Grifols wins first court battle in Gotham, US

BarcelonaGrifols has won its first court case against Gotham City Research in the U.S. The Federal District Court for the Southern District of New York rejected the hedge fund's request to dismiss the lawsuit filed by the Catalan multinational blood products company.

Judge Lewis J. Liman has determined that there is sufficient evidence to continue the defamation proceedings against Daniel Yu, founder of Gotham, and his company, which caused a stock market meltdown early last year by reporting alleged accounting malpractice at Grifols, according to the Catalan company, which Nacho Abia owns.

The judge also upheld the possibility of "necessary cooperation" from Cyrus de Weck and General Industrial Partners (GIP). At the same time, he expressly rejected the defendants' attempt to dismiss the case by invoking New York state laws designed to protect free speech in strategic litigation. He also denied their request to recover their legal fees.

False Claims

In its ruling, the judge stated that Grifols "properly" alleged that Gotham's report contained false statements. One of these was that the company had failed to disclose a $95 million loan to the Scranton Company, a shareholder in the company and which includes members of the founding family.

In fact, this information was included in all of its annual reports filed with the US securities regulator, the SEC, and the Spanish National Securities Market Commission (CNMV) from 2018 to 2022. According to Grifols, the court "makes clear that Gotham's statement was objectively false and potentially defamatory."

The judge concludes that Gotham was aware of the information in the annual reports, which were public, "but simply decided to report the opposite" in its publication on January 9, 2024, which caused the stock market crash of Grifols and other subsequent ones. He adds that it is plausible to argue that the modification of the report the following day, after closing its short position (a bet on making money from the fall of the stock), was not made "in good faith" and can be interpreted as an "attempt to cover up that initial falsehood."

The Catalan company, which holds its shareholders' meeting next week, considers the judge's decision "a significant procedural advance, overcoming an important legal hurdle in a demanding legal environment such as that of the state of New York."