Past Hindenburg reports challenged by the targeted companies for being ‘defamatory’ have never resonated in US courts.
NEW DELHI: Lawyers at Wachtell, Lipton, Rosen & Katz, the New York-based law firm that has been engaged by the Adani Group to explore the legal actions that it can initiate against the Delaware, New York registered Hindenburg Research Limited Liability Company, are unlikely to get any success if past precedents are to go by in which other companies had sued Hindenburg for “defamation” and “conspiracy”.
The said research company, that puts out studies with the disclosure in the same report that it was going to “short” the targeted company’s shares, had released a report on the Adani Group on 24 January, alleging it of indulging in fraudulent business practices and tax evasion.
As was the intent behind the report, following its release, the group has so far lost Rs 10 lakh crore or $110 billion, apart from facing a very strong possibility of being restricted by European countries and Asian countries from being allowed to bid in global tenders, given the damaging assertions made by Hindenburg.
Past similar reports by Hindenburg, that have been challenged by the targeted companies, on the primary ground that were “defamatory” have never resonated with the courts in the United States as they have been held to be “opinions” for the simple reason that Hindenburg has used words, phrases and qualifiers like “We believe”, “We think” and the fact that it mentioned in the report very prominently that the report was the “opinions of an author”.
In the recent 413 pages and about 42,000 words Adani report, the phrase “We believe” appears nine times. In the same report, Hindenburg carried a 439-word legal disclaimer that, among other things, states that it is not responsible for the accuracy of the said report. “Hindenburg Research makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and Hindenburg Research does not undertake to update or supplement this report or any of the information contained herein.”
In February 2020, the New York Supreme Court, while deciding on a defamation suit filed by Yangtze River Port and Logistics limited against Hindenburg Research, dismissed the claims of Yangtze on the ground that the article was an opinion piece and contained enough words and phrases to inform the readers that it was not an objective or accurate report.
Yangtze had sued Hindenburg in January 2019 against a similar Adani Group report that it released in December 2018 that led to a drastic fall in the share prices of Yangtze, a Nasdaq listed company. The court, while rejecting the company’s pleas, stated that the supporting documents used in its report by Hindenburg are electronic links to various publicly available sources, most prominently Yangtze’s SEC filings.
“Thus, the Report is nothing more than a financial commentary based on the publicly available information cited, and linked to, by the Report—in other words, textbook opinion,” the court observed. In the present report against the Adani Group, Hindenburg has similarly attested multiple publicly available documents to buttress the claim that Adani Group had indulged in corruption.
“The Report contains numerous citations and hyperlinks to primary source materials on which Hindenburg’s opinions were based. The Report is largely based on Yangtze’s own financial filings and other publicly available documents—all of which are hyperlinked throughout the Report. Thus, because plaintiff denies that those financial filings and public records are themselves falsely represented or grossly distorted, plaintiff’s claim of defamatory opinion has no merit,” the court had said.
In India, the Adani Group has engaged Cyril Amarchand Mangaldas firm led by Cyril Shroff, whose daughter is married to Gautam Adani’s son.