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DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
ARNOLD & PORTER LLPKENNETH G. HAUSMAN (No. 57252)[email protected] A. WINTHROP (No. 183532)[email protected] Y. WALDO (No. 277783)[email protected]
Three Embarcadero Center, 10th FloorSan Francisco, CA 94111-4024Telephone: 415.471.3100Facsimile: 415.471.3400
BOSTWICK LAWGARY L. BOSTWICK (No. 79000)[email protected] Wilshire Blvd., Suite 400Los Angeles, CA 90025Telephone: 310.979.6059Facsimile: 424.228.5975
Attorneys for DefendantJAMES CHANOS
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
STEPHEN WYNN and WYNN RESORTSLIMITED,
Plaintiffs,
v.
JAMES CHANOS,
Defendant.
Case No.: CV 14-4329 WHO
REPLY IN SUPPORT OF DEFENDANTJAMES CHANOSS MOTION TODISMISS PLAINTIFFS COMPLAINT
Date: December 3, 2014
Time: 2:00 p.m.
Courtroom: 2
Judge: Hon. William H. Orrick
Complaint Filed: September 25, 2014
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- i -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
TABLE OF CONTENTS
Page
I. INTRODUCTION 1
II. LEGAL ARGUMENT 2
A. The Certified Transcript Submitted To The Court Is ProperlyConsidered On Mr. Chanoss Motion To Dismiss. 2
B. Mr. Chanos Did Not Make The Statement Alleged, And His ActualStatements Do Not Support Plaintiffs Claim Despite Their DistortionsAnd Alterations. 4
C. The Statement Mr. Chanos Did Make Was His Opinion, Not A FactualAssertion. 7
D. Plaintiffs Cannot Plausibly Allege Mr. Chanoss Actual Statement WasFalse. 9
E. Plaintiffs Do Not Address Their Failure to Plead Malice With Respect toMr. Chanoss Actual Statements. 11
F. Leave to Amend Would be Futile. 11
III. CONCLUSION 12
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- ii -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
TABLE OF AUTHORITIES
Page(s)
Cases
Baker v. L.A. Herald Examiner,
42 Cal. 3d 254 (1986) 3
Compuware Corp. v. Moodys Investors Servs., Inc.,499 F.3d 520 (6th Cir. 2007) 8
Daniels-Hall v. Natl Educ. Assn,629 F.3d 992 (9th Cir. 2010) 2, 10
Forsher v. Bugliosi,26 Cal. 3d 792 (1980) 5
Friends of the River v. U.S. Army Corps of Engineers,870 F. Supp. 2d 966 (E.D. Cal. 2012) 4
Good Govt Grp. of Seal Beach, Inc. v. Superior Court (Hogard),22 Cal. 3d 672 (1978) 7
Haub v. Friermuth,1 Cal. App. 556 (1905) 3
In re Edward Q.,177 Cal. App. 4th 906 (2009) 4
In re Gilead Scis. Sec. Lit.,2005 U.S. Dist. LEXIS 3170 (N.D. Cal. Jan. 26, 2005) 10
In re Gilead Scis. Sec. Litig.,536 F.3d 1049 (9th Cir. 2008) 2, 10
In re iPhone Application Litig.,844 F. Supp. 2d 1040 (N.D. Cal. 2012) 11
Kaelin v. Globe Commcns Corp.,162 F.3d 1036 (9th Cir. 1998) 3
Knievel v. ESPN,393 F.3d 1068 (9th Cir. 2005) 3
Leadsinger, Inc. v. BMG Music Publg,512 F.3d 522 (9th Cir. 2008) 11
United States v. Smith,155 F.3d 1051 (9th Cir. 1998),superseded on other grounds by Konop v. Hawiian Airlines, Inc., 236 F.3d 1035 (9thCir. 2001) 5
Statutes
Cal. Code Civ. Proc. 425.16 1
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- iii -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
Other Authorities
6A Cal. Jur. 3dAssault and Other Wilful Torts 334 (2011) 3
Louis Loss & Joel Seligman,Fundamentals of Securities Regulation(3d ed.1988) 5
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- 1 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
I. INTRODUCTION
Plaintiffs arguments against the dismissal of their slanderper seclaim rest almost entirely
on convincing this Court to turn a blind eye to the certified Transcript and video of what
Mr. Chanos said as a panelist at the Berkeley Graduate School of Journalisms symposium. Failing
that, Plaintiffs would have the Court accept their cut-and-paste manipulation of the Transcriptin
which they actually substitute the word not for go to transform Mr. Chanoss words into the
oppositeof what he saidinstead of a straightforward reading of the words as spoken by
Mr. Chanos.
This Court should reject these tactics. Mr. Chanos never said or implied that either Wynn
Resorts or Stephen Wynn had violated the FCPA. He merely said, in response to a question from
the symposiums moderator, that he had sold Macau casino operators stock because of risk he
perceived at that time under the FCPA and other aspects of how business is done in China. This
statement is not defamatory on its face, does not imply a factual accusation that Wynn Resorts
violated the FCPA (and says nothing at all about Mr. Wynn personally), and is a non-actionable
statement of Mr. Chanoss historical opinion of investment risk. Moreover, even if Mr. Chanoss
historical assessment of investment risk could be considered a factual assertion, Plaintiffs have not
shown and cannot show that Mr. Chanoss assessment was false. Wynn Resorts admitted and
described the risks of FCPA violations in its judicially noticeable 2011 Form 10-K Annual Report
filed with the Securities and Exchange Commission.
Plaintiffs have failed to identify a defamatory statement by Mr. Chanos, explain how
Mr. Chanoss actual statement was a factual assertion, or make any allegations that Mr. Chanoss
actual statement was made with malice. The Transcript provides all the information the Court
needs to determine that Plaintiffs have no claim against Mr. Chanos, no matter how they might try
to amend their Complaint. Accordingly, Mr. Chanoss Motion to Dismiss should be granted and
this meritless suit should be dismissed without leave to amend. The motion to dismiss was filed at
the same time as a special motion to strike under California Code of Civil Procedure Section 425.16
and Mr. Chanos asks the Court to consider that motion first as it would render this motion moot.
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- 2 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
II. LEGAL ARGUMENT
A. The Certified Transcript Submitted To The Court Is Properly Considered OnMr. Chanoss Motion To Dismiss.
Plaintiffs cannot avoid dismissal of their claim by mischaracterizing the substance of
Mr. Chanoss comments at the symposium in their Complaint, and then arguing that the Court may
not even consider the record of precisely what Mr. Chanos said. In considering a motion to dismiss
a complaint, the court may take judicial notice of documents on which the complaint necessarily
relies if: (1) the complaint refers to them; (2) they are central to the plaintiffs claim; and (3) no
party questions the authenticity of the copy attached to the 12(b)(6) motion. Daniels-Hall v. Natl
Educ. Assn, 629 F.3d 992, 998 (9th Cir. 2010). The court need not accept as true allegations that
contradict matters properly subject to judicial notice or by exhibit or allegations that are merely
conclusory, unwarranted deductions of fact, or unreasonable inferences. In re Gilead Scis. Sec.
Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (citation and internal quotation marks omitted). This
Court can and should consider the Transcript containing Mr. Chanoss allegedly slanderous
statements because it satisfies all three preconditions: the Complaint incorporates the statements by
reference, they are central to Plaintiffs claim, no party contests the authenticity of the Transcript,1
and, as explained in Part II(B),infra, the Transcript contradicts Plaintiffs characterization of
Mr. Chanoss statements.
Plaintiffs argue that their fabricated version of what Mr. Chanos said is all the Court should
consider when assessing the sufficiency of their Complaint. Specifically, they assert that they need
not plead the allegedly defamatory statement verbatim, but only the substance of the statement.
Opp. 6. However, where the action is based on the allegation that the defendant charged the
plaintiff with commission of a crime, the complaint must specify the crime alleged to have been
imputed, along with the recital of the words as spoken, or may set forth the words themselves, and
that a mere allegation that the defendant charged the plaintiff with having committed a named crime
1That Plaintiffs do not dispute the accuracy and authenticity of the Transcript is apparent from their
own repeated reliance on and quotation from the Transcript. See, e.g., Opp. 11-13.
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- 3 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
is not sufficient. 6A Cal. Jur. 3dAssault and Other Wilful Torts 334 (2011) (citing Haub v.
Friermuth, 1 Cal. App. 556 (1905)).
Plaintiffs argue that the Court should ignore the Transcript and the publicly available video
of Mr. Chanoss actual comments, not because they question the authenticity or accuracy of either,
but because neither contains the two video clips shown by the moderator during the panel
discussion. Plaintiffs do not allege that Mr. Chanos appeared or spoke on the video clips, nor do
they explain how the absence of the video clips would prevent this Court from assessing whether
Mr. Chanoss words could plausibly be understood to be slanderper se. This Court has already
considered and rejected Plaintiffs arguments on this point in the context of Plaintiffs request for
discovery prior to consideration of Mr. Chanoss anti-SLAPP motion. ECF No. 30. As the Court
noted, I do not understand why the video clips are essential . . . or how the video clips would help
me decide whether Chanos made the defamatory statement alleged, whether it is an opinion or a
factual assertion, or whether it was reasonably based on Wynns own admissions in SEC filings and
other judicially noticeable material. Id.at 1-2. Plaintiffs present no new arguments in their
Opposition to the motion to dismiss that would warrant a change in the Courts ruling that the video
clips are unnecessary.
The cases Plaintiffs cite as support for the proposition that Mr. Chanoss statement must be
viewed in light of the context of the full communication (Opp. 7) actually support this Courts
consideration of the Transcript. InKaelin v. Globe Communications Corp., 162 F.3d 1036, 1040
(9th Cir. 1998), the court decided that to assess the defendants allegedly defamatory headline, it
needed to consider the rest of the defendants published article. InKnievel v. ESPN, 393 F.3d 1068,
1076 (9th Cir. 2005), the court determined that an image of the plaintiff and his wife and the
allegedly defamatory accompanying caption needed to be assessed in the context of other images
and captions presented in the series published by the defendant. Likewise, inBaker v. L.A. Herald
Examiner, 42 Cal. 3d 254, 261 (1986), the court held that to adjudicate defamatory meaning, the
court must examine the nature and full content of the communication. The unifying aspect of
each of these cases is that the additional material considered for context was thedefendants own
communication accompanying the allegedly defamatory snippet. None of these cases suggests that
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- 4 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
material outside of the defendants own communications provides essential context, much less
suggests that a court should, or even could, exclude from consideration a verbatim transcript and
video of the entirety of the defendants communications. Plaintiffs make an unsupported leap from
the cited cases to assert that the video clips, not alleged to have been created by Mr. Chanos and in
which he is not alleged to appear or speak, are necessary to the Courts analysis of Mr. Chanoss
statements.
The two cases Plaintiffs cite as examples of courts excluding documents submitted in
support of a motion to dismiss are inapposite. InIn re Edward Q., the court assessing the legislative
history behind a particular statute accepted three reports submitted by the Attorney General, but
declined to accept a fourth report because the copy submitted was incomplete such that the Court
could not even determine whether it was appropriate for judicial notice. 177 Cal. App. 4th 906, 910
n.3 (2009). InFriends of the River v. U.S. Army Corps of Engineers, 870 F. Supp. 2d 966 (E.D.
Cal. 2012), the court rejected a partial set of documents submitted in support of an argument over
the appropriateness of an agency action. The court determined that [t]o ensure fair review of an
agency action, [the court] should have before it neither more nor less information than did the
agency when it made its decision. Id.at 974 (citations omitted). Neither of these cases is relevant
to this Courts consideration of whether the Transcriptthe accuracy of which Plaintiffs do not
disputeis appropriate for review on a motion to dismiss a slander claim alleging only Plaintiffs
mischaracterization of Mr. Chanoss words.
Plaintiffs cite no case in which a court weighing a motion to dismiss a defamation claim has
refused to consider the actual words alleged to be defamatory. In assessing whether Mr. Chanoss
statements can be viewed by a reasonable person to be slanderper se, this Court can and should
consider the words Mr. Chanos actually spoke at the symposium, as reflected in the certified
Transcript.
B. Mr. Chanos Did Not Make The Statement Alleged, And His Actual StatementsDo Not Support Plaintiffs Claim Despite Their Distortions And Alterations.
As the Transcript shows, Mr. Chanos never made the statement alleged in the Complaint,
that Wynn and Wynn Resorts had violated the Foreign Corrupt Practices Act. Compl. 12.
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- 5 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
Undeterred by this fact, Plaintiffs attempt to salvage their slanderper seclaim by stitching together
the words Mr. Chanos did say and using bald assertions unsupported by the record to fabricate the
meaning they desire. Plaintiffs Opposition relies on three such distortions: (1) that Mr. Chanos
expressly state[d] that he went short in U.S. casino operators Mr. Adelman and Mr. Wynn
because . . . [they] were in contravention of the Foreign Corrupt Practices Act (Opp. 13), (2) that
Mr. Chanos stated that Macau casino operators [go] across the legal line ( id.), and (3) that
Mr. Chanos said that he shorted2
Macau casino operators in 2009-10 (id.). None of these assertions
is true, as the Transcript itself shows. Each is a cut and paste manipulation of Mr. Chanoss words.
Because Plaintiffs depend upon distortions and draw inferences that are so obscure and attenuated
as to be beyond the realm of reasonableness, they have no probability of prevailing on their claim.
Forsher v. Bugliosi, 26 Cal. 3d 792, 805 (1980).
Plaintiffs entire Opposition depends on these gross misstatements of the record. Plaintiffs
assert that Mr. Chanos expressly state[d] that he went short in U.S. casino operators Mr. Adelman
and Mr. Wynn because . . . [they] were in contravention of the Foreign Corrupt Practices Act.
Opp. 13:10-13. But Plaintiffs only quote the phrases U.S. casino operators Mr. Adelman and
Mr. Wynn and Foreign Corrupt Practices Act because nowhere does Mr. Chanos expressly
state[] that he went short or sold Wynn Resorts stock because it was in contravention of or
violating the FCPA.
More strikingly, Plaintiffs purport to quote Mr. Chanos as stating that Macau casino
operators [go] across the legal line. Opp. 13:19-21. Mr. Chanos never said that. He made the
oppositeassertion, which makes Plaintiffs editing of the Transcript particularly egregious. His
actual words were: And, although, they hide behind the facade of the junket companies,
increasingly, from aif not across the legal line, to use my friend Bethany McLeans term, it was
2Short selling is . . . sell[ing] stock which [one] does not own, anticipating that the price will
decline and that [one] will thereby be enabled to cover, or make delivery of the stock sold, bypurchasing it at the lesser price. If the decline materializes, the short seller realizes as a profit thedifferential between the sales price and the lower purchase or covering price. United States v.Smith, 155 F.3d 1051, 1053 n.1 (9th Cir. 1998) (citing Louis Loss & Joel Seligman, Fundamentalsof Securities Regulation699 (3d ed. 1988),superseded on other grounds by Konop v. HawiianAirlines, Inc., 236 F.3d 1035 (9th Cir. 2001).
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- 6 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
legal fraud. RJN (ECF No. 17) Ex. 1 (Transcript) 6:14-19. Mr. Chanoss very next words,
explaining the words legal fraud, confirm that he was asserting the exact opposite of the
fabricated phrase that Macau casino operators [go] across the legal line: While they might be
adhering to every aspect of legal requirements in what they were doing, there was still an attempt to
mislead and an attempt to obfuscate and I just couldnt get comfortable with that. Transcript 6:20-
25 (emphasis added). The explicit point he made is that while they might not cross the legal line, he
still was uncomfortable.
Finally, Plaintiffs misstate the record in their description of the dates Mr. Chanos said he
was longi.e., held stock inthe Macau casino operators and when he sold that long position.
Plaintiffs erroneously describe late 2009, early 2010 as the time at which Chanos admittedly
made his first short bet in Macau casinos. Opp. 13:6-9 (arguing that symposium audience could
also infer that, by late 2009, early 2010 the time at which Chanos admittedly made his first short
bet in Macau casinos he had uncovered information that caused him to abandon his long position
and assume a short position.). But here too, Mr. Chanos said no such thing. Mr. Chanoss words
in the Transcript are unequivocal: And when we first put our short bet on in China in late 09, 2010
that David [Barboza] wrote about,we were actually long Macau casinoson the thought that I
wanted to be long corruption and short property. Transcript 5:23-6:4. That is, while the Kynikos
funds were shortotherChina-related companies in late 2009 and early 2010, at that time they were
longthe stock of Macau casino operators like Wynn Resorts. Thus, Plaintiffs contention that
Mr. Chanos stated at the symposium that his firm had shorted Macau casino operators in 2009-10
based on his findings of FCPA violations (seeOpp. 13:4-14:5) is the exactoppositeof what
Mr. Chanos said.
A plain reading of the transcript (and review of the video) make it abundantly clear that
Mr. Chanos said he decided to sell not because he discovered violations or contravention of the
FCPA, but because of concerns with the risk he was taking with clients money under [the FCPA]
and a variety of other . . . aspects of exactly how business is done there. Transcript 6:11-14. No
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- 7 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
amount of Plaintiffs twisting and distortions can convert what Mr. Chanos said into a statement or
implication that Wynn Resorts had actually violated the FCPA.3
C. The Statement Mr. Chanos Did Make Was His Opinion, Not A FactualAssertion.
To survive a motion to dismiss, Plaintiffs Complaint would need to plausibly allege that
Mr. Chanoss statement conveyed a factual assertion andthat he either deliberately cast his
statements in an equivocal fashion in the hope of insinuating a defamatory import to the reader, or
that he knew or acted in reckless disregard of whether his words would be interpreted by the
average reader as defamatory statements of fact. Good Govt Grp. of Seal Beach, Inc. v. Superior
Court (Hogard), 22 Cal. 3d 672, 684 (1978). Plaintiffs have not shown they can meet either
requirement.
First, Plaintiffs failure to accurately identify what Mr. Chanos actually said at the
symposium completely undermines their analysis of whether Mr. Chanoss statement was a factual
assertion. Because Mr. Chanos never said that Mr. Wynn or Wynn Resorts had violated the FCPA,
Plaintiffs contention that such an accusation is provably false (Opp. 14-15) is beside the point.
Mr. Chanossactualstatementthat he had sold stock in the past because he was concerned then
about the risk [he] was taking with clients money under Foreign Corrupt Practices Act and a
variety of other, you know, aspects of exactly how business is done in Chinais a classic opinion
regarding Mr. Chanoss perception of investment risk that cannot be proven true or false.
The nature of Mr. Chanoss statement as pure opinion is evident from the time sequence set
out in his words. Mr. Chanos was speaking in 2014, but he was describing his state of mind at an
earlier point in time, setting out his predictionat that earlier timeabout thefutureperformance of
Wynn Resorts stock. SeeTranscript 5:24-7:1 (describing the Kynikos funds long position in
Macau casinos from 2010 onwards, describing a period of investigation and research, and then
3The three distortions of the Transcript described in the text are not the only examples of Plaintiffs
effort to rewrite what occurred at the symposium. For example, in arguing for discovery of thevideo clips, Plaintiffs claim Mr. Bergman, the symposium moderator, asked Mr. Chanos a questionimmediately after playing the first of two film clips. Opp. 8:6-10. In fact, Mr. Bergman first askeda question and received an answer from investigative reporter David Barboza, and only then turnedto Mr. Chanos. SeeTranscript 3:9-4:7.
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- 8 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
concluding with a sale of the positions in Macau casino operators). He explicitly contrasts his
views from the time of the sale (in 2012) with his current views: So we got out of our Macau
casinos andnow, I think, more importantly, I think, were looking at the Macau situation as a
conduit for, in effect, wholesale capital flight on China which has implications for the banking
system and the credit system there. Transcript 7:1-7 (emphasis added). With this time sequence in
mind, Mr. Chanos unmistakably was describing his forward-looking prediction at the time he sold
the stock in Macau casino operators, that by its nature cannot be a factual assertion. See
Compuware Corp. v. Moodys Investors Servs., Inc., 499 F.3d 520, 529 (6th Cir. 2007) (credit
rating held to be predictive opinion, and therefore not actionable factual assertion).
Second, Plaintiffs cannot reasonably allege that Mr. Chanos purposefully phrased his words
in an ambiguous fashion to imply that he had undisclosed facts showing that Plaintiffs had violated
the FCPA. Nothing in Mr. Chanoss decision to sellin and of itselfimplies that he believed that the
Plaintiffs had actually engaged in violations of the FCPA. The mere existence of rumors or
investigations is often enough to depress a companys stock price. Moreover, nothing in
Mr. Chanosswordsimplied that he had evidence that the Plaintiffs had violated the FCPA. Again,
it bears repeating what Mr. Chanos actuallysaid at the Symposium:
I began to really get concerned about the risk I was taking with clients money underForeign Corrupt Practices Act and a variety of other, you know, aspects of exactlyhow business is done there. And, although, they hide behind the facade of the junketcompanies, increasingly, from aif not across the legal line, to use my friendBethany McLeans term, it was legal fraud. While they might be adhering to everyaspect of legal requirements in what they were doing, there was still an attempt tomislead and an attempt to obfuscate and I just couldnt get comfortable with that. Sowe got out of our Macau casinos . . . . (Transcript 6:10-7:1)
That is, far from implying that he had evidence that Mr. Wynn or Wynn Resorts had
violated the FCPA, Mr. Chanos went out of his way to suggest that he did nothave such evidence
and that the discomfort that he felt about his Macau casino investments arose from the casino
operators business practices, which, he conceded, might be legal, not across the legal line, and
adhering to every aspect of legal requirements.
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- 9 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO
D. Plaintiffs Cannot Plausibly Allege Mr. Chanoss Actual Statement Was False.
Even if Mr. Chanoss statement could be understood to contain a factual statement beyond
what he said about his own concerns about risk, Plaintiffs cannot allege or prove that at the time
Mr. Chanos sold his investments in Macau casino operators, there was no risk under the FCPA or
the way business is done in China. Wynn Resorts contemporaneous SEC filings reflect this.
Wynns 2011 Form 10-K, filed in early March 2012 (just before the Kynikos funds sold their
holdings), confirms this. RJN (ECF No. 17) Ex. 26. It extensively describes the risks of FCPA
violationsdespiteWynn Resorts compliance programs:
Any violation of the F oreign Corru pt Practices Act or applicable Anti-M oneyLaunderi ng l aws or r egulations could have a negative impact on us.[] . . . We are subject to regulations imposed by the Foreign Corrupt Practices Act(the FCPA) and other anti-corruption laws . . . .Internal control policies and
procedures and employee training and compliance programs that we haveimplemented to deter prohibited practices may not be effective in prohibiting ourdirectors, employees, contractors or agents from violating or circumventing ourpolicies and the law.If our directors, employees or agents fail to comply withapplicable laws or Company policies governing our international operations, theCompany may face investigations, prosecutions and other legal proceedings andactions which could result in civil penalties, administrative remedies and criminalsanctions.Kazuo Okada, one of our directors, has failed to comply with internaltraining in these matters and has failed to return to the Company an executedAcknowledgment that he agrees to comply with the Companys Code of BusinessConduct and Ethics. For additional information on the Freeh Report, which detailednumerous instances of conduct constituting prima facie violations of the FCPA byMr. Okada and certain of his affiliates, and the redemption of Aruze USA, Inc.sshares, see Item 8Notes to Consolidated Financial Statements, Note 19Subsequent Events.Any determination that we have violated the FCPA could havea material adverse effect on our financial condition. (RJN Ex. 26 at 25 (WynnResorts 2011 Form 10-K) (emphasis added))
This party admission by Wynn Resorts contradicts Plaintiffs allegations that Mr. Chanoss
statement, even if considered a factual assertion, was true. Wynn Resorts itself admitted that there
could be violations of the FCPA that would have a material adverse effect on [its] financial
condition;ipso facto, Plaintiffs cannot allege that Mr. Chanoss statement that there was a risk
[he] was taking with clients money under Foreign Corrupt Practices Act and a variety of other, you
know, aspects of exactly how business is done there was false.
The Wynn Resorts 2011 Form 10-K is among the documents that Plaintiffs argue the Court
should reject from its consideration of the Motion to Dismiss. RJN Ex. 26. The 2011 10-K, along
with other exhibits submitted with the Request for Judicial Notice, contradict what the Complaint
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refers to as readily available information that Mr. Chanos allegedly disregarded and purposefully
avoided in making his allegedly defamatory statement. Compl. 19. Mr. Chanos expressed that he
decided to sell his stock in Macau casino operators because of his concern of risk under the FCPA
and a variety of other . . . aspects of exactly how business is done there. Transcript 6:11-14. For
this Court to assess whether Plaintiffs have plausibly alleged slanderper seon the basis of what
Mr. Chanos said, it should look at Mr. Chanoss actual words as well as the readily available
information Plaintiffs reference and rely upon for their claim. Cf. Daniels-Hall v. Natl Educ.
Assn, 629 F.3d 992, 998 (9th Cir. 2010) (noting that a court may take judicial notice of a document
on which the complaint necessarily relies if: (1) the complaint refers to the document; (2) it is
central to the plaintiff's claim; and (3) no party questions the authenticity of the document attached
to the 12(b)(6) motion). The Court need not accept as true Plaintiffs allegations about the readily
available information when their characterization of such information is contradicted by Plaintiffs
own admissions in SEC filings, press releases and news reports. See In re Gilead Scis. Sec. Litig.,
536 F.3d at1055 (noting a court need not accept as true allegations that contradict matters properly
subject to judicial notice or by exhibit).4
Plaintiffs do not question the authenticity of any of the additional materials submitted in
support of the motion to dismissin fact, they explicitly rely on at least one of the documents for
their own Opposition. See, e.g., Opp. 10 (citing and relying upon facts from RJN Ex. 14). Thus,
the Court should take judicial notice of the additional documents submitted with the Request for
Judicial Notice, particularly documents such as RJN Ex. 26 which contain party admissions
contradicting the allegations in the Complaint.
4Ignoring the fact that their Complaint references and implicitly relies upon allegations of the
content of the readily available information that Plaintiffs claim Mr. Chanos ignored, Plaintiffstake issue with Defendants citation toIn re Gilead Scis. Sec. Lit., 2005 U.S. Dist. LEXIS 3170, at*10-11 (N.D. Cal. Jan. 26, 2005). But in that case, the court acknowledged that it in ruling onmotion to dismiss it may take into consideration 1) documents that the complaint explicitlyreferences or on which it implicitly relied; and 2) public filings with the SEC.
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E. Plaintiffs Do Not Address Their Failure to Plead Malice With Respect toMr. Chanoss Actual Statements.
Plaintiffs attack a straw man with respect to malice. Plaintiffs arguments on the adequacy
of their malice pleading address only the allegation that Chanos stated that Wynn and Wynn Resorts
violated the FCPA. As explained above and in the Motion to Dismiss, this is not what Chanos said.
With respect to Mr. Chanoss actual words (about risk under the FCPA and the way business is
done in China), the Complaint is silent. In their Opposition, Plaintiffs offer no arguments to suggest
that they have alleged that Mr. Chanos knew the statements regarding the risk of investing in Macau
casino operators were false or made with reckless disregard for their truth.
F. Leave to Amend Would be Futile.
Dismissal without leave to amend is appropriate where plaintiff would not be able to cure
his defective pleading by amendment. Leadsinger, Inc. v. BMG Music Publg, 512 F.3d 522, 532-
33 (9th Cir. 2008). Plaintiffs slanderper seclaim rests on the faulty premise that Mr. Chanos
stated something that he did not: that Wynn and Wynn Resorts had violated the Foreign Corrupt
Practices Act. The Court has before it the Transcript of what Mr. Chanos said at the symposium
and it is readily apparent that no such statement was made or implied. Plaintiffs cannot plausibly
identify any slanderous statement by Mr. Chanos. Moreover, Plaintiffs fail to articulate any factual
allegations upon which an amendment could be based. These failures show that amendment would
be futile, and therefore, the Court should dismiss the Complaint without leave to amend.5
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5See In re iPhone Application Litig., 844 F. Supp. 2d 1040, 1077-78 (N.D. Cal. 2012) (dismissing
cause of action because plaintiffs theories regarding how defendants activities constituteactionable conduct were defective and it appeared that additional allegations would not remedy thedefects).
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III. CONCLUSION
For all the reasons given, Plaintiffs Complaint fails to state a claim upon which relief could
be granted and it should be dismissed without leave to amend.
Dated: November 19, 2014 Respectfully,
ARNOLD & PORTER LLP
By: /s/ Kenneth G. Hausman
KENNETH G. HAUSMANDOUGLAS A. WINTHROPJULIAN Y. WALDO
Attorne s for Defendant JAMES CHANOS
BOSTWICK LAWDated: November 19, 2014
By: /s/ Gary L. Bostwick
GARY L BOSTWICK
Attorne s for Defendant JAMES CHANOS
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