsuit is an attempt by Overstock.com to silence its critics.
Short sellers seek to profit by selling borrowed shares and later replacing them with cheaper shares if the price declines. Naked short sellers don't actually borrow the shares.
Gradient said it will appeal to the California Supreme Court the ruling on the motion to dismiss. "We were disappointed with the ruling," said Rooney, a partner with Lowenstein Sandler in Roseland, N.J.
Rooney will be co-lead counsel with David Shapiro, a Boies Schiller partner in Oakland, Calif. Boies, who represented the U.S. Justice Department in a 1998 antitrust case against Microsoft Corp. and 2000 presidential candidate Al Gore in litigation over the Florida vote recount, won't work on the Overstock.com suit, Shapiro said.
"From the beginning of the case Paul Hastings has acted as local northern California counsel, with the Lowenstein Sandler firm as lead counsel," said Paul Hastings spokeswoman Eileen King in an e-mailed statement. "The case is now moving to a different phase which no longer requires Paul Hastings legal counsel."
Grace Carter of Paul Hastings' San Francisco office, who led the firm's Rocker representation, declined to comment.
Rocker is now run by Copper River Management LLC, based in Red Bank, N.J. Monty Montgomery, a general partner in Copper River's California office, didn't immediately return a call for comment.
Contributing: Karen Gullo; Gary Matsumoto; Jesse Westbrook